Cryptocurrency, also known as Virtual Currency or “Crypto,” is a digital asset designed to function as an alternative to sovereign fiat currency (US Dollars, for example) whereby transactions between two parties are verified through a public, distributed ledger, also known as a blockchain. Most people think of Bitcoin and/or Ether when they hear the word “Crypto,” and while Bitcoin is the original cryptocurrency and most widely followed, there are a number of cryptocurrencies currently available.
The Engiven platform is a third party vendor provided donation software technology that enables nonprofits to safely and securely receive cryptocurrency donations and then convert those donations into usable fiat currency such as US dollars. Learn more about Engiven here.
Yes. It is lawful for a nonprofit to accept a donation in the form of a cryptocurrency. In March 2014, the United States Internal Revenue Service (IRS) ruled that Bitcoin is treated as property for tax purposes (IRS Notice 2014-21).
For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of donation. If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied. Upon receipt, cryptocurrency donations made to DataKind will be converted to U.S. dollars. In recognition of IRS rules, donors who give cryptocurrency donations to DataKind will receive an electronic donation receipt (through the Engiven donation platform) in US dollars with comprehensive details about each transaction.
For any donation valued over $500, the donor is responsible for sending IRS Form 8283 to DataKind to be signed by authorized personnel confirming the gift. For donations over $5,000, the IRS also may require a donor to submit a qualified appraisal along with Form 8283. Per IRS rules, the donor is required to pay any fees associated with obtaining the appraisal—DataKind is forbidden from participating in the creation of or payment for such appraisal. If you require assistance in finding a qualified appraiser, DataKind is permitted to make recommendations on possible appraisers and will assist you in that regard, if asked. Feel free to contact us at firstname.lastname@example.org.