As we draw up plans for events and other functions that rely on funding, what happens when a grant recipient for, say, IRL Events receives a grant to organize an event? Presumably, they’d be granted an allotment of $APE to fulfill on their objective.
Most expenses, however, must be paid in USD. What happens when someone gets a grant in $APE but has to convert that to USD? Is there a third-party in place to make such a conversion so that the recipient doesn’t incur a taxable event on the behalf of ApeCoin DAO?
Thanks @ssp1111. Would be unfortunate to incur a sizable tax burden for being essentially the facilitator of funds, especially those that the recipient in no way materially benefitted from. It’s one thing to get paid, and be taxed for that… it’s another to be essentially working on a DAO project and have to pay (potentially dearly) for that on personal taxes whilst receiving no compensation to offset those tax burdens.
I think it makes a lot of sense for us to diversify our treasury. I don’t think people would be opposed to holding at least USDC and staked ETH on the balance sheet.
I absolutely understand the impetus for the Ape Foundation to disburse whatever funds possible in $APE, so I wouldn’t emphasize a massive push for USD. But it’s something to consider, as my main thing is that folks aren’t disincentivized from participating and organizing based on the possible tax burden they’d be taking on by doing so.
Also, to your point @supriyo, USDC doesn’t really help solve anything, as you’s still need to convert that USDC you’ve been granted into dollars, which again is a taxable event.
The issue as it stands:
1.) You are awarded a grant to organize an event, that transfer of $APE to your wallet becomes a taxable event (in the US, at least), even though you are not benefitting monetarily from that grant in any way (it’s not a paycheck, after all, it’s funding to do work).
2. You now have $APE (or USDC even) in your wallet, but your vendors only take USD. You convert that $APE/USDC to USD to pay your vendors, you incur yet another taxable event in doing so.
How do we mitigate this? I don’t believe making event organizers (or other grant recipients doing work on behalf of the DAO) liable for shouldering the tax burden of doing the work is a viable long-term strategy for expanding DAO participation.
I made the mistake of requesting funds in $APE to be distributed over 3 months for our approved proposal AIP-88. The AIP process took a long time and the volatility of $APE from when I wrote the proposal to each actual disbursement was not worth what we originally budgeted to execute the AIP.
If possible we should provide options for disbursement. APE, USD, USDC.
$APE - for projects that give out or reward people in ApeCoin & don’t need funds for any other part of the project
$USD - projects that need to pay for products & services in fiat to execute. saves the extra tax, volatility, and fees from conversion issues
$USDC - projects that need more flexibility on how they convert the funds without dealing with the volatility of ApeCoin price.
$USDC is absolutely a better option than $APE from a tax / booking perspective (speaking first hand from managing our own internal treasury) . If you look at larger multi-month spanning proposals in other DAOs - they do learn towards final grants in absolute USD terms than readjusting it regularly before it passes or catching the short-end of the stick in a bad market.
When we spoke to the attorney’s about this issue for ApeComms, one of the options was to create a receiving LLC or C-Corp in the US to handle accounting, taxes, payroll, 1099’s etc, basically being the entity responsible for distributing monies.
SO, to your example of how to fund a Local Ambassador organizing an IRL Event without them being hit with taxes, perhaps the idea of ApeCoinIRL as the LLC/C-Corp could be the answer?
I’m sure there’d be other factors to consider, but we’ve been setting up Delaware LLC’s forever when it comes to tech startups, so it seems like a no-brainer.
Brilliant. What I had in the back of my mind was a third-party entity that might help intercept that taxable burden, but wasn’t sure about the realistic specifics of that option. Now I’ll need to look into this and get clearer. Looks like I’ll be drawing up an eventual AIP on this, thanks again.