[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 10357 Introduced in House (IH)]

<DOC>






119th CONGRESS
  2d Session
                               H. R. 10357

To amend the Internal Revenue Code of 1986 to reform the tax treatment 
               of digital assets, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 14, 2026

Mr. Smith of Missouri (for himself, Mr. Arrington, Mr. Bean of Florida, 
 Mr. Carey, Mr. Horsford, Mr. Kelly of Pennsylvania, Mr. Kustoff, Mr. 
Miller of Ohio, and Mr. Yakym) introduced the following bill; which was 
              referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to reform the tax treatment 
               of digital assets, 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; ETC.

    (a) Short Title.--This Act may be cited as the ``Digital Asset Tax 
Certainty Act''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
TITLE I--REMOVING TAX BARRIERS TO THE USE OF DIGITAL ASSETS AS A MEDIUM 
                              OF EXCHANGE

Sec. 101. Treatment of de minimis digital asset fees.
Sec. 102. Simplified accounting for gain and loss on widely traded 
                            digital assets.
Sec. 103. Treatment of U.S. dollar stablecoin transactions.
   TITLE II--PROVIDING PARITY BETWEEN DIGITAL ASSETS AND COMPARABLE 
                      TRADITIONAL FINANCIAL ASSETS

Sec. 201. Transfers of traded digital assets pursuant to a lending 
                            agreement.
Sec. 202. Dealers and traders of widely traded digital assets.
Sec. 203. Digital asset trading safe harbor.
Sec. 204. Charitable contributions of certain digital assets.
  TITLE III--APPLYING EXISTING TAX ANTI-ABUSE RULES TO DIGITAL ASSETS

Sec. 301. Application of wash sale rules to traded digital assets.
Sec. 302. Application of constructive sale rules to digital assets.
Sec. 303. Application of subpart F and PFIC rules.
Sec. 304. Rules related to possessions for determining source of gain 
                            or loss on disposition of traded digital 
                            assets.
Sec. 305. Application of registration-required obligation rules.
Sec. 306. Certain rules related to character of gains and losses 
                            relating to digital assets.
Sec. 307. Miscellaneous provisions.
      TITLE IV--CLARIFYING THE TAX TREATMENT OF MINING AND STAKING

Sec. 401. Source and character of mining and staking income.
Sec. 402. Investment trusts engaged in digital asset staking.
   TITLE V--ENSURING THAT OWNERS AND USERS OF DIGITAL ASSETS FACE AN 
                   APPROPRIATE TAX COMPLIANCE BURDEN

Sec. 501. Broker requirements.
Sec. 502. Establishment of Digital Asset Voluntary Disclosure Program.
Sec. 503. Treasury study and report.
       TITLE VI--DEFINITIONS; REGULATIONS; RULES OF CONSTRUCTION

Sec. 601. Definitions.
Sec. 602. Regulations.
Sec. 603. Rules of construction.
                       TITLE VII--FULL HOUSE ACT

Sec. 701. Reinstatement of rules for wagering losses.
    (d) Cross Reference to Defined Terms Related to Digital Assets.--
For definitions of certain terms related to digital assets used in the 
amendments made by this Act to the Internal Revenue Code of 1986, see 
the amendments made by section 601 of this Act.

TITLE I--REMOVING TAX BARRIERS TO THE USE OF DIGITAL ASSETS AS A MEDIUM 
                              OF EXCHANGE

SEC. 101. TREATMENT OF DE MINIMIS DIGITAL ASSET FEES.

    (a) In General.--Part III of subchapter O of chapter 1 of subtitle 
A is amended by inserting after section 1043 the following new section:

``SEC. 1044. DE MINIMIS DIGITAL ASSET FEE EXCEPTION.

    ``(a) In General.--No gain or loss shall be recognized on the 
disposition of a digital asset in payment of--
            ``(1) a de minimis network fee, or
            ``(2) a de minimis transaction fee.
    ``(b) De Minimis Network Fee.--For purposes of this section--
            ``(1) In general.--The term `de minimis network fee' means 
        an amount paid or incurred in a digital asset transaction to 
        validate another digital asset transaction if the aggregate 
        amount so paid or incurred with respect to the validation of 
        such other digital asset transaction does not exceed $10.
            ``(2) Network fee.--The term `network fee' means any amount 
        which would be a de minimis network fee if paragraph (1) were 
        applied without regard to the dollar limitation specified 
        therein.
    ``(c) De Minimis Transaction Fee.--For purposes of this section--
            ``(1) In general.--The term `de minimis transaction fee' 
        means an amount (other than a network fee) paid or incurred as 
        a brokerage fee, trading fee, liquidity fee, or similar fee, to 
        facilitate a transfer of a digital asset (hereafter referred to 
        as the `underlying digital asset transfer') if--
                    ``(A) the digital asset disposed of in payment of 
                such fee is a digital asset of the same type as the 
                type of digital asset disposed of or acquired by the 
                taxpayer in the underlying digital asset transfer, and
                    ``(B) the aggregate of such amounts with respect to 
                such underlying digital asset transfer does not exceed 
                $10.
            ``(2) Transaction fee.--The term `transaction fee' means 
        any amount which would be a de minimis transaction fee if 
        paragraph (1) were applied without regard to the dollar 
        limitation specified therein.
            ``(3) Type of digital asset.--A type of digital asset shall 
        be determined under rules similar to the rules of section 
        1051(b)(2).
    ``(d) Disposition of Digital Asset Used to Pay Network or 
Transaction Fee.--For purposes of this title, any payment of a network 
fee or transaction fee using a digital asset shall be treated as a 
disposition of such asset in exchange for consideration equal to the 
fair market value of such asset (and, in the case of a network fee, 
shall not fail to be treated as such a payment merely because such 
asset is not acquired by another person).
    ``(e) Treatment of Unrecognized Gain or Loss.--The amount of any 
network fee or transaction fee that is 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 network fee or transaction fee.
    ``(f) Exclusions.--
            ``(1) Trade or business.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to the disposition of a digital asset by--
                            ``(i) a trader, broker, or dealer in 
                        digital assets,
                            ``(ii) a person in the trade or business of 
                        batching or facilitating the validation of 
                        digital asset transactions on behalf of others,
                            ``(iii) 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 clause (i) or (ii), or
                            ``(iv) any person that engaged in more than 
                        5,000 transfers of digital assets during the 
                        preceding taxable year (determined without 
                        regard to any transfer made in payment of a de 
                        minimis network fee or a de minimis transaction 
                        fee).
                    ``(B) Administrative convenience exception.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply to any taxpayer that demonstrates to 
                        the Secretary that such taxpayer is of a type 
                        with respect to which not applying subparagraph 
                        (A) will not result in a substantial Federal 
                        revenue loss.
                            ``(ii) Guidance.--The Secretary shall issue 
                        regulations or other guidance that--
                                    ``(I) identifies different types of 
                                taxpayers with respect to which not 
                                applying subparagraph (A) will not 
                                result in substantial Federal revenue 
                                loss, and
                                    ``(II) specifies with respect to 
                                each such type of taxpayer the 
                                information that such taxpayer must 
                                provide to make the demonstration 
                                described in clause (i).
                            ``(iii) Certain factors required to be 
                        taken into account.--The regulations or other 
                        guidance issued by the Secretary under clause 
                        (ii) shall--
                                    ``(I) for purposes of determining 
                                the classification of types of 
                                taxpayers, and whether any Federal 
                                revenue loss from not applying 
                                subparagraph (A) with respect to any 
                                such type of taxpayer would be 
                                substantial, take into account the 
                                method or methods used by such type of 
                                taxpayer for selecting the digital 
                                assets used to pay network and 
                                transaction fees and the average 
                                holding period of such digital assets 
                                by such type of taxpayer, and
                                    ``(II) determine Federal revenue 
                                loss by reducing such loss by a 
                                reasonable approximation of the 
                                additional administrative costs of the 
                                Department of the Treasury, and the 
                                additional compliance costs of such 
                                type of taxpayer (and any person who 
                                would be required to make additional 
                                information return reporting with 
                                respect to such type of taxpayer), 
                                which would be imposed if subparagraph 
                                (A) were to apply to such type of 
                                taxpayer.
            ``(2) Certain accounting methods.--Subsection (a) shall not 
        apply to any digital asset--
                    ``(A) to which subsection (a), (e), (f), or (g) of 
                section 475, section 1051(a), or section 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.
    ``(g) 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--
            ``(1) transaction structuring for the purpose of qualifying 
        for the exclusion provided in subsection (a), and
            ``(2) the receipt of any value in exchange for a network 
        fee or transaction fee other than--
                    ``(A) in the case of a network fee, the validation 
                of a digital asset transaction, or
                    ``(B) in the case of a transaction fee, the 
                brokerage, trading, liquidity, or similar digital asset 
                transfer service.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter O of chapter 1 of subtitle A is amended by inserting after 
the item relating to section 1043 the following new item:

``Sec. 1044. De minimis digital asset fee exception.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to the disposition of assets after December 31, 2027.

SEC. 102. SIMPLIFIED ACCOUNTING FOR GAIN AND LOSS ON WIDELY TRADED 
              DIGITAL ASSETS.

    (a) In General.--Part IV of subchapter O of chapter 1 of subtitle A 
is amended by inserting before section 1052 the following new section:

``SEC. 1051. ELECTION TO APPLY SIMPLIFIED ACCOUNTING FOR GAIN AND LOSS 
              ON WIDELY TRADED DIGITAL ASSETS.

