US Cryptocurrency Miners Face Potential 30% Electricity Tax
by FARUK IMAMOVIC | VIEW 393
US cryptocurrency miners could soon be confronted with a 30% tax on their electricity expenses under President Joe Biden's budget proposal, designed to curtail mining activity. A Ministry of Finance document published on March 9 details the budget restructuring, stating that companies utilizing resources, whether owned or leased, will be "subject to excise duties in the amount of 30% of the price of electricity used in mining digital assets." The implementation of this tax is slated to commence after December 31, gradually increasing over three years at a rate of 10% per annum until it reaches the maximum rate of 30% in the third year.
Crypto miners will be required to report information such as "the amount and type of electricity consumed, as well as the value of that electricity."
Impact on Off-grid Mining Operations
Cryptocurrency miners relying on off-grid electricity sources will not be exempt from this tax.
These miners will be obligated to evaluate the cost of the electricity generated at any "electricity generating facility." The Treasury Department, in justifying the tax, argued that energy consumption in cryptocurrency mining operations "has negative effects on the environment," exacerbates prices for those sharing the network with these operations, and generates "uncertainty and risks for local utilities and communities." The document added, “An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms”.
One of the few surprises in the Biden budget. A proposed excise tax on electricity usage from crypto mining. Phasing in at 10% in year one and climbing to 30%. pic.twitter.com/UPgUdr8CeG — John Buhl (@jbuhl35) March 9, 2023
Changes to Crypto Tax Strategies
On March 9, the White House also confirmed reports of its intention to eliminate a tax strategy for cryptocurrency transactions that is projected to generate $24 billion.
Current regulations permit crypto investors to sell digital assets at a loss for tax purposes, a practice known as tax loss harvesting, and then immediately repurchase those cryptocurrencies. The proposed modifications would align the tax rules governing cryptocurrency trading with those applicable to stocks, where such a practice is prohibited under wash-sale rules.