On July 4, 2025, President Trump officially signed The One Big Beautiful Bill (OBBB) into law. Since then, news outlets have focused on its broad implications for businesses, families, and national security. Understandably, the nonprofit community has been asking: What does this mean for us?
While the OBBB brings sweeping tax changes—such as no tax on tips, overtime, or car loan interest—the direct impact on nonprofits is more targeted and relatively narrow. Still, certain provisions deserve close attention from tax-exempt organizations, particularly around charitable deductions and excise taxes.
1. Charitable Deduction Changes
The OBBB includes multiple sections affecting charitable giving, each with potential implications for nonprofit revenue:
- Section 70411 – Creates a nonrefundable tax credit of up to $1,700 for U.S. citizens or residents who donate to scholarship-granting organizations (501(c)(3), not private foundations).
- Section 70424 – Permanently reinstates and expands the partial charitable deduction for nonitemizers:
- $1,000 for single filers
- $2,000 for joint filers
- Applies to tax years beginning after December 31, 2025
- Section 70102 – Increases the standard deduction to $15,750 (single) and $23,625 (joint) starting in 2025.
- Section 70425 – Introduces a 0.5% floor for charitable deductions by individuals. Only contributions above 0.5% of the taxpayer’s contribution base are deductible; the rest can be carried forward.
- Section 70426 – Adds a 1% floor for charitable deductions by corporations, with carryforward allowed for five years (FIFO basis).
Potential impact:
- Nonprofit commentators caution that the higher standard deduction, coupled with percentage “floors” for charitable deductions, could reduce incentive for some donors to give, especially at lower contribution levels.
- On the other hand, because most taxpayers already take the standard deduction, the increased threshold could free up disposable income that might still flow to nonprofits—particularly if organizations clearly communicate impact and value.
2. Excise Tax Changes
Two excise tax provisions stand out for certain tax-exempt organizations:
- Section 70415 – Adjusts the excise tax on investment income for certain private colleges and universities with at least 3,000 U.S. tuition-paying students and high per-student endowments:
- $500,000–$750,000: 1.4% tax
- $750,000–$2,000,000: 4% tax
- Over $2,000,000: 8% tax
- Section 70416 – Expands the excess compensation tax to apply more broadly, including former employees, starting in tax years after December 31, 2025.
For most nonprofits, these changes will have no direct impact. However, affected institutions—particularly in higher education—should anticipate new compliance and planning considerations.
3. What’s Not in the Bill (Despite Media Buzz)
In recent weeks, headlines have speculated that the Executive Branch could revoke 501(c)(3) status for certain nonprofits or universities based on political positions. This is not true.
- Only the IRS has the authority to grant or revoke tax-exempt status.
- Federal law (26 U.S. Code §§ 6103 and 7213) strictly prohibits unauthorized disclosure of taxpayer information and makes violations a felony.
- While nonprofits are prohibited from endorsing or opposing political candidates, they may engage in issue advocacy if it aligns with their mission and complies with IRS rules.
That said, even compliant advocacy can affect public perception and potentially alienate stakeholders—so boards and leadership teams should weigh reputational risk alongside legal compliance.
4. Key Takeaways for Nonprofits
- Stay informed, not alarmed. The OBBB’s nonprofit-specific changes are limited but could still influence giving patterns and compliance for certain organizations.
- Communicate your impact. With potential shifts in donor tax benefits, mission clarity and storytelling become even more important in donor outreach.
- Review governance and compliance policies. Especially if your nonprofit operates in higher education or compensates executives at higher levels.
- Consult experts. The nuances of charitable deduction limits, excise taxes, and IRS compliance are complex—partnering with a nonprofit-focused tax advisor can ensure you remain on solid footing.
Bottom line:
The One Big Beautiful Bill introduces targeted but important changes for nonprofits. While it does not empower the Executive Branch to revoke exemptions based on political leanings, it does tweak the charitable giving landscape in ways that may require proactive donor engagement and internal policy review.
💙 Your Mission is Our Passion.
At TrimnerBeckham, we help nonprofits navigate complex tax landscapes—so you can focus on the work that matters most.
