Tax Free Cryptocurrency Mining
NSDQ Mining provides capital gains tax free cryptocurrency mining. We provide our vertically integrated solution by taking advantage of the Opportunity Zone provisions included in the December 2017 Tax Cuts and Jobs Act.
Our data center is located on site at a power plant in St. Louis Missouri. Ashley Energy is our strategic partner and brings deep experience and a wide breadth of relationships as we establish and grow our business.
NSDQ Mining Executive Summary
NSDQ Mining is an operating company, first and foremost. We are neither a hedge fund nor currency fund nor a pure financial trading company. As the business grows, NSDQ will own and operate multiple data centers at strategically important locations. We will own mining hardware, data center hardware, software assets and strategic power supply contracts. The balance sheet will also hold the results of our operating business - the mined coins. Functionally, this is no different than a company exploring for oil, natural gas, a gold mine or a diamond mine.
- Capital Gains Tax Free
- Data Center on Site at Power Plant
- 35 MW Available. Scaleable to 200+ MW.
- Economic Development via Opportunity Zone
Capital Gains Tax Benefit
The Opportunity Zone provisions included in the December 2017 Tax Cuts and Jobs Act provide compelling tax benefits. Our initial facility is located in an Opportunity Zone in St. Louis. As a result, our investors benefit from the Opportunity Zone tax benefits.
The Economic Innovation Group summarizes Opportunity Zone tax benefits:
“The Opportunity Zones program offers three tax benefits for investing in low-income communities through a Qualified Opportunity Fundi:
A temporary deferral of inclusion in taxable income for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026.
A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.
A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.”
A US taxpayer holds 150 BTC ( ~$1 million @ 1 BTC = $6700) purchased more than one year ago. The cost basis of the position is $100,000. If sold, $900,000 would be subject to long term capital gains of 15% or 20%. Uncle Sam gets a check for either $135,000 or $180,000. That’s a bummer.
Alternatively, one could liquidate their BTC and use the proceeds to make an Opportunity Zone investment via a Qualified Opportunity Fund. The Qualified Opportunity Fund investment provides the investor with temporary deferral, step-up in basis and permanent exclusion as discussed above. In a perfect world the the Opportunity Zone investment would allow the investor to maintain exposure to cryptocurrency assets. That is exactly what NSDQ Mining provides investors.
Blockchain and Cryptocurrency Powered Economic Development
It’s simple. Data centers need skilled, technical staff. Typically both land and power are inexpensive within the low income census tracts that define Opportunity Zones. NSDQ Mining creates jobs and positive economic development in the very places where it is most needed. Given our unique needs and mission, it is truly a win, win situation.
Definition of a Qualified Opportunity Fund
The Qualified Opportunity Fund has a bit of a different context than a traditional fund. The IRS provides guidance on Opportunity Zones and Qualified Opportunity Funds here. Below is an excerpt of the IRS FAQ:
“Q. What is a Qualified Opportunity Fund
A. Qualified Opportunity Fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in an Opportunity Zone and that utilizes the investor’s gains from a prior investment for funding the Opportunity Fund.
Q. How does a taxpayer become certified as a Qualified Opportunity Fund?
A. To become a Qualified Opportunity Fund, an eligible taxpayer self certifies. (Thus, no approval or action by the IRS is required.) To self-certify, a taxpayer merely completes a form (which will be released in the summer of 2018) and attaches that form to the taxpayer’s federal income tax return for the taxable year. (The return must be filed timely, taking extensions into account.)
Q. Who created Opportunity Zones?
A. Opportunity Zones were added to the tax code by the Tax Cuts and Jobs Act on December 22, 2017.
Q. What is the purpose of Opportunity Zones?
A. Opportunity Zones are an economic development tool—that is, they are designed to spur economic development and job creation in distressed communities.”
IRS and Treasury Opportunity Zone Sites:
U.S. Department of the Treasury | Community Development Financial Institutions Fund (CDFI) Opportunity Zones Resources
Additional Opportunity Zone Resources:
Enterprise Community Partners Opportunity Zones page
Local Initiatives Support Coalition (LISC) Fact Sheet
Bloomberg Tax Fact Sheet
Council of Development Finance Agencies Opportunity Zones page
Greenberg Traurig website
Novogradac resource center
Holland & Knight three-part series on Opportunity Zones
K&L Gates Opportunity Zone site