coinedition.com
The US Internal Revenue Service, the statutory body responsible for collecting the US federal tax has proposed to impose a tax on non-fungible tokens (NFTs), considering them as collectibles. The IRS along with the Treasury Department released a document on 21 March 2023, seeking public opinion on the proposal.
Notably, in the proposal, the IRS announced that the department is “soliciting feedback” for the tax treatment of NFTs, adding:
Today’s guidance also requests comments on the treatment of NFTs as collectibles and describes how the IRS intends to determine whether an NFT is a collectible until further guidance is issued.
In addition, the agency assured that IRS would utilize a “look-through analysis” for determining an NFT as a collectible until further guidance on the proposal is issued. In detail, an NFT would be treated as a collectible “if the NFT’s associated right or asset falls under the definition of collectible in the tax code.”
Significantly, the proposed guidance by the department is the US tax authority’s initial step toward clarifying the tax implementation on NFTs. It is part of President Joe Biden’s administration’s efforts to bring transparency to the treatment of crypto assets.
Interestingly, the IRS defines non-fungible tokens, stating that an NFT is a “unique identifier that is recorded using distributed ledger technology and may be used to certify authenticity and ownership of an associated right or asset”.
Further, the department stated that public comments on any aspect of NFTs that affect the treatment of NFTs as collectibles are expected to be submitted by June 19.