S. 2207

119 S2207 IS: To amend the Internal Revenue Code of 1986 to reform the treatment of digital assets.
 U.S. Senate
 2025-06-30
 text/xml
 EN
 Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
 II  119th CONGRESS  1st Session  S. 2207  IN THE SENATE OF THE UNITED STATES   June 30, 2025   Ms. Lummis  introduced the following bill; which was read twice and referred to the  Committee on Finance    A BILL
To amend the Internal Revenue Code of 1986 to reform the treatment of digital assets.
1.
Definition of digital asset
 Section 7701  of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
(51)
Digital asset
(A)
In general
Subject to subparagraph (B) and except as otherwise provided by the Secretary, the term  digital asset  means any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.
(B)
Financial assets
(i)
In general
Except as otherwise provided by the Secretary, in the case of any digital asset which is a representation of a financial asset which is itself not a digital asset, such asset—
(I)
shall not be treated as a digital asset, and
(II)
for purposes of this title, and except as otherwise provided by law, shall be treated as such financial asset.
(ii)
Definition
For purposes of this subparagraph, as specified by the Secretary, the term  financial asset  means an asset that trades on established markets or which is used as a medium of exchange, store of value, or unit of account, and shall exclude a payment stablecoin (as defined in section 1091(a)(3)).
(C)
Representations of other property
For purposes of this paragraph, as specified by the Secretary pursuant to regulation, in the case of a digital asset which is a representation of property other than a financial asset, such digital asset shall be treated in the same manner as the property which it represents.
(52)
Actively traded digital asset
Except as otherwise provided by the Secretary, the term  actively traded digital asset  means a fungible digital asset for which quotations are readily available on a digital asset exchange.
 .
2.
De minimis gain or loss from sale, exchange, or disposition of digital assets
(a)
In general
Part III of subchapter B of  chapter 1  of the Internal Revenue Code of 1986 is amended by inserting after section 139I the following new section:
139J.
De minimis gain or loss from sale, exchange, or disposition of digital assets
(a)
In general
Subject to subsection (b), gross income shall not include gain or loss from the sale, exchange, or disposition of digital assets to purchase products or services in a personal transaction (consistent with section 988(e)(3)), unless the sale, exchange, or disposition is for—
(1)
cash or cash equivalents, or
(2)
other digital assets.
(b)
Limitation
(1)
In general
Subsection (a) shall not apply in the case of any sale, exchange, or disposition for which—
(A)
the total value of such sale, exchange, or disposition exceeds $300, or
(B)
the total loss which would otherwise be recognized with respect to such sale, exchange, or disposition exceeds $300.
(2)
Aggregation rule
For purposes of this subsection, all sales, exchanges, or dispositions which are part of the same transaction (or a series of related transactions) shall be treated as one sale, exchange, or disposition.
(3)
Total gains
If, after applying subsection (a) to a transaction, the taxpayer’s total gain for the taxable year from transactions described in subsection (a) exceeds $5,000, no further exclusion shall apply for such year.
(c)
Basis
Except as otherwise provided by the Secretary, subsection (a) shall not apply to a sale, exchange, or disposition of digital assets for which the principal purpose of such sale, exchange, or disposition is to eliminate gains.
(d)
Books and records
A taxpayer shall maintain books and records or separate wallets or accounts (as determined by the Secretary) which distinguish between sales, exchanges, or dispositions of digital assets eligible for the exclusion from gross income under subsection (a) and sales, exchanges, or dispositions which are not eligible for the exclusion.
(e)
Inflation adjustment
(1)
In general
In the case of any taxable year beginning in a calendar year after 2026, each dollar amount in subsection (b)(1) shall be increased by an amount equal to—
(A)
such dollar amount, multiplied by
(B)
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting  calendar year 2025  for  calendar year 2016  in subparagraph (A)(ii) thereof.
(2)
Rounding
Any increase determined under paragraph (1) shall be rounded to the nearest multiple of $10.
(f)
Regulations and guidance
The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including—
(1)
requirements relating to recordkeeping and broker information reporting,
(2)
anti-abuse standards which are consistent with the purposes of this section, which may include defining related transactions to avoid unintended application of the exclusion from gross income under subsection (a),
(3)
allocation of basis and characterization of appreciation, and
(4)
treatment of mixed transactions which contain both goods or services and property described in paragraph (1), (2), or (3) of subsection (a).
(g)
Termination
This section shall not apply to taxable years beginning after December 31, 2035.
 .
(b)
Clerical amendment
The table of sections for part III of subchapter B of  chapter 1  of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 139I the following new item:
 Sec. 139J. De minimis gain or loss from sale, exchange, or disposition of digital assets. .
