Bitcoin Forum

The four congressman are:

https://i.imgur.com/zNc9rsi.png

Here is the complete letter they sent to Commissioner Rettig.

https://schweikert.house.gov/sites/schweikert.house.gov/files/Final%20Proof%20of%20Stake%20IRS%20Letter%207.29.20.pdf

Will this encourage more investors to get on-board if the IRS will somewhat heed this call?

That's a damn interesting letter, and I thank you for posting it here OP. 

I've been interested in PoS coins for a while now, though I don't own any at the moment, and I'm kind of shocked that congressmen are actually aware of their existence, much less concerned with the fair taxing of rewards from them.  It's also interesting to me that they proposed that taxation occur only upon the sale of the staking rewards.  I don't have any idea how PoS coin rewards are taxed now, but I'd assume they'd be considered to be income if they're taxed at all.  Maybe someone with some knowledge could clarify that.

Although it's an interesting letter, it remains to be seen whether anything comes of it.  A lot of these suggestions don't lead anywhere, and I'm not sure how much influence these four congressmen have.  I'll have to keep my eyes on it.

I would be shocked too, but they could not be in the end.
Sometimes politicians give their sign over something they have no clue. Why? Because money, money can buy their signature and approval even when they dont understand it.
Thats why world is corrupted so much, because business buying way law is created and most often its bad for people.

They probably saw that POS is a hot topic right now especially ETH is going POS too with the new version 2.0.

The question is, will IRS respond to this in a positive way? If IRS somehow favor this, then wouldn't other projects respond to this? like POW projects and other algorithm asking for fewer tax too.

I'm only familiar with Tom Emmer as one US congressman who are really pro-crypto stance.

For this to have some weight, there should be more congressmen to sign to petition and put pressure on IRS. Or at least some powerful person to lobby this. So this remains to be seen, we don't know if IRS will actually listen to these congressman, but this is a good initiative.

This will encourage the more investors due to ease of taxing on the system. If this will get adapted then pretty sure we can get much on it. However, we need more of them to push through this effort so that it will going to happen. It does need our support also so as to get this thing happen. Yeah I agree that there could be some powerful person to help this push through. It can get much if it will be influence by the likes of those people around in the congress.

Most probably, yes. As the concern stated by the 4 congressmen, "it is possible the taxation of 'staking' rewards as income may overstate taxpayers' actual gains from participating in this new technology." This could mean overtaxing those who are staking and this will certainly dissuade them from participating in PoS networks. This is in effect shooing investors away.  

However, there is one thing I noticed which the congressmen might have overlooked. It is the probable assumption behind this line: "...these tokens could be taxed when they are sold." I am not sure whether there are many shops or stores which are accepting PoS altcoins such as DASH, Tezos, ATOM, or other PoS coins, but it is very possible that these coins could actually be treated as money, I mean spendable on its own. And so tax should be imposed to PoS coins even if they are not sold.

 

Reading from different articles, I didn't see a clear tax guideline for POS coin rewards yet. It's currently treated by most as similar to mined bitcoins. They form part of ordinary income and are taxed according to their fair value at the time of receipt.

The current income tax bracket ranges from 10% to 37% and these Congressmen are proposing it should be under a different tax bracket. They're also proposing rewards should be taxed when they are actually sold and not when they are received.

IRS is still trying to adapt with the fast evolving cryptocurrency market, so it's hard for them to keep up. But I think they're always open for changes and the summit they held last March 2020 inviting cryptocurrency representative is a good proof of that.


Tax incentive is always a good thing for business investors. It'll be the same case for reduced tax rates.

They are congressman!! They need to support the nation by investing into the Presidential party and showing their upliftment through money, developments and supporting the Presidents ordeal.

This is big conspiracy and we as common man may not even understand the roots for same! They may not be thinking about the best interest of the technology but for their own benefits.

They know very well this is more or less public based investment and they can earn great deal of royalty and use that money in their Political Games

 :P

I doubt IRS is going to hear it but if IRS hears it and excludes POS rewards out of the tax calculation, that is going to be a big news for all POS coins and especially for ETH which is going POS in future. But I am wondering why these political personalities suddenly became interested in a specific blockchain technology and to that extent where they have sent a letter to IRS to exclude it from taxing! Do they have any vested interest? May be or may not be!

Actually politicians around the world have earned such a bad reputation so whenever they try to do something good for the common people, we started becoming skeptical! It's true that POS coins will get a huge boost if IRS finally decides to exclude the rewards from taxing, but trying to think through the motto of those congressmen!

