US Lawmakers Unveil Bill Requiring IRS Review of Crypto Tax Exemptions for Small Transactions

• Bipartisan lawmakers introduced the Digital Asset PARITY Act in the US House of Representatives.
• The bill directs the Treasury Department and IRS to study a potential de minimis tax exemption for small crypto transactions.
• Treasury would be required to provide interim guidance within 180 days on available relief under existing authority.
• The legislation includes provisions related to stablecoin tax treatment, broker safe harbor rules, and the application of wash sale rules to crypto.
• Lawmakers said the proposal is intended to modernize tax rules for digital assets and financial technology.

Lawmakers Introduce PARITY Act for Crypto Tax Review

A bipartisan group of US lawmakers has introduced the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation and Yields Act, known as the PARITY Act, in the House of Representatives. The legislation follows the release of a discussion draft in March.

“As America continues to lead the world in innovation, our tax code has failed to keep pace with the rapid growth of digital assets and modern financial technology,” Miller said in the statement.

The bill was introduced as Congress continues to focus on cryptocurrency regulation. The Senate is expected to consider separate legislation addressing how US market regulators would oversee the crypto sector. Democratic Representatives Steven Horsford and Suzan DelBene, along with Republican Representative Mike Carey, joined Miller in introducing the legislation.

Representative Steven Horsford stated:

“Innovation should create opportunity for everyone, not just those already ahead.”

Democratic Representative Steven Horsford said the Digital Asset PARITY Act is designed to modernize the US tax code for the digital age by creating clearer rules for digital assets. He added that the legislation aims to support financial inclusion and expand access to wealth-building opportunities through emerging financial technologies, while ensuring the future economy benefits working families.

Australia is considering replacing its 50% capital gains tax discount with an inflation-based model from FY2027, a move that could raise taxes for crypto investors, while South Korea has confirmed a 22% tax on virtual asset gains above 2.5 million won ($1,721) starting January 2027.

Study Focuses on Small Crypto Transaction Tax Relief

The cryptocurrency industry has urged Congress to create a tax exemption for small digital asset transactions. According to crypto exchange Kraken, it sent 56 million tax forms to the Internal Revenue Service last month. Nearly one-third of those forms were related to transactions worth less than $1, while more than 75% involved transactions below $50.

The latest version of the PARITY Act does not establish a de minimis exemption for small cryptocurrency transactions. Instead, it directs the Treasury Department, which oversees the IRS, to study the possibility of such an exemption. Under the proposal, the Treasury would be required to issue interim guidance within 180 days outlining what relief could be provided under existing authority.

The bill also calls for studies examining:

• The taxpayer compliance burden associated with reporting small crypto transactions.
• The number of cryptocurrency transactions under $200 reported to the IRS.
• The administrative requirements the IRS would need if a de minimis exemption were enacted.
• Potential forms of abuse that could occur under such an exemption.

Stablecoin and Trading Provisions Remain in the Bill

The legislation retains a provision from the discussion draft that would treat regulated payment stablecoins similarly to cash for tax purposes. Under the proposal, gains or losses would not be recognized unless the token’s cost basis is less than 99% of its redemption value. The bill also preserves a carve-out providing a safe harbor for trading through brokers and seeks to apply wash sale rules to cryptocurrency transactions. Representative Max Miller said he was confident the legislation could be approved before the end of the current Congress, which concludes in January following the November midterm elections, when all House seats will be contested.

FAQs

1. What is the Digital Asset PARITY Act?
The Digital Asset PARITY Act is a bipartisan bill introduced in the US House of Representatives that directs the Treasury Department and the IRS to study potential tax policy changes for digital assets, including a possible de minimis exemption for small cryptocurrency transactions.

2. Does the PARITY Act create a crypto tax exemption?
No. The current version of the bill does not establish a tax exemption for small cryptocurrency transactions. Instead, it requires the Treasury Department to study the issue and provide guidance on available relief under existing authority.

3. What studies would the Treasury Department conduct under the bill?
The bill calls for studies on taxpayer reporting burdens for small crypto transactions, the number of transactions under $200 reported to the IRS, IRS implementation requirements for a de minimis exemption, and potential risks of abuse under such a policy.

4. How does the bill address stablecoins?
The legislation retains a provision that would treat regulated payment stablecoins similarly to cash for tax purposes, with gains or losses generally not recognized unless the token’s cost basis is less than 99% of its redemption value.