House Ways and Means Committee Chair Jason Smith, R-Mo., has released a series of bills to reform the tax treatment of digital assets as lawmakers work to build bipartisan consensus toward moving legislation this year.
The Smith bills share many concepts with the Digital Asset PARITY Act (H.R. 8899), a sweeping reform bill developed from several discussion drafts from Ways and Means Committee members Rep. Max Miller, R-Ohio, and Steven Horsford, D-Nev. The Smith bills are sponsored by a series of members but are all endorsed by Smith and represent his vision for reforming the tax treatment of digital assets. The bills include :
- Tax Clarity for Mining and Staking Act (H.R. 9175);
- Charitable Deductions for Digital Asset Donations Act (H.R. 9173);
- Providing Analogous Rules for Digital Assets Act (H.R. 9176);
- Digital Assets Voluntary Disclosure Program Act (H.R. 9174);
- Applying Existing Tax Anti-Abuse Rules to Digital Assets Act (H.R. 9172);
- Less Tax Paperwork for Digital Asset Owners Act (H.R. 9178);
- Discussion Draft: End Digital Assets Tax Shelters Act; and
- Draft amendments to H.R. 9173 and H.R. 9175.
The new bills share a common framework with the PARITY Act, and they all seek to define core concepts such as digital assets, widely traded digital assets, stablecoin, validation activity, staking, and mining. Both sets of legislation also carry several similar provisions, including provisions that would:
- Expand wash sale rules to digital assets;
- Apply constructive sale rules to digital assets;
- Extend securities lending rules to digital assets;
- Allow a mark-to-market election for traders and dealers of digital assets;
- Create an exclusion from gain and loss on some stablecoin; and
- Offer a new election to defer mining and staking rewards for five years, with ordinary income treatment on recognition.
There are, however, important technical and substantive differences between the PARITY Act and the Smith bills. H.R. 9178 reframes the mark-to-market election in the Parity Act from “actively traded assets” to “widely traded assets” and “covered digital assets.” It also includes a four-year adjustment under Section 481 and transition relief.
The bill offers a more developed exclusion for stablecoin gain. It provides that there is generally no gain or loss on qualified stablecoin transactions, with basis deemed to equal redemption value as long as it is reasonable to conclude under the facts and circumstances that the consideration is not less than 99.5%, and not more than 100.5%, of the redemption value. This general rule does not apply to traders, brokers, or dealers in stablecoin or substantially similar trades or businesses; any taxpayer that uses a functional currency other than the dollar; or any person who engages in more than 5,000 digital asset transactions.
H.R. 9178 also creates a de minimis exception that excludes gain or loss on the disposition of a digital asset used to pay a network fee not exceeding $10 to validate another digital asset transaction. The PARITY Act and Smith bills have varying effective dates for many of the provisions.
Legislative Outlook
The Ways and Means Committee held a hearing June 9 to discuss the bills and other digital asset issues. Smith has made clear that he does not want to advance legislation without bipartisan support, and Ways and Means Committee ranking minority member Richard Neal, D-Mass., expressed openness to some of the provisions.
“There were some aspects of these bills that were quite sensible, providing clear rules of the road for taxpayers looking to simply comply with the law,” Neal said. “Other provisions sought the common sense goal of alleviating burdensome paperwork requirements, especially in situations where it is highly unlikely there would be any tax associated with the transactions.” He also said he supports provisions to “close loopholes that are specific to the digital asset industry.”
But Neal expressed reservations about other provisions, warning that preferential treatment for mining and staking “deviate substantially from general tax principles, providing a distinct advantage to digital assets above and beyond other investments.”
Neal and other Democrats also made clear that they need more time to study the issues and aren’t ready to mark up any legislation. “I don’t see us doing a bipartisan bill before the election,” Neal said.
Despite Democratic reservations, the legislative effort is boosted by broad bipartisan alignment across a number of issues. On the Senate side, Sen. Cynthia Lummis, R-Wy., has released draft legislation that is similar in direction to the House bills, and Sen. Steve Daines, R-Mont., recently said Senate Finance Committee members hope to unveil a draft bill by the fall. And in July 2025, the administration released a comprehensive report on digital assets that aligns with many aspects of the House and Senate bills.
The fate of any tax legislation covering digital assets will be tied to that of the Digital Asset Market Clarity Act (CLARITY Act, H.R. 3633), a broader bill that would provide a regulatory framework for digital assets. Lawmakers are unlikely to advance tax legislation on digital assets until the CLARITY Act passes, and passage could build momentum for any follow-up tax legislation.
The House passed its version of the CLARITY in a 294-134 vote in July 2025. The Senate Agricultural Committee approved its portion of the act in January, and the Senate Banking Committee approved its version in May, with some Democratic support. The Senate versions would need to be merged and pass with 60 votes in the Senate to advance. Then lawmakers would be tasked with resolving the differences between the House and Senate bills.
