The revised PARITY Act discussion draft, re-released March 26 by Reps. Max Miller (R-OH) and Steven Horsford (D-NV), represents the most comprehensive attempt to date to overhaul U.S. tax treatment of digital assets. The bill extends wash sale rules to crypto for the first time, offers a five-yea...
"America's tax code has failed to keep pace with modern financial technology. This bipartisan legislation brings clarity, parity, fairness, and common sense to the taxation of digital assets." — Rep. Max Miller (R-OH), House Ways and Means Committee
The revised PARITY Act discussion draft, re-released March 26 by Reps. Max Miller (R-OH) and Steven Horsford (D-NV), represents the most comprehensive attempt to date to overhaul U.S. tax treatment of digital assets. The bill extends wash sale rules to crypto for the first time, offers a five-year deferral on staking and mining income, eliminates gain/loss recognition on stablecoin payments within a 1% peg band, and introduces mark-to-market elections for professional traders. It sits alongside three other active pieces of crypto legislation — the CLARITY Act, the GENIUS Act, and Senator Lummis's standalone digital asset tax package — each competing for floor time as Congress weighs a potential second reconciliation bill in 2026.
The legislation arrives as the IRS's Form 1099-DA reporting regime enters its second year, with mandatory cost-basis reporting beginning for 2026 transactions. The intersection of expanded broker reporting obligations and proposed statutory changes creates a compressed implementation window for exchanges, custodians, and taxpayers. Whether PARITY's provisions survive reconciliation negotiations or move as standalone legislation remains uncertain, but the direction of travel is clear: the era of ad hoc crypto tax guidance is ending.
The Digital Asset Protection, Accountability, Regulation, Innovation, Taxation and Yields (PARITY) Act first appeared as a discussion draft in December 2025. The March 26, 2026 revision restructured several key sections and introduced new language on stablecoin treatment, constructive sales, and charitable deductions.
Both sponsors sit on the House Ways and Means Committee, giving the bill a direct path to markup. Rep. Horsford stated the bill "takes a targeted approach that provides an even playing field for consumers and businesses alike to benefit from this new form of payment." Miller indicated at the Blockchain Association's December 2025 policy summit that he expects Congress to pass some version of the legislation "before August" 2026.
The bill covers seven distinct areas: (1) stablecoin gain/loss recognition, (2) wash sale rule extension, (3) constructive sale rules for digital assets, (4) mark-to-market elections for traders and dealers, (5) mining and staking deferral, (6) charitable contribution rules for digital assets, and (7) securities lending treatment for fungible digital assets. Several sections remain explicitly reserved, including airdrop treatment and final de minimis anti-abuse rules, signaling ongoing negotiation.
The December 2025 draft proposed a straightforward $200 de minimis threshold for stablecoin transactions, mirroring the foreign currency treatment under Section 988 of the Internal Revenue Code. The March 2026 revision abandoned the fixed-dollar approach entirely.
Under the current language, no gain or loss is recognized on the sale of a "regulated payment stablecoin" unless the taxpayer's basis is less than 99% of the redemption value. The stablecoin must have maintained a price within 1% of $1.00 for at least 95% of the preceding 12-month trading period, and both purchase and sale prices must fall within the $0.99–$1.01 range. Stablecoin transactions processed through exchanges would automatically carry a deemed cost basis of $1.00.
The practical effect: routine stablecoin payments — buying goods, settling invoices, transferring between wallets — generate zero taxable events so long as the stablecoin holds its peg. This eliminates one of the most persistent compliance headaches for both consumers and businesses using dollar-pegged tokens for payments. According to Sullivan & Cromwell's April 1, 2026 tax policy update, the revision also separates sale treatment from exchange treatment and excludes related-party transactions from the safe harbor.
For context, the stablecoin market stands at approximately $320 billion in circulation as of April 2026, according to U.S. Treasury data referenced in recent GENIUS Act deliberations. The volume of on-chain stablecoin transactions has grown to levels that make individual gain/loss tracking per transfer operationally impractical for most users. The 99% rule effectively treats stablecoins as cash equivalents for tax purposes — a position the IRS has not formally adopted.
Senator Cynthia Lummis's parallel proposal offers a broader $300 per-transaction de minimis exemption capped at $5,000 in annual gains. The two approaches will need reconciliation if both advance.
Under current law, Section 1091 of the Internal Revenue Code applies wash sale restrictions only to "stock or securities." The IRS classifies crypto as property, not securities, creating an arbitrage: a taxpayer can sell Bitcoin at a loss, immediately repurchase it, claim the deduction, and retain economic exposure to the same asset. This strategy — crypto tax-loss harvesting — is legal, widely practiced, and costs the Treasury an undisclosed amount annually.
The PARITY Act extends wash sale rules to "specified assets" including digital assets. Under the proposed language, losses would be disallowed when substantially identical digital assets are acquired within 30 days before or after the sale. The provision applies to transactions in tax years beginning after enactment.
The bill simultaneously introduces constructive sale rules for digital assets under an amended Section 1259. Positions that "substantially eliminate both the risk of loss and the opportunity for gain" — such as certain DeFi strategies that synthetically replicate a sale — would trigger gain recognition.
For professional traders and dealers, the bill preserves a Section 475 mark-to-market election, allowing gains and losses to be recognized at year-end fair market value with ordinary income treatment. This provision applies only to "publicly traded digital assets," though the bill's definition of that term remains under negotiation.
Current IRS guidance (Rev. Rul. 2023-14) treats block rewards and staking income as taxable upon receipt at fair market value. The industry has long objected that this creates "phantom income" — a tax liability on illiquid tokens that may decline in value before the taxpayer can realize cash.
