A petition to amend Internal Revenue Service (IRS) Notice 2014-2 – the new guidance released on 25th March that announced digital currencies would be treated as property for tax purposes – has been filed on WhiteHouse.gov.
Managed by the presiding presidential administration, the official website of the White House allows for the filing of public petitions on all manner of subjects, from whether Election Day should be a designated holiday, to whether Alaska should secede from the US and join Russia.
Petitions that cross a certain threshold of signatures then generally garner a White House response.
Filed on 28th March, the new petition argues that the IRS’s recent ruling on digital currencies is “overly burdensome,” and that by imposing capital gains on all transactions, the policy will hurt innovation in the sector. The positioning is not unlike the one voiced by major industry investors when defending against the prospect of new regulation earlier this year.
Reads the petition:
“This treatment of VC is overly burdensome as it will create onerous record-keeping issues and unnecessary costs that will stifle the development and advancement of this important technology.”
To date, the IRS ruling has garnered varying responses. Bitcoin Foundation director Jon Matonis has said that the classification affirms bitcoin’s status as digital gold, though others allege that the IRS notice will adversely affect many aspects of bitcoin ownership and use.
More details
Perhaps the biggest impact the ruling will have is on bitcoin’s role in payments, as each transaction will require capital gains reporting.
While even bitcoin’s detractors view its underlying technology as perhaps its biggest advantage, the guidance seems to discourage its use as a payment system, a fact that the petition acknowledges.
Reads the petition:
“Under this interpretation, when Bitcoin is spent, the owner will have the tenuous responsibility of calculating their capital gains or losses, as well as the Seller of the goods or services.”
Community response
The petition gained significant attention on reddit this weekend, garnering nearly 200 comments from bitcoin users who greeted the initiative with varying amounts of enthusiasm. Many voiced uncertainty that the petition would be ultimately effective, while others took issue with what they considered the poor wording and limited argument of the petition itself. The petition was still circulating on social media as of 1st April.
Still, other commentators, such as SecondMarket and Bitcoin Investment Trust CEO Barry Silbert, suggest this ruling was the best possible outcome for the bitcoin community.
Speaking to CoinDesk, he acknowledged that the ruling represents a short-term burden for the industry, but he says innovation will help bitcoin users abide by the new rules:
“It clearly creates a new record-keeping requirement which in the near term is going to be overly burdensome, but I’m highly confident that by tax time a year from now, there will be plenty of automated solutions that will eliminate any headaches of managing this process.”
To date, the petition has received only 403 signatures. Its goal is to obtain 100,000 signatures by 27th April.
IRS asks for comment
Although the filing is a noteworthy sign of community concern, it is unclear how useful it will be given that the US Treasury Department and the IRS have asked the public for comments on the measure. However, the petition could theoretically come to the attention of the IRS should it reach a sizeable amount signatures.
The IRS would not comment on whether such a petition would or would not impact its decision, but stated that it considers information from a variety of sources when soliciting feedback for notices that have yet to become final rules.
Bitcoin users who are interested in providing feedback to the IRS may be better served by sending feedback via standard mail or by email to the government tax body. All entries will be posted for public inspection in their entirety.
For more information on the recent IRS ruling and its implications for the industry, read our full report here.
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