Once your gift acceptance policy is updated, be sure to take the time to go over it with your staff. Expand Your Payment Options. These grants will likely work about the same as traditional grants, but create more diversified access to new grant opportunities. While a crypto gift can sometimes feel no different than a gift of publicly-traded stock, there are differences when it comes to tax reporting. In this guide, well cover the basics of crypto, our best practices for fundraising it, and templates you can use to solicit donations through Crypto for Charity. Were here to help your nonprofit understand their impact on your fundraising diversification strategy. Cryptocurrency gifts are sometimes subject to a review process as well. Want to avoid all these steps? A blockchain is a technology that decentralizes data by spreading all of the information in a database across multiple internet-connected devices. Ready for some great news? Heres a good example from Save The Children, which has been accepting Bitcoin since 2013. This can be a contentious point, as some crypto owners like the anonymity that crypto allows. This may be an overarching policy for all the donations your organization accepts, but it doesnt hurt to call out a no refund policy for cryptocurrency specifically. If you use a third-party payment processor and intermediary nonprofit to accept crypto gifts, specify that and note that tax receipts will come from the intermediary 501(c)3. Transparency in terms of liquidation is important, especially if a crypto owner wants to donate as a way to promote crypto. Its a good idea to put this understanding in writing and upfront. Dogecoin, which got its name from this 2013 meme, has been referred to as the fun and friendly internet currency by its founders. Cryptocurrency is treated by the IRS as property. The information here is provided for educational purposes only and is not intended to provide, and should not be construed as providing legal or tax advice. Discover all of our webinar content in one place from planned giving chats to Coronavirus resources. Cryptocurrency remains one of the biggest opportunities for growth to both for-profit and nonprofit organizations alike. Free webinars for nonprofit professionals. FreeWill is not a law firm and its services are not substitutes for an attorneys advice. One in three crypto owners have donated crypto assets to charity, with more than half donating over $1,000. When it comes to these tax forms, Crypto for Charitys intermediary nonprofit, Cocatalyst Impact, Inc., takes care of most of the leg work, making accepting crypto much easier. Cryptocurrency gifts of $5,000 or more will require a qualified third-party appraisal for the donor to take a charitable tax deduction and this cost will be borne by the donor. You may not need to update your gift acceptance policy at all. Upon payment/acceptance, [NONPROFIT NAME] will provide the donor with a gift acknowledgement or receipt that substantiates the receipt of the cryptocurrency as a charitable gift. If your organization wants the option to hold on to crypto, that should be expressly stated in your gift acceptance policy as well. The currency touts itself as a new kind of money, which is recorded in a distributed public ledger called blockchain. For deductions above that amount, however, the IRS requires donors to obtain an independent appraisal of the donated crypto. If your organization has embraced the opportunity to tap into this new way of giving and is prepared to join the growing number of nonprofits accepting cryptocurrency donations, you may need to define and implement a policy internally and with your donors for how youll accept and liquidate these gifts. All rights reserved. You can also opt to leave room for some interpretation by calling out commonly-traded crypto, including Bitcoin, Ethereum, Litecoin, and more.. Its almost as if it was made in a lab specifically for nonprofits.. New coins are being created or deleted almost daily, and their value is in constant flux. Demonstrate your organizations focus on innovation and remain in touch with new technologies by considering this donation option. Cryptocurrency is a highly-discussed trend, but the technical details of this alternative asset class can be hard to fully understand. The Water Project has a similar informative landing page on their website with specific donation details and a list of which coins they accept. This affects how crypto is taxed, and the reporting requirements that go along with gifting crypto for your organization and your donors. The Giving Block, which brings in over four million dollars in monthly revenue, is a platform that aims to help nonprofits accept payments through cryptocurrencies. Because the value of cryptocurrency can be volatile, refunds could get especially complicated. Holding crypto long-term is generally only a viable option for nonprofit organizations with a robust fundraising program or a strong interest in promoting cryptocurrency (and the financial wherewithal to invest in doing so, such as dedicated training for their staff). Technically, Litecoin is very similar to Bitcoin, but the biggest difference is that