Safe Harbor for Taxpayers with Forked Assets Act of 2021

I 117TH CONGRESS 1ST SESSION H. R. 3273 To provide for the tax treatment of forked convertible virtual currency. IN THE HOUSE OF REPRESENTATIVES MAY 17, 2021 Mr. EMMER (for himself and Mr. SOTO) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To provide for the tax treatment of forked convertible virtual currency. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Safe Harbor for Tax- 4 payers with Forked Assets Act of 2021’’. 5 SEC. 2. TAX TREATMENT OF FORKED CONVERTIBLE VIR- 6 TUAL CURRENCY. 7 (a) EXCLUSION FROM GROSS INCOME.—Part III of 8 subchapter B of chapter 1 of the Internal Revenue Code 9 of 1986 is amended by inserting after section 139H the 10 following new section: 11 VerDate Sep 11 2014 04:44 Jun 15, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3273.IH H3273 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3273 IH ‘‘SEC. 139I. EXCLUSION OF CONVERTIBLE VIRTUAL CUR- 1 RENCY RECEIVED IN A HARD FORK. 2 ‘‘(a) IN GENERAL.—No amount shall be included in 3 gross income by reason of the receipt of any forked con- 4 vertible virtual currency. 5 ‘‘(b) FORKED CONVERTIBLE VIRTUAL CURRENCY.— 6 For purposes of this section— 7 ‘‘(1) FORKED CONVERTIBLE VIRTUAL CUR- 8 RENCY.—The term ‘forked convertible virtual cur- 9 rency’ means, with respect to any taxpayer, any con- 10 vertible virtual currency to which the taxpayer be- 11 comes entitled by reason of a hard fork. 12 ‘‘(2) CONVERTIBLE VIRTUAL CURRENCY.—The 13 term ‘convertible virtual currency’ means any digital 14 representation of value that— 15 ‘‘(A) functions as a medium of exchange, a 16 unit of account, or a store of value; 17 ‘‘(B) does not have legal tender status; and 18 ‘‘(C) has an ascertainable equivalent value 19 in legal tender or is used as a substitute for 20 legal tender. 21 ‘‘(3) HARD FORK.—The term ‘hard fork’ 22 means, with respect to any convertible virtual cur- 23 rency, any material change in the shared digital 24 ledger which is used to verify by consensus trans- 25 actions in such currency if such change results in 26 VerDate Sep 11 2014 04:44 Jun 15, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3273.IH H3273 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3273 IH the maintenance of independent shared digital ledg- 1 ers with respect to such currency. 2 ‘‘(4) CONSTRUCTIVE RECEIPT.—Receiving 3 forked virtual currency shall include any right to re- 4 ceive (or other constructive of) such virtual cur- 5 rency.’’. 6 (b) SAFE HARBOR PERIOD FOR PENALTIES RELAT- 7 ING TO TAX TREATMENT OF HARD-FORKED VIRTUAL 8 CURRENCY.— 9 (1) IN GENERAL.—In the case of a taxpayer 10 who during the applicable period receives forked con- 11 vertible virtual currency— 12 (A) no penalties or additions to tax under 13 part II of subchapter A of chapter 68 of the In- 14 ternal Revenue Code of 1986 shall apply with 15 respect to any portion of an underpayment or 16 understatement of tax that is attributable to 17 the taxpayer’s attempt during such period to 18 comply with the tax treatment under such Code 19 of the receipt of such virtual currency (or any 20 disposition of such currency during such pe- 21 riod); and 22 (B) no penalties or additions to tax under 23 sections 6651, 6654, 6655, 6656, 6698, and 24 6699 shall apply for any failure during the ap- 25 VerDate Sep 11 2014 04:44 Jun 15, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3273.IH H3273 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3273 IH plicable period to file a return or report or 1 make a payment of tax to the extent such fail- 2 ure is attributable to filing or payment require- 3 ments relating to the receipt of such virtual 4 currency (or any disposition of such currency 5 during such period). 6 (2) DEFINITIONS AND SPECIAL RULES.—For 7 purposes of this subsection— 8 (A) APPLICABLE PERIOD.—The term ‘‘ap- 9 plicable period’’ means any period beginning be- 10 fore the date of the enactment of this Act and 11 ending on the date the Secretary issues regula- 12 tions or guidance, or legislation is enacted, that 13 prescribes each of the following: 14 (i) Rules for calculating and allocating 15 the basis of forked convertible virtual cur- 16 rency. 17 (ii) Rules for calculating the fair mar- 18 ket value of forked convertible virtual cur- 19 rency at any given time. 20 (iii) Rules for determining the holding 21 period of forked convertible virtual cur- 22 rency. 23 (B) OTHER TERMS.—Terms used in this 24 subsection which are also used in section 139I 25 VerDate Sep 11 2014 04:44 Jun 15, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3273.IH H3273 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3273 IH of the Internal Revenue Code of 1986 shall 1 have the same meaning as when used in such 2 section 139I. 3 (c) CLERICAL AMENDMENT.—The table of sections 4 for part III of subchapter B of chapter 1 of such Code 5 is amended by inserting after the item relating to section 6 139H the following new item: 7 ‘‘Sec. 139I. Exclusion of convertible virtual currency received in a hard fork.’’. (d) EFFECTIVE DATE.—The amendments made by 8 this section shall apply to forked convertible virtual cur- 9 rency (as defined in section 139I of the Internal Revenue 10 Code of 1986 as added by this section) received after the 11 date of the enactment of this Act. 12 Æ VerDate Sep 11 2014 04:44 Jun 15, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H3273.IH H3273 kjohnson on DSK79L0C42PROD with BILLS