News : Mining for more crypto clarity — Infrastructure is on the move

Monday, August 9, 2021

Mining for more crypto clarity — Infrastructure is on the move — Don't forget the budget

Aug 09, 2021

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LET'S DO IT AGAIN SOON? For much of the last week, senators have been grappling with how to place more of a tax regime around virtual currencies, in hopes of raising billions of dollars to pay for new infrastructure improvements in the process.

It now looks like increasingly likely that none of them will get their way.

But first, a step back: The bipartisan infrastructure package is on the move, having cleared a big procedural hurdle on Sunday evening and on the path to final passage within the next day or so, as our Burgess Everett and Marianne LeVine reported.

And not only that: Senate Budget Chair Bernie Sanders (I-Vt.) said that Democrats would be releasing their budget resolution today, a key step for unlocking that second part of the party's two-track process — a reconciliation measure that would put new investments into a number of key progressive priorities.

But let's not get too far ahead of ourselves: The main issue senators were trying to work through was how to best put new tax reporting requirements into place for cryptocurrencies.

Both groups — Sens. Rob Portman (R-Ohio) and Mark Warner (D-Va.) on one side, and Sens. Cynthia Lummis (R-Wyo.), Pat Toomey (R-Pa.) and Ron Wyden (D-Ore.) on the other — weren't pleased with the original cryptocurrency language, believing it to be too broad.

And yet, that original language might be what ends up in the final bill. That's because Sen. Bill Hagerty (R-Tenn.) has vowed to block any efforts to speed up the clock for the infrastructure bill, which could essentially kill off any potential amendment process.

Senators could all agree to allow amendments in the hours to come, and Portman, Wyden and others working on the issue said Sunday evening that they were still talking about a potential path forward on crypto. But if nothing else, time is running short, and even the senators themselves acknowledged that any compromise they reach might not be considered.

"We are very, very close. We have been at it all day," Toomey said Sunday night.

MORE ON THAT IN A BIT, but first — thanks for coming for a special "the Senate is still in town" version of Weekly Tax. One of the highlights of your author's weekend: Getting to talk about the tax implications for daily fantasy sports — at a wedding. (We have fun at parties, too.)

And with this, a fond farewell to the Tokyo Olympics: Today marks 85 years since Jesse Owens won his famous fourth gold medal at the 1936 Summer Olympics in Berlin.

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BACK TO CRYPTO: To be fair, there are certainly people, including in the executive branch, who seem to think that the original reporting language is just fine — that the measure clearly lays out who should be classified as a broker, and thus subject to the new reporting requirements.

Portman took to the Senate floor on Sunday, seemingly seeking to ensure calm if the current crypto language isn't amended. The Ohio Republican noted that he certainly wanted to clarify further who would be covered by the new reporting requirements, and that he would continue to discuss ways to make that happen.

But both Treasury and JCT are among those who "believe that the current language is clear , and that the reporting requirements only covers brokers," Portman noted, via our Kellie Mejdrich.

That statement was well-received within the crypto industry, too — particularly the fact that Portman explicitly laid out who should not be covered by the measure. "This clear statement of intent," wrote Jerry Brito of Coin Center, will help Treasury implement the provision correctly.

But how about one more step back: Raise your hand if you had virtual currencies being perhaps the major sticking point on a major bipartisan infrastructure measure?

As our Victoria Guida noted, that's another sign that the industry's lobby is "a new power player in Washington that's starting to find its footing."

It didn't hurt that some of the major power players in the technology sector quickly came to the crypto lobby's aid — like Jack Dorsey from Twitter or Tesla's Elon Musk, who joined the fray in recent days.

DON'T FORGET THE BUDGET: Senate Majority Leader Chuck Schumer 's plan is to quickly move to the budget resolution once the infrastructure package is passed.

That will, in turn, bring about one of those favorite Washington pastimes — the Senate vote-a-rama.

None of those votes in that vote-a-rama are binding, but they can be politically embarrassing. And Democrats are starting to gear up for the process.

"I'm going to be prepared for all eventualities," Wyden said. "I assume there are going to be lots of amendments, for example, defending this deeply flawed 2017 tax bill that really cries out for us to make clear that times are different and the American people understand that everybody should pay their fair share. So we'll be ready for everything."

Around the World

NOT SO GREAT A DEAL ANYMORE: The Chinese internet giant Alibaba says that it's not getting as many cushy tax arrangements from Beijing anymore, Bloomberg reports. The company told investors that the loss of tax breaks will add billions of dollars in new costs. Going forward, Alibaba said that key parts of its business would no longer be eligible for a preferential 10 percent tax rate, something given to so-called Key Software Enterprises. That change will help drive Alibaba's effective tax rate from 8 percent to 20 percent, and the company is warning other digital companies that they're likely to be next. It's also a change in keeping with Beijing's new, stricter approach to technology companies — a recent op-ed from a state-backed media outlet argued that major internet companies had matured enough that they no longer needed big tax incentives.

Around the Nation

IT'S ALL VERY HAZY: Vaping companies are up in arms about a new requirement to register with Washington and state governments as tobacco distributors — to the point, Bloomberg Tax reports, that some businesses are abandoning certain states altogether. Congress amended an existing measure that targets cigarette trafficking to include vaping products in a spending package late last year. But the industry says that measure was essentially sprung upon both state governments and federal agencies, and has made complying with it very difficult. Business owners say that states can have wildly different processes for obtaining a license — depending on the state, tobacco can be regulated through the secretary of state, the revenue department, the health department or the attorney general's office. On top of that, some states can't or won't even offer employees to explain how they can obtain the necessary licenses, according to vaping companies.

Quick Links

The price of success: The American swimmer Katie Ledecky could owe $44,000 in taxes on her Olympic winnings.

WSJ: "Cigarette Companies Are Caught Between Death and Taxes."

The answer: Quite a few of them. (The question: "Which states are having tax free weekends?")

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Did You Know?

Mack Robinson, the brother of the baseball Hall of Famer Jackie Robinson, won the silver medal behind Owens in the 200-meter dash at the 1936 Olympics.

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