After the CLARITY Act faces obstacles, the U.S. crypto tax legislation takes significant action again.

Written by: KarenZ, Foresight News

On September 16, just one day after the CLARITY Act failed to pass the procedural vote in the Senate, another digital asset tax-related bill in the U.S. made progress.

Unlike the CLARITY Act, which primarily addresses the jurisdiction of the SEC, CFTC, and the market structure for digital assets, the H.R. 10357, titled the "Digital Asset Taxation Certainty Act," focuses on a more specific question: How should the U.S. tax digital assets?

Who proposed the bill, and what is its current status?

H.R. 10357 was introduced by Jason Smith, the Chairman of the House Ways and Means Committee and a Republican representative from Missouri, on September 14. The bill has a total of 8 co-sponsors, including Jodey Arrington, Aaron Bean, Mike Carey, Steven Horsford, Mike Kelly, David Kustoff, Max Miller, and Rudy Yakym.

Among them, Republican Representative Mike Kelly from Pennsylvania serves as the Chair of the Committee's Tax Subcommittee. H.R. 10357 includes provisions for charitable donations of digital assets that Kelly previously advocated, allowing eligible digital asset donations to be subjected to a simplified tax procedure closer to that applicable to publicly traded securities.

Democratic Representative Steven Horsford from Nevada is the only Democrat among the co-sponsors. He did not start engaging with the issue close to the vote. In May 2026, Horsford and Republican Representative Max Miller, among others, jointly introduced H.R. 8899, the "Digital Asset PARITY Act." This bill already addressed issues such as stablecoins, digital asset lending, wash sale rules, taxation at market value, mining and staking rewards, charitable donations, and investment trusts, some of which later appeared in H.R. 10357. Of course, H.R. 10357 does not fully adopt all designs of the PARITY Act.

After the proposal of the "Digital Asset Taxation Certainty Act," it was referred to the House Ways and Means Committee. On September 16, the committee passed the bill with 38 votes in favor and 5 against, and the next step is to await review by the full House. Even if the House passes it, it still needs to go through the Senate and be signed by the President to take effect.

What important provisions does the "Digital Asset Taxation Certainty Act" include?

H.R. 10357 covers ordinary users, investors, professional traders, brokers, miners, staking service providers, investment funds, and digital asset donors. The main content can be divided into the following aspects.

Network fees and transaction fees of no more than $10 may not trigger gains or losses

The IRS currently generally treats digital assets as property. Using digital assets to pay fees may simultaneously constitute a disposal of assets, requiring the calculation of the cost basis and gains or losses of that asset.

H.R. 10357 proposes that when using digital assets for blockchain network fees not exceeding $10, or for eligible brokerage fees, transaction fees, liquidity fees, and similar fees, the gains or losses arising from the digital assets used to pay such fees may be excluded from taxable results.

However, this is not a blanket exemption for crypto payments below $10. The $10 threshold applies to network fees and transaction fees, not the purchase price of goods or services. Professional traders, brokers, digital asset dealers, service providers that process trades on behalf of others in bulk, and certain subjects that made over 5,000 digital asset transfers in the previous year generally do not apply for the ordinary user exemption.

This provision is proposed to apply to asset disposals occurring after December 31, 2027.

Provide simplified accounting options for broadly traded digital assets

H.R. 10357 allows taxpayers to elect to use a simplified accounting method for eligible "broadly traded digital assets", providing a voluntary simplified accounting method for "broadly traded digital assets". It does not automatically apply to all investors and is not simply about reducing taxable amounts, but allows taxpayers to aggregate accounting annually for specific asset types, replacing the practice of tracking costs and confirming gains or losses for each batch of assets. Eligible USD stablecoins are not applicable under this system.

Once taxpayers make the election, the annual gains and losses for the same type of digital asset will be calculated using a unified formula. In simpler terms, it aggregates the revenues obtained from disposals of assets in that year with the fair market value of assets still held at the end of the year, and compares them with the costs of assets obtained during the year, the asset value at the end of the previous year, and other adjustments stipulated by the bill. The portion where the former exceeds the latter is counted as annual income, and vice versa as annual loss. Under this system, single sales, exchanges, or other disposals that occur within the year for such assets are generally not separately recognized for gains or losses.

This system can reduce the workload of identifying cost bases for each transaction, but comes at a cost: gains and losses calculated using this method will be treated as short-term capital gains and losses, and once the election takes effect, it cannot be revoked generally within the first five tax years. The relevant rules are proposed to apply to tax years commencing after December 31, 2027.

Establish specific rules for eligible USD stablecoins

H.R. 10357 proposes to determine the tax basis and transaction value of eligible USD stablecoins based on the redemption value promised by the issuer.

Under statutory conditions, if the purchase, sale, or exchange value of stablecoins remains near the redemption value, taxpayers typically do not need to separately recognize gains or losses due to minimal price differences around $1. The bill sets thresholds like 99.5% and 100.5%, with different thresholds applying to different transaction stages.

This treatment does not cover all tokens pegged to the dollar. Eligible stablecoins must, in principle, be issued by licensed payment-type stablecoin issuers as stipulated by the "GENIUS Act", or by qualified foreign issuers legally registered in the U.S. The Treasury is also required to regularly publish a list of eligible stablecoins within feasible limits.

Traders, brokers, some high-frequency traders, taxpayers using non-dollar functional currencies, and related party transactions will be subject to additional restrictions. The relevant rules are proposed to apply to tax years commencing after December 31, 2026.

