The U.S. Treasury Department is set to ease a regulation that would have imposed substantial taxes on companies’ unrealized Bitcoin gains, according to a recent filing.
The rule originates from the Corporate Alternative Minimum Tax (CAMT), a 15% minimum tax on large corporations’ reported profits under the Inflation Reduction Act of 2022. CAMT applies to corporations with an average book income of over $1 billion across three years.
Current Financial Accounting Standards Board (FASB) rules require companies to record crypto gains on their books even if they haven’t sold the assets.
This could have created major tax liabilities for firms like Michael Saylor’s Strategy, which holds around $73 billion in over 640,000 bitcoins. Strategy reported an unrealized gain of $14.05 billion in the second quarter due to a rebound in Bitcoin’s price and recent accounting changes.
Companies urge IRS guidance
Earlier in May, Strategy and Coinbase sent a joint letter to the Treasury asking that unrealized crypto gains be excluded. Both firms formally asked the IRS for guidance to exclude unrealized crypto gains and losses from the CAMT calculation.
They said that taxing these paper gains could force companies to sell crypto just to pay taxes. It could also discourage companies from holding large amounts of crypto. They added that U.S. companies might be at a disadvantage compared to foreign firms, which use different accounting standards.
Finally, they raised potential constitutional concerns under the Sixteenth Amendment, because the CAMT, combined with FASB rules, could tax income that hasn’t actually been realized.
A Senate Finance Committee hearing on crypto taxation is scheduled for today, as the government is growing its focus on digital assets in U.S. tax policy.
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