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September 14, 2021 | 5-minute read (886 words)
The U.S. Senate passed a historic $1.2 trillion bipartisan infrastructure plan on August 10 aimed at repairing the country's deteriorating infrastructure. The "Infrastructure Investment and Jobs Act,” currently awaiting a vote in the House, would allocate $550 billion in additional government spending for roads, telecommunications and utilities.
The bill proposes spending $110 billion on roads, bridges and major projects, as well as $65 billion to rebuild the electric grid, $66 billion on passenger and freight rail, $65 billion to expand broadband internet access, $7.5 billion to build a national network of electric vehicle charging infrastructure, and $39 billion to modernize and expand transit systems. It also contains $55 billion for water infrastructure, $15 billion of which will replace lead pipes, among other things.
Aside from repairing infrastructure, one section of the act in particular is generating a significant buzz: cryptocurrency and its tax implications. A section of the pending legislation would apply new rules to bitcoin brokers that require them to "make a return" by distributing earnings to their clients. This would prompt the IRS to more efficiently collect tax income from individuals who trade in digital assets.
Why is cryptocurrency part of an infrastructure bill?
To help pay for the infrastructure package, the Senate is calling for the crypto measure to impose stricter controls on how digital assets are taxed. Cryptocurrency brokers would be required to provide precise information regarding transactions, such as the price points at which customers purchased and sold. This would be in addition to the obligation to disclose transactions worth more than $10,000 to the IRS.
Although lobbyists worked to reduce the bill's digital currency tax regulations, House Democrats voted August 24 to prohibit any changes from being considered for the bill. This means that the crypto tax is unlikely to be repealed and that industry advocates will have to find new ways to influence legislation.
The provision’s definition of a broker has also raised some eyebrows in the crypto industry. In the bill, a broker is defined as "any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person."
According to cryptocurrency proponents, this definition of a broker is overly broad, and may ensnare people like crypto miners, software developers, stakers, and others who don't have clients or access to information needed to comply with the regulations because they are not brokers.
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