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[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 5616 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
2d Session
S. 5616
To amend the Internal Revenue Code of 1986 to reform the treatment of
digital assets.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 30, 2026
Mr. Daines (for himself, Ms. Lummis, Mr. Moreno, and Mr. Scott of South
Carolina) 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. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Aligning Digital
Assets with Principles of Taxation Act'' or the ``ADAPT Act''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; etc.
Sec. 2. Nonrecognition of gain or loss on certain sales, exchanges, or
dispositions of stablecoins.
Sec. 3. Mark to market election.
Sec. 4. Source rules for digital asset validation activities.
Sec. 5. Certain trading in digital assets not treated as a trade or
business within the United States.
Sec. 6. Transfer of digital assets under certain agreements.
Sec. 7. Application of wash sale rules to digital assets.
Sec. 8. Treatment of trusts and publicly traded partnerships holding
digital assets.
Sec. 9. Application of constructive sale rules to digital assets.
Sec. 10. Charitable contributions of widely traded digital assets.
Sec. 11. Treatment of de minimis digital asset network fees.
Sec. 12. Treatment of income from qualified digital asset validation
activity by tax-exempt entities.
Sec. 13. Application of registration-required obligation rules.
Sec. 14. Treatment of certain foreign entities established in
connection with decentralized autonomous
organizations.
Sec. 15. Definitions.
SEC. 2. NONRECOGNITION OF GAIN OR LOSS ON CERTAIN SALES, EXCHANGES, OR
DISPOSITIONS OF STABLECOINS.
(a) In General.--Part III of subchapter O of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
1033 the following new section:
``SEC. 1034. CERTAIN SALES, EXCHANGES, OR DISPOSITIONS OF STABLECOINS.
``(a) In General.--No gain or loss shall be recognized on the sale,
exchange, or disposition of covered payment stablecoins to purchase
products or services.
``(b) Definitions.--
``(1) Covered payment stablecoin.--The term `covered
payment stablecoin' means a qualified U.S. dollar stablecoin
which--
``(A) was identified in the most recent report
published by the Secretary under paragraph (2) before
the sale, exchange, or disposition of such stablecoin,
and
``(B) was acquired by the taxpayer at a price
within 3 percent of $1.00.
``(2) Identification by treasury.--Not less frequently than
every 3 months, the Secretary shall make publicly available a
report identifying each qualified U.S. dollar stablecoin that,
during the 12-month period ending on the last day of the
preceding month, was actively traded at a price within 3
percent of $1.00.
``(c) Exclusions.--
``(1) Trade or business.--Subsection (a) shall not apply to
the sale, exchange, or disposition of a covered payment
stablecoin by--
``(A) a trader, broker, or dealer in qualified U.S.
dollar stablecoins, or
``(B) to the extent provided by the Secretary, any
person in a trade or business which is substantially
similar to a trade or business described in
subparagraph (A).
``(2) Functional currency other than u.s. dollar.--
Subsection (a) shall not apply to any taxpayer or qualified
business unit (as defined in section 989(a)) that uses a
functional currency (as defined in section 985(b)) other than
the dollar.
``(d) Books and Records.--In such form and manner as the Secretary
may prescribe, a taxpayer shall maintain books and records sufficient
to distinguish sales, exchanges, or dispositions of covered payment
stablecoins eligible for nonrecognition under subsection (a) from
transactions which are not eligible under such subsection.
``(e) Regulations and Guidance.--The Secretary shall prescribe such
regulations or other guidance as may be necessary or appropriate to
carry out the purposes of this section, including--
``(1) requirements relating to recordkeeping and broker
information reporting, and
``(2) allocation of basis and characterization of the asset
and any gain or loss.''.
(b) Exemption From Information Reporting.--Section 6045 of such
Code is amended by adding at the end the following new subsection:
``(i) Exemption for Certain Digital Asset Transactions.--
``(1) Covered payment stablecoins.--In the case of the
sale, exchange, or disposition of any covered payment
stablecoin for which no gain or loss is recognized under
section 1034(a), no return shall be required under subsection
(a).
``(2) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out this subsection, including rules under
which a broker--
``(A) may rely on information or certifications
provided by a customer for purposes of determining
whether any applicable requirements under section 1034
have been satisfied,
``(B) shall not be required to determine whether
the requirement under section 1034(b)(1)(B) has been
satisfied with respect to a qualified U.S. dollar
stablecoin if the acquisition of such qualified U.S.
dollar stablecoin was not effected by such broker, and
``(C) shall not be required to determine any fact
that is not known or reasonably available to such
broker.''.
(c) Clerical Amendment.--The table of sections for part III of
subchapter O of chapter 1 of the Internal Revenue Code of 1986 is
amended by inserting after the item relating to section 1033 the
following new item:
``Sec. 1034. Certain sales, exchanges, or dispositions of
stablecoins.''.
(d) Effective Date.--The amendments made by this section shall
apply with respect to transactions entered into after December 31,
2026.
SEC. 3. MARK TO MARKET ELECTION.
(a) In General.--Section 475 of the Internal Revenue Code of 1986
is amended--
(1) in subsection (d), by adding at the end the following
new paragraphs:
``(4) Treatment of covered digital assets which are
securities or commodities.--In the case of any covered digital
asset which is a security or commodity (determined without
regard to this paragraph), such covered digital asset shall not
be treated as a security or commodity for purposes of
subsections (b) through (g).
``(5) Adjustments attributable to mark to market treatment
of securities, commodities, or covered digital assets.--In the
case of an adjustment described in section 481(a) by reason of
the application of subsection (a), (e), (f), or (g) of this
section, the character of any income or loss with respect to
any property as a result of such adjustment shall be the same
as the character of the gain or loss which would have resulted
from the sale of such property as of the close of the taxable
year preceding the year of the change (within the meaning of
section 481) under the method of accounting used for such
preceding taxable year.'',
(2) by redesignating subsection (g) as subsection (h), and
(3) by inserting after subsection (f) the following new
subsection:
``(g) Election of Mark to Market for Dealers and Traders in Covered
Digital Assets.--
``(1) Dealer in covered digital assets.--In the case of a
dealer in covered digital assets who elects the application of
this paragraph, this section shall apply to covered digital
assets held by such dealer in the same manner as this section
applies to securities held by a dealer in securities.
