Washington, D.C. - Today, Congressman Tom Emmer (MN-06) introduced the Safe Harbor for Taxpayers with Forked Assets Act, which prohibits penalties against taxpayers attempting to report certain gains or losses on “Forked Assets” until the IRS issues sufficient guidance on how to do so.
“Forks” are splits in one distributed ledger (often a blockchain) that results in a new, second independent digital ledger. For example, Bitcoin Cash is a fork of Bitcoin. The bill delineates that receipt of a forked virtual currency may not constitute a taxable event and creates a safe harbor under which the IRS cannot impose penalties or fees on taxpayers with forked assets until they provide clear and consistent guidance on how these transactions should be managed. Absent coherent guidance from the IRS, this legislation is designed to insulate taxpayers who, at no fault of their own, could be subject to potential tax liabilities and penalties.
Following introduction, Congressman Emmer released the following statement, "Just like every other federal agency, the IRS must keep up with the rapid pace of technology or risk losing American leadership in innovation. Taxpayers suffering from a lack of tax guidance are being unfairly punished for investing in an emerging technology. What has been issued by the IRS so far is not pragmatic and has not supported the technology nor those who engage with it.”
Emmer concluded, “We should be embracing emerging technologies and providing a clear regulatory system that allows innovation to flourish in the United States. A safe harbor will protect taxpayers until the IRS take steps to improve their guidance.”
“Blockchain technology is allowing innovative ideas to be developed quickly, further contributing to our nation’s economic growth,” said Congressman Soto. “As Congress works to protect those who invest in this technology, the Safe Harbor for Taxpayers with Forked Assets Act will prohibit penalties on good faith taxpayers who report forked digital assets until the IRS updates cryptocurrency tax guidance.”
"We applaud Rep. Emmer for his leadership on the issue of cryptocurrency taxation. American cryptocurrency users want to pay their fair share of taxes, but the IRS has given conflicting guidance and we hope this bill will help resolve that," said Jerry Brito, Executive Director of Coin Center.
“The Chamber of Digital Commerce is proud to support Congressman Emmer’s steady leadership in pursuing clarity for taxpayers. This important legislation sends a loud and clear message to the IRS that it must release straightforward, workable guidance for taxpayers who have received virtual currency following a hard fork before launching investigations and enforcement,” said Amy Davine Kim, Chief Policy Officer, Chamber of Digital Commerce.
"A clear and coherent tax policy is essential for the continued growth of the crypto industry in the United States. While it is important for American taxpayers to report their crypto transactions, it is only fair that the government provide them the clearest possible direction to ensure they are reporting those transactions lawfully. To ensure broader mainstream adoption of these cutting edge technologies, we must pursue consumer-forward, pro-growth regulatory policies," said Kristin Smith, Executive Director of the Blockchain Association.
In 2014, the IRS issued guidance, which treats digital assets like property. In 2018, Congressman Emmer initially introduced the Safe Harbor for Taxpayers with Forked Assets Act to provide a safe harbor for taxpayers with "forked" digital assets in order to restrict fines against individuals that attempt to report these assets until the IRS provided any type of guidance regarding the appropriate means of reporting them. Later in April of 2019, Congressman Emmer led a letter along with 20 members of Congress to the IRS urging additional guidance.
In October of 2019, the IRS issued guidance stating that the receipt of a forked virtual currency is a taxable event. Taxpayers who receive forked virtual currency, however, receive it automatically at the moment of the fork, often unwillingly and unknowingly. The result is a tax policy that places an additional tax burden on taxpayers who have not realized any change, and in fact, may have no knowledge of this new tax burden.
This bill is endorsed by the U.S. Chamber of Commerce, the Chamber of Digital Commerce, Coin Center, and the Blockchain Association.
Read the Safe Harbor for Taxpayers with Forked Assets Act here.
Congressman Emmer serves as the Ranking Member of the House Financial Services Committee’s Task Force on Financial Technology during the 117th Congress. In addition, Congressman Emmer became co-chair of the Congressional Blockchain Caucus in 2018.