Virtual Currency Tax Fairness Act
Bill: S.4608 | Sponsor: Sen. Toomey, Patrick (R-PA)
Policy area: Taxation

Summary:
Virtual Currency Tax Fairness Act
This bill excludes from gross income, for income tax purposes, a limited amount of gain from the sale or exchange of virtual currency, unless such sale or exchange is for cash or cash equivalents, property used in the active conduct of a trade or business, or property held for the production of income. The exclusion does not apply if the total value of the sale or exchange exceeds $50, or the total gain exceeds $50 (both amounts adjusted annually for inflation).
The bill defines virtual currency as a digital representation of value that functions as a unit of account, a store of value, or a medium of exchange, and is not a representation of the U.S. dollar or any foreign currency.

To amend the Internal Revenue Code of 1986 to exclude from gross income 
 de minimis gains from certain sales or exchanges of virtual currency, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Virtual Currency Tax Fairness Act''.

SEC. 2. VIRTUAL CURRENCY.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
139I the following new section:

``SEC. 139J. DE MINIMIS GAIN FROM SALE OR EXCHANGE OF VIRTUAL CURRENCY.

    ``(a) In General.--Subject to subsection (b), gross income shall 
not include gain from the sale or exchange of virtual currency, unless 
the sale or exchange is for--
            ``(1) cash or cash equivalents,
            ``(2) any property used by the taxpayer in the active 
        conduct of a trade or business, or
            ``(3) any property held by the taxpayer for the production 
        of income (as described in section 212(2)).
    ``(b) Limitation.--
            ``(1) In general.--Subsection (a) shall not apply in the 
        case of any sale or exchange for which--
                    ``(A) the total value of such sale or exchange 
                exceeds $50, or
                    ``(B) the total gain which would otherwise be 
                recognized with respect to such sale or exchange 
                exceeds $50.
            ``(2) Aggregation rule.--For purposes of this subsection, 
        all sales or exchanges which are part of the same transaction 
        (or a series of related transactions) shall be treated as one 
        sale or exchange.
    ``(c) Virtual Currency.--For purposes of this section, the term 
`virtual currency' means a digital representation of value which--
            ``(1) functions as a unit of account, a store of value, or 
        a medium of exchange, and
            ``(2) is not a representation of the United States dollar 
        or any foreign currency.
    ``(d) Inflation Adjustment.--In the case of any taxable year 
beginning in a calendar year after 2023, the dollar amount in 
subsection (b)(1) shall be increased by an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, determined by substituting `calendar year 2022' for 
        `calendar year 2016' in subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence shall be rounded 
to the nearest multiple of $10.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to section 139I the 
following new item:

``Sec. 139J. De minimis gain from sale or exchange of virtual 
                            currency.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to transactions entered into after December 31, 
2022.
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