To amend the Internal Revenue Code of 1986
The bill, dubbed the “Virtual Value Tax Fix Act of 2019,” was initially introduced by Representative Ted Budd (NC-R) on July 25 and referred to the Committee on Ways and Means. The bill seeks to introduce amendments to the Internal Revenue Code of 1986, which specifically determines:
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.”
The aim of the bill is to ensure that “the exchange of virtual currency for virtual currency of like kind shall be treated in the same manner as the exchange of real property for real property of like kind.”
In effect, if the bill became law, it would preclude cryptocurrencies from double taxation under the Internal Revenue Code.
“The Safe Harbor”
In July, U.S. Congressman Tom Emmer reintroduced his Safe Harbor for Taxpayers with Forked Assets bill in order to foster blockchain industry growth in the U.S. by lessening the burden on businesses to figure out relevant tax laws. In Emmer’s own words, “taxpayers can only comply with the law when the law is clear.”
The Safe Harbor bill is not intended to eliminate taxes on a hard-forked blockchain, but aims to provide a safe harbor to investors who do not properly account for a hard fork in calculating their tax returns.
Budd previously testified to the House of Representatives Ways and Means Committee on purported issues with current tax laws on cryptocurrencies in June. Budd argued that cryptocurrencies should have a de minimis tax exemption like foreign currencies.