- Cryptocurrency assets’ tax loophole is being targeted by US senators working on a $12.7 billion wildlife conservation bill.
- Three people familiar with the negotiations told E&E News that senators propose clarity on the “wash sale rule.”
- Cryptocurrencies would be defined as securities to apply the US Internal Revenue Service’s “wash sale rule” and raise up to $12.5 billion in a decade.
Cryptocurrency assets, if treated like securities, can help pay $12.5 billion over the next ten years and fund the historic “Recovering America’s Wildlife Act.” If applied to cryptocurrencies as well, the US Internal Revenue Service’s “wash sale rule” could close the loophole in crypto taxation.
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Cryptocurrency assets treated as securities in final RAWA negotiations
Cryptocurrency taxation has a loophole that can be closed by defining the asset class as securities. US Senators are closing in on negotiations on the bipartisan Recovering America’s Wildlife Act (RAWA).
For months the bipartisan bill was stalled over how it would be paid for, sources close to the matter told E&E News about a breakthrough in negotiations. Senators are considering closing a tax loophole and creating a funding mechanism that generates up to $12.5 billion in the next ten years to pay for RAWA.
Such a mechanism would require clarity on the definition of digital assets. Three anonymous sources told E&E News that the US Internal Revenue Service’s wash sale rules that apply to securities could be applied to cryptocurrencies.
The US Senate Finance Committee, a body that has jurisdiction over the funding, confirmed the application of the “wash sale rule” to crypto is an option in the ongoing discussion.
Virtual asset taxation could raise up to $12.5 billion in ten years
RAWA would provide $1.3 billion per year to states and territories and $97.5 million per year for indigenous tribes, to assist in their efforts to conserve, restore and protect wildlife and habitat. A bipartisan coalition in the House and Senate support the objectives of the legislation and view it as transformative.
RAWA is looked at as a natural successor to the Great American Outdoors Act of 2020 that fully and permanently reauthorized the Land and Water Conservation Fund for the first time since the program’s creation in the 1960s.
The Senate’s initial plan was to collect fees and fines paid by polluters. However, lawmakers in both parties were concerned that it would fail to sufficiently address the ballooning federal deficit.
The new cryptocurrency taxation rule would prohibit investors from claiming losses on securities sold at a loss and then reacquiring the same or similar asset within 30 days. The wash sale rule offset would achieve either $11.2 billion or $12.5 billion over 10 years, according to a source close to the matter.
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