Proposed Rule2026-04431
Electronic Furnishing of Payee Statements Regarding Digital Asset Sales by Brokers
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 6, 2026
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains proposed regulations that would provide digital asset brokers that are required to furnish to their customers written statements reflecting information provided to the IRS with respect to digital asset sale transactions with an alternative process for obtaining consent from their customers to receive these statements in an electronic format without offering a paper delivery alternative.
Full Text
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<title>Federal Register, Volume 91 Issue 44 (Friday, March 6, 2026)</title>
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[Federal Register Volume 91, Number 44 (Friday, March 6, 2026)]
[Proposed Rules]
[Pages 10983-11003]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-04431]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-105064-25]
RIN 1545-BR47
Electronic Furnishing of Payee Statements Regarding Digital Asset
Sales by Brokers
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations that would provide
digital asset brokers that are required to furnish to their customers
written statements reflecting information provided to the IRS with
respect to digital asset sale transactions with an alternative process
for obtaining consent from their customers to receive these statements
in an electronic format without offering a paper delivery alternative.
DATES: Written or electronic comments and requests for a public hearing
must be received by May 5, 2026.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically. Submit electronic submissions via the Federal
eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a> (indicate IRS and
REG-105064-25) by following the online instructions for submitting
comments. Requests for a public hearing must be submitted as prescribed
in the ``Comments and Requests for a Public Hearing'' section of this
preamble. Once submitted to the Federal eRulemaking Portal, comments
cannot be edited or withdrawn. The Department of the Treasury (Treasury
Department) and the IRS will publish any comments submitted
electronically or on paper to the public docket. Send paper submissions
to: CC:PA:01:PR (REG-105064-25), Room 5503, Internal Revenue Service,
P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Roseann Cutrone of the Office of the Associate Chief Counsel (Procedure
and Administration) at (202) 317-5436 (not a toll-free number);
concerning submissions of comments and requests to participate in the
public hearing, the Publications and Regulations Section at (202) 317-
6901 (not a toll-free number) or by sending an email to
<a href="/cdn-cgi/l/email-protection#88f8fdeae4e1ebe0ede9fae1e6effbc8e1fafba6efe7fe"><span class="__cf_email__" data-cfemail="05757067696c666d6064776c6b6276456c77762b626a73">[email protected]</span></a> (preferred).
SUPPLEMENTARY INFORMATION:
Authority
This document contains proposed regulations that would amend
regulations under section 6045 of the Internal Revenue Code (Code).
Section 6045(a) provides authority to the Secretary of the Treasury or
the Secretary's delegate (Secretary) to require every person doing
business as a broker to file an information return in accordance with
such regulations as the Secretary may prescribe. Section 6045(a)
further provides that such information return must show the name and
address of each customer, and details regarding gross proceeds and such
other information as the Secretary may by forms or regulations require
with respect to such business. The Secretary is further authorized
under section 401 of the Job Creation and Worker Assistance Act of 2002
(JCWAA), Public Law 107-147, 116 Stat. 21 (March 9, 2002) to provide
the manner of consent for a recipient to receive electronic payee
statements.\1\ These proposed regulations are also issued under the
express delegation of authority under section 7805 of the Code, which
directs the Secretary to prescribe all needful rules and regulations
for the enforcement of the Code.
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\1\ General references in these proposed regulations to payee
statements refer to written statements required to be furnished
under any information reporting provision under subpart B of part
III of subchapter A of chapter 61 of the Code. A person required to
furnish such a payee statement generally is referred to as a
furnisher. A person required to be furnished the payee statement
generally is referred to as a recipient.
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Background
Under section 6045 and the regulations thereunder, brokers are
required to make a return of information regarding certain digital
asset sale transactions to the IRS and furnish payee statements to the
person whose identifying number is (or is required to be) shown on Form
1099-DA, Digital Asset Proceeds From Broker Transactions.\2\ The
existing rules generally applicable to brokers furnishing payee
statements require brokers to obtain consent from their
[[Page 10984]]
customers before the brokers can satisfy their furnishing obligation
with an electronically furnished payee statement. The existing rules
also require brokers to furnish payee statements on paper to any
customer that does not consent to receiving electronically furnished
statements or that withdraws a previously provided consent. These
proposed regulations would provide brokers with an alternative process
for obtaining consent from their customers to receive 1099-DA
statements in an electronic format. Unlike the existing rules, these
proposed regulations would generally not require brokers to furnish the
1099-DA statements on paper to any customer that does not consent to
receiving these statements electronically but, instead, would
specifically permit brokers to terminate their business relationship
with these customers. Additionally, these proposed regulations would
not require brokers to give their customers the ability to withdraw a
previously provided consent.
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\2\ A payee statement reflecting information required by section
6045 and the regulations thereunder to be reported on Form 1099-DA
is referred to in this preamble as a 1099-DA statement. A payee
statement reflecting information required by section 6045 and the
regulations thereunder to be reported on Form 1099-B, Gross Proceeds
From Broker Transactions, is referred to in this preamble as a 1099-
B statement. A person required to furnish a 1099-B statement or a
1099-DA statement is referred to as a broker. A person required to
be furnished a 1099-B statement or a 1099-DA statement is referred
to herein as a customer.
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I. Information Reporting by Brokers Under Section 6045
Section 6045 and the regulations thereunder generally require
brokers to file information returns with the IRS with respect to
certain transactions, including sales of digital assets, effected by
the broker on behalf of each customer. Brokers required to make these
returns must include identifying information of the customer, such as
the customer's name and tax identification number (TIN), and such other
relevant information, including the gross proceeds from the
transaction, as the Secretary may require by forms or regulations. In
certain circumstances, the returns must also include the customer's
adjusted basis in the assets sold. Brokers must use either Form 1099-B,
Proceeds from Broker and Barter Exchange Transactions, or Form 1099-DA
as appropriate to provide this information to the IRS.
Under section 6045(b) and Sec. 1.6045-1(k)(1), a broker (which,
where applicable includes a barter exchange) making a return of
information under section 6045 must furnish either a 1099-B statement
or a 1099-DA statement to the broker's customer showing the information
required to be reported to the IRS as well as a legend stating that the
information is being reported to the IRS. Under Sec. 1.6045-1(k)(1), a
payee statement is considered to be furnished to the broker's customer
if it is mailed to the customer at the last address of the customer
known to the broker. A separate 1099-B statement or 1099-DA statement
must be furnished to the customer for each sale transaction effected
for that customer during the calendar year. Brokers may furnish these
payee statements to customers using Copy B of the official Form 1099 or
an acceptable substitute statement if it contains the same information
as the official IRS form. See section 4.1.2 of Rev. Proc. 2024-29,
2024-30 I.R.B. 121 (July 22, 2024), which is published as IRS
Publication 1179, General Rules and Specifications for Substitute Forms
1096, 1098, 1099, 5498, and Certain Other Information Returns
(Publication 1179).
Section 6045(b) requires brokers to furnish payee statements to
their customers on or before February 15 of the year following the
calendar year for which the return was required to be made. In certain
circumstances, filers reporting more than one type of payment during a
calendar year with respect to the same customer may furnish a combined
payee statement (called a consolidated reporting statement) to that
customer that combines different types of payments on the same
statement. Section 6045(b) and Sec. 1.6045-1(k)(3)(ii) extend the due
date for furnishing statements that are furnished with the consolidated
reporting statement from the due date set forth in the Code for such
other payee statements (generally on or before January 31 of a calendar
year) to February 15 of that year. The regulations permit this
combination of statements on a consolidated reporting statement only if
the statements are based on the same relationship of broker to customer
as the statement required to be furnished under section 6045. See Sec.
1.6045-1(k)(3)(i). Section 4.2.1 of Publication 1179 provides that
1099-B statements may be combined (in a consolidated statement that
Publication 1179 refers to as a composite recipient statement) only
with income reported on the following forms: Form 1099-DIV, Dividends
and Distributions (except for section 404(k) dividends), Form 1099-INT,
Interest Income (except for interest reportable under section 6041),
Form 1099-MISC, Miscellaneous Information (only for royalties or
substitute payments in lieu of dividends and interest), Form 1099-OID,
Original Issue Discount, Form 1099-PATR, Taxable Distributions Received
From Cooperatives, and Form 1099-S, Proceeds From Real Estate
Transactions (only for royalties). Section 4.2.1 of Publication 1179
does not permit brokers to include any other payee statement on a
composite recipient statement with a 1099-B statement.
Section 6722 of the Code imposes a penalty for any failure to
furnish a payee statement, including a payee statement required by
section 6045, on or before the required furnishing date to the person
to whom such statement is required to be furnished, and for any failure
to include all the information required to be shown on the payee
statement or for the inclusion of incorrect information on that payee
statement.
Section 6724 provides that no penalty shall be imposed under
section 6722 if the filer (payor) shows that the failure was due to
reasonable cause and was not due to willful neglect.
II. Current Rules Permitting Electronic Furnishing of Payee Statements
Section 401 of the JCWAA provides that any person required to
furnish a payee statement under certain information reporting
provisions (including section 6045) of the Code ``may electronically
furnish such statement . . . to any recipient who has consented to the
electronic provision of the statement in a manner similar to the one
permitted under regulations issued under section 6051 of such Code or
in such other manner as provided by the Secretary.'' The legislative
history to section 401 of JCWAA also makes clear that obtaining consent
to the electronic furnishing of payee statements by the recipient is
mandatory. The Technical Explanation of the JCWAA provides that the
provision ``removes the statutory impediment'' to electronically
furnishing payee statements and that ``these copies may be furnished
electronically to a recipient who has consented to this.'' See
Technical Explanation of the ``Job Creation and Worker Assistance Act
of 2002,'' JCX-12-02 at 27 (March 6, 2002). See also Description of
Chairman's Modification to the ``Economic Recovery and Assistance for
American Workers Act of 2001, JCX-78-01 at 12 (November 8, 2001).
Accordingly, payee statements within the scope of section 401 of JCWAA
may be furnished electronically only with the consent of the recipient.
When JCWAA was enacted, temporary regulations, 66 FR 10191
(February 14, 2001) (Temporary Regulations), were in effect under
section 6051 that generally required furnishers to comply with specific
notice and consent requirements before they could electronically
furnish payee statements to employee-recipients on Forms W-2, Wage and
Tax Statement, (W-2 payee statements). A Notice of Proposed Rulemaking,
66 FR 10247 (February 14, 2001) (2001 Proposed Regulations), cross-
referenced the text of the Temporary Regulations as the text of the
2001 Proposed Regulations.
[[Page 10985]]
Following the publication of the 2001 Proposed Regulations, the
Treasury Department and IRS received several comments seeking the
removal of the notice and consent requirements. The Treasury Department
and IRS retained the notice and consent requirements in the final
regulations. See TD 9114, 69 FR 7567 (February 18, 2004) (2004 Final
Regulations). The Explanation of Revisions and Summary of Comments to
the 2004 Final Regulations explained that the notice and consent
requirements were retained for tax administration reasons because ``it
is important that taxpayers be able to demonstrate the ability to
receive the tax statements electronically and then actually receive
them.'' Id. 69 FR at 7568. Additionally, the Explanation of Revisions
and Summary of Comments to the 2004 Final Regulations explained that
the notice and consent requirements were determined to be important to
ensuring that electronic furnishing remained voluntary for both
furnishers and recipients of payee statements to accommodate recipients
who perceive traditional paper delivery of statements to be more secure
and private. Id. Finally, the Explanation of Revisions and Summary of
Comments to the 2004 Final Regulations explained that keeping the
consent requirement voluntary was consistent with section 401 of the
JCWAA, which adopted the notice and consent requirements by cross
referencing the Temporary Regulations. Id.
The section 6051 regulations referenced by the JCWAA generally
permit furnishers that pay remuneration for services to recipients to
furnish payee statements to the recipients in an electronic format in
lieu of paper if the furnisher obtains the recipient's consent and
meets certain other requirements. See Sec. 31.6051-1(j)(1). These
other requirements generally require that the furnisher furnish the
payee statement on paper if the recipient does not consent (or
withdraws a previously provided consent) to receiving the statement
electronically. See for example, Sec. 31.6051-1(j)(2)(ii) and
(j)(3)(ii). Additionally, because recipients might not be aware that
their payee statements have been posted to the furnisher's website, the
regulations require the furnisher to provide the recipient with clear
notice that this important tax return document is available and to
provide the recipient with instructions on how to access it. See Sec.
31.6051-1(j)(5). Finally, the regulations contain rules to ensure that
recipients have access during the tax filing season to the payee
statements reflecting all the information reported to the IRS. See
Sec. 31.6051-1(j)(4) (format of substitute statements) and (j)(6)
(access period).
Section 4.6 of Publication 1179 applies the rules set forth in
Sec. 31.6051-1(j) regarding the electronic furnishing of payee
statements to several different payee statements required to be
furnished, including 1099-B statements required by section 6045(b) and
Sec. 1.6045-1(k). Publication 1179 is generally updated annually but
has not yet been revised to include 1099-DA statements.
III. Reasons for New Consent Procedures for 1099-DA Statements
Reflecting Digital Asset Sales
Stakeholders have provided comments indicating that transactions
involving digital assets, including the purchase, sale, or disposition
thereof, are almost exclusively conducted electronically. Customers who
buy and sell digital assets using the custodial wallet services and
exchange platform services of digital asset brokers must use computers
or mobile devices to access their brokers' websites or mobile device
applications. Given that customers have this technological capability,
the Treasury Department and the IRS are of the view, consistent with
that of stakeholder suggestions discussed later in this Part III of the
Background, that the furnishing of payee statements related to digital
asset transactions to these customers is better conducted
electronically to relieve potential compliance burdens on brokers.
Congress enacted third party information reporting provisions to
increase the IRS's ability to administer and enforce the tax laws and
to improve taxpayer compliance with these laws. See e.g., Sen. Rep. No
97-494, 239 (interest), 247 (fixed and determinable or determinable
income), and 245 (capital gains) (July 12, 1982). Third party
information reporting generally contributes to lowering the income tax
gap, which is the difference between taxes legally owed and taxes
actually paid. See U.S. Government Accountability Office (GAO), Tax
Gap: Multiple Strategies Are Needed to Reduce Noncompliance, GAO-19-
558T at 6 (May 9, 2019). Information reporting by brokers on their
customers' digital asset transactions benefits tax compliance by
helping to close the information gap. See TIGTA, Ref. No. 2020-30-066,
The Internal Revenue Service Can Improve Taxpayer Compliance for
Virtual Currency Transactions, 10 (September 2020); GAO, Virtual
Currencies: Additional Information Reporting and Clarified Guidance
Could Improve Tax Compliance, 28, GAO-20-188 (Washington, DC: February
2020). First, because brokers are also required to furnish 1099-DA
statements to their customers showing the information reported to the
IRS, customers receiving these 1099-DA statements are made aware that
their digital asset transactions may be taxable transactions and can
use these statements as a record to assist with reporting gross
proceeds (and, when basis is reported, calculating taxable gains and
losses) from the reported transactions. Second, information returns
allow the IRS to match the information reported to the IRS with tax
returns filed by these customers whose identifying number is shown on
the information returns to verify that these customers have properly
reported income (or loss) from the reported transactions. Thus,
furnishing of 1099-DA statements to customers is essential not only to
customers who use the furnished information to accurately file their
tax returns but also to reducing the overall tax gap attributable to
digital asset sale transactions.
