,,ii #aaith ,,congress #ast ,session ,s4 #bbjg ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,june #cj1 #bjbe,ms4 ,lummis introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to reform the treatment of digital assets4 #a4 ,definition of digital asset ,section #ggja of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#ea7 ,digital asset 7,a7 ,in general ,subject to subparagraph 7,b7 and except as otherwise provided by the ,secretary1 the term digital asset means any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the ,secretary4 7,b7 ,financial assets 7i7 ,in general ,except as otherwise provided by the ,secretary1 in the case of any digital asset which is a representation of a financial asset which is itself not a digital asset1 such asset-- 7,i7 shall not be treated as a digital asset1 and 7,,ii7 for purposes of this title1 and except as otherwise provided by law1 shall be treated as such financial asset4 7ii7 ,definition ,for purposes of this subparagraph1 as specified by the ,secretary1 the term financial asset means an asset that trades on established markets or which is used as a medium of exchange1 store of value1 or unit of account1 and shall exclude a payment stablecoin 7as defined in section #ajia7;a77#c774 7,c7 ,representations of other property ,for purposes of this paragraph1 as specified by the ,secretary pursuant to regulation1 in the case of a digital asset which is a representation of property other than a financial asset1 such digital asset shall be treated in the same manner as the property which it represents4 7#eb7 ,actively traded digital asset ,except as otherwise provided by the ,secretary1 the term actively traded digital asset means a fungible digital asset for which quotations are readily available on a digital asset exchange4 4 #b4 ,de minimis gain or loss from sale1 exchange1 or disposition of digital assets 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after section #aci;,i the following new section3 #aci;,j4 ,de minimis gain or loss from sale1 exchange1 or disposition of digital assets 7a7 ,in general ,subject to subsection 7b71 gross income shall not include gain or loss from the sale1 exchange1 or disposition of digital assets to purchase products or services in a personal transaction 7consistent with section #ihh7;e77#c771 unless the sale1 exchange1 or disposition is for-- 7#a7 cash or cash equivalents1 or 7#b7 other digital assets4 7b7 ,limitation 7#a7 ,in general ,subsection 7a7 shall not apply in the case of any sale1 exchange1 or disposition for which-- 7,a7 the total value of such sale1 exchange1 or disposition exceeds #cjj1 or 7,b7 the total loss which would otherwise be recognized with respect to such sale1 exchange1 or disposition exceeds #cjj4 7#b7 ,aggregation rule ,for purposes of this subsection1 all sales1 exchanges1 or dispositions which are part of the same transaction 7or a series of related transactions7 shall be treated as one sale1 exchange1 or disposition4 7#c7 ,total gains ,if1 after applying subsection 7a7 to a transaction1 the taxpayer's total gain for the taxable year from transactions described in subsection 7a7 exceeds #e1jjj1 no further exclusion shall apply for such year4 7c7 ,basis ,except as otherwise provided by the ,secretary1 subsection 7a7 shall not apply to a sale1 exchange1 or disposition of digital assets for which the principal purpose of such sale1 exchange1 or disposition is to eliminate gains4 7d7 ,books and records ,a taxpayer shall maintain books and records or separate wallets or accounts 7as determined by the ,secretary7 which distinguish between sales1 exchanges1 or dispositions of digital assets eligible for the exclusion from gross income under subsection 7a7 and sales1 exchanges1 or dispositions which are not eligible for the exclusion4 7e7 ,inflation adjustment 7#a7 ,in general ,in the case of any taxable year beginning in a calendar year after #bjbf1 each dollar amount in subsection 7b77#a7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjbe for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 7#b7 ,rounding ,any increase determined under paragraph 7#a7 shall be rounded to the nearest multiple of #aj4 7f7 ,regulations and guidance ,the ,secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section1 including-- 7#a7 requirements relating to recordkeeping and broker information reporting1 7#b7 anti-abuse standards which are consistent with the purposes of this section1 which may include defining related transactions to avoid unintended application of the exclusion from gross income under subsection 7a71 7#c7 allocation of basis and characterization of appreciation1 and 7#d7 treatment of mixed transactions which contain both goods or services and property described in paragraph 7#a71 7#b71 or 7#c7 of subsection 7a74 7g7 ,termination ,this section shall not apply to taxable years beginning after ,december #ca1 #bjce4 4 7b7 ,clerical amendment ,the table of sections for part ,,iii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after the item relating to section #aci;,i the following new item3 ,sec4 #aci;,j4 ,de minimis gain or loss from sale1 exchange1 or disposition of digital assets44 7c7 ,effective date ,the amendments made by this section shall apply with respect to transactions entered into after ,december #ca1 #bjbe4 #c4 ,tax treatment of digital asset lending agreements and related matters 7a7 ,in general ,section #ajeh of the ,internal ,revenue ,code of #aihf is amended by-- 7#a7 in the heading1 by striking