Two members of the US House of Representatives have filed a bill seeking to create a tax exemption for purchases made with cryptocurrencies.
Back in 2014, the Internal Revenue Service declared that it would consider bitcoin (and other cryptocurrencies) as a kind of property for tax purposes. Any profits made when selling or exchanging a cryptocurrency triggers a capital gains requirement. Yet due to the wording of the IRS decision, that covers any transaction involving bitcoin, including an oft-mentioned purchase of a cup of coffee – essentially meaning that if you bought some bitcoin at $1, and spent it on a $2 cup of coffee, you would owe tax on the difference.
Reps. Jared Polis and David Schweikert, who co-lead the Congressional Blockchain Caucus, are hoping to alleviate some of the issues resulting from that ruling with the Cryptocurrency Tax Fairness Act.
Unveiled today, the measure, if passed, would create a de minimis exemption for cryptocurrency payments below $600 after December 31 of this year. Put more simply, transactions involving a cryptocurrency below that threshold wouldn’t trigger a capital gains liability.
As the text of the bill states:
“Gross income shall not include gain from the sale or exchange of virtual currency for 5 other than cash or cash equivalents….[if the amount of gain excluded from gross income under subsection (a) with respect to a sale or exchange shall not exceed $600.”
In an interview with CoinDesk, Jerry Brito, executive director of the DC-based nonprofit Coin Center – which helped advocate for and organize the bill – compared the move to one taken previously by Congress to create an exemption for purchases made using foreign currency.
“What we have done with this bill is do something very similar, to create a de minimis exemption for small purchases.”
As for the prospects of the bill in a Congress beset by Republican infighting and looming fights over the federal government’s funding and ability to borrow, Brito struck a cautiously optimistic tone, pointing to the ongoing effort to reform the US tax system as aligning with the goals of the new bill.
“This should be unobjectionable to members of the Congress,” he said.
The full text of the bill can be found below:
CTFA by CoinDesk on Scribd