This notice describes the rules that the Internal Revenue Service (IRS) applies in determining the Federal income tax consequences of refunds of State or local taxes and certain other payments made by State or local governments (States) to individuals (State payments) and includes examples illustrating the application of these rules. This notice also describes the applicable Federal information reporting requirements. Section 5 of this notice requests comments, including comments on the application of the rules described in this notice.

This NPRM proposes rules regarding information reporting, determining amount realized and basis, and backup withholding, for sales and exchanges of digital assets. Based on existing authority and changes to the Internal Revenue Code of 1986 made by the Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, the NPRM would require brokers, including digital asset trading platforms, digital asset payment processors, and certain digital asset hosted wallets, to file information returns, and furnish payee statements, reporting gross proceeds for sales and certain exchanges of digital assets effected for customers on or after 1/1/2025. Certain brokers would also be required to report basis for sales and exchange transactions effected for customers on or after 1/1/2026. For real estate transactions that close on or after 1/1/2025, the NPRM would require real estate reporting persons, such as title companies, closing attorneys, mortgage lenders, and real estate brokers, to report the disposition of digital assets paid as consideration by real estate purchasers and to report on Form 1099-S the fair market value of digital assets paid to real estate sellers. The NPRM sets forth gain and loss computation rules, basis determination rules, and backup withholding rules applicable to digital asset sale and exchange transactions.