The Internal Revenue Service (“IRS”) issued final regulations on December 27, 2024, relating to information reporting requirements for brokers of digital asset transactions. Treasury Rule No. 2024-30496, “Gross Proceeds Reporting by Brokers that Regularly Provide Services Effectuating Digital Asset Sales,” (the “Regulation”)[1] requires brokers to file information returns and furnish payee statements to report gross proceeds on dispositions of digital assets in transactions they effectuate for customers. Nelson Mullins previously issued a Tax Report on the issuance of the Proposed Regulations.[2]

The Regulation expands the scope of who is considered a “broker” and the transactions that must be reported under Section 6045 of the Internal Revenue Code. The IRS has over the years made no secret of its concern that digital assets and their related transactions are being used to circumvent U.S. tax laws and avoid the payment of taxes. The Regulation expands who is considered a “broker” to now include operators of custodial digital asset trading platforms, certain digital asset hosted wallet providers, certain processors of digital asset payments, and persons that interact with their customers as counterparties to transactions, such as owners of digital asset kiosks, brokers who accept digital assets as payment for commissions and certain other property, brokers that transact as dealers in digital assets, and certain issuers of digital assets who regularly offer to redeem those digital assets.  In response to the Regulation, on December 27, 2024, a group of Plaintiffs filed a complaint against the IRS seeking Injunctive Relief to stop the Regulation from going into effect. The basis of the complaint is that the IRS violated the Administrative Procedures Act in promulgating the Regulation and that the Regulation itself violates the U.S. Constitution. The lawsuit is currently pending before the U.S. District Court for the Northern District of Texas.

Nelson Mullins will continue to monitor the status of the final regulations dealing with information reporting for brokers of digital asset transactions and provide updates as appropriate. If you have any questions or comments about the foregoing summary of the final regulations, please contact Tim Wagner, Richard Levin, Seth Proctor, or Wells Hall, who have contributed to the preparation of this Report, or any other member of the firm’s Fintech, Regulatory Practice Group, or Tax Practice Group.