A recent decision by the U.S. House of Representatives has overturned an IRS rule that classified crypto entities as brokers, requiring them to collect specific taxpayer and transaction information, including decentralized finance (DeFi) platforms. The bipartisan majority vote of 292-132 aligns with the Senate’s previous decision to advance the Congressional Review Act resolution, overturning the rule that was finalized during former President Joe Biden’s administration.
Missouri Republican Jason Smith emphasized the potential negative impact of the IRS rule on U.S. businesses and innovation, stating that DeFi platforms operate differently from centralized crypto exchanges and traditional banks or brokers. He pointed out that DeFi platforms do not have the capability to collect the necessary user information to comply with the rule.
The resolution to overturn the rule received support from 70 Senators last week, and President Donald Trump’s advisers have recommended that he sign the provision. However, the Senate will need to approve the resolution again due to budget rules. If approved and signed by Trump, the IRS will be prohibited from introducing a similar rule in the future.
Illinois Democrat Danny Davis defended the rule, highlighting its origin in the bipartisan Infrastructure Investment and Jobs Act of 2021 and drawing parallels between crypto and stocks. He argued that reporting transactions to the IRS through brokers increases tax compliance among taxpayers.
North Carolina Republican Tim Moore criticized the rule for surpassing Congress’s intentions with the 2021 law, noting the burdens it places on software developers and its potential impact on American leadership in digital asset innovation.
Texas Democrat Lloyd Doggett raised concerns about the resolution being perceived as “special interest legislation,” warning of its potential exploitation by wealthy tax evaders, drug traffickers, and terrorist financiers. He also pointed out that the resolution could add $4 billion to the national debt, contradicting President Trump’s goal of reducing debt.
The House vote on a continuing resolution to fund the U.S. government through Sept. 30, 2025, also took place, with 217 votes in favor and 213 against. The funding resolution will now move to the Senate for further consideration.
In conclusion, the decision to overturn the IRS rule on crypto entities as brokers has sparked debate among lawmakers, highlighting the complexities of regulating the burgeoning cryptocurrency industry. The outcome of this resolution will have significant implications for the future of crypto taxation and innovation in the United States.