Cryptocurrency miners residing in the United States could potentially be required to pay a 30% tax on energy costs in the near future. The tax change is included in a budget proposal submitted by U.S. President Joe Biden. The proposal is intended to “reduce mining activity.”
A Department of the Treasury budget explanation paper stated that under the new proposal, any company using resources, either owned or rented, would be “subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.” The proposal suggested that the tax be implemented beginning after December 31, 2023, and then rolled out over a three-year period, climbing 10% each year to ultimately reach the 30% rate.
Cryptocurrency miners would be subject to reporting requirements that would be based on the “amount and type of electricity used as well as the value of that electricity.” Miners who meet their energy needs using off-grid methods would still be impacted by the tax and would be expected to approximate the energy costs based on those generated by any “electricity generating plant.”
In attempting to explain the reasoning behind the tax, the Treasury Department claimed the energy usage of mining operations “has negative environmental effects,” raises costs for those who share a grid with mining operations, and brings about “uncertainty and risks to local utilities and communities.”
“An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms.”
In a recent statement, the White House confirmed that it’s seeking to eliminate a tax strategy for crypto-based transactions that could raise as much as $24 billion. Currently, the rules allow investors to sell cryptocurrencies at a loss and then report that loss on their taxes. After selling, investors can turn around and immediately repurchase those cryptocurrencies. Under the new rules, crypto trading would be treated the same as stocks, where such actions are not allowed under wash sale rules.