``(2) Trader in covered digital assets.--In the case of a
person who is engaged in a trade or business as a trader in
covered digital 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 covered digital assets held by
such 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) Election and revocation.--An election under paragraph
(1) or (2) 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.
``(4) Definitions.--For purposes of this subsection--
``(A) Covered digital asset.--The term `covered
digital asset' means--
``(i) any traded digital asset,
``(ii) any qualified U.S. dollar
stablecoin,
``(iii) any notional principal contract
with respect to any traded digital asset,
``(iv) any evidence of an interest in, or
derivative financial instrument in, any traded
digital asset or any notional principal
contract described in clause (iii), including
any option, forward contract, futures contract,
short position, or similar financial
instrument, and
``(v) any position which--
``(I) is not described in clause
(i), (ii), (iii), or (iv),
``(II) is a hedge with respect to
any item described in clause (i), (ii),
(iii), or (iv), and
``(III) is clearly identified in
the taxpayer's records as being
described in this clause before the
close of the day on which it was
acquired or entered into (or such other
time as the Secretary may by
regulations prescribe).
``(B) Dealer in covered digital assets.--The term
`dealer in covered digital assets' means a taxpayer
which--
``(i) regularly purchases covered digital
assets from, or sells covered digital 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 covered digital assets with
customers in the ordinary course of a trade or
business.
``(5) Regulations and guidance.--The Secretary shall
prescribe such regulations or other guidance as may be
necessary or appropriate to carry out the purposes of this
subsection, including rules to coordinate this subsection with
the treatment under this section of a covered digital asset
that is also a security or commodity.''.
(b) Application to First Taxable Year.--In the case of any taxpayer
who makes an election under paragraph (1) or (2) of subsection (g) of
section 475 of the Internal Revenue Code of 1986 (as added by
subsection (a)) with respect to the first taxable year beginning after
the date of enactment of this Act--
(1) any identification required pursuant to the application
of such subsection with respect to covered digital assets held
on the first day of such taxable year shall be treated as
timely made if made on or before the 30th day of such taxable
year, and
(2) the net amount of the adjustments required to be taken
into account by the taxpayer under section 481 of such Code by
reason of the application of such subsection shall be taken
into account ratably over the 4-taxable year period beginning
with such taxable year.
(c) Treatment as Specified Service Trade or Business.--Section
199A(d)(2)(B) of the Internal Revenue Code of 1986 is amended by
striking ``or commodities (as defined in section 475(e)(2))'' and
inserting ``commodities (as defined in section 475(e)(2)), traded
digital assets, or covered digital assets (as defined in section
475(g)(4)(A))''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2026.
SEC. 4. SOURCE RULES FOR DIGITAL ASSET VALIDATION ACTIVITIES.
(a) In General.--Section 863 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(f) Special Rules for Income From Validation of Digital Assets.--
``(1) In general.--Except as provided in paragraph (2) or
in regulations, any income derived from digital asset
validation supporting activities--
``(A) if derived by a United States person, shall
be sourced in the United States, and
``(B) if derived by a person other than a United
States person, shall be sourced outside the United
States.
``(2) Treatment of branches.--
``(A) Foreign branches.--Except as provided in
regulations, in the case of a United States person with
a qualified business unit (as defined in section
989(a)) in a foreign country, income described in
paragraph (1) that constitutes business profits
attributable to such unit shall be sourced outside the
United States.
``(B) U.S. branches.--Excepts as provided in
regulations, in the case of a person that is not a
United States person and that maintains an office or
other fixed place of business in the United States,
income described in paragraph (1) attributable to such
office or other fixed place of business shall be
sourced in the United States.
``(C) Attribution.--For purposes of subparagraphs
(A) and (B), the Secretary shall issue such regulations
or other guidance as the Secretary determines necessary
or appropriate for purposes of determining the amount
of business profits attributable to a qualified
business unit or office or other fixed place of
business.
``(3) Special rules for mining.--
``(A) Certain amounts treated as income.--For
purposes of paragraph (1)--
``(i) In general.--Except as provided in
clause (ii), any amounts received (including
amounts received as digital assets or
transaction fees) directly through a mining
pool or similar arrangement as a result of the
taxpayer's performance of, or contribution of
computing power to, mining shall be treated as
income derived from digital asset validation
supporting activities.
``(ii) Exclusion.--Compensation received
for providing services to another person for
services related to mining (including hosting
and equipment management services) shall not be
treated as income derived from digital asset
validation supporting activities.
``(B) Rules for attribution to branches.--The
Secretary shall prescribe rules for the purposes of
determining whether, and to what extent, income derived
from mining is attributable to a qualified business
unit or an office or other fixed place of business
under paragraph (2). Such rules shall take into
account--
``(i) the location and relative
contribution of the computing equipment used in
the mining activity,
``(ii) the location of personnel performing
functions with respect to the operation,
management, or maintenance of such equipment,
and
``(iii) such other functions, assets,
risks, or other factors as the Secretary
determines necessary or appropriate.
``(4) Treatment of partnerships.--In the case of a
partnership, except as otherwise provided by the Secretary in
regulations or other guidance, this subsection shall be applied
at the partner level.''.
(b) Effective Date.--The amendment made by this section shall apply
to income derived after the date of the enactment of this Act.
(c) No Inference.--The amendments made by this section shall not be
construed to create any inference with respect to whether, or the time
at which, a digital asset created, issued, acquired, or received in
connection with digital asset validation activity (as defined in
section 7701(q), as added by this Act) is includible in gross income.
SEC. 5. CERTAIN TRADING IN DIGITAL ASSETS NOT TREATED AS A TRADE OR
BUSINESS WITHIN THE UNITED STATES.
