Two US senators have recently reached out to the Treasury Department to address concerns over the corporate alternative minimum tax (CAMT) interpretation and its impact on US firms holding unrealized gains due to updated accounting standards. Senators Cynthia Lummis and Bernie Moreno penned a letter to Treasury Secretary Scott Bessent on May 12, urging regulatory guidance to exclude unrealized gains on digital assets from the calculation of Adjusted Financial Statement Income (AFSI) under CAMT.
The senators highlighted the potential consequences of not providing relief, warning that US corporations may be compelled to sell off their crypto assets to meet tax obligations or reduce their holdings. This could put them at a disadvantage compared to foreign firms subject to different accounting standards. The issue at hand revolves around the interaction between CAMT provisions and new mark-to-market requirements introduced by the Financial Accounting Standards Board (FASB).
Although the FASB’s mark-to-market requirements were intended to reflect fair-value treatment of crypto assets in corporate financial statements, they inadvertently subjected unrealized gains to taxation under CAMT for companies with an average AFSI of $1 billion or more. The senators emphasized that Congress did not intend to tax unrealized gains in this context and criticized the reliance on FASB, a private organization focused on financial reporting rather than tax principles.
They pointed out that the Treasury has the authority to adjust AFSI definitions under Sections 56A(c)(15) and (e) of the Internal Revenue Code, citing a 2023 IRS notice that provided interim relief to the insurance industry as a precedent for immediate guidance and regulatory flexibility. Failure to provide clarity on this issue could force corporations to sell assets solely to pay the tax, the senators argued.
In a related development, the Cedar Innovation Foundation, a significant player in the crypto-focused super PAC Fairshake, issued a public statement urging the Senate to finalize stablecoin legislation without further delay. The foundation’s spokesman, Josh Vlasto, emphasized the importance of passing stablecoin legislation to avoid putting American competitiveness and consumers at risk.
The senators’ letter and the Cedar Innovation Foundation’s statement underscore the need for clear rules and regulatory clarity within the crypto industry to ensure its safe and thriving presence in the US. As discussions continue in the Senate and Congress regarding crypto-related bills and stablecoin legislation, stakeholders in the industry are closely monitoring developments to safeguard their interests and promote a conducive regulatory environment for innovation and growth.