Cryptocurrency: Don’t drink the Kool-Aid - by Paul Dion

Cryptocurrencies like Bitcoin, Bitcash, and Ethereum rest on a foundation of  “blockchain;” a continuously growing public transaction ledger consisting of records called “blocks” that are linked together and secured using cryptography. Blockchain bulls see the new technology revolutionizing all sorts of transactions, like real estate sales and medical records. Skeptics dismiss the whole effort as fool’s gold, suitable for speculation, but nothing more. (Hedge fund tycoon T. Boone Pickens recently tweeted that, “at [age] 89, anything with the word ‘crypt’ in it is a real turnoff for me.”)

Now, former tech CEO Matt Liston has formed a blockchain-based religion called 0xω, (Zero ex Omega). “We’re incentivizing mindsharing, and eventually mind upload to use consensus to form a structure of collective consciousness,” he said. “And then, we’ll elevate an individual interaction with a religious structure as a group participation in a collective consciousness where the structure itself is God.” He’s even unveiled a computer-generated avatar he hopes to be the church’s first sacred object: a narwhal with a doge head, a beret, tattoos, an infinity tail, and an ethereum logo.

We’re praying that this is all just an elaborate prank, a ridiculous bit of self-referential trolling from a Silicon Valley tech-bro with too much time on his hands. But in the unlikely event that this guy is actually serious, the new church might someday qualify for the same tax deductions as more-established churches.

The path to enlightenment starts with filing IRS Form 1023, “Application for Recognition of Exemption.” There’s no guarantee that the IRS will play ball – the Church of Scientology fought for decades to gain recognition, and the service sees plenty of scammers masquerading as churches. But if the IRS green lights it with a straight face, donors can deduct up to 60% of their adjusted gross incomes for cash gifts and make 0xω the beneficiary of charitable trusts, foundations, pooled income funds, and donor-advised funds.

Tax deductions extend well beyond cash contributions. The Tax Court has approved medical deductions for Christian Science practitioner fees and Navajo Indian medicine man rituals. Under that same logic, voodoo animal sacrifice is also a deductible medical expense, as long as it’s part of a religious ceremony for healing purposes. (Hey, do you want to tell the voodoo queen she can’t deduct her chickens?)

The bad news for the faithful is that whatever they drop in the plate is deductible only if they itemize. Last year’s Tax Cuts and Jobs Act essentially doubled standard deductions, which should cut the number of taxpayers who itemize from about one out of three to just one out of ten.

And there’s another downside for blockchain-based religions. The blockchain records everything! No more exaggerating contributions on Form 1040 when the IRS can go online and verify gifts. For that matter, can you imagine showing up at 0xω’s Pearly Gates (with your randomly-generated user ID and password in hand), only to see your lifetime of sins chronicled irrevocably on St. Peter’s iCloud? If that’s the new church’s idea of heaven, we can imagine a lot of folks taking their chances with hell.

Here’s one thing blockchain won’t ever change – the pain you feel when you waste money on taxes you don’t have to pay. So call us today for a plan to pay less, and you’ll have more to donate to whatever organization you want to support!

Paul Dion, CPA, is a certified public accountant and president of Paul Dion CPA, Millbury, Mass.