Senate Votes to Repeal Biden-Era Crypto Tax Rule — WSJ

By Richard RubinWASHINGTON — The Senate voted to repeal a Biden-era rule requiring that some cryptocurrency platforms report their customers' transactions to the Internal Revenue Service, delivering a bipartisan victory to the ascendantindustry.The rule required the decentralized finance platforms, or DeFi, to report detailed information on customers to the IRS, starting for tax year 2027. The rule was designed to improve tax compliance and create parity with centralized crypto exchanges and stock brokerages.The crypto industry argued that DeFi platforms that enable peer-to-peer exchanges weren't really brokers, and lawmakers agreed and warned of high compliance costs. The House Ways and Means Committee backed the regulation repeal last week, and the measure looks likely to become law soon. The vote Tuesday in the Republican-controlled Senate was 70-27."It's a powerful statement of the importance of crypto. I think crypto was one of the major issues in the last election," said Sen. Ted Cruz (R., Texas), who led the effort and warned that the rule would have been devastating to the industry. "We just saw a really strong bipartisan repudiation of that regulation."Congress is trying to repeal the regulation using the Congressional Review Act, an expedited process that circumvents the usual 60-vote filibuster threshold in the Senate. The strategy lets lawmakers repeal recent regulations and prevents agencies from creating substantially similar rules in the future.If successful, the removal of the crypto regulation would be the first time that Congress eliminated a tax rule using the Congressional Review Act. Republicans are eyeing other Biden-administration rules using the same approach, including regulations on appliances, oil and gas drilling and rubber tire manufacturing.The Trump administration has aligned itself with the cryptocurrency industry, saying it would relax rules and floating the idea of a national strategic crypto reserve. The industry was active in last year's elections, rallying campaign contributions to defeat Sen. Sherrod Brown (D., Ohio).The Biden administration wrote the DeFi tax rule and wrapped it up in December as part of its implementation of a 2021 law. The idea was to give the IRS more visibility into crypto transactions and encourage investors to report taxable events. In general, tax compliance increases when the IRS gets independent information about taxpayers' activities. Repealing the rule would shrink federal revenue by $3.9 billion over a decade, according to the nonpartisan Joint Committee on Taxation."It would encourage more of the digital asset industry to move into the shadows, making it more difficult to counter crimes ranging from tax evasion to fentanyl trafficking to terrorist financing," said Mike Kaercher, deputy director of the Tax Law Center at New York University.Write to Richard Rubin at [email protected]