On Aug. 4, four U.S. congressional representatives wrote to the Internal Revenue Service (IRS) asking the tax authority not to overtax rewards from Proof-of-Stake blockchains.
Explaining the difference in energy consumption between PoS and Proof-of-Work blockchains like Bitcoin’s, Representatives Tom Emmer (R-MN), Darren Soto (D-FL), David Schweikert (R-AZ) and Bill Foster (D-IL) wrote that the IRS may be overestimating gains:
“We believe that taxpayers’ true gains from these tokens should indeed be taxed. However, it is possible the taxation of ‘staking’ rewards as income may overstate taxpayers’ actual gains from participating in this new technology.”
Industry response and clarity on PoS
PoS is a growing concern for U.S. taxpayers. The Proof of Stake Alliance (PoSA), a lobbying group, wrote in response, saying that they applauded the letter, which they also helped to write.
Most major crypto exchanges in the U.S. have limited options for staking, possibly because exchanges like Coinbase and Kraken promote their work to make taxes easy for U.S. users.
Blockchain Task Force and bulls in Congress
The four signatories to the bill are all members of the Congressional Blockchain Task Force and are known for their interest in crypto. They end their letter by describing their “continual efforts to future proof policy and tax regulations that will allow for safeguards, but also ensure that innovation won’t be driven elsewhere.”
Several of the signatories of today’s letter wrote a similar plea to the IRS in December calling for more guidance on taxing hard forks and air drops. Schweikert is the author of a bill he introduced in January that is concerned with excessive taxation of crypto — specifically that used in personal transactions.