[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7356 Introduced in House (IH)]
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115th CONGRESS
2d Session
H. R. 7356
To amend the Securities Act of 1933 and the Securities Exchange Act of
1934 to exclude digital tokens from the definition of a security, to
direct the Securities and Exchange Commission to enact certain
regulatory changes regarding digital units secured through public key
cryptography, to adjust taxation of virtual currencies held in
individual retirement accounts, to create a tax exemption for exchanges
of one virtual currency for another, to create a de minimis exemption
from taxation for gains realized from the sale or exchange of virtual
currency for other than cash, and for other purposes.
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IN THE HOUSE OF REPRESENTATIVES
December 20, 2018
Mr. Davidson (for himself and Mr. Soto) introduced the following bill;
which was referred to the Committee on Financial Services, and in
addition to the Committee on Ways and Means, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee
concerned
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A BILL
To amend the Securities Act of 1933 and the Securities Exchange Act of
1934 to exclude digital tokens from the definition of a security, to
direct the Securities and Exchange Commission to enact certain
regulatory changes regarding digital units secured through public key
cryptography, to adjust taxation of virtual currencies held in
individual retirement accounts, to create a tax exemption for exchanges
of one virtual currency for another, to create a de minimis exemption
from taxation for gains realized from the sale or exchange of virtual
currency for other than cash, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Token Taxonomy Act''.
SEC. 2. SECURITIES ACT OF 1933.
(a) Definition of Digital Token.--Section 2(a) of the Securities
Act of 1933 (15 U.S.C. 77b(a)) is amended by adding at the end the
following:
``(20) Digital token.--The term `digital token' means a
digital unit that--
``(A) is created--
``(i) in response to the verification or
collection of proposed transactions;
``(ii) pursuant to rules for the digital
unit's creation and supply that cannot be
altered by a single person or group of persons
under common control; or
``(iii) as an initial allocation of digital
units that will otherwise be created in
accordance with clause (i) or (ii);
``(B) has a transaction history that--
``(i) is recorded in a distributed, digital
ledger or digital data structure in which
consensus is achieved through a mathematically
verifiable process; and
``(ii) after consensus is reached, cannot
be materially altered by a single person or
group of persons under common control;
``(C) is capable of being traded or transferred
between persons without an intermediate custodian; and
``(D) is not a representation of a financial
interest in a company, including an ownership or debt
interest or revenue share.
``(21) Digital unit.--The term `digital unit' means a
representation of economic, proprietary, or access rights that
is stored in a computer-readable format.''.
(b) Definition of Security.--Section 2(a)(1) of the Securities Act
of 1933 (15 U.S.C. 77b(a)(1)) is amended--
(1) by inserting ``(A)'' after ``(1)''; and
(2) by adding at the end the following:
``(B) Such term does not include a digital token.''.
(c) Exemption.--Section 4(a) of the Securities Act of 1933 (15
U.S.C. 77d(a)) is amended by adding at the end the following:
``(8) Transactions involving the development, offer, or
sale of a digital unit if--
``(A) the person developing, offering, or selling
the digital unit has a reasonable and good faith belief
that such digital unit is a digital token; and
``(B) within ninety days following a written
notification from the Commission to such person that
such digital unit has been determined by the Commission
to be a security, posts public notice of such
notification and takes reasonable efforts to cease all
sales and return all proceeds from any sales of such
digital unit, excluding funds reasonably spent on the
development of technology associated with the digital
unit.''.
SEC. 3. SECURITIES EXCHANGE ACT OF 1934.
(a) Definition of Bank.--Section 3(a)(6)(C) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(6)(C)) is amended--
(1) by inserting ``or trust company,'' after ``Home Owners'
Loan Act,''; and
(2) by striking ``receiving deposits or exercising
fiduciary powers'' and inserting ``receiving deposits,
providing custodial services, or exercising fiduciary powers''.
(b) Definition of Security.--Section 3(a)(10) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(10)) is amended--
(1) by inserting ``(A)'' after ``(1)''; and
(2) by adding at the end the following:
``(B) Such term does not include a digital token.''.
(c) Definition of Digital Token.--Section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end
the following:
``(82) Digital token.--The term `digital token' has the
meaning given to it in section 2(a) of the Securities Act of
1933.''.
(d) Clerical Amendments.--Section 3(a) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)) is amended--
(1) by moving paragraph (79) so as to appear after
paragraph (78); and
(2) by redesignating the second paragraph (80) (relating to
``Funding portal'') as paragraph (81).
