For years, MicroStrategy (MSTR) founder Michael Saylor has been complaining that regulators have been unfairly forcing him to undervalue bitcoin (BTC) as a company asset. As of January 1, 2025, he obtained his want — and may need created an surprising, multi-billion greenback tax invoice within the course of.
Previous to 2025, Monetary Accounting Requirements Board’s (FASB) reporting requirements for Securities and Trade Fee (SEC) filings categorized MicroStrategy’s BTC as an “indefinite-lived intangible asset.”
This designation required MicroStrategy, as a public firm, to completely mark down the worth of its BTC when it declined in USD value. Completely marked down, the corporate may by no means mark up the worth once more, until it truly offered the asset.
Saylor decried this unfair therapy, claiming it was lunacy to not be capable to report a achieve after a markdown whilst BTC’s value rebounded.
Saylor fought for an ostensibly BTC-friendly change to FASB accounting requirements for public firms. He obtained his want through rule change ASU 2023-08 — which instantly backfired within the type of billions in upcoming tax liabilities.
Learn extra: Michael Saylor says he’s paying bitcoin taxes, not like ‘crypto-anarchists’
Bitcoin as an indefinite-lived intangible asset
For context, this rule change subject particularly applies to company tax therapy of BTC; this isn’t a tax subject for people.
As of January 1, the FASB permits companies to reclassify BTC, that means that they could now document positive factors when its value will increase. Corporations can checklist their BTC holdings at their actual greenback worth as of the reporting date, together with value adjustments from quarter to quarter.
Critically, if MicroStrategy decides to opt-in to accounting requirements based mostly on this reclassification, it will imply that would qualify for a brand new minimal tax and will owe a 15% unrealized positive factors tax on its as much as $17 billion in unsold BTC revenue.
Usually, capital positive factors taxes solely apply after somebody sells an asset. Nevertheless, in 2022, Congress handed the Inflation Discount Act which added a brand new, “corporate alternative minimum tax” and was a serious change to the FASB’s accounting guidelines.
Shock taxes on MicroStrategy’s unsold BTC
At first, some doubted whether or not the idea of taxes on unsold belongings was true, however it appears to be the case.
In line with WSJ’s Jonathan Weil and Simplify Asset Administration Chief Analyst Michael Inexperienced, opting-in to the flexibility to mark-to-market its BTC positive factors implies that MicroStrategy must pay taxes on even unrealized positive factors beginning as early as 2026.
Learn extra: Why have MicroStrategy insiders been dumping MSTR?
The identical therapy is given to merchants in undelivered futures merchandise. Sadly, within the complicated IRS system, generally tax could be due earlier than the achieve is definitely realized.
On account of the rule change, MicroStrategy is searching for assist from the Trump administration. At this level, solely politics can regulate IRS guidelines to exempt firms from paying taxes on such unrealized positive factors.
MicroStrategy even admitted to this minimal tax in its latest quarterly submitting. On web page 6, it states that it’s “currently evaluating the potential implications of unrealized fair value gains” as a result of the corporate’s mark-to-market valuation of its BTC may make the corporate topic to the Company Different Minimal Tax (CAMT) “in the tax years 2026 and beyond unless the proposed regulations with respect to CAMT are revised to provide relief.”
To this point, the IRS hasn’t carved out BTC or digital asset holdings in any exemption from its new, company various minimal tax.
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