ESRA News
IRS Releases Early Draft of Form 1099-DA for Reporting Digital Asset Transactions
The IRS recently unveiled a preliminary draft of the information return for reporting digital asset transactions, aligning with proposed regulations issued last year. Here’s what you need to know about the upcoming Form 1099-DA:
Overview:
- The 2025 Form 1099-DA will likely be included on federal income tax returns for taxpayers who engaged in digital asset transactions during the tax year.
- Digital assets to be reported include cryptocurrencies, stablecoins, and non-fungible tokens.
Key Points from the Draft Instructions:
- Taxpayers may need to recognize gains from digital asset dispositions.
- Reporting is required when a broker knows or has reason to know about reportable changes in control or capital structure for a corporation holding digital assets.
Information Required on Form 1099-DA:
- Details of digital asset transactions, including type and amounts.
- Addresses and Taxpayer Identification Numbers of involved parties.
- Dates of acquisition, sale, or disposal, along with cost basis.
- Question on nondeductible loss in wash sale transactions involving digital assets that are also stock or securities.
Notable Observations:
- The “wash sale rule” under Code Sec. 1091 does not currently apply to digital assets.
- Box 11d is included for cases where the sale is not recorded on the distributed ledger.
- Proposed regulations aim to clarify issues surrounding digital assets, including the definition of a “broker” under the Infrastructure Investment and Jobs Act.
Challenges and Concerns:
- Commenters have cautioned about potential issues with incomplete or inaccurate information on Forms 1099-DA.
- Some suggest the IRS should differentiate between centralized and decentralized exchanges to determine who qualifies as a broker.
- Brokers may face challenges with Box 5, indicating nondeductible losses due to changes in control or capital structure, as guidance on applicable events is lacking.
In conclusion, while the release of Form 1099-DA represents progress in addressing digital asset reporting, there are still uncertainties and challenges to navigate. Learn more at Thomson Reuters and view the format on the IRS site.
Senate and House Drive Forward on Data and AI Legislation
In a bipartisan effort to bolster the United States’ position in the global AI race, Senators Maria Cantwell, Todd Young, John Hickenlooper, and Marsha Blackburn introduced the Future of AI Innovation Act. This AI legislation aims to cultivate partnerships between government, industry, academia, and civil society to advance AI research and innovation. Key provisions include empowering the U.S. AI Safety Institute at NIST to develop voluntary standards and creating test beds with national labs to accelerate groundbreaking AI innovation for economic growth and national security.
Senator Cantwell emphasized the bill’s role in ensuring American leadership in AI for years to come, promoting public-private collaboration to drive innovation and competitiveness. When Senator Young spoke, he underscored the importance of establishing partnerships to ensure AI technologies reflect democratic values while supporting continued innovation in the U.S. Senator Hickenlooper highlighted the Act’s focus on responsible AI innovation, empowering the U.S. AI Safety Institute to develop research and standards. And Senator Blackburn emphasized the bill’s encouragement of coordination between the government and industry to capitalize on AI’s potential.
Foreign adversaries’ heavy investment in AI underscores the urgency of maintaining U.S. leadership in this critical domain. The Future of AI Innovation Act builds upon previous legislation to support private sector innovation in AI, furthering American competitiveness and security. Provisions in the Act were crafted based on recommendations from the National AI Advisory Committee (NAIAC).
Key Provisions of the Future of AI Innovation Act:
- NIST AI Safety Institute Authorization: Establishes the AI Safety Institute at NIST to develop voluntary guidelines and standards for robust AI innovation.
- Creation of AI Testbeds: Establishes testbed programs with national laboratories to evaluate AI models and foster scientific discoveries.
- Grand Challenge Prize Competitions: Spur private sector AI solutions and innovation through grand challenge competitions.
- Acceleration of AI Innovation with Public Datasets: Directs federal agencies to make curated datasets available for public use to accelerate AI advancements.
- International Alliances on AI Standards: Forms coalitions with U.S. allies to cooperate on global AI standards and research collaboration.
In a parallel effort, bipartisan support is growing for the American Privacy Rights Act, led by Senator Cantwell and Representative Cathy McMorris Rodgers. This draft AI legislation aims to establish national data privacy and security standards, ensuring individuals’ control over their personal information while holding violators accountable.
The House Energy and Commerce Committee, led by Chair Cathy McMorris Rodgers and Subcommittee Chair Gus Bilirakis, announced a hearing for April 27th on addressing data privacy shortfalls and establishing a national standard to protect Americans’ personal information. This initiative seeks to strengthen privacy protections online and preserve innovation and entrepreneurship.
As the Senate and House drive forward on data and AI legislation, bipartisan collaboration is key to shaping policies that safeguard privacy, promote innovation, and maintain American leadership in emerging technologies. Stay tuned for further developments on AI legislation and other crucial fronts.
Advancing Digital Sovereignty: EU’s New Digital Identity Wallet
The European Union has greenlit legislation with overwhelming support to provide digital ID wallets to its residents, a digital sovereignty move that eliminates the need for reliance on private companies for such services. The regulation passed with a resounding vote of 335 in favor to 190 against, signaling strong support for the initiative. Pending final approval from the Council of Ministers, this framework will grant EU residents access to digital ID wallets, offering enhanced security and privacy.
As digital services continue to play a pivotal role in everyday life, concerns over digital sovereignty, data control, and security have become paramount. The EU’s initiative addresses these concerns head-on, providing citizens with a comprehensive solution that prioritizes privacy and security without sacrificing convenience.
Features at a Glance:
- Centralized Hub for Access: The EU Wallet acts as a one-stop solution for authentication, service access, and document management, simplifying user interactions across platforms.
- User-Centric Privacy Dashboard: Offering unparalleled control, the privacy dashboard empowers individuals to manage their personal data in accordance with GDPR standards, ensuring transparency and compliance.
- Voluntary Participation: Participation in the EU wallet ecosystem remains entirely optional, respecting individual preferences and privacy concerns.
- Free Qualified Electronic Signatures: Users benefit from legally equivalent electronic signatures at no cost, bolstering trust in digital transactions and interactions.
- Open-Source Initiative: With an emphasis on transparency and innovation, the open-source approach fosters collaboration and security enhancements within the digital identity framework.
- Stringent Privacy Measures: Through rigorous oversight and privacy safeguards, the framework prioritizes data protection and minimizes the risk of unauthorized access or misuse.
Aligned with recommendations from the Conference on the Future of Europe, the legislation underscores the EU’s commitment to fostering a secure, inclusive digital environment while facilitating seamless cross-border transactions and services.
The introduction of the Digital Identity Wallet represents a monumental leap forward in digital sovereignty and governance, empowering citizens and positioning Europe as a global leader in digital innovation and security.
Having received overwhelming support from Parliament, the regulation now awaits formal approval by the EU Council of Ministers, marking a significant milestone in the journey toward digital sovereignty and security.