House lawmakers will vote on a $1 trillion infrastructure bill at the end of September, including a controversial crypto tax provision that has been the subject of extensive debate on Capitol Hill. And while there’s bipartisan support for amending the provision, it does not appear that any amendments will be accepted.
The crux of the debate – at least as far as the crypto community is concerned – is how the infrastructure bill defines “broker” in pay-for provision that banks on raising $28 billion over 10 years from a broadened crypto tax provision.
Critics of the provision argue that the definition of a “broker” is overly broad and could be interpreted to include miners, node validators and developers. There is also concern the provision could impose expanded surveillance on crypto users and make it difficult for crypto businesses to operate in the United States.
A bipartisan cadre of crypto-friendly Senators rushed to propose an amendment to the bill that would exclude developers, validators and miners from the reporting requirement. The amendment needed unanimous consent to be adopted and was blocked by a single senator, Richard Shelby (R-Ala.), who tried and failed to tack on $50 billion in additional military spending.
On Tuesday, the House voted 220-212 to advance the bill without considering any amendments. Another vote is set for Sept. 27.
Brewing opposition
A growing number of congressmen have publicly stated their intentions to push back against the cryptocurrency reporting provision in the infrastructure bill.
A group of Silicon Valley-area Democrats, including Rep. Anna Eshoo (D-Calif.), Rep. Ro Khanna (D-Calif.) and Rep. Eric Swalwell (D-Calif.) have voiced their opposition to the current provision and urged for an amendment to fix the “problematic” definition of “broker.”
The bipartisan Congressional Blockchain Caucus, headed by Rep. Tom Emmer (R-Minn.) sent a Congress-wide letter earlier this month calling for an amendment to update the “dangerous” pay-for provision.
In a statement provided to CoinDesk, Rep. Emmer wrote “Congress cannot cross-jurisdictionally try to pay for an infrastructure bill on the backs of our crypto industry though legislation that was slapped together with little to no consideration for the crypto industry.”
And other representatives including Rep. Patrick McHenry (R-N.C.) and Rep. Byron Donalds (R-Fla.) have joined the bipartisan fight, calling the provision “hastily drafted” and “burdensome” on the cryptocurrency industry. A spokesperson for Donalds said he plans to vote against the bill.
Complicating factors
The infrastructure bill has become a cornerstone of President Joe Biden’s policy and his establishment of a legacy built on public works.
The sweeping bill has been described by the White House as a “once-in-a-generation investment” that seeks to expand high-speed internet across the country, modernize the power grid, upgrade the nation’s roads, bridges and public transit systems and fund clean drinking water and electric vehicles.
There is concern on Capitol Hill that the infrastructure bill, which languished in Senate negotiations for months, could be further snarled – or even die – if the House adds any amendments, which would require the bill to return to the Senate for another vote.
Despite the growing number of representatives who have announced their intentions to add amendments to the bill, it does not appear that Speaker of the House Nancy Pelosi (D-Calif.) will allow the bill to be amended.
In a “Dear Colleagues” letter on Saturday, Pelosi told House Democrats that her goal is to enact both the infrastructure bill and the $3.5 trillion budget reconciliation by Oct. 1.
“The House would be very hard-pressed to meet that goal if they amend the bipartisan infrastructure bill, so I do not expect the bill to be amended,” Andrew Hinkes, a blockchain lawyer and partner at K&L Gates, told CoinDesk.
Though the Democrats have control of the House, the margin is slim, and Pelosi potentially needs near-unanimous support from Democrats to pass the bill, though even this remains unclear due to varying levels of support from Republicans.
Further complicating matters, the fate of the infrastructure bill has become intertwined with the ostensibly unrelated budget reconciliation, which the House will also begin to consider this week. Pelosi has doubled down on her previously-stated position to delay the vote on the infrastructure bill until the reconciliation package has passed.
Nine Democratic House moderates, led by Rep. Josh Gottheimer (D-N.J.), are taking the opposite stance, threatening to block the budget reconciliation until the infrastructure bill has been passed.
A letter from the Congressional Progressive Caucus, led by Rep. Pramila Jayapal (D-Wash.), Katie Porter (D-Calif.) and Ilhan Omar (D-Minn.), said a majority of the caucus’ 96 members would withhold votes for the infrastructure bill until the reconciliation bill is passed – a conflicting stance to House moderates that put Pelosi in a tough position.
Possible outcomes
According to Hinkes, the most likely outcome for the infrastructure bill is for it to clear the House with no amendments and be signed into law by President Biden.
Stephen Palley, a crypto lawyer and partner at Anderson Kill, agrees with Hinkes’ assessment.
“It seems unlikely that the bill’s progress will be delayed over only the crypto-tax reporting language, particularly where Treasury will be issuing clarifying guidance that says they do not intend to apply [the provision] to miners, developers, etc,” Palley told CoinDesk.
As Palley points out, the Treasury has reportedly said that it will provide clarifying guidance after the bill is passed to provide exemptions to firms that do not actually operate as brokers. If reports that Treasury Secretary Janet Yellen was lobbying against amendments to the bill are true, it seems to suggest that this was the Treasury’s end goal: to leave the language purposely vague so the Treasury gets to decide what it means.
Though this is considered a worst-case scenario for many critics of the provision, Palley thinks that floor testimony and Treasury guidance will prevent the provision from being too broadly interpreted.
“Assuming the IRS honors [Treasury’s guidance], I don’t think the language is as bad as some people have suggested,” he said.
Though there is a chance that the bill dies in the House, Palley thinks it’s unlikely.
“If I had to bet I would say no – it’s too politically important for Democrats to get this through. At the end of the day, I suspect that representatives on the left who are complaining it’s not enough will be legislatively and presidentially browbeaten into submission,” he said.
Source: Coindesk