Since we are discussing PoS coins,this thread should be moved to the Altcoin Discussion forum.
I don't believe that those 4 US congressmen are interested in crypto and I don't think that they actually care about crypto coins,Proof of Stake,Blockchain technology,etc.
I think that somebody paid them to write and send that letter to the IRS.Lobbyism is still a thing.Maybe some crypto whales are hiring lobbyists that are "influencing" some US congressmen to defend cryptocurrencies using the PoS protocol.
Anyway,PoS rewards should be taxated.When someone wins the lottery,he pays taxes over his reward.This is a pretty oversimplified comparison,but I believe it's true.

Good question, its not that suddenly they woke up and just decided to write a letter to IRS and stating their stance, not on bitcoin, but on POS and asking them not to levy tax on them, seems very odd.

And of all the agencies, it was IRS, not CFTC or SEC, so there's really something strange behind this. But anyhow, I don't think that just because four respected Congressmen give them notice that they will suddenly change everything in an instance.

Consideration of crypto currency on every country is one of a good move that government can have because if government legalize crypto currency on their country, lot of advantages will be given to their peoples. Examples of these advantages are : having a job with a good salary, disabled one will be having a good opportunity to work from home, financial system will be better than before and all users will be having a good practice when trading.

I hope congressmen will eventually appreciate all the advantages of crypto and start promoting it in the government.

Yes, they likely heard of the POS with the news about ETH2 coming which most of the investors are watching to at least own 32ETH for POS. Amazing these congressmen are aware and made this letter for tax-related policy. I'm sure this isn't going to appply yet in my country but I'd be interesting if they'd evolve in to taxing in the form of tokens later not taxing the fiat when we cahs out.

That seems like a good news as it brings in more involvement of the US government towards cryptocurrencies.
This will benefit big investors who always wants to save tax and may be this will encourage them more to invest in PoS coins.
If so then this will benefit ethereum a lot since it is soon going to be migrated into the Proof of Stake algorithm.

You will really ask yourself what are the intentions of these congressmen because all of a sudden they became interested in a certain facet of cryptocurrencies that most regulators aren't even peeping into. It's as if they see more value in regulating and awarding more lenient and lesser taxation in POS coins rather than bitcoin which stayed and proved what it can do on the bigger stage. Anyway, it would be interesting to see what will be the reply of the IRS on this letter. Probably no reply or some 'we'll be working closely on this..' type of reply but yeah, just fascinates me that the men and women of the law are seeing something on POS coins for the first time.

Probably about taxing Staking rewards and not the whole stake? For example, If you stake $100 and earn daily rewards of  $2,   5% of tax is charged on the $2? And is finally deducted from the accumulated taxes owed when withdrawing your stake/reward to your national account.
That's is fair way to tax in my opinion. But it's best done on companies/businesses/systems under a country jurisdiction.
I am not sure if that ^is how the tax works though. Just guessing.

I wonder though how stakes fully control by their owners in decentralized manner will be taxed. Besides, if a well decentralized network is independent of any nation, how will a nation tax the stakes? Imagine if all nations tax a single staker. I guess only the decentralized network is entitled to such taxes unless a company/business is "under the control"(by laws) of the nation it develops from

it is interesting for congressmen to deem it interesting for the IRS to ease tax on POS  rewards. loads of people are using alternative ways of transacting without the of intereferrence of government authorities. If they do not consider reducing tax and also reduccing hidden charges in transactiosn, the masses will have to resort to using alternative financial mediums where they will not be charged much aside fees on transactions alone.

There are really a lot of questions here, but we all know that these kind of requests are not being granted by IRS or any agencies of US government so I doubt that there's something that will came out with this letter. But I would agree, I have the same thoughts on why or what are the real intentions behind from these congressmen, why is something in POS that push them to write this letter in behalf of this type of consensus algorithm, is Vitalik behind all of this? hmm?. What incentives does this congressmen get in return?

Seeing the 4 names of the congressmen who signed the letter, there are several names like Tom Emmer who are indeed
pro cryptocurrencies. So of course this is an interesting thing that has never happened before, I will continue to wait for
the outcome of the decision letter presented to the IRS. But my feeling is that the IRS will reject the request from the letter,
considering that the 4 congressmen are not powerful persons.

My point is that they are comparing these tokens to things such as "crops, minerals, livestock, artworks, and so on" which would be taxed when they are sold. However, say, I would stake Ethereum as soon as they have already fully shifted to PoS, and so I would be receiving regular income in ETH. And I would use the same ETH for buying stuff. I might end up not taxed at all from my staking income if I would not ever convert my ETH to fiat but spend them just the same. That would defeat what the congressmen are saying, that "we believe the taxpayers' true gains from these tokens should indeed be taxed."