    ``(a) In General.--In the case of any designated type of digital 
asset with respect to any taxpayer for any taxable year--
            ``(1) such taxpayer shall recognize gain on such designated 
        type of digital asset for such taxable year equal to the excess 
        (if any) of--
                    ``(A) the sum of--
                            ``(i) the aggregate amount realized by the 
                        taxpayer on sales or exchanges (including 
                        nonrecognition transactions) of widely traded 
                        digital assets of such designated type during 
                        such taxable year,
                            ``(ii) in the case of dispositions 
                        (including nonrecognition transactions), other 
                        than sales or exchanges described in clause 
                        (i), of widely traded digital assets of such 
                        designated type, the fair market value of such 
                        widely traded digital assets (determined as of 
                        the time of such dispositions), and
                            ``(iii) the fair market value of widely 
                        traded digital assets of such designated type 
                        held by such taxpayer as of the close of the 
                        taxable year, over
                    ``(B) the sum of--
                            ``(i) the fair market value of 
                        consideration provided by the taxpayer for the 
                        acquisition of widely traded digital assets of 
                        such designated type during the taxable year 
                        (other than any portion of such acquisition to 
                        which clause (iii) applies),
                            ``(ii) in the case of any disposition 
                        described in subparagraph (A)(ii), any amounts 
                        which would have reduced the amount realized by 
                        the taxpayer on such disposition if such 
                        disposition had been a sale or exchange,
                            ``(iii) in the case of the acquisition of 
                        widely traded digital assets of such designated 
                        type during the taxable year the basis of which 
                        in the hands of the taxpayer is determined by 
                        reference to the basis of such assets in the 
                        hands of the transferor, the basis of such 
                        assets in the hands of the taxpayer immediately 
                        after such acquisition,
                            ``(iv) in the case of any adjustment to the 
                        basis of a widely traded digital asset of such 
                        designated type (including adjustments under 
                        sections 734(b) and 743(b)), the net dollar 
                        amount (positive or negative) of any adjustment 
                        to basis of such widely traded digital asset, 
                        and
                            ``(v) the fair market value of widely 
                        traded digital assets of such designated type 
                        held by such taxpayer as of the close of the 
                        preceding taxable year,
            ``(2) such taxpayer shall recognize loss on such designated 
        type of digital asset for such taxable year equal to the excess 
        (if any) of--
                    ``(A) the amount described in paragraph (1)(B), 
                over
                    ``(B) the amount described in paragraph (1)(A), and
            ``(3) except as provided in paragraphs (1) and (2), such 
        taxpayer shall not recognize any gain or loss on the 
        disposition of widely traded digital assets of such designated 
        type.
    ``(b) Designated Type of Digital Asset.--For purposes of this 
section--
            ``(1) In general.--The term `designated type of digital 
        asset' means, with respect to any taxpayer for any taxable 
        year, any type of widely traded digital asset (other than any 
        qualified U.S. dollar stablecoin) with respect to which such 
        taxpayer elects the application of this section for such 
        taxable year.
            ``(2) Type of widely traded digital asset.--Widely traded 
        digital assets shall be treated as being of the same type if, 
        and only if--
                    ``(A) such assets are fungible, or
                    ``(B) such assets are determined under rules 
                provided by the Secretary to have values that are 
                directly linked or highly correlated.
            ``(3) Pool token assets.--
                    ``(A) In general.--For purposes of this section, 
                qualified pool token assets shall be treated as widely 
                traded digital assets, but shall be treated as widely 
                traded digital assets with respect to any taxpayer if, 
                and only if--
                            ``(i) not more than 10 percent of such 
                        tokens are 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), and
                            ``(ii) the taxpayer and such persons do not 
                        have control or effective management of the 
                        composition of the assets to which the value of 
                        such tokens is attributable, including in a 
                        manner similar to a manager, sponsor, director, 
                        shareholder, general partner, commonly 
                        controlled affiliate, or other similar role.
                    ``(B) Qualified pool token asset.--For purposes of 
                this subsection, the term `qualified pool token asset' 
                means any type of digital asset (determined under 
                paragraph (2) by substituting `digital assets' for 
                `widely traded digital assets') for any taxable year 
                if--
                            ``(i) at substantially all times during the 
                        calendar year which ends in or with the taxable 
                        year preceding such taxable year--
                                    ``(I) substantially all of the 
                                value of such type of digital asset is 
                                attributable to widely traded digital 
                                assets (determined after the 
                                application of subparagraph (A)), and
                                    ``(II) such type of digital asset 
                                is redeemable on demand for a 
                                proportionate share of the assets to 
                                which the value of such digital asset 
                                is attributable, and
                            ``(ii) the Secretary has determined that 
                        allowing such type of digital asset to be 
                        treated as a widely traded digital asset for 
                        purposes of this section is consistent with 
                        efficient tax administration and not subject to 
                        abuse.
                    ``(C) Prevention of double counting.--In the case 
                of any designated type of qualified pool token assets 
                with respect to any taxpayer, such taxpayer shall not 
                recognize gain or loss with respect to the particular 
                assets to which the value of such designated type of 
                qualified pool token assets is attributable.
    ``(c) Gain or Loss Treated as Short-term.--Any gain or loss 
determined under subsection (a) shall be treated as short-term capital 
gain or short-term capital loss, respectively.
    ``(d) Treatment of Lending Transactions.--
            ``(1) Certain lending agreements.--In the case of any 
        transfer of widely traded digital assets to which section 
        1058(a) applies, such assets shall be treated for purposes of 
        this section as continuing to be held by the transferor.
            ``(2) Other lending transactions.--In the case of any loan 
        of widely traded digital assets which is not described in 
        paragraph (1), except as otherwise provided by the Secretary, 
        such assets shall be treated for purposes of this section as 
        continuing to be held by the lender.
    ``(e) Election.--
            ``(1) Application of election.--
                    ``(A) In general.--An election under this section 
                with respect to any designated type of digital asset 
                shall apply to the first taxable year which begins 
                after the date on which the taxpayer makes such 
                election and to each taxable year thereafter unless 
                revoked as provided in paragraph (5).
                    ``(B) Application to current taxable year.--If the 
                taxpayer has not held any unit of a designated type of 
                digital asset at any time during the 2-year period 
                ending on the date on which the taxpayer makes the 
                election described in subparagraph (A) with respect to 
                such designated type of digital asset, such taxpayer 
                may elect to apply subparagraph (A) by substituting 
                `the taxable year in which' for `the first taxable year 
                which begins after the date on which'.
            ``(2) Partnerships and s corporations.--In the case of any 
        partnership or S corporation, the election under this section 
        shall be made at the partnership or S corporation level.
            ``(3) Exclusion of dealers eligible to make mark-to-market 
        election.--A dealer that is eligible to make an election under 
        section 475(g) with respect to any taxable year may not make an 
        election under this section with respect to such taxable year.
            ``(4) Exclusion of traders with a mark-to-market election 
        in effect.--A trader which has an election in effect under 
        section 475(f)(3) with respect to any taxable year may not make 
        an election under this section with respect to such taxable 
        year.
            ``(5) Revocation.--
                    ``(A) In general.--A taxpayer may revoke an 
                election under this section with respect to a taxable 
                year which--
                            ``(i) has not begun as of the date on which 
                        such taxpayer requests such revocation, and
                            ``(ii) is not one of the first 5 taxable 
                        years to which such election applies.
                    ``(B) Deemed revocation.--In the case of any 
                designated type of digital asset which has ceased to be 
                a widely traded digital asset, the election under this 
                section with respect to such designated type shall be 
                treated as revoked with respect to the first taxable 
                year beginning after the date on which such designated 
                type ceases to be a widely traded digital asset.
                    ``(C) 5-year waiting period.--In the case of any 
                revocation under this paragraph with respect to any 
                designated type of digital asset, the taxpayer may not 
                make an election under this section with respect to 
                such designated type if such election would apply to 
                any of the first 5 taxable years to which such 
                revocation applies.
                    ``(D) Special rule for traders making mark-to-
                market election.--If a taxpayer has in effect one or 
                more elections under this section and such taxpayer 
                makes the election under section 475(f)(3) with respect 
                to any taxable year, the taxpayer shall 
                (notwithstanding subparagraph (A)) be treated as 
                revoking all such elections under this section 
                beginning with such taxable year.
    ``(f) Special Rules Related to Election, Revocation, and Certain 
Transfers.--
            ``(1) Treatment of assets upon election.--In the case of an 
        election under this section, with respect to any designated 
        type of digital asset, any widely traded digital assets of such 
        designated type held by the taxpayer shall be treated as sold 
        for fair market value on the last day of the taxable year 
        preceding the first taxable year to which such election 
        applies.
            ``(2) Adjustments upon revocation.--In the case of a 
        revocation of an election under this section, proper 
        adjustments shall be made in the amount of any gain or loss 
        subsequently realized for gain or loss taken into account under 
        subsection (a).
            ``(3) Certain transfers.--In the case of any transfer of a 
        widely traded digital asset which is a designated type of 
        digital asset with respect to the transferor for the taxable 
        year in which the transfer occurs, if the basis of such asset 
        in the hands of the transferee is determined by reference to 
        the basis of such asset in the hands of the transferor, the 
        basis of such asset in the hands of the transferor (solely for 
        purposes of determining the basis of such asset in the hands of 
        the transferee) shall be treated as being equal to the fair 
        market value of such asset at the time of such transfer.
    ``(g) Special Rules Related to Partnerships.--
            ``(1) Sale or exchange of interest in partnership.--The 
        amount of any money, or the fair market value of any property, 
        received by a transferor partner in exchange for all or a part 
        of such partner's interest in the partnership attributable to a 
        designated type of digital asset of the partnership shall be 
        considered as an amount realized from the sale or exchange of a 
        capital asset held for less than 1 year (under rules similar to 
        the rules that apply for purposes of section 751(a)), by 
        treating such designated type of digital asset in the same 
        manner as an unrealized receivable.
            ``(2) Certain distributions treated as sales or 
        exchanges.--In the case of any designated type of digital asset 
        of a partnership, rules similar to the rules of section 751(b) 
        shall apply by treating such designated type of digital asset 
        in the same manner as an unrealized receivable and by treating 
        any resulting gain or loss as short-term capital gain or short-
        term capital loss.
            ``(3) Allocations of basis.--For purposes of any allocation 
        of basis to a designated type of digital asset of a 
        partnership, rules similar to the rules for allocating basis to 
        unrealized receivables (including sections 755 and 732(c)) 
        shall apply except that proper adjustments shall be made to 
        treat the designated type of digital asset as a capital asset 
        held for less than 1 year.
            ``(4) Certain contributions to partnership.--
                    ``(A) In general.--Except to the extent otherwise 
                provided by the Secretary, in the case of a 
                contribution of any widely traded digital asset to a 
                partnership by a partner in a contribution to which 
                section 721 applies in a taxable year of the 
                partnership for which such widely traded digital asset 
                is a designated type of digital asset with respect to 
                such partnership, any gain or loss recognized by the 
                partnership under this section with respect to such 
                designated type of widely traded digital asset shall be 
                allocated to the contributing partner to the extent of 
                the built-in gain or built-in loss (as the case may be) 
                of the widely traded digital asset so contributed.
                    ``(B) Built-in gain.--For purposes of this 
                paragraph, the term `built-in gain' means the excess 
                (if any) of the fair market value of the property at 
                the time of contribution over the adjusted basis of 
                such property (in the hands of the partner) at such 
                time.
                    ``(C) Built-in loss.--For purposes of this 
                paragraph, the term `built-in loss' means the excess 
                (if any) of the adjusted basis of the property (in the 
                hands of the partner) at the time of contribution over 
                the fair market value of such property at such time.
    ``(h) Coordination With Certain Other Provisions.--
            ``(1) Determined without regard to wash and constructive 
        sale rules.--Sections 1091 and 1259 shall not apply to any 
        transaction with respect to which gain or loss is not 
        recognized by reason of subsection (a)(3).
            ``(2) Coordination with related party transaction rules.--
        Section 267 shall not apply with respect to a sale or exchange 
        of property if the transferor has an election in effect under 
        this section for the taxable year with respect to such 
        property.
    ``(i) Clarification That Certain Transfers Are Treated as 
Dispositions.--The following shall not fail to be treated as a 
disposition for purposes of this section:
            ``(1) The distribution of any digital asset from a trust to 
        a beneficiary.
            ``(2) The transfer of any digital asset from a decedent 
        (whether or not incident to the decedent's death).
    ``(j) Regulatory Authority.--The Secretary shall prescribe such 
regulations or other guidance as may be necessary or appropriate to 
carry out the purposes of this section, including regulations or 
guidance relating to--
            ``(1) the form and manner of making an election or 
        revocation under this section,
            ``(2) adjustments necessary by reason of such election or 
        revocation (including adjustments to basis of widely traded 
        digital assets of a designated type),
            ``(3) adjustments to reporting requirements relating to 
        widely traded digital assets with respect to which an election 
        is in effect under this section,
            ``(4) the treatment of a derivative of a designated type of 
        digital asset, and
            ``(5) preventing abuse of this section.''.
    (b) Clerical Amendment.--The table of sections for part IV of 
subchapter O of chapter 1 of subtitle A is amended by inserting before 
the item relating to section 1052 the following new item:

``Sec. 1051. Election to apply simplified accounting for gain and loss 
                            on widely traded digital assets.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2027.

SEC. 103. TREATMENT OF U.S. DOLLAR STABLECOIN TRANSACTIONS.

    (a) In General.--Part IV of subchapter O of chapter 1 of subtitle A 
is amended by redesignating section 1063 as section 1064 and by 
inserting after section 1062 the following new section:

``SEC. 1063. CERTAIN U.S. DOLLAR STABLECOIN TRANSACTIONS.