(a) In General.--Section 864(b)(2) of the Internal Revenue Code of
1986 is amended by redesignating subparagraph (C) as subparagraph (D)
and by inserting after subparagraph (B) the following new subparagraph:
``(C) Digital assets.--
``(i) In general.--Trading in traded
digital assets through a resident broker,
commission agent, custodian, or other
independent agent.
``(ii) Trading for taxpayer's own
account.--Trading in traded digital assets for
the taxpayer's own account, whether by the
taxpayer or the taxpayer's employees or through
a resident broker, commission agent, custodian,
staking provider, or other agent, and whether
or not any such employee or agent has
discretionary authority to make decisions in
effecting the transactions. This clause shall
not apply in the case of a dealer in covered
digital assets (as defined in section
475(g)(4)(B)).''.
(b) Conforming Amendments.--
(1) Subparagraph (D) of section 864(b)(2) of such Code (as
redesignated by subsection (a)) is amended--
(A) by striking ``subparagraphs (A)(i) and (B)(i)''
and inserting ``subparagraphs (A)(i), (B)(i), and
(C)(i)'', and
(B) by striking ``or in commodities'' and inserting
``in commodities, or in traded digital assets''.
(2) The heading of section 864(b)(2) of such Code is
amended by striking ``or Commodities'' and inserting ``,
Commodities, or Digital Assets''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2026.
(2) No inference.--The amendments made by this section
shall not be construed to create any inference with respect to
the application of section 864(b)(2) of the Internal Revenue
Code of 1986 to the trading of digital assets for any period
beginning before the date described in paragraph (1).
SEC. 6. TRANSFER OF DIGITAL ASSETS UNDER CERTAIN AGREEMENTS.
(a) Transfers Under Agreement.--
(1) In general.--Section 1058 of the Internal Revenue Code
of 1986 is amended--
(A) in subsection (a), by striking ``securities (as
defined in section 1236(c))'' and inserting
``applicable assets'', and
(B) by adding at the end the following new
subsection:
``(d) Applicable Asset.--For purposes of this section, the term
`applicable asset' means--
``(1) any security (as defined in section 1236(c)), and
``(2) traded digital assets.''.
(2) Conforming amendments.--
(A) Subsections (a) and (b) of section 1058 of such
Code, as amended by paragraph (1), are each amended by
striking ``securities'' each place it appears and
inserting ``applicable assets''.
(B) The heading of section 1058 of such Code is
amended by striking ``securities'' and inserting
``assets''.
(C) The item relating to section 1058 in the table
of sections for part IV of subchapter O of chapter 1 of
such Code is amended by striking ``securities'' and
inserting ``assets''.
(b) Treatment of Certain Legal Entitlements and Obligations Which
Accrue During Period of Agreement.--Section 1058(b)(2) of the Internal
Revenue Code of 1986, as amended by subsection (a)(2), is amended by
inserting ``(including, in the case of a traded digital asset, to the
extent provided by the Secretary, amounts equivalent to any protocol
distribution or staking reward with respect to such asset, or to any
transaction fee, priority fee, or tip allocated to the owner by reason
of staking)'' after ``and other distributions''.
(c) Payments With Respect to Loans.--
(1) In general.--Section 512 of the Internal Revenue Code
of 1986 is amended--
(A) in subsection (a)(5)(A), by striking ``in
respect of a security (as defined in section 1236(c))''
and inserting ``in respect of an applicable asset (as
defined in section 1058(d))'', and
(B) in subsection (b)(5), by striking ``securities
(as defined in section 1236(c))'' and inserting
``applicable assets (as defined in section 1058(d))''.
(2) Inclusion of certain payments.--Section 512(a)(5)(A)(i)
of such Code is amended by striking ``or other distributions''
and inserting ``property, legal entitlements, or other
distributions''.
(3) Conforming amendments.--
(A) Section 512 of such Code is amended by striking
``payments with respect to securities loans'' each
place it appears in subsection (a)(5) and (b)(1) and
inserting ``payments with respect to applicable asset
loans''.
(B) Section 512(a)(5) of such Code is amended--
(i) by striking ``the security'' each place
it appears and inserting ``the applicable
asset'',
(ii) by striking ``securities'' each place
it appears and inserting ``applicable assets'',
and
(iii) by striking ``securities loans'' in
the heading thereof and inserting ``applicable
asset loans''.
(C) The following provisions of the Internal
Revenue Code of 1986 are each amended by striking
``payments with respect to securities loans (as defined
in section 512(a)(5))'' and inserting ``payments with
respect to applicable asset loans (as defined in
section 512(a)(5))'':
(i) Section 509(e).
(ii) Section 514(c)(8)(A).
(iii) Section 851(b)(2)(A).
(iv) Section 4940(c)(2).
(D) Section 263(g)(2)(B)(iv) of such Code is
amended by striking ``a payment with respect to a
security loan (as defined in section 512(a)(5))'' and
inserting ``a payment with respect to an applicable
asset loan (as defined in section 512(a)(5))''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to transfers after the date of the enactment of this Act.
(2) No inference.--The amendments made by this section
shall not be construed to create any inference with respect to
the non-recognition treatment of the transfer of any traded
digital asset (within the meaning of section 1058(d) of the
Internal Revenue Code of 1986, as added by this section)
pursuant to an agreement that would otherwise qualify under
1058 of such Code before the date described in paragraph (1).
SEC. 7. APPLICATION OF WASH SALE RULES TO DIGITAL ASSETS.
(a) In General.--Section 1091 of the Internal Revenue Code of 1986
is amended--
(1) by striking ``stock or securities'' each place it
appears and inserting ``specified assets'', and
(2) by striking ``shares of'' each place it appears.
(b) Specified Asset.--Section 1091 of such Code is amended by
adding at the end the following new subsection:
``(g) Specified Asset.--For purposes of this section--
``(1) In general.--The term `specified asset' means--
``(A) any stock or security, and
``(B) any traded digital asset (other than a
qualified U.S. dollar stablecoin).
