Draft Executive Order on Citizen-Led Efforts to Promote Regional Economic Development
December__, 2022 • PRESIDENTIAL ACTIONS
By the authority vested in me as President by the Constitution and the laws of the United States of America, and in order to promote the interests of American workers, businesses, consumers and their communities, it is hereby ordered as follows:
Section 1. Background.
While the Federal Government is committed to doing all it can to make the lives of citizens positive and beneficial, it cannot do everything. There are times and conditions when citizens can and should address their own needs. And it is incumbent on the government to aid them in that effort whenever possible, including getting out of the way. This Executive Order is intended to support efforts to allow citizens to economically help themselves.
The United States of America has been built on a tradition of individualism, independence and mutual self-help. Citizens are encouraged to come to each other’s aid and address shared problems and, if possible, doing so without relying on the government.
Many of today’s challenges can be traced to growing income and wealth disparity. Lack of money is at the root of many seemingly unsolvable societal problems. Historically, communities have looked to the Federal Government to address that lack, on the assumption that all money comes from the government.
The reality is that the government is not the only entity allowed to issue money. Private citizens, communities and businesses can too, and have done so for hundreds of years, including in the United States where many entities have issued private money since our founding days.1
As the Federal Reserve Bank of Cleveland explains, “The founding fathers made it clear that the power to create money would not be taken lightly. Their experiences with money and inflation during the Revolutionary War made them wary of paper money and conscious of the power wielded by those authorized to create it. They gave Congress the right to issue money and forbade the states from doing so. But the Federal Government isn’t the only entity that has, in practice, issued money. Private citizens and private companies have, too. . .”2
And therein lies a key to helping address the scarcity of money in the productive economy. The government calls money issued by private parties “virtual currencies.” The citizens of the United States can issue their own money as a virtual currency and use it to boost their local economies.
Historically, all such currencies have been local in nature, intended to address the needs of a specific community or geographic area. Thus, they are often called local or community currencies. That is very relevant to this Executive Order due to recent developments that have created a set of circumstances radically different from those contemplated in this Executive Order.
Beginning in 2009, a new kind of currency was introduced called cryptocurrency that has grown to rival many national currencies, and is well beyond the intended beneficiaries and scale of community currencies. Cryptocurrencies have created a new set of problems for national governments, which is why on March 9th, 2022 I issued this Executive Order on Ensuring Responsible Development of Digital Assets.3
However, that Executive Order could potentially cause unintended and even irreparable harm to local community currency efforts and therefore this Executive Order hereby exempts such currencies from any and all regulatory burdens that might be imposed on them by that previous Executive Order, subject to the following conditions.
- Such currencies are geographically limited for usage primarily within one U.S. state or U.S. territory, and
- Are issued by a non-profit entity organized under IRS Code Sections 501(c)(3) or 501(c)(4), and
- The currencies so issued are for regional economic development purposes only, intended to benefit the general public as a whole and not any individual or group, and are not speculative in nature.
Exempting community currencies from the regulatory burdens of the cryptocurrency Executive Order will help them to aid local economies, something the cryptocurrency world is not focused on. However, their ability to provide aid to local communities is also hampered by other specific federal laws and regulations. This Executive Order is also intended to address those laws and regulations, the most significant of which relates to taxation.
Currently the Internal Revenue Service treats all transactions in virtual currencies as though they are conducted in U.S. dollars and requires that taxpayers pay the IRS any tax due in dollars, rather than the virtual currency.
So, even if a community wanted to issue its own money to fund job creation programs and other expenditures, to the benefit of the community, it would effectively be blocked from doing so because of a lack of dollars to pay any taxes resulting from those economic activities. Thus, even though citizens can issue their own money legally, practically they cannot.
It doesn’t have to be that way. The Internal Revenue Service Advisory Council4 (IRSAC), a long-standing IRS advisory group created by Congress to analyze tax issues and make recommendations to the IRS, issued a report5 in 2018 making eight recommendations concerning virtual currencies. The IRS adopted the first seven of those recommendations but ignored the eighth which stated “Accept payment of tax liabilities with virtual currency. . .”
And while that represents a potential solution, it carries with it the complication of allowing all sorts of virtual currencies to be used to pay taxes, some of which would be beneficial to society and others that would only benefit certain taxpayers. That would distract from the chief objective of allowing communities to address their own problems by issuing their own money and applying that money to their local needs.
Fortunately, my Administration has another means at its disposal concerning taxation that avoids those other complications and allows citizens to issue money for their local benefit. There is a section in the tax code dedicated to non-profit organizations whose purpose is to provide some service or benefit to society. In particular IRS Code Sections 501(c)(3) and 501(c)(4) provide for certain types of organizations whose fundamental purpose is to provide a public benefit, and prohibits actions that only benefit individuals. As such, their functions are considered exempt activities not subject to taxation.
This Executive Order will direct the Department of the Treasury and its agency, the Internal Revenue Service, to treat currencies issued by a 501(c)(3) or 501(c)(4) organization for regional economic development purposes, as an exempt activity under IRS rules governing exempt activities, whereby all transactions conducted in said local virtual currencies shall be exempt from taxation by the Federal Government. That will guarantee that society at large will benefit from this Order and not individuals. To protect this exemption from fraud and abuse, those organizations will be required to pre-qualify their currency with IRS under this rule, along with the potential of loss of their tax-exempt status for misusing this exemption.
