Cryptocurrency in Philanthropy
In the last week, two clients have asked us about accepting gifts of cryptocurrency toward capital campaigns. THG strives to meet donors where they are, and Hyper-Philanthropy™️ puts a heavy emphasis on culture and behavioral economics because of this point. However, we would be remiss if we did not ensure our clients were aware of the possible burdens of accepting a gift of this kind.
A recent Forbes article touches upon some of the potential complications in accepting a gift of cryptocurrency:
- Failure to Recognize the Type of Gift: Unlike a gift of stock or cash, a gift of cryptocurrency is treated by the IRS as a gift of real property. Our internal assessment process ensures clients have gift acceptance and investment policies that recognize this distinction. A Board must be proactive about what types of gifts it can and cannot accept. You do not want to be faced with a situation where a donor offers a large gift of cryptocurrency (or anything else), and then the Board must quickly gather to determine if its bylaws allow for such a gift. Then must navigate the bureaucracy around accepting and recognizing that gift.
- Failure to Understand the Tax Assessment/Benefits Process: With a gift of real property, a “qualified appraisal” must be made in order for the donor to be able to deduct the donation on their taxes. This process can be expensive and time intensive for cryptocurrency, specifically, due to the ever-changing nature of cryptocurrency and the shortage of qualified appraisers. Indeed, in some cases it may be cost-prohibitive to make a gift this way.
Above all, it is important to recognize where your donors are and how you can approach them. Contact us today if you’re ready to find that clarity and become Hyper about Philanthropy.