Ways and Means Committee advances Rep. Mike Carey’s CRA to overturn IRS crypto rule
At a February 26 mark-up, the House Ways and Means Committee voted 26-16 to advance Rep. Mike Carey’s (R-Ohio) resolution of disapproval to overturn the IRS’s broker rule on decentralized finance, known as “DeFi.”
Earlier in the week, Americans for Tax Reform led a coalition of 18 center-right groups in a letter calling on Congress to overturn this intrusive new rule attacking cryptocurrencies.
The rule expands the definition of a broker to include software developers working in crypto, imposing burdensome reporting requirements on those developers and other DeFi participants. It goes well beyond targeting actual brokers and attempts to capture all those in decentralized finance, a clear power-grab by regulators to invade taxpayers’ privacy.
Rep. Carey introduced a resolution of disapproval under the Congressional Review Act (CRA) to nullify the IRS rule. The CRA empowers Congress to strike down agency rules by passing a resolution of disapproval through both the House and Senate for the president’s signature. If adopted, a CRA both overturns the rule in question and “salts the earth” by prohibiting the agency from issuing any substantially similar rule in the future.
As Chairman Jason Smith (R-Mo.) noted while introducing the resolution at the mark-up, the rule has “massive impacts on millions of Americans taxpayers and the IRS itself, requiring millions of taxpayers to file a new form 1099 and inundating an already-inefficient IRS with additional paperwork and burden.”
DeFi participants largely do so to protect their privacy from government overreach, making the privacy invasion all the more perverse. As the ATR-led coalition argued in its letter:
The rule also requires these industry participants to first collect and then report to the government transaction details and the personal identifying information of tens of millions of users.
One need look no further than the recent prosecution of IRS contractor Charles Littlejohn, who stole private taxpayer files that were subsequently leaked to the press.
Rep. Carey argued at the mark-up that,
“While the IRS authority to designate self-custodial wallet providers as brokers is legally questionable, it is nevertheless inappropriate to impose consumer- and technology-related regulatory policy through the tax code, especially in the absence of explicit delegation of the legislative authority.”
In addition to the Carey resolution in the House, Senator Ted Cruz (R-Texas) has introduced a companion in the Senate.
Americans for Tax Reform applauds the vote to report the resolution favorably out of the Ways and Means Committee and urges Congress to swiftly pass the CRA, overruling the IRS’s overreach.