Summary of Legislative Hearing

On June 9, the House Ways and Means Committee held a legislative hearing to consider a series of proposals aimed at establishing a clearer tax framework for digital assets. The Committee reviewed eight measures, including six bills, a discussion draft, and a proposed amendment.

Members from both parties expressed general support for advancing a bipartisan approach to digital asset taxation and acknowledged the growing importance of the industry. At the same time, several members raised concerns regarding the treatment of mining and staking rewards, as well as the proposed rules governing charitable contributions of digital assets. Some members also sought additions, including a proposal related to anti-avoidance measures related to a Puerto Rico sourcing rule.

Whether a bipartisan consensus can be reached this year remains uncertain, particularly given the limited number of remaining legislative days. Nevertheless, the hearing represents a meaningful step toward developing a more comprehensive and coherent tax regime for digital assets, an area that has long been characterized by ambiguity, evolving administrative guidance, and the uneven application of existing tax principles.

Market participants should expect continued legislative and regulatory activity in this space, with the potential for increased momentum if Congress advances related cryptocurrency legislation, including the Clarity Act.

Summary of Legislation Considered

The Committee’s proposals are generally focused on improving administrability, increasing taxpayer certainty, promoting parity with traditional financial assets, and strengthening compliance.

H.R. 9178 – Less Tax Paperwork for Digital Asset Owners Act (Rep. Rudy Yakym)

This bill seeks to reduce administrative burdens associated with routine digital asset transactions.

Key provisions include:

• De minimis simplification: Excludes gains or losses arising from the use of digital assets to pay network (e.g., transaction) fees.
• Stablecoin treatment: Excludes gain or loss on transactions involving regulated U.S. dollar-backed stablecoins.
• Simplified accounting election: Permits taxpayers to elect a streamlined accounting method for digital assets.

Takeaway: The bill is designed to facilitate everyday use of digital assets by reducing compliance friction and reporting complexity.

H.R. 9175 – Tax Clarity for Mining and Staking Act (Rep. Mike Carey)

This bill addresses longstanding uncertainty regarding the tax treatment of mining and staking rewards.

Key provisions include:

• Income characterization: Confirms that newly minted digital assets received as rewards are treated as ordinary income.
• Election for self-created property treatment: Allows taxpayers to elect treatment similar to self-created property.
• Grantor trust clarification: Provides that grantor trusts holding digital assets may receive staking rewards without adverse tax consequences.

Takeaway: The bill provides greater clarity while preserving flexibility for taxpayers engaged in blockchain validation activities.

Additional Legislative Proposals

The Committee also considered several related measures aimed at aligning digital asset tax treatment with existing financial asset rules and enhancing compliance:

• H.R. 9173 – Charitable Deductions for Digital Asset Donations Act (Rep. Mike Kelly): Aligns charitable deduction rules for digital assets with those applicable to traditional financial instruments by eliminating the qualified appraisal requirement where fair market value can be determined using reliable market pricing data, thereby simplifying compliance and reducing costs.
• Proposed Amendment (Rep. Steven Horsford): Modifies the treatment of mining and staking income and charitable contributions by limiting deferral elections for mining and staking rewards to five years and capping deductions for certain donated digital assets, reflecting a more restrictive approach than H.R. 9175. This proposed amendment highlights one point of disagreement over policy preferences that was widely discussed during the hearing.
• Discussion Draft – End Digital Assets Tax Shelter Act: Introduces anti-avoidance measures, including a Puerto Rico sourcing rule, to prevent misuse of territorial tax provisions and highlights increased emphasis on cross-border compliance and enforcement. This policy was proposed by Democrats who are seeking to have it added to any larger package of bills that may move forward.
• H.R. 9176 – Providing Analogous Rules for Digital Assets (PAR) Act (Rep. David Kustoff): Extends key tax rules applicable to traditional financial instruments to digital assets, including safe harbors for foreign investors, nonrecognition treatment for certain lending transactions, and mark-to-market accounting for dealers and traders.
• H.R. 9174 – Digital Assets Voluntary Disclosure Program Act (Rep. Aaron Bean): Establishes a one-time voluntary disclosure program offering reduced penalties for taxpayers seeking to correct prior noncompliance related to digital assets.
• H.R. 9172 – Applying Existing Tax Anti-Abuse Rules to Digital Assets Act (Rep. Jodey Arrington): Applies longstanding anti-abuse provisions, like wash sale and constructive sale rules, to digital assets to prevent taxpayers from exploiting gaps in current law.

Key Definitions and Concepts

Definitions play a critical role in shaping the proposed tax framework for digital assets. The following concepts are central to understanding the legislation:

• Digital Asset: Any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology, as specified by the Secretary.
• Traded Digital Asset: A fungible digital asset available on an exchange that is not a tokenized or certain wrapped digital asset (unless tied to a traded reference asset).
• Widely Traded Digital Asset: A traded digital asset that meets liquidity, market capitalization (exceeding $500 million), and ownership dispersion thresholds.
• Tokenized Digital Asset: A digital asset (other than a qualified U.S. dollar stablecoin) whose value is derived in significant part from assets or rights external to the underlying distributed ledger.
• Wrapped Digital Asset: A digital asset redeemable on a one-for-one basis for another digital asset and recorded on a distributed ledger.
• Reference Digital Asset: A digital asset redeemable one-for-one for another digital asset.
• Qualified U.S. Dollar Stablecoin: A U.S. dollar stablecoin issued by a permitted or foreign payment stablecoin issuer, as defined under the GENIUS Act.
• Digital Asset Transaction: Any transfer of a digital asset recorded on a distributed ledger.
• Digital Asset Validation Supporting Activities: Activities such as staking or mining that support transaction validation.
• Validation: The process of proposing and verifying digital asset transactions.
• Newly Minted Digital Asset: A digital asset issued in connection with validation activities that was not previously owned.
• Staking: Making digital assets available to support transaction validation, or similar activities.
• Mining: Performing computations or providing computing power to support transaction validation, or similar activities.

Conclusion

The June 9 hearing reflects continued Congressional interest in establishing a clearer, more consistent tax framework for digital assets. While some policy differences remain, the range of proposals considered signals a growing recognition of the need for legislative action in this area.

Cozen O’Connor Public Strategies will continue to closely monitor developments as Congress evaluates potential pathways for advancing digital asset tax legislation.

For more information or to discuss how these proposals may affect your business or investments, please contact Sean Clerget or any member of the Cozen O’Connor Public Strategies team.