119-s2207

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2207 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 2207

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

_______________________________________________________________________

 IN THE SENATE OF THE UNITED STATES

 June 30, 2025

 Ms. Lummis introduced the following bill; which was read twice and 
 referred to the Committee on Finance

_______________________________________________________________________

 A BILL

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

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. DEFINITION OF DIGITAL ASSET.

 

Section 7701 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new paragraph:
 ``

    (51) Digital asset.--
 ``
        (A) In general.--Subject to subparagraph
        (B) and 
 except as otherwise provided by the Secretary, 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 Secretary.
 ``
        (B) Financial assets.--
 ``
            (i) In general.--Except as otherwise 
 provided by the Secretary, in the case of any 
 digital asset which is a representation of a 
 financial asset which is itself not a digital 
 asset, such asset--
 ``
            (I) shall not be treated as a 
 digital asset, and
 ``
            (II) for purposes of this title, 
 and except as otherwise provided by 
 law, shall be treated as such financial 
 asset.
 ``
            (ii) === Definition. ===
-For purposes of this 
 subparagraph, as specified by the Secretary, 
 the term `financial asset' means an asset that 
 trades on established markets or which is used 
 as a medium of exchange, store of value, or 
 unit of account, and shall exclude a payment 
 stablecoin (as defined in 

section 1091

    (a)

    (3) ).
 ``
            (C) Representations of other property.--For 
 purposes of this paragraph, as specified by the 
 Secretary pursuant to regulation, in the case of a 
 digital asset which is a representation of property 
 other than a financial asset, such digital asset shall 
 be treated in the same manner as the property which it 
 represents.
 ``

    (52) Actively traded digital asset.--Except as otherwise 
 provided by the Secretary, the term `actively traded digital 
 asset' means a fungible digital asset for which quotations are 
 readily available on a digital asset exchange.''.

SEC. 2. DE MINIMIS GAIN OR LOSS FROM SALE, EXCHANGE, OR DISPOSITION OF 
 DIGITAL ASSETS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after 

section 139I the following new section:

``

SEC. 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.''.

    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to 

section 139I the 
following new item:

``

Sec. 139J. De minimis gain or loss from sale, exchange, or 
 disposition of digital assets.''.
            (c) Effective Date.--The amendments made by this section shall 
apply with respect to transactions entered into after December 31, 
2025.

SEC. 3. TAX TREATMENT OF DIGITAL ASSET LENDING AGREEMENTS AND RELATED 
 MATTERS.

    (a) In General.--

Section 1058 of the Internal Revenue Code of 1986 
is amended by--

    (1) in the heading, by striking ``securities'' and 
 inserting ``specified assets'',

    (2) in subsection

    (a) , by striking ``securities (as defined 
 in 

section 1236
            (c) )'' and inserting ``specified assets'', and

    (3) striking ``securities'' each place it appears and 
 inserting ``specified assets.''.

    (b) Fixed Term.--

Section 1058

    (b)

    (3) of the Internal Revenue Code of 
1986 is amended by inserting ``other than as a result of such agreement 
being fixed-term, except as otherwise provided by the Secretary'' after 
``transferred''.
            (c) Basis.--

Section 1058
            (c) of the Internal Revenue Code of 1986 is 
amended by adding at the end the following: ``All appropriate basis 
adjustments to specified assets subject to an agreement under 
subsection

    (b) shall be made, as determined by the Secretary, including 
upon the return of the lent specified assets to the taxpayer.''.
            (d) Specified Assets.--

Section 1058 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new subsections:
 ``
            (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.''.

    (e) Conforming Amendment.--The table of sections for part IV of 
subchapter O of chapter 1 of the Internal Revenue Code of 1986 is 
amended by striking the item relating to 

section 1058 and inserting the 
following new item:

``

Sec. 1058. Transfers of specified securities under certain 
 agreements.''.

    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of enactment of this 
Act.

SEC. 4. LOSS FROM WASH SALES OF SPECIFIED ASSETS.

    (a) In General.--

Section 1091 of the Internal Revenue Code of 1986 
is amended to read as follows:

``

SEC. 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,
 then, subject to such exceptions as the Secretary shall 
 prescribe (including with respect to non-abusive wash 
 sale basis adjustment practices), paragraph

    (1) shall 
 apply to the substantially identical specified assets 
 described in clause
            (ii) and not to the contract, 
 option, or notional principal contract described in 
 clause
            (i) .
 ``
        (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.''.

    (b) Conforming Amendments.--

    (1) Section 1223

    (3) of the Internal Revenue Code of 1986 is 
 amended--
        (A) by striking ``stock or securities'' the first 
 place it appears and inserting ``specified assets (as 
 defined in 

section 1091

    (g) )'',
        (B) by striking ``stock or securities'' the second 
 and third place it appears and inserting ``specified 
 assets (as so defined)'', and
            (C) by striking ``(or the contract or option to 
 acquire which)'' and inserting ``(or the entering into 
 of a contract or option to acquire or notional 
 principal contract in respect of which)''.

