How Nonprofits Process Donations from the NFT Community
Any nonprofit organization that wants to engage with NFT projects and collectors should understand one thing: how to process donations they receive.
For nonprofit organizations to enable a direct form of charitable giving from the NFT community, accepting cryptocurrency donations is a must.
That’s because NFTs are listed, bought and sold on marketplaces that are equipped to handle cryptocurrency transactions. (Remember that NFTs are “non-fungible tokens,” which were created to be compatible with the Ethereum blockchain.)
When an NFT is sold, the creator receives a royalty in the form of a cryptocurrency such as Etherum or Solana. If a nonprofit already accepts crypto donations, an NFT creator can directly donate the proceeds from their sale.
An all-in-one solutions provider like The Giving Block makes it easy for nonprofits to fundraise multiple crypto assets, including NFTs, as well as generate tax receipts for donors.
Can’t NFT Creators Just Donate Their Proceeds in Cash?
NFT creators sell their non-fungible tokens and receive cryptocurrency in return, not cash. For an NFT creator to donate a portion (or all) of the proceeds in cash, they would have to exchange the cryptocurrency first.
Under US tax law, doing so would likely be considered a taxable event by the IRS, and the creator would have less to donate to your organization. For example, if they held that cryptocurrency for less than a year, it would in many cases be subject to a short-term capital gains tax, which can be as high as 37%.
On the other hand, by donating to your organization in cryptocurrency directly, they would generally not pay a capital gains tax on the transaction, because it did not have to be exchanged. Now the market value of their gift can be greater than it would have been if they had donated cash from the proceeds of their NFT sale.
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