New Legislation Introduced to Relieve Tax Burden For Digital Assets Holders
American’s fearing a large tax bill for trading digital assets may soon find relief thanks to a new bill called HR 3963 introduced by Representative Ted Budd (R-NC) on the House floor yesterday.
In 2014, the IRS defined cryptocurrencies as property in their notice 2014-21. It states “for Federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.”
Digital asset holders took advantage of Section 1031 which exempts taxation on “like-kind” exchanges of property. The new 2017 tax codes, however, replaced the term “property” in S.1031 with “real property,” thereby nullifying the like-kind tax exemption for cryptos and limiting it for real estate.
HR 3963, also called the Virtual Value Tax Fairness Act of 2019 (ViVa Act), would restore this 1031 exemption for digital assets under a five-year sunset provision. Holders of digital assets before the passage of this bill are grandfathered in. It additionally calls for legislators and industry leaders to work within that time period to craft comprehensive and competitive tax legislation.
Nick Spanos, co-founder of the The Digital Asset Policy Network (DAPNet) which worked closely with Rep. Budd’s congressional office on this house resolution, said in a press release, “Like-Kind treatment is admittedly not the ideal long-term way to tax all token to token transactions, but it makes sense in the short term as the industry matures.” Spanos continues:
“The five-year sunset provision in the ViVa Act will allow Congress and the industry to come together and work on fair, standardized nomenclature and create a fair and thoughtful long-term tax treatment for cryptos, while under the pressure of a ticking clock so the can is not simply kicked down the road.”
Representatives at DAPNet informed Cryptos.com that HR 3963 aims for bi-partisan support and is expected to draw the attention of many lawmakers.
Constituents should favor their representatives working across the aisle on forward-thinking legislation that relieves the American taxpayer and aims to create a competitive environment for blockchain companies and innovators.
Considering the recent tweets by President Trump against bitcoin and cryptocurrencies and Facebook’s Libra testimony before the Senate Banking Committee, there is heightened attention for blockchain technology on the Hill, and HR 3963 could capitalize on it.