Crypto investors build Bitcoin mines to avoid paying taxes — thanks to Trump

Crypto🚀🚀🚀

In the US, tax-shy crypto enthusiasts are building new Bitcoin mining plants in struggling rural areas to take advantage of a controversial Trump-era loophole intended for the poor, reports HuffPost.

Republican legislation introduced in 2017 allows companies and investors to reduce their tax bills when selling off assets like crypto or stocks — provided they use the money to fund projects in so-called “opportunity zones.”

Opportunity zones were introduced to give a leg-up to the most deprived areas in the US by creating jobs and kickstarting economic development.

It’s an altruistic endeavour. But the requirements to prove projects will actually create jobs, or improve the local area in any way, are so minimal they double as the perfect front for wealthy investors to squirrel away fortunes into almost any type of business they like.

Some have chosen to sink their profits (meant to be taxed) into high-end hotels or luxury apartments. Others have reportedly offloaded large amounts of crypto (again, supposed to be taxed) and plowed profits straight back into the ecosystem.

Blake Christian, an accountant who specializes in opportunity zones, told HuffPost the usual modus operandi for many of his clients was cloud mining.

They avoid paying taxes on crypto sales by erecting large warehouses full of Bitcoin mining rigs, then leasing this power to their customers.

“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,” said Christian.

“And they want to keep rolling the dice by staying invested in the crypto market.”

Some even built their mines in South America to take advantage of cheaper energy prices, only to open another company in an opportunity zone for the sweet tax breaks.

Tax breaks meant to help communities, not rich Bitcoin investors

This kind of creative accounting is what the scheme’s biggest critics have focused on.

“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,” explained David Wessel, a senior economics fellow at Brookings (via HuffPost, our emphasis).

“Do we really want to use the tax code to encourage these activities, just to make a few people rich?”

And there’s also considerable debate around whether opportunity zones work at all, particularly given how costly they are to run.

According to HuffPost, the program has spawned hundreds of real estate projects in the past five years. However, in 2019 they were entirely concentrated to only 16% of the available zones.

While these zones were found to be poorer relative to most other areas in the US, they were far more likely to “have undergone recent income and population growth and demographic change.”

In other words, those looking to secure tax breaks via the ‘opportunity zones’ scheme are mostly backing real estate projects in areas undergoing gentrification.

NBC News detailed problems associated with “opportunity zones” and their lack of job creation.

[Read more: Coinbase revives political fund to buy crypto favor in Congress]

There’s no way of knowing exactly which businesses have decided to target opportunity zones unless they make that information public themselves.

But according to HuffPost, London-based Argo Blockchain recently started work on a billion-dollar crypto mining facility in a Texan opportunity zone. Argo reckons it will eventually create 20 full-time jobs.

Chicago-headquartered startup Bit Capital even attempted to build a $50 million crypto mine in Washington State, funded by an “Opportunity Zone Fund.” Unfortunately, the bid attracted no investment.

Share - Crypto investors build Bitcoin mines to avoid paying taxes — thanks to Trump