US Lawmakers Float New Crypto Tax Provisions in Reconciliation Bill

The proposals would close loopholes in different types of sales rules.

Sep 13, 2021 at 11:53 p.m. UTC

Updated May 11, 2023 at 4:29 p.m. UTC

Representative Dave Camp, a Republican from Michigan and chairman of the House Ways and Means Committee, right, talks to Representative Richard Neal, a Democrat from Massachusetts, prior to a hearing in Washington, D.C., U.S., on Tuesday, Oct. 29, 2013. The official most responsible for the rollout of the Obamacare health-insurance exchange, Marilyn Tavenner, blamed a "subset" of outside contractors for the website woes, not her staff, in testimony before a U.S. House committee. Photographer: Andrew Harrer/Bloomberg via Getty Images

House Democrats are hoping to close two possible loopholes within tax regulations for cryptocurrencies, according to a proposal published Monday.

According to a document published by the House Ways and Means Committee, which is headed by Rep. Richard Neal (D-Mass.), lawmakers believe they can fund fiscal priorities through some “corporate and international tax reforms.”

The pair of provisions intends to prevent individuals from reporting a tax loss by selling cryptocurrencies at a loss but immediately (meaning within 30 days) buying the same cryptocurrencies.

The other provision intends to ensure taxpayers properly report capital gains, even if they purchase an offsetting position on their investments.

The first provision states:

This provision includes digital assets in the constructive sale rules, anti-abuse rules previously applicable to other financial assets. The constructive sale rules in section 1259 treat the adoption of certain offsetting positions to previously owned positions as sales of the previously owned position. These rules prevent taxpayers from locking in investment gains without realizing taxable gain. The amendments made by this section apply to taxable years beginning after December 31, 2021.

While the second states:

This section includes commodities, currencies, and digital assets in the wash sale rule, an antiabuse rule previously applicable to stock and other securities. The wash sale rule in section 1091 prevents taxpayers from claiming tax losses while retaining an interest in the loss asset. The amendments made by this section apply to taxable years beginning after December 31, 2021.

The Washington Post reported Sunday that these proposals anticipate raising $16 billion in tax revenue from the cryptocurrency sector.

The House document is intended to help support a $3.5 trillion infrastructure package Democrats hope to pass in the coming months. The “Build Back Better Act” is a cornerstone of U.S. President Joe Biden’s agenda, and has been championed by progressive Democrats in both the House and Senate.

The House committee is also marking up certain tax-related provisions of the broader Senate bipartisan infrastructure bill. That includes the controversial crypto tax provision that the industry unsuccessfully fought last month.

The overall House is expected to vote on the bill in two weeks.

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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

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