Analytics software company MicroStrategy (MSTR), which is a major corporate holder of Bitcoin, may face a significant tax bill due to a new corporate alternative minimum tax introduced by the Inflation Reduction Act of 2022. The tax could apply to MicroStrategy’s $47 billion Bitcoin stash, which includes $18 billion in unrealized gains. This could result in a multibillion-dollar tax bill starting in 2026.
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The new tax is calculated based on MicroStrategy’s adjusted earnings, which now include the fair market value of its bitcoin holdings. This differs from traditional capital gains tax, which only applies when investments are sold. MicroStrategy estimates that its GAAP retained earnings could increase by up to $12.8 billion, while deferred tax liabilities could rise by up to $4 billion.
Unsurprisingly, MicroStrategy is looking to get an exemption from the Internal Revenue Service by arguing that there is no fundamental difference in accounting for stocks versus cryptocurrencies. Indeed, the company pointed to companies like Berkshire Hathaway (BRK.B), which hold securities without paying similar taxes. If an exemption is not granted, MicroStrategy may need to sell some of its bitcoin to pay the tax, even though CEO Michael Saylor pledged not to do so anytime soon.
Is MSTR a Good Stock to Buy?
Overall, analysts have a Strong Buy consensus rating on MSTR stock based on eight Buys assigned in the past three months, as indicated by the graphic below. In addition, after a 710% surge in its share price over the past year, the average MSTR price target of $529.57 per share implies 42.7% upside potential.
