By Thomas Cauley
A decade ago nonprofit leaders were talking about the ways donors could change the world through social media. Today we’re talking about cryptocurrency.
The COVID-19 pandemic accelerated the world’s digital revolution. Advancements in interconnectivity, virtual education, and even currency exchange occurred at a blistering rate. This included, of course, the not-so-new digital legal tender, cryptocurrency
Over the past year, the crypto space has surged with few signs of slowing down. Its adoption and normalization has led philanthropic organizations to evaluate its role in achieving their mission, while donors who hold crypto have resoundingly answered this question posed by The Giving Block: “Would you rather donate to the IRS or to your favorite cause?”
And even though many organizations, including my own, Operation Smile, are accepting crypto donations, it is startling that cryptocurrency has not been widely adopted by the philanthropic sector more broadly. In 2019, Davide Menegald, Chief Operating Officer at Helperbit, noted on Giving Tuesday that “… cryptocurrency donations only represent some 1-5% of the used payment method for charitable donations.”
Cryptocurrency is a solution that nonprofit organizations cannot afford to miss. Operating a philanthropic enterprise in today’s world demands versatility. And for many nonprofits, this starts by staying attuned to the pulse of crypto and the ways it is revolutionizing the financial industry.
For Operation Smile, accepting tax-deductible crypto donations is a natural step for our organization. For nearly 40 years Operation Smile has partnered with generous individuals, families, corporations, foundations, countries, and ministries of health who were early adopters of the importance of global health care, safe surgery, and the impact a smile creates. Extending this invitation to make a global impact on our friends in the crypto community builds on our shared legacy of taking bold steps to make the world a better place.
Alongside forward-thinking crypto investors who believe in redesigning a better system, we can ensure that those suffering around the world from lack of safe, well-timed surgery will benefit from sustainable solutions in their community. Ones that address their needs on their terms.
There is no doubt that the cryptocurrency market can be volatile. Yet, the potential to increase crypto-adoption paired with tax-benefits reaped by both philanthropic organizations and the donor community creates a win-win scenario for all.
Not only is the donation tax deductible, but the IRS’s classification of cryptocurrency as property means that a crypto donation to a nonprofit could help to offset capital gains.
Consider this example from Steptoe – If a donor purchased crypto currency in 2019 for $5,000 and were to sell at $25,000, they would have to pay capital gains up to “… $4,760 in addition to federal income taxes.” If they were to donate it, however, “the taxpayer generally would not owe any capital gains tax as a result of the donation. Second, in the right circumstances, the taxpayer could receive a charitable contribution deduction that could reduce their federal income tax liability by up to $9,250. Together with the capital gains tax savings, that is over $14,000 in tax savings.”
A more simplified explanation comes from our partner, The Giving Block: “When you donate crypto to a registered charity, you do not recognize capital gains from the donation and can deduct it on your taxes. In other words, donating your crypto can often reduce your tax burden.”
Do not miss the opportunistic solution that is crypto. Whether nonprofit organization or crypto investor, our work together deals in the realm of people, and it is precisely their lives that are at stake.
At the onset of the coronavirus outbreak, those previously suffering were the ones who were hit the hardest and no doubt will continue to feel the effects of the pandemic for years to come. The myriad list of needs continues to grow while the backlog of services for those incapacitated by health risks before COVID-19 has created an impetus for us to act unlike any scenario in our history.
The potential partnership between crypto investors and nonprofits will go a long way toward filling this void. Building mutually beneficial relationships will help us to change the world and ourselves for the better.
About the Author
Thomas Cauley is a nonprofit leader with over a decade of experience in the philanthropic sector. Working with organizations ranging from grassroots startups to globally recognized nonprofits, he has helped to raise over 80 million in global funding. He currently serves as the Director of Development at Operation Smile, overseeing major philanthropic funding throughout the southeastern United States. He joined the crypto community in 2017 and has been an active contributor, keeping his finger on the pulse of its development, ever since.