BILL NUMBER: S8518
SPONSOR: KRUEGER
 
TITLE OF BILL:
An act to amend the tax law, in relation to imposing an excise tax on
energy used in digital asset mining using proof-of-work authentication
methods
 
PURPOSE OR GENERAL IDEA OF BILL:
This bill would create an excise tax on energy used to power cryptocur-
rency mining facilities, with the revenue directed to assistance for
utility customers enrolled in Energy Affordability Programs.
 
SUMMARY OF PROVISIONS:
Section One: amends the tax law by creating a new section 186-h.
186-h.1. Definitions
186-h.2. Imposes an excise tax on electricity used by a taxpayer with
respect to digital asset mining using proof-of-work authentication meth-
ods, at the following rates:
- For every kilowatt-hour less than or equal to 2.25 million kilowatt-
hours per year, 0 cents per kilowatt-hour.
- For every kilowatt-hour over 2.25 million to 5 million kilowatt-hours
per year, 2 cents per kilowatt-hour.
- For every kilowatt-hour over 5 million to 10 million kilowatt-hours
per year, 3 cents per kilowatt-hour. For every kilowatt-hour over 10
million to 20 million kilowatt-hours per year, 4 cents per kilowatt-
hour.
- For every kilowatt-hour over 20 million kilowatt-hours per year, 5
cents per kilowatt-hour.
Facilities powered by renewable energy systems that are not connected to
the electric grid in any way are exempt from the tax. 186-h.3. All
revenue collected pursuant to this section shall be used to provide
benefits to eligible residential customers enrolled in
Energy Affordability Programs.
Section Two: This act shall take effect immediately and shall apply to
all taxable years commencing on and after January 1, 2027.
 
JUSTIFICATION:
New Yorkers are facing enormous burdens resulting from the unregulated
growth of proof-of-work cryptocurrency mining operations, but are
receiving very few benefits, if any, from them. These cryptomining oper-
ations disrupt surrounding communities, fail to deliver jobs, and under-
pay for their own electricity usage. Frustratingly, New Yorkers are on
the hook for the massive energy demands of cryptomining - they are being
forced to pay higher electricity bills and directly or indirectly subsi-
dize these operations. Cryptomining operations place a significant
strain on the grid and divert energy away from homes and other busi-
nesses. The cost burden of generating and delivering this additional
electricity falls on all ratepayers. In fact, several localities in New
York State have seen their electricity prices increase substantially
when proof-of-work cryptocurrency miners move to town
(https://bfi.uchicago.edu/wp-content/uploads/2023/06/BFI WP
2023-78.pdf).
Through preferential rates, tax abatements, and competitive contracts,
New York State is providing cryptocurrency mining companies with direct
and indirect subsidies
(https://earthjustice.org/wpcontent/uploads/2024/09/2024.09.23 earthjus-
ticecomments.pdf). For example, under a New York Power Authority
contract, TeraWulf's Lake Mariner Facility in Somerset, NY, currently
receives between 90 and 500 MW of electricity from NYPAf
https://www.nypa.gov/-/media/nypa/documents/documentlibrary/
governance/2020govrep.pdf and appears to pay less than 5 cents/kWh
(https://hntrbrk.com/terawulf/). Digihost in North Tonawanda pays the
equivalent of 3 cents/kWh
(https://waterfrontonline.blog/wpcontent/uploads/2021/04/digihostbuys60m
wpower.pdf), and cryptominers in Plattsburgh paid approximately 2
cents/kWh before the town instituted a new rate to protect their commu-
nity
(https://www.cnbc.com/2018/03/16/plattsburghhas-become-the-first-city-in
-the-us-to-ban-cryptocurrency-mining.html).
Meanwhile, according to the U.S. Energy Information Administration
(https://www.eia.gov/electricity/state/ newyork/), in 2023:
* Residential ratepayers in New York paid an average of 22.25 cents per
kilowatt hours (kW/h) for their electricity.
* Commercial ratepayers in New York paid an average of 18.01 cents/kWh.
* Industrial ratepayers in New York paid an average of 6.87 cents/kWh.
Increasing electricity bills contribute to an unaffordable cost of
living for too many New Yorkers, leading to high amounts of consumer
debt to utilities, increasing numbers of utility service shutoffs, and
hardship as families struggle to also afford housing, food, medicine and
healthcare.
The climate impacts of cryptocurrency mining will be felt globally, but
the operations have disproportionate and damaging impacts on local
communities and environments. The continued operation of cryptomines
threatens the State's climate mandates and pollutes New York's air. The
intense energy demands from cryptomining have also led to extending the
life of gas-fired power plants in New York. Cryptomining operations
also consume significant amounts of freshwater, create noise pollution,
and generate massive amounts of e-waste.
It is necessary to ensure that the costs are being paid by cryptomining
companies, not subsidized by New Yorkers. This Act seeks to:
a. Reduce unjust and disproportionate energy cost burdens faced by other
electricity ratepayers by incentivizing cryptomining operations to
internalize their negative externalities.
b. Ensure cryptomining operations do not impede the emission reduction
mandates in the CLCPA.
c. Provide an additional source of revenue for energy affordability
programs.
The Act does not impose a ban on cryptocurrency mining. Rather, it
ensures that the negative externalities created by these cryptomining
operations are captured and paid for by the operators, rather than New
Yorkers. Through this excise tax, New Yorkers will benefit from more
affordable electricity bills and less pollution.
 
PRIOR LEGISLATIVE HISTORY:
New Bill.
 
FISCAL IMPLICATIONS:
Potential to raise over $700 million in revenue to the state for energy
affordability programs, depending on growth of the cryptocurrency mining
industry and dynamic impacts of the tax.
 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to all taxable
years commencing on and after January 1, 2027.