securities and inserting specified assets1 7#b7 in subsection 7a71 by striking securities 7as defined in section #abcf7;c77 and inserting specified assets1 and 7#c7 striking securities each place it appears and inserting specified assets44 7b7 ,fixed term ,section #ajeh7;b77#c7 of the ,internal ,revenue ,code of #aihf is amended by inserting other than as a result of such agreement being fixed-term1 except as otherwise provided by the ,secretary after transferred4 7c7 ,basis ,section #ajeh7;c7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following3 ,all appropriate basis adjustments to specified assets subject to an agreement under subsection 7b7 shall be made1 as determined by the ,secretary1 including upon the return of the lent specified assets to the taxpayer44 7d7 ,specified assets ,section #ajeh of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsections3 7d7 ,specified assets ,for purposes of this section1 the term specified asset means-- 7#a7 a security 7as defined in section #abcf7;c771 or 7#b7 an actively traded digital asset4 7e7 ,income ,an amount equal to the income which would otherwise accrue to the lender but for a lending transaction under this section shall be included in the gross income of the lender and the character of such income shall remain unchanged4 7f7 ,regulations and guidance ,the ,secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section1 including the application of the provisions of this section to digital asset forks1 digital asset airdrops1 and fees associated with digital asset lending4 7g7 ,termination ,this section shall not apply to taxable years beginning after ,december #ca1 #bjce4 4 7e7 ,conforming amendment ,the table of sections for part ,,iv of subchapter ,o of chapter #a of the ,internal ,revenue ,code of #aihf is amended by striking the item relating to section #ajeh and inserting the following new item3 ,sec4 #ajeh4 ,transfers of specified securities under certain agreements4 4 7f7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of enactment of this ,act4 #d4 ,loss from wash sales of specified assets 7a7 ,in general ,section #ajia of the ,internal ,revenue ,code of #aihf is amended to read as follows3 #ajia4 ,loss from wash sales of specified assets 7a7 ,disallowance of loss deduction 7#a7 ,in general ,no deduction shall be allowed with respect to any loss claimed to have been sustained from any sale or other disposition 7including any termination7 of specified assets where it appears that1 within a period beginning #cj days before the date of such sale or other disposition and ending #cj days after such date1 the taxpayer has-- 7,a7 acquired 7by purchase1 by an exchange on which the entire amount of gain or loss was recognized by law1 or by entering into7 substantially identical specified assets1 or 7,b7 entered into a contract or option to acquire1 or notional principal contract in respect of1 substantially identical specified assets4 7#b7 ,exception for dealers ,paragraph 7#a7 shall not apply if-- 7,a7 the taxpayer is a dealer in specified assets1 7,b7 the loss is sustained in a transaction made in the ordinary course of its business as a dealer1 and 7,c7 the acquisition 7or the entering into of the contract or option to acquire or notional principal contract7 which 7without regard to this paragraph7 would have resulted in the non-deductibility of the loss was similarly made in the ordinary course of such business4 7#c7 ,exception for stablecoins 7,a7 ,in general ,except as otherwise provided by the ,secretary1 paragraph 7#a7 shall not apply to a loss from the sale or disposition of a payment stablecoin or other stablecoin4 7,b7 ,in general ,subject to subparagraph 7,c71 for purposes of this paragraph1 the term payment stablecoin means a digital asset-- 7i7 that is1 or is designed to be1 used as a means of payment or settlement1 and 7ii7 the issuer of which-- 7,i7 is obligated to convert1 redeem1 or repurchase for a fixed amount of monetary value 7not including a digital asset denominated in a fixed amount of monetary value71 and 7,,ii7 represents that such issuer will maintain1 or creates the reasonable expectation that such issuer will maintain1 a stable value relative to the value of a fixed amount of monetary value4 7,c7 ,exception ,the term payment stablecoin shall not include a digital asset that is-- 7i7 a national currency1 7ii7 a deposit 7as defined in section #c of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac771 including a deposit recorded using distributed ledger technology1 or 7iii7 a security1 as defined in section #b of the ,securities ,act of #aicc 7#ae ,u4,s4,c4 #gg;b71 section #c of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c71 or section #b of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#b74 7b7 ,specified assets acquired less than specified assets sold ,if the amount of specified assets acquired 7or covered by the contract or option to acquire or notional principal contract7 is less than the amount of specified assets sold or otherwise disposed of1 then the particular specified assets the loss from the sale or other disposition of which is not deductible shall be determined under regulations prescribed by the ,secretary4 7c7 ,specified assets acquired not less than specified assets sold ,if the amount of specified assets acquired 7or covered by the contract or option to acquire or notional principal contract7 is not less than the amount of specified assets sold or otherwise disposed of1 then the particular specified assets the