A bipartisan group of House lawmakers introduced the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation and Yields Act on May 19, directing the Treasury Department to study whether small cryptocurrency transactions should be exempt from capital gains reporting. The bill, known as the PARITY Act, was introduced by Representatives Steven Horsford and Max Miller after Kraken disclosed that it sent 56 million tax forms to the IRS in the prior year, with nearly a third covering transactions worth less than one dollar and more than 75 percent covering trades under 50 dollars.

A Study Mandate, Not a Tax Break

The PARITY Act does not create a de minimis exemption for small crypto transactions. Instead, it directs the Treasury Department to examine whether such an exemption should exist and to report its findings within 180 days. The study must address how much paperwork small crypto transactions generate for taxpayers, the total number of transactions under 200 dollars reported to the IRS annually, what resources the IRS would need if a de minimis threshold were established, and what types of fraud or abuse such an exemption might invite.

The distinction between a study mandate and an actual tax change is significant. Previous legislative efforts to create crypto-specific de minimis exemptions, including the Virtual Currency Tax Fairness Act that has been introduced in various forms since 2020, have struggled to advance through committee. By framing the PARITY Act as a data-gathering exercise rather than a policy change, sponsors appear to be building a factual foundation that could support more substantive legislation in a future session.

The Scale of the Reporting Problem

Kraken’s disclosure that it filed 56 million tax forms, with the overwhelming majority covering trivial transaction amounts, illustrates a structural mismatch between current tax reporting requirements and how crypto assets are actually used. Under existing IRS rules, every taxable cryptocurrency transaction, regardless of size, potentially generates a reportable capital gain or loss event. For users who interact with DeFi protocols, make frequent swaps, or use crypto for small purchases, this can produce hundreds or thousands of individual taxable events per year.

Representative Max Miller stated that the US tax code “has failed to keep pace with the rapid growth of digital assets and modern financial technology.” The compliance burden falls not only on individual taxpayers but also on exchanges and platforms that must generate, validate, and transmit these forms. The IRS itself has acknowledged the challenge of processing the volume of crypto-related 1099 forms it now receives, though the agency has not publicly supported a de minimis exemption.

Legislative Context and Congressional Momentum

The PARITY Act enters a Congressional landscape where multiple crypto-related bills are competing for floor time and political attention. The GENIUS Act addressing stablecoin regulation, the CLARITY Act proposing to shift certain token oversight to the CFTC, and broader market structure legislation are all in various stages of advancement. Tax reform for digital assets has historically received less attention than market structure or regulatory authority questions, making the PARITY Act’s bipartisan sponsorship notable for signaling that the issue may be gaining priority.

The bill’s study-first approach also reflects a pragmatic assessment of legislative bandwidth. With the 119th Congress facing a crowded agenda across multiple policy domains, the likelihood of passing a standalone crypto tax exemption is low. A Treasury-led study that produces concrete data on compliance costs, taxpayer burden, and potential revenue impacts could provide the evidence base needed to attach de minimis provisions to a larger tax or financial regulation package.

Risks and Counterarguments

Critics of de minimis exemptions argue that any threshold creates opportunities for tax avoidance through transaction splitting, where users divide larger transactions into smaller ones to stay below the reporting limit. The Treasury study is specifically tasked with evaluating this risk, but enforcement agencies have historically been skeptical of exemptions that could be exploited by sophisticated actors while nominally designed to benefit retail users.

There is also uncertainty about whether a Treasury study will produce actionable recommendations within the 180-day window. Federal agency studies on complex tax policy questions frequently miss deadlines or produce reports that defer to Congress for legislative action, creating a circular dynamic. Additionally, the IRS’s ongoing implementation of the broker reporting rules finalized in 2024 already represents a significant crypto tax infrastructure buildout, and some policymakers may view a de minimis exemption as undermining the compliance framework that is still being deployed.

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