In her monthly column Expert Take, international tax attorney and CPA Selva Ozelli covers the intersection between emerging technologies and sustainability, providing the latest developments around tax, anti-money laundering and terrorist financing regulations, and legal issues affecting crypto and blockchain.
The United Nations General Assembly is holding its 76th annual meeting from 14-30 September to bring countries together at a critical time to mobilize collective action to confront the global environmental crisis, which has exacerbated the ongoing COVID-19 pandemic.
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Ahead of the UN General Assembly, the latest report from the Intergovernmental Panel on Climate Change notes that ambitious climate action is now a matter of urgency – especially since the publication of the “Nationally Determined Contributions under the Paris Agreement. A synthesis report prepared by the Secretariat,” making it clear that the world is not On track to reach Nationally Determined Contributions (NDCs) to tackle climate change in accordance with the Paris Agreement.
Moreover, 200 of the world’s leading health journals issued a joint statement, appealing to world leaders to reduce greenhouse gas emissions to mitigate climate change, which they say is the biggest threat to public health (SDGs 3 and 13).
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A sustainable green recovery plan from the pandemic requires an understanding of the links between climate change, health and inequality; and implementing ambitious climate change policies in line with the Paris Agreement. The 17 United Nations Sustainable Development Goals (SDGs) are a call to action by all countries and peoples to promote prosperity while protecting the planet. More important than ever, these goals provide a critical framework for a green recovery from COVID-19.
Blockchain technology and non-perishable tokens, or NFTs, have been instrumental in financing these goals during 2021 – declared by the United Nations General Assembly as the “International Year of the Creative Economy for Sustainable Development” – which has seen a rapid spread of highly contagious COVID-19 variants amidst the worst A wildfire season has been recorded.
COVID-19: Technical Charity and Blockchain
The COVID-19 pandemic has caused a public health crisis and an economic crisis. The pandemic has disrupted life, pushed the hospital system to the brink, and created a global economic slowdown that has resulted in losses totaling more than $1.7 billion for the arts and culture sector in the United States alone.
According to X4Impact – a US data and social innovation research and advisory service firm – more than 457,000 non-profit organizations in the US, which have raised nearly $2.9 trillion in funding, are still seeing increased demand for their services in exchange for a significant drop in income. The extent of the coronavirus’ impact on the US charitable sector is still unknown.
Defining the urgent need for funds for charities, artists as well as victims of COVID-19 (SDG 3), Pundep Rangar – CEO of PremFina, the UK’s first venture capital-backed alternative premium finance company, explained to me: “Last June, Art & Co The first of its kind charitable art auction with the help of blockchain technology. The auction bidding process and sale proceeds are tracked and proceeds are distributed to charities by LuxTag Blockchain/NEM.”
Since June 2020, when I held my first digital art show inspired by climate change and COVID-19 (SDGs 3 and 13), NFTs and blockchain technology have steadily infiltrated the world of art and philanthropy, enabling artists and museums to monetize their work and continue in receiving payments for their work even after it has been sold.
Related: Digitizing Philanthropy: We Can Do Better at Doing Good
COVID-19: Museums and the blockchain
Among the sectors most affected by the pandemic are museums, which play an important role in raising awareness of climate change (Goal 13) and providing reliable information (Goal 4). With essentially all US museums closed, these institutions have seen significant financial losses as they have had to incur the costs of digitization in order to survive and continue to reach the general public during the closures.
Diane Droby – founder of We Are Museums and a member of the NFTs on the platform Hic Et Nunc, which featured at DoinGud’s first “Origins exhibition” told me: “I see clean block chains, like Tezos, as a great opportunity for museums. Low carbon currencies and markets provide easy access fair and ethical to blockchain and NFTs, transforming the industry from this highly energy-intensive, exclusivity and money-making space portrayed by the media.” continued:
“We are still in the education stage when museums need to be literate in blockchain to fully understand its potential.”
She explained, “But once they do, they will find great ways to reach new audiences of young and creative people willing to engage in meaningful projects, engaging their groups through innovative, interactive and immersive processes, as well as new paradigms of self-sustaining themselves.”
Indeed, NFTs have been a game changer for digital artists and museums by providing them with new income opportunities that have been sustained through the COVID-19 pandemic shutdowns.
Related: NFTs is a game-changing game for indie artists and musicians
In August, OpenSea – the largest market for non-perishable tokens – saw its NFT sales volume swell to $4 billion, followed by a downward correction during September. But there is a race among artists and museums to take advantage of the NFT market to monetize their work.
Earlier this month, Russia’s Hermitage Museum, the world’s largest art collection, sold NFTs of several masterpieces in partnership with Binance’s NFT Marketplace in order to cover budget shortfalls caused by the ongoing COVID-19 crisis, with auctions including the sale . A work by Leonardo da Vinci for 440,000 dollars. The Metropolitan Museum of Art in New York, the largest art museum in the United States, is expected to do the same by selling 219 prints and photos to help make up for $150 million in lost revenue, according to Artnet News.
