The three major encryption industry organizations in the United States are pushing Congress to pass a tax bill that allows digital asset miners and pledgeers to recognize taxable income when they sell coins, rather than pay taxes immediately upon receipt of an incentive. Proponents believe that this can alleviate long-standing tax uncertainties and cash flow pressures in the industry.
Joint statement by three industry organizations
The Block Chain Association, the Encryption Innovation Committee and the Digital Chamber of Commerce have recently sent a letter to the United States House of Representatives fund-raising committee in support of the H.R. 9175 Clear Mining and Mortgage Tax Bill. Three agencies called on parliamentarians to move forward with legislation as it stood.
In the letter, they stated that the proposal was a compromise adjustment to the existing rules, subject to the maintenance of the principle of final taxation, with the aim of resolving the many-year-old tax disputes over mining and pledge incentives.
Retain the current rules and add a new deferred option
The bill was introduced by Congressman Mike Carey and centred on the creation of an optional tax treatment for newly generated digital assets.
According to the current U.S. IRS, miners and depositors are usually required to recognize and tax revenues upon receipt of an incentive. The Act does not abolish this practice but retains it as a default option.
On this basis, taxpayers may also choose another way: Revenue is recognized and taxed when new coins are received without taking into account the total income until the assets are sold or otherwise disposed of.
Proponents were of the view that this would prevent tax obligations from occurring before realization. This arrangement helps to reduce liquidity pressures for participants who have not yet sold their currency and lack cash in their hands.
Current calibration disputes focus on “pay on receipt”
In the letter, the industry organizations mentioned that the existing documentation of the United States National Revenue Service had been a source of uncertainty for certifying officers and associated taxpayers.
Of these, the extracted bitcoin was treated in Circular No. 2014-21 as generating taxable income upon receipt, while Decision No. 2023-14 made it clear that the pledge incentive was taxable upon receipt. In industry's view, this approach may force some participants to sell their assets for tax purposes, and may raise the issue of what is called “book income before cash income”.
The three agencies also indicated that, if the bill was passed, tax declarations and enforcement standards might be clearer and that the cost of compliance between taxpayers and tax authorities was expected to decrease.
Trust pledge terms or influence product design
The Act also states that if a trust holds and pledges a digital asset on behalf of an investor only and does not itself actively engage in the business of certifying the transaction, its tax status will not lapse solely because of its participation in the pledge.
This provision may relate to future pledge-type digital asset investment products. A clearer tax treatment is becoming more important as asset management agencies explore funds or trust structures with pledge proceeds.