Part 4/5 - One Big Beautiful Bill Act and Charitable Giving

The One Big Beautiful Bill Act has transformed the charitable giving environment in the United States. With the law now in effect, it is essential for both nonprofits and donors to adapt to the new landscape, ensuring compliance and maximizing impact. This installment provides updated, accurate guidance based strictly on provisions present in the final legislation and validated by reliable sources.

Key Compliance and Documentation Requirements

For Nonprofits

• Charitable Gift Substantiation:
  Nonprofits must provide written acknowledgments for donations of $250 or more, including the amount, date, and a statement about whether any goods or services were provided in exchange. This requirement applies to all donors, including those claiming the new universal deduction.

• Corporate Giving Receipts:
  Nonprofits are responsible for issuing accurate receipts and written acknowledgments for all corporate gifts received. They are not required to track or verify whether a corporate donor’s total annual giving exceeds 1% of taxable income. The responsibility for determining and substantiating deductibility under the new 1% floor falls entirely on the corporate donor.

• Executive Compensation:
  Expanded excise taxes now apply to compensation above $1 million for certain nonprofit employees. Nonprofits should monitor total compensation and ensure compliance with new reporting and tax obligations if applicable.

For Donors

• Universal Deduction Documentation:
  Donors claiming the new above-the-line deduction (up to $1,000 for singles, $2,000 for couples) must retain bank records or written acknowledgments for all gifts. For donations of $250 or more, a contemporaneous written acknowledgment from the nonprofit is required.

• Itemizer Floor:
  Only the portion of total annual giving that exceeds 0.5% of adjusted gross income (AGI) is deductible for itemizers. Donors should track cumulative giving and consult with tax advisors to optimize deduction strategies.

• Corporate Donors:
  Businesses must ensure that annual charitable contributions exceed 1% of taxable income to claim any deduction. The burden of tracking, calculating, and substantiating this threshold rests solely with the corporate donor, not the nonprofit recipient.

Strategic Recommendations for Nonprofits

1. Broaden Donor Outreach

With the universal deduction now available to 90% of taxpayers, nonprofits should expand campaigns to reach non-itemizers. Messaging should highlight the new tax benefit and the impact of even modest gifts.

2. Educate and Steward Donors

• Itemizers:
  Provide clear guidance on the new 0.5% AGI floor and help donors understand how to maximize their deductions through “bunching” (consolidating gifts in a single year to exceed the floor).
• Corporate Partners:
  Communicate about the new 1% giving threshold, but remember nonprofits are not responsible for monitoring or verifying a corporation’s taxable income. Focus on providing timely, accurate receipts and collaborating on multi-year or larger-scale partnerships.

3. Diversify Revenue Streams

Given the potential for reduced giving from traditional itemizers and corporate partners, nonprofits should:

• Explore fee-for-service models or social enterprises.
• Seek out new grant opportunities and public funding.
• Strengthen planned giving and endowment-building efforts.

4. Enhance Impact Reporting

Transparent reporting of outcomes and stewardship of all gifts—regardless of size—will help build trust and encourage sustained support.

5. Prepare for Increased Demand

Reductions in Medicaid and SNAP are expected to increase demand for nonprofit services, especially among basic needs organizations. Scenario planning and partnerships with other service providers will be critical.

Strategic Recommendations for Donors

1. Track and Document All Gifts

Maintain thorough records of all charitable contributions, including receipts and written acknowledgments for gifts of $250 or more. This is essential for both universal deduction and itemized deduction claims.

2. Consult Tax Advisors

Given the new floors and caps, donors—especially those with complex finances—should consult with tax professionals to optimize giving strategies and ensure compliance.

3. Consider Bunching and Timing

Itemizers may benefit from “bunching” donations in a single year to exceed the 0.5% AGI floor and maximize tax benefits. This approach can help maintain or increase support for favorite causes while optimizing deductions.

4. Corporate Giving Strategy

Businesses should review annual giving budgets to ensure they meet the 1% threshold, or consider multi-year commitments and partnerships with nonprofits to maximize the impact and deductibility of their contributions. The responsibility for monitoring and substantiating this threshold is the corporation’s alone.

Table: Key Compliance and Strategic Actions

Looking Ahead

The One Big Beautiful Bill Act’s complexity and new requirements demand a proactive approach from both nonprofits and donors. By focusing on compliance, transparent communication, and strategic planning, organizations and individuals can continue to advance their missions and maximize the impact of their giving in this transformed environment.

In the next and final installment, we’ll explore how platforms and communities can adapt to foster resilient, values-driven giving—no matter how the policy landscape evolves.

Sources:

1. Council on Foundations. “One, Big, Beautiful Bill: Impact on Philanthropy.” July 8, 2025. https://cof.org/page/one-big-beautiful-bill-impact-philanthropy
2. Nonprofit Law Blog. “Nonprofits and the Tax Bill: Corporate Giving Deduction Floor.” June 26, 2025. https://nonprofitlawblog.com/nonprofits-and-the-tax-bill-corporate-giving-deduction-floor/
3. Ernst & Young. “Estimate of reduction in corporate charitable giving resulting from the proposed 1% floor on deduction of charitable contributions made by corporations.” June 2, 2025. https://independentsector.org/wp-content/uploads/2025/06/Ernst-Young-Study-on-1-Floor-on-Corporate-Charitable-Donations.pdf
4. IRS. “Charitable Contributions – Substantiation and Disclosure Requirements.” (Accessed July 2025). https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contributions-substantiation-and-disclosure-requirements
5. Proskauer Tax Talks. “One Big Beautiful Bill: Update on Provisions for Nonprofits.” June 16, 2025. https://www.proskauertaxtalks.com/2025/06/one-big-beautiful-bill-update-on-provisions-for-nonprofits/
6. National Academy for State Health Policy. “What Health Care Provisions of the One Big Beautiful Bill Act Mean for States.” July 8, 2025. https://nashp.org/what-health-care-provisions-of-the-one-big-beautiful-bill-act-mean-for-states/
7. Brookings Institution. “One Big, Beautiful Bill complicates charitable giving.” June 6, 2025. https://www.brookings.edu/articles/one-big-beautiful-bill-complicates-charitable-giving/