A tax law that was implemented in 2017 as a means of helping poor communities is allegedly being taken advantage of by crypto miners and investors.
Crypto Investors Are Using a Tax Law to Their Advantage
The law in question allowed certain individuals and companies to either delay or reduce their capital gains taxes when they sell a stock or crypto unit if they take the money they earned and invest it in what are known as opportunity zones, which are neighborhoods that are poor or struggling economically. Granted they keep their money locked away in the zone for ten years or more, the profits they earn from their businesses become completely tax-free.
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Crypto miners and digital currency enthusiasts are purportedly utilizing the law to avoid taxes by investing their funds in virtual mining rigs stationed throughout the United States. Blake Christian – an accountant in Utah that specializes in opportunity zones – explained in an interview:
It’s a perfect fit. They’ve just had this big windfall and invariably they’re looking for a way to save some money because they’re about to get drilled on short term capital gains taxes and they want to keep rolling the dice.
He says that roughly 15 to 20 clients of his have made profits in the seven-figure range by trading or mining digital assets. Many have set up warehouses in opportunity zones full of computers and other equipment to extract new units of crypto from the blockchain. While it may not have been exactly what the law had in mind, it appears crypto hounds discovered a loophole… And they’re using it.
Naturally, the move has some analysts angry. They’re critical of investors who, as they say, seek to benefit from already poor areas by stealing their energy and giving nothing in return. These warehouses allegedly do little to create jobs or contribute to ailing economies. Rather, crypto investors – in their eyes – are simply looking for a way to avoid paying Uncle Sam every April 15th.
David Wessel – a senior economics fellow at Brookings – said:
Any investment that neither creates jobs nor has any economic spillover into the community is not what the proponents of opportunity zones said they were trying to accomplish. Do we really want to use the tax code to encourage these activities just to make a few people rich?
Tom Says Skeptics Are Wrong
Tom Frazier – who owns a blockchain firm known as Redivider, which helped to establish the opportunity zones law – scoffs at the idea that these warehouses do little for local and state economies. His business has developed new warehouses that can be transferred to a wide array of areas, meaning they can move around as the company sees fit. He says these data centers establish goodwill towards the tech industry and comments:
We’re creating jobs where Americans need them.