    ``(a) Treatment of Acquisitions of U.S. Dollar Stablecoins.--
            ``(1) Determination of basis.--The basis of any qualified 
        U.S. dollar stablecoin acquired by a taxpayer in any sale or 
        exchange shall be the redemption value of such stablecoin. The 
        preceding sentence shall not apply if it is unreasonable under 
        the facts and circumstances to conclude that the value of the 
        consideration provided for such stablecoin in such sale or 
        exchange is not less than 99.5 percent of such redemption 
        value.
            ``(2) Treatment of consideration provided in exchange.--For 
        purposes of this title, in the case of any consideration other 
        than money provided in exchange for a qualified U.S. dollar 
        stablecoin, the income, gain, or loss resulting from the 
        provision of such consideration shall be determined by treating 
        the value of such qualified U.S. dollar stablecoin as being 
        equal to the redemption value of such stablecoin. The preceding 
        sentence shall not apply if it is unreasonable under the facts 
        and circumstances to conclude that the value of such stablecoin 
        is not less than 99.5 percent, and not more than 100.5 percent, 
        of such redemption value.
    ``(b) Treatment of Sale or Exchange of Qualified U.S. Dollar 
Stablecoins.--
            ``(1) Determination of gain or loss.--If the taxpayer's 
        basis in any qualified U.S. dollar stablecoin was determined 
        under subsection (a)(1), gain or loss on such taxpayer's sale 
        or exchange of such stablecoin shall be determined as though 
        such stablecoin were sold or exchanged for the redemption value 
        of such stablecoin. The preceding sentence shall not apply if 
        it is unreasonable under the facts and circumstances to 
        conclude that the value of the consideration received for such 
        stablecoin in such sale or exchange is not more than 100.5 
        percent of such redemption value.
            ``(2) Treatment of consideration received in exchange.--For 
        purposes of this title, in the case of any consideration other 
        than money received in exchange for a qualified U.S. dollar 
        stablecoin, the cost of (and amount paid or incurred for) such 
        consideration shall be determined by treating the value of such 
        qualified U.S. dollar stablecoin as being equal to the 
        redemption value of such stablecoin. The preceding sentence 
        shall not apply if it is unreasonable under the facts and 
        circumstances to conclude that the value of such stablecoin is 
        not less than 99.5 percent, and not more than 100.5 percent, of 
        such redemption value.
    ``(c) Exceptions.--
            ``(1) In general.--Subsections (a) and (b) shall not apply 
        with respect to any taxpayer for any taxable year if such 
        taxpayer is--
                    ``(A) a trader, broker, or dealer in qualified U.S. 
                dollar stablecoins,
                    ``(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), or
                    ``(C) any other person who in the preceding taxable 
                year engaged in more than 5,000 transactions to which 
                subsection (a) or (b) applied, determined without 
                regard to--
                            ``(i) any such transaction which is with 
                        respect to a trade or business (other than a 
                        trade or business described in subparagraph (A) 
                        or (B)), including the acceptance of qualified 
                        U.S. dollar stablecoins at redemption value as 
                        a payment for goods or services in such trade 
                        or business and the use of qualified U.S. 
                        dollar stablecoins at redemption value to 
                        acquire goods and services for use in such 
                        trade or business, and
                            ``(ii) any such transaction which is a sale 
                        (for money) of a qualified U.S. dollar 
                        stablecoin at or below redemption value.
            ``(2) Functional currency other than the dollar.--
        Subsections (a) and (b) shall not apply to any taxpayer or 
        qualified business unit (as defined in section 989(a)) that 
        uses a functional currency other than the dollar.
            ``(3) Related parties.--In the case of any sale or exchange 
        between persons described in section 267(b) (applied without 
        regard to section 267(c)(3)) or section 707(b)(1)--
                    ``(A) subsections (a)(1), (a)(2), and (b)(2) shall 
                be applied by substituting `100 percent' for `99.5 
                percent', and
                    ``(B) subsections (a)(2), (b)(1), and (b)(2) shall 
                be applied by substituting `100 percent' for `100.5 
                percent'.
    ``(d) Redemption Value.--For purposes of this section, the term 
`redemption value' means, with respect to a qualified U.S. dollar 
stablecoin, the dollar amount for which the issuer is obligated to 
convert, redeem, or repurchase such stablecoin.
    ``(e) 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 other guidance--
            ``(1) describing the factors considered, and documentation 
        or substantiation required, with respect to the facts and 
        circumstances tests described in subsections (a)(1), (a)(2), 
        (b)(1), and (b)(2),
            ``(2) providing for the application of subsection (c)(1) 
        with respect to a portion of a taxable year if the taxpayer 
        only regularly purchases, exchanges, or sells qualified U.S. 
        dollar stablecoins for profit for a portion of such taxable 
        year, and
            ``(3) to prevent abuse of this section.''.
    (b) Clerical Amendment.--The table of sections for part IV of 
subchapter O of chapter 1 of subtitle A is amended by redesignating the 
item relating to section 1063 as an item relating to section 1064 and 
by inserting after the item relating to section 1062 the following new 
item:

``Sec. 1063. Certain U.S. dollar stablecoin transactions.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2026.
    (d) Transition Rules.--The Secretary of the Treasury, or the 
Secretary's delegate, shall, consistent with the purposes of section 
1063 of the Internal Revenue Code of 1986, provide temporary rules for 
taxpayers addressing periods prior to the issuance of final regulations 
or guidance under section 1063(e) of such Code.

   TITLE II--PROVIDING PARITY BETWEEN DIGITAL ASSETS AND COMPARABLE 
                      TRADITIONAL FINANCIAL ASSETS

SEC. 201. TRANSFERS OF TRADED DIGITAL ASSETS PURSUANT TO A LENDING 
              AGREEMENT.

    (a) In General.--Subsections (a) and (b) of section 1058 are each 
amended by striking ``securities'' each place it appears and inserting 
``specified assets''.
    (b) Specified Assets.--Section 1058 is amended by adding at the end 
the following new subsection:
    ``(d) Specified Assets.--For purposes of this section, the term 
`specified assets' means--
            ``(1) securities (as defined in section 1236(c)), and
            ``(2) traded digital assets.''.
    (c) Treatment of Certain Legal Entitlements and Obligations Which 
Accrue During Period of Agreement.--Section 1058(b)(2), as amended by 
subsection (a), is amended--
            (1) by striking ``require that payments'' and inserting 
        ``require that--
                    ``(A) payments'',
            (2) by inserting ``and'' after ``transferor;'', and
            (3) by adding at the end the following new subparagraph:
                    ``(B) in the case of any transfer of traded digital 
                assets--
                            ``(i) payments shall be made to the 
                        transferor of amounts equivalent to, except as 
                        otherwise provided by the Secretary, all 
                        property and other legal entitlements which the 
                        owner of the traded digital assets is entitled 
                        to receive during the period described in 
                        subparagraph (A), and
                            ``(ii) the transferor shall assume all 
                        obligations imposed on the owner of such traded 
                        digital assets during the period described in 
                        subparagraph (A);''.
    (d) Conforming Amendments.--
            (1) Section 1058(a) is amended by striking ``(as defined in 
        section 1236(c))''.
            (2) The heading of section 1058, and the item relating to 
        section 1058 in the table of sections for part IV of subchapter 
        O of chapter 1, are each amended by striking ``securities'' and 
        inserting ``specified assets''.
    (e) Effective Date.--The amendments made by this section shall 
apply to transfers made after the date of the enactment of this Act.

SEC. 202. DEALERS AND TRADERS OF WIDELY TRADED DIGITAL ASSETS.

    (a) In General.--Section 475 is amended by redesignating subsection 
(g) as subsection (h) and by inserting after subsection (f) the 
following new subsection:
    ``(g) Election of Mark to Market for Dealers in Covered Digital 
Assets.--
            ``(1) In general.--In the case of a dealer in covered 
        digital assets who elects the application of this subsection, 
        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) Covered digital asset.--For purposes of this section, 
        the term `covered digital asset' means--
                    ``(A) any specified traded digital asset,
                    ``(B) any notional principal contract with respect 
                to any specified traded digital asset,
                    ``(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, and
                    ``(D) any position which--
                            ``(i) is not a covered digital asset 
                        described in subparagraph (A), (B), or (C),
                            ``(ii) is a hedge with respect to such a 
                        covered digital asset, and
                            ``(iii) is clearly identified in the 
                        taxpayer's records as being described in this 
                        subparagraph 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).
            ``(3) Specified traded digital asset.--For purposes of 
        paragraph (2)--
                    ``(A) In general.--The term `specified traded 
                digital asset' means--
                            ``(i) any widely traded digital asset,
                            ``(ii) any qualified U.S. dollar 
                        stablecoin,
                            ``(iii) any qualified pool token asset (as 
                        defined in section 1051(b)(3)(B)),
                            ``(iv) any traded digital asset which--
                                    ``(I) would be a widely traded 
                                digital asset but for the requirement 
                                of clause (ii) of section 
                                7701(p)(3)(A), and
                                    ``(II) has an average daily trading 
                                volume, determined on the basis of 
                                business days during the calendar year 
                                that ends in or with the preceding 
                                taxable year, that exceeds $5,000,000, 
                                or
                            ``(v) any traded digital asset which--
                                    ``(I) would be a widely traded 
                                digital asset but for the requirement 
                                of clause (iii) of section 
                                7701(p)(3)(A), and
                                    ``(II) constitutes the principal 
                                asset held by an entity that is not 
                                registered under the Investment Company 
                                Act of 1940 and the securities of which 
                                are listed and traded on a national 
                                securities exchange registered under 
                                section 6 of the Securities and 
                                Exchange Act of 1934.
                    ``(B) Limited continued treatment.--In the case of 
                any taxpayer for any taxable year, the term `specified 
                traded digital asset' also includes any traded digital 
                asset that would be a widely traded digital asset but 
                for the requirement of clause (ii) of section 
                7701(p)(3)(A) if, with respect to one or more of the 3 
                preceding taxable years--
                            ``(i) such traded digital asset was a 
                        specified traded digital asset described in 
                        clause (i) or (ii) of subparagraph (A) with 
                        respect to such taxable year,
                            ``(ii) the taxpayer had an election in 
                        effect under this subsection that applied to 
                        such taxable year and each intervening taxable 
                        year, and
                            ``(iii) the taxpayer held specified traded 
                        digital assets of such type (determined under 
                        rules similar to the rules of section 
                        1051(b)(2)), or covered digital assets 
                        described in subparagraph (B), (C), or (D) of 
                        paragraph (2) with respect to such type of 
                        specified traded digital asset, to which 
                        paragraph (1) applied for such taxable year.
            ``(4) Election.--An election under this subsection may be 
        made without the consent of the Secretary. Such 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.''.
    (b) Application of Mark to Market Rules to Covered Digital 
Assets.--Section 475(f) is amended--
            (1) in the heading, by striking ``or Commodities'' and 
        inserting ``, Commodities, or Covered Digital Assets'',
            (2) by redesignating paragraph (3) as paragraph (4) and by 
        inserting after paragraph (2) the following new paragraph:
            ``(3) Traders 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, paragraph (1) shall apply to 
        covered digital assets held by such trader in connection with 
        such trade or business in the same manner as paragraph (1) 
        applies to securities held by a trader in securities.'', and
            (3) in paragraph (4), as so redesignated, by striking 
        ``paragraphs (1) and (2)'' and inserting ``paragraphs (1), (2), 
        and (3)''.
    (c) Treatment of Covered Digital Assets Which Are Securities or 
Commodities.--Section 475(d) is amended by adding at the end the 
following new paragraph:
            ``(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).''.
    (d) Treatment of Adjustments Attributable to Election of Mark to 
Market.--Section 475(d), as amended by subsection (c), is amended by 
adding at the end the following new paragraph:
            ``(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 taxpayer's change to, or from, a method of accounting 
        provided in 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.''.
    (e) Treatment as Specified Service Trade or Business.--Section 
199A(d)(2)(B) 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)(2))''.
    (f) Conforming Amendments.--
            (1) Section 475(e)(2) is amended by striking ``this 
        subsection and subsection (f)'' and inserting ``this section''.
            (2) The heading of section 475 is amended by striking 
        ``dealers in securities'' and inserting ``certain dealers and 
        traders''.
            (3) The table of sections for subpart D of part II of 
        subchapter E of chapter 1 is amended by striking the item 
        relating to section 475 and inserting the following:

``Sec. 475. Mark to market accounting method for certain dealers and 
                            traders.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
    (h) 4-year Spread of Adjustments.--In the case of a taxpayer that 
elects under subsection (f)(3) or (g) of section 475 of the Internal 
Revenue Code of 1986 (as added by this section) to change such 
taxpayer's method of accounting for the taxpayer's first taxable year 
beginning after the date of the enactment of this Act and before 
January 1, 2028--
            (1) any identification required with respect to 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 such subsection shall be taken into account ratably 
        over the 4-taxable year period beginning with such taxable 
        year.
    (i) Transitional Coordination With Wash Sale Rules.--
            (1) In general.--In the case of a taxpayer that elects 
        under subsection (f)(3) or (g) of section 475 of the Internal 
        Revenue Code of 1986 (as added by this section) for the 
        taxpayer's first taxable year beginning after the date of the 
        enactment of this Act and before January 1, 2028, section 1091 
        shall be applied without regard to any specified transaction 
        made by the taxpayer during the preceding taxable year if the 
        taxpayer does not, during such first taxable year, identify 
        under section 475(b)(2) of such Code any built-in-gain security 
        as being described in subparagraph (A) of section 475(b)(1) of 
        such Code.
            (2) Specified transaction.--For purposes of this 
        subsection, the term ``specified transaction'' means any 
        acquisition or disposition of a covered digital asset (as 
        defined in section 475(g) of such Code) made in the ordinary 
        course of the taxpayer's activity as a dealer or trader, as the 
        case may be.
            (3) Built-in-gain security.--For purposes of this 
        subsection, the term ``built-in-gain security'' means any 
        security if (as of the time of the identification referred to 
        in paragraph (1)) the fair market value of such security 
        exceeds the adjusted basis of such security.
    (j) Authority to Provide Additional Transition Rules.--The 
Secretary of the Treasury, or the Secretary's delegate, may issue such 
regulations or other guidance as may be necessary or appropriate to 
provide additional transitional rules with respect to taxpayers that 
make the election under subsection (f)(3) or (g) of section 475 of the 
Internal Revenue Code of 1986 (as added by this section) for the 
taxpayer's first taxable year beginning after the date of the enactment 
of this Act and before January 1, 2028, including regulations or other 
guidance to provide for simplified adjustments in the case of such an 
election which will apply to digital assets to which an election under 
section 475(e) of such Code applied for the preceding taxable year.

SEC. 203. DIGITAL ASSET TRADING SAFE HARBOR.

