US Treasury Department Proposes 30% Excise Duty on Crypto Mining Companies

The US Treasury Department has proposed a 30% tax on the cost of operating crypto mining facilities.

A provision in the department’s “Greenbook,” its list of tax proposals and explanations for the US president’s budget proposal, would create a phased-in excise tax based on the cost of the electricity used in crypto-mining, imposed on the companies “that use computing resources” to mine cryptocurrencies.

These companies will also be required to report how much electricity they use and what type of electricity was drawn. The tax will be phased in over the next three years, increasing by 10% each year.

The provision explicitly assumes that this type of tax could reduce the total number of mining machines in the United States

“The increase in energy consumption attributable to the growth of digital asset mining has negative environmental impacts and may have environmental justice implications as well as increase energy prices for those who share a power grid with digital asset miners,” according to the document. “Digital asset mining also creates uncertainty and risk for local utilities and communities, as mining activity is highly variable and highly mobile. An excise tax on electricity use by digital asset miners could reduce mining activity along with its associated environmental impacts and other damages,” the document added.

The House and Senate must pass a budget that includes these types of revenue-generating tax rules before they can be implemented. The Republican-led House is unlikely to pass the Democratic president’s proposal as is. Still, the proposal indicates Biden’s fiscal priorities as he prepares to announce his bid for a second term as US president.

US President Joe Biden unveiled his 2024 budget proposal on Thursday, highlighting a separate provision that would close a so-called wash-selling loophole in the tax code. The move would block people from reaping their tax losses by selling digital assets at a loss, marking the hit when filing the tax and then immediately buying the same assets again.

The Green Paper mentioned this provision, along with a third crypto-related proposal that would extend securities lending rules to include digital assets.

“The proposal would change the non-recognition rules for securities lending to apply to loans of actively traded digital assets recorded on cryptographically secured distributed ledgers, provided the loan has terms similar to those currently required for securities lending,” it said in the document.

Similarly, a fifth provision would require people with foreign financial accounts holding at least $50,000 in crypto to report those holdings on their tax returns.

Mark-to-market rules will be amended to include crypto in a sixth provision.