According to the Inflation Reduction Act of 2022, Microstrategy may have to pay Federal Income Taxes on its unrealized Bitcoin gains.
Microstrategy’s Bitcoin portfolio is currently showing a $19 billion unrealized gain. This data is available to the public through Saylor Tracker, a website tracking Micheal Saylors’s Bitcoin portfolio.
The thought of paying taxes on unrealized gains may sound absurd. However, the Inflation Reduction Act 2022 established a “corporate alternative minimum tax” (CAMT), which Microstrategy falls under.
The CAMT applies to corporations whose adjusted financial statement income (AFSI) exceeds $1 billion for three consecutive tax years.
If the CAMT liability exceeds the corporation’s regular corporate tax liability by the third year, these corporations are taxed at a flat 15% rate.
Microstrategy, holding over 450,000 BTC valued at $47 billion, will take a significant hit on its unrealized gains if Trump’s administration does not step in.
Big Corporations Fight the Corporate Alternative Minimum Tax (CAMT)
On January 3, Coinbase and Microstrategy wrote a joint letter to lawmakers to review the CAMT regulation, citing it could cause “serious unintended consequences to US corporations holding substantial cryptocurrency.”
The joint letter to the IRS and US Treasury reads:
“The unforeseen combination of CAMT and a newly promulgated accounting standard create unjust and unintended tax consequences. CAMT imposes a minimum tax of 15% on corporations with an average AFSI of at least $1 billion over the last three years.”
The two big players motioned that unrealized profits on crypto stockpiles should be exempted from the adjusted financial statement income (AFSI). The letter stated that:
“Since the standard affects a corporation’s AFSI, corporations that own enough appreciated crypto (or have enough other book income) to be subject to CAMT must now pay tax on unrealized gains in cryptocurrency.”
This new CAMT regulation will affect fewer than 150 corporations due to the $1 billion threshold. The Congressional Budget Office (CBO) estimates that CAMT will increase federal tax revenues by $222 billion over a 10-fiscal-year period.
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