The Senate announced that it passed the bipartisan infrastructure bill with a resulting tally of 69–30. Passing this sweeping $1 trillion infrastructure package came after several weeks of intense debate and negations about the nation’s largest federal investment in over a decade. With controversial language regarding cryptocurrency tax remaining on the bill as the amendment failed on the floor after the objection of Senator Richard Shelby (R-AL.), crypto natives have tax implications looming over their heads.
As a major priority for the Biden administration, President Biden tweeted in celebration of the final verdict. The process for the bill came with push-back from many crypto natives since the language is controversial regarding the appropriate definition for a “crypto broker.” Without any amendments surrounding the language being approved, anyone who provides “any service effectuating transfers of digital assets on behalf of another person,” is identified as a broker for the purposes of IRS reporting.
Senator Richard Shelby ultimately sank the amendment as he proposed his own budget.
Since two amendments were looking to correct and narrow the definition of “broker” as a means to exclude miners, stakers, node operators, and software developers, the Senate seemingly reached a comprise that received Treasury support. Aiming to prove that including these parties wouldn't be technologically feasible, Senator Pat Toomey presented the consolidated amendment for unanimous consent for the Senate, which means that no senator can object. However, given continuous debate, Senator Richard Shelby took his stance to defend a last-minute spending proposal.
Combining a truncated process and a last-minute proposal, the timing of the bill’s final vote came at the mercy of the senators where a single objection would ultimately terminate it. Once Toomey presented the amendment, Shelby motioned to add his own amendment to the broader infrastructure bill of $50 million for defense. Whether it was an attempt to remain relevant, the combined package was quickly shot down by an objection from Senator Bernie Sanders.
Infrastructure bill's tax implications and when they will take effect
Since the bill has now passed the Senate, it still has to be passed in the House of Representatives. Not scheduled to take place until September, many people wonder about the tax implications that are looming. The crypto provisions will continue to be faced with opposition in the House of Representatives as well. Darren Soto (D- Fla.), Ro Khanna ( D-Cal.), Tom Emmer (R. Minn.), and Ted Budd (R-N.C.) have all expressed interest in modifying the language, although it isn't clear what leeway the House will have in modifying the bill.
Regarding information reporting and tax implications, many who are unsure of what to expect still understand the detriment this bill causes to crypto companies. The companies will be forced to report information to the IRS they either don't have or can't get. The bill does address “self-custody,” which is similar to keeping cash underneath a mattress.
The bill does not expressly say anything about penalties, other than that of section 6724 of the Internal Revenue Code which was amended to include “digital assets” in the definition of what is included in an information return subject to penalty. While the impact of this bill will not be in effect immediately, individuals or entities who receive funds connected through crypto, should err on the side of reporting rather than risking the penalties of this shortcoming.