The Internal Revenue Service Advisory Committee (IRSAC) in its
public report for 2024 (IRSAC Report) \3\ stated that the current rules
requiring that payee statements be furnished on paper if the statement
recipient does not affirmatively consent (or withdraws a previously
provided consent) to receiving the statement electronically would be
impractical if applied to digital asset brokers required to furnish
1099-DA statements to their customers reflecting the information
reported to the IRS with respect to each digital asset transaction
effected during the calendar year. See IRSAC Report at 130. According
to the IRSAC Report, many customers engage in a significant number of
digital asset transactions each year. Furnishing separate 1099-DA
statements for each digital asset transaction (or even a single
substitute statement that includes information about each transaction)
by mail would impose avoidable compliance burdens on digital asset
brokers that would be forced to furnish to many customers hundreds or
even thousands of pages of paper statements annually. Id.
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\3\ Public Report, Internal Revenue Service Advisory Council,
Publication 5316 (Rev. 11-2024) available at <a href="https://www.irs.gov/pub/irs-pdf/p5316.pdf">https://www.irs.gov/pub/irs-pdf/p5316.pdf</a> (IRSAC Report).
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The current regulations in Sec. 1.6045-1(k) and the guidance in
Publication 1179, when revised to apply to brokers effecting sales of
digital assets pursuant to the 2024 final regulations (TD 10000, 89 FR
56480 (July 9, 2024)), would
[[Page 10986]]
require brokers to furnish 1099-DA statements on paper for any customer
that does not affirmatively consent (or withdraws a previously provided
consent) to receiving the 1099-DA statements in an electronic format.
The Treasury Department and the IRS acknowledge that the cost of
furnishing 1099-DA statements on paper for customers that do not
provide their consent under the existing rules may be unnecessarily
burdensome for brokers that effect sales of digital assets because of
the large number of digital asset transactions that some customers
engage in each year and because digital asset customers almost
exclusively conduct transactions electronically. Consequently, these
proposed regulations propose alternative rules that would allow digital
asset brokers to obtain customer consent to the electronic furnishing
of 1099-DA statements without having to offer customers the choice of
receiving the 1099-DA statements on paper. To ensure that customers are
made aware that an important tax return document has been furnished in
an electronic format and have continuing access to their 1099-DA
statement, these proposed alternative rules would, however, require
these brokers to meet certain enhanced electronic notice and delivery
requirements and to provide customer access to the statements for a
longer period of time.
Explanation of Provisions
These proposed regulations would provide guidance under proposed
Sec. 1.6045-1(k)(5) regarding the ability of brokers to obtain consent
from their customers to furnish 1099-DA statements in an electronic
format without offering a paper delivery alternative. For the reasons
discussed in Part III. of this Explanation of Provisions, these
proposed regulations are limited to consent procedures only for 1099-DA
statements and accordingly do not extend to any other payee statements,
such as 1099-B statements.
I. Electronic Furnishing of 1099-DA Statements
Proposed Sec. 1.6045-1(k)(5)(i) would permit brokers required to
furnish 1099-DA statements to obtain consent to furnish those
statements in an electronic format in lieu of paper either (1) pursuant
to guidance provided by the IRS in the Internal Revenue Bulletin or
other publications (such as under section 4.6.2 of Publication 1179)
applicable to other information return filers or (2) under the rules
proposed in these proposed regulations. The rules proposed in these
proposed regulations would not require the broker to furnish paper
payee statements if the customer does not consent but, instead, would
specifically permit brokers to terminate their business relationship
with these customers. Additionally, unlike the existing rules, the
rules proposed in these proposed regulations would not require brokers
to permit customers to withdraw a previously provided consent.
Customers not permitted to withdraw previously provided consents would
need to move their digital asset investments to other brokers willing
to furnish 1099-DA statements on paper in order to receive their 1099-
DA statements on paper. Because customers would not have the right to
have their 1099-DA statements furnished on paper, these proposed
regulations would impose enhanced notification requirements on brokers
to increase the likelihood that customers receive the communication
that their 1099-DA statements have been transmitted or otherwise made
available.
A. In General
Proposed Sec. 1.6045-1(k)(5)(i) would permit brokers to furnish
1099-DA statements to customers in an electronic format in lieu of a
paper format (and without the requirement to offer the paper format) if
the broker obtains consent from the customer, uses one of two qualified
electronic delivery methods, and meets certain other requirements
relating to continuing disclosure, format, notice, and access period.
The proposed consent requirements are generally modeled after the
consent requirements under Sec. 31.6051-1(j) for W-2 payee statements
but modify those rules where appropriate to reflect the technological
knowledge of digital asset investors and traders and the significantly
greater number of 1099-DA statements that must be furnished to each
customer. Under the proposed regulations, brokers would be required to
obtain the customer's positive consent to receiving the 1099-DA
statement in an electronic format after receiving certain information
from the broker regarding the scope of consent, the methods (including
hardware and software requirements) necessary to access the
electronically provided 1099-DA statements, the qualified electronic
delivery method that will be used to furnish the 1099-DA statements,
and other important information necessary for the customer to make an
informed consent. Unlike the consent requirements under Sec. 31.6051-
1(j) for W-2 payee statements, these proposed regulations would not
require brokers to give customers the option to receive their 1099-DA
statements on paper nor would they require brokers to give customers
the ability to withdraw a previously provided consent while remaining
customers. Nevertheless, as further described in Part I.C.3.b. of this
Explanation of Provisions, if a broker's email of an original 1099-DA
statement is returned as undeliverable, the broker may be required to
send the original 1099-DA statement to the customer by mail within 30
days of receiving that undeliverable response.
Brokers that obtain the customer's positive consent would be
required to furnish 1099-DA statements either by posting them to a
specified location that is electronically accessible, such as the
broker's website, mobile device application, or other online platform,
or by attaching them to an email. Brokers that furnish 1099-DA
statements by posting them to an electronically accessible specified
location would be required to send customers a notice by email that the
statements are available and, if requested by the customer, another
notice using a communication method other than email. Brokers that
furnish 1099-DA statements by attaching them to emails would not be
required to send the customer a notice unless the customer requests a
notice of that transmittal using a communication method other than
email. Because brokers may not know if their customers, in fact,
accessed their electronically furnished 1099-DA statements, proposed
Sec. 1.6045-1(k)(5)(i) would treat a broker that posts the 1099-DA
statement to a specified location that is electronically accessible and
that meets the consent, delivery, and other requirements in the
proposed regulations as furnishing the 1099-DA statement as of the last
of the following dates: (1) the date that the broker posts the 1099-DA
statement to the specified location; (2) the date that the broker sends
the customer a notice by email that the 1099-DA statement has been made
available; and (3) the date that the broker sends the requested notice
using a communication method other than email, if requested by the
customer. For a broker that sends the customer an email with a 1099-DA
statement attached and that meets the consent, delivery, and other
requirements in the proposed regulations, proposed Sec. 1.6045-
1(k)(5)(i) would generally treat the broker as furnishing the 1099-DA
statement as of the later of the date that the broker sends to the
customer an email with a 1099-DA statement attached or the date that
the broker sends the requested notice informing the customer that the
customer's 1099-
[[Page 10987]]
DA statement has been transmitted using a communication method other
than email. See Part I.C. of this Explanation of Provisions for a
discussion of the proposed rule that would require brokers to provide
customers with additional methods to receive requested notices
regarding their 1099-DA statements and the rationale behind this
proposed rule.
B. Consent
The proposed consent requirements are generally modeled after the
consent requirements under Sec. 31.6051-1(j) for W-2 payee statements.
For example, like the consent requirements under Sec. 31.6051-1(j),
the proposed consent requirements in these proposed regulations are
designed to ensure that the customer is made aware that the customer is
providing this specific consent to receive the 1099-DA statement in an
electronic format. Additionally, like the consent requirements under
Sec. 31.6051-1(j), the proposed rules would require that customers be
provided with a disclosure statement, prior to or at the time of this
consent, setting forth important information regarding the consequences
of consent and non-consent.\4\
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\4\ The Electronic Signatures in Global and National Commerce
Act (E-SIGN Act) Public Law 106-229, 114 Stat. 464 (2000), 15 U.S.C.
7001 through 7006 (2000), provides rules permitting businesses to
furnish to consumers legally required records in an electronic
format with the consent of the consumer. The consent rules in these
proposed regulations are largely consistent with the consent rules
in the E-SIGN Act.
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The proposed regulations would differ from the rules under Sec.
31.6051-1(j), however, where appropriate to reflect the technological
knowledge of digital asset traders and the significantly higher number
of 1099-DA statements that might be furnished to each customer in
comparison to the single-page W-2 payee statements that are required to
be furnished to employees under Sec. 31.6051-1(j). For example, the
proposed regulations would not include the requirement in Sec.
31.6051-1(j)(2)(i) that the recipient's consent be provided in a way
that reasonably demonstrates the recipient's ability to access the
statement in the electronic format. In addition, the proposed
regulations would not include the requirements in Sec. 31.6051-
1(j)(3)(ii) and (v) that furnishers inform recipients that recipients
will receive paper statements if they do not provide their consent or
that recipients may withdraw a previously provided consent under
specified procedures. See Parts I.B.1. through 5. of this Explanation
of Provisions for a more detailed explanation of the consent
requirements included in proposed Sec. 1.6045-1(k)(5)(iii) and how
they compare to the consent requirement in Sec. 31.6051-1(j).
1. Positive Consent
To achieve the objective that customers be made aware of what they
are consenting to, proposed Sec. 1.6045-1(k)(5)(iii)(A) would require
that the customer provide positive consent to receive the 1099-DA
statement in an electronic format. Positive consent would be treated as
obtained, for this purpose, if the customer performs an explicit action
to provide consent, such as by checking a box, clicking a button, or
completing a fill-in screen. See proposed Sec. 1.6045-1(k)(5)(iii)(A).
This proposed requirement to take an explicit action to provide
positive consent is included to ensure that customers are made aware
that they will receive their 1099-DA statements in an electronic
format. This requirement that the customer perform an explicit action
is similar to the affirmative consent requirement in the current
regulations in Sec. 1.6045-1(k) and the guidance in Publication 1179.
Use of the adjective ``positive'' in the proposed regulations instead
of ``affirmative'' is meant to distinguish the overall consent rules in
the proposed regulations from the overall consent rules under Sec.
31.6051-1(j) and as provided in section 4.6.2 of Publication 1179,
which, unlike the proposed regulations, require the customer to
demonstrate that the customer can access the electronically provided
statement. See Part I.B.2. of this Explanation of Provisions for a
discussion of the demonstration requirement of Sec. 31.6051-1(j) and
why it is not included in these proposed regulations.
Proposed Sec. 1.6045-1(k)(5)(iii)(A) would also require that the
broker's solicitation of the customer's consent meet specific
requirements designed to ensure that customers are aware of what they
are agreeing to when they provide their consent. As discussed in Part
III. of the Background, the furnishing of 1099-DA statements to
customers provides these customers with a record that they can use to
assist with reporting gross proceeds (and when basis is reported
calculating and reporting taxable gains and losses) from the reported
sales. If these customers are not made aware that their 1099-DA
statements will be furnished electronically, they might fail to access
those statements and report their taxable gains (and losses) from the
reported sales correctly, thus thwarting the benefits of third-party
information reporting. Accordingly, to address the importance of making
customers aware that their 1099-DA statements will be electronically
furnished, proposed Sec. 1.6045-1(k)(5)(iii)(A) would require that the
customer's consent to receiving the 1099-DA statements in an electronic
format be separate from any other consent provided by the customer. The
solicitation of the customer's consent to receive 1099-DA statements
electronically may be included in another communication, including a
communication that solicits consent on other issues, for example a
broker's terms and conditions, but the customer's response to the 1099-
DA consent solicitation may relate only to consent to receiving the
1099-DA statement electronically.
Additionally, to ensure that the customer's consent is an informed
consent, proposed Sec. 1.6045-1(k)(5)(iii)(A) would require that a
clear and conspicuous disclosure statement be provided to the customer
prior to or at the time of consent. See Part I.B.3. of this Explanation
of Provisions, for a discussion of the information that must be
disclosed to the customer prior to or at the time of consent and for
the rules detailing how this information must be provided to the
customer.
2. Demonstration of Ability To Access the 1099-DA Statement
The rules under Sec. 31.6051-1(j) and the guidance under section
4.6 of Publication 1179 require furnishers of payee statements to
obtain the consent of each recipient to receiving the payee statement
electronically before the statement can be furnished electronically to
that recipient. Consent, for this purpose, requires that the recipient
reasonably demonstrate the recipient's ability to access the payee
statement in the electronic format.\5\ Examples 1 and 2 under Sec.
31.6051-1(j)(2)(iv) demonstrate the application of this rule with facts
showing recipients who are directed to give their consent on documents
that are provided in the same electronic format as that in which the
payee statements will be furnished. Because the recipients give their
consent using the same electronic format as that in which the payee
statements will be furnished, Examples 1 and 2 conclude that the
recipients' consent demonstrates that the recipients are able to access
the electronic format in which the payee statements will be furnished.
Id. Example 3 under Sec. 31.6051-1(j)(2)(iv) shows facts under which a
recipient must give consent on the same website that the recipient's
[[Page 10988]]
electronically furnished payee statement will be posted. Example 3
concludes that because the recipient demonstrated the ability to access
the website on which the payee statement will be posted, the
recipient's consent demonstrated the recipient's ability to access the
payee statement in the electronic format. Id.
---------------------------------------------------------------------------
\5\ See Sec. 31.6051-1(j)(2)(i); see also 15 U.S.C.
7001(c)(1)(C)(ii).