Dropy indicated that she, along with other NFT artists, will launch a new sustainable blockchain-based platform called “alterHEN” on September 30, which she said is a vital laboratory on emerging models of the art market that have a new way of creating and collecting. Selling and displaying art.
Charitable and sustainable organizations for the 17 United Nations Sustainable Development Goals
Twitter CEO Jack Dorsey has sold his first tweet as an NFT for $2.9 million and donated the proceeds from Bitcoin (BTC) to GiveDirectly, a charitable organization that sends money to families in Africa affected by the COVID-19 pandemic (SDG 3). Bids were handled on a sustainable platform called Valuables that allows people to bid on tweets that are “signed by the original creators”.
Other sustainable non-moldable token platforms where artists can make NFTs, showcase and sell their creations to inspire greater awareness in the context of the 17 UN Sustainable Development Goals, including DigitalArt4Climate, Enjin NFT platform and DoinGud, where I launch my first NFT, “Recovery Roses, At the first-ever Origins Show – proceeds from the sale of NFT were donated to fund charitable organizations focused on the Sustainable Development Goals around the world.
DoinGud co-founder Manu Alzoro told me: “DoinGud’s blockchain-based social media and marketplace is designed to facilitate charitable giving via NFT sales to vetted social impact organizations of creative choice. It will lead to ever-increasing opportunities to support worthy charitable causes that share in the 17 UN Sustainable Development Goals such as ending world hunger, solving climate change, and more.”
Cryptocurrency investor William Quigley, co-founder of the NFT blockchain platform Worldwide eXchange (WAX) and co-founder of the first securities-backed stablecoin (USDT) told me about a new WAX philanthropic initiative that addresses Sustainable Development Goals 13 and 14. Green Blockchain provides NFTs, video games and collectibles – a new set of “Carbon Offset vIRL” NFTs. As Quigley said, “For every $1 composted in the WAX Sustainability Group, the National Forest Foundation will plant one tree seedling, each averaging one tonne of carbon dioxide over its lifetime. WAX officially sets standards Higher responsibility across the blockchain. We have worked tirelessly to ensure that our blockchain is energy efficient and inspires our community to act green. With Carbon Offset vIRL® NFTs, we are confident that we can all make a huge positive difference together.”
Related: Putting humanity ahead of profits through NFTs
On the other hand, Cryptograph is the first luxury and celebrity NFT auction platform to use blockchain technology to introduce a new way of doing philanthropy in the digital age and make charitable fundraising easier, global and permanent in nature. Tommy Alastra, Blockchain Pioneer and Co-Founder of Cryptograph, explained to me: “Cryptograph is a huge achievement for charitable organizations that want to ride the wave towards limitless philanthropic donations that can be accessed from around the world. With a new post-COVID world and large-scale charity festivals, Less personal, Cryptograph will allow charities to continue to successfully raise funds and receive percentages for each NFT auction item even on the resale market on an ongoing basis.”
Cryptographs sells NFTs made by Vitalik Buterin, Emin Gün Sirer, Erik Voorhees, Evan Van Ness – writer of “Week In Ethereum News” and former director at ConsenSys – and others, with proceeds funding to organizations working toward Sustainable Development Goals 1, 2, 4, 14. Creators can also choose their sustainable development-focused charitable organization to fund. For example, the Autism Science Foundation, which is dedicated to supporting and funding innovative autism research (SDG 3), has announced that it is accepting cryptocurrency and NFT donations via Every.org.
US tax treatment of NFT donations
Since NFT is considered property for tax purposes in the United States, it will be valued at fair market value at the time of the donation. Donors of NFTs over $500 that are non-cash donations will be required to comply with Internal Revenue Service assessment requirements by filing Form 8283. The donation will be tax-deductible for an individual donor as follows:
- If the grantor has held the NFT as a capital asset for more than a year, it will be able to deduct the gift’s fair market value, up to 30% of its adjusted gross income.
- If the grantor holds the NFT as a capital asset for a short period (less than one year) or as a common income property, the grantor will be able to deduct the lowest cost basis or fair market value, up to 50% of adjusted gross income.
- If the grantor receives NFT as payment for services rendered, the grantor may claim a discount on the fair market value on the date of receipt.
Related: Non-fungible tokens from a legal perspective
Charitable contributions that are not deductible in the current year, because they exceed the taxpayer’s adjusted gross income limit, can be carried forward for five years.
Donors of NFTs are urged to do their due diligence regarding the platform on which they release their NFTs to see if they are entitled to a US tax deduction.
The opinions, ideas and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Silva Ozelli, Esq. , CPA, is an international tax attorney and certified public accountant who writes frequently on tax, legal, and accounting issues for Tax Notes, Bloomberg BNA, other publications, and the Organization for Economic Co-operation and Development.