Can Nonprofits Accept Crypto?
The popularity of cryptocurrencies like Bitcoin and Ethereum has surged in recent years. It’s now common for people to buy everything from cars to laptops with these virtual tokens. As a result, you might be wondering whether your charity can accept them as donations. The Semanchik Law Group is here to provide you with the answer.
Are Nonprofit Organizations Allowed to Accept Cryptocurrency?
Generally speaking, almost all nonprofits in California and throughout the United States can accept donations in cryptocurrency. There are no state or federal laws that forbid this activity.
Indeed, accepting crypto can allow charities to:
- Increase their donor base
- Decrease their processing fees, and
- Help donors avoid capital gains tax
Because of these benefits, thousands of nonprofits already accept crypto donations. Hundreds more are joining them each month.
Factors to Consider Before Accepting Cryptocurrency
Would you like to begin accepting donations in cryptocurrency? If so, you would be wise to consider the following factors before taking the plunge:
The Volatility of Cryptocurrency
The price of cryptocurrencies like Bitcoin and Ethereum can increase and decrease significantly in a short period of time. Should your charity begin accepting crypto donations, this volatility might make it difficult to budget or plan for the future.
There are a few ways to mitigate this volatility, however. For example, you may be able to reduce the effects of price fluctuations by converting your cryptocurrency to USD as soon as you receive it.
The Need for a Gift Acceptance Policy
Before your nonprofit begins accepting crypto donations, you should write and publish a gift acceptance policy. This policy should outline:
- The cryptocurrencies you are willing to accept
- The wallets and exchanges your organization will use, and
- The groups from whom you do not wish to receive donations
You might also want to include a structure for gift approvals in your policy. Doing so will help you make difficult donation acceptance decisions later.
If you need help writing your gift acceptance policy, reach out to a skilled California charity lawyer. They will help you protect your nonprofit.
The IRS doesn’t consider crypto coins like Bitcoin and Ethereum currency for tax purposes. Instead, it designates them as property.
This decision means cryptocurrency gifts are subject to the same rules as other non-cash donations. For example, if a person donates crypto with a value of more than $500, they must fill out and file Form 8283 along with their annual tax return.
Similarly, if a person gifts your nonprofit more than $5,000 in crypto, they must obtain an appraisal from a qualified individual.
Your Knowledgeable Nonprofit Attorney in San Diego
Do you need help preparing your California nonprofit to accept crypto? If so, please do not hesitate to reach out to the Semanchik Law Group. Our team of experienced legal professionals will be more than happy to walk you through the process and answer any questions you may have along the way.
To set up a consultation with a member of our team, all you need to do is give us a call at (619) 535-1811 or fill in our online contact form.