PAR Act

This bill amends the Internal Revenue Code to clarify tax rules for digital assets, including lending, mark-to-market accounting, and trading safe harbors. It defines key terms like digital asset, traded digital asset, widely traded digital asset, tokenized digital asset, wrapped digital asset, reference digital asset, and stablecoin. The changes apply to transfers and taxable years after enactment or after December 31, 2025, as specified.

Sec. 2, Transfers of traded digital assets pursuant to a lending agreement: This section expands the non-recognition treatment for securities lending agreements under section 1058 to include traded digital assets. It requires the transferor to receive amounts equivalent to all distributions and to assume obligations during the loan period. The amendments apply to transfers made after enactment.

Sec. 3, Dealers and traders of widely traded digital assets: This section allows dealers in covered digital assets to elect mark-to-market accounting, treating these assets like securities. It also lets traders in covered digital assets elect similar treatment. Covered digital assets include widely traded digital assets and related derivatives. The amendments apply to taxable years beginning after enactment, with a 4-year spread for accounting adjustments.

Sec. 4, Digital asset trading safe harbor: This section amends section 864(b)(2) to provide that trading in traded digital assets through a resident broker or for one's own account does not create a U.S. trade or business for foreign persons, unless the taxpayer is a dealer. This applies to taxable years beginning after December 31, 2025.

Sec. 5, Definitions: This section adds new definitions to section 7701. A digital asset is a digital representation of value on a cryptographically secured distributed ledger. A traded digital asset is fungible with readily available quotations. A widely traded digital asset has readily available quotations for a full year, a market capitalization over $500 million (adjusted for inflation after 2027), and limited ownership concentration. A tokenized digital asset has value related to more than just the ledger's operation. A wrapped digital asset is redeemable one-for-one for another digital asset on a different ledger. A reference digital asset is the underlying asset for a wrapped digital asset. A qualified U.S. dollar stablecoin is defined by reference to the GENIUS Act, and the Secretary may treat such stablecoins as dollars.

Sec. 6, Rules of construction: This section states that nothing in the Act creates an inference about whether a digital asset is a security, commodity, or other financial instrument under any law, or about the proper application of tax law for periods before the amendments take effect.