The House Ways and Means Committee held a legislative hearing on a package of bills creating a tax framework for digital assets, with members and witnesses agreeing on cutting paperwork but split over a proposal to defer tax on mining and staking rewards.
“The digital asset status quo is untenable. America needs clear tax rules of the road to remain the crypto capital of the world,” said Chairman Jason Smith (R-MO) in his opening statement, citing growth of the industry to more than 67 million American owners and a market capitalization above $2 trillion.
Ranking Member Richard Neal (D-MA) welcomed the discussion but urged caution. He said the committee should “be very careful about putting a thumb on the scale here,” noting that “it’s much easier to put something into the tax code than it is to take it out.” Neal praised bipartisan engagement and singled out Representative Steven Horsford (D-NV).
Witnesses Press for Clarity
Sarah Reilly, vice president and senior tax counsel at Fidelity Investments, said most relevant tax rules were written without contemplating digital assets and that existing guidance has proved inadequate. She testified that the lack of clarity “affects not only those directly involved in the crypto space, but also the financial sector at large,” citing tokenized securities and payment stablecoins.
Lawrence Zlatkin, vice president of tax at Coinbase, said clarity drives compliance. “When tax rules are clear, people comply. When they’re unclear, complexity grows, costs rise, and economic activity moves elsewhere,” he testified. He urged a broad de minimis exemption for small purchases, arguing that “Americans shouldn’t need an accountant to buy jeans.”
Jason Somensatto, director of policy at Coin Center, said the tax system assumes intermediaries that open networks do not require. He argued that Congress “can make crypto tax compliance simpler without creating special tax preferences” and that newly issued block rewards should be taxed when sold rather than when created.
Michael Kaercher, deputy director of the Tax Law Center at NYU Law, urged members to weigh parity, administrability, and guardrails against abuse. He supported codifying that rewards are taxable when earned but opposed an election to defer that income, testifying that deferral “violates parity with traditional finance and the principle that income is taxed on receipt” and “functions as an interest-free loan from the government.”
Common Ground on Paperwork
Members from both parties focused on easing compliance for small transactions. Representative Ron Estes (R-KS) said half of the Forms 1099-DA, Digital Asset Proceeds From Broker Transactions, filed for 2025 were for amounts below $10, which he called “completely unworkable.” Zlatkin testified that the company forces “800 million transactions” into the IRS through data and that roughly half of its submissions involve transactions under $100. The Less Tax Paperwork for Digital Asset Owners Act, H.R. 9178, would exempt transaction fees under $10 and gain or loss on regulated stablecoins.
Reilly told Smith that micro transaction fees on tokenized securities and stablecoin transfers generate “voluminous tax reporting to taxpayers that may not even fully comprehend why they are getting tax reporting.” In an exchange with Representative David Schweikert (R-AZ), Somensatto compared the proposed relief to the de minimis rule for personal foreign currency transactions.
Witnesses also agreed on sourcing income from validation rewards to the recipient’s residence, a rule in the mining and staking bill. Responding to Representative Kevin Hern (R-OK), Reilly said any other approach “would continue to incentivize offshoring of validation activity.” Zlatkin and Somensatto concurred, and Kaercher said a residency-based rule would make the rules clearer.
Division Over Deferral
The deferral election generated the most debate. Kaercher described the disagreement over how to characterize the rewards as “a battle of analogies.” Somensatto likened block rewards to an athlete signing an autograph that gains value, who is not taxed at signing. Asked by Representative Mike Thompson (D-CA) which analogy fits, Kaercher said the rewards are “really a payment for service” and “not like harvesting your own crops or selling your own chair.” He said that view aligns with a recent Tax Court decision in Paschall, T.C. Memo. 2026-46.
Representative Lloyd Doggett (D-TX) characterized the mining and staking legislation as giving crypto “special tax advantages” and asked whether volatile assets held in retirement accounts could prompt a taxpayer bailout. Kaercher said a crash “would have an enormous impact on households’ retirement savings” and that policymakers might have to weigh a response such as a bailout.
Representatives Linda Sánchez (D-CA) and Judy Chu (D-CA) pressed on indefinite deferral. Kaercher warned that earning rewards through a partnership could convert deferral into permanent elimination of tax through stepped-up basis at death. A proposal detailed in an amendment from Horsford would limit the election to five years. Asked by Chu about timing, Kaercher said deferral is inappropriate as a policy matter but that a short window, “as low as a year,” could address liquidity concerns.
On charitable giving, Representative Mike Kelly (R-PA) said the appraisal requirement is a barrier to donations, and Zlatkin said widely traded assets can be valued from public exchange data. Kaercher told Sánchez that requiring a sale of less-traded assets would establish value without an appraisal, an approach reflected in the Horsford amendment.
Parity With Traditional Finance
The Providing Analogous Rules for Digital Assets Act, H.R. 9176, which Representative David Kustoff (R-TN) said he introduced the day before the hearing, would extend the trading safe harbor under IRC § 864, the securities lending rules under IRC § 1058, and mark-to-market accounting under IRC § 475 to digital assets.
Reilly testified that the trading safe harbor provision “merely extends the same safe harbor currently available to securities and commodities to digital assets,” which she said would put U.S. brokers, asset managers, and custodians “on a level playing field with our non-U.S. competitors.” She told Kustoff that the policy reasons for the existing safe harbors “should apply with full force in the digital assets context as well.”
Zlatkin addressed the securities lending provision, which lets assets such as stocks be loaned without triggering a taxable sale. He said he had previously sought an IRS ruling that existing law applied to digital assets but was unsuccessful. The provision “allows participants to lend digital assets without risk that that will essentially be a taxable transaction,” he testified, adding that hundreds of billions of dollars of such lending occurs today “at great risk to those taxpayers who don’t enjoy the benefit of the provision.”
On mark-to-market accounting, Zlatkin and Somensatto told Hern the election should be available for digital assets, with Somensatto urging that it reach individuals with high transaction volumes, not only dealers and traders.
Kaercher urged members to weigh each change against the same principles throughout. The tax system, he said, “is built to be adaptive to any economic activity or new industry,” and in tax the road “already exists, and it already has rules.” His counsel to the committee, he said, was to “keep in mind the first rule of road maintenance: don’t make the roads worse.”
For more on digital asset information reporting rules, see Checkpoint’s Federal Tax Coordinator 2d ¶ S-3715.
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