Two Kentucky legislators — House Majority Leader Steven Rudy, a Paducah Republican, and Rep. Chris Freeland, a Benton Republican — have introduced a bill to provide “sales and use tax exemptions on the tangible personal property directly used and the electricity used in commercial mining of cryptocurrency” with incentives focused on energy use.
The bill would exempt “commercial cryptocurrency miners” from paying 6% sales taxes or 6% excise taxes on their rigs’ electric bills and mining equipment.”
The bill is good news for The Creme Coffee House & Bakery, which has accepted cryptocurrency for the past three years.
“Honestly,” Brooklyn Patterson, the owner, said, “not very many people use it. I haven’t had anyone use it since I’ve taken over in May. However, it’s still pretty new and not a lot of people know much about it. I think as more information comes out and more people understand it, they’ll use it.”
She added, “I think with the possible tax incentive more will use it for sure.”
Investopedia says, “Bitcoin mining is performed by high-powered computers that solve complex computational math problems. These problems are so complex that they cannot be solved by hand and are complicated enough to tax even incredibly powerful computers.”
It adds, “When computers solve these complex math problems on the bitcoin network, they produce new bitcoin (not unlike when a mining operation extracts gold from the ground).”
The bill’s preamble says “the Commonwealth has an opportunity to become a national leader in the emerging industry of the commercial mining of cryptocurrency given its abundant supply of electricity that can be provided at lower rates than most states.”
Patterson’s father, Adam Carston Patterson, who owns the building where the coffee shop is located, said cryptocurrency “is the future of money. PayPal just bought in on it and the institutes are trying to buy it all up at the moment.”
He said the value of each coin has gone from $18,000 to $42,000 in the past month.
And Adam Patterson said, “JP Morgan Chase predicts it to be $146,000 a coin by the end of 2021.”
So, how do you buy a cup of coffee with a $42,000 coin?
“It breaks up into small pieces called a satoshi,” Adam Patterson said. “It’s just like having a bank card or gift card with $42,000 on it that can go up or down in value until it stabilizes. You spend it as you go.”
He said, “There is only 21 million (coins) that will ever be mined, so supply and demand is breaking ridiculous records and outperforming gold. It passed up Facebook on Top 10 most valuable assets in the world with a market cap of $766 billion. It’s the buzz of the world at the moment.”
House Bill 230 says, “The increased use of blockchain technology in a variety of applications and processes has led to significant innovation, developments, and modernization in multiple industries throughout the world and access to cost-effective energy is critical to the development and growth of blockchain technology, particularly in the commercial mining of cryptocurrency which requires a substantial and constant supply of energy.”
It adds, “Kentucky’s tax code must and does recognize that the continuing development of new and advanced manufacturing and industrial processing technologies has led to new industrial processes, such as blockchain used for commercial mining of cryptocurrency, which should and must be taxed in a manner similar to historical forms of manufacturing or industrial processing, in order to continue to encourage the location and expansion of such operations in the Commonwealth, rather than in other states likewise competing for such businesses.”
The bill was in committee on Tuesday.