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29 March 20242 minute read

Biden Administration 2025 FY budget proposes Wash Sale Rule for digital assets and crypto mining tax

The Biden Administration’s proposed FY 2025 budget, released on March 11, 2024, includes proposals for (i) applying wash sale rules to digital assets; (ii) expanding information reporting requirements for financial institutions and digital asset brokers; (iii) requiring reporting for certain foreign digital asset accounts; and (iv) applying existing mark-to-market rules to cryptocurrency. The budget estimates that these proposals, if enacted, would generate in excess of $42 billion of additional tax revenue over a 10-year period.

Another proposal included in the budget is an excise tax on digital asset mining. “Any firm using computing resources, whether owned by the firm or leased from others, to mine digital assets would be subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.” If this tax were enacted, cryptocurrency mining companies (even those who lease their computational capacity or produce their own electricity) would be required to report the amount and type of electricity they use, with the excise tax imposed on the value of that electricity.  If enacted, this proposal would be effective for taxable years after December 31, 2024, and the excise tax would be phased in at the following rates: 10 percent for the first year, 20 percent for the second year and 30 percent for the third and all subsequent years.

The Biden Administration’s budget request to Congress is unlikely to be enacted in its current form and is likely to be altered significantly by Congress through the appropriations process. We will continue to provide updates as these proposals move through the budgeting process.