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A new proposal is on the horizon in response to the rapidly growing digital asset mining industry and its associated environmental and energy consumption concerns. The information is abstract from General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposal. The current law lacks specific tax regulations addressing digital assets, except for certain broker reporting and cash transaction rules. However, the proposed change seeks to introduce an excise tax on electricity usage by digital asset miners.
Digital asset mining involves validating transactions among holders of digital assets to record and transfer cryptographically secured assets on a distributed ledger. This process, often conducted using high-powered computers, consumes significant computational power and, consequently, substantial amounts of energy. The surge in energy consumption due to digital asset mining has raised environmental concerns and can impact energy prices for communities sharing the same electricity grid.
To mitigate these issues, the proposal suggests imposing an excise tax equal to 30 percent of the electricity costs used in digital asset mining. This tax would apply to any firm utilizing computing resources, whether owned or leased, for mining purposes. Firms engaged in digital asset mining would be required to report their electricity usage and its value, with leased capacity attributing electricity costs to the lessor firm.
Furthermore, firms producing or acquiring power off-grid would also face a 30 percent excise tax based on estimated electricity costs. The proposal defines digital assets as any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology specified by the Secretary.
If implemented, the proposal would take effect for taxable years beginning after December 31, 2024, with the excise tax phased in over three years: 10 percent in the first year, 20 percent in the second, and reaching 30 percent thereafter.
This initiative aims to curtail the environmental impacts and energy consumption associated with digital asset mining while ensuring fair taxation and accountability within the industry.