I don't. How do you know it won't be granted by the IRS?

Last year, there were 8 congressmen who urged IRS to issue guidelines for for taxpayers who use cryptocurrencies and it was granted. They also asked treatment for hardforks and airdrops.

- https://cointelegraph.com/news/8-congress-reps-send-letter-to-irs-urging-further-crypto-tax-clarity

I wouldn't shut down the possibility given that the IRS is also paying attention to them. Maybe there will be revisions and IRS will come up with their own version but I wouldn't consider that as "request not being granted".

Like I said above, they also asked, through a letter, about the treatment for hardforks and airdrops. Maybe a group like POSA (Proof of Stake Alliance) brought it to their attention but took them a bit more time to study it before they made a request to the IRS?

.........

I also think "sold" in this case means converting POS coin rewards to fiat since these "crops, minerals, livestock, artworks, and so on" are usually sold for fiat because it's the legal tender. But the point you raised on vendors directly accepting eth as payment for goods or services is a good one and it should be clarified too.

"Sold in exchange of fiat currency"
"Sold in exchange of goods or services"

In effect, you are not actually selling it, you are using it to buy what the other party is selling. It's not selling; it is spending. In comparison to selling those tokens for something which you will use to buy goods and services, in this case fiat.

I am not sure they have this notion that these PoS reward tokens, in and of itself, could act as money and should therefore not be compared to the likes of artworks or livestock.

With their assumption, the government might end up not receiving any tax at all, because staking participants have two options: whether to directly spend their tokens as they are and not imposed any taxes or convert them into fiat first and pay taxes. Well, provided these tokens are widely acceptable by merchants, I guess it is not hard to decide which option to take.

Strange request. How can they be asking for easing tax on POS rewards when the IRS is silent on its treatment? When they released the 2014 tax on virtual currencies and its 2019 supplementary guidelines, POS rewards wasn't even mentioned. I've read that taxpayers are wondering whether it should be declared similar to mining income or as an interest income similar to how bank accounts earn interest. They should have asked for the proper declaration and reporting first.

As stated above, the current tax law is silent on this. Staking is similar to mining and I bet it would treated as such. Taxpayers who are staking should declare whether they do it as a "hobby" or as a "trade or business". Applicable tax is different between the two as laid out in the IRS guide (https://www.irs.gov/irb/2014-16_IRB#NOT-2014-21) (Notice 2014–21 specifically Q8 and Q9).

The logical reason I see why they proposed taxation of rewards at the point of sale (rather than at the point of receipt) is that it gives taxpayers the option to sell/trade/exchange the coin when its fair market value (in USD) goes down . Needless to say, doing such will result to lower taxes.

Perhaps these Congressmen used the word "sold" for simplicity's sake and we shouldn't get caught up with the term. IRS is clear on transactions regarding virtual currencies including cryptocurrencies.

We can't really compare the circumstance, the IRS did issue the guidelines, but the request now is that they have to overhaul or readjust their tax 'treatment', and it could take some time, because there could be some process behind and not just rewrite and change it in an instance just because those congressmen ask them to do so.

Not sure how they could possibly tax POS rewards anyway?

Since inflation benefits the banks, shouldn't the banks be taxed on this inflation?

If they're trying to charge tax on what is essentially inflation distributed to network participants, then there is no difference between banks receiving newly minted fiat to increase the money supply...

Maybe not but we can't completely ignore it either when considering the possibility of their request being granted. IRS has no fix guidelines on POS
rewards so there is really nothing to overhaul or rewrite.

That I can agree and I don't think anyone is also expecting a speedy change on the current tax laws on cryptocurrencies. Reading from the previous comments, there's a huge gap between the time the first guideline was issued and the time the supplementary guideline was released.
..........

Whatever the case, rewards are exchanged or traded for goods and/or services.

IRS treat cryptocurrencies as property. Maybe that's what they were thinking when they compared it to other properties.


This loophole is probably not what they had in mind when they wrote the request.

I doubt IRS is going to hear it but if IRS hears it and excludes POS rewards out of the tax calculation, that is going to be a big news for all POS coins and especially for ETH which is going POS in future. But I am wondering why these political personalities suddenly became interested in a specific blockchain technology and to that extent where they have sent a letter to IRS to exclude it from taxing! Do they have any vested interest? May be or may not be!

Actually politicians around the world have earned such a bad reputation so whenever they try to do something good for the common people, we started becoming skeptical! It's true that POS coins will get a huge boost if IRS finally decides to exclude the rewards from taxing, but trying to think through the motto of those congressmen!