Charitable Deductions for Digital Asset Donations Act
- Sponsor
- Rep. Kelly, Mike [R-PA-16]
- Committees
- Ways and Means Committee (primary)
- Last action
- Jun 8, 2026
Bottom line
The bill aims to simplify the tax deduction process for donating certain cryptocurrencies and other digital assets to charities, potentially increasing digital asset philanthropy by treating them similarly to publicly traded securities for appraisal purposes.
What it actually does
This bill amends the Internal Revenue Code of 1986 to exempt 'widely traded digital assets' from the requirement for a qualified appraisal when donated to a charitable organization. It establishes detailed definitions for 'digital asset,' 'traded digital asset,' and 'widely traded digital asset,' setting criteria based on fungibility, market availability, market capitalization, and ownership concentration. The bill also defines 'tokenized digital assets,' 'wrapped digital assets,' and 'qualified U.S. dollar stablecoins,' granting the Secretary of the Treasury authority to issue regulations to prevent abuse and ensure reliable price discovery.
Proponents argue
Proponents argue that this bill modernizes the tax code to reflect the growing importance of digital assets, reducing administrative burdens for both donors and charitable organizations. They contend that by streamlining the donation process, it will encourage greater charitable giving using digital assets, aligning their tax treatment with other liquid, publicly traded assets like stocks.
Opponents contend
Opponents might express concerns that the bill could open avenues for abuse due to the inherent volatility and sometimes opaque nature of digital asset markets, even for those deemed 'widely traded.' They may argue that accurate valuation remains challenging, potentially leading to inflated deductions and revenue loss, or creating an unfair advantage compared to other asset classes that still require appraisals.
The bill is relatively short and clearly structured, making its core purpose and mechanisms accessible to an informed reader within a reasonable timeframe.
Section 2(a), amending Section 170(f)(11)(A)(ii)(I) of the Internal Revenue Code of 1986
Exception from Appraisal Requirement for Widely Traded Digital Assets
This provision adds 'widely traded digital assets' to the list of assets that do not require a qualified appraisal when donated to a charity for tax deduction purposes. This means that if a digital asset meets the criteria for being 'widely traded,' a donor would not need to obtain a professional appraisal to claim a charitable deduction, similar to how publicly traded securities are treated. The Secretary of the Treasury retains authority to make exceptions to prevent abuse.
Supporters argue
Supporters argue this change streamlines the charitable giving process for digital assets, making it as straightforward as donating publicly traded stocks. This encourages philanthropy in a modern economy and reduces unnecessary hurdles for donors and charities.
Critics contend
Critics might contend that even 'widely traded' digital assets can be subject to significant volatility and potential manipulation, making a blanket exemption from appraisal risky. They may argue it could lead to inflated deductions and tax avoidance without proper oversight.
Tradeoffs
The provision balances the desire to simplify charitable giving and encourage donations of a new asset class against the need to prevent tax fraud and ensure fair valuation for tax purposes.
Section 3, amending Section 7701 by inserting new subsection (p)
Definitions Related to Digital Assets
This section introduces a new subsection (p) to Section 7701 of the Internal Revenue Code, establishing a comprehensive set of definitions for various terms related to digital assets. These definitions are crucial for determining which assets qualify for the appraisal exemption and how they are treated under the tax code. Key terms defined include 'digital asset,' 'traded digital asset,' 'widely traded digital asset,' 'tokenized digital asset,' 'wrapped digital asset,' 'reference digital asset,' and 'qualified U.S. dollar stablecoin.'
Section 3, new Section 7701(p)(3)
Definition of 'Widely Traded Digital Asset'
This provision defines a 'widely traded digital asset' as a traded digital asset that meets specific criteria: quotations must be readily available on an exchange for the entire preceding calendar year, its market capitalization must exceed $500,000,000 at substantially all times during that year, and the taxpayer or related persons must not own more than 10 percent of the asset's units. It includes special rules for wrapped digital assets and grants the Secretary authority to adjust requirements and exclude assets lacking reliable price discovery or at risk of manipulation, with an inflation adjustment for the market capitalization threshold.
