The measure inserts statutory definitions for “digital asset” and “actively traded digital asset,” classifying any cryptographically recorded unit of value as property unless it merely mirrors a traditional financial instrument.
A new §139J excludes gains or losses when tokens pay for goods or services, so long as each transaction and any attendant loss stay under $300 and a taxpayer’s annual gains from such activity do not top $5,000.
Treasury will index the dollar caps for inflation after 2026 and may deny the break if a sale’s principal purpose is loss harvesting. Taxpayers must keep dedicated books, wallets, or accounts to segregate eligible activity, and the exclusion sunsets after the 2035 tax year.
Lummis said the package “cuts through the bureaucratic red tape” and “ensures Americans can participate in the digital economy without inadvertent tax violations.”
Section 1058’s securities-lending safe harbor expands to “specified assets,” a category that now includes actively traded tokens. This allows holders to loan crypto without triggering recognition events and keeps substitute payments in the lender’s tax character.
A rewritten §1091 applies wash-sale loss disallowance to digital assets and related derivatives but excludes payment stablecoins and dealer inventory. It also grants Treasury authority to police abusive basis adjustments.
Dealers and traders in actively traded tokens may elect mark-to-market treatment under a new §475(g), which brings annual fair-value accounting to crypto inventories without prior IRS approval, and limits the election to publicly quoted assets.
Under the proposal’s text, income from block validation is no longer included in gross income on receipt. Miners and stakers instead recognize ordinary income only when they sell reward tokens, and sourcing follows the taxpayer’s residence.
The bill also allows private foundations to accept appreciated, actively traded tokens with the same favorable deduction that applies to publicly traded stock, broadening charitable planning options for token holders.
Most operating provisions, including the mining deferral, wash-sale expansion, and mark-to-market election, are set to expire after 2035 to align with congressional budget-scoring rules.
