United States Congressmen Brad Sherman and Stephen Lynch have jointly written a letter urging the US Treasury and the Internal Revenue Service (IRS) to establish comprehensive tax regulations for the cryptocurrency industry. The letter, addressed to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, highlighted the urgent need to address tax compliance challenges in the crypto sector.
Sherman and Lynch expressed concern about the persistent association of the crypto industry with tax evasion crimes. According to them: “For years now, that industry has been a major source of tax evasion and a significant part of the nation’s tax gap.”
They referenced a September 2020 audit report from the Treasury Inspector General for Tax Administration (TIGTA), which revealed the IRS’s inability to identify taxpayers involved in cryptocurrency due to inadequate reporting measures.
The lawmakers noted that despite the passage of the Bipartisan Infrastructure Bill in Congress in 2021, the specific requirements and processes for this regulation have not been established. The bill mandated the reporting of cryptocurrency transactions starting in 2023.
The Congressmen recommended swift implementation of the proposed regulations to close the tax gap and ensure full tax compliance within the cryptocurrency industry.
In May 2023, news emerged that the Biden administration had reaffirmed its support for the Digital Asset Mining Energy (DAME) tax proposal. This tax initiative aims to impose a 30% excise tax on the electricity consumed by cryptocurrency miners.
The White House’s Council of Economic Advisers (CEA) issued a statement endorsing the tax scheme while highlighting the negative environmental consequences associated with crypto mining. The CEA noted that the tax scheme would hold mining companies accountable for the social costs they impose, including environmental pollution, increased energy prices, and greenhouse gas emissions.
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