A bill to amend the Internal Revenue Code of 1986 to reform the treatment of digital assets.

This bill amends the Internal Revenue Code of 1986 to reform the tax treatment of digital assets. It defines digital assets, creates a de minimis exclusion for small personal transactions, updates rules for lending agreements, wash sales, mark-to-market elections, mining and staking income, and charitable contributions, with most provisions set to expire after 2035.

Sec. 1, Definition of digital asset: Adds a new definition for 'digital asset' as a digital representation of value on a cryptographically secured distributed ledger. It excludes digital assets that represent financial assets (like stocks or currencies) and treats them as the underlying financial asset. It also defines 'actively traded digital asset' as a fungible digital asset with readily available quotations on an exchange.

Sec. 2, De minimis gain or loss: Creates a new tax exclusion for gains or losses from using digital assets to buy products or services in personal transactions, as long as the transaction is not for cash, cash equivalents, or other digital assets. The exclusion is limited to transactions under $300 per transaction and total gains under $5,000 per year. Taxpayers must keep separate records. The dollar amounts are adjusted for inflation after 2026. This section expires after 2035.

Sec. 3, Tax treatment of digital asset lending agreements: Expands the existing tax rules for securities lending to also cover 'actively traded digital assets.' It clarifies that income from lending must be included in the lender's gross income and allows for basis adjustments. The Secretary may issue guidance on forks, airdrops, and fees. This section expires after 2035.

Sec. 4, Loss from wash sales of specified assets: Expands the wash sale rule (which disallows losses on sales if substantially identical assets are bought within 30 days) to cover digital assets. It provides an exception for payment stablecoins. The rule applies to sales, short sales, and certain contracts. These amendments are repealed on December 31, 2035.

Sec. 5, Mark-to-market election: Allows dealers and traders in actively traded digital assets to elect mark-to-market accounting, where assets are treated as sold at year-end for tax purposes. The election is available for dealers and traders, and once made, it applies to future years unless revoked with consent. This subsection expires after 2035.

Sec. 6, Digital asset mining and staking: Defers income recognition from validating digital asset transactions (mining and staking) until the assets are sold or disposed of, and treats that income as ordinary. It also specifies that the source of such income is determined by the recipient's residence. These provisions expire after 2035.

Sec. 7, Charitable contributions and qualified appraisals: Allows taxpayers to deduct charitable contributions of actively traded digital assets at fair market value, similar to qualified appreciated stock. It also adds actively traded digital assets to the list of property requiring a qualified appraisal for donations over $5,000. The special treatment for digital assets expires after 2035.