Powerful interest groups are pushing the Securities and Exchange Commission to tweak accounting guidance that makes it more expensive for U.S. banks to hold digital assets for their customers.

The regulator is already facing pressure from both Democrats and Republicans in Congress to repeal the guidance.

The trade group coalition, which includes the Bank Policy Institute, the American Bankers Association, the Securities Industry and Financial Markets Association, and Financial Services Forum, issued a letter to the SEC on Wednesday seeking certain changes.

The existing guidance directs public companies, including banks, to count crypto they custody as liabilities on their corporate balance sheets. That means banks have to set aside assets worth a similar amount to protect against losses to comply with their capital requirements.

The groups have asked the SEC for the following key changes:

• To exclude certain assets from what counts under the broad crypto umbrella. This includes any traditional assets recorded or transferred using blockchain networks — for instance, tokenized deposits — as well as any tokens underlying SEC-approved products, like spot-Bitcoin exchange traded funds.
• To exempt regulated lenders from the current balance sheet requirement while maintaining the requirement that firms disclose their crypto activities in financial statements.

  “If regulated banking organizations are effectively precluded from providing digital asset safeguarding services at scale, investors and customers, and ultimately the financial system, will be worse off,” the trade groups said in the letter.

  The regulator has said its accounting guidance is necessary because cryptoassets pose unique risks and uncertainties compared to other assets banks hold for clients. In an interview, on Wednesday, SEC Chair Gary Gensler described the crypto industry as lacking in appropriate and required disclosures related to securities.

  ‘Chilling effect’ 

  The guidance in question — known as Staff Accounting Bulletin No. 121 — has drawn pushback from banks since it was published in 2022. Lenders have said the bulletin effectively restricts them from scaling up services to hold digital assets on behalf of customers by making it too costly.

  As a result, banks have been unable to crack into the crypto custodian business and recently missed out on providing that service for the newly-approved Bitcoin ETFs — an issue the trade groups raised in their letter. A majority of those ETF issuers picked Coinbase Global Inc. as their crypto custodian, with the rest using BitGo, Gemini or in the case of Fidelity, an in-house custody solution.

  The trade groups also pointed to other challenges they’ve faced because of the guidance, including a “chilling effect” on plans to use blockchain, or distributed ledger, technology for traditional assets.

  On Thursday, a spokesperson for the SEC described SAB 121 as “non-binding staff guidance” that, if followed, “enhances important disclosure to investors in firms that safeguard crypto assets for others.”

  Bank of New York Mellon Corp., which launched a digital asset custody platform in 2022 for select clients, reported “de minimis” impact from the product on its revenues or assets as of the end of 2023, according to a filing.

  State Street Corp., which has plans to launch a crypto custody platform pending regulatory approval, cut some jobs in its digital-assets division recently, Bloomberg reported earlier. Jay Biancamano, State Street’s former head of tokenization, said in a LinkedIn post in January that the team’s focus on digital custody and tokenization was “well ahead of their time.” In the post, he added: “unfortunately the ebbs and flows of digital innovation are hard to predict.”

  Push to repeal

  The requests made in the Wednesday letter seek to find a path forward with the SEC, at a time when some U.S. lawmakers are ramping up calls to repeal the bulletin outright. The idea has gained traction on Capitol Hill over the last several months following a report from the Government Accountability Office that concluded the SEC guidance amounted to a “rule” subject to congressional review.

  Earlier this month, Reps. Mike Flood, a Republican from Nebraska, and Wiley Nickel, a Democrat from North Carolina, introduced a resolution to repeal the SEC’s guidance and said that the regulator had overstepped its authority. Cynthia Lummis, a Wyoming Republican, sponsored identical legislation in the Senate.

  “The SEC should not be making rules that affect bank custody,” Flood said in an interview this week. “That’s a job for our prudential regulators.”

  Donna Milrod, State Street’s chief product officer and head of State Street Digital, said in a statement that while the lender is encouraged by Congress’s efforts, it was critical for the SEC to work collectively alongside banks and accounting firms to “at minimum, properly modify SAB 121 to remove the balance sheet treatment for prudentially regulated banks.”

  BNY Mellon declined to comment. In a previous public comment to the SEC last year, the lender recommended that banks be exempt from the on-balance sheet requirements.