The PARITY Act creates an elective deferral: miners and validators can choose to defer taxation on rewards for up to five years, with ordinary income recognized at fair market value on the "recognition date" — either the election expiry or disposition, whichever comes first. The bill defines "mining and staking activity" as "the act of validating transactions on a cryptographically secured distributed ledger, and any activities closely related thereto."
The distinction between active and passive validation activities carries further implications. Active validators — those running hardware and maintaining uptime — receive different treatment than delegators who merely lock tokens into a staking pool. The precise boundary remains under negotiation, according to BDO's analysis of the draft.
For the U.S. mining industry, which generated an estimated $18.1 billion in Bitcoin issuance rewards alone in the 2024–2025 cycle (per webthreepedia's economic value framework), the deferral could materially improve cash-flow management. However, the five-year clock creates a deferred tax liability that will eventually hit — a trade-off, not an exemption.
While Congress debates statutory changes, the IRS enforcement apparatus is already operational. Form 1099-DA — the first IRS form specific to digital assets — went live for transactions beginning January 1, 2025. Custodial brokers were required to report gross proceeds by February 17, 2026. For 2025 transactions, basis reporting was voluntary; starting with 2026 transactions, it becomes mandatory.
The IRS granted transition relief for 2025: no penalties for failures to file or furnish Forms 1099-DA provided brokers made a "good faith effort." That grace period expires. For 2026 onward, exchanges and custodial wallet providers must report both proceeds and cost basis, creating an information trail the IRS has never previously possessed for crypto transactions.
On March 5, 2026, the IRS issued proposed regulations establishing an alternative process for brokers to obtain electronic delivery consent from customers for 1099-DA statements. The Notice 2026-23, released March 23, invited public comment by May 29 on 2026–2027 Priority Guidance Plan items related to digital assets.
The 1099-DA regime changes the enforcement calculus regardless of whether the PARITY Act passes. The data infrastructure is being built. Legislative clarity on what constitutes a taxable event merely determines what the reported data means — not whether it exists.
The PARITY Act does not exist in isolation. At least four pieces of legislation compete for floor time:
CLARITY Act — Passed the House July 17, 2025, with a 294-134 vote. Establishes comprehensive digital asset market structure regulation. The Senate Banking Committee postponed its markup in January 2026; the Senate Agricultural Committee has also delayed action. This is the market structure bill; the PARITY Act is the tax companion.
GENIUS Act — Stablecoin-specific regulation addressing issuance, reserves, and AML compliance. Currently in Senate Banking Committee consideration with a late April markup anticipated following a compromise on stablecoin yield provisions.
Lummis Digital Asset Tax Package — Senator Cynthia Lummis's standalone proposal includes a broader $300 de minimis exemption, different mining/staking treatment, and alternative charitable contribution relief. This package has been proposed as an amendment to potential reconciliation legislation.
Reconciliation Bill — The vehicle that could carry any or all of the above. According to Sullivan & Cromwell's April 1, 2026 update, the likelihood of a second 2026 reconciliation bill has increased due to DHS funding gaps and an anticipated $200 billion supplemental defense appropriation. Ways and Means Chairman Smith indicated tax provisions would be included once reconciliation work begins. However, as CoinDesk reported April 13, "it is far from certain that the reconciliation bill will happen or that crypto will be part of it."
The compressed timeline — reconciliation targeting late Q2/Q3, the GENIUS Act markup in late April, and the PARITY Act sponsors aiming for a bill introduction this spring — creates a narrow window where crypto tax provisions could attach to a must-pass legislative vehicle.
The PARITY Act's provisions, if enacted, would alter cost structures across multiple layers of the digital asset economy.
For exchanges and custodians: Mandatory 1099-DA reporting combined with wash sale rules increases compliance costs. Exchanges will need to track 30-day windows around each customer transaction and flag disallowed losses. This operational burden falls disproportionately on smaller platforms.
For stablecoin issuers: Tax-neutral treatment for compliant stablecoins strengthens the case for regulated, dollar-pegged tokens over alternatives. Issuers whose tokens consistently trade within the 1% band — primarily USDC and USDT — gain a structural advantage. Tokens that break the peg, even briefly, lose the safe harbor.
For miners and validators: The five-year deferral improves working capital but does not reduce total tax liability. The economic benefit is a time-value-of-money calculation: deferring a $1 million tax bill for five years at current discount rates is worth approximately $150,000–$200,000 in present-value savings, depending on assumptions.
For DeFi protocols: The constructive sale rules and the reserved airdrop provisions signal that DeFi-native activities are not being ignored. Protocols that facilitate synthetic positions, leveraged staking, or automated rebalancing may need to assess whether their mechanisms trigger constructive sale treatment for users.
For the Treasury: Closing the wash sale loophole generates revenue. Stablecoin de minimis treatment and staking deferrals reduce it. The net fiscal impact depends on implementation details that remain unresolved. The Congressional Budget Office has not yet scored the March 2026 draft.
The PARITY Act represents a structural upgrade to U.S. crypto tax policy — from ad hoc IRS guidance to statutory framework. The bill trades industry concessions (wash sale extension, constructive sale rules) for industry priorities (stablecoin tax neutrality, staking deferral). Whether this trade-off survives committee markup, reconciliation politics, and the inevitable lobbying crossfire remains uncertain.
What is not uncertain: the IRS information infrastructure is already being built. Form 1099-DA creates a data foundation that will persist regardless of what Congress does with the PARITY Act. The question is no longer whether crypto will be taxed with the same rigor as traditional assets, but how the rules will be structured and who bears the compliance cost.