The United States Senator Cynthia Lummis (R-WY) has introduced “extensive digital tax legislation” which would, among other things, provide exceptions to profits from profits from digital asset transactionsAn end to the so -called “double taxation” of digital assets and stakes and greater parity with how other types of asset are dealt with.
On July 3, Senator Lummis – a prominent supporter of the digital asset space and chairman of the Senate’s digital assets published the subcommittee – invoice to change Internal income code from 1986 To reform the treatment of digital assets, such as Wyoming Republican alleged Would “generate approximately $ 600 million in net revenue under the budget window 2025-2034.”
The legislation proposes several tax reforms to benefit the digital asset space, while the asset class provides more in line with the treatment of other securities and goods in certain areas.
“In order to maintain our competitive advantage, we must change our tax code to embrace our digital economy, not to burden digital asset users,” Lummis said. “This groundbreaking legislation is fully paid, cuts through the bureaucratic bureaucracy and establishes rules for common sense that reflects how digital technology works in the real world.”
She added that US legislators “cannot allow our archaic tax policy to suffocate US innovation, and my legislation ensures that Americans can participate in the digital economy without unintentional taxes.”
Tax exemption for small transactions
First on the list of changes would be a “de minimis exclusion” from taxation for digital asset gains or losses of $ 300 or less, with a total total capital of $ 5,000 – unless “sales or sales or exchange are for cash or cash equivalents ”(including payment
Stablecoins), property used in active trade or business or real estate held for income production.
“This provision recognizes the impracticality of tracking every small digital asset transaction, such as buying coffee with bitcoin, which creates huge compliance burdens for ordinary users,” said one press release From Lummis’ office, published on July 3 last year. “The threshold of $ 300 beats a reasonable balance between tax compliance and practical usability for digital assets as an exchange medium.”
This proposal aims to increase the market for small digital asset transactions and payments and would be particularly advantageous for Microka markets.
Mining
Another important proposal in the bill aims to terminate the controversial “double taxation” of digital assets.
According to the IRS’s existing rules, an American taxpayer who successfully breaks digital assets must treat “real market value” for the recently created assets because gross income is currently “created” – which means, the creation of the asset triggers a taxable event. However, when the miner later sells or exchange these assets, a second taxable event occurs at any estimate or loss above the original value at the time of sale.
In other words, digital assets are effectively taxed twice on the same assets according to current US tax rules – first at creation and then again upon disposition.
Lummis tries to terminate this double taxation by changing the rules for making mining and input income that is not reported until the sale or disposition of the assets produced (the second taxable event) and treat it as regular income when it is reported.
“This adapts the taxation of mining and staking rewards with the actual realization of economic advantage, rather than forcing recognition based on volatile and often uncertain market values at the reception,” the press release said. “The approach prevents cash flow problems where taxpayers are required to tax on assets that they have not sold and may not be able to liquidate easily.”
Adapt with other asset classes
Further remarkable changes proposed by the bill include extending securities Lending rules to include digital assets, which prevents a result where temporary lending of digital assets would trigger immediate tax consequences and potentially discourage legitimate lending markets on digital assets – a situation described as “absurd.”
Another reform means closing an “unfair loophole” where digital asset investors can get involved in tax connection
Strategies – where an investor sells an asset with a loss to compensate capital gains taxes – inaccessible to traditional securities investors.
This can be done for game Capital gains tax, but also as a form of ”Laundry trade“Where a trader sells a security with a loss and buys a” essentially identical “security within 30 days before or after the sale – a practice that can be used to mislead investors to believe that trade volumes for a security are higher than they really are.
Senator Lummis’ Bill proposes that you add digital assets to an IRS rule that prevents taxpayers from the fact that deductions from their taxable income losses that are the result of laundry with securities; An exception was included for retailers and fuse transactions.
The bill would also allow retailers and traders in digital assets to choose “ground-to-market treatment”, also known as “fair value accounting”, whereby the balance sheet shows assets to their actual market value, which may be higher or lower than the cost.
“This provides digital assets and traders the same tax treatment available for their securities and raw materials, which eliminates arbitrary discrimination based on the type of asset,” said Lummis announcement.
Finally, the proposed legislation would actively release digital assets from “qualified assessment” requirements for charity grants and thus remove “an unnecessary bureaucratic barrier that has counteracted charity of digital assets.”
Based on the current IRS rules, donations of non-contact assets require goods, securities or digital assets to more than $ 5,000 in general a “qualified assessment” to prove that the asset’s specified value is correct. However, listed securities are exempted, as their actual market value can easily be determined based on the current trading price.
According to Lummis’ Bill, digital assets should also be exempt, as they have often easily established fair market values through active trade. Removing this requirement, suggested the Senator’s press release, would encourage philanthropy, while recognizing that actively acting digital assets should be treated in the same way as listed securities for valuation purposes.
The proposal for the tax reform will now enter into the long US legislative process, which begins with debate and subsequent vote in the Senate, at an even unspecified period in the coming months.
Watch: Reggie Middleton at Defi, Booms/Busts & Crypto Regulation
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