U.S. Rep. Mike Carey (R-OH) led 18 of his GOP colleagues in requesting additional information from the Internal Revenue Service (IRS) on the rationale and analysis underlying its 2023 guidance on the treatment of cryptocurrency staking rewards, which are a way to earn rewards by putting crypto to work on a blockchain network.
“We urge the IRS to promptly review and update guidance on this issue before the 2026 tax year begins,” the lawmakers wrote in a Dec. 18 letter sent to IRS Acting Commissioner Scott Bessent.
Among the members who joined Rep. Carey in signing the letter were U.S. Reps. Young Kim (R-CA), Carol Miller (R-WV), Gabe Evans (R-CO), Dusty Johnson (R-SD), Mike Kelly (R-PA), Zach Nunn (R-IA), and Bryan Steil (R-WI).
Staking is a way for crypto owners to contribute to a blockchain network while receiving additional crypto in return for helping the network run more efficiently, according to Rep. Carey, who said in a statement that due to misled IRS guidance from the previous administration, staking rewards are currently taxed twice: when they are received, and when they are sold.
Like those who mine gold or anything else, cryptocurrency miners and stakers are the first owners of this new property, and the congressman thinks this is just another hindrance to the development of the digital asset sector.
In the letter, Rep. Carey and his colleagues requested fair tax treatment for digital assets and that the IRS end the double taxation of staking rewards.
“Taxing staking rewards at the time of their sale is critical to ensuring that stakers are taxed based on a correct statement of their actual economic gain, are able to hold their staking rewards throughout the year without facing unreasonable tax risk in the event of price changes, and finally will make compliance feasible as opposed to an administrative nightmare for taxpayers and the [IRS] alike,” they wrote.
“Millions of Americans own tokens on these networks,” added the lawmakers. “Network security — and American leadership — requires those taxpayers to stake those tokens, but today the administrative burden and prospect of over taxation discourages that participation.”
Rep. Carey and the lawmakers requested that Bessent answer several questions, including what considerations are weighed when determining whether to treat staking rewards as gross income or newly created property, given that taxpayers are the first beneficial owners of the newly minted token, among others.
The letter has garnered support from the Solana Policy Institute, the Blockchain Association, The Digital Chamber, the Crypto Council for Innovation, and the Uniswap Foundation.