MicroStrategy May Pay $3 Billion Tax On Bitcoin Gains

MicroStrategy, the largest corporate Bitcoin holder, could be on the hook for federal income taxes on its unrealized crypto gains due to the Inflation Reduction Act of 2022.

The law’s corporate alternative minimum tax (CAMT) provision imposes a 15% minimum tax on certain corporations’ adjusted earnings, including unrealized gains on assets like Bitcoin.

The company currently holds over 450,000 BTC—worth more than $48 billion—with an estimated $19.3 billion in unrealized gains. Despite these figures, MicroStrategy has never sold any of its Bitcoin holdings.

Michael Saylor, MicroStrategy’s executive chairman, previously faced scrutiny over tax issues. In June 2024, MicroStrategy settled a tax fraud lawsuit for $40 million, following allegations from the D.C. attorney general that Saylor avoided paying district income taxes for at least a decade.

Interestingly, Saylor shared a misleading post on October 30, attributing a quote to Donald Trump that falsely stated, “Bitcoin is money” and suggested a tax-free stance on crypto.

Saylor’s personal Bitcoin holdings are also substantial. He revealed in a 2020 tweet that he acquired 17,732 BTC at an average price of $9,882. At current prices, his holdings are worth over $1.8 billion, placing him among the top Bitcoin addresses.

Growing focus on crypto taxation

Both MicroStrategy and Coinbase criticized the CAMT framework. In a January letter to lawmakers, they argued that the tax on unrealized crypto gains would create “unjust and unintended tax consequences” for companies holding substantial digital assets. The letter urged the U.S. Treasury and IRS to exclude unrealized crypto gains from the adjusted financial statement income used to calculate CAMT liability.

The pushback highlights concerns that applying CAMT to crypto could discourage companies from holding digital assets on their balance sheets. While MicroStrategy and Coinbase advocate for changes to the rules, the IRS may consider exemptions under President Trump’s more crypto-friendly administration.

These developments come as the IRS tightens its focus on cryptocurrency. In June 2024, the agency introduced new guidelines requiring centralized exchanges to report digital asset sales starting in 2025. This move aims to improve tax compliance among crypto investors but has also drawn criticism. The Blockchain Association, for instance, filed a lawsuit against the IRS last year, arguing that the reporting requirements could raise constitutional questions.