Lawmakers Introduce Bipartisan Bill on Digital Asset Taxation

Legislators released a bipartisan bill to establish a comprehensive federal tax framework for digital assets.

The "Digital Asset PARITY Act" would amend the Internal Revenue Code to clarify the tax treatment of various digital asset transactions. The bill states that no gain or loss shall be recognized on the sale of a "regulated payment stablecoin" unless the taxpayer's basis is less than 99 percent of its redemption value. The bill would also extend existing non-recognition rules for securities lending to "eligible digital assets" and would apply wash sale and constructive sale rules to digital assets by replacing references to "stock or securities" with "specified assets."

The draft bill would create distinct classifications for digital asset activities and definitions. A "digital asset" is defined as "a digital representation of value recorded on a cryptographically secured distributed ledger." The bill defines an "actively traded digital asset" as a fungible asset with a minimum trading volume of $50,000,000 over the preceding two years and a minimum yearly market capitalization of $10,000,000,000. The legislation clarifies that "passive staking" does "not constitute a trade or business." It allows taxpayers who acquire newly created digital assets through passive validation to either include the fair market value in their gross income for that taxable year or elect to defer the inclusion of income and capitalize related expenses.

The bill creates a safe harbor for transactions conducted through resident brokers or exchanges and allows dealers and traders of actively-traded digital assets to elect mark-to-market tax treatment. It also establishes strict substantiation requirements for charitable contributions of "infrequently traded digital assets" valued over $500, requiring contemporaneous written acknowledgment to prevent fraudulent deductions. If enacted, the amendments made by this legislation would generally apply to taxable years beginning after December 31, 2025.