SEC. 4. INVESTMENT ADVISERS ACT OF 1940.
Section 202(a)(2)(C) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)(2)(C)) is amended by striking ``receiving deposits or
exercising fiduciary powers'' and inserting ``receiving deposits,
providing custodial services, or exercising fiduciary powers''.
SEC. 5. INVESTMENT COMPANY ACT OF 1940.
Section 2(a)(5) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(5)) is amended by striking ``receiving deposits or exercising
fiduciary powers'' and inserting ``receiving deposits, providing
custodial services, or exercising fiduciary powers''.
SEC. 6. SATISFACTORY CONTROL LOCATION REQUIREMENT.
Not later than 90 days after the date of the enactment of this Act,
the Commission shall amend section 240.15c3-3 of title 17, Code of
Federal Regulations, to provide that the requirement for a satisfactory
control location is fulfilled by protecting a digital unit (as defined
under section 2(a) of the Securities Act of 1933) through public key
cryptography and following commercially reasonable cybersecurity
practices.
SEC. 7. INDIVIDUAL RETIREMENT ACCOUNT INVESTMENTS IN CERTAIN VIRTUAL
CURRENCIES NOT TREATED AS DISTRIBUTIONS.
(a) In General.--Section 408(m) of the Internal Revenue Code of
1986 is amended--
(1) in paragraph (3)--
(A) in the heading of the paragraph, by striking
``and bullion'' and inserting ``, bullion, and virtual
currencies'';
(B) in subparagraph (A)(iv), by striking ``or'';
(C) in subparagraph (B), by inserting ``or'' after
``futures contract,'';
(D) by inserting after subparagraph (B) the
following:
``(C) virtual currency.''; and
(E) by striking ``if such bullion'' and inserting
``This paragraph shall only apply to bullion which'';
and
(2) by adding at the end the following:
``(4) Virtual currency defined.--For purposes of this
subsection, the term `virtual currency' means a digital
representation of value that is used as a medium of exchange
and is not currency (within the meaning of section 988).''.
(b) Effective Date.--The amendments made by this section shall
apply to sales or exchanges on or after January 1, 2017.
SEC. 8. CERTAIN EXCHANGES OF VIRTUAL CURRENCY TREATED AS NON-TAXABLE
EXCHANGES.
(a) In General.--Section 1031 of the Internal Revenue Code of 1986
is amended--
(1) in the heading, by striking ``real property'' and
inserting ``certain property'';
(2) in subsection (a), by adding at the end the follow new
paragraph:
``(4) Exchange of virtual currency.--An exchange of virtual
currency (as defined under section 408(m)) shall be treated as
if such exchange were an exchange of real property under this
section.''.
(b) Clerical Amendment.--The table of parts for part III of
subchapter O of chapter 1 of such Code is amended by striking
``Exchange of real property'' and inserting ``Exchange of certain
property''.
(c) Effective Date.--The amendments made by this section shall
apply to exchanges made on or after January 1, 2017.
SEC. 9. GAIN FROM SALE OR EXCHANGE OF VIRTUAL CURRENCY.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
139F the following new section:
``SEC. 139G. GAIN FROM SALE OR EXCHANGE OF VIRTUAL CURRENCY.
``(a) In General.--Gross income shall not include gain from the
sale or exchange of virtual currency (as defined under section 408(m))
for other than cash or cash equivalents.
``(b) Limitation.--
``(1) In general.--The amount of gain excluded from gross
income under subsection (a) with respect to a sale or exchange
of virtual currency shall not exceed $600.
``(2) Aggregation rule.--For purposes of this subsection,
all sales or exchanges which are part of the same transaction
(or a series of related transactions) shall be treated as one
sale or exchange.
``(c) Inflation Adjustment.--In the case of any taxable year
beginning in a calendar year after 2018, the dollar amount in
subsection (b) shall be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) 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 2017' for
`calendar year 2016' in subparagraph (a)(ii) thereof.
Any increase determined under the preceding sentence shall be rounded
to the nearest multiple of $50.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
the item relating to section 139F the following new item:
``Sec. 139G. Gain from sale or exchange of virtual currency.''.
(c) Reporting of Gains or Losses.--The Secretary of the Treasury
shall issue regulations providing for information returns on
transactions in virtual currency (as defined under section 408(m) of
the Internal Revenue Code of 1986) for which gain or loss is
recognized.
(d) Effective Date.--The amendments made by this section shall
apply with respect to transactions entered into on or after January 1,
2017.
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