Should Charitable Organizations Accept Crypto Donations? - Wealth Management

suitersa.blogspot.com

With cryptoassets gaining exponentially in popularity, gifts of digital currency to nonprofits and foundations are becoming more common. As generous and potentially impactful as these offers may be, accepting crypto donations should be evaluated carefully—with the help of experts and, ideally, buy-in from all levels of your client’s organization.

While you’ve likely heard of bitcoin, it’s just one of around 10,000 virtual currencies. In 2021, we saw precipitous surges and declines in many of these cryptoassets, whose value tends to be extremely volatile. Some wealthy individuals who’ve profited are looking to divest their holdings without having to pay taxes on the appreciation: doing good without reporting costly gains. Yet when it comes to donations of cryptocurrency to nonprofits and foundations, discretion is the better part of valor as this concept remains in its infancy.

Assessing the Benefits of Crypto Donations

The Internal Revenue Service classifies donated cryptocurrency as property, not currency. That means donors can avoid capital gains by making an in-kind gift. As with any other complex gifts your client may have received, documentation and risk assessment are paramount. A third-party organization can be helpful in valuing these assets.

Here are some other high-level considerations:

• What risks are involved in accepting a potentially volatile asset?
• Will your client incur additional operating costs or complexities in trying to accommodate this new type of request?
• Does it make sense to sell the cryptoassets immediately, or hold onto them as part of your client’s investment portfolio?

Answering those big-picture questions means digging deeper and consulting experts in the legal and operational aspects of a crypto donation.

Crypto Donation Checklist

Here are five factors to consider when helping your foundation and non-profit clients to decide whether to accept in-kind donations of cryptoassets:

1. Policy and Governance

• Who on your client’s staff is involved in the decision-making process? Has your client notified the board and sought their input?
• Does your client have procedures in place to document the discussion around both gift acceptance and investment policies?

2. Ethics

• While not all cryptoassets are energy intensive, the environmental impact of “mining” digital currency is concerning to some. If your client’s  mission centers on climate change, the ethical angle may be worth considering.
• If your client is concerned about the background of a donor offering a large sum in the form of cryptoassets, consult with lawyers who specialize in anti-corruption reviews.

3. Investments

• Is your client’s instinct to immediately liquidate a crypto donation and use the resulting cash for programming, operating expenses, etc.? Or is holding onto it for possible future appreciation appealing, with the caveat that losses might be just as likely as gains over time? Your client’s investment committee and financial advisor should participate in this conversation.
• Would your client use a cash donation to buy bitcoin or another virtual currency? If not, then holding crypto in your investment portfolio may not be the right move.

4. Development

• Marketing a crypto acceptance program could alert donors that your client’s nonprofit has done its homework, built an infrastructure to accept crypto and is familiar with the tax benefits for donors.
• Openness to crypto donations could attract younger donors, who may be more likely to have crypto stakes and recognize the benefit of offsetting realized gains among those assets.
• Keep in mind that donors planning to gift digital currencies will need a qualified appraiser to document the crypto’s value.

5. Operations

• Cryptocurrencies are held in digital wallets, accessible with a password known only to the owner. Unfortunately, passwords are easy to lose or forget. An estimated 20% of the value of all bitcoins is lost and likely unrecoverable due to owners having forgotten passwords. Given the healthy turnover at many nonprofits, instituting a rigorous protocol for password maintenance and recovery is essential if your client intends to set up its own wallet.
• In terms of IRS reporting requirements, donations of crypto should be disclosed as non-cash contributions.

Adblock test (Why?)

"accept" - Google News
September 01, 2021 at 09:44PM
https://ift.tt/2WMk7Ji

Should Charitable Organizations Accept Crypto Donations? - Wealth Management
"accept" - Google News
https://ift.tt/2YsXkRf
https://ift.tt/3d2Wjnc

Bagikan Berita Ini