The crypto tax fight Congress keeps getting wrong, according to Coin Center

The core dispute: income or created property?

@coincenter is telling lawmakers they have the tax treatment of crypto mining and staking rewards backwards. In written testimony submitted to the House Ways and Means Committee at a full hearing on June 9, 2026, the policy group argued that block rewards are newly created property and should only be taxed when sold, not at the moment they are minted.

Participants who validate transactions through proof-of-work mining or proof-of-stake validation create new tokens according to rules encoded in software. These newly created tokens are not paid by any counterparty. They are produced by the validator's own actions, much like a farmer growing crops or a novelist producing a manuscript. Coin Center argues that under longstanding tax doctrine, new property created through one's own labor or capital is not taxed when created, only upon sale or exchange.

The IRS's current interpretation treats block rewards as gross income upon receipt, even though income necessarily entails a payment or transfer from a third party, whereas block rewards are generated from interacting with a technology. Under existing IRS guidance, a validator owes tax based on the value of rewards at the moment of receipt. However, the validator may never sell those tokens at that price. If the market drops sharply, the tax bill can exceed the actual cash value of the rewards.

A band-aid fix, and a live lawsuit

One compromise gaining traction in Congress would tax unsold rewards after a fixed deferral window. Supporters of the Digital Asset PARITY Act, a bipartisan proposal from House Ways and Means Committee members, want to defer income recognition for up to five years and then tax further appreciation only when staking rewards are sold or spent. Coin Center views that approach as insufficient, arguing it still rests on the flawed premise that block rewards are income in the first place.

Rep. Mike Carey (R-OH) introduced the Tax Clarity for Mining and Staking Act, which would take a different approach. The bill would give miners the option of putting off the moment new assets are taxable, instead of assuming them as immediate income. Together with related bills under review, they represent the most coordinated congressional push on crypto tax policy in years.

The dispute is also playing out in federal court. Tezos network stakers Joshua and Jessica Jarrett filed a lawsuit against the IRS in a Tennessee federal court, arguing that tokens created through staking should be treated as property and taxable only upon their sale, not before. A bench trial is scheduled for September 29, 2026. The case directly challenges IRS Revenue Ruling 2023-14, which concludes that staking rewards are includible in a taxpayer's gross income in the tax year in which the taxpayer gains dominion and control over them.

The latest House bills remain at a fairly early stage of the legislative process, and with the current congressional session facing its final months, their viability remains uncertain. For now, miners and stakers sit in legal limbo, caught between a tax agency holding firm, a Congress still searching for a fix, and a courtroom that may ultimately force the issue.

Sources:
Coin Center: Six Ways Congress Can Make Crypto Taxes Work for Everyday Users
Genfinity: Crypto Groups Urge Congress to Pass Mining and Staking Tax Bill
CoinDesk: Crypto's Second U.S. Lobbying Front, Tax Policy, Sees Industry Push on Mining and Staking