New legislation led by U.S. House Budget Chairman Jodey Arrington (R-TX) would apply the same federal rules to digital assets and traditional assets in an effort to provide consistency and clarity to the U.S. Tax Code.
“America should lead the world in digital asset innovation, but that innovation shouldn’t come with preferential treatment in the tax code,” Rep. Arrington said.
He introduced the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act, H.R. 9172, which aims to close tax loopholes in the digital asset market and ensure investors use the same federal rules for traditional financial assets or digital assets.
The bill would apply existing anti-abuse rules to digital assets that already govern comparable investment assets, ending unequal treatment while supporting continued innovation and growth in America’s digital asset economy, according to a bill summary provided on June 17 by Rep. Arrington’s office.
“Today, digital assets are exempt from anti-abuse rules that apply to other investment assets, creating loopholes that undermine parity and equal treatment under the law,” the lawmaker said. “My Applying Existing Tax Anti-Abuse Rules to Digital Assets Act closes these loopholes by applying the same commonsense safeguards that already apply to similar traditional financial assets, providing greater certainty for taxpayers and supporting the continued growth of America’s digital asset economy.”
Specifically, H.R. 9172 would apply existing wash sale and constructive sale rules to digital assets.
The wash sale rule prevents investors from generating artificial tax losses while maintaining substantially the same investment position, while the constructive sale rule prevents investors from locking in gains while indefinitely deferring capital gains taxes, the summary says.
The bill would not create new taxes on digital assets; it would apply existing anti-abuse rules that already govern comparable investment assets, said Rep. Arrington.
H.R. 9172 has been referred for consideration to the U.S. House Ways and Means Committee, where chairman U.S. Rep. Jason Smith (R-MO) applauded its introduction.
“Congress established anti-abuse rules like the wash sale and constructive sale provisions to close loopholes and protect the integrity of our tax system. However, because those rules were created before digital assets existed, a regulatory gap has emerged that some individuals have exploited,” he said. “I thank Representative Arrington for his leadership on the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act.”