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Highlights
- Lummis-Moreno proposal seeks to exclude unrealized crypto gains from CAMT tax calculations.
- FASB’s fair value rule exposes firms to CAMT tax on unsold crypto assets.
- Missouri may scrap all capital gains taxes, including crypto, pending governor’s signature.
US Senators Cynthia Lummis and Bernie Moreno have introduced a new legislative effort aimed at easing the crypto tax treatment of digital assets. Their proposal comes amid growing concerns that current tax laws may lead to unfair burdens on companies holding cryptocurrency.
Cynthia Lummis, Bernie Moreno Proposal to Ease Crypto Tax
According to a filing by Cynthia Lummis and Bernie Moreno to the US Treasury, there is a need to address issues caused by the Corporate Alternative Minimum Tax (CAMT), which was introduced in the 2022 Inflation Reduction Act. CAMT imposes a 15% minimum tax on corporations with average adjusted financial statement income (AFSI) of at least $1 billion over a three-year period.
The crypto tax proposal by Cynthia Lummis focuses on excluding unrealized gains and losses from the fair value accounting of digital assets in the calculation of AFSI. These exclusions would prevent companies from facing crypto tax based on temporary changes in market prices. Lawmakers drafted the legislation in response to a rule that the Financial Accounting Standards Board (FASB) issued, which requires companies to report digital assets at fair market value on income statements.
The sponsors argue that the combination of CAMT and the new accounting rule may result in tax liabilities that exceed a firm’s actual economic gains. They believe this outcome discourages investment in digital assets and may push companies to move operations outside the United States.
FASB Rule and Corporate Tax Exposure
In late 2023, FASB released Accounting Standards Update 2023-08, which mandates fair value reporting for digital assets under Generally Accepted Accounting Principles (GAAP). This move was designed to increase transparency but unintentionally subjected firms to crypto tax liabilities under CAMT for unrealized gains.
Companies must now mark digital assets like Bitcoin and Ethereum to market at the end of each quarter. They report losses on the balance sheet and record gains as income, even when they do not sell the assets.
US Senators Cynthia Lummis and Moreno, in their proposal on tackling crypto tax, call on the Department of the Treasury to use its authority under sections 56A(c)(2), (15), and (16) to adjust AFSI calculations. Their proposal urged the Treasury to disregard unrealized gains and losses related to digital assets when computing CAMT liability.
Crypto Industry Concerns and Precedents
According to US Senator Cynthia Lummis and Bernie Moreno, the lack of clear rules could force U.S.-based companies to liquidate their holdings to meet CAMT liabilities. The new requirements could cause businesses to move their activities to countries with more favorable tax systems. In addition, they underline that domestic firms face a lack of tax equality with foreign companies, since fair value accounting for crypto assets is not mandatory under international standards.
In 2023, the IRS recognized these kinds of issues, responding with Notice 2023-20 that gave temporary relief to the insurance sector under CAMT. Amid these tensions, IRS Digital Asset Initiative leaders Seth Wilks and Raj Mukherjee have recently exited before 1099-DA rollout speculating fear among the crypto industry. Subsequently, the Senators suggest that this event demonstrates why Treasury should act urgently to prevent unwanted developments in the digital asset market.
They urge Treasury to issue interim guidance immediately and to modify the final rule to exclude fair value adjustments for digital assets.
“This would help ensure fair treatment and support innovation in digital finance,” the proposal says.
Missouri State Passes Bill to Eliminate Capital Gains Tax
In a separate development from the Cynthia Lummis proposal, Missouri passed House Bill 594, which would eliminate state capital gains tax, including on crypto assets. The bill is pending the governor’s signature. If signed, Missouri would become the first state to remove capital gains tax on all asset classes, including Bitcoin and XRP.
Meanwhile, federal policy changes remain uncertain. A prediction market on Kalshi gives only a 12% chance that a second Trump administration will eliminate capital gains taxes on crypto in 2025. Another market, Polymarket, shows slightly more optimism, though still below a majority.
Donald Trump recently suggested replacing income taxes with tariffs as a long-term reform goal, raising speculation about potential changes to crypto taxation. However, no formal policy has yet to get introduced to that effect at the federal level.
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