``(2) Treatment of tokenized digital assets as
substantially identical to an economically equivalent stock or
security.--A tokenized digital asset (or a bridged digital
asset with respect to which the reference digital asset is a
traded digital asset) shall be treated as substantially
identical to any stock, security, or traded digital asset if
such tokenized digital asset (or such bridged digital asset) is
economically equivalent to such stock, security, or traded
digital asset.''.
(c) Exception for Certain Acquisitions of Digital Assets.--Section
1091 of such Code, as amended by subsection (b), is further amended by
adding at the end the following new subsection:
``(h) Exception for Certain Acquisitions of Digital Assets.--This
section shall not apply with respect to the acquisition of a digital
asset if such digital asset is acquired--
``(1) in connection with the validation of digital asset
transactions (including digital asset validation supporting
activities), or
``(2) in a transaction which is part of a regular or
periodic series of acquisitions of digital assets which are
included by the taxpayer as ordinary income.''.
(d) Exception for Certain Mark-to-Market Positions.--Section 1091
of such Code, as amended by subsections (b) and (c), is further amended
by adding at the end the following new subsection:
``(i) Exception for Certain Mark-to-Market Positions.--This section
shall not apply with respect to any specified asset to which subsection
(a) of section 475 applies (including by reason of an election under
subsection (e), (f), or (g) of such section).''.
(e) Conforming Amendments.--
(1) Sections 312(f)(1) and 1256(f)(5) of the Internal
Revenue Code of 1986 are each amended by striking ``stock or
securities'' and inserting ``specified assets''.
(2) Clause (ii) of section 6045(g)(2)(B) of such Code is
amended to read as follows:
``(ii) Exception for wash sales.--
``(I) In general.--Except as
otherwise provided by the Secretary,
the customer's adjusted basis shall be
determined without regard to section
1091 (relating to loss from wash sales
of specified assets) unless the
transactions occur in the same account
with respect to identical specified
assets.
``(II) Tokenized digital assets.--
For purposes of subclause (I), a
tokenized digital asset and a specified
asset that is not a tokenized digital
asset shall be treated as identical
specified assets only if such tokenized
digital asset is a direct digital
representation of such other specified
asset''.
(3) Section 1091(e) of such Code (as amended by subsection
(a)) is amended to read as follows:
``(e) Certain Short Sales of Specified Assets and Specified Asset
Futures 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, exchange, or termination of a specified asset futures
contract to sell) specified assets if, within a period beginning 30
days before the date of such closing and ending 30 days after such
date--
``(1) substantially identical specified assets were sold,
or
``(2) another short sale of (or specified asset futures
contracts to sell) substantially identical specified assets was
entered into.
For purposes of this subsection, the term `specified asset futures
contract' has the same meaning given the term `securities futures
contract' under section 1234B(c), except that such term shall include a
contract for the future delivery of a digital asset.''.
(4) The heading of section 1091 of such Code is amended by
striking ``stock or securities'' and inserting ``specified
assets''.
(5) The headings of subsections (b), (c), and (d) of
section 1091 of such Code are each amended by striking
``Stock'' each place it appears and inserting ``Specified
Assets''.
(6) The item relating to section 1091 in the table of
sections for part VII of subchapter O of chapter 1 of such Code
is amended by striking ``stock or securities'' and inserting
``specified assets''.
(f) Effective Dates.--
(1) In general.--Except as provided under paragraphs (2)
and (3), the amendments made by this section shall apply to
sales, dispositions, and terminations after the date of
enactment of this Act.
(2) Exception for certain acquisitions.--For purposes of
the application of section 1091 of the Internal Revenue Code of
1986 with respect to any digital asset acquired before the date
of enactment of this Act, the amendments made by this section
shall be deemed to not apply.
(3) Transition rule for broker reporting.--For purposes of
the application of section 6045(g) of the Internal Revenue Code
of 1986 with respect to any sales, dispositions, and
terminations of any digital assets that are not securities
before January 1, 2028, the amendments made by this section
shall be deemed to not apply.
SEC. 8. TREATMENT OF TRUSTS AND PUBLICLY TRADED PARTNERSHIPS HOLDING
DIGITAL ASSETS.
(a) Trusts.--
(1) In general.--Section 7701 of the Internal Revenue Code
of 1986 is amended--
(A) by redesignating subsection (p) as subsection
(q), and
(B) by inserting after subsection (o) the following
new subsection:
``(p) Tax Treatment of Certain Digital Asset Investment Trusts.--
``(1) In general.--For purposes of this title, in the case
of a covered digital asset investment trust formed to hold
digital assets--
``(A) any power held by the trustee to stake or
unstake digital assets, whether directly or through
delegation to another party, and to perform any related
acts to exercise such power to stake, including the
retention of staking rewards, shall not be treated as a
power under such trust agreement to vary the investment
of the certificate holders of such trust and shall not
otherwise disqualify an entity from characterization as
an investment trust that is not classified as a
business entity under this section,
``(B) discretionary powers held by a trustee to use
other measures, including a borrowing facility, to
manage the trust's potential need for assets available
to satisfy redemptions shall not be treated as a power
under the applicable trust agreement to vary the
investment of the certificate holders of such trust,
and
``(C) discretionary powers held by a trustee to act
in response to changes to technology supporting the
digital assets held by the trust, including with regard
to staking, shall not be treated as a power under the
applicable trust agreement to vary the investment of
the certificate holders of such trust.
``(2) Nonapplication to validating trade or business.--This
subsection shall not apply in the case of any entity or
arrangement engaged in the active conduct of a trade or
business of validating digital asset transactions.
``(3) Covered digital asset investment trust.--For purposes
of this subsection, the term `covered digital asset investment
trust' means a trust which satisfies each of the following
requirements:
``(A) The trust is traded on a national securities
exchange which is registered with the Securities and
Exchange Commission and complies with any applicable
rules and regulations established by such Commission.
