To amend the Internal Revenue Code of 1986 to reform the treatment of digital assets.

“139J. De minimis gain or loss from sale, exchange, or disposition of digital assets

“(a) In general—Subject to subsection (b), gross income shall not include gain or loss from the sale, exchange, or disposition of digital assets to purchase products or services in a personal transaction (consistent with section 988(e)(3)), unless the sale, exchange, or disposition is for—

“(1) cash or cash equivalents, or

“(2) other digital assets.

“(b) Limitation

“(1) In general—Subsection (a) shall not apply in the case of any sale, exchange, or disposition for which—

“(A) the total value of such sale, exchange, or disposition exceeds $300, or

“(B) the total loss which would otherwise be recognized with respect to such sale, exchange, or disposition exceeds $300.

“(2) Aggregation rule—For purposes of this subsection, all sales, exchanges, or dispositions which are part of the same transaction (or a series of related transactions) shall be treated as one sale, exchange, or disposition.

“(3) Total gains—If, after applying subsection (a) to a transaction, the taxpayer’s total gain for the taxable year from transactions described in subsection (a) exceeds $5,000, no further exclusion shall apply for such year.

“(c) Basis—Except as otherwise provided by the Secretary, subsection (a) shall not apply to a sale, exchange, or disposition of digital assets for which the principal purpose of such sale, exchange, or disposition is to eliminate gains.

“(d) Books and records—A taxpayer shall maintain books and records or separate wallets or accounts (as determined by the Secretary) which distinguish between sales, exchanges, or dispositions of digital assets eligible for the exclusion from gross income under subsection (a) and sales, exchanges, or dispositions which are not eligible for the exclusion.

“(e) Inflation adjustment

“(1) In general—In the case of any taxable year beginning in a calendar year after 2026, each dollar amount in subsection (b)(1) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2025” for “calendar year 2016” in subparagraph (A)(ii) thereof.

“(2) Rounding—Any increase determined under paragraph (1) shall be rounded to the nearest multiple of $10.

“(f) Regulations and guidance—The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including—

“(1) requirements relating to recordkeeping and broker information reporting,

“(2) anti-abuse standards which are consistent with the purposes of this section, which may include defining related transactions to avoid unintended application of the exclusion from gross income under subsection (a),

“(3) allocation of basis and characterization of appreciation, and

“(4) treatment of mixed transactions which contain both goods or services and property described in paragraph (1), (2), or (3) of subsection (a).

“(g) Termination—This section shall not apply to taxable years beginning after December 31, 2035.”

“(d) Specified assets—For purposes of this section, the term specified asset means—

“(1) a security (as defined in section 1236(c)), or

“(2) an actively traded digital asset.

“(e) 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 unchanged.

“(f) Regulations and guidance—The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including the application of the provisions of this section to digital asset forks, digital asset airdrops, and fees associated with digital asset lending.

“(g) Termination—This section shall not apply to taxable years beginning after December 31, 2035.”

“1091. Loss from wash sales of specified assets

“(a) Disallowance of loss deduction

“(1) In general—No deduction shall be allowed with respect to any loss claimed to have been sustained from any sale or other disposition (including any termination) of specified assets where it appears that, within a period beginning 30 days before the date of such sale or other disposition and ending 30 days after such date, the taxpayer has—

“(A) acquired (by purchase, by an exchange on which the entire amount of gain or loss was recognized by law, or by entering into) substantially identical specified assets, or

“(B) entered into a contract or option to acquire, or notional principal contract in respect of, substantially identical specified assets.

“(2) Exception for dealers—Paragraph (1) shall not apply if—

“(A) the taxpayer is a dealer in specified assets,

“(B) the loss is sustained in a transaction made in the ordinary course of its business as a dealer, and

“(C) the acquisition (or the entering into of the contract or option to acquire or notional principal contract) which (without regard to this paragraph) would have resulted in the non-deductibility of the loss was similarly made in the ordinary course of such business.

“(3) Exception for stablecoins

“(A) In general—Except as otherwise provided by the Secretary, paragraph (1) shall not apply to a loss from the sale or disposition of a payment stablecoin or other stablecoin.

“(B) In general—Subject to subparagraph (C), for purposes of this paragraph, the term payment stablecoin means a digital asset—

“(i) that is, or is designed to be, used as a means of payment or settlement, and

“(ii) the issuer of which—

“(I) is obligated to convert, redeem, or repurchase for a fixed amount of monetary value (not including a digital asset denominated in a fixed amount of monetary value), and

“(II) represents that such issuer will maintain, or creates the reasonable expectation that such issuer will maintain, a stable value relative to the value of a fixed amount of monetary value.