---------------------------------------------------------------------------
Taxpayers who buy and sell digital assets using the custodial
wallet services and exchange platform services of digital asset brokers
must use computers or mobile devices to access their brokers' websites
or mobile device applications. Consequently, these taxpayers have
already demonstrated that they can access their brokers' websites or
mobile device applications to retrieve information posted to these
locations, such as a 1099-DA statement. Therefore, it is not necessary
for customers to demonstrate their ability to access their broker's
websites or mobile device applications. Similarly, by definition, if a
taxpayer provides the broker with the taxpayer's email address, the
taxpayer has confirmed that the taxpayer can access communications sent
to this address. Therefore, it is not necessary for customers to
demonstrate their technical ability to access their email accounts. By
not adopting these requirements from Sec. 31.6051-1(j), the Treasury
Department and the IRS anticipate that these proposed regulations will
be less burdensome on electronic commerce without materially increasing
the risk of harm to consumers. Accordingly, these proposed regulations
do not require the method by which a customer provides consent to
include a demonstration that the customer has the technical ability to
access electronically furnished 1099-DA statements in the format in
which it will be furnished.
3. Pre-Consent Disclosure Statement
a. Information Included in the Pre-Consent Disclosure Statement
As noted in Part I.B.1. of this Explanation of Provisions, proposed
Sec. 1.6045-1(k)(5)(iii)(A) would require brokers to provide customers
with a clear and concise disclosure statement prior to or at the time
of consent (pre-consent disclosure statement). Proposed Sec. 1.6045-
1(k)(5)(iii)(C) would require that this disclosure statement contain
seven information items described in proposed Sec. 1.6045-
1(k)(5)(iii)(C)(1) through (7). Two of these proposed disclosure
requirements are the same as the disclosure requirements set forth in
Sec. 31.6051-1(j)(3)(iii) (scope and duration of consent) and (viii)
(hardware and software requirements) and described in section 2.6.2 of
Publication 1179.\6\ Specifically, proposed Sec. 1.6045-
1(k)(5)(iii)(C)(1) would require the pre-consent disclosure statement
to inform the customer that the provided consent will apply to all
1099-DA statements required to be furnished by the broker.
Additionally, proposed Sec. 1.6045-1(k)(5)(iii)(C)(2) would require
the pre-consent disclosure statement to describe the method by which
the customer will need to access, download, and print the 1099-DA
statement furnished in the electronic format, including the hardware or
software the customer will need to conduct these functions.
---------------------------------------------------------------------------
\6\ See also 15 U.S.C. 7001(c)(1)(B)(ii) and (c)(1)(C)(i). Many
of the pre-consent disclosure requirements in Sec. 31.6051-1(j)(3)
are not included in the proposed regulations because they are not
applicable. For example, Sec. 31.6051-1(j)(3)(ii), (iv), and (v)
require disclosures associated with the paper statement option that
furnishers are required to provide under Sec. 31.6051-1(j).
Similarly, Sec. 31.6051-1(j)(3)(vi) is not applicable to these
proposed regulations because it requires furnishers to inform
recipients of the conditions under which payee statements will no
longer be electronically furnished.
---------------------------------------------------------------------------
Proposed Sec. 1.6045-1(k)(5)(iii)(C) also includes five pre-
consent disclosure requirements that are not included in (or are
different from) the pre-consent disclosures required by Sec. 31.6051-
1(j)(3) and described in section 2.6.2 of Publication 1179. For
example, proposed Sec. 1.6045-1(k)(5)(iii)(C)(3) would require the
pre-consent disclosure statement to describe the specific qualified
electronic delivery method that the broker will use to furnish the
1099-DA statement to the customer. The purpose of this disclosure is to
ensure that customers will know which method brokers will use to
deliver their 1099-DA statements. Customers can use this information to
evaluate whether, in their view, the delivery method chosen by the
broker is a secure or otherwise convenient method of delivery. See Part
I.C. of this Explanation of Provisions for a discussion of the
qualified electronic delivery methods.
If the broker chooses the qualified electronic delivery method that
would require the broker to send a notice to the customer that the
1099-DA statement has been posted to a specified location that is
electronically accessible, proposed Sec. 1.6045-1(k)(5)(iii)(C)(4)
would require the disclosure statement to state that the notice will be
sent to the customer by email and that the customer may ask for another
notice using an additional communication method (referred to as
requested notice). Alternatively, if the broker chooses the qualified
electronic delivery method that would require the broker to transmit
the customer's 1099-DA statement by way of attachment to an email,
proposed Sec. 1.6045-1(k)(5)(iii)(C)(4) would require the disclosure
statement to inform the customer that the customer may ask for a notice
using an additional communication method when the customer's 1099-DA
statement has been transmitted (also referred to as requested notice).
Additionally, regardless of which qualified electronic delivery method
the broker chooses, proposed Sec. 1.6045-1(k)(5)(iii)(C)(4) would
require the disclosure statement to inform the customer that the
customer may ask the broker to change the additional communication
method used by the broker to send the requested notices. See Part I.C.
of this Explanation of Provisions for a discussion of the proposed rule
that would require brokers to provide customers with additional methods
to receive requested notices regarding their 1099-DA statements and the
rationale behind this proposed rule. The purpose of this disclosure
requirement is to inform customers that they may request a
communication method other than email by which they will receive
notices regarding their 1099-DA statements.
Additionally, if the broker intends to limit the services available
to customers that do not provide their consent, such as not effecting
future sales for such customers, proposed Sec. 1.6045-
1(k)(5)(iii)(C)(5) would require that the disclosure statement inform
the customer of this intention. The purpose of this disclosure
requirement is to ensure that customers are made aware of the
consequences of their decision, not to limit the decisions brokers can
make regarding these consequences. For example, under the proposed
regulations, a broker may decide to not effect sales for customers that
do not provide their consent or could alternatively decide to continue
to effect sales for customers up to a certain limit to ensure that any
paper 1099-DA statements sent to non-consenting customers would be
short. See Part I.B.5.b. of this Explanation of Provisions for a
further discussion of this requirement and why the disclosure of this
consequence would not invalidate a consent.
Proposed Sec. 1.6045-1(k)(5)(iii)(C)(6) would require that the
disclosure statement inform the customer of the broker's policy
regarding the withdrawal of a previously provided consent. If a broker
does not offer customers the opportunity to withdraw a previously
provided consent, proposed Sec. 1.6045-1(k)(5)(iii)(C)(6)
[[Page 10989]]
would require that the disclosure statement inform the customer of this
policy. Conversely, if the broker does choose to offer customers the
opportunity to withdraw a previously provided consent, the disclosure
statement must inform the customer of the procedures the customer must
follow to withdraw a previously provided consent and when such
withdrawal will be effective. The purpose of this disclosure
requirement is to ensure that customers are made aware of the
consequences of their decision, not to limit the decisions brokers can
make regarding consent withdrawals.
Finally, proposed Sec. 1.6045-1(k)(5)(iii)(C)(7) would require
that the disclosure statement provide a document or describe a
location, such as on the broker's website, mobile device application,
or other online platform, where the customer can find the information
included in the pre-disclosure statement after providing consent. The
purpose of this proposed disclosure requirement is to ensure that
customers will be able to obtain answers to their questions about their
1099-DA statements if they are unable to remember the information
provided at the time of consent.
Section 31.6051-1(j)(3)(ii) and (iv) require the furnisher to
inform the recipient that a paper statement will be furnished if the
recipient does not consent and the procedures the recipient must follow
to obtain a paper statement after giving consent. These disclosures
have not been added to the proposed regulations' disclosure
requirements because these proposed rules do not require the broker to
offer the customer a paper 1099-DA statement. Instead, as discussed
earlier in this Part I.B.3, under the proposed regulations brokers may
refuse to offer a paper statement and may decline to continue or begin
their business relationship with customers that do not provide their
consent. See Part I.B.5 of this Explanation of Provisions for a further
discussion of the rationale behind not requiring brokers to offer
customers a paper option. For similar reasons, the proposed regulations
also do not require brokers to disclose to customers the information
included in Sec. 31.6051-1(j)(3)(ii), which requires furnishers to
inform recipients that they have a right to withdraw a previously
provided consent, the procedures the recipient must follow to do so,
and when a withdrawn consent will be effective. Instead, as discussed
earlier in this Part I.B.3, the proposed regulations would require the
broker to inform the customer of whether it will permit customers to
withdraw consent. Only if a broker does permit customers to withdraw
consent would the broker need to inform the customer of the procedures
the customer must follow to do so.
b. Method of Providing the Pre-Consent Disclosure Statement
Proposed Sec. 1.6045-1(k)(5)(iii)(C) would provide that the pre-
consent disclosure statement may be provided by the broker in any
manner that is part of the consent solicitation. For example, the
broker could include the information required to be disclosed on a pop-
up screen shown to the customer as part of the request for the
customer's consent or on another page on the broker's website, mobile
device application, or other online platform to which the pop-up
consent screen provides a direct link.
The Treasury Department and the IRS are concerned, however, that
customers that transact with brokers exclusively through one or more
physical electronic terminals or kiosks might not remember the name or
URL of the broker's website, mobile device application, or other online
platform if it was only accessed using the broker's kiosk. Similarly,
customers that transact with brokers that effect sales of digital
assets as a processor of digital asset payments as defined in Sec.
1.6045-1(a)(22) (PDAP broker), where the digital assets that the
customer uses for payment are held in an account at a different
custodial broker, might not be aware of the PDAP broker's website,
mobile device application, or other online platform. Accordingly, to
ensure that customers using kiosks or PDAP brokers to effect sales of
their digital assets have continuing access to this initial disclosure
statement, proposed Sec. 1.6045-1(k)(5)(iii)(C) would require that
PDAP brokers and brokers that transact exclusively with customers
through one or more physical electronic terminals or kiosks also
provide the disclosure statement to these customers by email or by
using any mail or private delivery service within five business days of
the customer's explicit action to provide positive consent. This five
business-day requirement would ensure that the customer is familiar
with the context of the communication when it is received.
Additionally, proposed Sec. 1.6045-1(k)(5)(iii)(C) would require that
these brokers also provide customers with the opportunity to receive
this disclosure statement using an additional communication method
described in Part I.C. of this Explanation of Provisions if requested
by the customer at the time of consent. See Part I.C. of this
Explanation of Provisions for a discussion of why the customer should
be given the opportunity to request communications sent by email using
an additional communication method.
Comments are requested regarding these additional rules requiring
the provision of the disclosure statement in the case of customers that
transact with brokers that operate physical terminals or kiosks. For
example, comments are requested on whether these customers regularly
visit the broker's website, mobile device application, or other online
platform when they are not at the broker's physical terminal or kiosk.
Comments are also requested regarding the need for this rule in the
case of customers that transact with PDAP brokers. For example,
comments are requested on whether these customers regularly visit the
broker's website, mobile device application, or other online platform.
Finally, comments are requested regarding whether the requirement that
brokers send the disclosure statements to the customer within five
business days of the customer's explicit action to provide consent
provides brokers with sufficient time to comply with this requirement.
4. Change in Hardware or Software Requirements
Under Sec. 31.6051-1(j)(2)(iii) and the guidance in section 4.6.2
of Publication 1179, if the furnisher changes the hardware or software
that the recipient will need to access the payee statement and that
change creates a material risk that the recipient will not be able to
access the payee statement, the furnisher must obtain a new consent
from the recipient to receive the payee statement electronically after
notifying the recipient of the new hardware or software requirements.
Because taxpayers who buy and sell digital assets are likely to have
the technological wherewithal to access statements provided using the
qualified electronic delivery methods described in proposed Sec.
1.6045-1(k)(5)(ii) (posted to an electronically accessible specified
location or by direct transmittal), the condition that recipients be
notified if there is a material risk that the recipient will not be
able to access the payee statement has been revised. Specifically, if
an intended change in the method by which the customer will need to
access, download, and print the 1099-DA statement furnished in the
electronic format, including a change in the hardware or software
required to conduct these functions, would create a material risk that
the customer will need to obtain new hardware or software to
[[Page 10990]]
access the 1099-DA statement, proposed Sec. 1.6045-1(k)(5)(iii)(B)
would require the broker to obtain a new consent from the customer to
receive the 1099-DA statement using the new hardware or software before
implementing the change. The broker would be required to obtain this
new consent regardless of whether the necessary new hardware to be
obtained or software required to be downloaded are available at a price
or are generally offered to consumers for free. This requirement,
however, is not intended to apply to the simple case in which the
customer is provided minor upgrades in existing software that do not
impede the customer's ability to access the 1099-DA statement. Comments
are requested regarding how this distinction can be expressed in
regulatory text. In addition, the broker would be required to obtain
this consent in the same manner as that described in proposed Sec.
1.6045-1(k)(5)(iii)(A) and would be required to furnish the customer
with updated pre-consent disclosures described in Part I.B.3. of this
Explanation of Provisions. Brokers would be required to furnish 1099-DA
statements in the old hardware or software format to customers that do
not provide their consent to receiving the 1099-DA statements in the
new hardware or software format until they receive that consent.
5. Not Offering a Paper 1099-DA Statement Alternative
a. In General
The rules under Sec. 31.6051-1(j)(3)(ii) and (v) as applied by
section 4.6.2 of Publication 1179 require furnishers to inform
recipients that payee statements will be furnished on paper if the
recipient does not consent to receiving the payee statement
electronically and that the recipient has the right to withdraw a
previously provided consent. Additionally, Sec. 31.6051-1(j)(2)(ii) as
applied by section 4.6.2 of Publication 1179 provides that a previously
provided consent from a recipient is not valid once a recipient's
withdrawal of that consent takes effect. The Treasury Department and
the IRS explained in the Explanation of Revisions and Summary of
Comments to the 2004 Final Regulations that it was important that the
electronic furnishing of payee statements remain voluntary (that is,
that recipients be provided with a paper option) to accommodate
recipients who perceive traditional paper delivery of statements to be
more secure and private. See 2004 Final Regulations 69 FR at 7568. This
accommodation, according to this explanation, was consistent with
Congressional intent as reflected by the reference in section 401 of
the JCWAA to the regulations under section 6051. Id.
In mandating that a paper delivery option be offered, the rules
under Sec. 31.6051-1(j) struck a balance between the desire of
furnishers to reduce costs by furnishing W-2 payee statements
electronically and the tax administration concerns associated with
recipients being unable to access electronically furnished W-2 payee
statements for use in filing accurate income tax returns. Unlike many
of the single-page payee statements subject to the rules under Sec.
31.6051-1(j) that reflect an aggregation of all reportable payments
made within the calendar year, the Sec. 1.6045-1 regulations require
brokers to furnish a separate 1099-DA statement for each transaction
(or a single substitute statement that includes information about each
transaction) effected for customers within a calendar year. Given the
number of digital asset transactions that may be effectuated by a
single customer in a given year, even substitute 1099-DA statements
that reflect each of these transactions, if printed, may be quite
lengthy.
The Treasury Department and the IRS are of the view that recipients
have become increasingly able to access electronically furnished payee
statements since the 2004 Final Regulations were first published.
