ADAPT Act
- Sponsor
- Sen. Daines, Steve [R-MT]
- Committees
- Finance Committee (primary)
- Last action
- Sep 30, 2026
Bottom line
The ADAPT Act aims to provide much-needed tax clarity and certainty for the rapidly evolving digital asset industry by integrating it into existing tax frameworks and creating new, specific rules where necessary.
What it actually does
This bill proposes comprehensive amendments to the Internal Revenue Code of 1986 to clarify the tax treatment of digital assets. It introduces new rules for stablecoins, mark-to-market accounting for digital asset traders, source rules for validation activities, and extends existing tax principles like wash sales and constructive sales to digital assets. The bill also clarifies treatment for digital asset trusts, charitable contributions, de minimis network fees, and tax-exempt entities, while providing extensive definitions for various digital asset types and activities.
Proponents argue
Supporters argue that the bill provides essential clarity and certainty for individuals and businesses engaging with digital assets, reducing compliance burdens and fostering innovation within the United States. They contend that aligning digital asset taxation with traditional financial instruments, while accounting for unique characteristics, will encourage responsible growth of the industry and prevent the US from falling behind other nations in digital asset regulation.
Opponents contend
Critics might contend that the bill's extensive new definitions and complex rules could still lead to administrative challenges for the IRS and taxpayers, potentially creating new loopholes or unintended consequences as the technology evolves. Some may argue that certain provisions, such as de minimis exceptions or UBIT exclusions, could lead to revenue loss or provide undue advantages to specific segments of the digital asset market.
The bill is highly technical and dense, requiring a significant time investment for an informed reader to fully grasp its implications across various sections of the tax code.
Sec. 2, new IRC Sec. 1034
Nonrecognition of Gain or Loss on Certain Stablecoin Transactions
This provision establishes that no gain or loss will be recognized on the sale, exchange, or disposition of 'covered payment stablecoins' when used to purchase products or services. A covered payment stablecoin must be a qualified U.S. dollar stablecoin identified by the Treasury and acquired by the taxpayer at a price within 3 percent of $1.00. This exception does not apply to dealers or traders in stablecoins or taxpayers using a non-U.S. dollar functional currency.
Supporters argue
Proponents argue this provision removes a significant barrier to the everyday use of stablecoins by eliminating the need to track minor gains or losses on transactions, thereby simplifying tax compliance for consumers and encouraging the growth of digital payments.
Critics contend
Opponents might argue that this creates a carve-out for digital assets that could be exploited, or that it adds complexity for the IRS to distinguish eligible from ineligible transactions, potentially leading to enforcement challenges.
Tradeoffs
The provision balances the desire to simplify consumer use of stablecoins with the need to prevent tax avoidance by professional traders and ensure proper tracking of larger transactions.
Sec. 3, new IRC Sec. 475(g)
Mark-to-Market Election for Digital Asset Dealers and Traders
This section allows dealers and traders in 'covered digital assets' to elect mark-to-market accounting, meaning they recognize gains and losses on their assets as if they were sold at fair market value at the end of each taxable year. These gains and losses are treated as ordinary income or loss, rather than capital. This aligns the tax treatment of professional digital asset trading with that of securities and commodities.
Sec. 4, new IRC Sec. 863(f)
Source Rules for Digital Asset Validation Activities
This section establishes clear source rules for income derived from 'digital asset validation supporting activities' (like mining and staking). Generally, income for U.S. persons is sourced in the U.S., and for non-U.S. persons, it's sourced outside the U.S. Special rules apply for foreign and U.S. branches, attributing business profits based on factors like computing equipment location and personnel. It also clarifies that compensation for services related to mining is not considered validation income.
Sec. 5, IRC Sec. 864(b)(2)(C)
Safe Harbor for Foreign Persons Trading Digital Assets
This provision amends the Internal Revenue Code to specify that trading in 'traded digital assets' for a taxpayer's own account or through an independent agent is generally not considered a trade or business within the United States for foreign persons. This means foreign investors engaging in such activities would typically not be subject to U.S. income tax on their gains, unless they are a dealer in covered digital assets. This extends a similar safe harbor already existing for securities and commodities.