“(C) Exception—The term payment stablecoin shall not include a digital asset that is—

“(i) a national currency,

“(ii) a deposit (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)), including a deposit recorded using distributed ledger technology, or

“(iii) a security, as defined in section 2 of the Securities Act of 1933 (15 U.S.C. 77b), section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c), or section 2 of the Investment Company Act of 1940 (15 U.S.C. 80a–2).

“(b) Specified assets acquired less than specified assets sold—If the amount of specified assets acquired (or covered by the contract or option to acquire or notional principal contract) is less than the amount of specified assets sold or otherwise disposed of, 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 Secretary.

“(c) Specified assets acquired not less than specified assets sold—If the amount of specified assets acquired (or covered by the contract or option to acquire or notional principal contract) is not less than the amount of specified assets sold or otherwise disposed of, then the particular specified assets the acquisition of which (or the entering into of the contract or option to acquire or notional principal contract of which) resulted in the non-deductibility of the loss shall be determined under regulations prescribed by the Secretary.

“(d) Adjustment to basis in case of wash sale

“(1) In general—The basis of the specified asset acquired (or the contract, option, or notional principal contract entered into) shall be increased by the amount of the deduction disallowed under subsection (a).

“(2) Rules with respect to certain acquisitions

“(A) In general—In any case in which—

“(i) the taxpayer enters into a contract or option to acquire, or notional principal contract in respect of, substantially identical specified assets (within the period specified in subsection (a)),

“(ii) the taxpayer also acquires (within the period specified in subsection (a)) substantially identical specified assets and such acquisition would, but for the entering into of the contract, option, or notional principal contract described in clause (i), have triggered a disallowance under subsection (a), and

“(iii) the contract, option, or notional principal contract matures, expires, is exercised, or otherwise terminates without the delivery or receipt of money or property during the term of the contract, option, or notional principal contract (other than at the time the contract, option, or notional principal contract is entered into) or upon such termination,

“(B) Special rule for contracts and options—Subject to such exceptions as the Secretary shall prescribe (including with respect to non-abusive wash sale basis adjustment practices), if the acquisition of any substantially identical specified asset is pursuant to a contract or option described in subparagraph (A)(i), then, notwithstanding whether such asset was acquired within the period specified in subsection (a), paragraph (1) shall apply to the substantially identical specified asset acquired pursuant to the contract or option and not to the contract or option.

“(e) Certain short sales of specified assets and contracts To sell—Rules similar to the rules of subsection (a) shall apply to any loss realized on the closing of a short sale of (or the sale, disposition, or termination of a contract or option to sell or a short notional principal contract in respect of) specified assets if, within a period beginning 30 days before the date of such closing and ending 30 days after such date, another such short sale of (or contract or option to sell or short notional principal contract in respect of) substantially identical specified assets was entered into by the taxpayer.

“(f) 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 (or could be settled in) cash or property other than such specified assets.

“(g) Specified asset—For purposes of this section, the term specified asset means any of the following:

“(1) Any security (as defined in section 475(c)(2)), including contracts or options to acquire or sell securities.

“(2) Except as otherwise provided by the Secretary—

“(A) any digital asset,

“(B) any notional principal contract with respect to any digital asset described in subparagraph (A), and

“(C) any evidence of an interest in, or a derivative instrument in, any digital asset described in subparagraph (A) or (B), including any option, forward contract, futures contract, short position, and any similar instrument in such a digital asset.

“(h) Regulations—The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including relating to abusive basis adjustment practices.”

“(l) Deferral of income recognition for digital asset activities

“(1) In general—In the case of a taxpayer who engages in validation of digital asset transactions (including digital asset mining and staking), any income relating to such activities—

“(A) 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 activities, and

“(B) shall be treated as ordinary income.

“(2) Regulations and guidance—The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection, including relating to the residence of a recipient of a digital asset fork or digital asset airdrop.

“(3) Termination—This subsection shall not apply to taxable years beginning after December 31, 2035.”

“(f) Source of income related to consideration received

“(1) 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 receipt.

“(2) Regulations and guidance—The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection.

“(3) Termination—This subsection shall not apply to taxable years beginning after December 31, 2035.”