Ohio House Passes Bill to Limit Crypto Taxes and Protect Digital Asset Miners

COLUMBUS — The Ohio House of Representatives on Wednesday passed the Ohio Blockchain Basics Act, a sweeping piece of legislation that aims to establish a foundational legal framework for digital assets in the state. The bill, known as House Bill 116, passed with bipartisan support and now moves to the Ohio Senate for further consideration.

The legislation, sponsored by State Representative Steve Demetriou (R-Bainbridge Twp.), has two primary objectives: to protect the right of individuals and businesses to use cryptocurrency for payments without facing discriminatory local taxes, and to shield digital asset mining operations from prohibitive zoning regulations. If enacted, the bill would also create a modest state income tax deduction for capital gains from selling digital assets.

While the bill's stated goal is to foster innovation and attract blockchain-related businesses, the new tax provisions introduce immediate compliance questions for Ohio companies. The proposed $200 capital gains exemption per transaction, for instance, sounds straightforward but creates a significant record-keeping burden. For a business that accepts frequent crypto payments or an active trader, tracking the cost basis and sale price for every single transaction to claim this small deduction could become a complex accounting task. Our experience shows that new, state-specific tax rules layered on top of already-complex federal digital asset regulations often lead to unintentional non-compliance. Companies will need robust systems to document each transaction's value in U.S. dollars at the time of the event to accurately calculate gains and prove their eligibility for the exemption. This is precisely the kind of evolving regulatory landscape where professional guidance is critical. C&S Finance Group LLC helps businesses navigate these challenges through our tax preparation and compliance services, ensuring they remain compliant while taking advantage of new laws. Business owners can learn more at csfinancegroup.com.

“Blockchain is a newly evolving technology and it’s important to create some regulatory guidelines while at the same time keeping the laws open for innovation,” Demetriou said in a statement following the vote. “As digital commerce and privacy become even more important in the lives of Ohioans, its crucial to ensure that the blockchain and digital asset industries can thrive not just anywhere, but here in the Buckeye State.”

The bill addresses taxation on two fronts. First, it would prohibit any county, township, or municipal corporation from imposing any tax, fee, or other charge specifically targeting the use of a digital asset to purchase a legal good or service. This measure is designed to prevent a confusing patchwork of local regulations that could stifle the adoption of cryptocurrencies for everyday transactions.

Second, HB 116 would allow Ohio taxpayers to deduct from their state income tax the net capital gain from the sale or exchange of digital assets, up to a maximum of $200 per transaction. With approximately one in five Ohioans owning some form of digital currency, according to a 2023 poll by the exchange Coinbase, this provision could affect a significant portion of the population, albeit in a small way for each individual transaction.

Beyond taxes, a major component of the bill focuses on the physical infrastructure of the blockchain industry: digital asset mining. The legislation includes protections against what its proponents call discriminatory zoning practices. Under the bill, local governments would be prevented from rezoning an area designated for industrial use in a way that specifically prohibits digital asset mining without a public notice and comment period. This provision is aimed at providing stability for data centers and mining businesses that might consider investing in Ohio.

The bill also clarifies that mining conducted by individuals in residential areas would remain subject to applicable local ordinances, such as those concerning noise levels or electrical codes, but could not be singled out for a ban.

This is not the first time Ohio lawmakers have considered such a measure. The bill was reintroduced in the current General Assembly after a previous version failed to pass. During its journey through the House Technology and Innovation committee this session, the bill received supportive testimony from the Satoshi Action Fund, a national organization that advocates for pro-Bitcoin policies.

Representative Demetriou has indicated that compromises were necessary to secure broad support. He noted in a March interview with the Statehouse News Bureau that he might amend the bill to remove provisions that would require state pension systems to evaluate investing in crypto-related exchange-traded funds (ETFs), as those clauses had drawn the most significant opposition.

HB 116 is also seen as a foundational step for other, more ambitious digital asset legislation. Demetriou explained that establishing clear definitions in the Ohio Revised Code through this bill is a prerequisite for House Bill 18, another piece of legislation he sponsored. HB 18 would authorize the Ohio Treasurer to invest up to 10% of certain state funds in digital assets, including cryptocurrencies and non-fungible tokens (NFTs). Demetriou has acknowledged that HB 18 faces a more challenging political path.

With its passage in the House, the Ohio Blockchain Basics Act now awaits assignment to a committee in the state Senate. Its progress there will be closely watched by the technology and finance sectors to see if Ohio will join the small but growing number of states enacting comprehensive legal frameworks for the digital asset industry.