19 May 2022

Biden Signs Infrastructure Bill with Digital Reporting Rules

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President Biden on Nov. 15 signed into law the $1.2 trillion infrastructure legislation that includes new reporting requirements for digital assets, additional pension smoothing relief and clarifies disaster relief assistance.

The House approved the Infrastructure Investment and Jobs Act (H.R. 3684) Nov. 6 by a vote of 228-205, with 13 Republicans voting for the bill and six Democrats against it. The Senate approved the bill in August on a 69-30 vote.

Digital Asset Reporting 

H.R. 3684 expands information reporting requirements to include “digital assets,” including cryptocurrency. The legislation defines digital assets as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the [Treasury] Secretary.”

The definition of “broker” is also modified to include “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.” In addition, broker-to-broker reporting requirements are expanded to make clear that transfers of digital assets are included. The bill also adds digital assets to existing rules requiring businesses to report cash payments of more than $10,000. The changes are effective for reports to be filed and statements required to be furnished after Dec. 31, 2023.

Notwithstanding these newly enacted reporting changes, Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cynthia Lummis (R-WY) introduced legislation Nov. 15 to clarify the definition of “broker” with respect to digital asset third-party reporting requirements.

The senators’ bill would clarify that the “broker” definition excludes miners and stakers, as well as wallet providers and developers, and would ensure that only those digital asset intermediaries that actually have access to material customer information are required to report to the IRS. Sens. Wyden, Lummis and others tried to add a similar provision to the infrastructure bill as it was being considered in August.

Pension Smoothing 

The pension smoothing provision was included to help offset the cost of $550 billion in new spending to rebuild the nation’s highways, roads, bridges, railways, transit systems and other infrastructure projects.

Under the provision, plan sponsors have the option for more flexibility in funding their pension obligations by adjusting the funding stabilization percentages that were included in the American Rescue Plan (ARPA) that was enacted in March. The bill also further extends the stabilization period from 2029 to 2034. The changes made by H.R. 3684 apply with respect to plan years beginning after Dec. 31, 2021.

For a table summarizing the minimum and maximum percentages included in the infrastructure legislation, along with the corresponding calendar years, click here.

Disaster Relief 

H.R. 3684 also clarifies the automatic extension of certain deadlines in the case of taxpayers affected by federally declared disasters under Code Section 7508A. Under the legislation, the definition of a disaster area in Section 7508A(d)(3) is amended to mean “an area in which a major disaster for which the President provides financial assistance under section 408 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5174) occurs.”

The provision is intended to ensure that the mandatory minimum extension period of 60 days is automatic, which the IRS does not currently interpret to be automatic in some cases. As background, the Taxpayer Certainty and Disaster Tax Relief Act of 2019 added IRC Section 7508A(d), creating a mandatory 60-day postponement period, commencing on the earliest incident date and ending 60 days after the latest incident date, for tax-related deadlines under IRC Section 7508A.

The provision clarifies the legislative intent of that provision by stating when the automatic extension ends, which required acts are postponed, the location of a qualifying disaster, and how to proceed when there are declarations relating to multiple disasters. For instance, the legislation specifies that in the case of multiple declarations relating to a disaster area which are issued within a 60-day period, a separate period will be determined under paragraph 1 of Section 7508A(d) with respect to each such declaration.

Several retirement-related deadlines and actions are affected by the automatic 60-day extension following a presidentially declared disaster. The provision applies to federally declared disasters declared after the date of enactment.

Employee Retention Credit 

The newly enacted infrastructure legislation also ends the employee retention tax credit early. In general, wages paid after Sept. 30, 2021, are no longer eligible for the credit (except for wages paid by an eligible recovery startup business, which retains the Jan. 1, 2022, expiration date).

The credit was first created by the CARES Act, and then subsequently amended by the Consolidated Appropriations Act, 2021, and extended by the American Rescue Plan Act. There apparently was a low take-up rate with the credit, which was part of the impetus for ending it early.

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