Proposed five-year cap on staking tax deferral draws industry backlash

A proposed change to a crypto tax bill would impose a five-year deadline for stakers and miners to recognize income, regardless of whether they've sold their tokens. Representative Steven Horsford's amendment to H.R. 9175, the Tax Clarity for Mining and Staking Act, has drawn opposition from the Blockchain Association and the Crypto Council for Innovation.

H.R. 9175, introduced on June 8 by Representative Mike Carey, would let validators defer taxes on mining and staking rewards until they actually sell. That would replace current IRS policy, which treats rewards as taxable income the moment they hit a wallet. Under Notice 2014-21 and Revenue Ruling 2023-14, every newly minted token triggers a tax event at receipt, not at sale.

Horsford's amendment would cap that deferral at five years. After the period ends, validators would owe taxes on the fair market value of their rewards, even if they haven't traded them. For long-term stakers on networks with extended lockup schedules, that could mean paying taxes on assets they cannot access.

The Blockchain Association and Crypto Council for Innovation sent a joint letter to the House Ways and Means Committee on June 21. They argued that the original deferral election properly accounts for market liquidity and the practical realities validators face. Imposing a hard deadline, they said, would force tax planning around an artificial timeline rather than an investment strategy.