Sec. 6, IRC Sec. 1058, 512
Nonrecognition for Digital Asset Lending Agreements and UBIT Treatment
This section extends the nonrecognition rules for securities lending (IRC 1058) to 'applicable assets,' which now include 'traded digital assets.' This means that transferring digital assets under certain lending agreements will not trigger immediate gain or loss recognition. It also clarifies that payments received in respect of these digital asset loans (including staking rewards or transaction fees) are treated similarly to securities loan payments for tax-exempt entities, generally excluding them from unrelated business taxable income (UBIT).
Sec. 7, IRC Sec. 1091
Application of Wash Sale Rules to Digital Assets
This section extends the wash sale rules (IRC 1091) to 'specified assets,' which now include 'traded digital assets' (excluding qualified U.S. dollar stablecoins). This means that if a taxpayer sells a digital asset at a loss and then acquires a substantially identical digital asset within 30 days before or after the sale, the loss will generally not be recognized for tax purposes. It includes special rules for tokenized digital assets and exceptions for assets acquired in validation activities or as ordinary income.
Sec. 8, new IRC Sec. 7701(p), 7704(d)(1)
Tax Treatment of Digital Asset Investment Trusts and Publicly Traded Partnerships
This section clarifies that certain activities by a 'covered digital asset investment trust' (e.g., staking, managing redemptions, responding to technology changes) will not cause it to be classified as a business entity for tax purposes, thus avoiding corporate-level taxation. It also expands the definition of 'qualifying income' for publicly traded partnerships (PTPs) to include income from staking rewards, payments from digital asset loans, and gains from the sale of digital assets (excluding inventory), allowing more digital asset-focused PTPs to avoid corporate tax.
Sec. 9, IRC Sec. 1259
Application of Constructive Sale Rules to Digital Assets
This section extends the constructive sale rules (IRC 1259) to 'digital assets' (excluding qualified U.S. dollar stablecoins) and 'widely traded digital assets.' A constructive sale occurs when a taxpayer enters into certain offsetting positions (e.g., short selling, futures contracts) with respect to an appreciated financial position, triggering immediate gain recognition even without an actual sale. This prevents tax deferral through hedging strategies for digital assets, similar to how it applies to stocks and other securities.
Sec. 10, IRC Sec. 170(f)(11)(A)(ii)(I)
Charitable Contributions of Widely Traded Digital Assets
This section amends the Internal Revenue Code to exempt 'widely traded digital assets' from the appraisal requirements for charitable contributions. This means that donors contributing such assets to qualified charities will not need to obtain a qualified appraisal, similar to the treatment of publicly traded securities. The Secretary is granted authority to determine appropriate exceptions to prevent abuse.
Sec. 11, new IRC Sec. 1044, 6045(i), 1091(j)
De Minimis Network Fee Exception
This section introduces a new rule stating that no gain or loss will be recognized on the disposition of a digital asset used to pay a 'digital asset transaction cost' (like network fees, gas fees, or tips) if the aggregate fair market value of digital assets disposed of for such costs does not exceed $10 per transaction. It defines these costs and includes aggregation rules to prevent abuse. Exceptions apply to professional traders and high-volume transactors (over 5,000 transactions/year). Brokers are also exempted from reporting these de minimis dispositions.
Sec. 12, IRC Sec. 512(b)(20)
Exclusion of Qualified Digital Asset Validation Income from UBIT
This section excludes income from 'qualified digital asset validation activity' from unrelated business taxable income (UBIT) for tax-exempt entities. Qualified activity means passive participation in digital asset validation (like staking or mining) where the tax-exempt entity does not 'substantially participate' (e.g., by delegating validation rights and not operating validator nodes or controlling validator selection beyond token commitment). This aims to treat passive digital asset validation income similarly to other passive investment income for tax-exempt organizations.
Sec. 13, IRC Sec. 163(f)(2)(A), 4701(c)
Registration Rules for Qualified U.S. Dollar Stablecoins and Digital Assets
This section exempts 'qualified U.S. dollar stablecoins' from the registration-required obligation rules, which typically disallow interest deductions for unregistered bonds. This means issuers of these stablecoins would not face penalties related to non-registration. It also clarifies that for digital assets without a fixed maturity date, the maturity date for registration purposes is treated as 25 years after issuance, and specifies that disclosure statements can be included in marketing materials and other documents.