the network processes blocks more frequently than Bitcoin, making it easier to process transactions more quickly. Cryptocurrency is just like any other legal tender that can be traded for goods and services. Theres no way to keep up with all of them, but here is a list of a few of the most popular cryptocurrencies currently on the market to catch you up to speed. Cryptocurrency as a donation method has everything a donor looks for when contributing to a nonprofit, said Pat Duffy, co-founder of The Giving Block. As a nonprofit, you dont want to imply that youre giving tax or financial advice. You may also already accept anonymous donations of different types. Ethereum is the second largest crypto currency, which was initially released back in 2015. Tether is an altcoin controlled by Bitfinex, a Hong Kong-based financial exchange. Youll likely need to develop other policies and procedures around accepting crypto, just as you have for other types of gifts. Making the updates above will help manage your donors expectations and provide financial transparency. When a charity receives a non-cash contribution valued over $5,000, the nonprofit also has to sign the form to acknowledge receipt of the property. Your gift acceptance policy can also include tax information for your nonprofit organization. To factor in some flexibility, some organizations elect to use language specifying that donations will be liquidated immediately unless other instructions are communicated by the donor. Be sure to specify who bears the cost of the crypto donation appraisal. This would not apply to your crypto donations if they were liquidated and given as cash by a third-party. Even some larger financial institutions, like Fidelity Bank, are getting on board. This is because the IRS does not currently consider cryptocurrency exchange markets to be as reliable for determining asset value as securities exchange markets. Some gift types, like real estate, are closely reviewed by the nonprofit before acceptance because of possible inherent risk (e.g., property subject to environmental hazards). This is in some part because of how the IRS defines charitable deduction property. The way they define it along with other factors, can trigger additional reporting responsibilities. If you liquidate donated crypto immediately, your donors can claim tax deductions for less than $5,000 by citing the price at which the gift was liquidated. When it comes to crypto donation tax considerations, you may want to suggest that the donor seek advice from their accountant or tax advisor. There arent as many nonprofits that currently accept these alternative coins, so its an opportunity to stand out. Sign up for the waitlist to receive a custom crypto donation page today. The intermediary accepts and liquidates the crypto and then sends USD (the net cash proceeds) on to your nonprofit. Bitcoin was introduced to the public in 2009 by an anonymous individual or group. We saw the growth of that market and the potential for our community to have their wealth do something positive. By far the most popular cryptocurrency, with 68% of the crypto market, is Bitcoin. Copyright 2022 FreeWill Co., a Delaware Public Benefit Corporation. Dollars as quickly as administratively possible when the gift is received. Cryptocurrency donations continue to gain traction. Implementing a gift review process may be helpful if youd like the option to refuse a gift for any reason. If you decide to hold on to crypto, your nonprofit should consider the volatility of the assets and set policies around when to liquidate. With a digital currency, people are no longer reliant on a financial institution, like a bank, to hold their money. Crypto for Charity is a new giving platform by FreeWill that facilitates crypto donations to an intermediary 501(c)3. This is even more true with most cryptocurrencies because their values have historically been volatile. All rights reserved. News & Research, Business & Tech, Leadership & Culture, 2022 Nonprofit Fundraising Trends and Predictions, worth over $1 trillion and boasts more than 100 million users, here is a list of a few of the most popular cryptocurrencies, Todays Cryptocurrency Prices by Market Cap, How Nonprofits Find Resilience in Times of Recession or Economic Downturn, Move Your Recurring Donors to Classy in 3 Steps, Insights to take full advantage of this new revenue stream. You can choose not to invest in the future and stay in your lane. Whether you liquidate or hold, your policy should note that crypto donations are non-refundable. Anyone who speaks to donors or potential donors should have a basic understanding of what crypto is, and how it can be donated to your organization. Your policy should therefore note that if the donor is claiming a deduction for gifts valued above $5,000, an independent appraisal is required in order to substantiate the value of the donated assets. All cryptocurrency gifts will be reviewed and accepted upon approval from the Gift Acceptance Committee. A charitable gift of cryptocurrency is only complete once the currency has been successfully paid to and accepted by [NONPROFIT NAME] designated currency processor, [PROCESSOR NAME].