    (2) Section 6045

    (g)

    (2)
        (B) of such Code is amended--
        (A) in clause
            (i) 
            (I) --
            (i) by striking ``security (other than 
 stock'' and inserting ``covered security (other 
 than stock'', and
            (ii) by striking ``stock sold or 
 transferred'' and inserting ``covered security 
 sold or transferred'', and
        (B) in clause
            (ii) --
            (i) by striking ``stock or securities'' and 
 inserting ``specified assets'', and
            (ii) by striking ``identical securities'' 
 and inserting ``identical specified assets (as 
 defined in 

section 1091

    (g) )''.

    (3) The table of sections for part VII of subchapter O of 
 chapter 1 fo such Code is amended by striking the item relating 
 to 

section 1091 and inserting the following new item:

``

Sec. 1091. Loss from wash sales of specified assets.''.
            (c) Termination.--The amendments made by this section shall be 
repealed on December 31, 2035.
            (d) Effective Date.--The amendments made by this section shall 
apply to sales, dispositions, and terminations in taxable years 
beginning after December 31, 2025.

SEC. 5. MARK-TO-MARKET ELECTION.

    (a) In General.--

Section 475 of the Internal Revenue Code of 1986 
is amended--

    (1) by redesignating subsection

    (g) as subsection

    (h) , and

    (2) by inserting after subsection

    (f) the following new 
 subsection:
 ``

    (g) Election of Mark To Market for Dealers and Traders in 
Specified Assets.--
 ``

    (1) Dealer in specified assets.--
 ``
        (A) In general.--In the case of a dealer in 
 specified assets who elects the application of this 
 paragraph, 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 securities.
 ``
        (B) Revocation.--An election under subparagraph
        (A) may be made without the consent of the Secretary. 
 An election, once made, shall apply to the taxable year 
 for which made and all subsequent taxable years unless 
 revoked with the consent of the Secretary.
 ``

    (2) 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 assets, subsection

    (f)

    (1) 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 
 securities.
 ``

    (3) Limitation.--The application of this subsection shall 
 be limited to specified assets which are treated as actively 
 traded.
 ``

    (4) === Definitions. ===
-For purposes of this subsection--
 ``
        (A) Specified asset.--The term `specified asset' 
 means--
 ``
            (i) a digital asset,
 ``
            (ii) any notional principal contract with 
 respect to a digital asset described in clause
            (i) , or
 ``
            (iii) any evidence of an interest in, or 
 a derivative instrument in, an asset described 
 in clause
            (i) or
            (ii) , including any option, 
 forward contract, futures contract, short 
 position, or similar instrument in such digital 
 asset.
 ``
        (B) Dealer in specified assets.--The term `dealer 
 in specified assets' means a taxpayer which--
 ``
            (i) regularly purchases specified assets 
 from, or sells specified assets to, customers 
 in the ordinary course of a trade or business, 
 or
 ``
            (ii) regularly offers to enter into, 
 assume offset, assign, or otherwise terminate 
 positions in specified assets with customers in 
 the ordinary course of a trade or business.
 ``

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

    (6) Termination.--This subsection shall not apply to 
 taxable years beginning after December 31, 2035.''.

    (b) 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 Act.

SEC. 6. DIGITAL ASSET MINING AND STAKING.

    (a) In General.--

Section 451 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
 ``
            (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.''.

    (b) Source of Income Related to Consideration Received.--

Section 863 of the Internal Revenue Code of 1986 is amended by adding at the 
end the following new subsection:
 ``

    (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.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of enactment of this 
Act.

SEC. 7. CHARITABLE CONTRIBUTIONS AND QUALIFIED APPRAISALS.

    (a) In General.--

Section 170

    (f)

    (11)
        (A)
            (ii) 
            (I) of the Internal 
Revenue Code of 1986 is amended by inserting ``actively traded digital 
assets,'' before ``and any qualified vehicle''.

    (b) Contributions to Private Foundation.--

Section 170

    (e)

    (5) of the 
Internal Revenue Code of 1986 is amended--

    (1) in the heading, by inserting ``or digital assets'' 
 after ``stock'',

    (2) in subparagraph
        (A) , by inserting ``or qualified 
 appreciated digital assets'' after ``qualified appreciated 
 stock'', and

    (3) by adding at the end the following new subparagraph:
 ``
            (D) Qualified appreciated digital asset.--
 ``
            (i) In general.--For purposes of this 
 paragraph, the term `qualified appreciated 
 digital asset' means a digital asset--
 ``
            (I) which is actively traded, and
 ``
            (II) which is capital gain 
 property (as defined in subsection

    (b)

    (1)
            (C) 
            (iv) ).
 ``
            (ii) Regulations and guidance.--The 
 Secretary may prescribe such regulations or 
 other guidance as may be necessary to carry out 
 the purposes of this subparagraph.
 ``
            (iii) Termination.--The term `qualified 
 appreciated digital asset' shall not apply to 
 any contribution made in taxable years 
 beginning after December 31, 2035.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years beginning after the date 
of enactment of this Act.
 <all>