Sec. 14
Guidance for Decentralized Autonomous Organization (DAO) Reorganizations
This section directs the Treasury Secretary to issue regulations or other guidance within 12 months to clarify the appropriate tax treatment for reorganizations of 'applicable foreign entities' (DAOs established as foreign foundations or similar structures) into domestic corporations. The guidance is also required to provide temporary safe harbors to encourage DAOs organized before September 24, 2026, to complete such reorganizations promptly after the bill's enactment.
Establishes a comprehensive set of definitions for digital assets and related activities, including 'digital asset,' 'traded digital asset,' 'staking,' 'mining,' 'qualified U.S. dollar stablecoin,' 'tokenized digital asset,' 'widely traded digital asset,' and many others. These definitions are foundational to the application of all other provisions in the bill.
Sec. 15, new IRC Sec. 7701(q)
Why it matters:It is standard legislative practice to consolidate definitions in one section. However, given the novelty and complexity of digital assets, these definitions are not merely technical but fundamentally shape the scope and effect of every tax rule introduced or amended by the bill.
Case for: Supporters argue that these comprehensive definitions are absolutely essential for providing clarity and consistency in the application of tax law to digital assets, reducing ambiguity for taxpayers, the IRS, and the courts, which is critical for a nascent industry.
Case against: Critics might contend that the highly specific and numerous definitions, while aiming for clarity, could inadvertently exclude new forms of digital assets or activities that emerge, potentially stifling innovation or requiring constant legislative updates to keep pace with technological advancements.
Estimated impact: Fundamental to the entire bill's operation, impacting all digital asset transactions and participants by defining what assets and activities are subject to the new tax rules.
Amends Section 6045 of the Internal Revenue Code to exempt brokers from information reporting requirements for the sale, exchange, or disposition of 'covered payment stablecoins' for which no gain or loss is recognized under the new Section 1034(a). It also provides rules allowing brokers to rely on customer certifications and not requiring them to determine facts not known or reasonably available.
Sec. 2(b), IRC Sec. 6045(i)
Why it matters:It is standard legislative practice to place related provisions together, but the impact on broker compliance is substantial and could be easily missed by a casual reader focusing on the primary nonrecognition rule.
Case for: Supporters argue that this exemption is crucial for reducing the compliance burden on digital asset brokers and exchanges, making it feasible for them to facilitate small stablecoin transactions without incurring disproportionate reporting costs, thereby encouraging broader adoption.
Case against: Critics might contend that reducing information reporting, even for de minimis transactions, could diminish transparency for the IRS, making it more challenging to monitor compliance or detect potential abuses if the reliance on customer certifications is not robustly audited.
Estimated impact: Significantly reduces the reporting obligations for digital asset brokers, potentially impacting millions of small stablecoin transactions and altering the data available to the IRS for oversight.
This subsection specifies that when a digital asset is disposed of to pay a 'digital asset transaction cost' (e.g., a network fee) and no gain or loss is recognized due to the de minimis exception, the amount of that transaction cost must be adjusted. Specifically, the amount that would normally be taken into account for determining gain/loss, deduction, or basis is reduced by any unrecognized gain or increased by any unrecognized loss from the disposition of the digital asset used to pay the fee.
Sec. 11(g), new IRC Sec. 1044(g)
Why it matters:This is a standard technical correction required to ensure proper tax accounting when a nonrecognition rule applies to a transaction that also involves a cost. It's crucial for preventing unintended tax benefits or detriments but is not a headline provision.
Case for: Supporters argue that this provision is essential for maintaining the integrity of the tax system by ensuring that the basis of assets and the calculation of future gains or losses are correctly adjusted following a de minimis nonrecognition event, preventing unintended tax consequences.
Case against: Critics might contend that this adds another layer of complexity for taxpayers and tax preparers, who must track these specific adjustments for potentially numerous small transactions, thereby undermining the overall goal of simplification for everyday users.
Estimated impact: Affects the basis and ultimate gain/loss calculation for individual users who incur de minimis network fees, ensuring accurate long-term tax reporting.