Act HB 357, the Utah Decentralised Autonomous Organizations Act, has been adopted by the Utah State Legislature (Utah DAO Act) which establishes DAOs as “Utah LLDs” and provides them with limited liability and legal recognition. This law was developed by the Digital Innovation Taskforce and the Utah Blockchain Legislature.
After being reviewed by the Senate and House committees, the Utah DAO Act was adopted on March 1, 2023. Bylaws will be used to ensure compliance with DAO regulations and determine ownership. Quality assurance DAO protocols have also been established to ensure distinct differences in tax treatment and modernised DAO features.
This act is a significant milestone for DAO innovation as it is based on the coalaglobal DAO Model Law and is set to take effect in January 2024. According to Joni Pirovich, a tax expert who worked with the Digital Innovation Taskforce on blockchain and digital assets, this Act recognises that DAOs are global organisations and aims to provide the most freedom possible for innovation. The act also provides technical assurances comparable to those that laws aim to provide by requiring manual reporting procedures.
The Utah Blockchain Legislature had several substantial reservations, however compromises were made in order to enact the measure. An agreement that required DAOs to reveal an incorporator while still keeping their anonymity addressed one worry about the anonymity and unaccountability of DAOs.
A suitable tax wording was then submitted by the Utah Tax Commissioner’s office after the Utah Blockchain Legislature determined that the previous tax language utilised was incompatible with federal and state tax reality.
Last but not least, there was a worry over the Utah Division of Companies’ inability to process additional applications due to a lack of ramp-up time. The bill’s implementation date was moved forward to 2024 to allay this worry, giving more time to modify and revise actual implementations of the legislation.
Similar law was enacted by the Republic of the Marshall Islands last year, designating DAOs as limited liability organisations and mandating official DAO structure adoption in the state’s judicial institutions.