Why Are There New Crypto Rules in the Infrastructure Bill?
Plus: California's new pork regulations, Florida's COVID-19 boom, and more...
Crypto taxes are infrastructure. The infrastructure bill—"to authorize funds for Federal-aid highways, highway safety programs, and transit programs, and for other purposes"—is here, and it's 2,702 pages long. That's a lot of "other purposes." And one of the most notable noninfrastructure pegs relates to cryptocurrency.
First, the good news: Cryptocurrency holders face no new regulations under the proposal. "The pending bill does not create new reporting requirements for individuals, create new penalties for individuals, or impose any new obligations on individual cryptocurrency holders at all," notes Forbes.
But cryptocurrency exchanges and brokers do face new reporting requirements—and penalties—for digital assets. A digital asset is defined as "any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary."
Under language tucked down on page 2,433 of the bill, "any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person" will have to report each transaction to the federal government on an information return. The new rule would take effect on January 1, 2023.
Here's where the bad news for cryptocurrency holders comes in: The information reported by exchanges would give the IRS a new tool to go after individuals who don't fully or accurately report digital assets on their tax returns. As Forbes explains:
The proposed legislation, if passed, would have a significant impact on both investors and exchanges. Exchanges will need to undertake significant efforts to comply with the reporting regime. Investors, on the other hand, won't have to "do" anything. But under the new law, all of the information that the IRS would normally receive when an investor sells a share of Amazon stock will now be sent to the IRS when an investor sells one Bitcoin, one Ethereum, or the like. There's a lot to be sorted out: what will happen with crypto stored in cold storage, wallets not on exchanges, so-called "self custody." The proposed legislation does not address this "self-custody" cryptocurrency, because it is analogous to cash under a mattress. It is difficult to trace and even more difficult to devise an information reporting scheme that would encompass such an asset. Individual cryptocurrency owners and investors must still pay attention, however, because it is even more likely that the IRS will be made aware of their transactions and expect them to be reported on a tax return.
Lawmakers are hoping to use money from enforcing cryptocurrency taxes to help fund all these new programs in the infrastructure bill.
"By strengthening tax enforcement on such digital assets, the federal government could raise $28 billion over a decade, according to an estimate by the Joint Committee on Taxation, which analyzed the plan. While that would be just a small fraction of the $550 billion that lawmakers have proposed in new federal spending on infrastructure, it is among the few fresh sources of revenue included in the plan," The New York Times reports.
"With regulators circling the industry, cryptocurrency firms have been stocking up on high-priced lobbyists to help shape the coming rules," the Times adds.
There it is. The bipartisan infrastructure bill pic.twitter.com/0vypuMIQFw
— Leigh Ann Caldwell (@LACaldwellDC) August 1, 2021
The infrastructure bill does not list specific penalties for cryptocurrency exchanges and digital asset brokers that fail to file proper information returns, but does amend the IRS code to include digital assets "in the definition of what is included in an information return subject to penalty," notes Moore, a tax litigator who calls information reporting penalties "the most onerous and costly in the Internal Revenue Code…both in terms of the penalty assessed and the extraordinarily difficult path to contesting them in court."
Cryptocurrency exchanges could see $250 penalties per customer whom they didn't accurately furnish with an information return or for whom they didn't accurately furnish a return to the IRS, with even steeper fees if any mistake was judged to be intentional. (As Moore points out, "Coinbase, the first major cryptocurrency exchange to go public, has over 56 million customers.")
More general information on the bill here and here.
FREE MINDS
More issues with the Provincetown, Massachusetts, study undergirding the Centers for Disease Control and Prevention's (CDC) updated guidance on masks. See this thread from Joseph Allen, associate professor at the Harvard T.H. Chan School of Public Health and a member of The Lancet's COVID-19 commission, for a breakdown:
1. Exposure misclassification
This is more important than the attention it's getting. It calls into question Figure 2, which underpins the conclusion that "vaxxed=unvaxxed". Turns out that latter category is a mixed bag. They have the data to answer thishttps://t.co/M5Xr6JP7kd
— Joseph Allen (@j_g_allen) July 31, 2021
3. Weak proxies (Part 1)
Ct values are only weak proxy of viral load. The authors, to their credit, are clear to note this ("crude correlation"), whereas CDC used this weak proxy as strong evidence that vaxxed can transmit. pic.twitter.com/4zzv2iH9gB
— Joseph Allen (@j_g_allen) July 31, 2021
If the argument is that CDC changed policy based on many factors, that would be perfectly reasonable. But that's not what they said. Instead, what they told us was that there was a new, game-changing study that suggested vaxxed transmit the same as unvaxxed. It was incorrect.
— Joseph Allen (@j_g_allen) July 31, 2021
More on Provincetown from Reason's Jacob Sullum here.
FREE MARKETS
Did California effectively outlaw bacon? New animal welfare rules could keep many pork operations from selling meat in the state. From Bloomberg:
At the beginning of next year, California will begin enforcing an animal welfare proposition approved overwhelmingly by voters in 2018 that requires more space for breeding pigs, egg-laying chickens and veal calves. National veal and egg producers are optimistic they can meet the new standards, but only 4% of hog operations now comply with the new rules. Unless the courts intervene or the state temporarily allows non-compliant meat to be sold in the state, California will lose almost all of its pork supply, much of which comes from Iowa, and pork producers will face higher costs to regain a key market….
With little time left to build new facilities, inseminate sows and process the offspring by January, it's hard to see how the pork industry can adequately supply California, which consumes roughly 15% of all pork produced in the country.
QUICK HITS
• Florida is seeing its highest number of COVID-19 cases since the start of the pandemic, making up one-fifth of new COVID-19 cases across the U.S., according to the CDC.
• Exurbs gain during the pandemic. "The biggest population shift was from urban areas to rural neighborhoods and exurbs," reports Business Insider on a new analysis of migration data. But "overall, changes in occupancy between urban, suburban, and exurban areas are moderating. Population shifts were most intense last summer and are now the smallest they've been since the pandemic began."
• There's evidence that the pandemic housing boom is finally starting to subside.
• Some Democrats seem to want to extend the federal eviction moratorium forever.
• Can Americans please stop championing China's tech policy?
• The prekindergarten system Biden has held up as a model for the nation "has an accountability problem," reports Politico.
• Cheers! Massachusetts might move to overturn its happy hour ban.
