[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.
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