Sponsor
David Kustoff
Representative · R-TN
Representative · R-TN
The bill brings needed tax-definition clarity and accounting options for digital assets (including stablecoins) and prevents retroactive tax change, but it raises compliance costs, can shift legal/tax liabilities onto transferors, risks lock‑in under new accounting regimes, and leaves unresolved regulatory classification mismatches.
Taxpayers, exchanges, and payment processors get clearer tax definitions and rules for digital assets (including a path for Treasury/IRS to identify qualified U.S. dollar stablecoins) and are protected from retroactive tax changes, reducing immediate legal uncertainty and risk of surprise past liabilities.
Dealers, traders, and other market participants can elect mark-to-market accounting with 481(a) adjustments spread over four years and without prior IRS consent, simplifying annual tax accounting and smoothing transitional tax volatility.
Parties to transferred digital-asset arrangements have clearer contractual tax/economic protections because the law requires payments to transferors equal to interest/dividends/distributions and specifies which party bears owner obligations during the agreement, reducing enforcement ambiguity.
Retail investors, taxpayers, brokers, and small traders will face higher compliance costs and more complex recordkeeping and reporting (including narrow identification/timing rules for hedges and new withholding/reporting for intermediaries), increasing operational burdens especially for smaller firms.
Transferors of traded digital assets now must assume owner obligations during agreements, which can expose ordinary taxpayers and holders to unforeseen legal or tax liabilities if obligations arise while they are nominally the 'transferor.'
Mark-to-market taxation can create 'phantom income' — forcing taxpayers to pay tax on notional gains in years without cash liquidity — and the election is effectively permanent unless IRS consents to revoke, risking harmful lock-in for some traders.
Based on analysis of 6 sections of legislative text.
Creates statutory definitions for digital assets, expands tax-code coverage to traded digital assets, enables mark-to-market accounting for certain digital-asset dealers/traders, and changes sourcing rules for trading activity.
Official title: To amend the Internal Revenue Code of 1986 to clarify the application of certain rules with respect to the trading of digital assets, and for other purposes.
Introduced June 8, 2026 by David Kustoff · Last progress June 8, 2026
Creates a new, detailed federal tax framework for digital assets by inserting statutory definitions (digital asset, traded digital asset, widely traded digital asset, stablecoin, tokenized/wrapped/reference assets) into the Internal Revenue Code; extends and adapts existing tax rules for securities and commodities to apply to digital assets; and allows dealers and traders of certain digital assets to use mark-to-market accounting under section 475. It also treats trading in traded digital assets as a U.S. trade or business in specified circumstances and gives the Treasury broad regulatory authority to refine definitions and prevent abuse. The law mainly changes how digital-asset transactions are taxed and accounted for, clarifies which assets count as widely traded, and phases in effective dates tied to taxable years beginning after enactment (with one provision tied to taxable years after December 31, 2025). It includes transitional rules for taxpayers changing accounting methods and non-inference clauses that do not change securities/commodity status for other laws or for prior periods.