U.S. Rep. Tom Emmer (R-MN) introduced bipartisan legislation that would require the Internal Revenue Service (IRS) to provide clarity on the issue of digital assets and would insulate taxpayers who, at no fault of their own, could be subject to potential tax liabilities and penalties pertaining to forked assets.
Rep. Emmer on May 17 sponsored the Safe Harbor for Taxpayers with Forked Assets Act of 2021, H.R. 3273, with original cosponsor U.S. Rep. Darren Soto (D-FL), which would protect taxpayers who own forked assets from any penalties and fees that the IRS may try to impose on them until the IRS provides clear and consistent cryptocurrency tax guidance on how these transactions should be managed.
“We should be embracing emerging technologies and providing a clear regulatory system that allows innovation to flourish in the United States,” Rep. Emmer said. “A safe harbor will protect taxpayers until the IRS takes steps to improve their guidance.”
In October 2019, the IRS issued guidance stating that the receipt of a forked virtual currency is a taxable event, even though taxpayers who receive a forked asset receive it automatically at the moment of the fork, often unwillingly and unknowingly, resulting in an additional tax burden, according to Rep. Emmer’s office.
“Taxpayers suffering from a lack of tax guidance are being unfairly punished for investing in an emerging technology,” said Rep. Emmer. “What has been issued by the IRS so far is not pragmatic and has not supported the technology nor those who engage with it.”
The Chamber of Digital Commerce, Coin Center, and the Blockchain Association support H.R. 3273, which has been referred to the U.S. House Ways and Means Committee for consideration.
“Just like every other federal agency, the IRS must keep up with the rapid pace of technology or risk losing American leadership in innovation,” Rep. Emmer said.