As the bipartisan group of Senators put together the compromise $1T infrastructure deal they slipped in a revenue measure to collect taxes from crypto transactions and focused on increased disclosure. The provision was likely written by Treasury and as the language got full sunlight it became apparent that the definition of crypto broker was too broad and needed to be narrowed.
Late last week there was a flurry of activity with two competing groups working on language to improve the bill’s crypto provision. One group led by Senator Rob Portman was working with Treasury to narrow the scope, but most in the industry felt it was still too broad. Another version was written by a group of Senators led by Pat Toomey that had more input from industry. By Monday the two sides had come together with language that seemed to have broad support and the approval of Treasury. Under the rules in place in the Senate during the infrastructure debate amendments could only be accepted by Unanimous Consent (UC).
When Senator Toomey went to the floor to get a UC on the carefully negotiated crypto language Alabama Senator Richard Shelby was upset that he couldn’t get a UC on an amendment he favored so in retaliation he objected to the crypto deal, even though he later admitted he supported the provision.
Senator Shelby’s objection meant that when the Senate passed the massive infrastructure bill it included the overly broad crypto language. The infrastructure bill is now sitting in the House where it needs to pass the bill in order for it to go to the White House for the President’s signature.
Speaker Pelosi has said the House will not consider the infrastructure legislation until the Senate passes the Democrats $3.5T human infrastructure bill in the Budget Reconciliation process that won’t be happen until later this fall. On Friday a group of 9 House moderate Democrats wrote a public letter to the Speaker saying they will vote against the forward progress of Budget Reconciliation unless the House votes on the Senate passed infrastructure bill first. With only a four seat majority these 9 Democrats could kill the Reconciliation process. This reflects a broad push for the House to approve the bipartisan infrastructure deal.
The other dilemma the Speaker faces is whether or not to allow any amendments to the Senate passed bill. While there is broad agreement that the Toomey/Portman crypto language makes sense, if the House leadership allows for one amendment to be offered they will then be faced with many amendments. It is important to remember that if the House makes any changes to the Senate passed bill it must go back to the Senate for approval of the bill as amended by the House.
As with any legislative proposal in the Senate the revised infrastructure bill would be subject to the 60 vote margin and could be filibustered. While a bill that is the same except for the crypto language would likely easily pass the Senate, if other provisions are added by the House the legislative situation becomes murky.
If any other House amendment draws objection from Senators, and is deleted by the Senate, the House bill with Senate changes has to go back to the House. This confusing process is referred to as ping ponging legislation. With the strong support that exists for the infrastructure bill there is little patience for this process to occur; hence, putting real pressure on the House to just accept the Senate bill with NO changes.
While this means that the overly broad crypto broker language would stay in the bill there are ways to correct the language. The House and Senate both have procedures to pass non-controversial bills that make corrections in legislation previously approved and it is my guess that a corrections bill could be considered for crypto.
Without getting into the ways of regulatory procedure, as the IRS develops regulations for the crypto broker disclosure provisions there will be opportunities to deal with the issue through the development of implementing regulations.
At FSInsight we will be following both legislative and regulatory actions aimed at cleaning up the crypto broker disclosure rules.