    (a) In General.--Section 864(b)(2) is amended--
            (1) in the heading, by striking ``or commodities'' and 
        inserting ``commodities, or traded digital assets'',
            (2) by redesignating subparagraph (C) as subparagraph (D) 
        and by inserting the following new subparagraph after 
        subparagraph (B):
                    ``(C) Traded digital assets.--
                            ``(i) In general.--Trading in traded 
                        digital assets through a resident broker, 
                        commission agent, custodian, staking service 
                        provider, 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 his employees or through a resident 
                        broker, commission agent, custodian, staking 
                        service 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 digital 
                        assets.
                            ``(iii) Coordination with rules for 
                        securities and commodities.--A traded digital 
                        asset shall not be treated as a security or 
                        commodity for purposes of this paragraph.'', 
                        and
            (3) in subparagraph (D), as so redesignated--
                    (A) by striking ``and (B)(i)'' and inserting ``, 
                (B)(i), and (C)(i)'', and
                    (B) by striking ``or in commodities'' and inserting 
                ``in commodities, or in traded digital assets''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.

SEC. 204. CHARITABLE CONTRIBUTIONS OF CERTAIN DIGITAL ASSETS.

    (a) Exception From Appraisal Requirement for Qualified U.S. Dollar 
Stablecoins and Widely Traded Digital Assets.--Section 
170(f)(11)(A)(ii)(I) is amended by inserting ``qualified U.S. dollar 
stablecoins, 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) Charitable Contributions of Digital Assets Other Than Qualified 
U.S. Dollar Stablecoins, Widely Traded Digital Assets, and Tokenized 
Digital Assets.--
            (1) In general.--Section 170(f) is amended by adding at the 
        end the following new paragraph:
            ``(20) Contributions of conversion eligible digital 
        assets.--
                    ``(A) In general.--No deduction shall be allowed 
                under subsection (a) for any contribution of a 
                conversion eligible digital asset (as defined in 
                section 1046(d)).
                    ``(B) Cross reference.--For nonrecognition of gain 
                on certain sales and exchanges of conversion eligible 
                digital assets the proceeds of which are used to make 
                charitable contributions, see section 1046.''.
            (2) Nonrecognition of gain on dispositions of conversion 
        eligible digital assets used to fund charitable 
        contributions.--Part III of subchapter O of chapter 1 is 
        amended by adding at the end the following new section:

``SEC. 1046. CERTAIN DISPOSITIONS OF CONVERSION ELIGIBLE DIGITAL ASSETS 
              USED TO FUND CHARITABLE CONTRIBUTIONS.

    ``(a) In General.--No gain shall be recognized on the sale of 
conversion eligible digital assets (or the exchange of conversion 
eligible digital assets for qualified U.S. dollar stablecoins) if all 
of the gross receipts of such sale (or all of the qualified U.S. dollar 
stablecoins received in such exchange) are contributed by the taxpayer 
as a charitable contribution (as defined in section 170(c)) not later 
than the earlier of--
            ``(1) the date that is 7 days after the date of such sale 
        or exchange, or
            ``(2) the close of the taxpayer's taxable year which 
        includes the date of such sale or exchange.
    ``(b) Contributions of Less Than Entire Proceeds.--Except as 
otherwise provided by the Secretary, if less than all of the gross 
receipts of a sale described in subsection (a) (or less than all the 
qualified U.S. dollar stablecoins received in an exchange so described) 
are contributed as described in subsection (a), so much of the gain on 
such sale (or exchange) as bears the same ratio to such entire gain as 
the amount so contributed bears to all of such gross receipts (or all 
such U.S. dollar stablecoins) shall not be recognized.
    ``(c) Application of Certain Limitations on Deduction for 
Charitable Contributions.--In the case of any charitable contribution 
described in subsection (a) or (b)--
            ``(1) In general.--For purposes of subsections (b)(1)(G), 
        (b)(1)(I), and (p) of section 170, such contribution shall not 
        be treated as a contribution of cash.
            ``(2) Capital gain property.--For purposes of subsections 
        (b)(1)(C), (b)(1)(D), (b)(1)(I), and (e) of section 170, such 
        contribution shall be treated as a contribution made directly 
        by the taxpayer on the date of the sale or exchange referred to 
        in subsection (a) or (b) (as the case may be) of--
                    ``(A) in the case of a sale or exchange referred to 
                in subsection (a), the conversion eligible digital 
                assets so sold or exchanged, and
                    ``(B) in the case of a sale or exchange referred to 
                in subsection (b), the portion of the conversion 
                eligible digital assets so sold or exchanged that bears 
                the same ratio to such assets as the gain not 
                recognized under subsection (b) bears to the entire 
                gain referred to in such subsection.
    ``(d) Conversion Eligible Digital Assets.--For purposes of this 
section, the term `conversion eligible digital asset' means any digital 
asset other than--
            ``(1) a qualified U.S. dollar stablecoin,
            ``(2) a widely traded digital asset to which section 
        170(f)(11)(A)(ii)(I) applies, and
            ``(3) a tokenized digital asset.
    ``(e) Related Party Transactions.--This section shall not apply to 
any sale or exchange between persons described in section 267(b) 
(applied without regard to section 267(c)(3)) or section 707(b)(1).''.
            (3) Clerical amendment.--The table of sections for part III 
        of subchapter O of chapter 1 is amended by adding at the end 
        the following new item:

``Sec. 1046. Certain dispositions of conversion eligible digital assets 
                            used to fund charitable contributions.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2026.

  TITLE III--APPLYING EXISTING TAX ANTI-ABUSE RULES TO DIGITAL ASSETS

SEC. 301. APPLICATION OF WASH SALE RULES TO TRADED DIGITAL ASSETS.

    (a) In General.--Section 1091 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 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) Contracts and options.--Except as otherwise provided 
        in regulations, the term `specified asset' includes any 
        contract or option to acquire or sell any specified asset 
        described in paragraph (1).
            ``(3) Treatment of tokenized digital assets as 
        substantially identical to an economically equivalent stock or 
        security.--A tokenized digital asset (and a wrapped 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 wrapped digital asset) is 
        economically equivalent to such stock, security, or traded 
        digital asset.
            ``(4) Functional currency other than the dollar.--In the 
        case of any taxpayer or qualified business unit (as defined in 
        section 989(a)), a qualified U.S. dollar stablecoin shall not 
        be treated as a qualified U.S. dollar stablecoin for purposes 
        of paragraph (1)(B) if such taxpayer or qualified business unit 
        uses a functional currency other than the dollar.''.
    (c) Exception for Certain Acquisitions of Digital Assets.--Section 
1091, as amended by subsection (b), is amended by adding at the end the 
following new subsection:
    ``(h) Exception for Certain Acquisitions of Traded Digital 
Assets.--The acquisition of a traded digital asset shall not be taken 
into account under this section if such traded 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 traded digital assets which 
        are included by the taxpayer as ordinary income.''.
    (d) Conforming Amendments.--
            (1) Section 1091(a) is amended by striking the last 
        sentence.
            (2) Section 1091(e) (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 meaning provided by section 1234B(c).''.
            (3) The heading of section 1091 is amended by striking 
        ``stock or securities'' and inserting ``specified assets''.
            (4) The headings of subsections (b), (c), and (d) of 
        section 1091 are each amended by striking ``Stock'' each place 
        it appears and inserting ``Specified Assets''.
            (5) The item relating to section 1091 in the table of 
        sections for part VII of subchapter O of chapter 1 is amended 
        by striking ``stock or securities'' and inserting ``specified 
        assets''.
            (6) Section 312(f)(1) is amended by striking ``stock or 
        securities'' and inserting ``specified assets''.
            (7) Section 1256(f)(5) is amended by striking ``stock or 
        securities'' and inserting ``specified assets''.
            (8) Section 6045(g)(2)(B)(ii) is amended--
                    (A) by striking ``stock or securities'' and 
                inserting ``specified assets'', and
                    (B) by striking ``identical securities'' and 
                inserting ``identical specified assets''.
    (e) Effective Date.--The amendments made by this section shall 
apply to dispositions after the date of the introduction of this Act.
    (f) Transition Rule Relating to Broker Reporting.--For purposes of 
section 6045 of the Internal Revenue Code of 1986, in the case of the 
sale or other disposition before January 1, 2028, of a traded digital 
asset to which section 1091 would not have applied but for the 
amendments made by this section, the customer's adjusted basis may be 
determined without regard to section 1091 of such Code.

SEC. 302. APPLICATION OF CONSTRUCTIVE SALE RULES TO DIGITAL ASSETS.

    (a) In General.--Section 1259(b)(1) is amended by inserting ``, 
digital asset (other than a qualified U.S. dollar stablecoin)'' after 
``debt instrument''.
    (b) Application of Exception for Sales of Nonpublicly Traded 
Property.--Section 1259(c)(2) is amended by inserting ``or widely 
traded digital asset'' after ``marketable security (as defined in 
section 453(f))''.
    (c) Treatment of Tokenized Digital Assets as Substantially 
Identical to Economically Equivalent Financial Property.--Section 
1259(c) is amended 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 shall be treated as 
        substantially identical to any stock, debt instrument, or 
        partnership interest if such tokenized digital asset is 
        economically equivalent to such stock, debt instrument, or 
        partnership interest.''.
    (d) Functional Currency Other Than the Dollar.--Section 1259(e) is 
amended by adding at the end the following new paragraph:
            ``(4) Qualified u.s. dollar stablecoins and functional 
        currency other than the dollar.--In the case of any taxpayer or 
        qualified business unit (as defined in section 989(a)), a 
        qualified U.S. dollar stablecoin (determined without regard to 
        this paragraph) shall not be treated as a qualified U.S. dollar 
        stablecoin for purposes of this section if such taxpayer or 
        qualified business unit uses a functional currency other than 
        the dollar.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to constructive sales after the date of the introduction of this 
Act.

SEC. 303. APPLICATION OF SUBPART F AND PFIC RULES.

    (a) In General.--Section 954(c)(1)(B) is amended--
            (1) by striking ``or'' at the end of clause (ii),
            (2) by redesignating clause (iii) as clause (iv), and
            (3) by inserting after clause (ii) the following new 
        clause:
                            ``(iii) which is a digital asset, or''.
    (b) Certain Passive Digital Asset Validation Supporting Income.--
Section 954(c)(1) is amended by adding at the end the following new 
subparagraphs:
                    ``(I) Certain passive digital asset validation 
                supporting income.--Income derived from staking, 
                mining, or similar activities in support of the 
                validation of digital asset transactions, unless--
                            ``(i) such income is derived in the active 
                        conduct of a trade or business of validating 
                        such transactions,
                            ``(ii) substantially all of the controlled 
                        foreign corporation's digital assets are 
                        related to such trade or business, and
                            ``(iii) substantially all of the activities 
                        of such trade or business occur in the same 
                        country as the country in which such 
                        corporation is created or organized (or in the 
                        case of a qualified business unit described in 
                        section 989(a), is attributable to activities 
                        of the unit in the country in which the unit 
                        both maintains its principal office and 
                        conducts substantial business activity).
                    ``(J) Certain payments pursuant to digital asset 
                lending agreements.--In the case of an agreement 
                described in section 1058(a) pursuant to which traded 
                digital assets are transferred, any payment made 
                pursuant to such agreement other than any payment 
                described in section 1058(b)(1).''.
    (c) Exception for Dealers.--Section 954(c)(2)(C) is amended--
            (1) in clause (i)--
                    (A) by striking ``or (G)'' and inserting ``(G), or 
                (I)'', and
                    (B) by striking ``and'' at the end,
            (2) by striking the period at the end of clause (ii) and 
        inserting ``, and'', and
            (3) by adding at the end the following new clause:
                            ``(iii) if such dealer is a dealer in 
                        covered digital assets (within the meaning of 
                        section 475), any interest or dividend (or 
                        equivalent amount described in subparagraph (E) 
                        or (G) of paragraph (1)) or income described in 
                        paragraph (1)(I), from any transaction 
                        (including any hedging transaction) entered 
                        into in the ordinary course of such dealer's 
                        trade or business as such a dealer in covered 
                        digital assets, but only if the income from the 
                        transaction is attributable to activities of 
                        the dealer in the country under the laws of 
                        which the dealer is created or organized (or in 
                        the case of a qualified business unit described 
                        in section 989(a), is attributable to 
                        activities of the unit in the country in which 
                        the unit both maintains its principal office 
                        and conducts substantial business activity).''.
    (d) Regulations.--The Secretary of the Treasury shall, not later 
than 12 months after the date of the enactment of this Act, issue such 
regulations or other guidance (under the authority granted to such 
Secretary under section 7805 of the Internal Revenue Code of 1986) to 
clarify the appropriate tax treatment of certain foreign entities (and 
United States persons related to such entities or involved in the 
governance of such entities) established in connection with 
organizations commonly referred to as decentralized autonomous 
organizations, which are established in a foreign country as a 
foundation under foreign law (or other similar structure with a 
purported purpose other than profit), including--
            (1) clarifying the methods by which such foreign entities 
        may reorganize as domestic corporations under subchapter C of 
        chapter 1 of such Code, and
            (2) providing, in appropriate circumstances, temporary safe 
        harbors to encourage such foreign entities (which were 
        organized before the date of the introduction of this Act) to 
        complete such reorganizations promptly after the enactment of 
        this Act.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations ending after the date of 
the enactment of this Act.

