US lawmakers introduce bill to clarify taxation of staking rewards

Two bipartisan U.S. lawmakers have introduced a bill to clarify that staking rewards should only be taxed at the time of their sale, aiming to prevent double taxation.

Reps. Wiley Nickel, D-N.C. and Drew Ferguson, R-Ga., introduced that bill on Tuesday called the Providing Tax Clarity for Digital Assets Act. 

"The United States’ treatment of digital asset rewards is overly complex – leading to confusion by investors, double taxation, and American businesses relocating overseas," Rep. Ferguson said in a statement . "The Providing Tax Clarity for Digital Assets Act would give the industry desperately wanted tax clarity, establish United States leadership in digital asset tax treatment, and encourages innovation and business in the United States.”

This comes as the Internal Revenue Service said in a ruling last year that crypto investors who earn rewards from staking services will need to include the value of those rewards as part of their gross income. 

Crypto industry reacts 

The new bill would require that taxes on block rewards from proof-of-work or proof-of-stake networks shouldn't be applied when they are acquired and instead when they are spent or sold, Coin Center said in a post on Wednesday. 

"This simple policy would resolve major issues with how cryptocurrencies are taxed today and put the technology on a level playing field," the center said. 

The Proof of Stake Alliance said the bill was "common-sense clarification of existing law" in a post on Tuesday.

"The bill promotes tax fairness and compliance by confirming that block rewards are taxed only at the time of their sale or exchange – rather than taxed twice, first when they are acquired and then again at the time of disposition," POSA said. 

Rep. Nickel has supported crypto and pushed to advance the digital asset legislation called Financial Innovation and Technology Act last year. Both he and Rep. Ferguson have announced they are retiring and won't be seeking reelection.