New IRS Guidance Offers Relief to Crypto Holdings of Treasury Firms

The Internal Revenue Service has introduced new guidance that will alleviate tax burdens for companies holding cryptocurrencies and other assets, albeit with certain limitations. This guidance, recently published by the IRS, states that C Corporations with revenues exceeding $1 billion are no longer required to pay taxes on unrealized capital gains under the Corporate Alternative Minimum Tax. This development is particularly beneficial for firms like Strategy (MSTR) and Mara Holdings (MARA), given their substantial Bitcoin holdings. Both companies have expressed that they will benefit from this new guidance. According to Brett Cotler, a partner at Seward & Kissel, this guidance primarily applies to larger corporations, including Digital Asset Treasury companies. Cotler explained that the volatility of cryptocurrencies can lead to significant tax liabilities, which may force companies to liquidate assets to cover these liabilities. The new proposal addresses this issue by not recognizing these assets on a mark-to-market basis, thereby providing relief to affected firms. The corporate alternative minimum tax regime applies to specific types of corporations, imposing a minimum tax on larger corporations. The values of treasury assets, including those of cryptocurrency holdings, are among the issues that these corporations would have had to pay taxes on, according to Cotler. This is not a crypto-specific issue, as companies with revenues of around $1 billion per year would be subject to these rules, regardless of the type of assets they hold. Shehan Chandrasekera, head of tax strategy at CoinTracker, noted that the guidance is interim but still applicable, allowing companies to rely on it when filing taxes next year. Typically, interim guidance like this will become a proposed final rule before being finalized. Although the IRS's guidance is not yet finalized, it indicates the agency's direction. Companies have until April of next year to file, with the option to extend until October, providing the IRS with sufficient time to finalize this guidance despite the ongoing government shutdown.