SEC. 304. RULES RELATED TO POSSESSIONS FOR DETERMINING SOURCE OF GAIN 
              OR LOSS ON DISPOSITION OF TRADED DIGITAL ASSETS.

    (a) Reporting Requirement.--Section 937(c) is amended by adding at 
the end the following new paragraph:
            ``(3) Special rules for traded digital assets.--
                    ``(A) In general.--If an individual required to 
                file a specified notice under paragraph (1) is a 
                specified possession resident individual (as defined in 
                subsection (d)(3)) for the taxable year to which such 
                notice relates, such notice shall include the fair 
                market value and basis of each traded digital asset 
                property held by the taxpayer as of the close of the 
                preceding taxable year.
                    ``(B) De minimis exception.--Subparagraphs (A) and 
                (E) shall not apply if the aggregate fair market value 
                of traded digital asset property which would (but for 
                this subparagraph) be required to be included in a 
                notice under such subparagraph (A) or (E), as the case 
                may be, does not exceed $10,000.
                    ``(C) Specified notice.--For purposes of this 
                paragraph, the term `specified notice' means a notice 
                required under paragraph (1) by reason of the 
                individual taking the position for United States income 
                tax reporting purposes that the individual became a 
                bona fide resident of a possession specified in 
                subsection (a)(1).
                    ``(D) Traded digital asset property.--For purposes 
                of this paragraph, the term `traded digital asset 
                property' has the meaning given such term in subsection 
                (d)(5).
                    ``(E) Transition rule.--In the case of an 
                individual who was required to file a specified notice 
                under paragraph (1) with respect to one of the 9 
                taxable years immediately preceding the first taxable 
                year of the taxpayer beginning after December 31, 2026, 
                and who was a specified possession resident individual 
                (as defined in subsection (d)(3)) for such taxable 
                year, such individual shall file a notice with the 
                Secretary stating the fair market value and basis 
                (determined as of the last day of the taxable year 
                preceding the taxable year to which such notice 
                relates) of each traded digital asset property (as 
                defined in subsection (d)(5)) that was held by the 
                taxpayer both on such last day and on January 1, 2027. 
                The notice required under the preceding sentence shall 
                be filed with the Secretary not later than the earlier 
                of--
                            ``(i) the due date of the taxpayer's return 
                        of tax for the taxpayer's first taxable year 
                        beginning after December 31, 2026, during which 
                        the taxpayer disposes of any traded digital 
                        asset property with respect to which 
                        information is required to be included in such 
                        notice, and
                            ``(ii) such date as the Secretary may 
                        specify under subsection (d)(6)(B)(i).''.
    (b) Special Rules for Determining Source.--Section 937 is amended 
by adding at the end the following new subsection:
    ``(d) Special Rules for Traded Digital Assets.--
            ``(1) In general.--Notwithstanding subsection (b)(1) (and 
        except as provided in subsection (b)(2)), in the case of any 
        specified possession resident individual for any taxable year, 
        any gain recognized (directly or indirectly) on the disposition 
        of traded digital asset property during such taxable year--
                    ``(A) shall, except as provided in subparagraph 
                (B), be treated as gain from sources within the United 
                States, and
                    ``(B) shall be treated as gain from sources within 
                the relevant possession (and not from sources within 
                the United States) to the extent that the taxpayer--
                            ``(i) timely provided the information 
                        specified in subsection (c)(3) to the Secretary 
                        with respect to such property, and
                            ``(ii) demonstrates to the satisfaction of 
                        the Secretary that such gain is properly 
                        attributable to the increase in the value of 
                        such property during periods that such 
                        individual was a bona fide resident of such 
                        possession.
            ``(2) Election for widely traded digital assets.--
                    ``(A) In general.--In the case of any electing 
                individual--
                            ``(i) such individual shall recognize gain 
                        on any widely traded digital assets held by 
                        such individual as of the close of the taxable 
                        year preceding the taxable year described in 
                        subparagraph (B) as if such assets were sold 
                        for their fair market value as of such time,
                            ``(ii) proper adjustment shall be made in 
                        the amount of any gain or loss subsequently 
                        realized for gain taken into account under 
                        clause (i), and
                            ``(iii) paragraph (1) shall not apply to 
                        any disposition of a widely traded digital 
                        asset by such taxpayer (without regard to 
                        whether clause (i) applied to such asset).
                    ``(B) Electing individual.--For purposes of this 
                paragraph, the term `electing individual' means any 
                specified possession resident individual who elects (in 
                such manner as the Secretary may provide) the 
                application of this paragraph not later than the due 
                date for the return of tax for the taxable year for 
                which such individual first becomes a bona fide 
                resident of the relevant possession.
            ``(3) Specified possession resident individual.--For 
        purposes of this subsection, the term `specified possession 
        resident individual' means, with respect to any taxable year, 
        any citizen of the United States who--
                    ``(A) is a bona fide resident of Guam, American 
                Samoa, the Northern Mariana Islands, Puerto Rico, or 
                the Virgin Islands for such taxable year, and
                    ``(B) was a resident of the United States at any 
                time during the preceding 10 taxable years.
            ``(4) Relevant possession.--For purposes of this 
        subsection, the term `relevant possession' means, with respect 
        to any specified possession resident individual for any taxable 
        year, the possession referred to in paragraph (3)(A) with 
        respect to which such individual is a bona fide resident for 
        such taxable year.
            ``(5) Traded digital asset property.--For purposes of this 
        subsection, the term `traded digital asset property' means--
                    ``(A) any traded digital asset,
                    ``(B) any notional principal contract with respect 
                to a traded digital asset,
                    ``(C) any evidence of an interest in, or a 
                derivative instrument in, any traded digital asset 
                described in subparagraph (A) or (B), including any 
                option, forward contract, futures contract, short 
                position, and any similar instrument in such traded 
                digital asset,
                    ``(D) to the extent provided by the Secretary, any 
                position which--
                            ``(i) is not a traded digital asset 
                        property described in subparagraph (A), (B), or 
                        (C), and
                            ``(ii) is a hedge with respect to such a 
                        traded digital asset property, or
                    ``(E) any interest in any entity if--
                            ``(i) the taxpayer contributed any traded 
                        digital asset to such entity (directly or 
                        indirectly), or
                            ``(ii) more than 25 percent of the value of 
                        such entity is derived (directly or indirectly) 
                        from traded digital assets (other than 
                        qualified U.S. dollar stablecoins), determined 
                        without regard to any assets acquired by such 
                        entity as part of a plan a principal purpose of 
                        which is to prevent interests in such entity 
                        from being treated as traded digital assets for 
                        purposes of this section.
            ``(6) Regulations.--The Secretary shall issue regulations 
        or other guidance as may be necessary or appropriate to carry 
        out the purposes of this subsection, including regulations or 
        other guidance--
                    ``(A) treating gain on dispositions of traded 
                digital asset property by a partnership as described in 
                section 702(a)(7) to the extent such gain is taken into 
                account (directly or indirectly) in the distributive 
                share of any specified possession resident individual,
                    ``(B) providing for the appropriate allocation of 
                losses on the disposition of traded digital asset 
                property with respect to specified possession resident 
                individuals, and
                    ``(C) providing appropriate transition rules for 
                individuals who first became a bona fide resident of 
                the relevant possession during one of the 9 taxable 
                years preceding the first taxable year of the taxpayer 
                beginning after December 31, 2026, including 
                alternative rules--
                            ``(i) for timely providing the information 
                        described in subsection (c)(3),
                            ``(ii) for timely making the election 
                        described in paragraph (2)(B), and
                            ``(iii) for applying paragraph (2)(A)--
                                    ``(I) with respect to the taxable 
                                year for which the election is timely 
                                made under clause (ii) of this 
                                subparagraph, and
                                    ``(II) only to widely traded 
                                digital assets acquired before becoming 
                                a bona fide resident of the relevant 
                                possession and not disposed of before 
                                January 1, 2027.''.
    (c) Limitation on Assessment and Collection.--Section 6501(c)(8)(A) 
is amended by inserting ``937(c)(3),'' before ``1298(f),''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2026.

SEC. 305. APPLICATION OF REGISTRATION-REQUIRED OBLIGATION RULES.

    (a) Exception for Qualified U.S. Dollar Stablecoins.--Section 
163(f)(2)(A) 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 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 the introduction 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 the 
        introduction of this Act.

SEC. 306. CERTAIN RULES RELATED TO CHARACTER OF GAINS AND LOSSES 
              RELATING TO DIGITAL ASSETS.

    (a) Application of Worthless Asset Rules.--
            (1) In general.--Section 165 is amended by redesignating 
        subsection (m) as subsection (n) and by inserting after 
        subsection (l) the following new subsection:
    ``(m) Worthless Digital Assets.--If any digital asset (other than a 
tokenized digital asset described in subsection (g)(2)(D)) becomes 
worthless during the taxable year, the loss resulting therefrom shall, 
for purposes of this subtitle, be treated as a loss from the sale or 
exchange, on the last day of the taxable year, of such digital 
asset.''.
            (2) Certain tokenized securities.--Section 165(g)(2) is 
        amended--
                    (A) by striking the semicolon at the end of 
                subparagraph (A) and inserting a comma,
                    (B) by striking ``; or'' at the end of subparagraph 
                (B) and inserting a comma,
                    (C) by striking the period at the end of 
                subparagraph (C) and inserting ``, or'', and
                    (D) by adding at the end the following new 
                subparagraph:
                    ``(D) a tokenized digital asset that is 
                economically equivalent to a security described in 
                subparagraph (A), (B), or (C).''.
    (b) Application of Rules for Futures Contracts.--
            (1) In general.--Section 1234B(c) is amended by striking 
        all that precedes ``any security future (as defined'' and 
        inserting the following:
    ``(c) Specified Asset Futures Contract.--For purposes of this 
section--
            ``(1) In general.--The term `specified asset futures 
        contract' means--
                    ``(A) any securities futures contract, and
                    ``(B) any futures contract in a digital asset.
            ``(2) Securities futures contract.--The term `securities 
        futures contract' means''.
            (2) Conforming amendments.--
                    (A) Section 1234A(1) is amended by striking 
                ``securities futures contract'' and inserting 
                ``specified asset futures contract''.
                    (B) Subsections (a)(1), (b), and (d) of section 
                1234B are each amended by striking ``securities futures 
                contract'' and inserting ``specified asset futures 
                contract''.
                    (C) Section 1234B(e) is amended by striking 
                ``securities futures contracts'' and inserting 
                ``specified asset futures contracts''.
                    (D) The heading of section 1234B is amended by 
                striking ``Securities Futures Contracts'' and inserting 
                ``specified asset futures contracts''.
                    (E) The item relating to section 1234B in the table 
                of sections for part IV of subchapter P of chapter 1 is 
                amended by striking ``securities futures contracts'' 
                and inserting ``specified asset futures contracts''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 307. MISCELLANEOUS PROVISIONS.

