House lawmakers will vote on Sept. 27 on a $1 trillion infrastructure bill that includes a crypto tax-reporting provision that has been the subject of extensive debate on Capitol Hill. And although amending the provision has bipartisan support, it does not appear that any amendments to the infrastructure bill will be accepted.
The crux of the debate is how the infrastructure bill defines “broker” in a provision that banks on raising $28 billion over 10 years by requiring crypto "brokers" to report transactions .
Critics of the provision argue that the definition of a “broker” is too broad and could be interpreted to include crypto miners, node validators and developers. Crypto advocates are also concerned that the provision could impose expanded surveillance on crypto users and make it difficult for crypto businesses to operate in the United States.
A bipartisan group of crypto-friendly senators proposed an amendment to the bill that would exclude developers, validators and miners from the reporting requirement. The amendment needed unanimous consent to be adopted and was blocked by Richard Shelby (R-Ala.), who tried and failed to tack on $50 billion in extra funding for the military.
On Tuesday, the House voted 220-212 to advance the bill without considering any amendments.
A growing number of congressmen have publicly stated their intentions to push back against the cryptocurrency reporting provision in the infrastructure bill.
The bipartisan Congressional Blockchain Caucus, headed by Rep. Tom Emmer (R-Minn.), sent a Congress-wide letter earlier this month calling for an amendment to update what he called the “dangerous” provision.
“Congress cannot cross-jurisdictionally try to pay for an infrastructure bill on the backs of our crypto industry through legislation that was slapped together with little to no consideration for the crypto industry," Emmer wrote in a statement.
Other representatives, including Rep. Patrick McHenry (R-N.C.) and Rep. Byron Donalds (R-Fla.), have joined the bipartisan fight, calling the provision “hastily drafted” and “burdensome” on the cryptocurrency industry. A spokesperson for Donalds said the congressman plans to vote against the bill.
The infrastructure bill has become a cornerstone of President Joe Biden’s policy and his establishment of a legacy built on public works.
The sweeping bill has been described by the White House as a “once-in-a-generation investment” that seeks to expand high-speed internet across the country, modernize the power grid, upgrade the nation’s roads, bridges and public transit systems and fund clean drinking water and electric vehicles.
There is concern on Capitol Hill that the infrastructure bill, which languished in Senate negotiations for months, could be further snarled – or even die – if the House adds any amendments, which would require the bill to return to the Senate for another vote.
Despite the growing number of representatives who have announced their intentions to add amendments to the bill, it does not appear that House Speaker Nancy Pelosi (D-Calif.) will allow the bill to be amended.
In a “Dear Colleagues” letter on Saturday, Pelosi told House Democrats that her goal is to enact both the infrastructure bill and a $3.5 trillion budget reconciliation package by Oct. 1.
“The House would be very hard-pressed to meet that goal if they amend the bipartisan infrastructure bill, so I do not expect the bill to be amended,” Andrew Hinkes, a blockchain lawyer and partner at K&L Gates, told CoinDesk.
Though the Democrats have control of the House, the margin is slim, and Pelosi potentially needs near-unanimous support from Democrats to pass the bill, though even that remains unclear because of varying levels of support from Republicans.
Further complicating matters is that the fate of the infrastructure bill has become intertwined with the reconciliation package.
According to Hinkes, the most likely outcome for the infrastructure bill is for it to clear the House with no amendments and be signed into law by Biden.
Stephen Palley, a crypto lawyer and partner at Anderson Kill, agrees with Hinkes’ assessment.
“It seems unlikely that the bill’s progress will be delayed over only the crypto-tax reporting language, particularly where Treasury will be issuing clarifying guidance that says they do not intend to apply [the provision] to miners, developers, etc,” Palley told CoinDesk.
As Palley points out, the Treasury has reportedly said that it will provide clarifying guidance after the bill is passed to provide exemptions to firms that do not actually operate as brokers. If reports that Treasury Secretary Janet Yellen was lobbying against amendments to the bill are true, it suggests that Treasury’s end goal was to leave the language purposely vague so that Treasury could decide what it means.
Though many critics of the provision consider that to be a worst-case scenario, Palley said he thinks that floor testimony and Treasury guidance will prevent the provision from being interpreted too broadly.
“Assuming the IRS (Internal Revenue Service) honors [Treasury’s guidance], I don’t think the language is as bad as some people have suggested,” he said.
Though there is a chance that the bill dies in the House, Palley thinks it's unlikely. “If I had to bet I would say no – it’s too politically important for Democrats to get this through. At the end of the day, I suspect that representatives on the left who are complaining it's not enough will be legislatively and presidentially browbeaten into submission,” he said.
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