ADAPT Act

This bill amends the Internal Revenue Code to reform the tax treatment of digital assets, including stablecoins, trading, validation activities, and related transactions. It provides nonrecognition for certain stablecoin transactions, allows mark-to-market elections for dealers and traders, establishes source rules for validation income, excludes certain digital asset trading from being a U.S. trade or business, and addresses wash sales, constructive sales, charitable contributions, de minimis fees, tax-exempt entity income, registration rules, and foreign entities linked to decentralized autonomous organizations.

Sec. 2, Nonrecognition of gain or loss on certain sales, exchanges, or dispositions of stablecoins: No gain or loss is recognized on the sale, exchange, or disposition of a covered payment stablecoin to purchase products or services. A covered payment stablecoin is a qualified U.S. dollar stablecoin identified by the Treasury in a quarterly report and acquired within 3 percent of $1.00. This does not apply to traders, brokers, dealers, or taxpayers using a functional currency other than the U.S. dollar.

Sec. 3, Mark to market election: Dealers and traders in covered digital assets may elect mark-to-market treatment, with adjustments to character of income or loss. Covered digital assets that are securities or commodities are not treated as such for certain mark-to-market provisions.

Sec. 4, Source rules for digital asset validation activities: Income from digital asset validation supporting activities (e.g., staking, mining) is sourced in the United States if derived by a U.S. person, and outside the United States if derived by a non-U.S. person, with special rules for foreign branches and U.S. offices.

Sec. 5, Certain trading in digital assets not treated as a trade or business within the United States: Trading in traded digital assets through a resident broker or for the taxpayer's own account is not treated as a U.S. trade or business, except for dealers in covered digital assets. This applies to taxable years beginning after December 31, 2026.

Sec. 6, Transfer of digital assets under certain agreements: Section 1058 of the Internal Revenue Code is expanded to cover traded digital assets, including provisions for protocol distributions, staking rewards, and transaction fees during the loan period.

Sec. 7, Application of wash sale rules to digital assets: Wash sale rules apply to traded digital assets (except qualified U.S. dollar stablecoins), with tokenized or bridged digital assets treated as substantially identical to economically equivalent assets. Exceptions apply for acquisitions in validation activities or regular periodic series.

Sec. 8, Treatment of trusts and publicly traded partnerships holding digital assets: For covered digital asset investment trusts, certain trustee powers (e.g., staking, managing redemptions, responding to technology changes) do not disqualify the trust from being an investment trust. This does not apply if the trust is engaged in a validating trade or business.

Sec. 9, Application of constructive sale rules to digital assets: Constructive sale rules apply to digital assets (except qualified U.S. dollar stablecoins), with tokenized or bridged digital assets treated as substantially identical to economically equivalent financial property. This applies to constructive sales after enactment.

Sec. 10, Charitable contributions of widely traded digital assets: Widely traded digital assets are excepted from appraisal requirements for charitable contributions, subject to Treasury anti-abuse rules. This applies to taxable years beginning after December 31, 2026.

Sec. 11, Treatment of de minimis digital asset network fees: No gain or loss is recognized on a qualified transaction cost disposition where the aggregate fair market value of digital assets disposed for transaction costs does not exceed $10. Digital asset transaction costs include fees, taxes, commissions, and network fees.

Sec. 12, Treatment of income from qualified digital asset validation activity by tax-exempt entities: Income from qualified digital asset validation activity is excluded from unrelated business taxable income if the taxpayer does not substantially participate (e.g., delegates validation rights without controlling nodes).

Sec. 13, Application of registration-required obligation rules: Qualified U.S. dollar stablecoins are excepted from registration-required obligation rules. For digital assets without a fixed maturity date, the maturity date is treated as 25 years after issuance. These amendments apply to taxable years ending after enactment, with the maturity date rule applying to digital assets issued after enactment.

Sec. 14, Treatment of certain foreign entities established in connection with decentralized autonomous organizations: The Treasury must issue regulations within 12 months to clarify tax treatment of reorganizations of applicable foreign entities (e.g., foundations linked to DAOs) as domestic corporations, including temporary safe harbors for entities organized before September 24, 2026.

Sec. 15, Definitions: Defines key terms including bridged digital asset, digital asset, digital asset transaction, digital asset validation supporting activities, and mining, with authority for the Treasury to specify further.