    (a) Distributions of Traded Digital Assets From a Partnership to a 
Partner.--
            (1) Traded digital assets treated as marketable 
        securities.--Section 731(c)(2)(A) is amended--
                    (A) by striking ``means financial instruments'' and 
                inserting ``means--
                            ``(i) financial instruments'',
                    (B) by striking the period at the end and inserting 
                ``, and'', and
                    (C) by adding at the end the following new clause:
                            ``(ii) traded digital assets (determined 
                        without regard to clause (iii) of section 
                        7701(p)(2)(A)) other than specified stablecoins 
                        (as defined in subsection (d)(4)(A)).''.
            (2) Treatment of distributions of specified stablecoins.--
        Section 731 is amended--
                    (A) by redesignating subsection (d) as subsection 
                (e), and
                    (B) by inserting after subsection (c) the following 
                new subsection:
    ``(d) Treatment of Specified Stablecoins.--
            ``(1) In general.--For purposes of subsection (a)(1) and 
        section 737--
                    ``(A) the term `money' includes specified 
                stablecoins, and
                    ``(B) such specified stablecoins shall be taken 
                into account at their fair market value as of the date 
                of the distribution.
            ``(2) Basis of securities distributed.--Except as otherwise 
        provided by the Secretary--
                    ``(A) In general.--For purposes of subsection 
                (c)(4), the term `marketable securities' includes 
                specified stablecoins (other than exempt U.S. dollar 
                stablecoins).
                    ``(B) Exempt u.s. dollar stablecoins.--In the case 
                of any exempt U.S. dollar stablecoin, paragraph (1) 
                shall be applied by substituting `sections 732, 733, 
                and 737' for `section 737'.
            ``(3) Application of certain other rules.--Except as 
        otherwise provided by the Secretary, for purposes of paragraphs 
        (5) and (6) of subsection (c), the term `marketable securities' 
        includes specified stablecoins.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) Specified stablecoin.--The term `specified 
                stablecoin' means any digital asset which is designed 
                to track the value of the functional currency of the 
                partner to which such digital asset is distributed.
                    ``(B) Exempt u.s. dollar stablecoin.--The term 
                `exempt U.S. dollar stablecoin' means any specified 
                stablecoin if--
                            ``(i) the functional currency referred to 
                        in subparagraph (A) with respect to such 
                        stablecoin is the dollar, and
                            ``(ii) no gain or loss would have been 
                        recognized by reason of section 1063 if the 
                        partnership had sold such stablecoin for its 
                        redemption value (as defined in section 
                        1063(d)) immediately before distribution.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations or other guidance as may be necessary or 
        appropriate to carry out the purposes of this subsection, 
        including regulations or other guidance to prevent the 
        avoidance of such purposes.''.
            (3) Conforming amendments.--Section 737(e) is amended--
                    (A) by inserting ``and specified stablecoins'' 
                after ``marketable securities'',
                    (B) by striking ``section 731(c)'' and inserting 
                ``section 731'', and
                    (C) by inserting ``and Specified Stablecoins'' 
                after ``Marketable Securities'' in the heading thereof.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to distributions made after December 31, 2026.
    (b) Traded Digital Assets Taken Into Account in Determining 
Investment Company Status.--
            (1) In general.--Section 351(e)(1)(B) is amended--
                    (A) by redesignating clauses (iv) through (viii) as 
                clauses (v) through (ix), respectively, and
                    (B) by inserting after clause (iii) the following 
                new clause:
                            ``(iv) any traded digital asset (determined 
                        without regard to clause (iii) of section 
                        7701(p)(2)(A)),''.
            (2) Conforming amendments.--
                    (A) Section 351(e)(1)(B)(v) (as redesignated by 
                paragraph (1)) is amended by striking ``clause (v) or 
                (viii)'' and inserting ``clause (vi) or (ix)''.
                    (B) Section 351(e)(1)(B)(vii) (as redesignated by 
                paragraph (1)) is amended by striking ``clause (viii)'' 
                and inserting ``clause (ix)''.
                    (C) Section 351(e)(1)(B)(viii) (as redesignated by 
                paragraph (1)) is amended by striking ``clauses (i) 
                through (v) or clause (viii)'' and inserting ``clauses 
                (i) through (vi) or clause (ix)''.
                    (D) Section 351(e)(1)(B) is amended in the matter 
                following clause (ix) (as redesignated by paragraph 
                (1)) by striking ``clauses (i) through (v)'' and 
                inserting ``clauses (i) through (vi)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to transfers made after December 31, 2026.
    (c) Certain Stablecoin Lending Treated as Indebtedness.--
            (1) In general.--Subpart D of part V of subchapter P of 
        chapter 1 is amended by adding at the end the following new 
        section:

``SEC. 1289. STABLECOIN LENDING.

    ``(a) In General.--Except as otherwise provided by the Secretary, 
for purposes of this title, the lending, rental, sale and repurchase, 
or other transfer of specified stablecoins shall be treated as 
indebtedness (and transfers made pursuant to such lending, rental, sale 
and repurchase, or other transfer shall be treated as interest) in the 
same manner, and to the same extent, as the equivalent transfer of 
money.
    ``(b) Specified Stablecoin.--Except as otherwise provided by the 
Secretary, for purposes of this section, the term `specified 
stablecoin' means any digital asset which is designed to track the 
value of any currency or currencies.
    ``(c) Special Rule for Sale and Repurchases Involving Currency or 
Different Types of Specified Stablecoin.--Except as otherwise provided 
by the Secretary, for purposes of this section, a sale (or repurchase) 
of a specified stablecoin in connection with a repurchase (or sale) of 
currency or a different type (determined under rules similar to the 
rules of section 1051(b)(2)) of specified stablecoin shall be treated 
as a sale and repurchase of a specified stablecoin.
    ``(d) Regulations.--The Secretary may issue such regulations or 
other guidance as may be necessary or appropriate to carry out the 
purposes of this section, including regulations or other guidance 
providing rules for determining the source of interest income if the 
payor is unknown and backup withholding and reporting rules if the 
recipient of an interest payment is unknown.
    ``(e) Cross Reference.--For special rules applicable to transfers 
of specified stablecoins that are indebtedness under this section, see 
sections 1271 through 1288.''.
            (2) Clerical amendment.--The table of sections for subpart 
        D of part V of subchapter P of chapter 1 is amended by adding 
        at the end the following new item:

``Sec. 1289. Stablecoin lending.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2026.
    (d) Digital Assets Not Treated as Section 197 Intangibles.--
            (1) In general.--Section 197(e) is amended by adding at the 
        end the following new paragraph:
            ``(8) Digital assets.--Except as otherwise provided by the 
        Secretary to prevent abuse, any digital asset.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to digital assets acquired after the date of the 
        introduction of this Act.
    (e) Application of Straddle Rules to Traded Digital Assets, etc.--
            (1) In general.--Section 1092(d)(1) is amended--
                    (A) by striking ``means any'' and inserting 
                ``means--
                    ``(A) any'',
                    (B) by striking the period at the end and inserting 
                ``, and'', and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(B) any traded digital asset (determined without 
                regard to clause (iii) of section 7701(p)(2)(A)).''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to positions established after the date of the 
        enactment of this Act.
    (f) Backup Withholding on Illiquid Digital Assets Paid for Digital 
Asset Validation Supporting Activities.--
            (1) In general.--Section 3406(h) is amended by adding at 
        the end the following new paragraph:
            ``(11) Certain illiquid digital assets paid for digital 
        asset validation supporting activities.--
                    ``(A) In general.--In the case of an other 
                reportable payment that consists of specified illiquid 
                digital assets, except to the extent provided by the 
                Secretary in regulations or other guidance, the payor 
                shall be treated as having deducted and withheld from 
                such payment the amount specified in subsection (a)(1) 
                (and the proceeds of the liquidation referred to in 
                clause (ii) shall be treated as the amount deducted and 
                withheld under subsection (a)(1)) if such payor--
                            ``(i) holds the applicable percentage of 
                        such specified illiquid digital assets 
                        (hereafter referred to as the `withheld amount 
                        of digital assets') in a manner that prevents 
                        the recipient from using or withdrawing the 
                        withheld amount of digital assets,
                            ``(ii) liquidates the withheld amount of 
                        digital assets at fair market value not later 
                        than the close of the first business day 
                        following the close of such fixed period, and
                            ``(iii) deposits the proceeds of such 
                        liquidation at the time and in the same manner 
                        as would be required with respect to an amount 
                        withheld on the date of such liquidation.
                    ``(B) Specified illiquid digital asset.--For 
                purposes of this paragraph, the term `specified 
                illiquid digital assets' means digital assets that 
                are--
                            ``(i) transferred to the recipient in 
                        exchange for digital asset validation 
                        supporting activities, and
                            ``(ii) restricted from being sold, 
                        exchanged, transferred, or otherwise disposed 
                        of, for a fixed period that ends after the date 
                        of such transfer.
                    ``(C) Applicable percentage.--For purposes of this 
                paragraph, the term `applicable percentage' means the 
                rate of tax referred to in subsection (a)(1), expressed 
                as a percentage.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to specified illiquid digital assets received after 
        December 31, 2026.

      TITLE IV--CLARIFYING THE TAX TREATMENT OF MINING AND STAKING

SEC. 401. SOURCE AND CHARACTER OF MINING AND STAKING INCOME.

    (a) Determination of Source.--Section 863 is amended by adding at 
the end the following new subsection:
    ``(f) Treatment of Income From Digital Asset Validation Supporting 
Activities.--
            ``(1) In general.--Income from digital asset validation 
        supporting activities shall be sourced--
                    ``(A) in the United States if the taxpayer is a 
                United States resident, and
                    ``(B) outside the United States if the taxpayer is 
                a nonresident.
            ``(2) Treatment of branches.--
                    ``(A) Foreign branches.--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.--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 may 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) 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.
            ``(4) United states resident; nonresident.--For purposes of 
        this subsection, the terms `United States resident' and 
        `nonresident' have the meaning given such terms, respectively, 
        in section 865(g)(1), determined after application of section 
        865(g)(2).''.
    (b) Determination of Character.--
            (1) In general.--Part IV of subchapter P of chapter 1 is 
        amended by adding at the end the following new section:

``SEC. 1261. INCOME FROM DIGITAL ASSET VALIDATION SUPPORTING 
              ACTIVITIES.

    ``Income from digital asset validation supporting activities shall 
be treated as ordinary income.''.
            (2) Clerical amendment.--The table of sections for part IV 
        of subchapter P of chapter 1 is amended by adding at the end 
        the following new item:

``Sec. 1261. Income from digital asset validation supporting 
                            activities.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 402. INVESTMENT TRUSTS ENGAGED IN DIGITAL ASSET STAKING.

    (a) In General.--Section 7701(p), as added by section 601 of this 
Act, is amended by adding at the end the following new paragraph:
            ``(13) Status of trusts engaged in digital asset staking.--
                    ``(A) In general.--An entity or arrangement shall 
                not fail to be treated as a trust for purposes of this 
                title solely by reason of the power of the trustee of 
                such entity or under such arrangement to--
                            ``(i) engage in staking digital assets held 
                        by the trust,
                            ``(ii) retain or distribute digital assets 
                        received in connection with such staking,
                            ``(iii) determine which digital assets held 
                        by the trust to use in staking,
                            ``(iv) to the extent that any digital 
                        assets held by the trust are committed to 
                        staking, take measures necessary or appropriate 
                        to ensure that the trust has sufficient 
                        liquidity to make distributions in redemption 
                        of interests in the trust, including by 
                        borrowing or entering into an agreement to 
                        borrow money or digital assets to make such 
                        distributions, and
                            ``(v) perform acts related to the exercise 
                        of the powers described in the preceding 
                        clauses of this subparagraph.
                    ``(B) Not to apply to validating trade or 
                business.--Subparagraph (A) shall not apply in the case 
                of an entity or arrangement engaged in the active 
                conduct of a trade or business of validating digital 
                asset transactions.
                    ``(C) Regulations.--The Secretary may prescribe 
                such regulations or other guidance as may be necessary 
                or appropriate to carry out the purposes of this 
                paragraph.''.
    (b) Clerical Amendment.--The heading for section 7701(p), as added 
by section 601 of this Act, is amended by inserting ``and Special 
Rules'' after ``Definitions''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

   TITLE V--ENSURING THAT OWNERS AND USERS OF DIGITAL ASSETS FACE AN 
                   APPROPRIATE TAX COMPLIANCE BURDEN

SEC. 501. BROKER REQUIREMENTS.

