Bipartisan groups in the U.S. House of Representatives are circulating a draft bill that would simplify tax rules for investors, traders and developers by explaining how they handle tax reporting on pledges, low-value transactions and wash sales.
Representative Max Miller of Ohio and Representative Steven Horsford of Nevada unveiled the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation and Revenue (PARITY) Act on December 20. The proposal seeks to modernize the 1986 Internal Revenue Code by eliminating excessive taxation on everyday crypto transactions, addressing the issue of “phantom income,” and closing gaps that lawmakers believe lead to tax abuses.
Miller said: “America’s tax laws have failed to keep pace with modern financial technology. This bipartisan legislation brings clarity, equality, fairness and common sense to the taxation of digital assets. It protects consumers’ everyday purchases, ensures the rules are clear for innovators and investors, and strengthens compliance so everyone plays by the same rules.”
The Parity Act includes targeted tax exemptions for regulated stablecoins, optional tax deferrals for staking and mining rewards, and new rules to align digital assets more closely with traditional securities and commodities. It would exempt low-value stablecoin transactions under $200 from capital gains taxes, provided the tokens are pegged to the U.S. dollar, actively traded and issued by a federally regulated entity.
The bill would also apply long-standing wash sale rules to cryptocurrencies, preventing traders from suffering tax losses while maintaining similar positions. Additionally, it recommends a mark-to-market accounting election for active digital asset traders, requiring annual gains and losses to be recognized based on fair market value. Another provision applies the “constructive sale” principle to cryptocurrencies, targeting derivatives-based hedging strategies that defer tax payments indefinitely.
Other measures include granting non-recognition treatment to certain digital asset loans, excluding NFTs and lightly traded tokens, and providing tax benefits to foreign investors who trade cryptocurrencies through U.S. brokers. While most provisions will take effect upon enactment, the stablecoin exemption will begin for tax years beginning after December 31, 2025.
“Today, even the smallest crypto transactions can trigger tax calculations, while other areas of law lack clarity and lead to abuse,” Horsford said. “Our Digital Asset Parity Bill discussion draft takes a targeted approach to provide a level playing field for consumers and businesses to benefit from this new payment method.”
