For years, MicroStrategy (MSTR) founder Michael Saylor has been complaining that regulators have been unfairly forcing him to undervalue bitcoin (BTC) as a company asset. As of January 1, 2025, he obtained his want — and might need created an sudden, multi-billion greenback tax invoice within the course of.
Previous to 2025, Monetary Accounting Requirements Board’s (FASB) reporting requirements for Securities and Change Fee (SEC) filings labeled MicroStrategy’s BTC as an “indefinite-lived intangible asset.”
This designation required MicroStrategy, as a public firm, to completely mark down the worth of its BTC when it declined in USD price. Completely marked down, the corporate may by no means mark up the worth once more, until it really bought the asset.
Saylor decried this unfair therapy, claiming it was lunacy to not have the ability to report a acquire after a markdown at the same time as BTC’s price rebounded.
Saylor fought for an ostensibly BTC-friendly change to FASB accounting requirements for public corporations. He obtained his want by way of rule change ASU 2023-08 — which instantly backfired within the type of billions in upcoming tax liabilities.
Learn extra: Michael Saylor says he’s paying bitcoin taxes, not like ‘crypto-anarchists’
Bitcoin as an indefinite-lived intangible asset
For context, this rule change concern particularly applies to company tax therapy of BTC; this isn’t a tax concern for people.
As of January 1, the FASB permits companies to reclassify BTC, that means that they might now file features when its price will increase. Firms can checklist their BTC holdings at their actual greenback worth as of the reporting date, together with price modifications from quarter to quarter.
Critically, if MicroStrategy decides to opt-in to accounting requirements based mostly on this reclassification, it might imply that would qualify for a brand new minimal tax and will owe a 15% unrealized features tax on its up to $17 billion in unsold BTC revenue.
Usually, capital features taxes solely apply after somebody sells an asset. Nonetheless, in 2022, Congress handed the Inflation Discount Act which added a brand new, “corporate alternative minimum tax” and was a significant change to the FASB’s accounting guidelines.
Shock taxes on MicroStrategy’s unsold BTC
At first, some doubted whether or not the idea of taxes on unsold property was true, nevertheless it appears to be the case.
In accordance with WSJ’s Jonathan Weil and Simplify Asset Administration Chief Analyst Michael Inexperienced, opting-in to the power to mark-to-market its BTC features signifies that MicroStrategy must pay taxes on even unrealized features beginning as early as 2026.
Learn extra: Why have MicroStrategy insiders been dumping MSTR?
The identical therapy is given to merchants in undelivered futures merchandise. Sadly, within the advanced IRS system, generally tax might be due earlier than the acquire is definitely realized.
Because of the rule change, MicroStrategy is searching for assist from the Trump administration. At this level, solely politics can modify IRS guidelines to exempt corporations from paying taxes on such unrealized features.
MicroStrategy even admitted to this minimal tax in its latest quarterly submitting. On web page 6, it states that it’s “currently evaluating the potential implications of unrealized fair value gains” as a result of the corporate’s mark-to-market valuation of its BTC may make the corporate topic to the Company Different Minimal Tax (CAMT) “in the tax years 2026 and beyond unless the proposed regulations with respect to CAMT are revised to provide relief.”
To date, the IRS hasn’t carved out BTC or digital asset holdings in any exemption from its new, company different minimal tax.
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