- US Senators Lummis and Moreno sponsor crypto tax reform aimed specifically at the 15% Corporate Alternative Minimum Tax (CAMT).
- It applies to companies with an AFSI of $1 billion or more over three years.
- The Senators call on the Treasury to exempt digital assets from fair value changes for equitable treatment.
US Senators Cynthia Lummis and Bernie Moreno have proposed legislation to reform crypto taxation. According to a filing, it targets the Corporate Alternative Minimum Tax (CAMT), which imposes a 15% tax on large corporations. They argue that the law creates unfair tax burdens on companies holding cryptocurrency under current financial accounting standards.
The CAMT enacted in the 2022 Inflation Reduction Act targets companies with a minimum of $1 billion of average adjusted financial statement income (AFSI) over three years. The concern is the accounting of digital assets, particularly in light of the recent changes in accounting standards that have incorporated virtual assets’ unrealized gains and losses into AFSI.
Crypto Firms Face Taxation on Unrealized Gains
The Financial Accounting Standards Board (FASB) has released a rule that mandates companies to employ fair value accounting for digital assets. This implies that companies might report crypto holdings using their current price value. Even if the price increases without selling the asset, the company might already have a tax liability on unrealized profit.
The senators warn that this could create significant tax liabilities disconnected from real economic profit. They argue that such taxation may drive businesses to shift operations overseas to avoid these rules. The combination of CAMT and fair value reporting creates a harsh environment for companies investing in digital assets in the U.S.
Initially, crypto firms were not subject to such taxation. But with the new standard ASU 2023-08 in effect, companies holding Bitcoin and other cryptocurrencies must now report them under the mark-to-market method. This change increases the risk of taxation on volatile, unsold assets, putting companies at a financial disadvantage.
Senators Urge US Treasury Action Regarding CAMT
Lummis and Moreno point out that firms in other countries are not subject to the same fair value rules. This difference gives foreign companies a competitive edge and creates tax inequality. U.S.-based digital asset firms may have to sell off crypto holdings to meet CAMT obligations, harming innovation and growth.
In 2023, the IRS recognized similar issues when it provisionally exempted insurance companies from CAMT in its Notice 2023-20. During the same time, the resignation of IRS Digital Asset Initiative leaders Seth Wilks and Raj Mukherjee before 1099-DA implementation has caused concern throughout the crypto space, drawing attention to more far-reaching systemic problems.
The senators appeal for the prompt action of the Treasury by promulgating interim guidelines and updating the final CAMT rules. More particularly, they seek digital assets not to be subject to fair value adjustments. They aim to establish a tax framework that fosters innovation and achieves fair treatment of U.S.-based crypto businesses.
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