There are still many steps left in the legislative process, and the midterm elections will make passing anything very difficult. The political climate is highly divisive, and the 60-vote procedural hurdle in the Senate presents challenges.
That said, digital asset legislation represents one of the few areas where bipartisan action remains possible over the next two years. Taxpayers should assess the potential effects of the current proposals, understanding that they may continue to evolve. If the legislation continues progressing and enactment eventually appears likely, taxpayers should review the effective dates and consider the impact on planning and investment decisions.
The table below provides more detailed information on key provisions.
Comparison of Tax Provisions in Smith Drafts and the PARITY Act
| Provision | PARITY Act | Smith Bill | Comments | |
| Stablecoin Exclusion | No gain or loss recognized on stablecoin unless basis is less than 99% of redemption value. Acquisition basis assumed to be $1. | H.R. 9178 provides that redemption value equals basis if a qualified U.S. stablecoin meets a facts-and-circumstances test and the consideration is not less than 99.5%, and not more than 100.5%, of the redemption value. | Key open issues include which markets and pricing sources would be used to test the trading and price stability thresholds. | |
| De Minimis Exception | Mandates a study on a general de minimis exception. | No general de minimis exception. H.R. 9178 contains a limited exception for specified network fees not exceeding $10. | This issue remains contentious, and Democrats remain wary of potential abuse. | |
| Wash Sale Rule | Expands the wash sale rule to apply to digital assets, disallowing any loss on a sale in which substantially identical assets were acquired within 30 days before or after the sale or exchange. | H.R. 9172 provides a substantially identical provision. | Democrats support this provision, which could raise revenue to pay for other provisions. Taxpayers should monitor the potential advancement of this provision and the proposed effective dates to consider possible preemptive action. | |
| Constructive Sale Rule | Applies the constructive sale rules under Section 1259 to digital assets. | H.R. 9172 provides a substantially identical provision. | Democrats support this provision, which could raise revenue to pay for other provisions. | |
| Lending | Expands the securities lending rules under Section 1058 to include specified digital assets. | H.R. 9176 includes a similar provision with slight differences in definitions and construction. | Treasury guidance could be important in how this provision is implemented. | |
| Mark-to-Market Election | Creates an optional mark-to-market election under Section 475 for traders and dealers in digital assets. Like the treatment of securities under Section 475, the mark-to-market election would allow taxpayers to recognize gain or loss on “actively traded digital assets” based on their fair market value on the last day of the year, with the gain or loss treated as ordinary. | H.R. 9176 creates a similar election, but for “covered digital assets” that are “widely traded.” The election would include a four-year adjustment under Section 481 and transition relief for identification. | If enacted, a key practical issue will be establishing consistent valuation conventions and reliable pricing sources across exchanges and trading venues for year-end fair market value determinations. | |
| Passive Staking | Provides that passive staking is not a trade or business. | The Smith drafts create an equivalent rule using definitions included in several of the bills. | The bills do not address the threshold at which staking activity could rise to the level of a trade or business, such as for validators, pooled staking, funds, and custodial platforms. | |
| Mining and Staking | Provides that validated and acquired assets are generally recognized as ordinary income immediately at fair market value but offers an election to defer recognition for five years. | H.R. 9175 provides a substantially identical provision. | The issue remains contentious among lawmakers, and many Democrats believe deferral is too generous. There appears to be little support for the position some taxpayers are taking, which is that staking and mining rewards should be treated as self-created property. | |
| Charitable Contributions | Eases deductions for actively traded digital asset donations by removing qualified appraisal requirements, while adding stricter substantiation rules for non-actively traded assets over $500. | H.R. 9173 generally exempts gifts of “widely traded digital assets” from the qualified appraisal requirement. | Taxpayers would still need to satisfy the remaining substantiation, documentation, and reporting requirements applicable to charitable contributions. | |
| Voluntary Disclosure | Directs Treasury to study the feasibility of creating a voluntary disclosure program to help taxpayers come into compliance with digital asset transaction reporting. | H.R. 9174 creates a voluntary disclosure program with tiered penalties and criminal referral protection. | PARITY only studies the feasibility of voluntary disclosure, while H.R. 9174 would create a formal compliance program. |
Next Steps
Lawmakers still need to reconcile key differences among the major proposals and resolve several outstanding technical issues. The legislative climate will make enactment difficult. Even so, broad bipartisan agreement is possible over the next two years, and the contours of a potential deal are beginning to take shape. Several provisions lean heavily on future Treasury guidance, which could be pivotal to the impact of the changes.
Taxpayers active in digital assets should evaluate how the legislation could affect their tax planning and investment decisions. Many of the proposals could substantially alter the future tax treatment of current investments and transactions. It will be important to monitor any legislative progress, with an eye on effective dates. If the legislation begins to advance, taxpayers should factor the potential changes into modeling, structuring, and investment decisions.
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