Emmer, Blockchain Caucus members seek improved IRS policy for virtual currencies

Because Americans are increasingly using virtual currencies, there is a need for the Internal Revenue Service (IRS) to provide clearer tax policy, according to U.S. Rep. Tom Emmer (R-MN) and a bipartisan group of his colleagues on the congressional Blockchain Caucus. 

For capital gains purposes when making a charitable contribution, the IRS currently instructs taxpayers to quote the exchange rate of their cryptocurrency. For contributions of $5,000 or more in cryptocurrency, the IRS requires taxpayers to have the value of their cryptocurrency donation appraised by an “IRS appraiser,” despite the exchange rate for these assets being easily accessible and verifiable on public exchanges, according to a June 10 letter the members sent to IRS Commissioner Charles Rettig.

“The current guidance by the IRS is, in many ways, arbitrary and in need of a correction,” Rep. Emmer said in a statement last week. “The market value of these cryptocurrencies is readily available on public bitcoin exchanges, so requiring an appraisal creates additional and unnecessary hurdles for those looking to donate to the charity of their choice via crypto.” 

Rep. Emmer added that, in general, “inconsistent regulation can and will have a chilling effect on the expanded use of digital currencies and financial technology in our society. In this case, the IRS’s guidance creates more problems than it solves.”

According to their letter, which was signed by six other caucus members, including U.S. Rep. Darren Soto (D-FL), the current IRS approach is inconsistent with the rules determining virtual currency fair market value for purposes of a deductible donation where the IRS directs a taxpayer to comply with Form 8283 for Noncash Charitable Contributions. 

“This contradiction can be easily reconciled by amending Form 8283 such that a taxpayer making a charitable contribution using virtual currency can report the donation value under Section A as they would securities or other assets with readily available price indices,” wrote Rep. Emmer and his colleagues. “Ideally the IRS will swiftly clarify and ameliorate the contradiction so as to not further disincentivize charitable giving using these important new payment technologies.”

The Coin Center, the Chamber of Digital Commerce, and the Blockchain Association endorsed the letter.