To avoid other potential complications, there are several other federal agencies that will be directed to either take affirmative action or to avoid certain actions that might interfere with this plan.
The first of these is the Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury. Its oversight of Money Services Businesses (MSBs) is intended to prevent money laundering. That role is addressed in the above cryptocurrency Executive Order.
However, that objective is a mismatch with community currencies. Community-oriented virtual currencies are a dead end for money launderers, primarily since they can only be moved or used locally, especially when limited to the conditions specified above. Forcing non-profit organizations to register with FinCEN and deal with that regulatory overhead is a waste of time and resources on both sides.
Therefore, FinCEN shall be directed to exempt organizations that issue virtual currencies under this Executive Order from being classified as MSBs. Any non-profit organization formed under § 501(c)(3) and § 501(c)(4) shall be exempt from having to register with FinCEN as a money services business.
The second agency is the U.S. Securities and Exchange Commission (SEC), an independent agency of the United States federal government. The SEC considers many virtual currencies, especially cryptocurrencies, as fitting the definition of a security,6 and thus subject to its jurisdiction and oversight. Such oversight would translate into potentially costly and time-consuming activities on the part of the non-profit to register those securities with the SEC or prove that they are considered exempt.7
Therefore, the SEC will be requested to exclude any virtual currency issued by entities formed under § 501(c)(3) and § 501(c)(4) from being considered securities by the Securities and Exchange Commission, whether or not said currencies are tied to, or backed by, any form of assets.
In the interest of providing for liquidity for holders of those local virtual currencies and in particular convertibility to U.S. dollars, my Administration would like to enlist all federally and state-chartered banks and credit unions to serve as clearing houses for holders of those currencies. Certain federal agencies have oversight over those banks and credit unions and therefore need to support the above objective.
Therefore, all federal agencies that have oversight of state and federally chartered banks and credit unions shall treat any virtual currencies issued by non-profit organizations under U.S. Code Title 26, § 501(c)(3) and § 501(c)(4), and held by a state or federally chartered bank or credit union, as equal to U.S. dollars for purposes of determining such things as, but not limited to: reserve requirements, insurance payments, balance sheet evaluations, etc. The value of said currencies shall be the dollar equivalent established by the issuing non-profit organization when they issue those currencies. Thus, if a non-profit sells their currency on par with the US dollar (i.e., $1 equal to one unit of that currency), then those agencies shall treat the units of those issued currencies as equal to a dollar.
In the case of banks, the Secretary of the Treasury shall request that the Federal Deposit Insurance Corporation (FDIC), an independent US government corporation, accept such virtual currencies for partial or full payment of required insurance payments due from that bank as though said payment were in U.S. dollars.
In the case of credit unions, the Secretary of the Treasury shall request that the National Credit Union Administration and its National Credit Union Share Insurance Fund (NCUSIF), an independent US government corporation, accept such virtual currencies for partial or full payment of required insurance payments due from that credit union as though said payment were in U.S. dollars.
And to provide those banks and credit unions with liquidity in those currencies, the Department of the Treasury shall be directed to provide for the following:
Should any state or federally chartered bank or credit union wish to exchange any virtual currency held by said bank or credit union and issued by a non-profit organization under U.S. Code Title 26, § 501(c)(3) and § 501(c)(4), for U.S. dollars from the Treasury, the Department of the Treasury shall purchase said currency from the requesting bank or credit union. The value of said currencies shall be the dollar equivalent established by the issuing non-profit organization when they issue those currencies.
In turn, should the Department of the Treasury wish to liquidate its holdings in said virtual currencies, the Secretary of the Treasury is hereby directed to request that the Federal Reserve purchase those currencies from the Treasury in a manner similar to the purchases of various financial instruments that the Federal Reserve makes from banks.
All of the above will be taken by My Administration to further reaffirm the policies and objectives stated in previously issued Executive Orders whose collective intent is to combat the excessive concentration of economic power and abuses of market power — especially as these issues arise in labor markets, agricultural markets and local economies. The problem of economic consolidation now spans these sectors and many others, endangering our ability to rebuild and emerge from the COVID-19 pandemic with a vibrant, innovative and resilient economy.
This Executive Order will reinforce and enhance the goals of these previous Executive Orders, by allowing citizens to proactively engage with the Federal Government, and to establish programs and activities that directly address the issues covered by those Orders.
