New Bill Introduced by Sen. Lummis Aims to Simplify Crypto Taxation
Senator Cynthia Lummis has unveiled a new piece of legislation aimed at providing various tax benefits for individuals involved in digital asset transactions. The proposed measure would exempt users from calculating capital gains on transactions that fall below $300. Additionally, those engaged in crypto mining and staking would only incur tax liabilities upon selling their rewards. The bill also seeks to simplify the process of donating cryptocurrency to charitable organizations. Despite the exclusion of crypto tax exemptions from President Donald Trump’s recent economic proposal, these benefits may soon be revisited in Congress as a standalone initiative.
Legislation Promises to Support Digital Asset Industry
On Thursday, Senator Lummis (R-WY), who previously sought to integrate crypto tax benefits into a larger legislative package, introduced a detailed tax framework for digital assets. She asserted that this legislation would deliver significant advantages for the digital asset sector and establish equitable conditions for users nationwide. “To sustain our competitive advantage, we must revise our tax system to support our digital economy rather than hinder its participants,” Lummis stated in a communication shared with Decrypt. She emphasized the need to modernize tax laws to prevent them from obstructing American innovation and ensure that citizens can engage in the digital economy without the fear of unintentional tax infractions.
Proposed Tax Exemptions and Benefits
The bill, informally referred to as the Lummis Crypto Tax Bill, encompasses several tax provisions that industry leaders had hoped to see included in the larger economic proposal. A key feature of the legislation is a $300 de minimis tax exemption applicable to most digital asset transactions. This allowance would enable U.S. crypto users to make minor purchases using various tokens without the burden of calculating capital gains taxes. Transactions under this threshold—such as buying a meal with Bitcoin or paying gas fees with Ethereum—would not require capital gains reporting. However, there is a $5,000 annual limit on the exemption, which does not extend to cash purchases or cash equivalents like stablecoins, nor to property used for business purposes or income generation. Advocates believe that such an exemption could significantly enhance the adoption of crypto as a viable payment method.
Additional Tax Benefits and Clarifications
Furthermore, the Lummis bill aims to formalize other tax advantages that were anticipated earlier in the week, including a mark-to-market election that would facilitate businesses in reporting unrealized crypto gains on their financial statements. It also seeks to clarify that rewards obtained through crypto mining or staking should only be taxed as ordinary income when sold, addressing ongoing legal uncertainties regarding the tax treatment of staking rewards at the time they are generated.
Other enhancements proposed in the legislation include an expansion of current securities lending regulations to encompass digital assets, which would categorize crypto lending as a non-taxable event, akin to traditional securities lending. Additionally, the bill would streamline the process of donating cryptocurrency to charitable organizations.
Next Steps for the Legislation
A representative for Senator Lummis informed Decrypt that a specific timeline for presenting the legislation to the Senate has yet to be established. Last month, the Senate passed the GENIUS Act, a bill that lays out a framework for the issuance and trading of stablecoins in the U.S., which is anticipated to be voted on in the House of Representatives within the coming weeks.
