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Republican and Democratic members of the House Ways and Means Committee formally introduced legislation to overhaul U.S. tax treatment of stablecoins and cryptocurrencies.
The Digital Asset PARITY Act (PDF - 884.72KB), introduced on May 19 by Reps. Max Miller (R-Ohio) and Steven Horsford (D-Nev.), would largely exempt payment stablecoins from tax reporting requirements in cases of exchange, similar to the treatment of cash, unless the gain or loss is over 1% of the value of the digital asset.
Stablecoins are meant to be pegged to the value of the fiat currency which they’re exchanged for, and dollar stablecoins are typically exchanged for within 99% of the value of a dollar. As a result, the exemption would apply to almost all instances of the use of stablecoins. However, dealers of securities and commodities would not receive the exemption, as mark-to-market reporting requirements already apply to them.
The PARITY Act would also:
- Extend existing wash sale tax rules around securities to cryptocurrencies.
- Create a safe harbor for foreign investors on U.S. digital currency exchanges, in which they would not be deemed to be running a U.S. business for tax purposes. Normal capital gains tax would still apply.
- Apply stock lending rules to the taxation of crypto lending. Lending would not be a taxable event, under certain circumstances, though the underlying asset would be taxed upon sale.
- Allow crypto dealers and active traders to elect for mark-to-market accounting for their asset transactions.
- Change the tax treatment of cryptocurrency mining and staking rewards, charitable contributions, create uniform terminology for digital assets within the tax code, and mandate that the Treasury Department study possible de minimis transaction tax exemptions for cryptocurrencies.
Grant Thornton insight:
The bill’s introduction reflects increased interest among members of Congress, including the House Ways and Means Committee, in overhauling how the government oversees digital asset activities. On May 14, several Democrats joined Republicans on the Senate Banking Committee to advance legislation that would significantly change financial regulations around cryptocurrencies, and Ways and Means Committee Chair Jason Smith, R-Mo., has said he wants to advance legislation changing tax treatment of digital assets this Congress.
Whether that enthusiasm provides enough momentum for major tax and financial legislative changes to happen remains to be seen. Despite the movement, friction remains in several policy areas that would need to be addressed for legislation to reach a critical mass of support and become law.
Gas tax holiday sputters
President Donald Trump’s May 11 call for a holiday on the federal 18.4-cent-per-gallon gas tax, in response to disruption of the global oil and natural gas supply resulting from the war with Iran, did not fire on all cylinders on Capitol Hill.
Several Republican lawmakers in both chambers of Congress told members of the press that a gas tax holiday would not meaningfully address the spike in fuel prices while also forcing more borrowing by the federal government or depletion of the Highway Trust Fund, a federal fund for roads and mass transit for which the tax provides revenue.
“We need infrastructure, new roads and bridges, very badly as well,” Sen. Roger Marshall, R-Kan., told Punchbowl News.
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