Compared to the early 2000s, most U.S. adults today say they use the
internet (95%), have a smartphone (90%) or subscribe to high-speed
internet at home (80%).\7\ This is especially true for digital asset
investors and traders who generally communicate with their digital
asset brokers solely through electronic means. As such, the risk of
harm to recipients who are asked to consent to receiving payee
statements in an electronic format has materially diminished since
those regulations were first published. Additionally, the Treasury
Department and the IRS are sympathetic to the potentially substantial
compliance costs for digital asset brokers, and the burden those costs
place on electronic commerce, that would result if digital asset
brokers were required to offer customers paper 1099-DA statements.
According to the IRSAC Report, the printing and mailing costs that
physical delivery of 1099-DA statements would require could create
unmanageable burdens for brokers because of the large quantity of
trades engaged in by some digital asset investors. Moreover, customers
that inadvertently fail to provide their consent to receiving the
statements electronically or that do not appreciate the length of these
statements when they choose to receive paper statements could
potentially be significantly inconvenienced by this choice because they
may need to scan potentially lengthy paper statements to computer files
for transmission to tax return preparers or for use by tax return
preparation software. The significant cost of printing and mailing
paper 1099-DA statements to customers also imposes material burdens on
small business brokers, who may incur substantial expenses to meet
paper-furnishing requirements. As such, the tax administration benefits
of not requiring brokers to offer a paper delivery option for 1099-DA
statements outweigh the costs to digital asset investors and traders of
not having that option because digital asset investors and traders have
the technological capability to receive electronic communications and
to visit their brokers' websites or mobile device applications to
access their electronically furnished 1099-DA statements.\8\
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\7\ See Pew Research Center, Americans' Use of Mobile Technology
and Home Broadband, <a href="https://www.pewresearch.org/internet/2024/01/31/americans-use-of-mobile-technology-and-home-broadband/">https://www.pewresearch.org/internet/2024/01/31/americans-use-of-mobile-technology-and-home-broadband/</a> (accessed
January 12, 2026).
\8\ The E-SIGN Act permits a Federal agency to promulgate
consent rules that deviate from the consent rules in the E-SIGN Act
if it makes a determination that this deviation is necessary to
eliminate a substantial burden on electronic commerce and will not
increase the material risk of harm to consumers. 15 U.S.C. 7004(d).
---------------------------------------------------------------------------
b. Changes to the Parties' Relationship if the Customer Does Not
Consent
There may be customers that refuse to consent to receiving the
1099-DA statement in an electronic format even though the broker does
not offer the customer an option to receive the 1099-DA statement on
paper (or limits that option to customers with transaction numbers
below a certain threshold). As discussed in Part II. of the Background,
section 401 of the JCWAA mandates that the recipient consent to
receiving a payee statement electronically before the furnisher may
electronically furnish that statement. Therefore, if a broker is
unwilling to furnish paper 1099-DA statements to customers that do not
consent to electronic furnishing, the broker would need to cease
effecting sales for these customers to avoid being penalized for the
failure to furnish 1099-DA statements under section 6722. If a broker
makes the business decision to limit its services, for example by not
effecting any future sales for all such customers or for those
[[Page 10991]]
customers with transaction numbers above a certain threshold, proposed
Sec. 1.6045-1(k)(5)(iii)(C)(5) would require that the broker disclose
this business decision to customers prior to obtaining their
consent.\9\ Disclosure of the consequences to not providing consent
when those consequences are legally permitted does not invalidate an
otherwise valid consent. See, e.g., Ballard v. Comm'r, T.C. Memo. 1987-
471 (Commissioner's statement that IRS Appeals conference would not be
allowed if taxpayer failed to consent to extending statute of
limitation does not invalidate signed consent because such statements
are nothing more than notice that the Commissioner intends to use
lawful means at his disposal to assess the tax); Hall v. Commissioner,
T.C. Memo. 2013-93 (signed consent valid where taxpayer faced choice of
whether to accept plea agreement or go on trial and face significantly
worse consequences). Accordingly, a broker may inform customers that
the broker has determined it will not effectuate sales with, or will
otherwise limit the business relationship with, a customer that does
not consent to receiving electronic 1099-DA statements.
---------------------------------------------------------------------------
\9\ Informing customers of these consequences is consistent with
the E-SIGN Act, which requires that furnishers inform consumers of
any consequences (including termination of the parties'
relationship) if the consumer withdraws consent. See 15 U.S.C.
7001(c)(1)(B)(i)(II).
---------------------------------------------------------------------------
c. Withdrawal of Consent
The rules under Sec. 31.6051-1(j) and the guidance under section
4.6 of Publication 1179 require furnishers of payee statements to
inform recipients that they have the right to withdraw consent. See
Sec. 31.6051-1(j)(3)(v). Additionally, once a recipient withdraws
consent and that withdrawal is effective, the furnisher must provide
the payee statement on paper. See Sec. 31.6051-1(j)(2)(ii) and (j)(7).
For the same reason that these proposed regulations do not require a
broker to provide a paper delivery option at the time of consent, these
proposed regulations also do not require brokers to offer customers the
opportunity to withdraw a previously provided consent. See Part
I.B.5.a. of this Explanation of Provisions for a discussion of the
paper option. Despite this conclusion, the proposed regulations would
require brokers to inform customers if they will not be given the
opportunity to withdraw a consent once provided. See Part I.B.3. of
this Explanation of Provisions for a general discussion of the
information that a broker must disclose to the customer prior to or at
the time of consent.
C. Qualified Electronic Delivery Methods
The rules under Sec. 31.6051-1(j) when originally proposed would
have only permitted furnishers to furnish payee statements
electronically by posting them to a website accessible to the
recipient. See Temporary Regulations 69 FR at 1193 (proposed Sec.
31.6051-1(j)(5)). In response to this proposed rule, two commenters
recommended that the regulations allow furnishers to provide payee
statements as attachments to emails, and one commenter stated that
providing tax statements by email raised security and privacy concerns.
See Explanation of Revisions and Summary of Comments to the 2004 Final
Regulations 69 FR at 7568. In response to these comments, the 2004
Final Regulations did not restrict furnishers solely to the use of
website technology, but the Treasury Department and the IRS noted that,
although website technology provided the most secure method of
furnishing payee statements electronically, it was not the Secretary's
intention to limit the technology to be used in furnishing payee
statements electronically. Id.
The 2004 Final Regulations do not provide any rules for brokers
that fulfill their furnishing obligations by attaching payee statements
to emails. In contrast, these proposed regulations include proposed
rules for brokers that furnish 1099-DA statements by attaching them to
emails because these furnishing rules are necessary to ensure customers
receive their 1099-DA statements no matter how they are furnished.
Additionally, furnishing rules for 1099-DA statements are necessary for
all delivery methods because 1099-DA statements will be new to digital
asset investors and traders who might not otherwise seek to obtain
their statements if they do not receive an email regarding these
statements. Given these considerations, it is important to provide
brokers with clear rules for whichever electronic delivery method they
use to furnish 1099-DA statements. Accordingly, these proposed
regulations include rules for brokers that furnish 1099-DA statements
by posting them to electronically accessible specified locations as
well as for brokers that furnish 1099-DA statements by attaching them
to emails. These methods are collectively referred to as qualified
electronic delivery methods.
As discussed in Part I.A. of this Explanation of Provisions,
proposed Sec. 1.6045-1(k)(5)(i) would require brokers furnishing 1099-
DA statements in an electronic format to use a qualified electronic
delivery method to do so. Proposed Sec. 1.6045-1(k)(5)(ii) would
define a qualified electronic delivery method, for this purpose, as
falling within one of two broad types of delivery methods. First, under
proposed Sec. 1.6045-1(k)(5)(ii)(A), the broker would be permitted to
post the 1099-DA statement to a specified location that is
electronically accessible, such as the furnisher's website, mobile
device application, or other online platform. Brokers using this
qualified electronic delivery method would also be required to notify
the customer by email that the 1099-DA statement has been so posted.
Alternatively, under proposed Sec. 1.6045-1(k)(5)(ii)(B), the broker
would be permitted to transmit the 1099-DA statement directly to the
customer by attaching it to (or otherwise including it with) an email
to the customer. Comments are requested addressing whether there are
any other practical methods of electronically furnishing the 1099-DA
statements other than the two methods described in proposed Sec.
1.6045-1(k)(5)(ii)(A) and (B) that should be included in the definition
of a qualified electronic delivery method.
Regardless of which of these two proposed qualified electronic
delivery methods the broker chooses to furnish 1099-DA statements
electronically, the broker would be required to send an email to the
customer either to provide notice that the statement has been made
available in an electronically accessible specified location or to
transmit the 1099-DA statement directly. The Treasury Department and
the IRS considered whether brokers should be given the ability to
choose a different communication method for these notices and
transmittals but decided against providing brokers with this choice for
several reasons. First, email is a ubiquitous method of communication
with which most people are familiar. Because it is essential to tax
administration that customers actually receive these important
communications and view and use their 1099-DA statements, it is
essential that the most broadly used and well-known method of
communication be required. Second, most email providers have policies
to prevent the reuse of previously used addresses and will return as
undeliverable messages sent by email to an address that is not assigned
to any user. In contrast, if a broker sent a communication by way of
text message to a customer regarding the customer's 1099-DA statement,
the broker might not be informed if the customer's mobile phone number
was
[[Page 10992]]
no longer in service or was reassigned to another mobile phone
customer.
The Treasury Department and IRS considered whether a customer's in-
account messaging system with the broker (also referred to in certain
circumstances as in-application messaging) should be permitted as a
default communication method. This communication method was not
proposed as a default method, however, because of the concern that this
method did not provide a sufficient level of certainty that the
communication will be received by most customers because it is unclear
if all customers would even be aware that communications have been sent
to their in-account messaging system. The Treasury Department and IRS
also considered whether communications sent to a customer's cellular
device in a manner that can be viewed even when the account application
with the broker is not open (sometimes referred to as push
notifications) should be permitted as a default communication method
for this purpose. Because customers can turn off push notifications on
their device without the broker's knowledge, the Treasury Department
and the IRS also concluded that this method does not provide a
sufficient level of certainty that the communication will be received
by most customers. See Parts I.C.1. and 2. of this Explanation of
Provisions for a discussion of the requirement that brokers provide
customers with the opportunity to request certain additional
communications regarding their 1099-DA statements using other methods
of communication, including in-account messaging and push
notifications.
1. Posting a 1099-DA Statement to an Electronically Accessible
Specified Location
The first type of qualified electronic delivery method is described
in proposed Sec. 1.6045-1(k)(5)(ii)(A)(1). Under proposed Sec.
1.6045-1(k)(5)(ii)(A)(1), a qualified electronic delivery method would
require the broker to post the 1099-DA statement to a specified
location that is electronically accessible, such as the broker's
website, mobile device application, or other online platform. Once the
1099-DA statement has been posted, proposed Sec. 1.6045-
1(k)(5)(ii)(A)(1) would also require the broker to send the customer an
email notice, containing the information described in proposed Sec.
1.6045-1(k)(5)(ii)(A)(4), to inform the customer that the 1099-DA
statement has been so posted. Like the information required to be
included in notices sent to recipients under Sec. 31.6051-1(j)(5) and
the guidance in section 4.6.2 of Publication 1179, proposed Sec.
1.6045-1(k)(5)(ii)(A)(4) would require the broker to include in the
notice instructions on how the customer can access and print the 1099-
DA statement. The notice would also be required to include the
following statement in capital letters, ``IMPORTANT TAX RETURN DOCUMENT
AVAILABLE.'' This statement would also be required to be included on
the subject line of the email. These rules are designed to make the
customer aware that the customer's 1099-DA statements are available and
to provide information on how to access those statements.
The Treasury Department and the IRS are concerned that some
customers may not regularly check whether emails have been sent to an
address that the customer provided to the broker or may not be aware if
the customer's email provider filters out as unsolicited an important
email from the broker. For example, a customer may regularly access a
broker's website to carry out transactions but only occasionally check
whether emails have been sent to an email address that the customer has
provided to the broker. Additionally, some customers may not open
emails from their broker because they are concerned that the emails may
be compromised and could give rise to a phishing attack. Finally, some
customers may find it useful to receive notices regarding their 1099-DA
statements using a different communication method to remind them that
they may have taxable digital asset transactions that need to be
reported on their tax returns. Accordingly, proposed Sec. 1.6045-
1(k)(5)(ii)(A)(1) would require the broker to provide the customer with
the opportunity to receive another notice from the broker using an
additional communication method if the customer requests this notice
not later than the end of the calendar year to which the 1099-DA
statement relates (requested notice). These requested notices would
also be required to include the following statement in capital letters,
``IMPORTANT TAX RETURN DOCUMENT AVAILABLE.'' This statement must also
be included prominently in the message of the requested notice. See
proposed Sec. 1.6045-1(k)(5)(ii)(B)(4).
Requiring brokers to provide customers with a choice of additional
communication methods regarding these important communications is
important to tax administration. First, providing customers that do not
find email to be the best communication method with the ability to
choose an additional communication method that is better suited to
their needs will increase the likelihood that these customers actually
receive these important communications and view and use their 1099-DA
statements. Second, because 1099-DA statements will be new for digital
asset investors and traders, it is more likely that these customers
will not be experienced in knowing when they should look for email
communications about their 1099-DA statements. For these reasons, the
proposed regulations would require brokers to provide customers with
the opportunity to receive a requested notice from the broker regarding
the posting of their 1099-DA statements using an additional
communication method. Because brokers would only be required to send
requested notices to those customers that take the initiative to ask
for these notices, the cost of this rule for the broker should be
limited to those customers that need to receive the notice using
another communication method.
If the customer asks for this requested notice by the required
deadline, proposed Sec. 1.6045-1(k)(5)(ii)(A)(1) would require that
the broker provide the customer with certain choices of communication
methods. Under proposed Sec. 1.6045-1(k)(5)(ii)(C), the broker must
always offer the customer the choice of receiving the requested notice
on paper using the physical delivery method chosen by the broker (that
is by mail or any private delivery service). The broker may, but is not
required to, offer customers additional choices of electronic delivery
using any electronic delivery method described in proposed Sec.
1.6045-1(k)(5)(ii)(C)(1) that the broker chooses to offer. These
electronic delivery methods include messages sent to the customer's
cellular phone number (sometimes referred to as text messaging), to the
customer's in-account messaging system with the broker (sometimes also
referred to as in-application messaging), to the customer's cellular
device in a manner that can be viewed even when the account application
with the broker is not open (sometimes referred to as push
notifications), or to any other electronic messaging address of the
customer.
Although sending notices by mail or private delivery service may be
more costly to brokers than sending them electronically, the Treasury
Department and the IRS have proposed that brokers always offer
customers this option because mail is likely the most common
communication method for important tax documents other than email.
