You’ve done your research, and decided that accepting crypto donations is right for your nonprofit. Now what? As previously mentioned in part one of our Cryptocurrency 101 series, there are many factors to consider if your nonprofit is thinking about accepting crypto donations. Some of these factors include your organization’s risk tolerance to volatile assets and ability to pay for additional crypto processing fees. Once you’ve decided that accepting crypto donations is right for your organization, you put it into action.
If you’re looking for tips and suggestions on how to implement crypto donations for your nonprofit, look no further. In this article, we will cover different platforms you can use to accept crypto donations, the tax implications of cryptocurrency, and creating a gift acceptance policy to include crypto.
How can we start accepting crypto donations?
There are several different platforms that are geared towards crypto donations for nonprofits, such as Every.org, The Giving Block, and Engiven. Depending on what services you’re looking for and what you plan on doing with your cryptocurrency, you may favor one platform over the others. Let’s take a more detailed look into the offerings of each platform.
If your organization has chosen to be more hands-off with the crypto process and would prefer converting it to cash as soon as possible, Every.org may be the right platform for you. Every.org instantly converts crypto donations into USD and offers additional services, such as legal, accounting, compliance, and administrative work. They also have the ability to send tax receipts directly to donors on your behalf. The only drawback of Every.org is that they only accept three types of cryptocurrencies: Bitcoin, Ethereum, and USD Coin. If you’re looking for something simple to use with a full service package, this platform would be worth considering.
The next two platforms, The Giving Block and Engiven, are quite similar to Every.org. One main difference is these two platforms allow organizations to hold onto crypto as an investment. If your organization has an investment analyst, they can help with forecasting cryptocurrency peaks and dips. This can help you with holding onto your crypto donations to create additional revenue.
The amount of accepted cryptocurrencies is another difference. The Giving Block accepts 80 different types of cryptocurrency, whereas Engiven accepts 42. Both platforms accept significantly more types of cryptocurrency, which can be an advantage if your donor demographic is more tech-savvy.
What are the tax implications of accepting crypto donations?
Both the US and Canada do not consider cryptocurrency to be a “currency” for tax purposes. It’s seen as property and crypto donations are considered a gift in-kind, which would be subject to fair market value rules that are used by both the IRS and CRA. With cryptocurrencies that are popular and traded frequently, it may be easier to determine the fair market value. However, this information may be more difficult to obtain for cryptocurrencies that are less often traded.
Another point to keep in mind is that accepting crypto donations can significantly increase the risk of being audited. This can result in extra time spent and issues such as compliance agreements and penalties. There are still many regulatory complexities surrounding the topic of crypto donations. That’s why it should be a priority to have a knowledgeable accountant on board to minimize the risk of inaccurate tax reporting.
Before implementing crypto donations, we would strongly suggest consulting with a tax professional to discuss the specifics of your organization. Depending on whether your organization is located in the US vs. Canada, there could be additional accounting factors to consider.
Creating gift acceptance policies
Having a gift acceptance policy in place can make it clear to both your donors and staff the type of gifts that are accepted by your nonprofit, as well as any important details related to those gifts. If your organization already has a gift acceptance policy, you should revise your policy to include information on crypto donations.
Some important crypto-specific points to include are the definition of cryptocurrency, when it will be liquidated, and how tax deduction purposes will determine the value of crypto. Your organization can decide what policies you’d like to enforce since not all of them may be applicable to you. Similar to “terms and conditions”, the policies should be clear and subject to as little interpretation as possible.
Additionally, it may be in your organization’s best interest to include a policy advising donors to seek their own financial or tax advice. Providing general tax information in your gift acceptance policy can be beneficial for donors. However, you would not want to imply that you’re giving specific tax advice. Recommending that donors seek their own financial advice can alleviate that liability from your organization.
Cryptocurrency 101: Conclusion
Accepting crypto donations should not be rushed as it is a multi-step process. Since the adoption of new technology can often have some hiccups, it would be beneficial to plan for potential issues. This article is meant to be a brief guideline that will provide you with the first steps to start the process. We suggest continuing your research and reaching out to the appropriate professionals during the implementation process. There are still many legal, accounting, and policy considerations to take into account.
In the meantime, click here if you’d like to learn more about how Donor Compass™ can help you build a fundraising strategy for your nonprofit organization.