“A bill to amend the Internal Revenue Code of 1986 to reform the treatment of digital assets.”
No CRS summary available for this bill.
This section defines a digital asset for purposes of the Internal Revenue Code as any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology specified by the Treasury Secretary. It excludes from such treatment any digital representation of a financial asset (i.e., an asset that trades on established markets or is used as a medium of exchange, store of value, or unit of account, excluding payment stablecoins), which instead is treated as the underlying financial asset; digital representations of other property, which are treated as the underlying property; and provides the Secretary regulatory authority over such classifications. This section further defines an actively traded digital asset as a fungible digital asset for which quotations are readily available on a digital asset exchange, subject to exceptions specified by the Secretary.
This section establishes a new exclusion from gross income (under new IRC §139J) for gain or loss from the sale, exchange, or disposition of digital assets used to purchase products or services in a personal transaction (consistent with IRC §988(e)(3)), provided the transaction is not for cash or cash equivalents or other digital assets. The exclusion does not apply to any transaction (or aggregated related transactions) where (1) the total value exceeds $300, (2) the total loss exceeds $300, or (3) the principal purpose is to eliminate gains; additionally, if a taxpayer's total excluded gains for the year exceed $5,000, no further exclusion applies that year (with the $300 amounts adjusted for inflation after 2026 using a cost-of-living adjustment based on calendar year 2025). Taxpayers must maintain books, records, or separate wallets distinguishing eligible from ineligible transactions, and the Secretary of the Treasury may issue regulations on recordkeeping, anti-abuse rules, basis allocation, and mixed transactions. The provision applies to transactions after December 31, 2025, and terminates for taxable years beginning after December 31, 2035.
This section revises IRC §1058, which provides nonrecognition of gain or loss on transfers of securities (as defined in IRC §1236(c)) under certain lending or similar agreements (with basis carryover to replacement securities), to instead apply to "specified assets" that include such securities and actively traded digital assets. The revision (1) excludes fixed-term agreements from treatment as transfers (except as provided by the Secretary), (2) requires basis adjustments for lent specified assets including upon their return, (3) includes in the lender's gross income any income that would otherwise accrue (with unchanged character), (4) authorizes regulations on digital asset forks, airdrops, and lending fees, and (5) terminates the provision for taxable years beginning after December 31, 2035. The amendments apply to taxable years beginning after the date of enactment.
This section revises IRC §1091 to expand the wash sale loss disallowance rule from stock or securities to specified assets, generally barring loss deductions if substantially identical specified assets are acquired (including via exchange, contract, option, or notional principal contract) within 30 days before or after the sale or disposition (61-day period total). It provides exceptions for (1) dealers sustaining losses in the ordinary course of business where the offsetting acquisition is similarly ordinary course and (2) losses from payment stablecoins or other stablecoins as determined by the Secretary (i.e., digital assets designed for payment or settlement where the issuer must redeem for a fixed monetary value and maintains—or is reasonably expected to maintain—a stable value relative to fiat currency, excluding national currencies, deposits as defined in the Federal Deposit Insurance Act [12 U.S.C. 1813], and securities); and it specifies rules for prorated disallowance and basis adjustments in partial wash sales, certain contract terminations or exercises, and losses from short sales or related contracts or options.
This section establishes an elective mark-to-market accounting regime under IRC §475(g) for dealers and traders in specified assets—defined as digital assets (i.e., cryptocurrencies and similar), notional principal contracts thereon, or derivatives/evidence of interest therein (e.g., options, forwards, futures)—limited to actively traded such assets, terminating for taxable years beginning after December 31, 2035. (1) Dealers may elect treatment identical to securities dealers, applicable to the election year and subsequent years unless revoked with IRS consent (initial election requires no consent); (2) traders may elect treatment identical to securities traders for assets held in such trade or business. Amendments apply to sales and exchanges in taxable years beginning after enactment. (As background, mark-to-market accounting under §475 treats unrealized gains and losses on covered positions as realized at year-end, simplifying ordinary income/loss recognition for dealers and electing traders.)
This section establishes, for taxable years beginning after enactment and through taxable years beginning before January 1, 2036, a deferral of income recognition under new IRC §451(l) for taxpayers engaged in digital asset transaction validation (i.e., mining or staking), such that rewards are included in gross income only upon sale or other disposition of the assets and treated as ordinary income (currently, such rewards are generally included upon receipt at fair market value). It further establishes under new IRC §863(f) that the source of such income is determined by the recipient's residence at the time of receipt (rather than production or other activities). The Secretary of the Treasury may issue regulations to implement both provisions, including on digital asset forks and airdrops.
This section expands the exception from qualified appraisal requirements for charitable contributions exceeding $5,000 to include actively traded digital assets (currently limited to publicly traded securities and qualified vehicles). It also extends the special deduction rule for qualified appreciated stock contributed to private foundations—which allows a fair market value deduction (subject to adjusted gross income limits) rather than the donor's basis—to qualified appreciated digital assets (i.e., actively traded digital assets that are capital gain property), for contributions in taxable years beginning after enactment through 2035.