Less Tax Paperwork for Digital Asset Owners Act

This Act may be cited as the Less Tax Paperwork for Digital Asset Owners Act.

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.

The table of contents for this Act is as follows:

Part III of subchapter O of chapter 1 of subtitle A is amended by inserting after section 1043 the following new section:

No gain or loss shall be recognized on the disposition of a digital asset in payment of a de minimis network fee.

For purposes of this section—

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.

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.

For purposes of this section—

(1) a disposition of a digital asset shall not fail to be treated as a payment merely because such asset is not received by another person, and

(2) any payment of a network 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 digital asset.

The amount of any network fee which would otherwise be 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 not recognized by reason of subsection (a) with respect to the disposition of the digital asset used to pay such network fee.

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 digital asset transactions during the preceding taxable year.

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.

The Secretary shall issue 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).

The 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 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) did not apply to such type of taxpayer.

Subsection (a) shall not apply to any digital asset—

(A) to which section 475, 1051(a), or 1256(a), or

(B) except as otherwise provided by the Secretary, to which a mark-to-market method applies under any other provision of this subtitle.

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 other than the validation of a digital asset transaction in exchange for a network fee.

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:

The amendments made by this section shall apply to the disposition of assets after December 31, 2027.

Part IV of subchapter O of chapter 1 of subtitle A is amended by inserting before section 1052 the following new section:

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 exchange 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,

(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 are 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, and

(iv) 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 paragraph (1) and (2), such taxpayer shall not recognize any gain or loss on the disposition of widely traded digital assets of such designated type.

For purposes of this section—

The term designated type of digital asset means, with respect to any taxpayer for any taxable year, any type of widely traded digital asset with respect to which such taxpayer elects the application of this section for such taxable year.

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.

Any gain or loss determined under subsection (a) shall be treated as short-term capital gain or short-term capital loss, respectively.

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.

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.

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 (3).

In the case of any partnership or S corporation, the election under this section shall be made at the partnership or S corporation level.

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.

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.

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.

If a taxpayer has in effect one or more elections under this section with respect to designated types of digital assets 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.

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.

In the case of a revocation of an election under this section, proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain or loss taken into account under subsection (a).

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.

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).

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.

In the case of any transfer of a widely traded digital asset which is not a designated type of digital asset with respect to the transferor for the taxable year of the transferor in which the transfer occurs but which is a designated type of digital asset with respect to the transferee for the taxable year of the transferee in which the transfer occurs, if the transferor and transferee are described in section 267(b) (applied without regard to section 267(c)(3)) or section 707(b)(1), gain or loss shall be recognized on such transfer notwithstanding any other provision of this title.

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).

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,

(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.

The table of sections for part III of subchapter O of chapter 1 of subtitle A is amended by inserting before the item relating to section 1052 the following new item:

The amendments made by this section shall apply to taxable years beginning after December 31, 2027.

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:

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.

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.

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.

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.

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 predominantly 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.

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.

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.

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.

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.

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:

The amendments made by this section shall apply to taxable years beginning after December 31, 2026.

Section 6045(g)(3)(D) is amended to read as follows:

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(e)).

(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)).

Section 6045(g) is amended by adding at the end the following new paragraph:

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.

If the broker has been notified by the taxpayer or the Secretary that the exception described in section 1044(e)(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.

Section 6045(g), as amended by subsection (b), is amended by adding at the end the following new paragraph:

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 desginated 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 acquistions 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.

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).

The amendments made by this section shall apply to returns required to be filed, and statements required to be furnished, after December 31, 2027.