Additionally, because these requested notices should be short
[[Page 10993]]
communications, as opposed to potentially lengthy 1099-DA statements,
the tax administration benefits for the IRS and customers choosing to
receive these notices by mail or private delivery service should
outweigh the higher costs of mailing these notices. As noted, the
Treasury Department and the IRS intend for this mailing requirement, as
well as the other mailing requirements throughout the proposed
regulations, to permit the broker to choose the particular mail or
private delivery service that best meets the broker's business needs.
Comments are requested regarding whether there is a more reasonable
amount of time (other than the proposed end of the calendar year to
which the 1099-DA statement relates) for the customer to ask for a
requested notice using an additional communication method. Comments are
also requested addressing whether there are any other practical methods
of delivering these important notices.
2. Direct Transmittal of the 1099-DA Statement
The second type of qualified electronic delivery method is
described in proposed Sec. 1.6045-1(k)(5)(ii)(B)(1) as a direct
transmittal of the 1099-DA statement to the customer. Under this
method, the 1099-DA statement would be attached to, or otherwise
included with, an email to the customer. The rules under Sec. 31.6051-
1(j)(5) and the guidance in section 4.6.2 of Publication 1179 do not
include information requirements for emails sent directly to recipients
to which payee statements are attached. It is important that customers
that are sent emails to which payee statements are attached be made
aware that important documents related to their tax compliance
obligations are attached to an email. Accordingly, proposed Sec.
1.6045-1(k)(5)(ii)(B)(4) would require the broker's email to which the
1099-DA statement has been attached to include instructions on how the
customer can access, download, and print the 1099-DA statement.
Additionally, proposed Sec. 1.6045-1(k)(5)(ii)(B)(4) would also
require that this electronic communication include the following
statement in capital letters, ``IMPORTANT TAX RETURN DOCUMENT
AVAILABLE'' and that this statement be on the subject line of the
electronic communication.
Additionally, as discussed in Part I.C.1. of this Explanation of
Provisions, the Treasury Department and the IRS are concerned that some
customers may not regularly check whether emails have been sent to an
email address that the customer provided to the broker. Because some
customers may find it useful to receive an electronic communication
using an additional communication method or a paper document that
reminds them that they may have taxable digital asset transactions that
need to be reported on their tax returns, proposed Sec. 1.6045-
1(k)(5)(ii)(B)(1) would require the broker to provide the customer with
the opportunity to request a notice from the broker informing the
customer that the customer's 1099-DA statement has been transmitted
(requested notice). See Part I.C.1. of this Explanation of Provisions,
for a discussion of the definition of an additional communication
method. If the customer requests this requested notice by the end of
the calendar year to which the 1099-DA statement relates, proposed
Sec. 1.6045-1(k)(5)(ii)(B)(1) would require the broker to send this
requested notice to the customer on paper using the physical delivery
method chosen by the broker (that is by mail or any private delivery
service). The broker may also offer to send this requested notice to
the customer using any of the electronic delivery methods described in
proposed Sec. 1.6045-1(k)(5)(ii)(C)(1)(i) through (iv). Regardless of
whether the broker offers to send the notice by electronic delivery,
proposed Sec. 1.6045-1(k)(5)(ii)(C) would require brokers to offer at
least one type of physical delivery method. See Part I.C.1. of this
Explanation of Provisions, for a discussion of the definition of an
additional communication method. As discussed in Part I.C.1. of this
Explanation of Provisions, the tax administration benefits for the IRS
and customers requesting these requested notices should outweigh the
costs to brokers of providing them because these requested notices
should be short communications as opposed to potentially lengthy 1099-
DA statements. Finally, proposed Sec. 1.6045-1(k)(5)(ii)(B)(4) would
require these requested notices include the following statement in
capital letters, ``IMPORTANT TAX RETURN DOCUMENT AVAILABLE.'' In
addition, the email to which a 1099-DA statement is attached must
include this statement on the subject line of the email. If the
customer requests a requested notice, this statement must be included
prominently in the message of that requested notice. This rule is
included to ensure that these customers are made aware that they have
received these important communications.
3. Undeliverable Communications Regarding 1099-DA Statements
Proposed Sec. 1.6045-1(k)(5)(ii)(A)(2) and (k)(5)(ii)(B)(2) set
forth rules for what a broker must do if the broker's electronically
delivered notice or transmittal is returned to the broker as
undeliverable.
a. Communications Regarding Posted 1099-DA Statements
Under proposed Sec. 1.6045-1(k)(5)(ii)(A)(2), if a broker's
electronically delivered notice regarding an original 1099-DA statement
posted to an electronically accessible specified location is returned
to the broker as undeliverable, the broker would generally be required
to send the notice by mail or private delivery service within 30 days
of receiving that undeliverable response. Under proposed Sec. 1.6045-
1(k)(5)(ii)(A)(2)(ii), the broker would be able to avoid sending the
notice by mail or private delivery service if the broker resends the
emailed notice to a corrected email address for the customer within 30
days of the receipt of the undeliverable communication and that resent
notice is not returned as undeliverable. These rules are included to
ensure that the customer will receive the notice regarding the 1099-DA
statement in a timely fashion.
Proposed Sec. 1.6045-1(k)(5)(ii)(A)(3) would require the broker to
send a notice regarding the posting of a corrected 1099-DA statement by
mail or private delivery service if the broker previously received a
communication that the original notice (regarding the original 1099-DA
statement) was returned as undeliverable and the broker was unable to
obtain a correct email address for the customer. This proposed rule
requiring the mailing of the notice in this case is similar to the
notice requirement rule for corrected W-2 payee statements in Sec.
31.6501-1(j)(5)(iii).\10\ Unlike the rules in Sec. 31.6501-
1(j)(5)(iii), proposed Sec. 1.6045-1(k)(5)(ii)(A)(3) would enable a
broker to avoid sending the notice regarding the posting of a corrected
1099-DA statement by mail or private delivery service if the broker
sends the customer within five business days of the posting of the
corrected 1099-DA statement an email notice regarding that statement to
a corrected email address for the customer that is not returned as
undeliverable. These rules are included in these proposed regulations
to ensure that the customer will receive the notice regarding the
corrected 1099-DA statement in a timelier fashion.
---------------------------------------------------------------------------
\10\ Section 4.6 of Publication 1179 does not specifically
address the notice requirements for corrected payee statements, but
cross references readers to Sec. 31.6051-1(j) for more information.
---------------------------------------------------------------------------
[[Page 10994]]
The Treasury Department and the IRS considered but declined to
propose a rule that would allow brokers that send requested notices to
customers to avoid mailing notices to customers when emailed notices
are returned as undeliverable for several reasons. First, mail and
email are the most common communication methods, with most digital
asset customers at least aware that unexpected communications could be
sent in this manner. Second, many of the additional communication
methods do not have an undeliverable feature that would enable the
broker to know whether the customer received the communication. Third,
while brokers might be able to use technology to determine if the
communication was opened, monitoring which customers opened these
communications would likely be more burdensome than mailing the
notices. Comments are requested regarding the reliability of these
other communication methods in making the customer aware about their
important tax documents.
b. Communications Regarding Direct Transmittals of 1099-DA Statements
As discussed in Part I.C.2. of this Explanation of Provisions, the
2004 Final Regulations under section 6051 did not provide any rules for
brokers that attach payee statements to emails. Because it is important
to provide brokers with clear rules for whichever qualified electronic
delivery method they adopt, these proposed regulations would include
rules for brokers that furnish 1099-DA statements by attaching them to
emails that are similar to those that apply to brokers that furnish
1099-DA statements by posting them to electronically accessible
specified locations. Accordingly, proposed Sec. 1.6045-
1(k)(5)(ii)(B)(1) would require the email to which the 1099-DA
statement is attached to contain information similar to that which the
notice required under proposed Sec. 1.6045-1(k)(5)(ii)(A)(1) would be
required to contain. Additionally, under proposed Sec. 1.6045-
1(k)(5)(ii)(B)(2), if a broker's direct transmittal of an original
1099-DA statement is returned to the broker as undeliverable, the
broker would be required to send the original 1099-DA statement to the
customer by mail or private delivery service within 30 days of
receiving that undeliverable response unless the broker sends another
email to which the 1099-DA statement is attached within five business
days of receipt of the undeliverable communication to a corrected email
address for the customer that is not returned as undeliverable.
The Treasury Department and the IRS are aware that the consequence
of an undeliverable direct transmittal of a 1099-DA statement by email
under this rule could be costly if the broker is unable to obtain a
corrected email address for the customer that is not returned as
undeliverable because the broker would be required to provide a paper
1099-DA statement to the customer. Comments are requested regarding
whether brokers anticipate using the direct transmittal method of
delivery, whether this consequence of an undeliverable direct
transmittal of a 1099-DA statement makes the direct transmittal method
not viable, and whether the direct transmittal method should be removed
from the final regulations as a qualified electronic delivery method.
Comments are also requested regarding whether there are other less
burdensome alternatives for brokers choosing to furnish 1099-DA
statements using the direct transmittal method when emails to which the
1099-DA statements are attached are returned as undeliverable. Finally,
comments are requested addressing whether there are any other methods
of electronically delivering the 1099-DA statements that should be
included as a qualified electronic delivery method.
4. Corrected 1099-DA Statements
The regulations under Sec. 31.6051-1(j) include rules for
furnishers that are required to furnish corrected payee statements.
Specifically, under Sec. 31.6051-1(j)(5)(iii), if the furnisher
electronically furnished the original payee statement, the furnisher
must also electronically furnish the corrected payee statement. The
proposed rules adopt a similar rule for brokers required to furnish
corrected 1099-DA statements. Thus, under proposed Sec. 1.6045-
1(k)(5)(ii), if a broker has corrected a customer's 1099-DA statement,
the broker would be required to furnish the corrected 1099-DA statement
using the same delivery method that the broker used to furnish the
original 1099-DA statement for that delivery method to be treated as a
qualified electronic delivery method.
Additionally, under the proposed regulations, any required or
requested notice that the broker was required to provide to the
customer regarding the availability of the original 1099-DA statement
(either because it has been posted to an electronically accessible
specified location or directly transmitted) must also be provided with
respect to the availability of the corrected 1099-DA statement. See
proposed Sec. 1.6045-1(k)(5)(ii)(A)(3) and (k)(5)(ii)(B)(3). In
addition, proposed Sec. 1.6045-1(k)(5)(ii)(A)(3) and (k)(5)(ii)(B)(3)
would require the broker to provide any required and requested notices
regarding the availability of the corrected 1099-DA statement within
five business days from the date the corrected 1099-DA statement has
either been posted to an electronically accessible specified location
or attached to, or otherwise included with, an email sent to the
customer. This five-business day rule, instead of the 30-day rule
generally applicable to communications relating to the original 1099-DA
statement, is proposed to provide customers enough time to prepare and
timely file their tax returns after receiving the corrected 1099-DA
statements. Accordingly, under these proposed rules, if the original
1099-DA statement was posted on the broker's website, then the broker
must also post the corrected 1099-DA statement on the broker's website
and provide to the customer the required notice and, if applicable, the
requested notice regarding that corrected posting within five business
days of that posting. Alternatively, if the original 1099-DA statement
was directly transmitted to a customer, the broker must directly
transmit the corrected 1099-DA statement and, if applicable, the
requested notice notifying the customer of that transmittal, within
five business days of that transmittal. Comments are requested
regarding the shortened notice requirement for corrected 1099-DA
statements.
See Part I.C.3. of this Explanation of Provisions for a discussion
of the broker's obligations with respect to the corrected 1099-DA
statement if a previous email regarding the original 1099-DA statement
was returned as undeliverable.
D. Continuing Disclosures
The rules under Sec. 31.6051-1(j)(3) and the guidance under
section 4.6.2 of Publication 1179 do not include any continuing
disclosure requirements after consent is given. However, because
certain information that is included in the pre-consent disclosure as
well as certain other information is more relevant to customers after
the consent is provided, this information should be available to
customers on an ongoing basis (continuing disclosures) after consent is
provided so that customers can get the answers to their questions or
change their contact information when appropriate. Accordingly,
proposed Sec. 1.6045-1(k)(5)(iv)(A) would require the broker to
provide a location, such as on the broker's website, mobile device
application, or other online platform, where customers can generally
find
[[Page 10995]]
updated versions of the pre-consent disclosure information proposed
Sec. 1.6045-1(k)(5)(iii)(C)(1) through (7) through the period of time
that customers would need to access their 1099-DA statements. See Part
I.B.3. of this Explanation of Provisions for a discussion of this pre-
consent disclosure information and Part I.F. of this Explanation of
Provisions for a discussion of the access period through which this
updated information should be provided.
In addition, proposed Sec. 1.6045-1(k)(5)(iv)(A) would also
require the broker to provide to the customer on an ongoing basis four
additional items of information that are typically not relevant to the
customer at the time of consent. Proposed Sec. 1.6045-1(k)(5)(iv)(A)
would permit the information included in the continuing disclosures to
generally be provided by the broker to the customer on the broker's
website, mobile device application, or other online platform.
Like the concern discussed in Part I.B.3. of this Explanation of
Provisions with respect to customers that transact with brokers
exclusively through one or more physical electronic terminals or kiosks
and customers that transact with PDAP brokers, the Treasury Department
and the IRS are concerned that these customers will not have access to
the continuing disclosures if they are made available only on the
broker's website, mobile device application, or other online platform.
Accordingly, to ensure that these customers have access to the
continuing disclosures, proposed Sec. 1.6045-1(k)(5)(iv)(A) would
provide that PDAP brokers and brokers that transact exclusively with a
customer through one or more physical electronic terminals or kiosks
must also provide the continuing disclosures to their customer by
email, mail, or private delivery service within five business days of
the customer's explicit action to provide consent. Additionally, if a
PDAP broker or a broker that transacts exclusively with a customer
through one or more physical electronic terminals or kiosks updates the
information in the continuing disclosures, proposed Sec. 1.6045-
1(k)(5)(iv)(A) would provide that the broker must also provide updated
versions of the continuing disclosures to the customer by email, mail,
or private delivery service within five business days of posting the
updated version of the continuing disclosures to the broker's website,
mobile device application, or other online platform. Finally, to the
extent the customer requested to receive the disclosure statement using
an additional communication method at the time of consent or anytime
thereafter, proposed Sec. 1.6045-1(k)(5)(iv)(A) would require the
broker to also send the continuing disclosure statement and any updated
versions of that statement to the customer using the additional
communication method requested by the customer. See Part I.C. of this
Explanation of Provisions for a discussion of why customers should be
given the opportunity to request that these disclosure statements be
sent using an additional communication method. Comments are requested
regarding this additional requirement for continuing disclosures for
PDAP brokers and brokers that transact with customers exclusively
through one or more physical terminals or kiosks.
