U.S. Senators Cynthia Lummis and Bernie Moreno have advised the Treasury to provide necessary clarity on the "unfair tax burden" on crypto companies in the country.
The two senators wrote a joint letter to Treasury Secretary Scott Bessart, with Senator Lummis sharing a copy on X.
In the letter, the senators stated that the current tax laws could put American digital asset companies at a disadvantage compared to their overseas counterparts. Hence, this could threaten America's leading position in the fast-growing industry.
The basis of this issue is the Corporate Alternative Minimum Tax (CAMT), which was introduced in 2022 under the Inflation Reduction Act. CAMT applies a minimum 15% tax to companies that generate more than $1 billion in profits every year.
The major problem is that this tax calculation is based on the company's financial statement income and not on the usual taxable income.
Initially, this tax rule wasn't applied to the crypto industry. However, there was a recent change in accounting rules which now affects companies holding Bitcoin and other cryptocurrencies.
Based on the updated accounting standard (ASU 2023-08), firms must report cryptocurrencies using their current market value. This is known as the mark-to-market reporting standard. If a company's digital asset holdings rise in value, they would owe taxes on the unrealized gains even if they haven't sold them.
However, if the value drops, the rule allows them to deduct the losses. The senators argue that digital asset companies in other countries are under different accounting laws which don’t require the reporting standard being practiced in the U.S., giving them a tax advantage over firms based in the U.S.
Lummis and Moreno explained that this difference in accounting rules could discourage many American companies from holding their cryptocurrencies for the long term or force them to sell such holdings prematurely so that they can pay their taxes.
As a solution, the senators suggested that the Treasury remove all unrealized gains and losses from CAMT calculations or exclude those associated with digital assets. This move is part of Senator Lummis' efforts in ensuring that there are clear, fair regulations for the crypto industry.
As of the time of writing, the Treasury Department has yet to issue a public response to the letter. Meanwhile, U.Today reported earlier that there are three price levels to watch before BTC hits a new all-time high.
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