U.S. House Committee Moves to Eliminate IRS DeFi Tax Regulation
A joint resolution in Congress aims to undo a December decision by the IRS that imposed a tax regime on decentralized finance (DeFi) platforms. The House has taken initial actions to reverse this regulation.
What to know:
- A significant move has begun to remove an IRS tax rule deemed a major obstacle to DeFi, with the U.S. House committee passing a resolution to repeal the regulation.
- The House Ways and Means Committee voted 26-16 in favor of recommending the removal of the IRS rule under the Congressional Review Act.
The U.S. House of Representatives recently made a notable move to negate the IRS’s efforts to implement a taxing framework for DeFi platforms during the closing days of former President Joe Biden’s administration. The Ways and Means Committee, which supervises the IRS, approved a resolution to overturn the IRS transaction-reporting policy under the Congressional Review Act, which necessitates majority backing from both the House and Senate before presidential approval finalizes the changes.
In December, the IRS sanctioned a mechanism that the crypto sector claims forces DeFi protocols into a broker-like reporting scheme, which could limit the operational capacity of such protocols and apply to various entities that aren’t brokers. Nearly all major players in the crypto space supported a Blockchain Association letter last week urging the repeal of this rule.
Senator Ted Cruz of Texas has introduced a Senate version of the resolution to eliminate the IRS regulation. “We must pass this resolution to avoid this nightmare for American taxpayers and for the IRS,” stated Representative Mike Carey from Ohio, who advocated for the Congressional intervention, arguing it would overwhelm the tax agency.
Conversely, Democratic Representative Richard Neal from Massachusetts opposed the Republican initiative. He argued, “The bill intended to remove sensible Treasury regulations ensures taxpayers fulfill their tax obligations and don’t evade the law through unreported cryptocurrency sales.”
Erasing this focused tax approach for decentralized platforms could lead to an estimated $3.9 billion reduction in U.S. revenue over the next decade.
Representative Jason Smith, the Republican committee chairman from Missouri, accused the IRS of bypassing the law when it sanctioned the rule during Biden’s final days in office. “It’s not only unfair, but also unworkable,” he remarked.