(c)
Effective date
The amendments made by this section shall apply with respect to transactions entered into after December 31, 2025.
3.
Tax treatment of digital asset lending agreements and related matters
(a)
In general
 Section 1058  of the Internal Revenue Code of 1986 is amended by—
(1)
in the heading, by striking
securities   and inserting
specified assets  ,
(2)
in subsection (a), by striking  securities (as defined in section 1236(c))  and inserting  specified assets , and
(3)
striking  securities  each place it appears and inserting  specified assets. .
(b)
Fixed term
 Section 1058(b)(3)  of the Internal Revenue Code of 1986 is amended by inserting  other than as a result of such agreement being fixed-term, except as otherwise provided by the Secretary  after  transferred .
(c)
Basis
 Section 1058(c)  of the Internal Revenue Code of 1986 is amended by adding at the end the following:  All appropriate basis adjustments to specified assets subject to an agreement under subsection (b) shall be made, as determined by the Secretary, including upon the return of the lent specified assets to the taxpayer. .
(d)
Specified assets
 Section 1058  of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:
(d)
Specified assets
For purposes of this section, the term  specified asset  means—
(1)
a security (as defined in section 1236(c)), or
(2)
an actively traded digital asset.
(e)
Income
An amount equal to the income which would otherwise accrue to the lender but for a lending transaction under this section shall be included in the gross income of the lender and the character of such income shall remain unchanged.
(f)
Regulations and guidance
The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including the application of the provisions of this section to digital asset forks, digital asset airdrops, and fees associated with digital asset lending.
(g)
Termination
This section shall not apply to taxable years beginning after December 31, 2035.
 .
(e)
Conforming amendment
The table of sections for part IV of subchapter O of  chapter 1  of the Internal Revenue Code of 1986 is amended by striking the item relating to  section 1058  and inserting the following new item:
Sec. 1058. Transfers of specified securities under certain agreements.
  .
(f)
Effective date
The amendments made by this section shall apply to taxable years beginning after the date of enactment of this Act.
4.
Loss from wash sales of specified assets
(a)
In general
 Section 1091  of the Internal Revenue Code of 1986 is amended to read as follows:
1091.
Loss from wash sales of specified assets
(a)
Disallowance of loss deduction
(1)
In general
No deduction shall be allowed with respect to any loss claimed to have been sustained from any sale or other disposition (including any termination) of specified assets where it appears that, within a period beginning 30 days before the date of such sale or other disposition and ending 30 days after such date, the taxpayer has—
(A)
acquired (by purchase, by an exchange on which the entire amount of gain or loss was recognized by law, or by entering into) substantially identical specified assets, or
(B)
entered into a contract or option to acquire, or notional principal contract in respect of, substantially identical specified assets.
(2)
Exception for dealers
Paragraph (1) shall not apply if—
(A)
the taxpayer is a dealer in specified assets,
(B)
the loss is sustained in a transaction made in the ordinary course of its business as a dealer, and
(C)
the acquisition (or the entering into of the contract or option to acquire or notional principal contract) which (without regard to this paragraph) would have resulted in the non-deductibility of the loss was similarly made in the ordinary course of such business.
(3)
Exception for stablecoins
(A)
In general
Except as otherwise provided by the Secretary, paragraph (1) shall not apply to a loss from the sale or disposition of a payment stablecoin or other stablecoin.
(B)
In general
Subject to subparagraph (C), for purposes of this paragraph, the term  payment stablecoin  means a digital asset—
(i)
that is, or is designed to be, used as a means of payment or settlement, and
(ii)
the issuer of which—
(I)
is obligated to convert, redeem, or repurchase for a fixed amount of monetary value (not including a digital asset denominated in a fixed amount of monetary value), and
(II)
represents that such issuer will maintain, or creates the reasonable expectation that such issuer will maintain, a stable value relative to the value of a fixed amount of monetary value.
(C)
Exception
The term  payment stablecoin  shall not include a digital asset that is—
(i)
a national currency,
(ii)
a deposit (as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 )), including a deposit recorded using distributed ledger technology, or
(iii)
a security, as defined in section 2 of the Securities Act of 1933 ( 15 U.S.C. 77b ), section 3 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c ), or section 2 of the Investment Company Act of 1940 ( 15 U.S.C. 80a–2 ).
(b)
Specified assets acquired less than specified assets sold
If the amount of specified assets acquired (or covered by the contract or option to acquire or notional principal contract) is less than the amount of specified assets sold or otherwise disposed of, then the particular specified assets the loss from the sale or other disposition of which is not deductible shall be determined under regulations prescribed by the Secretary.