- Executive Order On Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,8 January 20, 2021
- Executive Order on Ensuring an Equitable Pandemic Response and Recovery,9 January 21, 2021
- Executive Order on Economic Relief Related to the COVID-19 Pandemic,10 January 22, 2021
- Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers,11 January 25, 2021
- Executive Order on Worker Organizing and Empowerment,12 April 26, 2021
- Executive Order on Advancing Equity, Justice, and Opportunity for Asian Americans, Native Hawaiians, and Pacific Islanders,13 May 28, 2021
- Executive Order on Promoting Competition in the American Economy,14 July 09, 2021
- Executive Order on White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity through Historically Black Colleges and Universities,15 September 03, 2021
- Executive Order on White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity for Hispanics,16 September 13, 2021
- Executive Order on the White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity for Native Americans and Strengthening Tribal Colleges and Universities,17 October 11, 2021
- Executive Order on White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity for Black Americans,18 October 19, 2021
- Executive Order on Implementation of the Infrastructure Investment and Jobs Act,19 November 15, 2021
- Executive Order on Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability,20 December 08, 2021
- Steps to Increase Competition and Better Inform Consumers and Workers to Support Continued Growth of the American Economy,21 April 15, 2016
Section 2. Specific Provisions.
To address the objectives identified in section 1 of this order, it is hereby directed that:
The Secretary of the Treasury shall:
- Direct the Commissioner of Internal Revenue to:
- designate all virtual currencies issued by non-profit organizations organized under U.S. Code Title 26, § 501(c)(3) and § 501(c)(4) for economic development purposes to be exempt from federal taxation and all transactions conducted in said currencies to be non-taxable, except that any purchase of said currency by a business using U.S. dollars for the purchase, may treat that purchase as an expense and deduct it from their gross income, and any sale of goods in exchange for said currencies may be considered a sale at the cost of those goods and any sale of real property in exchange for said currencies may be considered a sale equal to the seller’s basis in that property, subject to the following provisions and
- require all non-profit organizations formed under § 501(c)(3) and § 501(c)(4) wishing to issue such tax-exempt currencies to register that intention with the IRS before being allowed to issue such tax-exempt currencies. Existing § 501(c)(3) and § 501(c)(4) organizations that can demonstrate for a period of at least one year prior to that registration date any form of general economic development efforts for the benefit of society at large shall be automatically entitled to issue such currencies upon registration with the IRS. Any § 501(c)(3) and § 501(c)(4) organizations wishing to issue such currencies that are newly formed or without at least one year of economic development activities intended to benefit society at large shall enter into a trial period with the IRS of one year in which those organizations can demonstrate that they are conducting their efforts for a public benefit and not to the benefit of individuals. Thereafter all such § 501(c)(3) and § 501(c)(4) organizations will need to provide the IRS with annual reports detailing their economic development activities and the corresponding issuance of a local virtual currency in support of those activities, and
- terminate a non-profit’s tax exemption status for misuse of the right to issue a tax-exempt currency, in particular for doing so for the benefit of private individuals.
- Direct the Director of the Financial Crimes Enforcement Network (FinCEN) to exempt any § 501(c)(3) and § 501(c)(4) organizations that issues a virtual currency under the terms of this Executive Order and manages the transactions using said currencies from designation as a Money Services Business (MSB) with a commensurate determination that said entities need not register with FinCEN as an MSB, nor provide it with any Anti Money Laundering (AML) or Know Your Customer (KYC) reports of any kind.
- Direct the Comptroller of the Office of the Comptroller of the Currency (OCC) to consider such currencies held by those banks chartered by OCC as equal to dollars for purposes of determining such things as, but not limited to: reserve requirements, balance sheet evaluations, etc.
- Direct the Commissioner of the Bureau of Fiscal Services (BFS) to purchase any virtual currencies, issued by § 501(c)(3) and § 501(c)(4) organizations and held by federally or state-chartered banks and credit unions, which said banks and/or credit unions wish to convert into U.S. dollars. Upon such request, the BFS shall purchase said currencies at the conversion rate to the U.S. dollar determined by those issuing organizations.
- If the Commissioner of BFS purchases currencies as defined above and the Secretary of the Treasury wishes to sell those currencies, the Secretary of the Treasury shall extend a request to the Federal Reserve to purchase said currencies in a fashion similar to purchases of various financial instruments that the Federal Reserve currently makes from banks.
- Extend a request to the Chair of the U.S. Securities and Exchange Commission (SEC) to exclude any virtual currency issued by entities formed under § 501(c)(3) and § 501(c)(4) from being considered securities by the Securities and Exchange Commission, whether or not said currencies are tied to, or backed by, any manner or form of assets.
- Extend a request that the Chair of the Federal Deposit Insurance Corporation (FDIC) accept such virtual currencies for partial or full payment of required insurance payments due from banks as though said payments were in U.S. dollars.
- Extend a request to the Chair of the National Credit Union Administration to have its National Credit Union Share Insurance Fund (NCUSIF) accept such virtual currencies for partial or full payment of required insurance payments due from credit unions as though said payment were in U.S. dollars, and to consider such currencies held by those credit unions as equal to dollars for purposes of determining such things as, but not limited to: reserve requirements, balance sheet evaluations, etc.
Sec. 3. General Provisions.
(a) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
(b) Where not already specified, independent agencies are encouraged to comply with the requirements of this order.
(c) Nothing in this order shall be construed to impair or otherwise affect:
(i) the authority granted by law to an executive department or agency, or the head thereof; or
(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
(d) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
JOSEPH R. BIDEN JR.
THE WHITE HOUSE,
August __, 2022.