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ABA Tax Section Comments on Proposed Crypto Broker Reporting Regulations

On December 20th, 2023, the American Bar Association Tax Section published detailed comments and recommendations (the “ABA Comments”) on the proposed crypto broker reporting regulations.  As discussed here, the New York State Bar Association Tax Section also recently provided comments and recommendations on the same regulations.  These proposed regulations elaborate on the 2021 changes to the Internal Revenue Code that expanded the definition of broker to include “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person,” and are discussed in detail here

 The ABA Comments recommend:

  • Including guidance on transactions with multiple brokers in order to limit the number of Form 1099-DAs received with respect to digital asset sales or exchanges;
  • Clarifying the applicability of the back-up withholding rules;
  • Expanding the exceptions to the facilitative service concept to prevent wallet providers from being classified as brokers;
  • Excluding Remote Procedure Calls (“RPC”) software providers from the digital asset middleman definition;
  • Expanding the validation exception to facilitative services to cover sequencer services;
  • Providing clear guidance to identify who must report decentralized finance transactions;
  • Excluding certain items from the definition of digital assets, including payment stablecoins and certain non-fungible tokens;
  • Excluding from the broker reporting rules liquidity pool transactions, wrapping transactions, and digital asset lending until additional guidance is provided detailing whether such transactions constitute sales or exchanges;
  • Clarifying the specific identification rules for determining basis in transactions with multiple brokers;
  • Providing that standard orders are permitted for purposes of identifying digital assets sold;
  • Expanding the rules for non-custodial digital assets to allow specific identifications from any wallets or account;
  • Pushing out the effective date for gross proceeds and basis reporting;
  • Creating safe harbors for non-U.S. brokers and middlemen wanting to avoid broker reporting by excluding U.S. users; and
  • Delaying implementation of broker reporting rules for non-U.S. brokers until the U.S. rules are aligned with international standards.

The ABA Comments are available online here.

Key Contacts

Adam Blakemore
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Linda Z. Swartz
T. +1 212 504 6062

Jon Brose
T. +1 212 504 6376

Andrew Carlon
T. +1 212 504 6378

Mark P. Howe
T. +1 202 862 2236

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