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Lawmakers Advocate for Treasury Department to Reconsider Taxation of Unrealized Cryptocurrency Profits

U.S. senators argue that the proposed tax regulation will put local companies at a competitive disadvantage against foreign competitors and urge the Treasury Department to take immediate action.

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U.S. legislators warn that a proposed tax regulation could put domestic businesses at a competitive...
U.S. legislators warn that a proposed tax regulation could put domestic businesses at a competitive disadvantage against foreign competitors, urging the Treasury Department to take immediate action.

In a nutshell

  • Senators Cynthia Lummis (R-WY) and Bernie Moreno (R-OH) have called out the Treasury to take immediate action against the Biden-era tax policy, labeling it a potential disaster for U.S. crypto companies.
  • The policy at question is the 2022 Corporate Alternative Minimum Tax (CAMT), combined with new accounting guidelines, which could make firms commit to paying taxes on digital assets they haven't even sold.
  • In a letter to Treasury Secretary Scott Bessent, the senators expressed concerns on the negative impact this policy could have on U.S. crypto firms, particularly regarding competitiveness with foreign firms.

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Lawmakers Advocate for Treasury Department to Reconsider Taxation of Unrealized Cryptocurrency Profits

These pro-crypto senators are on a mission to protect U.S. digital finance by demanding a rethink of the 2022 Corporate Alternative Minimum Tax (CAMT) application to crypto holdings.

In a letter penned to Treasury Secretary Scott Bessent last Tuesday, Senators Cynthia Lummis and Bernie Moreno urged for a thorough review of the tax implications of digital assets.

The two legislators strongly warned that the merger of tax law and accounting guidelines has the potential to create massive tax liabilities for crypto businesses with unrealized profits – and that’s just plain wrong.

The CAMT, initiated under the Inflation Reduction Act, imposes a 15% minimum tax on a company's adjusted financial statement income (AFSI) above $1 billion in annual earnings. This figure is based on financial statements prepared under Generally Accepted Accounting Principles (GAAP), rather than traditional tax rules.

However, in December 2023, the Financial Accounting Standards Board (FASB) released ASU 2023-08, a rule requiring companies to value digital assets based on fair-value (mark-to-market) accounting. Unfortunately, this change has caused unrealized crypto gains to be counted towards taxable income – not what congress or FASB intended.

"This is like getting a speeding ticket while parked," Lummis tweeted when she shared the letter, "We're asking #Treasury to stop this #bitcoin roadblock."

Lummis and Moreno have urged the Treasury to exclude unrealized crypto gains from tax calculations, providing a reprieve for crypto firms by avoiding liquidation of their digital assets to meet tax obligations. Foreign firms, which operate under different accounting standards, will remain unaffected.

Failure to address the senators' concerns, the letter states, will discourage companies from maintaining large digital asset portfolios. The senators want interim guidance before the final rule is solidified, with the hope that prompt action can prevent this policy from taking hold.

This call to Treasury comes after a wave of pro-crypto action under President Trump, including the repeal of the IRS's DeFi broker rule in April.

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If this tax policy stands, it could accelerate the exodus of crypto firms seeking friendlier tax conditions and further widen the competitive gap between U.S. and international players. Keep an eye on this developing situation and let us know your thoughts at [insert contact info]!

  1. Senators Cynthia Lummis and Bernie Moreno have raised concerns about the potential impact of the 2022 Corporate Alternative Minimum Tax (CAMT) on U.S. crypto companies, particularly regarding competitiveness with foreign firms.
  2. In a letter to Treasury Secretary Scott Bessent, the senators urged for a review of the tax implications of digital assets, expressing concerns that the merger of tax law and accounting guidelines could create massive tax liabilities for crypto businesses with unrealized profits.
  3. The problem, according to the senators, lies in the new accounting guidelines, which require companies to value digital assets based on fair-value (mark-to-market) accounting. This has caused unrealized crypto gains to be counted towards taxable income.
  4. Lummis and Moreno have called for unrealized crypto gains to be excluded from tax calculations, providing a reprieve for crypto firms by avoiding liquidation of their digital assets to meet tax obligations.
  5. Foreign firms, which operate under different accounting standards, will remain unaffected if this policy is not addressed.
  6. The senators' call to Treasury comes after a wave of pro-crypto action under President Trump, including the repeal of the IRS's DeFi broker rule in April.
  7. If this tax policy stands, it could accelerate the exodus of crypto firms seeking friendlier tax conditions and further widen the competitive gap between U.S. and international players.
  8. This developing situation underscores the importance of crypto regulation, decentralized finance (DeFi), and the wider adoption of digital assets in business, politics, and general-news.

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