Cryptocurrency mining tax considered

The Revenue Committee heard testimony Feb. 12 on a bill intended to manage the impact of cryptocurrency mining operations on Nebraska’s electrical grid.

LB526, introduced by North Platte Sen. Mike Jacobson at the request of Gov. Jim Pillen, would impose an excise tax of 2.5 cents per kilowatt-hour on the energy used by facilities to conduct cryptocurrency mining operations in excess of 1,000 kilowatt-hours per year.

Jacobson brought an amendment to the hearing that he said would impose a lower 1-cent per kilowatt-hour rate, among other changes.

LB526 also would allow public power districts to impose terms and conditions on and require direct payment or a letter of credit from cryptocurrency mining operations for the cost of “significant” infrastructure upgrades needed to serve them.

Jacobson said cryptocurrency mining facilities place “considerable” stress on the state’s electrical grid, requiring utilities to build expensive new substations, transmission lines and other infrastructure.

The facilities provide “minimal” economic benefit to the state relative to their power consumption, he added, particularly when compared to other industries that use large amounts of electricity, such as agriculture and manufacturing.

“At the end of the day,” Jacobson said, “this is about curbing the growth of miners in the state and putting our electricity to better use.”

The state Department of Revenue estimates that the bill as introduced would increase state general fund revenue by $9 million in fiscal year 2025-26, $13.9 million in FY2026-27 and $14.4 million in FY2027-28.

Kenny Zoeller, director of the Governor’s Policy Research Office, testified in support. He said some businesses seeking to locate or expand in Nebraska cannot do so in the near term because demand for electricity is greater than the state’s generation and transmission capacity.

At the same time, Zoeller said, “large numbers” of cryptocurrency mining operations and data centers — which also benefit from state tax incentives — have located in Nebraska due to the state’s low-cost electricity without adding many permanent jobs.

“The goal of LB526 is to ensure that loads that have come onto our system are not taking advantage of our responsibly run system for little to no gain to the state,” he said.

Testifying in opposition to the bill was Matthew Carson of AAIM Data Centers, which operates a cryptocurrency mining facility in Aurora. He said AAIM employs four full-time workers and plans to hire more this year. The company has invested more than $3 million in its Nebraska operations, Carson said, and it helped pay for upgrades to local electric infrastructure.

He said the proposed excise tax would force AAIM to leave Nebraska.

“All I have asked for is to be treated the same as any other business in the state,” Carson said. “[LB526] would see the state of Nebraska discriminate [against] my business simply because of how it operates.”

Jim Crawford of MARA, which owns a bitcoin mining operation in Kearney, also testified in opposition, saying the company likely would not invest further in Nebraska if the measure passes.

He said cryptocurrency mining companies often have interruptible service agreements that allow utilities to curtail the facilities’ energy use at times of peak demand.

“By helping balance the grid,” Crawford said, “miners provide a valuable service that should be encouraged, not penalized.”

Also in opposition was Shelley Sahling-Zart of Lincoln Electric System. As introduced, she said, the bill could require LES to collect the excise tax even though it cannot identify which customers are mining cryptocurrency.

Sahling-Zart said public power utilities plan years in advance to ensure that they build enough electric generation to meet customers’ needs. Although adding capacity for new projects with large energy demands might be challenging, she said, it is manageable.

“We are not running out of power in the state of Nebraska,” Sahling-Zart said. “And from an economic development standpoint, it’s a really bad message to send.”

Ron Tillery testified in opposition to LB526 on behalf of the Nebraska Economic Developers Association and the Nebraska Chamber of Commerce and Industry. He said businesses that employ a small number of high-wage workers are “just as valuable as those companies that employ dozens or hundreds” and that technology companies are the future of Nebraska’s economy.

“Data centers and even crypto mining are being integrated into other economic sectors,” Tillery said, “and if we discourage growth in any of those sectors, then we’re going to affect the growth of other businesses as well.”

The committee took no immediate action on the bill.