The US Senate Finance Committee has issued an open letter to the digital asset community and other stakeholders, seeking their views on the taxation of digital assets. The letter, dated July 11, 2023, was signed by Chairman Ron Wyden and Ranking Member Mike Crapo.

The rapid emergence of digital assets has raised new regulatory issues, including their proper treatment under federal tax law. The Internal Revenue Code of 1986, as amended (IRC), draws distinctions between types of property, without a direct classification for digital assets. This uncertainty creates complex reporting issues for taxpayers and warrants examining how the IRC can provide clearer guidance for taxpayers on the treatment of digital asset transactions.

The Finance Committee initiated a bipartisan effort to identify key questions that lie at the intersection of digital assets and tax law. To provide background on current law, Chairman Wyden and Ranking Member Crapo asked the Joint Committee on Taxation to compile a report on the taxation of digital assets.

The letter seeks to better understand how Congress can address the tax challenges and opportunities presented by digital assets. It asks a series of detailed questions on topics such as marking to market for merchants and distributors, trading safe harbor, treatment of digital asset lending, wash sales, build sales, timing and source of income earned from participation and mining, non-functional currency, FATCA and FBAR reports, and valuation and justification.

The Committee will collect responses to these questions on a rolling basis through September 8, 2023. Interested parties are asked to send electronic copies of their responses to Committee staff at answers@finance.senate.gov.

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