House Moves To Reverse IRS DeFi Tax Rule

According to CoinDesk, the U.S. House of Representatives has initiated a significant step to dismantle the Internal Revenue Service's (IRS) tax policy on decentralized financial (DeFi) platforms, a measure implemented during the last days of former President Joe Biden's administration. The House Ways and Means Committee, which oversees the Treasury Department's IRS, voted 26-16 to advance a resolution under the Congressional Review Act to reverse the IRS's transaction-reporting policy. This resolution requires majority approval in both the House and Senate, followed by a presidential signature, to become final. The matter now proceeds to the full House for consideration. In December, the IRS had established a system that the cryptocurrency industry argues imposes a reporting regime on DeFi protocols, originally designed for brokers. This system threatens the operational framework of these protocols and potentially includes entities that do not qualify as brokers. In response, nearly every major player in the crypto sector endorsed a Blockchain Association letter last week, urging the elimination of this rule. Senator Ted Cruz, a Republican from Texas, has introduced a Senate version of the Congressional Review Act resolution to abolish the IRS rule. Republican Representative Mike Carey from Ohio emphasized the necessity of passing this resolution to prevent complications for American taxpayers and the IRS. He argued that the rule would overwhelm the tax agency. Conversely, Democrat Representative Richard Neal from Massachusetts defended the IRS policy, stating that the bill aims to repeal essential Treasury regulations that ensure taxpayers fulfill their tax obligations and do not evade the law by selling cryptocurrency without reporting gains. Neal asserted that the issue is straightforward. The removal of this specific tax approach to decentralized crypto platforms is projected to reduce U.S. revenue by approximately $3.9 billion over the next decade. Republican Representative Jason Smith, the committee chairman from Missouri, criticized the IRS for exceeding "the letter of the law" when it approved the rule during Biden's final days in office, describing the rule as both unfair and unworkable.