Senate Finance Chair Ron Wyden wants tweaks to provisions for enforcing taxes on cryptocurrency transactions that were tucked into the bipartisan infrastructure bill on the floor in that chamber this week.

Changes could come in a manager’s amendment to the bill, which consists of a series of adjustments that senators typically agree to ahead of time, according to an aide to the Oregon Democrat.

Wyden, who leads the chamber’s tax-writing panel, wants to be sure it’s clear the rules don’t apply to blockchain technology developers that may face difficulty complying, a problem that cryptocurrency lobbyists have highlighted in the days since draft text of the proposal began to circulate.

“Americans avoiding paying taxes they owe through cryptocurrency is a real problem that deserves a real solution,” Wyden said in a series of tweets Sunday, hours before senators unveiled the draft bill text. “The Republican provision in the bipartisan infrastructure framework isn’t close to being that solution. It’s an attempt to apply brick and mortar rules to the internet and fails to understand how the technology works.”

Wyden supports reporting rules for cryptocurrency exchanges, which is what the provisions aim to do, according to an aide. His concern is that the language lacks clarity and could mean that developers of blockchain technologies such as wallets, which allow users to manage different crypto transactions, have to provide information to the IRS, which could pose technological challenges and cause unintended consequences. Wyden hasn’t ruled out putting forward his own amendment as a fix.

He’s not alone in aiming to adjust that portion of the bill. Sen. Patrick J. Toomey of Pennsylvania, the top Republican on the Senate Banking Committee, said Monday that he’d propose an amendment to address similar concerns, describing the text as “unworkable.”

Toomey, who cryptocurrency groups have described as receptive to the industry, voted against starting debate on the broader infrastructure package but hasn’t said how he’ll ultimately vote on the underlying bill.

“Congress should not rush forward with this hastily-designed tax reporting regime for cryptocurrency, especially without a full understanding of the consequences,” Toomey said in a statement. “By including an overly broad definition of broker, the current provision sweeps in nonfinancial intermediaries like miners, network validators, and other service providers. Moreover, these individuals never take control of a consumer’s assets and don’t even have the personal-identifying information needed to file a 1099 with the IRS.”

Toomey is also concerned the bill would allow the Treasury secretary to define a digital asset with broad discretion, according to an aide, who noted it’s the first time a digital asset will be defined by law.

Amendment process underway

Senators were set to begin amending the package on Monday night after its provisions were finalized and revealed late Sunday, pressing to pass the bill before the August recess.

The lead Republican negotiator for the infrastructure deal, Sen. Rob Portman of Ohio, said in recent months that he was preparing a bill to increase reporting on transactions involving digital assets such as Bitcoin and Ethereum, and to better define the area for tax purposes. Portman described interest in addressing the “tax gap,” the divide between taxes owed and paid to the government, which Democrats are also looking to as a revenue source.

The Biden administration has pressed for several measures to get at the tax gap, which Internal Revenue Service Commissioner Charles P. Rettig has estimated could be as much as $1 trillion each year including unpaid taxes on cryptocurrencies. The Treasury Department’s tax proposals this year included cryptocurrency-related reporting similar to what is in the infrastructure bill, as well as general funding for the IRS to strengthen enforcement.

Senators considered IRS funding in the bipartisan deal, but it was scrapped after Republicans soured on the idea. Crypto provisions emerged as a way to offset $28 billion of the package’s $550 billion in new spending for roads, highways, bridges and other infrastructure projects as senators finalized a deal over the last week.

The final bill would require business transactions involving more than $10,000 in cryptocurrency to be reported to the IRS, adding digital coins to mandates that already exist for large cash payments.

It would add businesses facilitating digital coin trades to the definition of “brokers” who are required to report information to the IRS. That’s the piece of the proposal that’s generated the most pushback, with industry groups saying it would ask some intermediaries for information they don’t have and risk pushing the cryptocurrency industry to leave the United States.

Starting in 2024, anyone who regularly provides services for transferring digital assets on behalf of others would be added as a broker to rules that require reporting information to the IRS. The Treasury proposal described broker reporting as allowing the U.S. to get involved in automatic global sharing of information on cryptocurrency transfers, which would mean the U.S. could get information on taxpayers’ transactions outside the U.S. in return.

Tweaks from earlier drafts

Senators appear to have edited the bill from earlier draft versions that circulated late last week. Earlier drafts specified that broker reporting would apply to decentralized exchanges, peer-to-peer marketplaces and noncustodial services, but the final text doesn’t specify.

The earlier versions had more general language directing brokers to provide customers and the IRS with forms showing the names, addresses and gross proceeds for a transaction when not otherwise required to provide reporting. The final text specifies that when a broker is executing a transfer that isn’t part of a sale or exchange, and in which a digital asset is moved from an account the broker maintains to an account or address not known to be a broker, they must provide the forms.

These edits have done little to quell the industry’s concern with the legislation.

The Blockchain Association, which represents cryptocurrency trading platforms, blockchain networks and investors, has been working to get the provisions dropped or narrowed. They say the language continues to be so broad that it could apply to businesses that represent only one step in the transaction process, don’t have customer relationships and couldn’t provide this sort of information to the IRS.

The group doesn’t want digital asset-related businesses added to the definition of broker at all, but would be open to similar requirements for information reporting on virtual currencies that Treasury’s Financial Crimes Enforcement Network has proposed for banks and other payment services.

“While some minor improvements have been made, the latest language still poses fundamental concerns and questions about certain terms and definitions used in the provision,” Kristin Smith, executive director of the Blockchain Association, said in a statement Monday morning.

“As this bill continues to move through the Senate, we urge Senators to clarify that the language doesn’t capture non-custodial entities in the digital asset ecosystem,” she said, adding it remains unclear to the industry how the provision would apply.

The Blockchain Association and Chamber of Digital Commerce have been lobbying Senate offices to change the broker reporting pieces of the legislation. The requirement for reporting transactions over $10,000 appears to be the main revenue-raiser. Treasury had in its original proposal estimated that broker reporting rules would generate negligible revenue, while the $10,000 threshold was in a package of provisions expected to raise billions.