    (a) In General.--
            (1) Exception for qualified u.s. dollar stablecoins 
        acquired at redemption value.--Section 6045(g)(3)(D) is amended 
        to read as follows:
                    ``(D) Specified digital asset.--The term `specified 
                digital asset' means any digital asset other than a 
                qualified U.S. dollar stablecoin the customer's basis 
                in which at the time of acquisition is at least 99.5 
                percent of such stablecoin's redemption value (as 
                defined in section 1063(d)).''.
            (2) Conforming amendments.--
                    (A) Section 6045(c)(1)(D) is amended by striking 
                ``digital assets'' and inserting ``specified digital 
                assets''.
                    (B) Subparagraph (B)(iv) and subparagraph (C)(iii) 
                of section 6045(g)(3) are each amended by striking 
                ``digital asset'' and inserting ``specified digital 
                asset''.
                    (C) Section 6050I(d)(3) is amended by striking 
                ``(as defined in section 6045(g)(3)(D))''.
            (3) Transition rules.--The Secretary of the Treasury, or 
        the Secretary's delegate, may, consistent with the purposes of 
        section 6045(g) of the Internal Revenue Code of 1986--
                    (A) provide temporary safe harbor rules for brokers 
                that address periods before the date that is 18 months 
                after the issuance of final regulations or other 
                guidance under section 1063(e) of such Code, and
                    (B) provide rules that allow brokers to treat, for 
                purposes of section 6045(g)(3)(D) of such Code (as 
                amended by this section), the customer's basis in a 
                qualified U.S. dollar stablecoin (as defined in section 
                7701(p)(7) of such Code) at time of acquisition as 
                being equal to the redemption value (as defined in 
                section 1063(d)) of such stablecoin if--
                            (i) such stablecoin was acquired before the 
                        date that is 18 months after the issuance of 
                        final regulations or other guidance under 
                        section 1063(e) of such Code, and
                            (ii) the customer's adjusted basis 
                        (determined in accordance with section 
                        6045(g)(2)(B) of such Code) in such stablecoin 
                        as of the later of--
                                    (I) December 31, 2026, or
                                    (II) the date that such stablecoin 
                                first became a qualified U.S. dollar 
                                stablecoin (as so defined),
                        is at least 99.5 percent of such redemption 
                        value.
    (b) Special Rules for Digital Assets Used to Pay De Minimis Digital 
Asset Fees.--Section 6045(g) is amended by adding at the end the 
following new paragraph:
            ``(7) Special rules for digital assets used to pay de 
        minimis digital asset fees.--
                    ``(A) In general.--Except as otherwise provided by 
                the Secretary, in the case of the disposition of a 
                digital asset with respect to which no gain or loss is 
                recognized by reason of section 1044(a)--
                            ``(i) except as provided in clause (ii), 
                        subsection (a) shall not apply to such 
                        disposition, and
                            ``(ii) the broker shall include in a return 
                        under subsection (a) such aggregate information 
                        relating to such dispositions of the taxpayer 
                        as the Secretary determines necessary or 
                        appropriate, including for purposes of 
                        verifying the taxpayer's basis in digital 
                        assets held by the taxpayer.
                    ``(B) Application of de minimis exception.--If the 
                broker has been notified by the taxpayer or the 
                Secretary that the exception described in section 
                1044(f)(1)(B) applies to such taxpayer, the broker may 
                treat such exception as continuing to apply with 
                respect to such taxpayer for any calendar year 
                (hereafter in this subparagraph referred to as the 
                `current calendar year') unless--
                            ``(i) such taxpayer had more than 5,000 
                        digital asset transactions with such broker 
                        during any of the 5 preceding calendar years 
                        and the taxpayer has not notified the broker 
                        that such exception applies to such taxpayer 
                        for the current calendar year,
                            ``(ii) such taxpayer or the Secretary 
                        notifies such broker that such exception does 
                        not apply to such taxpayer, or
                            ``(iii) such broker otherwise knows, or has 
                        reason to know, that such exception does not 
                        apply to such taxpayer.''.
    (c) Special Rules for Simplified Accounting for Widely Traded 
Digital Assets.--Section 6045(g), as amended by subsection (b), is 
amended by adding at the end the following new paragraph:
            ``(8) Special rules for simplified accounting for widely 
        traded digital assets.--
                    ``(A) In general.--Except as otherwise provided by 
                the Secretary, in the case of widely traded digital 
                assets with respect to which an election under section 
                1051 applies--
                            ``(i) except as provided in clause (ii), 
                        subsection (a) shall not apply to dispositions 
                        of such assets, and
                            ``(ii) the broker shall include in a return 
                        under subsection (a) such information with 
                        respect to each designated type of such assets 
                        (within the meaning of section 1051) as the 
                        Secretary may provide, including--
                                    ``(I) aggregate reporting with 
                                respect to sales, exchanges, 
                                dispositions, and acquisitions of 
                                assets of such designated type 
                                (including net gain or loss thereon),
                                    ``(II) the fair market value of 
                                assets of such designated type held by 
                                the taxpayer as of the beginning and 
                                end of the calendar year, and
                                    ``(III) such other information as 
                                the Secretary may require with respect 
                                to assets of such designated type for 
                                purposes of the administration of 
                                section 1051.
                    ``(B) Determination of election based on broker 
                notification.--For purposes of subparagraph (A), the 
                broker shall take into account any election under 
                section 1051 (and any revocation of such election) if 
                (and only if) the taxpayer or the Secretary notifies 
                such broker of such election (or revocation) or such 
                broker otherwise knows, or has reason to know, of such 
                election (or revocation).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to returns required to be filed, and statements required to be 
furnished, after December 31, 2027.

SEC. 502. ESTABLISHMENT OF DIGITAL ASSET VOLUNTARY DISCLOSURE PROGRAM.

    (a) In General.--Not later than 12 months after the date of the 
enactment of this Act, the Secretary shall establish the Digital Asset 
Voluntary Disclosure Program (hereinafter referred to as the 
``program'') to allow eligible taxpayers to remedy digital asset 
violations by fulfilling the remedial requirements described in 
subsection (b).
    (b) Remedial Requirements.--The remedial requirements of this 
subsection are fulfilled if, at such time and in such manner as the 
Secretary determines appropriate, the eligible taxpayer--
            (1) files, not later than 24 months after the date on which 
        the Secretary establishes the program, an amended return for 
        each applicable taxable year with respect to which the proper 
        amount of any tax item is affected by any digital asset 
        violation,
            (2) provides immediate payment, or the Secretary accepts 
        from such taxpayer (and does not thereafter terminate) an 
        installment agreement under section 6159 to provide payment, 
        of--
                    (A) the aggregate amount of the deficiency of tax 
                (including any interest thereon) attributable to all 
                digital asset violations, and
                    (B) the digital asset violation penalty, and
            (3) timely fulfills such other requirements, and provides 
        such other information, as the Secretary determines 
        appropriate.
    (c) Benefits.--If the remedial requirements described in subsection 
(b) have been fulfilled to the satisfaction of the Secretary--
            (1) in the case of an uncertified eligible taxpayer--
                    (A) the Secretary shall not assert any further 
                penalties under sections 6662 and 6663 with respect to 
                any deficiency of tax attributable to any digital asset 
                violation properly disclosed by the taxpayer under the 
                program, and
                    (B) the Secretary shall not use any information 
                properly disclosed by the taxpayer under the program 
                for purposes of referring such taxpayer for criminal 
                investigation, or prosecuting such taxpayer, under 
                section 7201, 7203, or 7206 (other than paragraph (2) 
                thereof) with respect to any digital asset violation 
                properly disclosed by the taxpayer under the program, 
                and
            (2) in the case of a certified eligible taxpayer, the 
        Secretary shall not assert any further penalties under section 
        6662 with respect to any deficiency of tax attributable to any 
        digital asset violation properly disclosed by the taxpayer 
        under the program.
    (d) Definitions.--For purposes of this section--
            (1) Eligible taxpayer.--
                    (A) In general.--The term ``eligible taxpayer'' 
                means any uncertified eligible taxpayer or certified 
                eligible taxpayer.
                    (B) Uncertified eligible taxpayer.--The term 
                ``uncertified eligible taxpayer'' means any taxpayer 
                who--
                            (i) committed any digital asset violation 
                        during the applicable period,
                            (ii) submits (in such form and manner as 
                        the Secretary may prescribe), not later than 24 
                        months after the date on which the Secretary 
                        establishes the program, an application which 
                        is approved by the Secretary to participate 
                        therein,
                            (iii) does not certify, under penalty of 
                        perjury, that no digital asset violation 
                        occurring during the applicable period was 
                        committed fraudulently or willfully, and
                            (iv) if subject to--
                                    (I) any ongoing criminal 
                                investigation with respect to any 
                                digital asset violation, or
                                    (II) any ongoing audit or 
                                examination by the Internal Revenue 
                                Service with respect to any applicable 
                                taxable year,
                        has requested and been issued a waiver by the 
                        Secretary to nonetheless participate in the 
                        program. For purposes of clause (ii), the 
                        Secretary may impose a reasonable fee for 
                        submission of an application to participate in 
                        the program.
                    (C) Certified eligible taxpayer.--The term 
                ``certified eligible taxpayer'' means any taxpayer 
                who--
                            (i) committed any digital asset violation 
                        during the applicable period,
                            (ii) as an addendum to each amended return 
                        filed under subsection (b)(1) (or at such other 
                        time and in such other form and manner as the 
                        Secretary may prescribe), certifies, under 
                        penalty of perjury, that no digital asset 
                        violation occurring during the applicable 
                        period was committed fraudulently or willfully, 
                        and
                            (iii) if subject to any ongoing audit or 
                        examination by the Internal Revenue Service 
                        with respect to any applicable taxable year, 
                        has requested and been issued a waiver by the 
                        Secretary to nonetheless participate in the 
                        program.
            (2) Digital asset violation.--
                    (A) In general.--The term ``digital asset 
                violation'' means, with respect to any eligible 
                taxpayer, any instance in which such taxpayer failed to 
                comply with a requirement under the Internal Revenue 
                Code of 1986 if--
                            (i) such instance relates to the ownership 
                        of, or transactions in, digital assets during 
                        the applicable period, and
                            (ii) such failure affects the proper amount 
                        of any tax item with respect to any applicable 
                        taxable year.
                    (B) Digital asset.--For purposes of subparagraph 
                (A), the term ``digital asset'' means, except as 
                otherwise provided by the Secretary, any digital 
                representation of value which is recorded on a 
                cryptographically secured distributed ledger or any 
                similar technology as specified by the Secretary.
            (3) Applicable period.--The term ``applicable period'' 
        means, with respect to any eligible taxpayer, the period--
                    (A) beginning with the later of--
                            (i) the taxpayer's first taxable year with 
                        respect to which the proper amount of any tax 
                        item is affected by any digital asset 
                        violation, or
                            (ii) the taxpayer's first taxable year with 
                        respect to which a return of tax was filed 
                        during the 6-year period (3-year period in the 
                        case of a certified eligible taxpayer) 
                        immediately preceding the date of the enactment 
                        of this Act, and
                    (B) ending with the taxpayer's last taxable year 
                ending before the date of the enactment of this Act.
            (4) Applicable taxable year.--The term ``applicable taxable 
        year'' means, with respect to any eligible taxpayer, any 
        taxable year during the applicable period with respect to such 
        taxpayer.
            (5) Digital asset violation penalty.--
                    (A) In general.--The digital asset violation 
                penalty is an amount equal to the sum of--
                            (i) 25 percent (0 percent in the case of a 
                        certified eligible taxpayer) of the aggregate 
                        amount of so much of the deficiency of tax 
                        attributable to all digital asset violations as 
                        does not exceed $25,000 with respect to each 
                        applicable taxable year, plus
                            (ii) 40 percent (5 percent in the case of a 
                        certified eligible taxpayer) of the aggregate 
                        amount of so much of the deficiency of tax 
                        attributable to all digital asset violations as 
                        exceeds $25,000 with respect to each applicable 
                        taxable year.
                    (B) Special rules for amended returns filed after 
                certain date.--In the case of an amended return with 
                respect to any applicable taxable year filed under 
                subsection (b)(1) after the date that is 12 months 
                after the date on which the Secretary establishes the 
                program, subparagraph (A) shall be applied with respect 
                to such applicable taxable year--
                            (i) by substituting ``40 percent'' in lieu 
                        of ``25 percent'' in clause (i) thereof,
                            (ii) by substituting ``5 percent'' in lieu 
                        of ``0 percent'' in clause (i) thereof,
                            (iii) by substituting ``50 percent'' in 
                        lieu of ``40 percent'' in clause (ii) thereof,
                            (iv) by substituting ``10 percent'' in lieu 
                        of ``5 percent'' in clause (ii) thereof, and
                            (v) in the case of a certified eligible 
                        taxpayer, by substituting ``$100,000'' in lieu 
                        of ``$25,000'' each place it appears.
                    (C) Waiver by secretary.--The Secretary may waive 
                part or all of the digital asset violation penalty to 
                the extent the Secretary determines that such a waiver 
                would be in the interests of justice and the proper 
                administration of the internal revenue laws, including 
                in cases involving digital asset violations 
                attributable to reasonable cause (as determined by the 
                Secretary).
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or the Secretary's delegate.
    (e) Assessment Authority; Waiver of Restrictions and Limitations on 
Assessment.--For purposes of this section, any deficiency of tax, 
additional tax or amount, or digital asset violation penalty shall be 
assessed, collected, and paid in the same manner as taxes, as provided 
in section 6665(a) (without regard to any restrictions or limitations 
on assessment described in section 6213 or 6501).
    (f) References to Internal Revenue Code of 1986.--Except as 
otherwise expressly provided, whenever in this section a reference is 
made to a section, the reference shall be considered to be made to a 
section of the Internal Revenue Code of 1986.
    (g) Regulatory Authority.--The Secretary shall prescribe such 
regulations or other guidance as may be necessary or appropriate to 
carry out the purposes of this section, including with respect to the 
provision of reasonable assurances to taxpayers that any information 
properly disclosed under the program shall not be used in contravention 
of any benefit described in subsection (c).

SEC. 503. TREASURY STUDY AND REPORT.

