Congress Cuts September Session: What It Means for Crypto Tax Bills
House Republican leadership announced on September 3 that the chamber would cancel its final two weeks of planned legislative session ahead of November's midterm elections, recessing no later than September 17 and not returning until November 9. That single scheduling decision has materially narrowed the window for digital asset tax legislation this year, leaving crypto wash-sale reform and mark-to-market accounting proposals in limbo at a moment when many accounting firms and CFOs had been expecting regulatory clarity.
The Legislative Calendar Collapse, Explained
The House returned from its summer recess on August 31. The Senate was scheduled to follow on September 14. Under the original plan, both chambers would have had several weeks of overlapping session time before an anticipated pre-election recess, creating a viable path for committee-level and potentially floor-level action on a range of tax bills.
That calculus changed abruptly. With the House now exiting September 17 and members focused on campaign activity, the effective legislative window has shrunk to days, not weeks. The Senate's return date remains September 14, but meaningful bicameral progress on new legislation in that compressed period is widely regarded as unrealistic.
What This Means for the Congressional Calendar
The next realistic legislative opportunity is a post-election lame-duck session beginning in November. Lame-duck periods can be productive when there is genuine bipartisan momentum, but they are also unpredictable: leadership priorities shift depending on election outcomes, and the political dynamics around any individual bill can change quickly. For digital asset legislation specifically, a September 15 Senate procedural vote was cited as a potential indicator of whether a path forward exists for either financial regulation or tax legislation in the remainder of this Congress.
Digital Asset Tax Bills: Where They Stand Now
The House Ways and Means Committee had been expected to hold a markup session this month on several bills touching the tax treatment of cryptocurrency and digital assets. Two provisions attracted the most attention from the accounting and finance community.
Crypto Wash-Sale Reform
Under current law, the wash-sale rule — which disallows a loss deduction when a taxpayer sells a security at a loss and repurchases a substantially identical security within 30 days — does not apply to digital assets. Cryptocurrency is classified as property, not a security, for federal tax purposes, so traders can sell at a loss to realize a deduction and immediately repurchase the same asset. The proposed legislation would close this gap, extending wash-sale treatment to digital assets. For firms managing client portfolios or their own treasury positions, this would eliminate a tax-loss harvesting strategy that has been widely used since crypto became a mainstream asset class.
Mark-to-Market Accounting for Digital Assets
A separate proposal would subject digital assets held by certain taxpayers to mark-to-market treatment under Section 475 of the Internal Revenue Code. Under mark-to-market rules, gains and losses are recognized at year-end based on fair market value, regardless of whether the asset was sold. This is the regime that applies to dealers in securities. Extending it to digital assets would represent a fundamental shift in how unrealized gains and losses are treated for tax purposes, with significant cash-flow implications for any entity holding material crypto positions.
The Ways and Means Committee held an initial hearing on these topics in June. A markup had been anticipated for September. That session may still occur before September 17, but even if it does, a floor vote before the midterms is now effectively ruled out after leadership canceled the remaining session weeks.
The Likelihood of Lame-Duck Action
Grant Thornton's analysis notes that political headwinds have grown around a broader overhaul of cryptocurrency financial regulation, which is distinct from but related to the tax bills. The two tracks are interconnected in practice: firms trying to determine how to classify, record, and report digital assets need both the accounting standards framework and the tax treatment to be settled. With financial regulation also facing uncertainty, the overall picture for digital asset rule-making in 2026 is less clear than it appeared earlier in the year.
IRS Funding: A Parallel Pressure Point
Separate from the digital asset bills, Congress passed and President Trump signed a continuing resolution to fund the government through December 11, avoiding a shutdown at the end of the federal fiscal year on September 30. IRS funding is held at the current level of $11.2 billion under the CR, and Senate-drafted language in the measure prevents a second rescission of the $11.7 billion in IRS operational funding originally provided by the Inflation Reduction Act.
The December 11 Deadline and What Follows
The CR is a bridge, not a solution. Congress and the White House will need to negotiate full-year appropriations for fiscal year 2027 before December 11 or pass another CR to avoid a shutdown. The stakes for the IRS are meaningful: the White House has proposed reducing the agency's funding to $9.8 billion for FY27, while the House Appropriations Committee passed a bill at $10.2 billion. The Senate has not yet moved its own appropriations bill for the agency. That funding gap matters for enforcement capacity, processing times, and the IRS's ability to implement any new legislation that does eventually pass, including potential digital asset reporting rules.
A narrower funding effort through budget reconciliation was floated as a possibility for September, but Grant Thornton's assessment is that this now appears quite unlikely given limited Senate Republican enthusiasm and the political costs of forcing difficult votes ahead of an election.
The TAS Act: Tax Administration Reform with Real Traction
One piece of tax legislation that has gathered genuine bipartisan momentum is the Taxpayer Assistance and Service Act, co-authored by Senate Finance Committee Chair Mike Crapo and ranking member Ron Wyden. The committee advanced the bill with strong support. Key provisions include allowing the Tax Court to hear refund and credit disputes, requiring the IRS to build a public dashboard for tracking refund status and service wait times, allowing Tax Court judges to reopen cases in certain circumstances, and accelerating filing deadlines for certain information returns.
