Blockchain Association Urges Congress for Crypto Tax Clarity After Clarity Act Failure

The Blockchain Association has sent a letter to Congressional leadership urging the passage of bipartisan digital asset tax legislation. This appeal comes in the wake of the Clarity Act's recent failure in the Senate, marking the group's first significant push on tax issues since that setback.

Signed by Chief Policy Officer Lindsay Fraser, the letter was addressed to key leaders including Majority Leader John Thune and Minority Leader Chuck Schumer. It argues that the existing tax rules for the 67 million Americans holding digital assets are outdated and need reform.

To facilitate communication between constituents and their representatives, the Blockchain Association has launched a new website, TaxClarityforAmerica.com. The letter outlines several requests that have become familiar in the ongoing tax debate, including:

• A de minimis exemption for small transactions
• Cash treatment for stablecoins
• Taxation on mining and staking rewards at the time of sale rather than receipt
• Broker reporting limited to firms holding customer assets
• Wash sale rules that do not interfere with regular transactions
• A safe harbor for foreign traders on U.S. exchanges
• A mark-to-market election
• R&D credit eligibility for blockchain development

While the letter highlights the need for these changes, it notably does not endorse any specific bills currently under consideration. The House has already moved forward with the Digital Asset Tax Certainty Act, which includes provisions for capital gains reporting exemptions on small transactions, while the Senate is reviewing the ADAPT Act, which offers similar exemptions for stablecoins.

As Congress is set to reconvene after the November 3 midterms, the urgency for tax clarity remains high, especially with the impending lame-duck session. The Blockchain Association's refusal to endorse either bill suggests that the industry is seeking more comprehensive reforms than what has been proposed so far.

New Developments in Crypto Tax Compliance

• The IRS is set to overhaul its Voluntary Disclosure Program, making it easier for taxpayers to admit past tax mistakes without facing heavy penalties.
• Changes to the program are expected to be announced before December, aiming to resolve cases within 120 days of submission.
• Lower penalties and flexible payment structures, including installment plans, will be introduced for taxpayers with unreported digital asset gains.
• Crypto transactions will now fall under the general Voluntary Disclosure Program framework, allowing for streamlined processes similar to other taxpayers.
• New Form 1099-DA reporting requirements for 2025 will require custodial platforms to report digital asset sales directly to the IRS.
• Section 502 of the Digital Asset Tax Certainty Act, which proposes reduced penalties for digital asset violations, has passed the House Ways and Means Committee.
• The IRS aims to reduce the deterrents associated with the voluntary disclosure process, which has been criticized for being slow and punitive.