Safe Harbor for Taxpayers with Forked Assets Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 3650 To provide temporary safe harbor for the tax treatment of hard forks of convertible virtual currency in the absence of administrative guidance. IN THE HOUSE OF REPRESENTATIVES JULY 9, 2019 Mr. EMMER introduced the following bill; which was referred to the Committee on Ways and Means A BILL To provide temporary safe harbor for the tax treatment of hard forks of convertible virtual currency in the ab- sence of administrative guidance. 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 2019’’. 5 VerDate Sep 11 2014 22:40 Jul 16, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3650.IH H3650 pamtmann on DSKBFK8HB2PROD with BILLS 2 •HR 3650 IH SEC. 2. SAFE HARBOR PERIOD FOR PENALTIES RELATING 1 TO TAX TREATMENT OF HARD-FORKED VIR- 2 TUAL CURRENCY. 3 (a) IN GENERAL.—In the case of a taxpayer who dur- 4 ing the applicable period receives forked convertible virtual 5 currency— 6 (1) no penalties or additions to tax under part 7 II of subchapter A of chapter 68 of the Internal 8 Revenue Code of 1986 shall apply with respect to 9 any portion of an underpayment or understatement 10 of tax that is attributable to the taxpayer’s attempt 11 during such period to comply with the tax treatment 12 under such Code of the receipt of such virtual cur- 13 rency (or any disposition of such currency during 14 such period); and 15 (2) no penalties or additions to tax under sec- 16 tions 6651, 6654, 6655, 6656, 6698, and 6699 shall 17 apply for any failure during the applicable period to 18 file a return or report or make a payment of tax to 19 the extent such failure is attributable to filing or 20 payment requirements relating to the receipt of such 21 virtual currency (or any disposition of such currency 22 during such period). 23 (b) DEFINITIONS AND SPECIAL RULES.—For pur- 24 poses of this section— 25 VerDate Sep 11 2014 22:40 Jul 16, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3650.IH H3650 pamtmann on DSKBFK8HB2PROD with BILLS 3 •HR 3650 IH (1) APPLICABLE PERIOD.—The term ‘‘applica- 1 ble period’’ means any period beginning before the 2 date of the enactment of this Act and ending on the 3 date the Secretary issues regulations or guidance, or 4 legislation is enacted, that prescribes each of the fol- 5 lowing: 6 (A) The tax treatment of receiving forked 7 convertible virtual currency. 8 (B) Rules for calculating and allocating 9 the basis of forked convertible virtual currency. 10 (C) Rules for calculating the fair market 11 value of forked convertible virtual currency at 12 any given time. 13 (D) Rules for determining the holding pe- 14 riod of forked convertible virtual currency. 15 (2) FORKED CONVERTIBLE VIRTUAL CUR- 16 RENCY.— 17 (A) IN GENERAL.—The term ‘‘forked con- 18 vertible virtual currency’’ means, with respect 19 to any taxpayer, any convertible virtual cur- 20 rency to which the taxpayer becomes entitled by 21 reason of a hard fork. 22 (B) CONVERTIBLE VIRTUAL CURRENCY.— 23 The term ‘‘convertible virtual currency’’ means 24 any digital representation of value that— 25 VerDate Sep 11 2014 22:40 Jul 16, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3650.IH H3650 pamtmann on DSKBFK8HB2PROD with BILLS 4 •HR 3650 IH (i) functions as a medium of ex- 1 change, a unit of account, or a store of 2 value; 3 (ii) does not have legal tender status; 4 and 5 (iii) has an ascertainable equivalent 6 value in legal tender or is used as a sub- 7 stitute for legal tender. 8 (C) HARD FORK.—The term ‘‘hard fork’’ 9 means, with respect to any convertible virtual 10 currency, any material change in the shared 11 digital ledger which is used to verify by con- 12 sensus transactions in such currency if such 13 change results in the maintenance of inde- 14 pendent shared digital ledgers with respect to 15 such currency. 16 (3) CONSTRUCTIVE RECEIPT.—Receiving forked 17 virtual currency shall include any right to receive (or 18 other constructive of) such virtual currency. 19 Æ VerDate Sep 11 2014 22:40 Jul 16, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6301 E:\BILLS\H3650.IH H3650 pamtmann on DSKBFK8HB2PROD with BILLS