Part 3/5 - One Big Beautiful Bill Act and Charitable Giving

The One Big Beautiful Bill Act, now law since July 4, 2025, creates a complex landscape of winners and losers in the charitable giving ecosystem. While some groups benefit from new opportunities, others face significant challenges that could reshape their giving patterns and organizational strategies. Understanding these differential impacts is crucial for nonprofits and donors navigating this new environment.

Nonprofits: A Tale of Two Sectors

The Winners: Organizations Positioned to Benefit

Large National Nonprofits Organizations with sophisticated fundraising operations and national reach are best positioned to capitalize on the new universal charitable deduction. These nonprofits can effectively market to the 90% of taxpayers who don’t itemize and can now claim up to $1,000 (singles) or $2,000 (married filing jointly) for charitable contributions .

Religious Organizations Historical evidence suggests religious organizations will likely prove most resilient to these changes. Research from the 2017 Tax Cuts and Jobs Act found that “very little, if any, of the TCJA-caused decrease in giving was due to decreased giving to religious congregations” . This resilience reflects the fact that donors to religious organizations are typically motivated by spiritual and community values rather than tax incentives.

Organizations Serving Diverse Communities The universal deduction may particularly benefit organizations that serve lower- and middle-income communities, as these donors are more likely to take the standard deduction. The $74 billion over 10 years estimated to flow to nonprofits through this provision represents a significant new funding stream for organizations that can effectively engage these previously tax-disincentivized donors.

The Losers: Nonprofits Facing Challenges

Small Community Organizations Local nonprofits heavily dependent on small business support face particular vulnerability. The 1% floor for corporate charitable deductions means that corporations must donate at least 1% of their taxable income to qualify for any deduction . Ernst & Young analysis found that many corporations, especially small businesses, currently donate less than 1% of taxable income and will lose all tax benefits [1].

Arts, Culture, and Humanities Organizations These organizations showed high sensitivity to tax incentive changes following the 2017 TCJA. Arts and culture giving comprises just 5% of total philanthropy in the U.S., making this sector particularly vulnerable to further reductions [2]. The 0.5% floor for itemized deductions will likely affect donors who previously supported cultural institutions with modest gifts.

Basic Needs Organizations Organizations focused on food security, housing, and other basic necessities face a “double burden.” The TCJA research found that “most of the decrease was in giving to organizations whose primary focus is helping people in need of basic necessities” [3]. Simultaneously, cuts to Medicaid and SNAP programs in the same legislation will increase demand for these services while reducing charitable giving incentives.

Environmental Organizations Environmental nonprofits experienced significant impacts from the 2017 tax changes and are likely to face similar challenges under the new law. These organizations often depend on middle-income donors who may be affected by the new floors and caps on charitable deductions.

Individual Donors: A Spectrum of Impacts

The Winners: Donors Gaining New Incentives

Non-Itemizing Taxpayers (90% of Filers) The biggest winners are the approximately 90% of taxpayers who take the standard deduction. Starting in 2026, these donors can claim up to $1,000 (singles) or $2,000 (married filing jointly) for charitable contributions [4]. This represents the first time since the CARES Act that non-itemizers have received a federal tax benefit for charitable giving.

Value-Driven Donors Donors motivated by personal values, spiritual beliefs, or community connection rather than tax benefits will continue their giving patterns. Research consistently shows that these donors are less responsive to tax policy changes and often maintain their support regardless of incentive structures [5].

Major Donors Who Exceed New Floors High-income donors who can easily exceed the 0.5% AGI floor for itemized deductions will continue to benefit from charitable deductions, though at a reduced rate due to the 35% cap on itemized deductions [6].

The Losers: Donors Facing Reduced Incentives

Middle-Income Itemizers Donors who itemize but make modest charitable contributions face the greatest challenges. The 0.5% floor means that a taxpayer with $100,000 in adjusted gross income must give more than $500 to charity before any charitable deduction is allowed. This creates an “all or nothing” threshold that may discourage smaller gifts.

High-Income Donors Motivated by Tax Benefits Wealthy taxpayers in the 37% tax bracket now receive only 35 cents in tax benefits for each dollar donated, down from the previous 37 cents [8]. Research shows that high-income donors are more responsive to tax incentives, with elasticity estimates ranging from -1.6 or higher for this group [9].

Donors Making Gifts to Donor-Advised Funds The universal deduction specifically excludes contributions to donor-advised funds, limiting the appeal of this popular giving vehicle for non-itemizers [10].