``(B) The trust only holds units of a single
digital asset and any transactions with respect to such
units are carried out on a network that uses a proof-
of-stake consensus mechanism.
``(C) The trust's digital assets are held by a
qualified custodian on behalf of the trust at digital
asset addresses controlled by such custodian.
``(D) The trust directs staking of its digital
assets through 1 or more custodians who facilitate the
staking of the digital assets on behalf of the trust
with 1 or more staking providers, subject to terms
consistent with those that would be agreed to between
unrelated persons dealing at arm's length under
comparable circumstances.
``(4) Regulations and guidance.--The Secretary shall
prescribe such regulations or other guidance as may be
necessary and appropriate to carry out the purposes of this
subsection''.
(2) Effective date.--
(A) In general.--Subject to subparagraph (B), the
amendments made by this subsection shall apply to
taxable years beginning after December 31, 2026.
(B) Election.--At the election of the taxpayer, the
amendments made by this subsection may apply to any
taxable years beginning before January 1, 2027. No
inference may be drawn from the amendments made by this
subsection with respect to the absence of explicit
rules during such taxable years.
(b) Publicly Traded Partnership.--
(1) In general.--Section 7704(d)(1) of the Internal Revenue
Code of 1986 is amended--
(A) in subparagraph (F), by striking ``and'' at the
end,
(B) in subparagraph (G), by striking the period at
the end and inserting ``, and'',
(C) by inserting after subparagraph (G) the
following new paragraph:
``(H)(i) staking rewards, to the extent includible
in gross income,
``(ii) payments with respect to applicable asset
loans (as defined in section 512(a)(5)) to the extent
attributable to traded digital assets, or
``(iii) gains from the sale or exchange of--
``(I) digital assets (other than those
described in section 1221(a)(1) in the hands of
the taxpayer), or
``(II) futures contracts, forward
contracts, or options with respect to digital
assets.'', and
(D) in the flush text following subparagraph (H),
by adding at the end the following: ``For purposes of
subparagraph (H), qualifying income shall not include
income or gain derived from operating a digital asset
exchange, lending platform, broker, dealer, or other
digital asset financial services business for a spread,
commission, fee, or similar compensation.''.
(2) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31, 2026.
SEC. 9. APPLICATION OF CONSTRUCTIVE SALE RULES TO DIGITAL ASSETS.
(a) In General.--Section 1259 of the Internal Revenue Code of 1986
is amended--
(1) in subsection (b)(1), by inserting ``digital asset
(other than a qualified U.S. dollar stablecoin),'' after ``debt
instrument,'', and
(2) in subsection (c)--
(A) in paragraph (2), by inserting ``or widely
traded digital asset'' after ``marketable security (as
defined in section 453(f))'', and
(B) by adding at the end the following new
paragraph:
``(5) Treatment of tokenized digital assets as
substantially identical to economically equivalent financial
property.--A tokenized digital asset (or a bridged digital
asset with respect to which the reference digital asset is a
traded digital asset) shall be treated as substantially
identical to any stock, debt instrument, partnership interest,
or widely traded digital asset if such tokenized digital asset
(or such bridged digital asset) is economically equivalent to
such stock, debt instrument, partnership interest, or widely
traded digital asset.''.
(b) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to constructive sales after the date of enactment of this
Act.
(2) Rule of construction.--No transaction entered into on
or before the date of enactment of this Act shall be deemed to
cause or result in a constructive sale by reason of the
amendments made by this section.
SEC. 10. CHARITABLE CONTRIBUTIONS OF WIDELY TRADED DIGITAL ASSETS.
(a) Exception From Appraisal Requirements.--Section
170(f)(11)(A)(ii)(I) of the Internal Revenue Code of 1986 is amended by
inserting ``widely traded digital assets (except as the Secretary
determines appropriate to prevent abuse of this section),'' after
``publicly traded securities (as defined in section 6050L(a)(2)(B)),''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2026.
SEC. 11. TREATMENT OF DE MINIMIS DIGITAL ASSET NETWORK FEES.
(a) In General.--Part III of subchapter O of chapter 1 of the
Internal Revenue Code of 1986, as amended by section 2, is amended by
inserting after section 1043 the following new section:
``SEC. 1044. DE MINIMIS NETWORK FEE EXCEPTION.
``(a) In General.--No gain or loss shall be recognized with respect
to any qualified transaction cost disposition.
``(b) Qualified Transaction Cost Disposition.--For purposes of this
section, the term `qualified transaction cost disposition' means the
disposition of a digital asset by a taxpayer--
``(1) in satisfaction of a digital asset transaction cost
paid or incurred by the taxpayer, including a disposition
resulting from the withholding of a digital asset from an
amount transferred or received by the taxpayer, and
``(2) with respect to which the aggregate fair market value
of all digital assets disposed of by the taxpayer in
satisfaction of digital asset transaction costs relating to
such transaction does not exceed $10.
``(c) Digital Asset Transaction Cost.--
``(1) In general.--For purposes of this section, the term
`digital asset transaction cost' means any amount paid in cash
or property (including a digital asset) to effect the sale,
disposition, or acquisition of a digital asset, including
transaction fees, transfer taxes, commissions, and network fees
paid or incurred with respect to any digital asset transaction
initiated by the taxpayer and recorded on a cryptographically
secured distributed ledger.
``(2) Network fee.--For purposes of paragraph (1), the term
`network fee' means any amount paid or incurred to cause,
facilitate, expedite, or prioritize the execution, validation,
settlement, or recording of a digital asset transaction on a
cryptographically secured distributed ledger or similar
technology, including any base fee, gas fee, priority fee, tip,
or similar amount, without regard to--
``(A) whether payment of such amount is mandatory
or elective, or
``(B) whether such amount is paid or transferred to
a person, paid or transferred to a protocol, burned,
destroyed, or otherwise removed from circulation.
