Representatives Steven Horsford and Max Miller have released a discussion draft of the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields Act on December 20, 2025. The bill aims to extend anti-abuse tax rules like constructive sales and wash sales to digital assets, addressing gaps in current law. This follows ongoing congressional reviews prompted by a presidential executive order earlier in the year.
The U.S. Congress has been actively examining the taxation of digital assets since President Donald J. Trump's Executive Order 14178, issued on January 23, 2025, which directed a focus on digital financial technology. The House of Representatives passed the CLARITY Act, now pending in the Senate, while the President’s Working Group on Digital Asset Markets released its report in July 2025. These efforts culminated in testimony before the Senate Committee on Finance on October 1, 2025, where experts discussed regulatory needs.
The latest development is the PARITY Act discussion draft from Representatives Horsford (D-NV) and Miller (R-OH). It proposes applying Internal Revenue Code Section 1259's constructive sale rule to digital assets, treating certain transactions as sales to prevent gain deferral. As the draft notes, "comparable strategies are increasingly available in digital asset markets but are not clearly covered by existing statutory language, allowing gain deferral that is inconsistent with the realization principle." This would mark a shift, potentially treating digital assets differently from other commodities.
On wash sales under Section 1091, the draft extends the rule to digital assets, substituting "specified assets" for "securities," with basis adjustments and exemptions for mark-to-market elections and dealer transactions. It suggests excluding stablecoins with minimal gains or losses, aligning with the GENIUS Act of July 18, 2025, which defines payment stablecoins. Senator Cynthia Lummis's S.2207, introduced June 30, 2025, also addresses wash sales for specified assets, exempting certain stablecoins.
Straddle rules under Section 1092 already apply to actively traded personal property, including digital assets, preventing loss deferral through offsetting positions. Both bills grant Treasury authority for anti-abuse regulations, targeting related-party transactions and tax avoidance. These measures respond to the speed and divisibility of digital assets, aiming to close loopholes while fostering innovation.