Corporate Donors: Dramatic Restructuring

The Winners: Large Corporations Above the Threshold

Corporations Already Giving Above 1% Companies that currently donate more than 1% of their taxable income will continue to benefit from charitable deductions. The law maintains the existing 10% ceiling and adds a five-year carryforward provision for excess contributions [11].

Corporations with Marketing-Based Giving Many corporations support charities through sponsorships that come from marketing budgets rather than charitable giving budgets. As the Akron Community Foundation notes, “the proposed legislation does not impact a corporation’s ability to deduct marketing expenses” [12].

The Losers: Corporations Below the New Threshold

Small and Medium-Sized Businesses The most dramatic impact falls on smaller corporations. The 1% floor means that corporations donating less than 1% of taxable income lose all tax benefits for charitable contributions. This provision is projected to reduce corporate charitable giving by $4.2-$4.8 billion annually [13].

Corporations with Inconsistent Giving Patterns Companies that occasionally make charitable contributions but don’t maintain consistent giving at the 1% level will face difficult decisions about whether to increase their giving to meet the threshold or eliminate charitable deductions entirely.

Secondary Effects: The Ripple Impact

Increased Demand, Reduced Resources

The legislation creates a particularly challenging environment by simultaneously increasing demand for nonprofit services while reducing charitable giving incentives. Cuts to Medicaid and SNAP programs will increase the need for basic services just as charitable giving faces headwinds [14].

Geographic Variations

The impact will vary significantly by region. Areas with higher concentrations of small businesses may see particularly dramatic reductions in local charitable support, while regions with more high-income taxpayers may experience smaller effects.

Timing and Behavioral Changes

The legislation may encourage “bunching” strategies, where donors consolidate multiple years of giving into single tax years to exceed the 0.5% floor. This could create more volatile funding patterns for nonprofits as donors time their contributions strategically [15].

Sector-Specific Implications

Healthcare Nonprofits

Nonprofit hospitals and health systems face particular challenges. The legislation expands the 21% excise tax on compensation exceeding $1 million to all current and former nonprofit employees, potentially increasing operating costs [16]. Simultaneously, Medicaid cuts may increase demand for uncompensated care.

Educational Institutions

Private colleges and universities with large endowments face significantly higher excise taxes, with rates up to 21% for the largest endowments [17]. This represents a substantial increase from the current 1.4% rate.

Community Foundations

These organizations may play an increasingly important role as intermediaries, helping smaller nonprofits access the expanded base of non-itemizing donors while providing guidance on navigating the new tax landscape.

Long-Term Strategic Implications

For Nonprofits

Organizations must diversify their funding strategies, focusing more on relationship-building and impact demonstration rather than tax incentives. The $74 billion opportunity from the universal deduction requires new approaches to donor engagement and stewardship.

For Donors

The changes create incentives for more strategic giving planning. Donors may need to adjust their giving patterns, consider bunching strategies, or explore alternative giving vehicles that align with the new tax structure.

For the Sector Overall

The estimated net $7 billion reduction in charitable giving over 10 years [18] comes at a time when nonprofit demand is increasing due to government program cuts. This creates pressure for innovation in funding models and service delivery.

Conclusion

The One Big Beautiful Bill Act creates a complex matrix of winners and losers in the charitable giving ecosystem. While the universal deduction provides significant opportunities for organizations that can effectively engage non-itemizing donors, various floors and caps create challenges for traditional funding sources.

The legislation’s impact will be felt differently across subsectors, with religious organizations likely proving most resilient and arts, culture, and basic needs organizations facing the greatest challenges. Corporate giving faces dramatic restructuring, with many small businesses losing tax incentives entirely.

Success in this new environment will require organizations to focus on building authentic relationships with supporters based on shared values rather than tax benefits alone. As we’ll explore in our next installment, the practical implications for navigating this new landscape require careful planning and strategic adaptation.

In Part 4, we’ll examine the practical implications and strategic recommendations for nonprofits and donors operating in this transformed charitable giving environment.

