Senate Finance Committee chair Ron Wyden (D-Ore.) pressed a group of cryptocurrency companies and professionals on Monday to justify their use of a tax break meant to uplift low-income neighborhoods, which HuffPost revealed is instead being used by wealthy crypto investors to skirt taxes with questionable benefits for the local community.
The tax incentive, created by Republicans’ signature 2017 tax legislation, offers a significant reduction in capital gains taxes to wealthy investors and companies in exchange for building housing or businesses in low-income neighborhoods designated by the federal government as “opportunity zones.”
The program was created with bipartisan support. But it has come under fire as a government boondoggle after evidence emerged that billions in tax breaks have gone to projects like luxury housing, high-end hotels, and self-storage units.
Now, Wyden is demanding details from a cryptocurrency mining company, a data-center company that leases space to cryptominers, and an accountant with several crypto clients using the opportunity zone program. Each of the companies and the accountant were identified in HuffPost’s February story.
Wyden sent requests for information about the number of temporary and permanent jobs they intend to create, their investors, and how big of a tax advantage they might reap from the opportunity zone program.
“I have long been concerned that the Opportunity Zone program may permit wealthy investors another opportunity to avoid billions of dollars in taxes without meaningfully benefitting the distressed communities the program was intended to help,” Wyden wrote in one letter.
“I am similarly concerned by recent reports that companies involved in cryptocurrency mining may be seeking to avoid taxes without meaningfully benefitting distressed communities,” he continued.
One request went to Argo Blockchain, a publicly traded, London-based cryptocurrency mining company that is building a billion-dollar mine in an opportunity zone in Dickens County, Texas. Argo explored whether it could operate as an opportunity zone business, HuffPost learned, but ultimately decided against it, according to a company spokeswoman.
The second letter went to Blake Christian, a CPA who told HuffPost he has helped more than a dozen crypto millionaires invest their windfall in data centers located in opportunity zones. In one case, Christian set up a management company in an opportunity zone for a data center located outside the United States.
The third went to Redivider Blockchain, which is setting up prefabricated data centers in opportunity zones around the country. The company is not exclusively working with cryptocurrency miners, although one of its first centers is serving a Bitcoin mine in Homestead, Florida. One of Redivider’s advisers is Daniel Kowalski, an ex-Treasury official who helped write the opportunity zone rules under former Secretary Steve Mnuchin.
Argo, Redivider and Christian did not immediately comment on Wyden’s requests.
Critics of the opportunity zone program interviewed by HuffPost don’t object to cryptocurrency mining per se. But they questioned the need to use federal tax dollars to underwrite a volatile industry that has had no trouble growing on its own.
“Why are we taking forgone taxpayer revenue and subsidizing this, of all the things we want to spend our nation’s money on?” Brett Theodos, an Urban Institute senior fellow, said.
Wyden, who has introduced legislation that would require investors to be more transparent about the projects financed in opportunity zones, echoed their concerns.
“There is currently no requirement that such companies demonstrate the benefit they are providing to low income-communities they claim to help,” he wrote. “Currently, the lack of safeguards and transparency measures in the Opportunity Zone program raise the possibility that taxpayers are simply subsidizing companies involved in cryptocurrency mining.”