President Joe Biden has proposed a higher tax of 30 percent for the forthcoming budget on electricity costs for crypto mining in a drive to reduce the impact of electricity consumption on the environment through digital asset mining activity.
The Department of Treasury has released an additional paper on 9 March that explains the budget in detail. The document says that any company using electricity resources for digital asset mining would be liable to an excise tax of 30 percent on electricity used, whether resources are owned or rented.
Declaring electricity usage
Implementation of the proposed tax would be phased out over three years at 10 percent each year with a maximum threshold of 30 percent which would be reached by the third year. Reporting regulations for crypto miners will also change. Users will be obliged to declare the type of electricity being used referenced with the corresponding value. Off-grid electricity users, be it via solar panels, wind generators or similar will also need to log their usage and cross reference the value for taxable purposes. Any associated costs relating to any type of electricity usage for crypto mining will need to be estimated and will be subject to tax.
The US Treasury document points out that all sorts of energy consumption has detrimental effects on the environment and when it comes to green energy and renewable, the high cost of crypto mining will inflate the price for other users of the same grid. Mining digital assets may also give rise to a separate excise tax as the excessive usage of mining has raised many questions about the negative and harmful impact on the environment and communities.
End of tax breaks for cryptocurrency transactions
On 9 March the White House said that an additional US $24 billion could be generated in tax revenues if the beneficial tax schemes ended for the transaction of digital assets.
‘Tax loss harvesting‘ will also come under scrutiny. This process allows investors to sell digital assets at a loss for tax purposes and immediately buy them back for a profit.