Sources

Council of Nonprofits. “Congress Passes Major Tax Package; Nonprofits Directly Impacted.” March 7, 2025. https://www.councilofnonprofits.org/articles/congress-passes-major-tax-package-nonprofits-directly-impacted

Indiana University Lilly Family School of Philanthropy. “Tax law change caused U.S. charitable giving to drop by about $20 billion in law’s first year, new study shows.” July 29, 2024. https://philanthropy.indianapolis.iu.edu/news-events/news/_news/2024/tax-law-change-caused-us-charitable-giving-to-drop-by-about-20-billion-new-study-shows.html

National Council of Nonprofits. “Statement on Senate Passage of the One Big Beautiful Bill Act.” January 7, 2025. https://www.councilofnonprofits.org/pressreleases/national-council-nonprofits-statement-senate-passage-one-big-beautiful-bill-act

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/

[1] 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

[2] Changing Our World. “Four Key Trends for Arts Culture Nonprofits to Know in 2024.” June 20, 2025. https://changingourworld.com/four-key-trends-and-tips-for-arts-culture-nonprofits-to-know-in-2024/

[3] Nonprofit Pro. “U.S. Charitable Giving Fell $20B in First Year of Tax Law Change.” July 31, 2024. https://www.nonprofitpro.com/article/u-s-charitable-giving-fell-about-20b-in-first-year-of-tax-law-change/

[4] CNBC. “Trump’s budget bill includes a new tax break worth up to $2,000.” July 3, 2025. https://www.cnbc.com/2025/07/03/trumps-budget-bill-includes-a-new-tax-break-worth-up-to-2000-dollars.html

[5] Center for Public Justice. “The Charitable Act: How Tax Reform Can Boost Charitable Giving and Support Faith-Based Organizations.” August 7, 2024. https://cpjustice.org/the-charitable-act-how-tax-reform-can-boost-charitable-giving-and-support-faith-based-organizations/

[6] Council on Foundations. “One, Big, Beautiful Bill: Impact on Philanthropy.” July 7, 2025. https://cof.org/page/one-big-beautiful-bill-impact-philanthropy

[8] Darryll K. Jones. “New Floors and Ceilings on the Charitable Contribution Deduction.” July 7, 2025. https://darryllkjones.substack.com/p/new-floors-and-ceilings-on-the-charitable

[9] Philanthropy Roundtable. “How Tax Policy Affects Charitable Giving.” https://www.philanthropyroundtable.org/resource/how-tax-policy-affects-charitable-giving/

[10] Akron Community Foundation. “Understanding the One Big Beautiful Bill Act: Three insights for philanthropy.” July 8, 2025. https://www.akroncf.org/story/understanding-the-one-big-beautiful-bill-act-three-insights-for-philanthropy/

[11] Gulf Coast Business Law Blog. “One Big Beautiful Bill Imposes an AGI Floor on Charitable Contributions Deductions.” July 7, 2025. https://www.gulfcoastbusinesslawblog.com/2025/07/one-big-beautiful-bill-imposes-an-agi-floor-on-charitable-contributions-deductions/

[12] Akron Community Foundation. “Three observations about pending tax legislation for nonprofits.” June 11, 2025. https://www.akroncf.org/story/on-notice-three-observations-about-pending-tax-legislation/

[13] AFP Global. “Universal Deduction Secured Through Advocacy Efforts, But Challenges Remain in Final Tax Bill.” July 7, 2025. https://afpglobal.org/news/universal-deduction-secured-through-advocacy-efforts-challenges-remain-final-tax-bill

[14] National Council of Nonprofits. “New Tax Law Threatens Nonprofits’ Ability to Serve Communities.” April 7, 2025. https://www.councilofnonprofits.org/pressreleases/new-tax-law-threatens-nonprofits-ability-serve-communities-warns-national-council-0

[15] The Nonprofit Alliance. “Tax Reform & Charitable Giving: What It Means for Your Organization and Donors.” July 7, 2025. https://tnpa.org/tax-reform-charitable-giving-what-it-means-for-your-organization-and-donors/

[16] Nonprofit Law Blog. “Some Highlights of H.R. 1 – One Big Beautiful Bill Act.” July 7, 2025. https://nonprofitlawblog.com/some-highlights-of-h-r-1-one-big-beautiful-bill-act/

[17] Yeo & Yeo. “What Nonprofits Need to Know About the One Big Beautiful Bill Act.” June 12, 2025. https://www.yeoandyeo.com/resource/what-nonprofits-need-to-know-about-the-one-big-beautiful-bill-act

[18] Bipartisan Policy Center. “Surprises and Opportunities for Nonprofits in Massive New Tax Bill.” July 3, 2025. https://www.bipc.com/surprises-opportunities-for-nonprofits-in-massive-new-tax-bill