The additional information that would be included in the continuing
disclosures are described in proposed Sec. 1.6045-1(k)(5)(iv)(B)
through (E). First, proposed Sec. 1.6045-1(k)(5)(iv)(B) would require
the broker to provide a description of the procedures for customers to
update the information needed by the broker to send the customer the
required and requested notices that the 1099-DA statement has been
posted to a specified location that is electronically accessible, the
email to which the 1099-DA is attached, or the requested notice
informing the customer that the customer's 1099-DA statement has been
transmitted. Second, proposed Sec. 1.6045-1(k)(5)(iv)(C) would require
the broker to provide the broker's contact information in the event the
customer has questions about the consent or about the customer's 1099-
DA statement. Third, proposed Sec. 1.6045-1(k)(5)(iv)(D) would require
the broker to provide a description of the procedures for asking for
the requested notices required to be offered by proposed Sec. 1.6045-
1(k)(5)(ii)(A)(1) (that the customer's 1099-DA statements have been
posted to an electronically accessible specified location) or by
proposed Sec. 1.6045-1(k)(5)(ii)(B)(1) (that the customer's 1099-DA
statement has been transmitted) using an additional communication
method. Finally, for brokers that will furnish 1099-DA statements by
posting them to an electronically accessible specified location,
proposed Sec. 1.6045-1(k)(5)(iv)(E) would require the broker to
provide information about the period of time that the broker will keep
1099-DA statements and corrected 1099-DA statements posted to that
specified location. This must include the date when the 1099-DA
statements will no longer be available at the specified location and a
description of the procedures for customers to obtain 1099-DA
statements and corrected 1099-DA statements that are no longer
available at the specified location.
E. Format
Like the format requirement in Sec. 31.6051-1(j)(4), proposed
Sec. 1.6045-1(k)(5)(v) would require that the electronic version of a
1099-DA statement furnished to a customer contain all required
information and comply with applicable revenue procedures relating to
substitute statements.
F. Access Period
Once electronically furnished 1099-DA statements have been posted
to an electronically accessible specified location, such as the
broker's website, mobile device application, or other online platform,
it is essential that 1099-DA statements remain available for customers'
use throughout the tax return filing season. Accordingly, similar to
the access rules provided in Sec. 31.6051-1(j)(6), proposed Sec.
1.6045-1(k)(5)(vi) would require brokers to maintain access for
customers to 1099-DA statements posted on a website through October 15
of the year following the calendar year to which the 1099-DA statements
relate. Additionally, proposed Sec. 1.6045-1(k)(5)(vi) would require
brokers to maintain access for customers to corrected 1099-DA
statements that are posted on the broker's website through October 15
of the year following the calendar year to which the statements relate
or the date that is 90 days after the corrected statements are posted,
whichever is later. The normal rules under section 7503 of the Code for
when the last day prescribed for performing an act falls on a Saturday,
Sunday or a legal holiday would apply to these deadlines. Thus, for
example, if October 15 falls on a Saturday, Sunday, or legal holiday,
the 1099-DA statements would be required to be retained on the broker's
website until the first business day after such October 15.
Finally, it is important that customers seeking to amend their
timely filed tax returns have access to their 1099-DA statements during
the general three-year period of limitations on assessment under
section 6501(a) and also during the six-year period of limitations on
assessment under section 6501(e) for substantial omissions from gross
income. These statute of limitations periods will generally begin to
apply for most individual taxpayers after the April 15 filing due date
for Federal income tax returns. Accordingly,
[[Page 10996]]
because the due date for furnished 1099-DA statements is February 15 of
the calendar year following the year of the digital asset sale
transaction, proposed Sec. 1.6045-1(k)(5)(vi) would require brokers to
retain and make available to customers upon request previously
furnished 1099-DA statements for seven years from the date the 1099-DA
statements are required to be furnished or (if later) the date that the
1099-DA statements are actually furnished to ensure that ensure their
customers will have access to all the records they need during the six
years that the period of limitations is open. Requiring brokers to
provide access to these statements for seven years from their
furnishing would also assist taxpayers who have not complied with
Federal tax return filing obligations, and for whom the statute of
limitations is open indefinitely under section 6501(c)(3). Seven years
strikes a reasonable balance for individual taxpayer compliance and the
burden on brokers for retaining this information.
Comments are requested regarding whether this additional retention
requirement creates any undue burdens for brokers.
II. Electronic Furnishing of Consolidated Reporting Statements
The proposed regulations generally leave in place the existing
consolidated reporting statement rules in Sec. 1.6045-1(k)(3), which
requires that any furnished statements included with a consolidated
reporting statement required to be furnished under section 6045 be
based on the same relationship of broker or barter exchange to customer
as the statement required to be furnished under section 6045. Proposed
Sec. 1.6045-1(k)(3) would amend existing Sec. 1.6045-1(k)(3) by
adding paragraph headings to existing Sec. 1.6045-1(k)(3)(i) and (ii).
Proposed Sec. 1.6045-1(k)(3)(iii) would add rules regarding when a
consolidated reporting statement is permitted to be furnished
electronically. Under these proposed rules, a broker would be permitted
to furnish a consolidated reporting statement in an electronic format
in lieu of on paper if it has obtained consent from the customer under
the applicable rules for consent for each of the statements to be
included in the consolidated reporting statement. Therefore, to combine
a 1099-B statement with respect to a sale of stock and a 1099-DA
statement with respect to a sale of digital assets in an electronically
furnished consolidated reporting statement, the broker would need to
obtain consent from the customer with respect to the electronic
furnishing of the 1099-B statement under the guidance set forth in
section 4.6.2 of Publication 1179 (which generally follows the rules
under Sec. 31.6051-1(j)) and consent from the customer with respect to
the electronic furnishing of the 1099-DA statement either under the
guidance set forth in section 4.6.2 of Publication 1179 (when updated)
or the rules set forth in proposed Sec. 1.6045-1(k)(5). Proposed Sec.
1.6045-1(k)(5)(vii) would provide an example illustrating the
application of this rule to facts involving a broker required to
furnish both a 1099-B statement and a 1099-DA statement to the same
customer. Comments are requested regarding whether the receipt from the
same broker of a paper statement with respect to some payments and an
electronic statement with respect to other payments could potentially
lead to confusion for customers and whether brokers should be required
to include a clear communication with each statement in such
circumstances that another statement will be provided separately to
minimize the risk of confusion.
III. Electronic Furnishing of 1099-B Statements and Other Payee
Statements
The cost of furnishing 1099-B statements and other payee statements
on paper can also result in compliance burdens to brokers. This is
particularly true when customers engage in significant daily, and in
some cases algorithmic, trading. However, unlike transactions involving
digital assets, which are almost exclusively conducted through
electronic means by a population comfortable transacting in such
medium, it is likely that some investors who engage in securities and
commodities transactions will not have a similar level of comfort.
Because it is essential to effective tax administration that all
investors, including those uncomfortable with website technology,
mobile device applications or other online platforms, or emailed
attachments, have the ability to conveniently access their furnished
1099-B statements, these proposed regulations would only apply to
brokers that are required to furnish 1099-DA statements reflecting
information reportable to the IRS on Form 1099-DA and would not apply
to any other payee statements.
The sale by a customer of an interest in a widely held fixed
investment trust (WHFIT) that holds digital assets is reported to the
IRS on Form 1099-B instead of on Form 1099-DA, and brokers are not
required to furnish statements to customers reflecting information
reportable to the IRS on Form 1099-DA. Accordingly, these new proposed
consent rules would not apply to brokers that report information
regarding their customers' sales of interests in WHFITs that hold
digital assets to the IRS on Form 1099-B.
The Treasury Department and the IRS are, however, considering
whether to propose less burdensome consent procedures for customers
that receive a 1099-B statement and recipients that receive certain
other payee statements. To facilitate the receipt of comments from the
public regarding the issues involved with electronic furnishing of
1099-B statements and certain other payee statements more broadly,
Notice 2026-4 is being issued contemporaneously with these proposed
regulations to request comments on the broader issues involved in these
other circumstances. This notice will be published in the Internal
Revenue Bulletin. Comments regarding these other payee statements
should not be submitted in response to these proposed regulations but
instead should be submitted in accordance with the instructions
provided in Notice 2026-4. Comments submitted on 1099-B statements or
other payee statements will not be considered or incorporated into any
final regulation that results from these proposed regulations.
Applicability Dates
The proposed regulations would apply to 1099-DA statements required
to be furnished on or after January 1 of the calendar year immediately
following [date of publication of final regulations in the Federal
Register].
Special Analyses
I. Regulatory Planning and Review
These proposed regulations are not subject to review under section
6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement
(July 4, 2025) between the Treasury Department and the Office of
Management and Budget regarding review of tax regulations.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA)
generally requires that a Federal agency obtain the approval of the
Office of Management and Budget (OMB) before collecting information
from the public, whether such collection of information is mandatory,
voluntary, or required to obtain or retain a benefit. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it
[[Page 10997]]
displays a valid control number assigned by the OMB.
The collection of information in these proposed regulations contain
third party information reporting and recordkeeping requirements. The
collection of information contained in proposed Sec. 1.6045-1(k) is
required only if a person required to furnish a taxpayer with a 1099-DA
statement chooses to furnish that statement electronically under the
proposed regulations instead of on paper or electronically under
existing guidance set forth in Publication 1179 permitting electronic
furnishing of payee statements. The collected information will be used
by the broker to determine whether the broker's customer has consented
to receive the 1099-DA statement electronically. Additionally, if a
broker's customer has consented to receive the 1099-DA statement
electronically, proposed Sec. 1.6045-1(k) would require the retention
of information for a period that is longer than the access period
required under Sec. 1.6051-1(j)(6) and set forth in section 4.3.6 of
Publication 1179.
The proposed regulations mention third party information reporting
and recordkeeping requirements related to the dispositions of digital
assets, as detailed in Sec. 1.6045-1(k). The burden for these
requirements is included with the Form and Instructions for Form 1099-
DA, Digital Asset Proceeds From Broker Transactions. The Form and
Instructions for Form 1099-DA are already approved by OMB under control
number 1545-2330. These proposed regulations are not creating or
changing these already approved collections.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that this proposed regulation will not have a
significant economic impact on a substantial number of small entities.
The proposed regulation would affect brokers, which may meet the
definition of ``small entity'' in 5 U.S.C. 601(6). However, because
these proposed regulations would provide brokers with an additional
option for electronically furnishing payee statements, the
certification is based on this proposed regulation not imposing any
additional obligations on small entities than that which is already
imposed by existing regulations and Form 1099-DA.
IV. Submission to Small Business Administration
Pursuant to section 7805(f), this notice of proposed rulemaking has
been submitted to the Chief Counsel for the Office of Advocacy of the
Small Business Administration for comment on its impact on small
business.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a State,
local, or Tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. This proposed regulation does not include any Federal
mandate that may result in expenditures by State, local, or Tribal
governments, or by the private sector in excess of that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule either
imposes substantial, direct compliance costs on State and local
governments, and is not required by statute, or preempts State law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive order. This proposed regulation does not
have federalism implications, does not impose substantial direct
compliance costs on State and local governments, and does not preempt
State law within the meaning of the Executive order.
Comments and Requests for a Public Hearing
Before these proposed amendments to the regulations are adopted as
final regulations, consideration will be given to any comments that are
submitted timely to the IRS as prescribed in this preamble under the
ADDRESSES heading. The Treasury Department and the IRS request comments
on all aspects of the proposed rules. All comments that are submitted
by the public will be made available at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Once submitted to the Federal eRulemaking Portal, comments cannot be
edited or withdrawn.
A public hearing will be scheduled if requested in writing by any
person who timely submits electronic or written comments. Requests for
a public hearing also are encouraged to be made electronically. If a
public hearing is scheduled, notice of the date and time for the public
hearing will be published in the Federal Register.
Statement of Availability of IRS Documents
IRS Revenue Procedures, Revenue Rulings, Notices and other guidance
cited in this document are published in the Internal Revenue Bulletin
and are available from the Superintendent of Documents, U.S. Government
Publishing Office, Washington, DC 20402, or by visiting the IRS website
at <a href="https://www.irs.gov">https://www.irs.gov</a>.
Drafting Information
The principal authors of these regulations are Roseann Cutrone and
Jessica Chase, Office of the Associate Chief Counsel (Procedure and
Administration). However, other personnel from the Treasury Department
and the IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and the IRS propose to amend
26 CFR part 1 as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by removing
the first occurrence of the entry for Sec. 1.6045-1 to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.6045-1 also issued under 26 U.S.C. 6045(a).
* * * * *
0
Par. 2. Section 1.6045-0 is amended by, in the table of contents for
Sec. 1.6045-1:
0
1. Adding entries for paragraphs (k)(3)(i) through (iv);
0
2. Removing and reserving the entry for paragraph (k)(4); and
0
3. Adding entries for paragraphs (k)(5) through (7).
The revisions and additions read as follows:
Sec. 1.6045-0 Table of contents.
* * * * *
Sec. 1.6045-1 Returns of information of brokers and barter
exchanges.
* * * * *
(k) * * *
(3) * * *
(i) In general.
(ii) Due date for furnishing consolidated reporting statements.
(iii) Electronic furnishing of consolidated reporting
statements.
(iv) Examples.
* * * * *
[[Page 10998]]
(5) Electronic furnishing of 1099-DA statements.
(i) In general.
(ii) Qualified electronic delivery method.
(A) Posted to an electronically accessible specified location.
(1) In general.
(2) Undeliverable address.
(3) Corrected 1099-DA statement.
(4) Required information for notices.
(B) Direct transmittal.
(1) In general.
(2) Undeliverable address.
(3) Corrected 1099-DA statement.
(4) Required information for emails and notices.
(C) Additional communication method.
(iii) Consent.
(A) In general.
(B) Change in hardware or software requirements.
(C) Disclosure statement.
(1) Scope of consent.
(2) Hardware and software requirements.
(3) Qualified electronic delivery method.
(4) Notification method.
(5) Consequences of non-consent.
(6) Withdrawal of consent.
(7) Further information.
(D) Examples.
(iv) Continuing disclosures.
(A) In general.
(B) Updating information.
(C) Broker information.
(D) Additional communication methods for requested notices.
(E) Access procedures for statements posted to an electronically
accessible specified location.
(v) Format.
(vi) Access period for statements posted to an electronically
accessible specified location.
(vii) Example of rules for electronic furnishing of consolidated
reporting statements.
(6) Applicability date.
(7) Cross-reference to penalty.
