If the United States Treasury Department budget proposal passes, cryptocurrency miners will have to pay an additional 30% in excise tax according to its budget proposal Greenbook.
Released on Thursday, the proposal noted these companies would be required to report how much electricity they use and what source they’re using. The tax would be phased in over the next three years, with a 10 per cent increase per year.
The document noted increased energy consumption due to the growth of digital asset mining has had negative environmental effects. Also, it could result in environmental justice implications and increased energy prices for people sharing an electricity grid with crypto-miners.
“Digital asset mining also creates uncertainty and risks to local utilities and communities, as mining activity is highly variable and highly mobile. An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms,” according to the document.
Biden also included a provision that would close a wash-sale loophole in the tax code.
The provision blocks people from reinvesting tax losses by selling digital assets at a loss, noting the loss when they file their taxes, and buying the same assets again.
The greenbook noted this provision, alongside a third cryptocurrency-related proposal expanding the securities loans rules to include digital assets.
“The proposal would amend the securities loan nonrecognition rules to provide that they apply to loans of actively traded digital assets recorded on cryptographically secured distributed ledgers, provided that the loan has terms similar to those currently required for loans of securities,” the document said.
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Another provision considers the Foreign Account Tax Compliance Act rules (FATCA). Specifically, it references the 2021 Infrastructure Investment and Jobs Act’s crypto tax reporting provision, and proposes capturing foreign account holders in the information reporting rules as part of the government’s ongoing information-sharing efforts on financial brokers.
Foreign account holders will now use the same information reporting rules as domestic account holders under FATCA.
This helps the government keep better track of the flow of funds coming into and leaving the country.
The fifth provision requires people with foreign financial accounts with over $50,000 in crypto to include this in their taxes.
The sixth provision includes amendments to the mark-to-market (MTM) rules to include crypto. MTM rules are a set of regulations in the financial industry requiring market participants to record the value of their assets and liabilities at their current market value on a periodic basis. This is done to ensure that the value of their assets and liabilities are accurately reflected in their financial reports.
Treasury has released the Greenbook, the General Explanations of the Administration’s FY2024 Revenue Proposals, describing revenue measures in President Biden’s Fiscal Year 2024 Budget. https://t.co/M83N9Vpo1v
— Treasury Department (@USTreasury) March 9, 2023
Also, the provisions would expand information reporting requirements by certain financial institutions and brokers. Additionally, it expands reporting requirements for certain taxpayers who hold foreign digital assets.
Both The House of Representatives and Senate have to pass a budget including revenue-generating tax rules prior to implementation. It’s also unlikely that the Republican-led house is going to adopt Biden’s proposal without changes. But the proposal displays Biden’s fiscal priorities as he prepares to announced his intention regarding a second term as U.S. President.
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