Safe Harbor for Taxpayers with Forked Assets Act of 2021
Bill: H.R.3273 | Sponsor: Rep. Emmer, Tom (R-MN)
Policy area: Taxation

Summary:
Safe Harbor for Taxpayers with Forked Assets Act of 2021
This bill excludes from gross income, for income tax purposes, any amount received as forked convertible virtual currency. It also establishes a safe harbor period during which certain penalties and additional taxes applicable to a taxpayer who receives a forked convertible virtual currency are suspended until the Internal Revenue Service issues regulations or guidance, or legislation is enacted, that addresses specified issues related to the tax treatment of such currency.

To provide for the tax treatment of forked convertible virtual 
                               currency.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Safe Harbor for Taxpayers with 
Forked Assets Act of 2021''.

SEC. 2. TAX TREATMENT OF FORKED CONVERTIBLE VIRTUAL CURRENCY.

    (a) Exclusion From Gross Income.--Part III of subchapter B of 
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting 
after section 139H the following new section:

``SEC. 139I. EXCLUSION OF CONVERTIBLE VIRTUAL CURRENCY RECEIVED IN A 
              HARD FORK.

    ``(a) In General.--No amount shall be included in gross income by 
reason of the receipt of any forked convertible virtual currency.
    ``(b) Forked Convertible Virtual Currency.--For purposes of this 
section--
            ``(1) Forked convertible virtual currency.--The term 
        `forked convertible virtual currency' means, with respect to 
        any taxpayer, any convertible virtual currency to which the 
        taxpayer becomes entitled by reason of a hard fork.
            ``(2) Convertible virtual currency.--The term `convertible 
        virtual currency' means any digital representation of value 
        that--
                    ``(A) functions as a medium of exchange, a unit of 
                account, or a store of value;
                    ``(B) does not have legal tender status; and
                    ``(C) has an ascertainable equivalent value in 
                legal tender or is used as a substitute for legal 
                tender.
            ``(3) Hard fork.--The term `hard fork' means, with respect 
        to any convertible virtual currency, any material change in the 
        shared digital ledger which is used to verify by consensus 
        transactions in such currency if such change results in the 
        maintenance of independent shared digital ledgers with respect 
        to such currency.
            ``(4) Constructive receipt.--Receiving forked virtual 
        currency shall include any right to receive (or other 
        constructive of) such virtual currency.''.
    (b) Safe Harbor Period for Penalties Relating to Tax Treatment of 
Hard-Forked Virtual Currency.--
            (1) In general.--In the case of a taxpayer who during the 
        applicable period receives forked convertible virtual 
        currency--
                    (A) no penalties or additions to tax under part II 
                of subchapter A of chapter 68 of the Internal Revenue 
                Code of 1986 shall apply with respect to any portion of 
                an underpayment or understatement of tax that is 
                attributable to the taxpayer's attempt during such 
                period to comply with the tax treatment under such Code 
                of the receipt of such virtual currency (or any 
                disposition of such currency during such period); and
                    (B) no penalties or additions to tax under sections 
                6651, 6654, 6655, 6656, 6698, and 6699 shall apply for 
                any failure during the applicable period to file a 
                return or report or make a payment of tax to the extent 
                such failure is attributable to filing or payment 
                requirements relating to the receipt of such virtual 
                currency (or any disposition of such currency during 
                such period).
            (2) Definitions and special rules.--For purposes of this 
        subsection--
                    (A) Applicable period.--The term ``applicable 
                period'' means any period beginning before the date of 
                the enactment of this Act and ending on the date the 
                Secretary issues regulations or guidance, or 
                legislation is enacted, that prescribes each of the 
                following:
                            (i) Rules for calculating and allocating 
                        the basis of forked convertible virtual 
                        currency.
                            (ii) Rules for calculating the fair market 
                        value of forked convertible virtual currency at 
                        any given time.
                            (iii) Rules for determining the holding 
                        period of forked convertible virtual currency.
                    (B) Other terms.--Terms used in this subsection 
                which are also used in section 139I of the Internal 
                Revenue Code of 1986 shall have the same meaning as 
                when used in such section 139I.
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by inserting after 
the item relating to section 139H the following new item:

``Sec. 139I. Exclusion of convertible virtual currency received in a 
                            hard fork.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to forked convertible virtual currency (as defined in section 
139I of the Internal Revenue Code of 1986 as added by this section) 
received after the date of the enactment of this Act.
                                 <all>