``(d) Aggregation Rule.--
``(1) In general.--For purposes of subsection (b)(2)--
``(A) all digital assets disposed of in
satisfaction of digital asset transaction costs
relating to the same economic transaction shall be
aggregated, including a series of related economic
transactions structured for the purpose of avoiding the
limitation under such subsection, and
``(B) any digital asset transaction cost paid or
incurred to effect the disposition of a digital asset
used to pay another digital asset transaction cost
shall be treated as relating to the transaction to
which such other cost relates.
``(2) Limitation.--For purposes of paragraph (1),
transactions shall not be aggregated solely because such
transactions are executed through the same account, wallet,
protocol, program, smart contract, or automated strategy.
``(e) Determination of Fair Market Value.--For purposes of
subsection (b)(2), the fair market value of a digital asset shall be
determined as of the date and time of the disposition of such digital
asset.
``(f) Coordination With Treatment of Transaction Costs.--Nothing in
this section shall be deemed to modify the capitalization, allocation,
or other treatment of a digital asset transaction cost.
``(g) Treatment of Unrecognized Gain.--The amount of any digital
asset transaction cost which would otherwise be taken into account in
determining the amount of gain or loss on the disposition of any asset,
in determining the amount of any deduction, or in determining the basis
of any asset acquired, shall be reduced by the amount of any gain or
increased by the amount of any loss not recognized by reason of
subsection (a) with respect to the disposition of the digital asset
used to pay such digital asset transaction cost.
``(h) Exclusions.--
``(1) Trade or business.--Subsection (a) shall not apply to
the disposition of a digital asset by--
``(A) a trader, broker, or dealer in digital
assets,
``(B) a person in the trade or business of batching
or facilitating the validation of digital asset
transactions on behalf of others,
``(C) to the extent provided by the Secretary, any
person in a trade or business which is substantially
similar to a trade or business described in
subparagraph (A) or (B), or
``(D) any person that initiated more than 5,000
digital asset transactions during the preceding taxable
year.
``(2) Certain accounting methods.--Subsection (a) shall not
apply to any digital asset--
``(A) to which section 475 or 1256(a) applies, or
``(B) except as otherwise provided by the
Secretary, to which a mark-to-market method applies
under any other provision of this subtitle.
``(i) Regulations.--The Secretary shall issue such regulations or
other guidance as may be necessary or appropriate to carry out the
purposes of this section, including regulations or guidance to prevent
the abuse of this section through transaction structuring for the
purpose of qualifying for the exclusion provided in subsection (a).''.
(b) Exemption From Information Reporting.--Section 6045(i) of such
Code, as added by section 2 of this Act, is amended--
(1) by redesignating paragraph (2) as paragraph (3), and
(2) by inserting after paragraph (1) the following new
paragraph:
``(2) De minimis network fee exception.--
``(A) In general.--Except as otherwise provided by
the Secretary or under subparagraph (B), in the case of
the disposition of a digital asset to which section
1044(a) applies, subsection (a) shall not apply with
respect to such disposition.
``(B) Aggregate information.--With respect to any
dispositions described in subparagraph (A), a broker
shall include in the return under subsection (a) such
aggregate information relating to such dispositions as
the Secretary determines necessary or appropriate,
including for purposes of verifying the taxpayer's
basis in digital assets held by the taxpayer.''.
(c) Exception From Wash Sale Rules.--Section 1091 of the Internal
Revenue Code of 1986, as amended by this Act, is further amended by
adding at the end the following new subsection:
``(j) Exception for Qualified Transaction Cost Dispositions.--This
section shall not apply with respect to any qualified transaction cost
disposition (as defined in section 1044(b)).''.
(d) Clerical Amendment.--The table of sections for part III of
subchapter O of chapter 1 of the Internal Revenue Code of 1986 is
amended by inserting after the item relating to section 1043 the
following new item:
``Sec. 1044. De minimis network fee exception.''.
(e) Effective Date.--The amendments made by this section shall
apply to the disposition of assets after December 31, 2026.
SEC. 12. TREATMENT OF INCOME FROM QUALIFIED DIGITAL ASSET VALIDATION
ACTIVITY BY TAX-EXEMPT ENTITIES.
(a) Treatment Under Unrelated Business Taxable Income.--
(1) In general.--Section 512(b) of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
``(20) Certain digital asset validation income.--
``(A) In general.--There shall be excluded income
from qualified digital asset validation activity, and
all deductions directly connected with such income.
``(B) Qualified digital asset validation
activity.--
``(i) In general.--For purposes of this
subsection, the term `qualified digital asset
validation activity' means any activity--
``(I) which involves digital asset
validation supporting activities, and
``(II) in which the taxpayer does
not substantially participate.
``(ii) Substantial participation.--For
purposes of clause (i)(II), a taxpayer shall be
treated as not substantially participating in
an activity described in clause (i)(I) if the
taxpayer--
``(I) owns the digital assets and
delegates validation rights to another
person on terms consistent with those
that would be agreed to between
unrelated persons dealing at arm's
length under comparable circumstances,
``(II) does not operate the
validator nodes and does not control
validator selection beyond delegation
and committing or uncommitting tokens
to the validation network, and
``(III) does not undertake other
activity that seeks to control the
activity described in clause (i)(I).''.
(2) Debt-financed property.--Section 512(b)(4) of such Code
is amended by striking ``or (5)'' and inserting ``(5), or
(20)''.
(b) Regulations.--The Secretary of the Treasury (or the Secretary's
delegate) shall issue such regulations or other guidance as may be
necessary or appropriate to carry out the purposes of the amendments
made by this section, including regulations or guidance to prevent the
abuse of such amendments.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2026.
SEC. 13. APPLICATION OF REGISTRATION-REQUIRED OBLIGATION RULES.
(a) Exception for Qualified U.S. Dollar Stablecoins.--Section
163(f)(2)(A) of the Internal Revenue Code of 1986 is amended--
(1) by striking ``or'' at the end of clause (ii),
(2) by striking the period at the end of clause (iii) and
inserting ``, or'', and
(3) by adding at the end the following new clause:
``(iv) is a qualified U.S. dollar
stablecoin.''.
