Cryptocurrency is widely emerging as a powerful currency for trading and investments. Charity is another sector emerging where charitable institutions are interested in cryptocurrency for potential tax-saving and charitable activities. According to the current trend, charitable trusts and institutions are looking forward to cryptocurrency for donations against cash.
Crypto owners can donate their crypto assets with high-end convenience and comfort. Many charitable organizations have passed and empowered this acceptance of charity and gifts in crypto assets. It is included with the growing number of non-profits according to the implemented policies internally active with donors and your method to accept and liquidate the donations.
Gift Acceptance Policies: An Overview
Gift acceptance policies explain the type of gift and genre of your non-profit acceptance and relevant details about the crypto gifts. The gift acceptance policy serves dual functions as it provides knowledge to the professionals while accepting, soliciting, and fielding the donations with setting the expectation for donors.
It is advised to have a well-managed gift acceptance policy for stable donor relationships and non-profit risk management. A few imperative factors add and update the gift acceptance policy. We will discuss it further.
Key Factors To Update The Gift Acceptance Policy:
1. Define cryptocurrency
It is necessary to state that you accept cryptocurrency donations and provide comprehensive information about the type of cryptocurrency. It is necessary to explain to the interested investors to make up their minds about donations. You can briefly mention virtual and digital currency and specify the details explaining the type of crypto coins. You can also provide the idea explaining the brief interpretation, such as basic trading coins mentioning Bitcoins, Litecoins, Ethereum, etc.
2. Outlining the approval procedure
Certain gift assets, such as real estate, are briefly reviewed and analyzed by non-profits. Such a gift attains specific inherent causalities and risks related to environmental hazards. The cryptocurrency gifts are sometimes necessarily subjected to the review and analysis procedure. Adapting this procedure will help you to refuse the gifts for specific reasons. The analysis clarifies the concerns and confusions regarding cryptocurrencies which might address certain uncertain casualties.
3. Determining the liquidity Of crypto assets (When & How):
Certain non-profits need to liquidate non-profit gifts such as crypto and stocks into cash due to the frequent volatility of the non-cash gifts. It relates historically to fluctuating valuation of the cryptocurrency. Hence holding the crypto assets for a long-term duration is a healthy option for the non-profit charity with a powerful fund-raising program interested in promoting the use of cryptocurrency for donations and charity. If the institution does not want to confront the risks, the organization can sell the cryptocurrency as soon as they receive it from the donor.
4. Explaining the tax deduction benefits of crypto donations
When the organization liquidates the donated cryptocurrency, the donor can claim the tax deduction upto $5000 according to the liquidation rate of cryptocurrency. An independent appraisal is required for IRS as it does not consider the reliability and authentication of the crypto exchange market to determine the valuation of the security exchange market and assets. Hence your gift acceptance policy must have the condition that if the gift is above $5000, then an independent appraisal is required to get a substantial value of donated assets.
5. Encouraging donor to avail the independent tax and financial advice
During the crypto donation and associate tax deduction, it will benefit the donor to seek expert advice from an accountant or professional tax advisor. Relating to the non-profit, it is necessary for the implication of tax and finance-related advice. It is necessary because, in certain instances, crypto gifts appear similar to public traded stocks; still, the regulation might be different at the time of tax reporting and filing. The complete tax deduction plan and information must and mentioned and briefly explained in the gift acceptance policy. While using the outsourcing professionals to pay non-profit crypto gifts, specify particularly that tax receipts will be generated for the outsourced professional.
6. Establishment of donor requirement
It is the major aspect essentially specified in the gift acceptance policy. You can mention all the donor’s identities in your records while making crypto donations as per their interest. According to the specific procedure to follow to receive the crypto donations, you must have the form to fill in the donor’s contact and identity details. The aspect of receiving the anonymous donation must also be included in the gift acceptance policy.
These are vital updates that you can add to your gift acceptance policies. While the gift acceptance policy is updated, you have to go over it with your staff to make your donors understand the gift acceptance policies and associate regulations. The gift acceptance policy must explain the comprehensive process of how your organization accepts crypto assets and educate potential donors about it. These policies should be timely updated and with new policies and regulations according to the emerging trends and accepting crypto as gifts or donations.