Paul L. Caron

Thursday, May 2, 2024

Mayer: Charity Law And Blockchain Technology

Lloyd Hitoshi Mayer (Notre Dame; Google Scholar), Charity Law & Blockchain Technology: Using Old Wineskins for New Wine?, 77 Tax Law. __ (2024):

Tax lawyerWhenever something new emerges, the question of how existing law applies arises. Sometimes it is both easy to answer that question and the answer is consistent with the policy goals of existing law. But sometimes the answer to that question is uncertain, does not fit well with those policy goals, or reflects a mixture of these two issues.

This question is particularly vexing today with respect to new assets facilitated by blockchain technology. These new assets include cryptocurrencies, non-fungible tokens (NFTs), and ownership interests in decentralized autonomous organizations (DAOs). Commentators have written about how certain laws, particularly securities law, apply to these new assets. However, there is one legal area that commentators have yet to fully address: charity law, especially the federal tax laws relating to charities. Charities and donors are increasingly involved in transactions involving these new assets, with little guidance about how this law applies to those transactions.

This Article considers how existing charity law applies to these new assets and, to the extent that application is either uncertain or inconsistent with the policy goals underlying charity law, how charity law should be modified to accommodate these new assets. It concludes that existing law provides sufficiently certain answers regarding its application to these new assets and that application is consistent with the goals underlying that law. But two areas may require further guidance or modification of existing law in the foreseeable future: first, should certain cryptocurrencies be treated as readily valued for charitable contribution tax deduction purposes if sufficiently reliable cryptocurrency exchanges emerge; and second, if charities increasingly use blockchain technology, and particularly DAO governance structures, to further their exempt purposes, when is that use consistent with exemption under federal tax law.

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