Digital Asset PARITY Act

(p) Tax treatment of certain digital asset activities

(1) Passive staking not a trade or business

(A) In general. Passive staking shall not constitute a trade or business, including for purposes of sections 512 and 864.

(B) Passive staking. For purposes of this subsection—

(i) In general. The term passive staking means staking by an individual or entity that is a passive validator.

(ii) Passive validator. The term passive validator means, with respect to the acquisition of any newly created digital asset (as defined in section 1400W–3)—

(I) the person who validated the digital asset transactions in connection with which such digital asset was issued, and

(II) with respect to which there are no deductible business expenses relating to such validation activity.

(2) Digital assets in investment trusts. For purposes of this title, in the case of a digital asset investment trust formed to hold digital assets—

(A) any power held by the trustee to stake or unstake digital assets, whether directly or through delegation to another party, and to perform any related acts to exercise such power to stake, including the retention of staking rewards, shall not be treated as a power under such trust agreement to vary the investment of the certificate holders of such trust and shall not otherwise disqualify an entity from characterization as an investment trust that is not classified as a business entity under this section,

(B) discretionary powers held by a trustee to use other measures, including a borrowing facility, to manage the trust’s potential need for assets available to satisfy redemptions shall not be treated as a power under the applicable trust agreement to vary the investment of the certificate holders of such trust, and

(C) discretionary powers held by a trustee to act in response to changes to technology supporting the digital assets held by the trust, including with regard to staking, shall not be treated as a power under the applicable trust agreement to vary the investment of the certificate holders of such trust.