    (a) In General.--The Secretary shall perform a study on the 
feasibility of using new digital technologies, including zero-knowledge 
proofs, smart contracts, and other blockchain technology for increased 
compliance, efficiency, and data protection in connection with 
information reporting, withholding, and taxpayer compliance regarding 
digital asset transactions.
    (b) Study Requirements.--In conducting the study under subsection 
(a), the Secretary shall--
            (1) investigate the extent to which such new digital 
        technology can--
                    (A) reduce compliance costs and burden for 
                withholding agents on cross-border transactions 
                involving digital assets,
                    (B) replace traditional information reporting, 
                withholding, transaction reports, and other financial 
                information reporting for digital asset transactions 
                using smart contract based withholding, instantly 
                verified self-reporting with zero-knowledge proofs, or 
                other trustworthy alternatives to existing third-party 
                information collection, withholding, and reporting for 
                on-chain transactions (or to provide an equivalent to 
                such collection and reporting in cases where no 
                intermediary currently provides equivalent data), and
                    (C) improve tax administration, reduce compliance 
                costs, and improve taxpayer data security,
            (2) evaluate the effectiveness of current withholding and 
        backup withholding rules as applied to digital assets 
        (including digital assets derived from staking activities) and 
        assess whether existing timing, liquidity, valuation, and 
        remittance requirements are workable where digital assets may 
        be locked or otherwise unavailable for immediate use,
            (3) identify challenges for payors, withholding agents, and 
        the Internal Revenue Service in applying existing withholding 
        and backup withholding rules and provide recommendations for 
        legislative changes that would improve administration of 
        withholding and backup withholding for digital assets,
            (4) emphasize data security and individual privacy 
        improvements, including reducing identity theft risks from 
        providing sensitive information to parties other than the 
        Internal Revenue Service for reporting purposes, in considering 
        the efficacy of such new digital technologies, and
            (5) coordinate with stakeholders, such as technology 
        developers, industry leaders, and data privacy and consumer 
        protection experts, to identify new digital technologies, that 
        are currently feasible or may be feasible in the near future, 
        to promote efficient tax administration and reduced compliance 
        burden for the digital economy.
    (c) Report to Congress.--Not later than September 30, 2028, the 
Secretary shall submit a written report to the Committee on Ways and 
Means of the House of Representatives and the Committee on Finance of 
the Senate that includes all of the findings of the Secretary with 
respect to the study conducted under subsections (a) and (b). Such 
report shall include a description of--
            (1) the recommendations of the Secretary regarding the 
        adoption of any new digital technologies for the purposes 
        described in subsection (a),
            (2) any legislative changes to the tax laws necessary to 
        implement such recommendations,
            (3) any additional resources required by the Secretary for 
        such implementation, and
            (4) the amount of time required to complete such 
        implementation.
    (d) Secretary.--For purposes of this section, the term 
``Secretary'' means the Secretary of the Treasury or the Secretary's 
delegate.

       TITLE VI--DEFINITIONS; REGULATIONS; RULES OF CONSTRUCTION

SEC. 601. DEFINITIONS.

    Section 7701 is amended--
            (1) by redesignating subsection (p) as subsection (q), and
            (2) by inserting after subsection (o) the following new 
        subsection:
    ``(p) Definitions Related to Digital Assets.--For purposes of this 
title--
            ``(1) Digital asset.--The term `digital asset' means, 
        except as otherwise provided by the Secretary, any digital 
        representation of value which is recorded on a 
        cryptographically secured distributed ledger or any similar 
        technology as specified by the Secretary.
            ``(2) Traded digital asset.--
                    ``(A) In general.--The term `traded digital asset' 
                means, except as otherwise provided by the Secretary to 
                prevent abuse, any digital asset if--
                            ``(i) such asset is fungible,
                            ``(ii) quotations of such asset are readily 
                        available on an exchange (or, in the case of an 
                        exchange that does not provide quotations, such 
                        quotations are readily ascertainable), and
                            ``(iii) such asset is not a tokenized 
                        digital asset.
                    ``(B) Special rule for wrapped digital assets.--In 
                the case of any wrapped digital asset, except as 
                otherwise provided by the Secretary to prevent abuse, 
                such asset shall be treated as a traded digital asset 
                if, and only if, the reference digital asset with 
                respect to such wrapped digital asset is a traded 
                digital asset.
            ``(3) Widely traded digital asset.--
                    ``(A) In general.--The term `widely traded digital 
                asset' means, with respect to any taxpayer for any 
                taxable year and except as otherwise provided by the 
                Secretary to prevent abuse, any traded digital asset 
                if--
                            ``(i) quotations for such asset were 
                        readily available on an exchange for the entire 
                        calendar year which ends in or with the taxable 
                        year preceding such taxable 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 such preceding 
                        taxable year.
                    ``(B) Special rule for wrapped digital assets.--In 
                the case of any wrapped digital asset, except as 
                otherwise provided by the Secretary to prevent abuse, 
                such asset shall be treated as a widely traded digital 
                asset with respect to any taxpayer if, and only if, the 
                reference digital asset with respect to such wrapped 
                digital asset is a widely traded digital asset with 
                respect to such taxpayer.
                    ``(C) Authority to ensure reliable price 
                discovery.--For purposes of subparagraphs (A) and (B), 
                the term `prevent abuse' includes the exclusion of 
                assets that lack reliable price discovery or that the 
                Secretary determines are at risk of price manipulation.
                    ``(D) Authority to adjust requirements.--The 
                Secretary may, by regulation, provide requirements that 
                apply in lieu of one 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 digital asset market structure legislation) 
                that such alternative requirements would more 
                effectively or efficiently identify traded digital 
                assets for which there is consistent and reliable price 
                discovery.
                    ``(E) 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.
            ``(4) Tokenized digital asset.--
                    ``(A) In general.--The term `tokenized digital 
                asset' means any digital asset (other than any 
                qualified U.S. dollar stablecoin) if more than an 
                insignificant portion of the value of such digital 
                asset is derived from anything other than the operation 
                of the cryptographically secured distributed ledger on 
                which such digital asset is recorded (including the 
                protocols applicable to the operation of such ledger 
                with respect to such digital asset).
                    ``(B) Special rule for wrapped digital assets.--In 
                the case of any wrapped digital asset, except as 
                otherwise provided by the Secretary to prevent abuse, 
                such asset shall be treated as a tokenized digital 
                asset if, and only if, the reference digital asset with 
                respect to such wrapped digital asset is a tokenized 
                digital asset.
            ``(5) Wrapped digital asset.--The term `wrapped digital 
        asset' means, except as otherwise provided by the Secretary to 
        prevent abuse, 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.
            ``(6) Reference digital asset.--
                    ``(A) In general.--The term `reference digital 
                asset' means, with respect to any wrapped digital 
                asset, the digital asset referred to in paragraph 
                (5)(A).
                    ``(B) Special rule for rewrappings.--If, but for 
                this subparagraph, the reference digital asset with 
                respect to any wrapped digital asset would be a wrapped 
                digital asset (hereafter referred to in this paragraph 
                as the lower-tier wrapped digital asset)--
                            ``(i) subparagraph (A) shall be applied 
                        with respect to such lower-tier wrapped digital 
                        asset, and
                            ``(ii) the reference digital asset with 
                        respect to such lower-tier wrapped digital 
                        asset shall be treated as the reference digital 
                        asset of such wrapped digital asset.
                    ``(C) Multiple wrappings.-- If, after the 
                application of subparagraph (B), the reference digital 
                asset with respect to the lower-tier wrapped digital 
                asset is a wrapped digital asset, such subparagraph 
                shall be reapplied by treating such lower-tier wrapped 
                digital asset as the wrapped digital asset.
            ``(7) Stablecoin.--
                    ``(A) Qualified u.s. dollar stablecoin.--The term 
                `qualified U.S. dollar stablecoin' means any U.S. 
                dollar stablecoin the issuer of which is--
                            ``(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 paragraph), or
                            ``(ii) a foreign payment stablecoin issuer 
                        (as defined in section 2(12) of the GENIUS Act, 
                        as so in effect) registered with the Office of 
                        the Comptroller of the Currency under the 
                        GENIUS Act (as so in effect).
                    ``(B) U.S. dollar stablecoin.--The term `U.S. 
                dollar stablecoin' means--
                            ``(i) a payment stablecoin (as defined in 
                        section 2(22) of the GENIUS Act (as in effect 
                        on the date of the enactment of this 
                        paragraph), applied by substituting `dollars' 
                        for `monetary value' each place it appears in 
                        such section), and
                            ``(ii) to the extent provided by the 
                        Secretary to prevent abuse, any stablecoin 
                        similar to a payment stablecoin described in 
                        clause (i).
                    ``(C) Publication of list.--The Secretary shall, to 
                the extent feasible, regularly publish a list of 
                qualified U.S. dollar stablecoins.
                    ``(D) Limited authority to treat stablecoins as 
                money.--The Secretary may issue such regulations or 
                other guidance as may be necessary or appropriate to 
                (except as otherwise expressly provided in this 
                title)--
                            ``(i) treat qualified U.S. dollar 
                        stablecoins as dollars, and
                            ``(ii) treat payment stablecoins (as 
                        defined in section 2(22) of the GENIUS Act, as 
                        in effect on the date of the enactment of this 
                        paragraph) other than qualified U.S. dollar 
                        stablecoins as currency if such treatment is 
                        expected to increase net Federal revenues.
            ``(8) Digital asset transaction.--The term `digital asset 
        transaction' means any transfer of a digital asset recorded on 
        the cryptographically secured distributed ledger (or similar 
        technology) referred to in paragraph (1).
            ``(9) Digital asset validation supporting activities.--The 
        term `digital asset validation supporting activities' means 
        staking, mining, or, except as otherwise provided by the 
        Secretary, similar activities in support of the validation of 
        digital asset transactions.
            ``(10) Validation.--The term `validate', and any derivative 
        of such term (including `validation'), when used in connection 
        with a digital asset transaction, includes the processes of 
        proposing transactions for validation and verifying the 
        validation of transactions.
            ``(11) 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) except as otherwise provided by the 
                Secretary, any substantially similar activity.
            ``(12) Mining.--The term `mining', when used in connection 
        with a digital asset, means--
                    ``(A) performing computations, or making available 
                computing power, in support of the validation of 
                digital asset transactions, and
                    ``(B) except as otherwise provided by the 
                Secretary, any substantially similar activity.''.

SEC. 602. REGULATIONS.

    It is the sense of the Congress that the Secretary of the Treasury 
should strongly consider issuing (under the authority of section 7805 
of the Internal Revenue Code of 1986, or other applicable provisions of 
such Code) regulations or other guidance to--
            (1) provide simplified methods for determining basis in 
        digital assets,
            (2) specify appropriate methods for determining the fair 
        market value of illiquid digital assets,
            (3) provide for the appropriate application of section 954 
        of such Code with respect to digital assets, including digital 
        assets which are also securities or commodities,
            (4) provide for the appropriate application of subpart J of 
        part III of subchapter N of chapter 1 of such Code (relating to 
        foreign currency transactions) to digital assets,
            (5) clarify what constitutes the active conduct of a trade 
        or business of validating digital asset transactions (or 
        conducting staking, mining, or similar activities in support of 
        validating digital asset transactions),
            (6) clarify the application of the provisions of such Code 
        to a digital asset that is also a security or commodity,
            (7) clarify the treatment of tokenized digital assets, and
            (8) clarify the circumstances under which any of the 
        following transactions constitute realization events: 
        tokenization transactions, wrapping transactions, unwrapping 
        transactions, forks, airdrops, and exchanges involving 
        liquidity pool tokens or staking pool tokens.

SEC. 603. RULES OF CONSTRUCTION.

    (a) No Inference With Respect to Application of Other Provisions of 
Law.--Except as otherwise expressly provided by this Act (or an 
amendment made by this Act) with respect to the application of one or 
more provisions of the Internal Revenue Code of 1986, nothing in this 
Act (or any amendment made by this Act) shall be construed to create an 
inference that a digital asset does or does not constitute a security, 
a commodity, debt, equity, stock, a partnership interest, or an 
interest in a trust, for purposes of any provision of law.
    (b) No Inference With Respect to Prior Periods.--No provision of 
this Act (or any amendment made by this Act) shall be construed to 
create any inference with respect to the proper application of any 
provision of the Internal Revenue Code of 1986 with respect to any 
period before the period to which such provision or amendment applies.

                       TITLE VII--FULL HOUSE ACT

SEC. 701. REINSTATEMENT OF RULES FOR WAGERING LOSSES.

    (a) In General.--Section 165(d) is amended to read as follows:
    ``(d) Wagering Losses.--Losses from wagering transactions shall be 
allowed only to the extent of the gains from such transactions. For 
purposes of the preceding sentence, the term `losses from wagering 
transactions' includes any deduction otherwise allowable under this 
chapter incurred in carrying on any wagering transaction.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2025.
                                 <all>