(b) Clarification of Treatment of Digital Assets.--Section 4701 of
such Code is amended by adding at the end the following new subsection:
``(c) Digital Assets.--
``(1) Location of disclosure statement.--In the case of any
digital asset, the requirement of clause (iii) of subsection
(b)(1)(B) shall be treated as satisfied if the statement
described therein is included in all written terms or marketing
materials with respect to such digital asset and in such other
locations or documents as the Secretary may prescribe in
regulations.
``(2) Treatment of digital assets without a fixed maturity
date.--In the case of any digital asset that does not have a
fixed maturity date at issue, the date of maturity of such
asset for purposes of subsection (a)(2) shall be treated as the
date that is 25 years after the date of issuance of such
digital asset.''.
(c) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxable years ending after the date of enactment of this Act.
(2) Clarification of treatment of digital assets without a
fixed maturity date.--The amendment made by subsection (b)
shall apply to digital assets issued after the date of
enactment of this Act.
SEC. 14. TREATMENT OF CERTAIN FOREIGN ENTITIES ESTABLISHED IN
CONNECTION WITH DECENTRALIZED AUTONOMOUS ORGANIZATIONS.
(a) In General.--Not later than12 months after the date of the
enactment of this Act, the Secretary of the Treasury (or the
Secretary's delegate) shall issue regulations or other guidance to
clarify the appropriate tax treatment of reorganizations of applicable
foreign entities (and United States persons related to such entities or
involved in the governance of such entities).
(b) Matters Included.--The regulations or other guidance issued
under subsection (a) shall--
(1) clarify the methods by which applicable foreign
entities may reorganize as domestic corporations under
subchapter C of chapter 1 of the Internal Revenue Code of 1986,
and
(2) provide, in appropriate circumstances, temporary safe
harbors to encourage applicable foreign entities organized
before September 24, 2026, to complete such reorganizations
promptly after the date of the enactment of this Act.
(c) Applicable Foreign Entity.--For purposes of this section, the
term ``applicable foreign entity'' means an entity which is
established--
(1) in connection with an organization commonly referred to
as decentralized autonomous organizations, and
(2) in a foreign country as a foundation under foreign law
(or other similar structure with a purported purpose other than
profit).
SEC. 15. DEFINITIONS.
(a) In General.--Section 7701 of the Internal Revenue Code of 1986,
as amended by section 8 of this Act, is further amended--
(1) by redesignating subsection (q) as subsection (r), and
(2) by inserting after subsection (p) the following new
subsection:
``(q) Definitions Related to Digital Assets.--For purposes of this
title--
``(1) Bridged digital asset.--Except as otherwise provided
by the Secretary, the term `bridged digital asset' means any
digital asset if such asset--
``(A) is redeemable on demand, on a one-for-one
basis, for another digital asset, and
``(B) is recorded on a cryptographically secured
distributed ledger other than the cryptographically
secured distributed ledger on which the digital asset
referred to in subparagraph (A) is recorded.
``(2) Digital asset.--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.
``(3) Digital asset transaction.--The term `digital asset
transaction' means any transaction, instruction, or other
operation submitted for execution and recorded on the
cryptographically secured distributed ledger (or similar
technology) referred to in paragraph (2), regardless of whether
such transaction, instruction, or other operation transfers a
digital asset or is successfully executed.
``(4) Digital asset validation supporting activities.--The
term `digital asset validation supporting activities' means
staking, mining, or similar activities in support of the
validation of digital asset transactions.
``(5) Mining.--
``(A) In general.--The term `mining', when used in
connection with a digital asset, means--
``(i) performing computations, or making
available computing power, in support of the
validation of digital asset transactions on a
cryptographically secured distributed ledger
that uses a proof-of-work consensus mechanism,
and
``(ii) except as otherwise provided by the
Secretary, any activity which is substantially
similar to an activity described in clause (i).
``(B) Exception.--The term `mining' does not
include staking or the operation of a validator node on
a cryptographically secured distributed ledger that
uses a proof-of-stake consensus mechanism.
``(6) Qualified u.s. dollar stablecoin.--
``(A) In general.--The term `qualified U.S. dollar
stablecoin' means any U.S. dollar stablecoin which is
issued by--
``(i) a permitted payment stablecoin issuer
(as defined in section 2(23) of the GENIUS Act,
as in effect on the date of the enactment of
this subsection), or
``(ii) a foreign payment stablecoin issuer
(as defined in section 2(12) of the GENIUS Act,
as so in effect) authorized to issue such U.S.
dollar stablecoin to United States persons by
reason of--
``(I) registration with the Office
of the Comptroller of the Currency
under the GENIUS Act (as so in effect),
or
``(II) a determination by the
Secretary under such Act that the
regulatory and supervisory regime of
the jurisdiction in which such issuer
is organized is comparable to the
requirements of such Act.
``(B) Exception.--For purposes of subparagraph
(A)(ii), a foreign payment stablecoin issuer shall not
be treated as authorized to issue a U.S. dollar
stablecoin under such subparagraph by reason of the
absence of a prohibition on the offer or sale of such
U.S. dollar stablecoin in the United States.
``(7) Receipt token.--
``(A) In general.--Except as otherwise provided by
the Secretary, the term `receipt token' means any
digital asset (other than a bridged digital asset) that
is readily redeemable, directly or through a protocol
or similar arrangement, for a determinable amount of 1
or more other digital assets (referred to in this
subsection as `underlying digital assets'), without
regard to whether--
``(i) such receipt token and any underlying
digital asset are recorded on the same
cryptographically secured distributed ledger,
``(ii) the amount of underlying digital
assets for which such receipt token is
redeemable varies over time, or
``(iii) redemption is subject to a waiting
period, queue, or similar delay imposed by the
protocol.
