As Congress weighs competing frameworks for digital assets, the tax consequences remain unsettled, and the tax bill is not waiting on the broader market-structure legislation, according to EY Americas Crypto and Digital Asset Tax Leader Tom Shea.
Shea told Checkpoint that the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields (PARITY) Act (H.R. 8899) has bipartisan support and can advance independently of the Digital Asset Market Clarity Act (H.R. 3633), which advanced out of the Senate Banking Committee May 14 by a vote of 15-9.
The PARITY Act was introduced by Representatives Max Miller (R-OH) and Steven Horsford (D-NV), while the Clarity Act is the market-structure bill that would split digital asset oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Tax Bill Moving on an Independent Track
“We don’t necessarily need [the] Clarity Act to move the tax bill forward,” Shea said. Tax rules can be informed by other legislation, he explained, but they often advance on a separate track. He pointed to the PARITY Act’s reliance on definitions from the previously enacted Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act (P.L. 119-27), which lets the tax measure proceed without waiting for the Clarity Act’s regulatory framework to be settled. “At least in the [PARITY Act] right now,” he said, “we’re kind of seeing that move forward independently” of the Clarity Act.
The path forward is uncertain. Shea said the House Ways and Means Committee is preparing its own digital asset tax draft for markup, though the timing, possibly after the midterm elections, and how much it would borrow from the PARITY Act remain unclear. He hoped any eventual bill would be more comprehensive than the PARITY Act’s roughly half-dozen provisions and would track the wider set of issues, including decentralized finance (DeFi), raised in a recent White House report.
A Deemed-Basis Rule for Stablecoins
A central PARITY Act provision is a “deemed-basis rule” that would treat certain regulated, dollar-pegged payment stablecoins like cash, sparing consumers from tracking small gains and losses on routine transactions. Under the bill, no gain or loss is recognized on the sale or exchange of a qualifying stablecoin unless the taxpayer’s basis is less than 99% of its redemption value, and the acquirer’s basis is deemed to be $1. To qualify, the asset must be a payment stablecoin issued by a permitted issuer under the GENIUS Act and acquired for a price within 1% of $1.00. The relief excludes professional dealers and traders.
The PARITY Act does not, however, create the broad de minimis exemption for everyday digital asset purchases sought in earlier proposals. Instead, it directs the Treasury Department to study such relief and report to Congress within one year, and it includes a “Sense of Congress” that taxpayers should not face undue compliance burdens on low-value personal transactions.
Shea said the de minimis question and the treatment of staking rewards are among the most hotly debated issues, noting that the cash-like treatment was narrowed from all digital assets in prior drafts to GENIUS-qualifying stablecoins.
Staking Rewards, Wash Sales, Lending
To address what sponsors call a “phantom income” problem, the bill would let validators elect to defer income from newly created staking and mining rewards for up to five years, rather than recognizing ordinary income on receipt. Any disposition during the deferral period would be treated as ordinary income or loss. “That’s where the PARITY Act has kind of deviated from a lot of the previous proposals,” Shea said.
The bill also extends several established securities rules to digital assets. It applies the wash sale rule under IRC § 1091, which defers losses when a substantially identical asset is reacquired within 30 days before or after a sale, and the constructive sale rule under IRC § 1259. Separately, it expands securities-lending treatment under IRC § 1058 so that lending a digital asset is not a taxable sale, and it lets dealers and active traders make a mark-to-market election under IRC § 475. Shea said the industry has largely come to view the wash sale rule’s application to digital assets as an inevitability.
Open Questions on Classification, Sourcing, Rulemaking
Foundational questions remain. Shea said the IRS’ default classification of digital assets as property, unchanged by the GENIUS Act or the pending proposals, sits at the “central root of the problem,” creating complexity for assets that often function as currency. The proposals, he noted, do not alter that classification but extend existing rules to digital assets.
He also flagged a gap the PARITY Act leaves open. While the bill addresses the character and timing of income, “there’s really been nothing on source,” Shea said, a critical omission for determining U.S. taxing jurisdiction over cross-border transactions.
Clarifying regulations will be essential regardless of how detailed the statute is, Shea said, given how the provisions interact. He offered one example: if a taxpayer elects to defer staking income, it is unclear whether a later disposition still triggers an event for wash sale purposes.
Compliance Burdens, Consumer Behavior
Shea said brokers would need significant lead time to build new cost basis and wash sale reporting into systems that currently treat digital assets as property. “They’re going to have to allow some time for this, for the industry to actually effectuate all this stuff,” he said, suggesting a window of at least 18 months.
He raised a related concern about consumer behavior. With the DeFi broker reporting regulations repealed last year and centralized platforms facing heavier obligations (new Forms 1099-DA and wash sale tracking among them), some users could migrate from regulated, centralized organizations “more into the decentralized space,” he said.
Still, Shea said the appetite to comply is real, even if hindered by unclear rules and a lack of accessible tools. Many in the industry, he observed, “either don’t know the rules, or they don’t have the means to actually put together the reporting required to comply with the rules.”
For more on the use of digital assets, formerly referred to as virtual currencies, as a form of payment, see Checkpoint’s Federal Tax Coordinator 2d ¶ I-2151.1.
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