* * * * *
0
Par. 3. Section 1.6045-1 is amended by:
0
1. Revising and republishing paragraph (k)(1);
0
2. Adding paragraph headings to paragraphs (k)(3)(i) and (ii);
0
3. Redesignating paragraph (k)(3)(iii) as paragraph (k)(3)(iv);
0
4. Adding new paragraph (k)(3)(iii);
0
5. In newly redesignated paragraph (k)(3)(iv), designating Examples 1
through 4 as paragraphs (k)(3)(iv)(A) through (D), respectively;
0
6. In newly designated paragraph (k)(3)(iv)(B), removing the language
``Assume the same facts as in Example 1'' and adding the language ``The
facts are the same as in paragraph (k)(3)(iv)(A) of this section (the
facts in Example 1)'' in its place;
0
7. In newly designated paragraph (k)(3)(iv)(D), removing the language
``Assume the same facts as in Example 3'' and adding the language ``The
facts are the same as in paragraph (k)(3)(iv)(C) of this section (the
facts in Example 3)'' in its place;
0
8. Redesignating paragraph (k)(4) as paragraph (k)(7);
0
9. Adding and reserving new paragraph (k)(4); and
0
10. Adding paragraphs (k)(5) and (6).
The revisions and additions read as follows:
Sec. 1.6045-1 Returns of information of brokers and barter
exchanges.
* * * * *
(k) * * *
(1) General requirements. A broker or barter exchange making a
return of information under this section must furnish to the person
whose identifying number is (or is required to be) shown on the return
(customer) a written statement showing the information required to be
reported under this section and containing a legend stating that the
information is being reported to the Internal Revenue Service. If the
return of information is not made on magnetic media or in electronic
form, this requirement may be satisfied by furnishing to the customer a
copy of all Forms 1099 or any successor form for the customer filed
with the Internal Revenue Service Center. A statement is considered to
be furnished to a customer if it is mailed to the customer using any
mail or private delivery service chosen by the broker at the last
address of the person known to the broker or barter exchange. See
paragraph (k)(5) of this section for rules regarding when certain
written statements described in this paragraph (k)(1) may be furnished
to a customer in an electronic format.
* * * * *
(3) * * *
(i) In general. * * *
(ii) Due date for furnishing consolidated reporting statements. * *
*
(iii) Electronic furnishing of consolidated reporting statements. A
broker may furnish a consolidated reporting statement described in this
paragraph (k)(3) in an electronic format in lieu of a paper format if
it has met the applicable requirements for consent and other associated
rules under either the procedures set forth in the applicable revenue
procedures relating to electronic delivery of payee statements
generally or by following the rules set forth in paragraph (k)(5) of
this section relating to electronic delivery by a broker of payee
statements showing the information required to be reported to the IRS
on Form 1099-DA, Digital Asset Proceeds From Broker Transactions, or
successor form (1099-DA statements), as applicable, to be treated as
furnishing each of the statements included in the consolidated
reporting statements in a timely manner.
* * * * *
(4) [Reserved]
(5) Electronic furnishing of 1099-DA statements--(i) In general. A
broker required by section 6045(b) and this paragraph (k) to furnish a
written statement showing the information required to be reported to
the IRS on Form 1099-DA, Digital Asset Proceeds From Broker
Transactions, or successor form (1099-DA statement) to a customer may
furnish the 1099-DA statement in an electronic format in lieu of a
paper format either by following the procedures set forth in the
applicable revenue procedures relating to electronic delivery of payee
statements or by using a qualified electronic delivery method as
defined in paragraph (k)(5)(ii) of this section and meeting the
requirements set forth in paragraphs (k)(5)(iii) through (vi) of this
section. A broker that meets the requirements set forth in paragraphs
(k)(5)(iii) through (vi) of this section and that furnishes a 1099-DA
statement using a qualified electronic delivery method described in
paragraph (k)(5)(ii)(A)(1) of this section (posting to an
electronically accessible specified location) is treated as furnishing
the required 1099-DA statement on the last of the following three
dates: the date that the broker sends to the customer the required
notice by email informing the customer that the customer's 1099-DA
statement has been so posted; the date that the broker sends to the
customer the requested notice, if requested by the customer in the
manner described in paragraph (k)(5)(ii)(A)(1) of this section; and the
date that the broker posts the customer's 1099-DA statement to an
electronically accessible specified location as described in paragraph
(k)(5)(ii)(A)(1) of this section. A broker that meets the requirements
set forth in paragraphs (k)(5)(iii) through (vi) of this section and
who furnishes a 1099-DA statement using a qualified electronic delivery
method described in paragraph (k)(5)(ii)(B)(1) of this section (direct
transmittal) is treated as furnishing the required 1099-DA statement on
the later of the date that such transmittal is sent to the customer or
the date that the broker sends to the customer the requested notice
informing the customer that the customer's 1099-DA statement has been
transmitted as described in paragraph (k)(5)(ii)(B)(1) of this section,
if requested by the customer in the manner described in paragraph
(k)(5)(ii)(B)(1) of this section.
[[Page 10999]]
(ii) Qualified electronic delivery method. For purposes of this
paragraph (k)(5), a qualified electronic delivery method means either
of the delivery methods described in paragraphs (k)(5)(ii)(A) and (B)
of this section. If the broker has corrected a customer's 1099-DA
statement, to be treated as furnishing the corrected 1099-DA statement
using a qualified electronic delivery method, the corrected 1099-DA
statements must be furnished using the same qualified electronic
delivery method by which the original 1099-DA statement was furnished.
(A) Posted to an electronically accessible specified location--(1)
In general. A qualified electronic delivery method means the posting of
a 1099-DA statement to an electronically accessible specified location,
such as the broker's website, mobile device application, or other
online platform, if the broker provides the customer with a notice
containing the information described in paragraph (k)(5)(ii)(A)(4) of
this section that the 1099-DA statement has been posted. Except as
provided in paragraph (k)(5)(ii)(A)(2) of this section, this notice
must be sent to the customer by email. In addition, the broker must
provide the customer with the opportunity to receive another notice
from the broker using an additional communication method described in
paragraph (k)(5)(ii)(C) of this section if requested by the customer
not later than the end of the calendar year to which the 1099-DA
statement relates (requested notice).
(2) Undeliverable address. Except in the case of a notice that a
corrected 1099-DA statement has been posted to an electronically
accessible specified location, the broker must furnish to the customer
a notice that an original 1099-DA statement has been posted to the
electronically accessible specified location by any mail or private
delivery service chosen by the broker within 30 days after an emailed
notice is returned to the broker as undeliverable unless prior to that
date the broker sends to the customer another email notice to a
corrected email address that is not returned as undeliverable.
(3) Corrected 1099-DA statement. If the broker has corrected a
customer's 1099-DA statement, the broker must provide the customer with
notice that the corrected 1099-DA statement has been posted to the
electronically accessible specified location within five business days
of such posting. The broker must send this notice to the customer by
email. In addition, if the customer asked for a requested notice
described in paragraph (k)(5)(ii)(A)(1) of this section, the broker
must also send the notice regarding the posting of the corrected 1099-
DA statement to the customer using the same additional communication
method as that used for the requested notice regarding the original
1099-DA statement. A notice that a corrected 1099-DA statement has been
posted to the electronically accessible specified location must be sent
to the customer using any mail or private delivery service chosen by
the broker if the emailed notice regarding the original 1099-DA
statement was returned as undeliverable unless the broker sends within
five business days of such posting an email notice regarding the
corrected 1099-DA statement to a corrected email address for the
customer that is not returned as undeliverable.
(4) Required information for notices. Any notice required by
paragraphs (k)(5)(ii)(A)(1) through (3) of this section must include
instructions on how to access, download, and print the 1099-DA
statement. The notice must also include the following statement in
capital letters, ``IMPORTANT TAX RETURN DOCUMENT AVAILABLE.'' A notice
provided by email must include the foregoing statement on the subject
line of the email. A requested notice described in paragraph
(k)(5)(ii)(A)(1) of this section must include the foregoing statement
prominently in the message of that requested notice.
(B) Direct transmittal--(1) In general. A qualified electronic
delivery method also includes the transmittal of a 1099-DA statement
directly to the customer by means of being attached to, or otherwise
included with, an email containing the information described in
paragraph (k)(5)(ii)(B)(4) of this section. A broker that transmits the
1099-DA statement to the customer under this paragraph (k)(5)(ii)(B)(1)
must offer the customer the opportunity to request a notice from the
broker informing the customer that the customer's 1099-DA statement has
been transmitted by email (requested notice). If this notice is
requested by the customer by the end of the calendar year to which the
1099-DA statement relates, the broker must send the requested notice to
the customer using the customer's choice of additional communication
methods described in paragraph (k)(5)(ii)(C) of this section. This
requested notice must also contain the information described in
paragraph (k)(5)(ii)(B)(4) of this section.
(2) Undeliverable address. Except in the case of a direct
transmittal of a corrected 1099-DA statement, the broker must furnish
the original 1099-DA statement to the customer using any mail or
private delivery service chosen by the broker within 30 days after the
email to which the 1099-DA statement is attached is returned as
undeliverable unless the broker sends another email to which the 1099-
DA statement is attached within five business days of receipt of the
undeliverable communication to a corrected email address for the
customer that is not returned as undeliverable.
(3) Corrected 1099-DA statement. If the broker has transmitted a
corrected 1099-DA statement to a customer that has asked for a
requested notice described in paragraph (k)(5)(ii)(B)(1) of this
section by the end of the calendar year to which the 1099-DA statement
relates, the broker must also provide that customer within five
business days of the transmittal with the requested notice of the
transmittal of the corrected 1099-DA statement using the same
additional communication method as that used for the requested notice
regarding the original 1099-DA. The broker must furnish a corrected
1099-DA statement using any mail or private delivery service chosen by
the broker if the email to which the original 1099-DA statement was
attached was returned as undeliverable unless the broker sends another
email to which the corrected 1099-DA statement is attached within five
business days of receipt of the undeliverable communication to a
corrected email address for the customer that is not returned as
undeliverable.
(4) Required information for emails and notices. An email to which
a 1099-DA statement is attached and any requested notice required by
paragraphs (k)(5)(ii)(B)(1) and (3) of this section must include
instructions on how to access, download, and print the 1099-DA
statement. The email to which a 1099-DA statement is attached and the
requested notice must also include the following statement in capital
letters, ``IMPORTANT TAX RETURN DOCUMENT AVAILABLE.'' The email to
which a 1099-DA statement is attached must include the foregoing
statement on the subject line of the email. A requested notice
described in paragraph (k)(5)(ii)(B)(1) of this section must include
the foregoing statement prominently in the message of that requested
notice.
(C) Additional communication method. For purposes of this section,
a communication will be treated as sent using an additional
communication method if the broker sends the communication to the
customer using the customer's choice of physical delivery in the manner
described in paragraph (k)(5)(ii)(C)(2) of this section or, to the
extent offered by the broker, electronic delivery to the locations in
[[Page 11000]]
the manner described in paragraph (k)(5)(ii)(C)(1) of this section.
(1) Electronic delivery. A communication is sent by electronic
delivery if it is sent to any of the following locations--
(i) To the customer's cellular phone number;
(ii) To the customer's in-account messaging system with the broker
(including in-application and in-website messaging);
(iii) To the customer's cellular device in a manner that can be
viewed when the customer's account application with the broker is not
open;
(iv) To any other electronic messaging address.
(2) Physical delivery. A communication is sent by physical delivery
if it sent by way of any mail or private delivery service chosen by the
broker.
(iii) Consent--(A) In general. The customer must positively consent
to receive the 1099-DA statement in an electronic format. The consent
may be made electronically in any manner that requires the customer to
take an explicit action to provide consent, such as by checking a box,
clicking a button, or completing a fill-in screen. The customer's
consent to receive the 1099-DA statement in an electronic format must
relate solely to the 1099-DA statement and be separate from any other
consent provided by the customer. In addition, prior to, or at the time
of, a customer's consent, the broker must provide to the customer a
clear and conspicuous disclosure statement in the manner set forth in
paragraph (k)(5)(iii)(C) of this section, containing each of the
disclosures set forth in paragraphs (k)(5)(iii)(C)(1) through (7) of
this section.
(B) Change in hardware or software requirements. If the broker
intends to adopt a change in the method by which the customer will need
to access, download, and print the 1099-DA statement furnished in the
electronic format, including the hardware or software the customer will
need to conduct these functions, and that change creates a material
risk that the customer would need to purchase or otherwise obtain new
hardware or acquire or otherwise download new software to access the
1099-DA statement in the new electronic format, before implementing the
change, the broker must obtain a new consent to receive the 1099-DA
statement in the new electronic format from the customer in the manner
described in paragraph (k)(5)(iii)(A) of this section and must provide
to the customer a disclosure statement containing updated disclosures
of the information set forth in paragraph (k)(5)(iii)(C) of this
section through the access period described in paragraph (k)(5)(vi) of
this section with respect to that customer.
(C) Disclosure statement. The clear and conspicuous disclosure
statement required to be provided to the customer prior to, or at the
time of, a customer's consent pursuant to paragraph (k)(5)(iii)(A) of
this section, may be provided by the broker in any manner that is part
of the consent solicitation, including as a link to another page on the
broker's website, mobile device application, or other online platform.
Notwithstanding the previous sentence, a broker that transacts with a
customer exclusively through one or more physical electronic terminals
or kiosks and a broker that effects sales of digital assets for a
customer as a processor of digital asset payments as defined in
paragraph (a)(22) of this section must also send this disclosure
statement to the customer by email or using any mail or private
delivery service chosen by the broker within five business days of the
customer's explicit action to provide consent as described in paragraph
(k)(5)(iii)(A) of this section. Additionally, the broker must provide
the customer with the opportunity to receive the disclosure statement
using an additional communication method described in paragraph
(k)(5)(ii)(C) of this section if requested by the customer at the time
of consent. The disclosure statement provided to the customer prior to,
or at the time of, a customer's consent must include the information
described in paragraphs (k)(5)(iii)(C)(1) though (7) of this section.
(1) Scope of consent. The disclosure statement must inform the
customer that the provided consent shall apply to all 1099-DA
statements required to be furnished by the broker.
(2) Hardware and software requirements. The disclosure statement
must describe the method by which the customer will need to access,
download, and print the 1099-DA statement furnished in the electronic
format, including the hardware or software the customer will need to
conduct these functions.
(3) Qualified electronic delivery method. The disclosure statement
must describe the specific qualified electronic delivery method that
the broker will use to furnish the 1099-DA statement to the customer.