Expand certain traditional financial tax rules to digital assets

H.R. 10357 prepares to allow eligible digital assets to be subject to certain tax systems already used for securities and commodities, mainly including:

• Eligible digital asset lending may qualify for rules that do not immediately recognize gains or losses, but the lending agreements must meet conditions such as returning similar assets;
• Digital asset dealers and eligible professional traders may choose to be taxed at market value;
• Foreign investors trading digital assets through U.S. brokers or agents may qualify for a safe harbor similar to securities and commodities transactions;
• Donating eligible USD stablecoins or broadly traded digital assets may waive some qualified assessment requirements;
• For other digital assets that do not fall into the above two categories and are also not tokenized digital assets, directly donating the assets themselves will not be eligible for charitable deductions. However, they may first sell or exchange the assets into qualified USD stablecoins and donate the proceeds within a stipulated time, with eligible disposal gains not counted against taxable capital gains.

The proposed rules also clarify that these tax regulations cannot be used to infer that a certain digital asset necessarily belongs to securities, commodities, debts, or equity under securities law or other laws.

Extend wash sale, constructive sale, and other anti-avoidance rules to digital assets

H.R. 10357, while providing certain traditional financial tax treatments for digital assets, also extends corresponding anti-avoidance rules to this market. The core purpose of this section is to close tax loopholes unique to digital assets, preventing investors from creating artificial losses by quickly selling and repurchasing, or locking in profits through derivatives without recognizing taxable events.

First is the wash sale rule. The bill proposes to include trading digital assets, excluding eligible USD stablecoins, under IRC Section 1091. If an investor sells a digital asset at a loss and acquires substantially identical assets within 30 days before or after the sale, the associated loss generally cannot be immediately deducted but is included in the replacement asset's cost basis. For example, if an investor sells Bitcoin at a loss and then immediately buys back the same amount of Bitcoin, they will not be able to immediately offset that loss against other capital gains as current rules allow. Contracts and options corresponding to the assets will also be included; tokenized or wrapped assets that are economically equivalent to stocks, securities, or other digital assets may also be deemed "substantially identical" assets.

The bill also expands the constructive sale rule to digital assets, preventing investors from delaying taxes while effectively locking in asset gains. For example, even if an investor hasn’t actually sold appreciated digital assets, if they essentially lock in profits through shorting, forward contracts, or other reverse positions, the tax law may treat this arrangement as having already sold, requiring the recognition of gains accrued up to that point.

Additionally, the bill adjusts the tax treatment of digital assets in foreign companies, U.S. territories, and hedging positions.

Clarify the nature of mining and staking income, but does not address the recognition timing

The bill uniformly categorizes income generated from mining, staking, and similar blockchain validation activities as "income from digital asset validation support activities" and specifies that it constitutes ordinary income.

Income sourcing is generally determined by the taxpayer's residency status: relevant income for U.S. residents is typically regarded as U.S.-sourced income, while that of non-residents is usually seen as foreign-sourced income.

If the validation activities are conducted through fixed places, the source shall be determined based on the actual conditions of that business location.

For investment trusts, the bill states that trusts shall not automatically lose tax status just because they stake the digital assets they hold, receive staking rewards, or undertake necessary liquidity management measures. However, if an entity actively engages in blockchain validation business, they may not rely on this protection.

Adjust broker reporting rules

The bill proposes to adjust the reporting obligations for digital asset brokers to align with stablecoin rules and simplified accounting options.

Eligible USD stablecoins obtained at near redemption values will no longer be treated in a transactional report manner as ordinary digital assets. If the taxpayer chooses to simplify accounting for a certain type of broadly traded digital asset, brokers may report transactions, net gains/losses, and beginning and ending fair values by asset category.

Establish a voluntary disclosure program for digital assets

The bill requires the Treasury to establish a voluntary disclosure program for digital assets within 12 months of enactment. Eligible taxpayers may submit applications and amended tax returns within 24 months after the program is established, pay back taxes, interest, and stipulated penalties for digital asset violations.

After completing the required remedial measures, the taxpayer may obtain partial reductions of civil penalties; under qualifying circumstances, voluntarily disclosed information won’t be used to initiate specific criminal investigations or prosecutions for already disclosed violations.

The bill also calls for the Treasury to study the feasibility of utilizing zero-knowledge proofs, smart contracts, and other blockchain technologies to enhance the efficiency of information reporting, withholding taxes, tax compliance, and data protection.

The bill also includes gambling loss provisions

H.R. 10357 finally incorporates provisions from the FULL HOUSE Act, which are not directly related to digital assets, intending to restore the original rules allowing taxpayers to deduct all gambling losses within the scope of gambling winnings.

Under current rules starting in 2026, the deductible amount is restricted to 90% of actual gambling losses and cannot exceed gambling winnings. Theoretically, a taxpayer who wins $100,000 while also losing $100,000 in a year, although their economic result is zero, may still face $10,000 of taxable income due to the limitation on loss deductions to $90,000. H.R. 10357 proposes to repeal this change.

What does this bill mean?

H.R. 10357 aims to address: Which small fees do not need to be calculated individually? How should stablecoins be accounted for? Can traditional financial rules apply to digital assets? What anti-avoidance and reporting obligations should investors and platforms bear?

From a policy perspective, the value of H.R. 10357 lies not in "allowing cryptocurrencies to pay less tax," but in attempting to establish a relatively symmetrical system: reducing compliance costs without substantive significance, allowing digital assets to obtain taxation treatments that some traditional financial assets already have, while also bringing over anti-avoidance rules from traditional markets.

However, the bill is still a considerable distance from becoming effective. It has currently only received approval from the House Ways and Means Committee, and subsequent texts may still change during the review process in the House or Senate.