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Treasury and the IRS on August 25 issued lengthy proposed regulations (Proposed Regulations) regarding information reporting, determination of the amount realized and basis, and backup withholding for certain digital asset sales and exchanges.
The regulations, if finalized as proposed, would impose obligations to file information returns and furnish payee statements on dispositions of digital assets based on companies engaging in a broad array of services or activities related to digital assets.
Key provisions of the Proposed Regulations would:
The preamble to the Proposed Regulations solicits feedback on over 100 specific matters.
These reporting requirements generally are proposed to become effective for sales and exchanges of digital assets effected on or after January 1, 2025, with later effective dates for basis reporting and transfer statements.
Written or electronic comments on the Proposed Regulations must be received by October 30, 2023. A public hearing on the regulations has been scheduled for November 7 (and November 8, if needed). Requests to attend the hearing(s) must be made by November 3.
Action item: Any person who facilitates the disposition or transfer of digital assets should review the Proposed Regulations and consider submitting comments or participating in the public hearing. Companies also should assess (1) what data they collect about customers, users, and transactions and (2) their information reporting systems, processes, and documentation to identify what alterations may be required in seeking to comply with these regulations if adopted as proposed. Significant implementation efforts likely will be required based on the (1) expansive scope of broker and transactions in scope, (2) specific information to be obtained and reported, and (3) presumption rules if certain data is not available.
See our Policy on Demand episode, Digital asset regulations: What you need to know, for additional discussion of the Proposed Regulations.
Global and US Tax Knowledge Management Leader, PwC US