House Ways and Means Circulates Draft Crypto Tax Bill

The House Ways and Means Committee circulated a draft cryptocurrency tax bill to members this week ahead of a scheduled committee hearing next week. The text was shared to give lawmakers time to review proposed language that could guide debate on how digital assets are taxed and reported.

The circulation came from the committee chaired by Rep. Jason Smith. Committee staff indicated the hearing will be used to discuss the draft's main points, identify areas needing clarification and gather input from outside witnesses before any formal markup.

The draft addresses how existing tax rules should apply to cryptocurrencies and other digital assets. It focuses on reporting taxable events, defining which entities qualify as brokers for information reporting and explaining how transfers, staking and other crypto-specific activities should be treated under the tax code.

Portions of the text aim to reduce ambiguity that has complicated filing and enforcement. Lawmakers balancing priorities include making compliance clearer for taxpayers and intermediaries while expanding reporting to help the Internal Revenue Service track taxable gains from digital asset transactions.

Additional details in the circulated draft concentrate on information reporting and recordkeeping. The proposal specifies which platforms and service providers would have reporting obligations and what types of transactions would trigger reports to the IRS. It also considers peer-to-peer transfers, decentralized finance activity and rewards from staking and yield-generation platforms.

The draft would propose changes to existing forms and deadlines to accommodate crypto-specific reporting. Industry participants are expected to highlight practical implementation challenges at the hearing, including tracking cost basis across wallets and recording transactions that do not pass through a centralized intermediary.

Tax practitioners note many taxpayers do not keep the detailed records needed to calculate gains or losses for frequent or complex crypto activity. Crypto firms have warned that broad reporting requirements could be difficult to meet without clear standards for data capture and reconciliation.

Lawmakers circulated the draft after members and stakeholders raised questions about the broker-reporting provision in the 2021 infrastructure law, which left uncertainty about which crypto activities and platforms were covered. The IRS and Treasury have since issued guidance, and some members of Congress are seeking statutory clarity to reduce disputes and enforcement costs.

The hearing next week will be an early public step in a process that could lead to changes in the tax code for digital assets. Committee members could propose amendments during committee work and may seek to include agreed provisions in broader tax or budget bills. Any final change to federal tax law would require approval by the full House, the Senate and the president.

Observers expect the committee's approach to affect exchanges, custodial services, wallet providers and taxpayers who hold or trade crypto. Lawmakers want to reduce opportunities for noncompliance while providing taxpayers and businesses a predictable framework for reporting digital-asset activity.