Digital Asset PARITY Act
- Sponsor
- Rep. Miller, Max L. [R-OH-7]
- Committees
- Ways and Means Committee (primary)
- Last action
- May 19, 2026
Bottom line
The Digital Asset PARITY Act seeks to modernize the U.S. tax code to provide clarity and specific rules for the rapidly evolving digital asset economy, aiming to reduce compliance burdens and prevent tax avoidance.
What it actually does
This bill, the "Digital Asset PARITY Act," amends the Internal Revenue Code of 1986 to establish specific tax treatments for various digital asset activities. It aims to clarify the tax implications of regulated payment stablecoin transactions, digital asset lending agreements, wash sales, constructive sales, and income from validation activities like staking and mining. The bill also defines key terms related to digital assets and mandates a study on relief for small digital asset consumer transactions.
Proponents argue
Proponents argue that the current tax code is ill-equipped to handle digital assets, leading to confusion, high compliance costs for taxpayers, and potential barriers to innovation. They contend this bill provides much-needed clarity, fosters responsible growth in the digital asset sector, and ensures fair and consistent tax treatment, particularly for stablecoins and validation activities.
Opponents contend
Opponents might argue that the bill could create new loopholes or provide preferential treatment for certain digital asset activities, potentially leading to revenue loss or unfair advantages. Some might also contend that the definitions and classifications within the bill are too narrow or too broad, failing to adequately address the diverse nature of digital assets or future innovations, or that it might not go far enough to simplify tax burdens for everyday users.
The bill is moderately technical due to its nature as an amendment to the Internal Revenue Code, requiring careful reading to understand the implications of each section.
Section 2
Non-recognition of Gain or Loss on Regulated Payment Stablecoin Sales
This section amends the tax code to generally prevent the recognition of gain or loss on the sale or exchange of a "regulated payment stablecoin," unless the taxpayer's basis is less than 99% of its redemption value. It defines a regulated payment stablecoin as a digital asset issued by a permitted issuer, redeemable for a fixed amount of US dollars, and acquired within 1% of $1.00. Transaction costs are excluded from basis calculation, and the acquirer's basis in an exchanged stablecoin is deemed to be $1.
Supporters argue
Supporters argue this provision removes a significant compliance burden for users of stablecoins, which are often used for payments rather than investment, by preventing small gains or losses from triggering taxable events. This aligns their tax treatment more closely with fiat currency.
Critics contend
Critics might argue that this creates a carve-out for a specific type of digital asset, potentially complicating the broader tax framework or creating an unfair advantage compared to other digital assets or traditional financial instruments.
Tradeoffs
Balances the desire to simplify tax compliance for payment-oriented digital assets with the need for consistent tax treatment across all asset classes.
Section 3
Foreign Person Digital Asset Trading Safe Harbor
This section expands the existing "trading safe harbor" rules for foreign persons to include "traded digital assets." This means that foreign persons trading in these digital assets through a resident agent or for their own account will generally not be considered engaged in a U.S. trade or business, thus avoiding U.S. income tax on capital gains from such trading, provided the assets are customarily dealt in on a digital asset exchange.
Section 4
Digital Asset Lending Agreements Tax Treatment
This section extends the non-recognition rules for securities lending (Section 1058) to "eligible digital assets." It clarifies that substitute payments received by a lender in lieu of staking rewards, transaction fees, or protocol distributions from a lent digital asset are included in the lender's gross income as if received directly. It also adds a rule of construction that this section does not classify digital assets as securities.
Section 5
Wash Sale Rules Extended to Digital Assets
This section expands the "wash sale" rules (Section 1091) to include "specified assets," which are defined to include digital assets alongside stocks and securities. This prevents taxpayers from deducting losses from the sale of a digital asset if they acquire a "substantially identical" digital asset within 30 days before or after the sale. It also provides specific criteria for determining if digital assets are "substantially identical," focusing on economic exposure.
Section 8
Tax Treatment of Income from Staking and Mining
This section creates a new subchapter (Subchapter W) to address digital assets acquired through validation activities (like staking and mining). It generally includes the fair market value of newly created digital assets in gross income as ordinary income when acquired. However, it also provides an election to defer income inclusion and capitalize related expenses until disposition, at which point gains/losses are treated as ordinary. After the election period, gains/losses are long-term capital.
Section 9
Charitable Contributions of Digital Assets
This section modifies rules for charitable contributions of digital assets. It exempts "actively traded digital assets" from qualified appraisal requirements for contributions. For "infrequently traded digital assets" over $500, it requires a specific contemporaneous written acknowledgment from the donee organization, and limits the deduction to the gross proceeds if the organization sells the asset. It also establishes a penalty for fraudulent acknowledgments.
Section 10
Passive Staking and Digital Asset Investment Trusts
This section clarifies that "passive staking" by an individual or entity (defined as a passive validator with no deductible business expenses related to validation) does not constitute a trade or business for tax purposes. It also specifies that certain trustee powers in digital asset investment trusts (like staking, unstaking, or managing redemptions) do not cause the trust to be classified as a business entity, preserving its investment trust status.
Section 12
Study on De Minimis Exclusion for Digital Asset Transactions
This section mandates the Secretary of the Treasury to conduct a study and submit a report to Congress within one year. The study will assess the compliance burden of small digital asset transactions, the feasibility of a de minimis exclusion, potential for abuse, and alignment with international standards (CARF). It also requires interim guidance on existing authority for relief within 180 days.
This subsection defines criteria for determining if digital assets are "substantially identical" for wash sale rules, explicitly including economic exposure as the primary basis and clarifying what does and does not prevent assets from being identical. Notably, it states that assets based on the same or substantially similar protocol or computer code are not automatically treated as substantially identical.
Section 5(h)
Why it matters:Standard legislative practice to put detailed definitions in a dedicated subsection, but its technical nature makes it less accessible to a casual reader.
Case for: Proponents argue this provides necessary specificity to prevent abuse of wash sale rules while acknowledging the unique characteristics of digital assets, ensuring fairness and preventing unintended application.
Case against: Critics might argue that the definition, particularly "economic exposure," could still be subject to interpretation, leading to uncertainty for taxpayers and potential disputes with the IRS, despite the detailed clarifications.
Estimated impact: Significant impact on digital asset traders attempting to realize tax losses, potentially affecting millions of dollars in disallowed losses by clarifying what constitutes a disallowed wash sale.
This section defines "actively traded digital asset" with specific quantitative thresholds for trading volume ($50,000,000 for two preceding years), market capitalization ($10,000,000,000 for three preceding years), and a limit on taxpayer ownership (no more than 5% by value or units for taxpayer and related parties). These thresholds are subject to inflation adjustment.
Section 11(q)(3)
Why it matters:Standard practice for definitions to be grouped at the end, but the detailed thresholds are easily overlooked despite their critical role in the bill's application.
Case for: Proponents argue these objective criteria provide clear boundaries for applying specialized tax treatments, ensuring they are targeted at genuinely liquid and widely held assets, promoting certainty for both taxpayers and the IRS.
Case against: Critics might argue that the thresholds are arbitrary, potentially excluding innovative or emerging digital assets from beneficial tax treatments, or that the ownership limit could be complex to monitor for taxpayers, especially in decentralized environments.
Estimated impact: Determines eligibility for mark-to-market accounting for dealers/traders (Sec. 6) and appraisal exemptions for charitable donations (Sec. 9), affecting tax compliance and planning for a significant segment of digital asset participants.