(c)
Specified assets acquired not less than specified assets sold
If the amount of specified assets acquired (or covered by the contract or option to acquire or notional principal contract) is not less than the amount of specified assets sold or otherwise disposed of, then the particular specified assets the acquisition of which (or the entering into of the contract or option to acquire or notional principal contract of which) resulted in the non-deductibility of the loss shall be determined under regulations prescribed by the Secretary.
(d)
Adjustment to basis in case of wash sale
(1)
In general
The basis of the specified asset acquired (or the contract, option, or notional principal contract entered into) shall be increased by the amount of the deduction disallowed under subsection (a).
(2)
Rules with respect to certain acquisitions
(A)
In general
In any case in which—
(i)
the taxpayer enters into a contract or option to acquire, or notional principal contract in respect of, substantially identical specified assets (within the period specified in subsection (a)),
(ii)
the taxpayer also acquires (within the period specified in subsection (a)) substantially identical specified assets and such acquisition would, but for the entering into of the contract, option, or notional principal contract described in clause (i), have triggered a disallowance under subsection (a), and
(iii)
the contract, option, or notional principal contract matures, expires, is exercised, or otherwise terminates without the delivery or receipt of money or property during the term of the contract, option, or notional principal contract (other than at the time the contract, option, or notional principal contract is entered into) or upon such termination,
 then, subject to such exceptions as the Secretary shall prescribe (including with respect to non-abusive wash sale basis adjustment practices), paragraph (1) shall apply to the substantially identical specified assets described in clause (ii) and not to the contract, option, or notional principal contract described in clause (i).
(B)
Special rule for contracts and options
Subject to such exceptions as the Secretary shall prescribe (including with respect to non-abusive wash sale basis adjustment practices), if the acquisition of any substantially identical specified asset is pursuant to a contract or option described in subparagraph (A)(i), then, notwithstanding whether such asset was acquired within the period specified in subsection (a), paragraph (1) shall apply to the substantially identical specified asset acquired pursuant to the contract or option and not to the contract or option.
(e)
Certain short sales of specified assets and contracts To sell
Rules similar to the rules of subsection (a) shall apply to any loss realized on the closing of a short sale of (or the sale, disposition, or termination of a contract or option to sell or a short notional principal contract in respect of) specified assets if, within a period beginning 30 days before the date of such closing and ending 30 days after such date, another such short sale of (or contract or option to sell or short notional principal contract in respect of) substantially identical specified assets was entered into by the taxpayer.
(f)
Cash settlement
This section shall not fail to apply to a contract or option to acquire or sell specified assets solely by reason of the fact that the contract or option settles in (or could be settled in) cash or property other than such specified assets.
(g)
Specified asset
For purposes of this section, the term  specified asset  means any of the following:
(1)
Any security (as defined in section 475(c)(2)), including contracts or options to acquire or sell securities.
(2)
Except as otherwise provided by the Secretary—
(A)
any digital asset,
(B)
any notional principal contract with respect to any digital asset described in subparagraph (A), and
(C)
any evidence of an interest in, or a derivative instrument in, any digital asset described in subparagraph (A) or (B), including any option, forward contract, futures contract, short position, and any similar instrument in such a digital asset.
(h)
Regulations
The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including relating to abusive basis adjustment practices.
 .
(b)
Conforming amendments
(1)
 Section 1223(3)  of the Internal Revenue Code of 1986 is amended—
(A)
by striking  stock or securities  the first place it appears and inserting  specified assets (as defined in section 1091(g)) ,
(B)
by striking  stock or securities  the second and third place it appears and inserting  specified assets (as so defined) , and
(C)
by striking  (or the contract or option to acquire which)  and inserting  (or the entering into of a contract or option to acquire or notional principal contract in respect of which) .
(2)
Section 6045(g)(2)(B) of such Code is amended—
(A)
in clause (i)(I)—
(i)
by striking  security (other than stock  and inserting  covered security (other than stock , and
(ii)
by striking  stock sold or transferred  and inserting  covered security sold or transferred , and
(B)
in clause (ii)—
(i)
by striking  stock or securities  and inserting  specified assets , and
(ii)
by striking  identical securities  and inserting  identical specified assets (as defined in section 1091(g)) .
(3)
The table of sections for part VII of subchapter O of chapter 1 fo such Code is amended by striking the item relating to section 1091 and inserting the following new item:
 Sec. 1091. Loss from wash sales of specified assets. .
