Illinois crypto tax is impossible to enforce as written, crypto industry tells court
Eighteen crypto companies and organizations have filed a court brief arguing that Illinois' pending crypto tax is impossible to enforce as written.
The crypto industry's latest court brief argues that Illinois' pending crypto tax fails in several areas, including being discriminatory, inappropriately vague and effectively impossible for certain targeted entities to meet. A group of 18 digital assets companies and organizations filed the brief in Illinois court as the matter continues to face legal dispute and has been postponed for at least six months.
Tax Implementation Delayed
Illinois sought to boost its revenue with a sudden grab at the assets changing hands in crypto transactions, catching the industry off guard in June. Now the whole crypto party, from a16z to Uniswap and many names in between, seems to have arrived in opposition, outlining in court why the state's hopes for a cash influx are misplaced.
The planned tax — currently on hold while the legal challenges are disputed in court — doesn't properly account for a complex crypto ecosystem in which the concept of "digital asset business activity" isn't as easy to pin down as the state might like. Illinois wants to implement a 0.2% tax on crypto activity involving firms exceeding $100,000 in receipts.
Industry's Legal Arguments
The latest brief, which was also signed by Aave Labs, Chainlink Labs, Paradigm, Phantom Technologies, Stand With Crypto and the DeFi Education Fund, says the tax law's definitions leave them baffled as to who should be treated as a crypto broker and what activity falls into the taxable range.
Under the agency's erroneous interpretation, developers and providers that lack custody of user assets, customer account relationships or access to customer-location information could face obligations they have no practical ability to perform.
They argue it's too vague to be legally permissible and discriminates against the digital assets industry. The Illinois Department of Revenue would be "sweeping in developers, providers and other network participants who would not be able to collect a tax from customers they do not have, direct payments from assets they do not control or determine a transaction's location from information they do not have."
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