During the first session of the Arizona State Senate seating for 2023, the trio of senator Wendy Rogers, Sonny Borrelli, and Justine Wadsack considered taking the vote of Arizonians on the possibility of drafting a bill that adds virtual currency to the list of properties with tax exemptions.
The draft (SCR 1007) described cryptocurrency as a “digital representation of value that functions as a medium of exchange, a unit of account and a store of value other than the representation of the United States dollar or foreign currency.”
Arizona’s constitution status on tax exemptions
Based on Arizona’s constitution stipulates all federal, state, county, and municipal property, home items, and public obligations, a limited number of “stocks of raw, finished materials, unassembled parts, works in process, or finished products have tax exemptions.
While at the federal level, Sales and purchases of cryptocurrencies in the United States are typically subject to federal capital gains taxes.
Recall that on January 19 and 23, the SCR 1007 bill underwent two readings as part of Arizona’s state Senate’s agenda, and there were previous efforts in 2018 to impose tax payment via crypto. Still, it was rejected by Doug Ducey, then state governor.
American state’s attempts at crypto tax
Arizona is not the only American state working on a possible crypto tax exemption; different states in America are also coming up with various policies related to crypto and taxation.
Mayor Scott Conger of Jackson, Tennessee, on July.16,2021, announced the city’s intention to vigorously explore tax payments in bitcoin (BTC).
Jared Polis, governor of Colorado, facilitated the use of cryptocurrency in making payments for income tax, severance tax, use tax, excise fuel tax, withholding tax, and sales tax.
Ron DeSantis, the Governor of Florida, in March.23,2022, while speaking during the signing of the financial literacy curriculum bill, revealed the state’s intention to start accepting tax payments in cryptocurrencies.
Other states like Alaska, New Hampshire, Nevada, South Dakota, Texas, Washington, and Wyoming offer potential investors a 0% capital gain tax.
Bitcoin as a legal tender in the US
The law proposed on Jan. 25 would make Arizona the first state in the union to formally recognize bitcoin as a legal tender if it were to pass. Other Arizona Republican Party leaders have joined in co-sponsoring the bill.
The congressman referenced current research by banking behemoth Goldman Sachs, stating that bitcoin is the best-performing asset in 2023 when announcing the bill’s introduction.
The US Constitution forbids separate states from establishing their legal cash, so it is unclear whether the law will succeed. It’s interesting to note that the bill made mention of bitcoin’s independence from meddling from central banks.
Senators Sonny Borrelli, Justine Wadsack, and Wendy Rogers recently submitted new legislation that would bring the question of whether virtual currency should be treated as property subject to tax exemptions to a vote in 2024. Currently, all federal, state, county, and municipal real estate in Arizona is tax-exempt, as well as some household items and public debts.
This is not the state’s first law about crypto taxes; the document defines virtual currency as tokens that don’t represent the US dollar or another currency. Legislation that would have let citizens pay their taxes with cryptos was presented in 2018. In May 2018, the president finally vetoed the bill.
The law describes bitcoin as “the decentralized, peer-to-peer digital currency that operates independently of a central bank and in which a record of transactions is preserved on the bitcoin blockchain.” Computing solutions to mathematical puzzles generate new units of money
If the bill passes, state agencies can contract with crypto issuers to accept bitcoin payments for taxes, penalties, fees, and other financial responsibilities.
The first attempt, made in January 2022 but failed to clear the second reading, was Senator Rogers’ second attempt to submit similar legislation in the state.
These measures have been reintroduced at a time when there is a new discussion about the regulations for the sector, highlighting the interest that parliamentarians are showing in cryptos. Several measures intended to regulate crypto are currently pending in the US Congress.
This article was written with additional reporting from Wayne Jones.