H.R. 9174: Digital Assets Voluntary Disclosure Program Act

The Digital Assets Voluntary Disclosure Program Act aims to create a new framework for taxpayers who may have violated tax laws related to digital assets. This program is designed to allow eligible taxpayers to come forward and address any compliance issues without facing harsh penalties.

Program Establishment

Within one year of the law's enactment, the Secretary of the Treasury will set up the Digital Assets Voluntary Disclosure Program. This program will offer a chance for eligible taxpayers to remedy violations concerning digital assets by following specific remedial steps.

Remedial Requirements

The remedial process will differ for two groups of taxpayers: uncertified eligible taxpayers and certified eligible taxpayers.

• Uncertified Eligible Taxpayers: These individuals must:
  • Apply to join the program.
  • File amended tax returns within 24 months of program establishment for years with violations.
  • Pay any tax deficiencies and penalties associated with their violations.
  • Fulfill additional information requirements set by the Secretary.
• Certified Eligible Taxpayers: They must complete the same steps as the uncertified taxpayers, excluding the need for application.

Benefits of Participation

Taxpayers who meet the program's requirements will receive certain benefits, including:

• For uncertified taxpayers, paying the penalty will eliminate any further penalties related to that violation.
• The information disclosed under this program will not be used to initiate criminal investigations against the taxpayer concerning those specific violations.
• Certified taxpayers will also benefit from a waiver of further penalties on the disclosed violations.

Definitions

The Act includes specific definitions regarding who qualifies to participate in the program:

• Eligible Taxpayer: Refers to both uncertified and certified taxpayers with digital asset violations.
• Digital Assets Violation: Involves any failure to comply with tax code requirements related to digital asset transactions or ownership affecting taxable income.
• Digital Asset: Any digital representation of value recorded on a cryptographically secured ledger.

Penalty Structure

Penalties for digital asset violations are structured based on the amount of tax deficiency:

• A 25% penalty applies for tax deficiencies up to $25,000 and 40% for the amount over $25,000 for uncertified taxpayers.
• For certified taxpayers, there is no penalty for deficiencies under $25,000, and only 5% applies to amounts over $25,000.

Should amended returns be filed later than one year after the program's establishment, the penalty rates will increase, imposing harsher consequences for those who delay their compliance.

Regulatory Authority

The Secretary of the Treasury will have the authority to implement regulations ensuring the program fulfills its purpose, including protecting the confidentiality of all information disclosed under the program.

Applicability

The provisions of this Act will apply in the same manner as any deficiencies in tax collection and penalties as defined in the Internal Revenue Code.

Relevant Companies

• COIN (Coinbase Global, Inc.): As a major platform for trading digital assets, changes in compliance regulations could affect their operations and customer behaviors.
• FTT (FTX Trading Ltd.): Regulatory compliance and penalties may directly impact the company's ability to operate and manage client assets.