Why the TAS Act Matters for Digital Asset Filers
For accounting firms and CFOs dealing with digital asset positions, several of these provisions are practically significant. The ability to track refunds and IRS service status through a dashboard reduces one layer of administrative uncertainty. Accelerated information return deadlines, if enacted, could affect the timing obligations for brokers and exchanges that issue Forms 1099-DA under the digital asset broker reporting rules. The TAS Act is unlikely to pass the Senate before November, but its broad support means it remains a strong candidate for a lame-duck deal if a consensus path emerges.
Tariffs, Sanctions, and the Trade Policy Backdrop
Two significant trade and sanctions developments are running in parallel with the tax calendar, and both have indirect relevance for international business structuring and cross-border crypto flows.
Before the August recess, the Senate passed legislation now named after the late Senator Lindsey Graham that would grant the president new unilateral authority to impose secondary tariffs of up to 100% on imports from countries that are major buyers of Russian oil or natural gas. The bill also contains a narrowly drafted provision expanding tax deduction eligibility for early childhood educators' classroom expenses. Despite broad Senate support, the bill faces resistance in the House: opposition to the expanded tariff authority crosses party lines, and the shortened September session reduces the time available to build a House coalition. Its future is now genuinely uncertain.
Senate Majority Leader Chuck Schumer introduced separate legislation on September 1 to repeal several categories of tariffs imposed by the Trump administration and return the revenue collected. The bill targets tariffs imposed under specific statutory authorities, including provisions that had not been used before this administration. The measure is widely read as a Democratic policy marker for midterm campaigning rather than near-term law, but it signals that tariff repeal would be a priority for a Democratic Senate majority in the next Congress. Notably, the Schumer bill does not touch product-specific tariffs on materials such as aluminum, steel, and auto parts, some of which enjoy labor union support and cross-party backing.
Accounting and Tax Implications for Firms and CFOs
The immediate practical consequence of the shortened September session is that the current legal and accounting framework for digital assets remains unchanged for longer. That is not neutral: it means continued reliance on the property classification under Revenue Ruling 2014-16 and Notice 2014-21, the existing broker reporting rules under the 2024 Treasury regulations, and the absence of a statutory wash-sale rule for crypto.
What Firms Should Do Now
First, do not assume the status quo is permanent. The Ways and Means markup could still occur before September 17, and a lame-duck session starting in November could move quickly if election outcomes shift the political calculus. Firms using crypto compliance and reporting workflows should ensure those workflows can be toggled between current-law and proposed-law scenarios without rebuilding from scratch.
Second, the wash-sale question deserves specific attention. If the rule is extended retroactively or prospectively from a mid-period date, the timing of any tax-loss harvesting executed before enactment will matter. Firms advising clients with active crypto portfolios should document the rationale and timing of any loss realizations now, while the current rules still apply, and maintain clear audit trails in their digital asset accounting systems.
Third, the mark-to-market proposal is the higher-stakes item for entities holding large positions. If enacted, it would require unrealized gains and losses to flow through the income statement annually, creating tax liability on appreciation that has not been converted to cash. Treasury teams should model this scenario against current balance sheet positions and assess whether hedging or restructuring makes sense ahead of any potential effective date.
Fourth, IRS funding uncertainty has operational consequences. Slower processing times, reduced audit capacity, and delayed implementation of new reporting requirements are all plausible outcomes if appropriations remain contested through December. Firms that need IRS guidance on digital asset issues, whether through private letter rulings or published notices, should factor longer response timelines into their planning. For a broader view of how digital asset regulatory developments are intersecting with accounting obligations, see our analysis of what Congress's digital asset regulatory standoff means for DeFi accounting.
The compressed calendar does not eliminate the risk of legislative change before year-end. It concentrates that risk into a narrower, harder-to-predict window. Firms that have stress-tested their crypto bookkeeping software and digital asset accounting software against both the current rules and the proposed changes will be better positioned to act quickly when clarity finally arrives.
Source: Grant Thornton
Frequently Asked Questions
Why did the House cancel two weeks of September session?
House Republican leadership announced on September 3 that members would recess no later than September 17, two weeks earlier than originally planned, to allow more time for midterm election campaigning. The House will not return until November 9.
What happens to the crypto wash-sale and mark-to-market bills now?
The bills may still be advanced at the Ways and Means Committee level before September 17, but a House floor vote before midterms is now effectively ruled out. Any further action would need to happen during a post-election lame-duck session starting in November, and the outcome of that session will depend heavily on election results and leadership priorities.
Does the continuing resolution affect IRS enforcement of digital asset rules?
The CR maintains IRS funding at $11.2 billion through December 11. It does not expand or cut enforcement capacity in the short term, but the longer-term funding picture remains unresolved. If appropriations for FY27 settle at a lower level than current funding, enforcement and processing capacity could be affected, including the agency's ability to implement digital asset broker reporting rules on schedule.
Should firms change their crypto tax-loss harvesting approach right now?
No immediate change is required under current law, which still does not apply the wash-sale rule to digital assets. However, firms should document the timing and rationale of any loss realizations carefully, since the proposed legislation could be enacted with an effective date that makes the timing of transactions material. Maintaining clear audit trails is essential.
What is the TAS Act and why should crypto-focused firms pay attention?
The Taxpayer Assistance and Service Act is bipartisan legislation advanced by the Senate Finance Committee that would, among other things, create IRS dashboards for tracking refund and service status, allow the Tax Court to hear refund and credit disputes, and accelerate deadlines for certain information returns. For firms dealing with digital asset reporting obligations, the information return deadline changes and improved IRS transparency tools are the most directly relevant provisions. The bill has strong momentum and could become law in a lame-duck session.