Section 3, new Section 7701(p)(7)
Definitions and Treatment of Stablecoins
This provision defines 'qualified U.S. dollar stablecoin' by referencing definitions in the 'GENIUS Act' (as in effect on the date of enactment). It also defines 'U.S. dollar stablecoin' by similarly referencing the GENIUS Act's definition of 'payment stablecoin' but specifically for dollars. The Secretary is mandated to regularly publish a list of qualified U.S. dollar stablecoins and is granted limited authority to treat qualified U.S. dollar stablecoins as dollars and other stablecoins as currency if it increases Federal revenues.
The Secretary of the Treasury is granted broad authority to determine exceptions to the appraisal requirement for 'widely traded digital assets' to prevent abuse, and to define or redefine various digital asset terms to prevent abuse or ensure reliable price discovery.
Section 2(a) and Section 3 (new 7701(p) definitions)
Why it matters:This is standard legislative practice to provide administrative agencies with necessary flexibility to implement complex laws and adapt to unforeseen circumstances or market changes, especially in rapidly evolving sectors like digital assets. It prevents the need for constant legislative updates.
Case for: Granting the Secretary this authority is crucial for the bill's long-term effectiveness, allowing the IRS to respond to new forms of digital assets, market manipulations, or tax avoidance schemes without requiring new legislation. This ensures the integrity of the tax system.
Case against: Critics might argue that such broad discretionary authority could lead to regulatory uncertainty for taxpayers and the digital asset industry. It places significant power in the hands of an unelected official to define key terms and exceptions, potentially leading to inconsistent application or politically motivated decisions.
Estimated impact: This authority has a high potential impact on the practical application and scope of the bill, as it allows the IRS to significantly shape which assets qualify and under what conditions, potentially altering the fiscal impact and administrative burden.
The $500,000,000 market capitalization requirement for a 'widely traded digital asset' is subject to an inflation adjustment for calendar years after 2027, rounded to the nearest $100,000.
Section 3, new Section 7701(p)(3)(E)
Why it matters:This is a standard technical provision designed to ensure that monetary thresholds in the tax code maintain their real value over time. It's not intended to be hidden but is part of the detailed mechanics of the definition.
Case for: Indexing the market capitalization threshold to inflation ensures that the criteria for 'widely traded' remain relevant over time, preventing the threshold from becoming too low (and thus encompassing less liquid assets) or too high (and thus excluding legitimate assets) due to economic changes.
Case against: No specific opposition is typically raised against inflation adjustments in principle, as they are generally seen as a technical necessity for maintaining the intended scope of monetary thresholds.
Estimated impact: This provision ensures the long-term relevance of the market capitalization requirement, preventing unintended expansion or contraction of the definition of 'widely traded digital asset' due to inflation.
The definitions for 'qualified U.S. dollar stablecoin' and 'U.S. dollar stablecoin' are explicitly tied to definitions found in 'section 2(23) of the GENIUS Act' and 'section 2(22) of the GENIUS Act,' respectively, 'as in effect on the date of the enactment of this paragraph.'
Section 3, new Section 7701(p)(7)
Why it matters:This is a legislative technique to ensure consistency across different bills dealing with related topics, particularly when a comprehensive framework (like the GENIUS Act for stablecoins) is being developed or is already in place. It avoids duplicating lengthy definitions.
Case for: Referencing a comprehensive stablecoin framework like the GENIUS Act ensures that the tax treatment of stablecoins is consistent with broader regulatory efforts. It avoids creating conflicting definitions and streamlines the legislative process by not reinventing the wheel.
Case against: Critics might argue that this cross-reference makes the bill's provisions dependent on another, potentially un-enacted or evolving, piece of legislation, creating uncertainty. If the GENIUS Act is not passed or is significantly altered, the stablecoin definitions in this bill could become ambiguous or ineffective.
Estimated impact: The impact is significant as it ties the tax treatment of stablecoins directly to the fate and specific language of another, potentially separate, legislative effort. This could lead to regulatory gaps or conflicts if the GENIUS Act's status is uncertain.