2020 GCS Speaker Spotlight Series | Lukka

Paige Cresco
September 29, 2020

Sovos’ Global Compliance Summit – Intelligent Reporting “Speaker Spotlight” Series continues with an introduction to another brilliant tax expert who is particularly knowledgeable in the cryptocurrency industry.

In this segment, we welcome Roger Brown of Lukka, who will be presenting at our upcoming conference in early October.  Roger will highlight the anticipated OECD developments involving tax reporting and cryptocurrency.

 

Thanks for joining us, Roger!

  Roger Brown – Lukka

Roger Brown is Head of Tax & Regulatory Affairs for Lukka, a data and software company for digital assets. He has more than 28 years of tax experience as an international tax and financial products lawyer. Roger spent a decade in the national office of the IRS writing regulations & other guidance, and a similar period as a  partner in Ernst & Young’s financial services office serving some of EY’s largest financial services clients. After being tasked to be lead international tax partner on a number of EY’s largest banking, insurance, and other capital markets clients, Roger was one of EY’s lead technical tax leaders in the FinTech and Blockchain space prior to joining Lukka. 

Sovos: Can you tell us a bit more about your experience in the field and how you came to love this industry?

Roger: When Crypto became a topic of discussion for me approximately 5 – 6 years ago, it was natural for me to get into it because I was someone who always gravitated into things that were new in financial instruments and/or international tax. As a partner in a law or accounting firm, you’re always driving your practice forward. It’s about thinking ahead – not only assessing what you’re doing for your clients today, but also, asking yourself “How am I expanding my knowledge base & positioning myself to earn new business?”

Sovos: What we might expect to learn from your GCS Intelligent Reporting sessions, this year?

Roger: I will be discussing multilateral developments around the potential increase in tax reporting of transactions involving virtual currencies. Some countries use reporting by third parties, such as brokers and exchanges, to check the accuracy of what taxpayers self report.  This is the U.S.’s approach for certain assets, for example. In the case of crypto, press and governmental reports indicate that many countries, including the U.S., believe there is a large gap between the income taxpayers earn from transactions involving crypto and what they report on their tax returns. 

The Organisation for Economic Co-operation and Development (OECD) is getting involved to revise the Common Reporting Standard (a/k/a “CRS”) to have it apply to crypto. The effect will be that exchanges in more than 100 countries will have to report on transactions involving crypto to their local governments. The information will then be sent by each country to other countries where persons transacting on local exchanges reside. The objective of the anticipated rules to enable a country to assess whether a tax resident’s trading activities present the potential for tax underpayments — regardless of where the trading occurs.

Our panel will discuss some of the issues that the OECD is dealing with in drafting the rules that determine (a) which exchanges are subject to CRS, (b) what assets are covered, (c) what data is exchanged, and (d) other details relevant to minimizing the potential tax understatements.

Sovos: What is the most common concern you are hearing related to this upcoming tax information reporting season?

Roger: I’m most concerned about the negative implications due to the lack of specific guidance applicable to transactions involving crypto, as well as the long-term impact that this may have.

Many crypto companies have been heads-down focusing on creating sustainable business models, exploring potential areas of expansion, and generating revenue. Given the depth of these responsibilities alone, many of these companies have not yet dealt with the complexities of complying with the maze of regulations that can apply to their activities. We saw the SEC and CFTC issue financial penalties to crypto organizations who prioritized growth over compliance. The same type of retroactive penalties from the IRS may come and which would have a dampening effect on this emerging industry. 

Separately, the IRS is asking taxpayers whether they own or have transacted in crypto when they fill out their tax returns.  It’s a yes / no question.  If a taxpayer holds positions which could relate back to a period when a taxpayer’s tax reporting was less than fully accurate, that can taint the accuracy of their current tax reporting.  While some yes / no questions are easy, this may not be for some. 

Sovos: What are some best practices you would advise for digital asset organizations who are responsible for reporting on 10-series forms this tax season? 

Roger: Here are a couple of important best practices that come to mind:

    1. I would tell people who are responsible for reporting to justify their position in writing with advice from a tax advisor. It would be best to ensure that the advice from the advisor aligns with what your financial auditor will be looking for [during an audit], as well.
    2. Start aligning your systems so that if the information is requested by the government you can give it in an effective way. Aligning your systems is also important because when taxpayers fill out each form and report their crypto gains & losses on other schedules – you will be able to easily get this information from your platform. 

Sovos would like to thank Roger Brown for taking the time to collaborate with us and offer just a handful of his extensive knowledge prior to speaking to the collective group at the conference. We are so excited to welcome him to GCS Intelligent Reporting – 2020!

To learn more from Roger & many other industry stalwarts, register for Sovos’ GCS Intelligent Reporting Conference that will be held virtually from October 5-9, 2020. Earn up to 17 CPE credits, network with other tax professionals, and learn everything you need to know about 1099 and unclaimed property reporting for tax year 2020. 

*REGISTRATION FOR GCS INTELLIGENT REPORTING HAS BEEN EXTENDED! Don’t forget to register by Friday, October 2nd, 2020!*

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Paige Cresco

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