acquisition of which 7or the entering into of the contract or option to acquire or notional principal contract of which7 resulted in the non-deductibility of the loss shall be determined under regulations prescribed by the ,secretary4 7d7 ,adjustment to basis in case of wash sale 7#a7 ,in general ,the basis of the specified asset acquired 7or the contract1 option1 or notional principal contract entered into7 shall be increased by the amount of the deduction disallowed under subsection 7a74 7#b7 ,rules with respect to certain acquisitions 7,a7 ,in general ,in any case in which-- 7i7 the taxpayer enters into a contract or option to acquire1 or notional principal contract in respect of1 substantially identical specified assets 7within the period specified in subsection 7a771 7ii7 the taxpayer also acquires 7within the period specified in subsection 7a77 substantially identical specified assets and such acquisition would1 but for the entering into of the contract1 option1 or notional principal contract described in clause 7i71 have triggered a disallowance under subsection 7a71 and 7iii7 the contract1 option1 or notional principal contract matures1 expires1 is exercised1 or otherwise terminates without the delivery or receipt of money or property during the term of the contract1 option1 or notional principal contract 7other than at the time the contract1 option1 or notional principal contract is entered into7 or upon such termination1 then1 subject to such exceptions as the ,secretary shall prescribe 7including with respect to non-abusive wash sale basis adjustment practices71 paragraph 7#a7 shall apply to the substantially identical specified assets described in clause 7ii7 and not to the contract1 option1 or notional principal contract described in clause 7i74 7,b7 ,special rule for contracts and options ,subject to such exceptions as the ,secretary shall prescribe 7including with respect to non-abusive wash sale basis adjustment practices71 if the acquisition of any substantially identical specified asset is pursuant to a contract or option described in subparagraph 7,a77i71 then1 notwithstanding whether such asset was acquired within the period specified in subsection 7a71 paragraph 7#a7 shall apply to the substantially identical specified asset acquired pursuant to the contract or option and not to the contract or option4 7e7 ,certain short sales of specified assets and contracts ,to sell ,rules similar to the rules of subsection 7a7 shall apply to any loss realized on the closing of a short sale of 7or the sale1 disposition1 or termination of a contract or option to sell or a short notional principal contract in respect of7 specified assets if1 within a period beginning #cj days before the date of such closing and ending #cj days after such date1 another such short sale of 7or contract or option to sell or short notional principal contract in respect of7 substantially identical specified assets was entered into by the taxpayer4 7f7 ,cash settlement ,this section shall not fail to apply to a contract or option to acquire or sell specified assets solely by reason of the fact that the contract or option settles in 7or could be settled in7 cash or property other than such specified assets4 7g7 ,specified asset ,for purposes of this section1 the term specified asset means any of the following3 7#a7 ,any security 7as defined in section #dge7;c77#b771 including contracts or options to acquire or sell securities4 7#b7 ,except as otherwise provided by the ,secretary-- 7,a7 any digital asset1 7,b7 any notional principal contract with respect to any digital asset described in subparagraph 7,a71 and 7,c7 any evidence of an interest in1 or a derivative instrument in1 any digital asset described in subparagraph 7,a7 or 7,b71 including any option1 forward contract1 futures contract1 short position1 and any similar instrument in such a digital asset4 7h7 ,regulations ,the ,secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section1 including relating to abusive basis adjustment practices4 4 7b7 ,conforming amendments 7#a7 ,section #abbc7c7 of the ,internal ,revenue ,code of #aihf is amended-- 7,a7 by striking stock or securities the first place it appears and inserting specified assets 7as defined in section #ajia7;g771 7,b7 by striking stock or securities the second and third place it appears and inserting specified assets 7as so defined71 and 7,c7 by striking 7or the contract or option to acquire which7 and inserting 7or the entering into of a contract or option to acquire or notional principal contract in respect of which74 7#b7 ,section #fjde7;g77#b77;,b7 of such ,code is amended-- 7,a7 in clause 7i77,i7-- 7i7 by striking security 7other than stock and inserting covered security 7other than stock1 and 7ii7 by striking stock sold or transferred and inserting covered security sold or transferred1 and 7,b7 in clause 7ii7-- 7i7 by striking stock or securities and inserting specified assets1 and 7ii7 by striking identical securities and inserting identical specified assets 7as defined in section #ajia7;g774 7#c7 ,the table of sections for part ,,vii of subchapter ,o of chapter #a fo such ,code is amended by striking the item relating to section #ajia and inserting the following new item3 ,sec4 #ajia4 ,loss from wash sales of specified assets44 7c7 ,termination ,the amendments made by this section shall be repealed on ,december #ca1 #bjce4 7d7 ,effective date ,the amendments made by this section shall apply to sales1 dispositions1 and terminations