On December 23, 2022, the Internal Revenue Service (IRS) released Announcement 2023-2 in response to the new broker reporting rules that were part of the 2021 Infrastructure Investment and Jobs Act (the Infrastructure Act). The Infrastructure Act provided that new rules were to be effective for transactions occurring in 2023. Announcement 2023-2, however, appears to delay the Treasury Department’s implementation of the new rules until final regulations are issued.
The Infrastructure Act expanded existing broker reporting rules under sections 6045 and 6045A of the Internal Revenue Code by mandating that brokers report information on transactions involving digital assets. Among other changes, the Infrastructure Act expanded the definition of “broker” to include any person who, for consideration, is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person, and expressly provided that digital assets were now within the scope of sections 6045 and 6045A. The Infrastructure Act provides that these amendments apply to returns required to be filed, and statements required to be furnished, after December 31, 2023 (and thus applied to transactions occurring during 2023).
The existing regulations under section 6045 and 6045A do not address sales or exchanges of digital assets. Under section 6045, a person doing business as a broker is required to file information returns and furnish payee statements for each customer for whom the broker has sold stocks, certain commodities and other specified categories of assets in exchange for cash. Brokers must furnish payee statements and file Form 1099-B (Proceeds from Broker and Barter Exchange Transactions) with the IRS. Under Section 6045A, a broker who transfers to another broker securities that are “covered securities” in the hands of the transferring broker must furnish a written statement setting forth the information required under the regulations.
The Announcement appears to defer implementation of new rules addressing digital assets. The Announcement states that until the Treasury Department and the IRS issue new final regulations under section 6045 and 6045A, a broker may report gross proceeds and basis under section 6045, and may furnish statements on transfers of covered securities under section 6045A, as required under existing law and regulations as of December 23, 2022. Further, the Announcement states that brokers will not be required to report or furnish any additional information with respect to dispositions of digital assets under section 6045, issue any additional statements under section 6045A, or file any returns with the IRS on transfers of digital assets under section 6045A(d), until new final regulations under sections 6045 and 6045A are issued.