(c)
Termination
The amendments made by this section shall be repealed on December 31, 2035.
(d)
Effective date
The amendments made by this section shall apply to sales, dispositions, and terminations in taxable years beginning after December 31, 2025.
5.
Mark-to-market election
(a)
In general
 Section 475  of the Internal Revenue Code of 1986 is amended—
(1)
by redesignating subsection (g) as subsection (h), and
(2)
by inserting after subsection (f) the following new subsection:
(g)
Election of mark To market for dealers and traders in specified assets
(1)
Dealer in specified assets
(A)
In general
In the case of a dealer in specified assets who elects the application of this paragraph, this section shall apply to such assets held by such dealer in the same manner as this section applies to securities held by a dealer in securities.
(B)
Revocation
An election under subparagraph (A) may be made without the consent of the Secretary. An election, once made, shall apply to the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.
(2)
Trader in specified assets
In the case of a person who is engaged in a trade or business as a trader in specified assets and who elects to have this paragraph apply to such trade or business as a trader in such assets, subsection (f)(1) shall apply to specified assets held by the trader in connection with such trade or business in the same manner as such subsection applies to securities held by a trader in securities.
(3)
Limitation
The application of this subsection shall be limited to specified assets which are treated as actively traded.
(4)
Definitions
For purposes of this subsection—
(A)
Specified asset
The term  specified asset  means—
(i)
a digital asset,
(ii)
any notional principal contract with respect to a digital asset described in clause (i), or
(iii)
any evidence of an interest in, or a derivative instrument in, an asset described in clause (i) or (ii), including any option, forward contract, futures contract, short position, or similar instrument in such digital asset.
(B)
Dealer in specified assets
The term  dealer in specified assets  means a taxpayer which—
(i)
regularly purchases specified assets from, or sells specified assets to, customers in the ordinary course of a trade or business, or
(ii)
regularly offers to enter into, assume offset, assign, or otherwise terminate positions in specified assets with customers in the ordinary course of a trade or business.
(5)
Regulations and guidance
The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection.
(6)
Termination
This subsection shall not apply to taxable years beginning after December 31, 2035.
 .
(b)
Effective date
The amendments made by this section shall apply to sales and exchanges in taxable years beginning after the date of enactment of this Act.
6.
Digital asset mining and staking
(a)
In general
 Section 451  of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
(l)
Deferral of income recognition for digital asset activities
(1)
In general
In the case of a taxpayer who engages in validation of digital asset transactions (including digital asset mining and staking), any income relating to such activities—
(A)
shall not be included in the gross income of the taxpayer until the taxable year of the sale or other disposition of the assets produced or received in connection with the mining or staking activities, and
(B)
shall be treated as ordinary income.
(2)
Regulations and guidance
The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection, including relating to the residence of a recipient of a digital asset fork or digital asset airdrop.
(3)
Termination
This subsection shall not apply to taxable years beginning after December 31, 2035.
 .
(b)
Source of income related to consideration received
 Section 863  of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
(f)
Source of income related to consideration received
(1)
In general
The source of any income related to validation of digital asset transactions shall be determined by reference to the residence of the recipient at the time of receipt.
(2)
Regulations and guidance
The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection.
(3)
Termination
This subsection shall not apply to taxable years beginning after December 31, 2035.
 .
(c)
Effective date
The amendments made by this section shall apply to taxable years beginning after the date of enactment of this Act.
7.
Charitable contributions and qualified appraisals
(a)
In general
 Section 170(f)(11)(A)(ii)(I)  of the Internal Revenue Code of 1986 is amended by inserting  actively traded digital assets,  before  and any qualified vehicle .
(b)
Contributions to private foundation
 Section 170(e)(5)  of the Internal Revenue Code of 1986 is amended—
(1)
in the heading, by inserting
or digital assets   after
stock  ,
(2)
in subparagraph (A), by inserting  or qualified appreciated digital assets  after  qualified appreciated stock , and
(3)
by adding at the end the following new subparagraph:
(D)
Qualified appreciated digital asset
(i)
In general
For purposes of this paragraph, the term  qualified appreciated digital asset  means a digital asset—
(I)
which is actively traded, and
(II)
which is capital gain property (as defined in subsection (b)(1)(C)(iv)).
(ii)
Regulations and guidance
The Secretary may prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subparagraph.
(iii)
Termination
The term  qualified appreciated digital asset  shall not apply to any contribution made in taxable years beginning after December 31, 2035.
 .
(c)
Effective date
The amendments made by this section shall apply to contributions made in taxable years beginning after the date of enactment of this Act.