Nevada State Legislature Approves Bill Blocking Local Taxes On Blockchain/DLT Transactions
On May 30, 2017, the Nevada Legislature approved an amended version of Senate Bill 398 (introduced by Sen. Ben Kieckhefer and unanimously passed by the Senate last month) that would block local governmental entities from taxing blockchain transactions. Assembly Amendment 681 was approved by 41 out of 42 State Assembly members (Rep. Ira Hansen was the sole abstainer due to absence) on May 26, which was then “concurred to” (legalese for accepting amendments) by the State Senate yesterday. According to the Nevada Legislature website, this action paves the way for the amended bill’s final copy to be printed and delivered to Gov. Brian Sandoval, who then has five days to act on the bill or else it automatically takes effect.
According to public records, the amendments to the bill expanded the definition of “blockchain”:
An electronic record of transactions or other data which is:
- Uniformly ordered;
- Redundantly maintained or processed by one or more computers or machines to guarantee the consistency or nonrepudiation of the recorded transactions or other data; and
- Validated by the use of cryptography
This language replaces the original definition of “blockchain” of:
“An electronic record created by the use of a decentralized method by multiple parties to verify and store a digital record of transactions which is secured by the use of a cryptographic hash of previous transaction information.”
Technical purists will recognize that this amendment expands the state’s statutory definition of “blockchain” beyond how the term was implied in Satoshi Nakamoto’s famous Bitcoin White Paper – which outlines “blockchain” as a chain of cryptographic hash-based blocks verified through miner or node consensus based on whether they reflect previous blocks – to reflect the broader term “distributed ledger technology” (DLT) as used by industry insiders – technologies that may use distributed cryptographic verification processes, but whose records aren’t strictly kept on a “blockchain” per se. This expanded definition allows for transfers using platforms like Ripple – which utilizes a distributed ledger of cryptographically signed transactions, but isn’t technically validated via consensus of hash-based blocks – to definitively fall within the bill’s special tax treatment, as they might not have qualified under the original definition.
The advancement of this bill indicates that Nevada is keeping pace with states like Delaware and Arizona in their efforts to lead the country in pioneering legislation friendly to blockchain/DLT innovation.