House tax panel weighs crypto tax changes as bipartisan support remains uncertain

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House panel weighs crypto tax changes

Highlights

House Ways and Means Committee will review seven GOP-sponsored crypto tax bills Tuesday, addressing de minimis thresholds, staking, mining, wash sale rules, and charitable donations.
Democratic support is uncertain as Rep. Steven Horsford threatens to withhold backing unless GOP revises bills, particularly concerning limits on staking reward taxation and charitable contribution provisions.
Banking and advocacy groups warn that the proposals could heighten compliance burdens and give digital assets tax advantages, influencing legislative prospects ahead of November's midterm elections.

Tax proposals and hearing agenda

As reported by The Block, the House Ways and Means Committee is set to hold a hearing at 2 p.m. ET on Tuesday to examine seven crypto tax bills introduced by Republican lawmakers. The measures cover issues including de minimis tax treatment for smaller transactions, taxation of mining and staking rewards, wash sale rules for cryptocurrencies, and the treatment of digital assets in charitable donations.

Industry representatives say the proposals are aimed at bringing digital assets closer to the tax treatment applied to other investment classes. Alison Mangiero, senior director of the staking coalition and industry affairs at the Crypto Council for Innovation, describes tax policy as the "third leg of the stool," arguing that stablecoin rules and broader market structure legislation would be incomplete without tax provisions that recognize digital assets.

One of the main disputes centers on staking rewards. The crypto industry has pushed for those rewards to be taxed when they are sold rather than when they are created, while one of the new bills would let taxpayers elect to pay either at sale or at receipt without a time limit. Democratic Representative Steven Horsford has proposed an amendment that would impose a limit of up to five years, and he has also filed a separate amendment on charitable donations.

Horsford has said he will not support the tax package unless Republicans revise parts of it, especially around validation rewards and charitable giving. Those issues are expected to be discussed during Tuesday's hearing, raising questions over whether the bills can gain bipartisan backing.

Compliance concerns and political implications

Wash sale treatment has emerged as another flashpoint before the hearing. Coin Center Communications Director Neeraj Agrawal says extending the rule to crypto would be unworkable for everyday use, decentralized finance activity, and tracking across multiple wallets, while Coin Center Director of Policy Jason Somensatto says in prepared testimony that the change would sharply raise compliance burdens with limited tax administration benefits.

Somensatto argues that current tax rules are built around intermediaries that can report and track users, a framework he says does not fit crypto markets well. In his testimony, he says even routine digital asset activity, such as sending a payment through a phone app or receiving a gaming reward, can trigger tax consequences that require extensive recordkeeping out of proportion to the amount of tax involved.

Banking groups are also pushing back. American Bankers Association Senior Vice President for Fiscal Policy Joey Connor says the bills could give cryptocurrencies a significant advantage over other assets through their treatment of staking, mining, and yields, warning that taxing similar returns differently would tilt the playing field across the financial system.

The hearing may offer an early signal on Democratic messaging and the bills' legislative path. The measures could eventually be folded into a third reconciliation bill, though industry sources say support from Democrats remains important, especially if control of the House changes after the November midterm elections.

Scheduled witnesses include Coinbase Vice President of Tax Lawrence Zlatkin, Fidelity Investments Vice President and Senior Tax Counsel Sarah Reilly, Coin Center's Somensatto, and Mike Kaercher, deputy director of the Tax Law Center at NYU Law.

Our earlier coverage of the Trump-linked World Liberty Financial deal detailed how Alt5 Sigma (now AI Financial Corp.) bought $1.5 billion in crypto tokens in a transaction that delivered about $500 million to the Trump family, followed by a steep drop in the company’s shares and the WLFI token. We also noted the growing regulatory and ethics scrutiny around the venture, including concerns about investor risk and the possibility of a Nasdaq delisting as the stock traded below $1.

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