Payment of Federal taxes with bitcoin

(a) In general Subchapter B of chapter 64 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 6318. Payment with bitcoin (a) Authority The Secretary shall allow taxpayers to pay the taxes (and any penalty, addition to tax, or other amount) imposed under this title with Bitcoin. (b) Manner of payment For purposes of this title, a payment of any amount with Bitcoin shall be deemed made— (1) if the taxpayer irrevocably transfers Bitcoin— (A) to a Bitcoin network address designated by the Secretary, or (B) to an address or account of an entity designated by the Secretary to act as a financial agent under subsection (e), in accordance with procedures prescribed by the Secretary, and (2) at the time that the transfer described in paragraph (1) has obtained the level of network confirmations specified by the Secretary. The Secretary may prescribe rules regarding required network confirmations and proof of transfer. (c) Valuation The amount of any payment made with Bitcoin shall be the fair market value of the Bitcoin at the time the payment is deemed made under subsection (b). The Secretary shall prescribe regulations that establish and publish one or more reference rates for determining such fair market value, similar to the foreign currency exchange rates published for Federal tax purposes. (d) Nonrecognition No gain or loss shall be recognized by a taxpayer on the transfer of Bitcoin to the United States (including to a financial agent of the United States acting pursuant to subsection (e)) in satisfaction of any liability imposed by this title. A transfer described in the preceding sentence shall not be treated as a sale or exchange for purposes of section 1001. Nonrecognition under this subsection shall apply only to the portion of any transfer not exceeding the amount of the liability satisfied thereby, determined using the fair market value under subsection (c). Any amount transferred in excess of such liability shall be treated as a disposition for purposes of section 1001. (e) Third-Party financial agents The Secretary may enter into contracts or other arrangements with regulated financial institutions chartered or licensed under United States law and subject to the Bank Secrecy Act and applicable Office of Foreign Assets Control (OFAC) requirements to act as the Secretary’s financial agents to receive custody, convert (if and as directed by the Secretary), and remit Bitcoin tendered under this section. Agents shall comply with applicable Treasury, Internal Revenue Service, and financial regulatory standards. (f) Information reporting and guidance The Secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this section, including rules for documentation, receipts, timing and source of valuation, acceptable exchanges and price feeds, required network confirmations, and information reporting by payors and agents. (g) Basis and lot selection (1) In general In the case of a taxpayer that holds more than one lot of Bitcoin, the taxpayer may designate which lot or lots of Bitcoin are treated as transferred in a transaction described in subsection (d), in such form and manner and at such time as the Secretary may prescribe. (2) Permissible methods The Secretary shall prescribe regulations that allow taxpayers to determine which lot or lots are treated as transferred using one or more permissible methods including specific identification, first-in first-out, last-in first-out, highest cost in first-out, or other methods similar to those allowed under section 1012 and the regulations thereunder. The regulations shall provide rules for elections, changes in method, and default ordering when a taxpayer does not make a designation. (3) Basis The adjusted basis of the lots of Bitcoin treated as transferred under this section shall be removed from the taxpayer’s aggregate basis in Bitcoin held, and the basis and holding period of any remaining Bitcoin shall be determined without regard to any gain or loss not recognized under subsection (d).. (b) Clerical amendment The table of sections for subchapter B of chapter 64 of such Code is amended by adding at the end the following new item: Sec. 6318. Payment with Bitcoin.. (c) Effective date The amendments made by this section shall apply to payments made after the date of the enactment of this Act.