Senators Urge Treasury to Exclude Unrealized Crypto Gains from Corporate Tax

Two US senators have expressed their concerns to the Treasury Department regarding the potential taxation of unrealized crypto gains by US firms. Senators Cynthia Lummis and Bernie Moreno sent a letter to Treasury Secretary Scott Bessent on May 12, urging the department to issue regulatory guidance that would exclude unrealized gains on digital assets from the calculation of Adjusted Financial Statement Income (AFSI) under the corporate alternative minimum tax (CAMT).

The senators argued that without such guidance, US corporations could be forced to sell their crypto holdings or reduce their investments to meet tax obligations, thereby putting them at a competitive disadvantage compared to foreign firms that are subject to different accounting standards. This issue arises from the interaction between the Inflation Reduction Act’s CAMT provision and new mark-to-market requirements issued by the Financial Accounting Standards Board (FASB).

The new accounting standards, which were secured after engagement from crypto-friendly lawmakers, were intended to reflect the fair-value treatment of crypto in corporate financial statements. However, this change has inadvertently subjected unrealized gains to taxation under CAMT for companies with an average of $1 billion or more in AFSI. The senators emphasized that Congress did not intend to tax unrealized gains in this context and criticized the reliance on FASB, a private body focused on financial reporting rather than tax principles.

They highlighted that the Treasury has the authority under Sections 56A(c)(15) and (e) of the Internal Revenue Code to adjust AFSI definitions. The senators also referenced a 2023 IRS notice that provided interim relief to the insurance industry as a precedent for immediate guidance and regulatory flexibility. The letter warned that failure to provide this clarity could force corporations to sell assets just to pay the tax.

This development comes amid broader frustration within the crypto industry over stalled legislation in the Senate and Congress. On May 13, the Cedar Innovation Foundation, a major component of the crypto-focused super PAC Fairshake, issued a public statement urging the Senate to finalize stablecoin legislation without delay. Josh Vlasto, spokesman for the foundation, stated that Senate leadership on both sides of the aisle should avoid political games and pass a final stablecoin bill in the coming days. The statement warned that further delays put American competitiveness and consumers at risk.

Fairshake has emerged as one of the crypto sector’s most well-funded political action committees, backing candidates from both parties in the 2024 and 2026 election cycles. The senators’ letter and Cedar’s statement underscore the industry’s concerns about the need for clear rules to ensure the safe and thriving development of the crypto industry in the US.