``(B) Tiered receipt tokens.--If any underlying
digital asset with respect to a receipt token is itself
a receipt token or a bridged digital asset--
``(i) the underlying digital assets or
reference digital asset of such asset shall be
treated as underlying digital assets of the
first receipt token, and
``(ii) rules similar to the rules of
subparagraphs (B) and (C) of paragraph (8)
shall apply.
``(8) Reference digital asset.--
``(A) In general.--The term `reference digital
asset' means, with respect to any bridged digital
asset, the digital asset referred to in paragraph
(1)(A).
``(B) Special rule for rewrappings.--If, but for
this subparagraph, the reference digital asset with
respect to any bridged digital asset would be a bridged
digital asset (referred to in this paragraph as the
`lower-tier bridged digital asset')--
``(i) subparagraph (A) shall be applied
with respect to the lower-tier bridged digital
asset, and
``(ii) the reference digital asset with
respect to such lower-tier bridged digital
asset shall be treated as the reference digital
asset of such bridged digital asset.
``(C) Multiple wrappings.--If, after the
application of subparagraph (B), the reference digital
asset with respect to the lower-tier bridged digital
asset is a bridged digital asset, such subparagraph
shall be reapplied by treating such lower-tier bridged
digital asset as the bridged digital asset.
``(9) Staking.--The term `staking', when used in connection
with a digital asset, means--
``(A) making such asset available in support of the
validation of digital asset transactions, and
``(B) to the extent provided by the Secretary, any
activity which is substantially similar to an activity
described in subparagraph (A).
``(10) Staking reward.--
``(A) In general.--The term `staking reward' means
any additional units of a digital asset, or portions
thereof, that are created or issued by the protocol
itself as part of validation and allocated to a
taxpayer (directly or through 1 or more agents or
pools) as a result of the taxpayer's direct or indirect
participation in digital asset validation supporting
activities of a distributed ledger.
``(B) Exclusion for service compensation.--
``(i) In general.--The term `staking
reward' shall not include any fee, commission,
spread, or other amount received for providing
validation, staking, exchange, lending, or
other digital asset financial services to
another person.
``(ii) Exception.--For purposes of clause
(i), a protocol-issued reward shall not be
treated as compensation for providing digital
asset financial services merely because the
taxpayer directly validates transactions or
delegates digital assets to a validator.
``(11) Tokenized digital asset.--The term `tokenized
digital asset' means any digital asset (other than a qualified
U.S. dollar stablecoin) that is a digital representation of all
rights, obligations, or interests in a tangible or intangible
asset that is not itself a digital asset.
``(12) Traded digital asset.--Except as otherwise provided
by the Secretary, the term `traded digital asset' means any
digital asset if--
``(A) such asset is fungible,
``(B) quotations of such asset are readily
available or readily ascertainable on 1 or more
exchanges and reflect trading in sufficient volume and
with sufficient liquidity to provide reliable price
discovery, and
``(C) such asset is either--
``(i) not a tokenized digital asset,
``(ii) a bridged digital asset with respect
to which the reference digital asset is a
traded digital asset, or
``(iii) a receipt token with respect to
which each underlying digital asset is a traded
digital asset.
``(13) U.S. dollar stablecoin.--The term `U.S. dollar
stablecoin' means a payment stablecoin as defined in section
2(22) of the GENIUS Act (as in effect on the date of the
enactment of this subsection) applied by substituting `dollars'
for `monetary value' each place it appears in such section.
``(14) Validation.--The term `validate', and any derivative
of such term (including `validation'), when used in connection
with a digital asset transaction, means participating in a
consensus process of a cryptographically secured distributed
ledger by proposing, attesting to, verifying, ordering,
recording, or otherwise confirming transactions or blocks.
``(15) Widely traded digital asset.--
``(A) In general.--Except as otherwise provided by
the Secretary, the term `widely traded digital asset'
means, for any taxable year, any traded digital asset
if--
``(i) quotations for such asset were
readily available on an exchange for the
entirety of the immediately preceding calendar
year,
``(ii) the market capitalization of such
asset exceeded $500,000,000 at substantially
all times during such calendar year, and
``(iii) not more than 10 percent of the
units of such asset were owned, directly or
indirectly, by the taxpayer or any person
described with respect to the taxpayer under
section 267(b) (applied without regard to
section 267(c)(3)) or section 707(b)(1) at any
time during such taxable year or the
immediately preceding taxable year.
``(B) Special rule for bridged digital assets.--
Except as otherwise provided by the Secretary, in the
case of any bridged digital asset, such asset shall be
treated as a widely traded digital asset if the
reference digital asset with respect to such bridged
digital asset is a widely traded digital asset.
``(C) Authority to ensure reliable price
discovery.--For purposes of subparagraphs (A) and (B),
the Secretary may exclude any asset that lacks reliable
price discovery or that the Secretary determines is at
risk of price manipulation.
``(D) Authority to adjust requirements.--The
Secretary may, by regulation, provide requirements that
apply in lieu of 1 or more of the requirements of
clauses (i) through (iii) of subparagraph (A) if the
Secretary determines that, due to changes in market
conditions (including by reason of the enactment of
Federal legislation relating to digital asset market
structure), such alternative requirements would more
effectively or efficiently identify traded digital
assets for which there is consistent and reliable price
discovery.
``(E) Special rule for receipt tokens.--Except as
otherwise provided by the Secretary, a receipt token
shall be treated as a widely traded digital asset if
each underlying digital asset with respect to such
receipt token is a widely traded digital asset.
``(F) Inflation adjustment.--In the case of any
calendar year after 2027, the $500,000,000 amount in
subparagraph (A)(ii) shall be increased by an amount
equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for such
calendar year, determined by substituting
`calendar year 2026' for `calendar year 2016'
in subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence
which is not a multiple of $100,000 shall be rounded to
the nearest multiple of $100,000.''.
(b) Conforming Amendments.--
(1) Section 6045(g)(3) of the Internal Revenue Code of 1986
is amended by striking subparagraph (D).
(2) Section 6050I(d)(3) of such Code is amended by striking
``(as defined in section 6045(g)(3)(D))''.
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