The Saint Paul & Minnesota Foundations got a quick education in how to handle bitcoin donations. The end of the year is approaching, and you’re probably considering financial contributions to the charities most important to you. But did you realize that you can donate all kinds of things, not just securities or dollars?
Recently the Saint Paul & Minnesota Foundations worked with a donor to accept his bitcoin donation, a first for the foundations, which share a board. This required research, new policies, and discussion with the Investment Committee. But it worked out well for both the foundations and the donor, and now new donors have come forward with similar gifts of cryptocurrency. The foundations are ready to help other nonprofits learn from these experiences and to be equally responsive.
Cryptocurrency is hardly top of mind for nonprofit fundraisers—but these innovative foundations think it should be. The basic tenet is this: Give donors multiple pathways and optimal flexibility so that it’s easy to channel their impulses to support charitable causes.
The Saint Paul & Minnesota Foundations are not alone in this practice, but they are unusual in our region. The Silicon Valley Community Foundation has accepted multiple forms of cryptocurrency as donations, perhaps not surprising given its geography and its donor base weighted toward tech entrepreneurs.
And, of course, community foundations and nonprofits have long accepted real estate, collectibles, and other appreciated assets as donations.
But the cryptocurrency question seems more complex, and it’s certainly new. Long-standing rules are in place about the appraisal and valuation of donated property, and fundraisers are schooled in ways to talk to donors about these possibilities. Talking to donors about cryptocurrency required the Saint Paul & Minnesota Foundations staff to learn about the currencies themselves, appropriate policies for accepting them, and ways to recruit more donors who may have cryptocurrencies they’d like to use for charitable giving.
“The same concepts apply to cryptocurrency donations as any other donations,” says Jeremy Wells, vice president of philanthropic services for the two foundations. “Our goal is always to convert any donated assets to cash as soon as they are received,” he says, adding, “If we can help donors convert their appreciated asset toward the public good, we’re ready to do so.” He notes that the foundations have helped people donate land, farm equipment, and commodities—even bushels of soybeans.
What sort of audit standards apply and are the accounting rules difficult and complex? “The IRS considers cryptocurrency to be property,” says Christine Searson, vice president of finance. “So, like any property owned by the foundations at the end of the audit year, there would be questions of valuation. Our goal is to sell donated assets before year-end so we are not holding property. Cryptocurrency is no different. When donated, we sell immediately.”
The foundations don’t try to time their asset sales to market highs or play the market at all. When a non-cash donation is received, it is sold, whether it’s a farm combine or it’s bitcoin. The foundations provide a high and low market value to the donor at the time of the gift, and, naturally, donors are the ones thinking most about the timing of their donation to achieve maximum valuation.
On the donor’s end, Searson says, “There is not a lot of case law regarding valuing cryptocurrency that would help the donor with protocols for establishing valuation.” But the standards and practices are rapidly evolving as more cryptocurrency circulates and people want to use it for investing, purchases, and donations.
Searson and Wells both say they’ve learned a lot since they were first approached about the possibility of a bitcoin donation. “Our goal is to be nimble and to serve the donor,” Wells says, “so we thought we’d better learn about this and be ready.” By late summer, the foundations had received a few donations “in the five-figure range” in cryptocurrency. More are in the pipeline.
“They were just great about this,” says Dave Wahlsted, the foundations’ first cryptocurrency donor and part of a multi-generational donor family with a long-term relationship with the foundations. “The beauty of the foundations, as I see it, is that they are ready to accept appreciated assets that not a lot of charities can or will accept directly.” Regarding the donation process, he says, “This was a great way to capitalize on gains without the tax liability. They were great about it. They had to learn but it didn’t take long.” He adds, “This is the future of money, not the present of money. It’s good to learn now and be ready.”
As to lessons that could be helpful to other nonprofits, Searson and Wells say that cryptocurrency is not a regulated industry, so exchanges are not geared toward institutions; they’re geared toward individuals. A nonprofit’s first instinct might be to open a cryptocurrency account in the name of an individual for ease, but Searson says this will not permit the necessary controls needed by a nonprofit institution. The underlying technologies for the different cryptocurrencies mean the nonprofit might need to educate itself more, depending on which currency is being donated.
The best way to learn about this? Little has been published, so Wells and Searson are planning a series of conference presentations and seminars to help other nonprofits learn the ropes. “We all need to meet donors where they are,” says Wells, “and help them donate whatever assets they choose to donate. We need to honor their desire to do good and be nimble enough to work through any complexities on our end.”
And from a bottom-line perspective? Wells says, “The gifts already made and those in the pipeline are of sufficient significance to make our efforts at understanding these currencies completely worthwhile.”
Sarah Lutman is a St. Paul-based independent consultant and writer for clients in the cultural, media, and philanthropic sectors.