The Virtual Currency Tax Fairness Act is being introduced today by Senator Patrick Toomey (R-PA) and democratic Senator Krysten Sinema (D-AZ) to provide tax exemption for bitcoin transactions up to $50, or trades which net a gain of up to $50, according to CNBC.
“While digital currencies have the potential to become an ordinary part of Americans’ everyday lives, our current tax code stands in the way,” Toomey said, regarding the bipartisan effort.
Senator Toomey isn’t alone in his opinion, as multiple introductions of legislation have been presented in an effort to ease tax requirements for those looking to transact in or invest small amounts of money into bitcoin and other cryptocurrencies.
Congressional representative Suzan K. DelBene from Washington previously sponsored the Virtual Currency Tax Fairness Act introduced earlier this year that sought to exempt gains from bitcoin transactions of less than $200.
Similarly, senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) introduced the Responsible Financial Innovation Act in an effort to also exempt taxes on capital gains up to $200 from bitcoin payments for goods and services.
Currently, the Internal Revenue Service (IRS) states that “the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability.”
Therefore, any transaction involving the exchange of bitcoin is considered a taxable event by the IRS, regardless of how small the transaction may be. This sweeping generalization pre-supposes that bitcoin is strictly an investment vehicle, even though the IRS recognizes that “it operates like ‘real’ currency.” Thus, legislators are met with the struggle of lessening the burden of taxes regarding bitcoin’s use as a currency.
However, Congress will be taking an extended recess in August before upcoming midterm elections, and Toomey currently has no plans to run for re-election. Therefore, if Congress fails to take action, Toomey might not be around to carry this torch in future sessions.