Tax Clarity for Mining and Staking Act

This bill amends the Internal Revenue Code to provide tax rules for digital assets received from mining and staking. It creates a new subchapter for taxing newly minted digital assets, allows an election to defer income and capitalize costs, clarifies sourcing rules, and defines key terms.

Sec. 2, Treatment of certain digital assets received in connection with the validation of digital asset transactions: This section adds a new subchapter W to the tax code. Under new section 1400W-1, when a taxpayer acquires a newly minted digital asset, its fair market value is included in gross income as ordinary income at the time of acquisition, and that amount becomes the taxpayer's basis. Specified acquisition costs are generally treated as expenses, not capitalized. Under new section 1400W-2, a taxpayer may elect to defer including newly minted digital assets in income and instead capitalize specified acquisition costs. Upon disposition of such assets, any gain is recognized and treated as ordinary income, and losses are ordinary to the extent they exceed non-cost basis. The election applies to the taxpayer's taxable year and later years unless revoked. It is not available to controlled foreign corporations, passive foreign investment companies, or certain foreign trusts and partnerships. The Secretary may issue regulations for grantor trusts. New section 1400W-3 defines "newly minted digital asset" as a digital asset issued in connection with validating transactions that was not previously owned, and "specified acquisition costs" as amounts paid in connection with validation where there is a reasonable possibility of acquiring a newly minted asset. The section also amends sourcing rules under section 863 to source income from acquiring such assets based on the taxpayer's residence, and amends partnership rules under section 751 to treat qualified newly minted digital assets as ordinary income items. It also coordinates with the qualified business income deduction under section 199A. These amendments apply to assets acquired in taxable years beginning after enactment.

Sec. 3, Investment trusts engaged in digital asset staking: This section amends section 7701(p) to provide that a trust does not lose its trust status solely because the trustee has the power to stake digital assets held by the trust, retain or distribute staking rewards, choose which assets to stake, take liquidity measures for redemptions, or perform related acts. This does not apply if the trust is actively engaged in a trade or business of validating digital asset transactions. The Secretary may issue regulations. This applies to taxable years ending after enactment.

Sec. 4, Definitions: This section adds new definitions to section 7701. "Digital asset" means a digital representation of value recorded on a cryptographically secured distributed ledger or similar technology. "Digital asset transaction" means any transfer of a digital asset recorded on such ledger. "Digital asset validation supporting activities" includes staking, mining, or similar activities. "Validate" includes proposing transactions for validation and verifying validation. "Staking" means making a digital asset available to support validation, and similar activities. "Mining" means performing computations or making computing power available to support validation, and similar activities.