Global Recognition of Domain Name As Digital Asset

Attention:

United States Congress
European Union Members
Africa Union Members
ASEAN Members

In the 14th and 15th centuries, British tax assessors used ownership or occupancy of the property to estimate a taxpayer’s ability to pay. But as time progresses the tax came to be regarded as a tax on the property itself (in rem). In the new world (the United States of America), things were different. Around 1796 seven of the fifteen states levied uniform capitation taxes. Twelve of the states taxed some or all livestock. The land was taxed in a variety of ways, but only four states taxed the mass of property by valuation. In 2019 I sold a domain name for $50,000. The marketplace where the domain name was sold collected $7,500 as a commission. The United States IRS taxed the balance $42,500.

The first domain name was created on January 1985. Without a domain name, no company will exist on the internet. Some of the most successful web-based companies credited their success to having the right domain name, yet little credit is given to the domain name itself. When Zoom Communication paid $2 million to acquire Zoom.com not long before going public, the company founder, Eric Yuan told Forbes.com that the acquisition was necessary in order to operate as a global company. After Sex.com sold for $13 million, the Guinness Book of World Records, recognized it as the most expensive domain name. All Fortune 1,000 and global public companies’ websites are powered by a domain name.

A domain name is one of the few digital assets that is old as the internet and has a steady increase in value. According to Verisign, there are more than 350 million domain names registered. That number is expected to reach 745 million according to an article published on Yahoo Finance. In an article published on Forbes.com, the domain name secondary market is valued at more than $2 billion. Siminoff the founder of Ring.com was quoted on Forbes as saying “If you want to be a player in the market,” you have to look like one.” Siminoff paid $1 million to acquire the domain name Ring.com. Not long after that, he sold the company to Amazon.com for $1 billion. According to an article published on Domain Name Wire, MicroStrategy sold the domain name Voice.com for $30 million. MicroStrategy is a public company listed on Nasdaq. The company also owns other digital assets such as Alert.com, Courage.com, Mike.com, and Usher.com.

In an October 2015, memorandum, the United States Internal Revenue Service, or the US IRS stated the "Costs incurred by a taxpayer to acquire a generic domain name or a non-generic domain name from the secondary market for use in the taxpayer’s trade or business must be capitalized under § 263(a) as an intangible asset pursuant to § 1.263(a)-4(b)(1)(i) and § 1.263(a)-4(c)(1). The US IRS also states that “Certain domain names may be registered as trademarks. A domain name that is registered as a trademark clearly meets the definition of a trademark under § 1.197-2(b)(10). According to the United States Patent and Trademark Office, “Trademarks, patents, and copyrights are different types of intellectual property.” “For federal tax purposes, digital assets are treated as property. General tax principles applicable to property transactions apply to transactions using digital assets. You may be required to report your digital asset activity on your tax return.”

In a 2006 Asset Purchase Agreement, filed with the US Security and Exchange Commission, under the recitals, the agreement referred to the domain name Banks.com under 1.1 as "the asset to be transferred." Meaning, the domain name Banks.com is an asset. Banks.com sold for $1.3 million. If a domain name were to be treated as digital real estate, a $1.3 million sale of Banks.com would increase purchasing power to about $1.9 million in 2023. In a December 27, 2022 article published in Investopedia.com, the writer said, "Domain names are hot commodities in today's tech-centric world. The $16 million sale of 'insure.com' to Quinstreet in 2009 may have set the world record, but even lengthier domain names are routinely sold for hundreds of dollars every day. The result is a unique opportunity for investors to invest in domain names that can be sold for a profit in the future."

The United States IRS defines “Digital assets are broadly defined as any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary. Digital assets include (but are not limited to): Convertible virtual currency and cryptocurrency. Stablecoins.” While according to Investopedia.com, “A digital asset is generally anything that is created and stored digitally, is identifiable and discoverable, and has or provides value. Digital assets have become more popular and valuable as technological advances become integrated into our personal and professional lives. Data, images, video, written content, and more have long been considered digital assets with ownership rights.

Domain name investing is an emerging market that has created millions of jobs worldwide. Yes, domain names should be regulated to keep out bad actors that infringe on trademarks. However, domain name investors have helped ensure that domain names are not used for illegal activities like child pornography. According to Bain & Company, "newer retailers who initially operated exclusively online – are set to more than double their share of the industry’s revenues by 2030 and triple their share of profits." Owning a great domain name will be one of the major factors in their success. Several public companies have classified domain names as assets in their SEC filing or reports.

On behalf of more than 10,000 domain investors and the more than 350 million domain names already registered, I appeal to the United State Congress, European Union, Africa Union, and ASEAN to pass a law recognizing domain names as digital assets. Recognizing domain names as digital assets will make tax collection agencies around to properly tax domain names or issue credits for lost in the sale. Moreover, this will also possible for domain investors to use domain name collateral when securing personal or business loans from financial instructions. Lastly, classifying domain names as digital assets will help CFPs and lawyers to determine the proper monetary value of a domain name when it is part of a company merging with another company or being acquired.

Thank you