The need for clear tax guidance and the absence of accounting standards for virtual currency users is a mission critical issue for companies seeking to invest and innovate in this exciting technology frontier and may hold back economic growth in the United States.

+ TAX TASK FORCE

The IRS first addressed the issue of taxation of digital currency transactions in 2014, declaring that virtual currency should be treated as property for tax purposes.

That classification was a major setback for the adoption of virtual currency because taxpayers were required to track gains and losses in the value of virtual currency each time it was used, hindering adoption for payments for goods and services. The 2014 guidance also left many open questions about the tax treatment of events unique to virtual currencies, such as airdrops and forks.

Five years later in July 2019, the IRS launched a major enforcement effort by issuing more than 10,000 letters to taxpayers who had exchanged virtual currency asking them to review their transactions to determine if they had fully complied with their reporting and filing requirements. Shortly thereafter, in October 2019, the IRS issued additional guidance on the tax treatment of hard forks and airdrops, but again this new effort left many open questions and failed to provide clear and technically precise advice to taxpayers and tax professionals.

+ Accounting Initiative

The United States currently lacks accounting standards for digital assets.

In June 2019, the International Financial Reporting Standards Interpretations Committee published an agenda decision in which it found that digital assets were considered intangible assets for accounting purposes under IAS 38.

The Financial Accounting Standards Board, which sets accounting standards for private and public U.S. companies, has not developed any accounting standards for digital assets.  The lack of uniform standards has led to companies with crypto holdings to figure out the appropriate accounting method on their own.  This impacts financial statements and discourages companies from buying and holding digital assets.  

+ OUR STRATEGY

The Chamber is engaging policymakers through the work of its Tax Task Force and Accounting Initiative to discuss recommendations for tax policy and the classification of digital assets for accounting purposes.

The Tax Task Force is working to review the recent IRS guidance and develop feedback and strategies. The Accounting Initiative is monitoring how companies are accounting for digital assets and educating standard-setting bodies in the United States and overseas on the use of digital assets. It is advocating for fair value accounting treatment for digital assets.

+ ACCOMPLISHMENTS

Oct 2019 – Launch of the Tax Task Force, led by experienced professionals in tax compliance, to evaluate the IRS guidance, identify issues that need to be addressed, and advocate for a tax framework for virtual currency that will promote its use and adoption.

Provided feedback on the 2019 IRS guidance to the Government Accountability Office.

Currently developing feedback for the IRS in response to its October 2019 guidance.

Advocated for accounting standards for virtual currency to the Financial Accounting Standards Board.

2019 – Wrote to the IFRS Foundation to provide input on its tentative agenda decision to classify digital assets as intangible assets under IAS 38.

+ RESOURCES & LINKS