Republican Rep. Max Miller of Ohio and Democrat Rep. Steven Horsford of Nevada are creating a cryptocurrency tax framework in the House of Representatives, according to Accounting Today.
"America's Tax Code has failed to keep pace with modern financial technology," Miller noted in a statement. "This bipartisan legislation brings clarity, parity, fairness, and common sense to the taxation of digital assets."
The framework's goal is to offer a safe harbor for some stablecoin transactions as well as delay taxation of rewards garnered via the verification of blockchain transactions.
The cryptocurrency industry has been wanting legislation that will clarify the tax treatment of digital assets, even as a broader measure to create regulation of the assets is still under negotiation, Accounting Today reported.
The two legislators have a rough draft that aligns the taxation of cryptocurrencies with traditional securities.
The draft—a mix of bill text and policy aims not yet translated into legislative language touted by lawmakers—will exempt transactions of regulated stablecoins that have consistently maintained a value of between $0.99 and $1.01 from capital gains tax.
An explanatory note forming part of the draft has limited the tax exemption to those transactions of less than $200. However, the final text might change what tokens would be covered by that safe harbor, aides for both congressmen said, Accounting Today said.
Additionally, the proposal tries to establish safe harbors for the tithing of rewards collected for verifying blockchain transactions.
According to Miller's statement, the following are among the key provisions of the bill:
• Creates a commonsense tax treatment for regulated payment stablecoins as well as ensures everyday payment transactions would not cause unnecessary tax reporting.
• Explains source-of-income rules for digital asset trading, offering certainty for US and foreign market players while having strong tax enforcement standards.
• Draws out existing securities-lending tax rules to digital assets, ensuring that bona fide digital asset lending is not viewed as a taxable sale.
• Applies wash-sale and constructive-sale rules to digital assets, filling loopholes that lets taxpayers to artificially harvest losses as well as defer gains.
• Lets mark-to-market elections for digital asset traders and dealers, aligning tax treatment with established financial market practices.
• Establishes an elective framework for staking and mining rewards, viewing rewards as income while letting deferral of taxation to tackle liquidity and phantom income worries.
• Modernizes charitable contribution rules, distinguishing between highly liquid digital assets and speculative or illiquid tokens to stop abuse while providing support for legal charitable giving.