Illinois has joined a growing number of US states looking to pave the way to allow cryptocurrencies as payment for taxes. House Bill 5335, aka the Revenue Cryptocurrency Bill, is being sponsored by Rep. Michael Zalewski, a Democrat.
It's an amendment to the current Department of Revenue Law of the Civil Administrative Code of Illinois, and it declares that "in addition to any other method of payment provided for by law," cryptocurrencies will be accepted as payment for state taxes. The state would then convert the cryptocurrency payment into fiat money "at the prevailing rate" within 24 hours, and the taxpayers account becomes credited with the converted USD amount.
The bill was first introduced in February and in recent days was assigned to the Revenue and Finance Committee.
It's really been a wave of states showing an interest in adding bitcoin and other cryptocurrencies into their revenue streams. Wyoming, which is also competing for the title of blockchain capital, is considering a bill that would lift state property tax on cryptocurrencies. Meanwhile, similar to Illinois, Arizona and Georgia are looking to legalize bitcoin as a payment for taxes.
Something for investors to consider when paying taxes with bitcoin or some other digital coin is that it could qualify as a tax event. For instance, if you purchased $1,000 worth of bitcoin and the value of that investment balloons to $5,000 on tax day, that's a capital gain and it will be taxed as such.
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Illinois has been jockeying for position among states to take the lead in technology, including but not limited to blockchain. For instance, the city of Chicago is on the list for Amazon's second headquarters. While Amazon already employs more than 10,000 people in the Windy City on a full-time basis, Amazon HQ2 would usher in 50,000 more jobs and billions of dollars in investment.
Meanwhile, the Illinois Blockchain Initiative is comprised of state and county agencies dedicated to exploring how blockchain can bolster state services while appealing to the blockchain community.
And the Illinois Blockchain and Distributed Ledger Task Force recently published a report to the General Assembly. The report highlights ways for the government to use blockchain as a "cheaper and safer way to administer government."
In addition to new innovation that the blockchain would inspire, the technology would be "ideal" for Medicaid enrollment and social programs such as food stamps. But they want to see blockchain "improve its scalability and smart contract security first."
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