  The Republican-led House Financial Services Committee could vote on the repeal measure as soon as this month, according to several people familiar with the matter. In the Senate, Lummis is trying to garner the 30 member signatures needed for a discharge petition, which would allow the legislation to skip a committee vote and set the stage for a floor vote, the people said.

  But even if the measures make it that far, it’s unclear if there will be enough support — particularly among Democrats and within the White House — for the legislation to become law.

Source: Bloomberg News

WASHINGTON — The Internal Revenue Service announced today tax relief for individuals and businesses in parts of Maine affected by severe storms and flooding that began on Dec. 17, 2023.

These taxpayers now have until June 17, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes Androscoggin, Franklin, Hancock, Kennebec, Oxford, Penobscot, Piscataquis, Somerset, Waldo and Washington Counties. Individuals and households that reside or have a business in these localities qualify for tax relief.

The same relief will be available to any other Maine localities added later to the disaster area. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

Filing and payment relief

The tax relief postpones various tax filing and payment deadlines that occurred from Dec. 17, 2023, through June 17, 2024 (postponement period). As a result, affected individuals and businesses will have until June 17, 2024, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the June 17, 2024, deadline will now apply to:

• Individual income tax returns and payments normally due on April 15, 2024.

• 2023 contributions to IRAs and health savings accounts for eligible taxpayers.

• Quarterly estimated income tax payments normally due on Jan. 16 and April 15, 2024.

• Quarterly payroll and excise tax returns normally due on Jan. 31 and April 30, 2024.

• Calendar-year partnership and S corporation returns normally due on March 15, 2024.

• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2024.

• Calendar-year tax-exempt organization returns normally due on May 15, 2024.

In addition, penalties for failing to make payroll and excise tax deposits due on or after Dec. 17, 2023, and before Jan. 2, 2024, will be abated as long as the deposits are made by Jan. 2, 2024.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these kinds of unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

The IRS urges anyone who needs an additional tax-filing extension, beyond June 17, for their 2023 federal income tax return to request it electronically by April 15. Though a disaster-area taxpayer qualifies to request an extension between April 15 and June 17, a request filed during this period can only be submitted on paper. Whether requested electronically or on paper, the taxpayer will then have until Oct. 15, 2024, to file, though payments are still due on June 17. Visit IRS.gov/extensions for details.

Additional tax relief

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2023 return normally filed this year), or the return for the prior year (2022). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. For individual taxpayers, this means Oct. 15, 2024. Be sure to write the FEMA declaration number – 4754-DR − on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

The IRS may provide additional disaster relief in the future.

The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit DisasterAssistance.gov.

Source: IRS-2024-32, Feb. 5, 2024

The Internal Revenue Service today reminded disaster-area taxpayers who received extensions to file their 2022 returns that these returns are due on Feb. 15, 2024.

Eligible taxpayers were those affected by various disasters that occurred between Aug. 8 and Oct. 9, 2023. This included Hurricane Idalia, Hurricane Lee, Tropical Storm Bolaven, the wildfires in Hawaii, the seawater intrusion in Louisiana and storms and flooding in Illinois. For extension filers, payments on these returns were not eligible for the additional time because they were originally due last spring before any of these disasters occurred.

Locations that qualify for the Feb. 15 filing deadline:

• Forty-nine counties in Florida.
• Thirty-two counties In Georgia.
• All of Guam.
• Maui and Hawaii counties in Hawaii.
• Cook County in Illinois.
• Five parishes in Louisiana.
• All 16 counties in Maine.
• All 14 counties in Massachusetts.
• Six islands in the Northern Mariana Islands.
• All 46 counties in South Carolina.

The IRS normally provides relief, including postponing various tax filing and payment deadlines, for any area designated by the Federal Emergency Management Agency (FEMA). As long as their address of record is in a disaster-area locality, individual and business taxpayers automatically get the extra time, without having to ask for it. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers who assisted with relief activities who are affiliated with a recognized government or philanthropic organization.

Besides those who received extensions to file their 2022 returns, there are other returns, payments and time-sensitive tax-related actions that also qualify for the Feb. 15 deadline. For details, see the IRS disaster relief page, especially the disaster relief announcements for each state and territory.

The tax relief is part of a coordinated federal response to the damage caused by these disasters and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Source: IRS-2024-29, Jan. 31, 2024