U.S. Sen. Ron Wyden (D-OR) continues his probe of the Opportunity Zone program to see if it has achieved the intended goals of encouraging investment and creating jobs in low-income communities.
The Opportunity Zone initiative was created as part of the 2017 Tax Cuts and Jobs Act to spur economic growth and job creation in low-income communities while providing tax benefits to investors.
Wyden, chair of the Senate Finance Committee, is examining two cryptocurrency companies — Argo Blockchain and Redivider Blockchain – and an accountant involved in the transactions, Blake Christian, about their reported efforts to use the program to avoid taxes without significantly benefitting low-income communities.
“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. Earlier this year, I launched an investigation into luxury real estate developments in Opportunity Zones that might shield wealthy investors from capital gains taxes in exchange for limited public benefit. I am similarly concerned by recent reports that companies involved in cryptocurrency mining may be seeking to avoid taxes without meaningfully benefitting distressed communities using the Opportunity Zone program. According to these reports, Argo Blockchain may have chosen to invest in locations based, in part, on their eligibility for the Opportunity Zone program,” Wyden wrote to Argo Blockchain.
He also sent letters seeking more information to Redivider Blockchain and Christian.
“Currently, the lack of safeguards or transparency measures in the Opportunity Zone program raise the possibility that taxpayers are simply subsidizing companies involved in cryptocurrency mining. In particular, I am concerned about comments you made in a recent Huffington Post interview, which described you as saying you ‘100%’ would have founded a data center business with or without opportunity zones, which calls into question what, if any, net public benefit Redivider Blockchain investments are providing,” he wrote to Redivider.
Wyden posed several questions that he sought answers to in each letter.
“One of these reports attributed a statement to you in which you assert that some cryptocurrency mining investors ‘[have] 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.’ The article also reported that 15 or 20 of your clients ‘who have made money in the low seven-figures mining or trading cryptocurrency have set up warehouses in opportunity zones full of powerful computers that solve equations in order to ‘mine’ cryptocurrency and lease the computing power to other customers.’ In addition, according to the same report, you believe that a client mining cryptocurrency in a South American country can qualify for a giant tax subsidy using an affiliated management company that is located in an Opportunity Zone,” Wyden wrote to Christian.