in taxable years beginning after ,december #ca1 #bjbe4 #e4 ,mark-to-market election 7a7 ,in general ,section #dge of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by redesignating subsection 7g7 as subsection 7h71 and 7#b7 by inserting after subsection 7f7 the following new subsection3 7g7 ,election of mark ,to market for dealers and traders in specified assets 7#a7 ,dealer in specified assets 7,a7 ,in general ,in the case of a dealer in specified assets who elects the application of this paragraph1 this section shall apply to such assets held by such dealer in the same manner as this section applies to securities held by a dealer in securities4 7,b7 ,revocation ,an election under subparagraph 7,a7 may be made without the consent of the ,secretary4 ,an election1 once made1 shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the ,secretary4 7#b7 ,trader in specified assets ,in the case of a person who is engaged in a trade or business as a trader in specified assets and who elects to have this paragraph apply to such trade or business as a trader in such assets1 subsection 7f77#a7 shall apply to specified assets held by the trader in connection with such trade or business in the same manner as such subsection applies to securities held by a trader in securities4 7#c7 ,limitation ,the application of this subsection shall be limited to specified assets which are treated as actively traded4 7#d7 ,definitions ,for purposes of this subsection-- 7,a7 ,specified asset ,the term specified asset means-- 7i7 a digital asset1 7ii7 any notional principal contract with respect to a digital asset described in clause 7i71 or 7iii7 any evidence of an interest in1 or a derivative instrument in1 an asset described in clause 7i7 or 7ii71 including any option1 forward contract1 futures contract1 short position1 or similar instrument in such digital asset4 7,b7 ,dealer in specified assets ,the term dealer in specified assets means a taxpayer which-- 7i7 regularly purchases specified assets from1 or sells specified assets to1 customers in the ordinary course of a trade or business1 or 7ii7 regularly offers to enter into1 assume offset1 assign1 or otherwise terminate positions in specified assets with customers in the ordinary course of a trade or business4 7#e7 ,regulations and guidance ,the ,secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection4 7#f7 ,termination ,this subsection shall not apply to taxable years beginning after ,december #ca1 #bjce4 4 7b7 ,effective date ,the amendments made by this section shall apply to sales and exchanges in taxable years beginning after the date of enactment of this ,act4 #f4 ,digital asset mining and staking 7a7 ,in general ,section #dea of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7l7 ,deferral of income recognition for digital asset activities 7#a7 ,in general ,in the case of a taxpayer who engages in validation of digital asset transactions 7including digital asset mining and staking71 any income relating to such activities-- 7,a7 shall not be included in the gross income of the taxpayer until the taxable year of the sale or other disposition of the assets produced or received in connection with the mining or staking activities1 and 7,b7 shall be treated as ordinary income4 7#b7 ,regulations and guidance ,the ,secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection1 including relating to the residence of a recipient of a digital asset fork or digital asset airdrop4 7#c7 ,termination ,this subsection shall not apply to taxable years beginning after ,december #ca1 #bjce4 4 7b7 ,source of income related to consideration received ,section #hfc of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7f7 ,source of income related to consideration received 7#a7 ,in general ,the source of any income related to validation of digital asset transactions shall be determined by reference to the residence of the recipient at the time of receipt4 7#b7 ,regulations and guidance ,the ,secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection4 7#c7 ,termination ,this subsection shall not apply to taxable years beginning after ,december #ca1 #bjce4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of enactment of this ,act4 #g4 ,charitable contributions and qualified appraisals 7a7 ,in general ,section #agj7;f77#aa77;,a77ii77,i7 of the ,internal ,revenue ,code of #aihf is amended by inserting actively traded digital assets1 before and any qualified vehicle4 7b7 ,contributions to private foundation ,section #agj7;e77#e7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 in the heading1 by inserting or digital assets after stock1 7#b7 in subparagraph 7,a71 by inserting or qualified appreciated digital assets after qualified appreciated stock1 and 7#c7 by adding at the end the following new subparagraph3 7,d7 ,qualified appreciated digital asset 7i7 ,in general ,for purposes of this paragraph1 the term qualified appreciated digital asset means a digital asset-- 7,i7 which is actively traded1 and 7,,ii7 which is capital gain property 7as defined in subsection 7b77#a77;,c77iv774 7ii7 ,regulations and guidance ,the ,secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subparagraph4 7iii7 ,termination ,the term qualified appreciated digital asset shall not apply to any contribution made in taxable years beginning after ,december #ca1 #bjce4 4 7c7 ,effective date ,the amendments made by this section shall apply to contributions made in taxable years beginning after the date of enactment of this ,act4