(4) Notification method. If the broker will furnish the 1099-DA
statements using a qualified electronic delivery method described in
paragraph (k)(5)(ii)(A) of this section (posting to an electronically
accessible specified location), the disclosure statement must specify
that the broker will notify the customer by email that the 1099-DA
statement has been posted to the electronically accessible specified
location and that the customer may ask for a requested notice described
in paragraph (k)(5)(ii)(A)(1) of this section using an additional
communication method pursuant to procedures set forth at a location
described in paragraph (k)(5)(iii)(C)(7) of this section. The
disclosure statement must also provide that the customer may change the
additional communication method selected for this requested notice
pursuant to procedures set forth at a location described in paragraph
(k)(5)(iii)(C)(7) of this section. If the broker will furnish the 1099-
DA statements using a qualified electronic delivery method described in
paragraph (k)(5)(ii)(B)(1) of this section (direct transmittal), the
disclosure statement must offer the customer the opportunity to ask for
a requested notice using an additional communication method informing
the customer that the customer's 1099-DA statement has been
transmitted. The disclosure statement must provide that the customer
may change the additional communication method selected for this
requested notice pursuant to procedures set forth at a location
described in paragraph (k)(5)(iii)(C)(7) of this section.
(5) Consequences of non-consent. If the broker intends to limit the
services available to a customer that does not provide consent, such as
not effecting future sales for the customer, the disclosure statement
must inform the customer of this intention.
(6) Withdrawal of consent. If the broker does not offer the
customer the opportunity to withdraw a previously provided consent, the
disclosure statement must inform the customer of this intention.
Additionally, if the broker does offer the customer the opportunity to
withdraw a previously provided consent, the disclosure statement must
inform the customer of the procedures the customer must follow to
withdraw a previously provided consent and when such withdrawal will be
effective.
(7) Further information. The statement must describe the location,
such as on the broker's website, mobile device application, or other
online platform, where the customer can find the information included
in the disclosure statement described in this paragraph (k)(5)(iii)(C)
after providing the consent described in paragraph (k)(5)(iii)(A) of
this section.
[[Page 11001]]
(D) Examples. The following examples illustrate the rules of this
paragraph (k)(5)(iii):
(1) Example 1--(i) Facts. Broker (B) is a broker that operates a
digital asset trading platform and provides hosted wallet services for
customers. B's general terms and conditions shown to all customers
using B's website or mobile device application include a ``check box''
which all customers must check to provide their agreement. During
calendar year 1 (CY1), to obtain customer consent to receiving 1099-DA
statements in an electronic format, B updates its general terms and
conditions to include a clear and concise disclosure statement that
provides the information described in paragraphs (k)(5)(iii)(C)(1)
through (7) of this section. The updated general terms and conditions
include a separate ``check box'' which all customers must check to
provide their consent to receiving 1099-DA statements in an electronic
format. Customer J (J) accesses B's mobile device application to make a
transaction and checks a ``check box'' to agree to B's general terms
and conditions and also checks the ``check box'' to consent to
receiving 1099-DA statements in an electronic format.
(ii) Analysis. B's updated terms and conditions disclose to J all
the information described in paragraphs (k)(5)(iii)(C)(1) through (7)
of this section. Accordingly, B has satisfied the disclosure
requirements set forth in paragraph (k)(5)(iii)(C) of this section.
Additionally, by checking a box that relates solely to consenting to
receiving 1099-DA statements in an electronic format and that is
separate from any other consent provided by the customer, J has
positively consented to receiving J's 1099-DA statements in an
electronic format as required under paragraph (k)(5)(iii)(A) of this
section.
(2) Example 2--(i) Facts. Broker (F) is a broker that operates a
digital asset trading platform and provides hosted wallet services for
customers. During calendar year 1 (CY1), F adds a pop-up screen that is
shown to all customers and potential customers using F's website or
mobile device application seeking consent from such customers to
receiving 1099-DA statements in an electronic format. The pop-up screen
includes a clear and concise disclosure statement that provides the
information described in paragraphs (k)(5)(iii)(C)(1) through (7) of
this section. The pop-up screen includes an ``I agree'' button that is
separate from any other consent provided by the customer and on which
all customers and potential customers must click to provide their
consent. Customer R accesses F's mobile device application to make a
transaction and clicks on the ``I agree'' button.
(ii) Analysis. F's pop-up screen discloses to R all the information
described in paragraphs (k)(5)(iii)(C)(1) through (7) of this section.
Accordingly, F has satisfied the disclosure requirements set forth in
paragraph (k)(5)(iii)(C) of this section. Additionally, by clicking on
the ``I agree'' button on F's pop-up screen, which is separate from any
other consent provided by the customer, R has positively consented to
receiving R's 1099-DA statements in an electronic format as required
under paragraph (k)(5)(iii)(A) of this section.
(3) Example 3--(i) Facts. The facts are the same as in paragraph
(k)(5)(iii)(D)(2) of this section (the facts in Example 2), except that
the disclosure statement includes a statement that F will not effect
future sales for customers that do not provide their consent to receive
their 1099-DA statements in an electronic format. Additionally, R does
not click on the ``I agree'' button.
(ii) Analysis. Because R did not click on the ``I agree'' button on
F's pop-up screen, R has not consented to receive the 1099-DA
statements electronically. Accordingly, although F may not be obligated
to continue the business relationship with R, F must furnish R's 1099-
DA statements reflecting any of R's sales previously effected by F in
CY1 in a paper format.
(4) Example 4--(i) Facts. The facts are the same as in paragraph
(k)(5)(iii)(D)(2) of this section (the facts in Example 2), except the
disclosure statement provided to the customer includes language
indicating that the 1099-DA statements will be furnished in XYZ
electronic format and a statement that F will not effect future sales
for customers that do not provide their consent to receive their 1099-
DA statements in an electronic format. In calendar year 2 (CY2), after
F effected digital asset sales on behalf of R, F makes the decision to
change the software used to furnish the 1099-DA statements from XYZ
software to ABC software. This change creates a material risk that
existing customers would need to download new software to access the
1099-DA statements in the new ABC electronic format. F adds a revised
pop-up screen to solicit a new consent to receiving 1099-DA statements
in the new ABC electronic format. This pop-up screen will be shown to
all customers and potential customers using F's website or mobile
device application. The revised pop-up screen includes a clear and
concise disclosure statement that provides the updated information set
forth in paragraphs (k)(5)(iii)(C)(1) through (7) of this section,
including a disclosure of the software needed to access the 1099-DA
statements in the new ABC electronic format and a statement that F will
not effect future sales for customers that do not provide their consent
to receive their 1099-DA statements in the ABC electronic format. The
revised pop-up screen includes an ``I agree'' button on which all
customers and potential customers must click to provide their consent
to receiving 1099-DA statements in an electronic format and does not
address any other issues. Customer R does not click on this ``I agree''
button.
(ii) Analysis. Because R did not click on the ``I agree'' button, R
has not consented to receive the 1099-DA statements electronically in
the ABC format. Accordingly, although F may not be obligated to
continue the business relationship with R, F must furnish R's 1099-DA
statements reflecting any of R's sales previously effected by F in CY2
in the XYZ format.
(5) Example 5--(i) Facts. Broker (K) is a broker that operates
physical electronic terminals (kiosks) that customers use to purchase
and sell digital assets. During calendar year 1 (CY1), K adds a pop-up
screen that is shown to all customers and potential customers using K's
kiosk seeking consent from such customers to receiving 1099-DA
statements in an electronic format. The pop-up screen includes a clear
and concise disclosure statement that provides the information
described in paragraphs (k)(5)(iii)(C)(1) through (7) of this section.
The pop-up screen includes an ``I agree'' button on which all customers
and potential customers must click to provide their consent. Customer J
visits K's kiosk to make a transaction and clicks on the ``I agree''
button, which is separate from any other consent provided by the
customer and does not address any issues other than consenting to
electronic receipt of 1099-DA statements. K does not send the
disclosure statement to J by email, mail, or private delivery service.
Additionally, K does not provide J with the opportunity to request that
the disclosure statement be provided using an additional communication
method. J does not engage in any other transactions using K's services.
(ii) Analysis. Under paragraph (k)(5)(iii)(A) of this section, K is
required to provide a clear and conspicuous disclosure statement to the
customer prior to, or at the time of, a customer's consent. Under
paragraph (k)(5)(iii)(C) of this section, that statement may be
provided in any manner that is part of the consent
[[Page 11002]]
solicitation. K's pop-up that provides the information described in
paragraphs (k)(5)(iii)(C)(1) through (7) of this section satisfies this
requirement. In addition, however, because K transacts with J only
through K's kiosk, K is also required to send this disclosure statement
to J by email, mail, or private delivery service and is required to
provide J with the opportunity to request that the disclosure statement
be provided using an additional communication method. Accordingly,
because K failed to provide this disclosure statement to J by email,
mail, or private delivery service, J has not positively consented to
receiving J's 1099-DA statements in an electronic format as required
under paragraph (k)(5)(iii)(A) of this section.
(iv) Continuing disclosures--(A) In general. The broker must
provide a location where the customer can generally find updated
versions of the information described in paragraphs (k)(5)(iii)(C)(1)
through (7) of this section through the access period described in
paragraph (k)(5)(vi) of this section with respect to such customer. In
addition, this location must also include the information described in
paragraphs (k)(5)(iv)(B) though (E) of this section. A broker may
generally provide the information described and cross-referenced in
this paragraph (k)(5)(iv)(A) on the broker's website, mobile device
application, or other online platform. Notwithstanding the previous
sentence, a broker that transacts with a customer exclusively through a
physical electronic terminal or kiosk and a broker that effects sales
of digital assets for a customer as a processor of digital asset
payments as defined in paragraph (a)(22) of this section must also send
this disclosure statement by email, mail, or private delivery service
within five business days of the customer's explicit action to provide
consent as described in paragraph (k)(5)(iii)(A) of this section.
Additionally, if a broker described in the previous sentence updates
the information described in paragraphs (k)(5)(iii)(C)(1) through (7)
of this section during the access period described in paragraph
(k)(5)(vi) of this section with respect to a customer, the broker must
also send updated versions of the information to the customer by email,
mail, or private delivery service within five business days of posting
the updated version to the broker's website, mobile device application,
or other online platform. Finally, to the extent the customer requested
at the time of consent or anytime thereafter that the disclosure
statement be provided using an additional communication method
described in paragraph (k)(5)(ii)(C) of this section, the broker must
also send the continuing disclosure statement and any updated versions
of the information included on that statement to the customer using the
additional communication method requested by the customer.
(B) Updating information. The broker must provide a description of
the procedures the customer may use to update the information needed by
the broker to deliver to the customer, as applicable, the notice(s)
described in paragraph (k)(5)(ii)(A)(1) of this section that the 1099-
DA statement has been posted to an electronically accessible specified
location, the email to which the 1099-DA statement is attached, or the
requested notice described in paragraph (k)(5)(ii)(B)(1) of this
section informing the customer that the customer's 1099-DA statement
has been transmitted.
(C) Broker information. The broker must provide the broker's
contact information in the event the customer has questions about the
consent or about the customer's 1099-DA statement.
(D) Additional communication methods for requested notices. The
broker must provide a description of the procedures for asking for the
requested notices as required to be offered by paragraphs
(k)(5)(ii)(A)(1) and (k)(5)(ii)(B)(1) of this section using the
customer's choice of additional communication method.
(E) Access procedures for statements posted to an electronically
accessible specified location. If the broker will furnish the 1099-DA
statements using a qualified electronic delivery method described in
paragraph (k)(5)(ii)(A) of this section (posting to an electronically
accessible specified location), the broker must provide information
about the period of time that the broker will retain the 1099-DA
statement and any corrected 1099-DA statement at that electronically
accessible specified location. In addition, the broker must provide the
date when the 1099-DA statements will no longer be available at the
electronically accessible specified location and a description of the
procedures for the customer may use to obtain 1099-DA statements and
corrected 1099-DA statements that are no longer available at the
electronically accessible specified location.
(v) Format. The electronic version of the 1099-DA statement must
contain all required information and comply with applicable revenue
procedures relating to substitute statements to the customer.
(vi) Access period for statements posted to an electronically
accessible specified location. The broker must maintain access to 1099-
DA statements posted to an electronically accessible specified location
through October 15 of the year following the calendar year to which the
1099-DA statements relate (or the first business day after such October
15, if October 15 falls on a Saturday, Sunday, or legal holiday). The
broker must maintain access for the customer to corrected 1099-DA
statements that are posted to an electronically accessible specified
location through October 15 of the year following the calendar year to
which the statements relate (or the first business day after such
October 15, if October 15 falls on a Saturday, Sunday, or legal
holiday) or the date 90 days after the corrected statements are posted,
whichever is later. The broker must retain 1099-DA statements for seven
years from the date the 1099-DA statements are required to be furnished
under paragraph (k)(2) of this section or (if later) the date that the
1099-DA statements are actually furnished and must make them available
to the customer upon request.
(vii) Example of rules for electronic furnishing of consolidated
reporting statements--(A) Facts. Customer C has an account with B, a
broker, consisting of stock in a single corporation and digital assets.
In calendar year 1, C sells the stock and digital assets held within
C's account. Under this section, B must furnish a statement reflecting
the information reported to the IRS on Form 1099-B, Proceeds From
Broker and Barter Exchange Transactions, and Form 1099-DA, Digital
Asset Proceeds From Broker Transactions, to C for the sale of stock
(1099-B statement) and digital assets (1099-DA statement). B obtains
consent from C for C to receive the 1099-DA statement in an electronic
format under the rules set forth in paragraph (k)(5)(iii) of this
section and meets the requirements set forth in paragraphs (k)(5)(iii)
through (vi) of this section and this paragraph (k)(5)(vii) to be
treated as furnishing the required 1099-DA statements in a timely
manner. B does not obtain consent from C to receive the 1099-B
statement in an electronic format under the applicable revenue
procedures relating to electronic delivery of payee statements. With
respect to calendar year 1, B electronically furnishes the 1099-DA
statement and the 1099-B statement to C in a consolidated reporting
statement. B does not separately furnish the 1099-B statement to C on
paper.
(B) Analysis. Under paragraph (k)(3)(iii) of this section, because
B did not obtain consent from C to receive the 1099-B statement in an
electronic
[[Page 11003]]
format under the applicable revenue procedures relating to electronic
delivery of payee statements, the electronic furnishing to C of the
1099-B statement in a consolidated reporting statement with the 1099-DA
statement does not satisfy B's obligation under this paragraph (k) to
furnish a 1099-B statement to C with respect to C's sales of stock.
Accordingly, the failure to furnish penalty under section 6722 and
Sec. 301.6722-1 of this chapter would apply to B with respect to B's
failure to furnish a 1099-B statement to C with respect to C's sales of
stock.
(6) Applicability date. The rules of paragraph (k)(5) of this
section regarding electronic furnishing of 1099-DA statements apply to
1099-DA statements required to be furnished on or after January 1 of
the calendar year immediately following [date of publication of final
regulations in the Federal Register].
* * * * *
Frank J. Bisignano,
Chief Executive Officer.
[FR Doc. 2026-04431 Filed 3-5-26; 8:45 am]
BILLING CODE 4830-GV-P
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</html>Indexed from Federal Register on March 6, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.