On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act, Pub. L. 119-21 (the Act or the OBBB). In this piece, we outline the selected provisions that pertain to nonprofit organizations, provide insight into how they may influence charitable giving incentives and nonprofit operations, and lastly, share guidance on how to address these changes.

Individual giving 

A new charitable tax incentive for non-itemizers

Beginning in 2026, taxpayers who do not elect to itemize deductions will be permitted a deduction of $1,000 ($2,000 for joint filers) for contributions to certain charitable organizations. To be eligible for the deduction, the contribution must be made in cash to a charitable organization other than a supporting organization or a donor-advised fund. Through 2025, the income tax charitable deduction is an itemized deduction. Around 90% of Americans do not itemize their deduction and do not claim a charitable deduction. This new provision may incentivize charitable giving.

New limitations on charitable deductions

A deduction for charitable contributions is allowed only to the extent that the total amount of the contributions exceeds 0.5% of the taxpayer’s contribution base (adjusted gross income with certain modifications) for the year. The limit on deductibility for cash gifts made to certain charities (generally, public charities) of 60% of a taxpayer’s contribution base is now permanent. This provision could disincentivize major donors as amounts above these levels will not be deductible. 

Corporate giving

Under the Act, corporations will no longer receive a tax deduction for gifts to nonprofits until the level of contributions is at least 1% of the corporation's taxable earnings. Corporations that make larger contributions can now carry them forward for five years. Most corporate contributions heretofore fall below this minimum. The ceiling remains unchanged at 10% of its taxable income. A study commissioned by Independent Sector and conducted by Ernst & Young estimates the floor may reduce corporate contributions by $4.5 billion over ten years.[1]

Scholarship-granting organizations 

Beginning in 2027, a citizen or resident of the United States will be allowed a credit against income tax of up to $1,700 for contributions to a scholarship-granting organization (meeting specified qualifications), which grants scholarships to eligible students attending elementary and secondary schools. States must opt into the program and prepare a list of scholarship-granting organizations. The amount of the credit is reduced by any credit allowed on a state tax return of the taxpayer. Any unused credit may be carried forward for up to five years. A charitable contribution deduction cannot be taken for any amount for which the credit is allowed. This may encourage donations to qualifying scholarship organizations. 

Programmatic and community impacts 

The nearly $1 trillion in cuts from Medicaid and food and housing assistance programs may cause those who rely on these programs to turn to nonprofits to fill these gaps. Nonprofits should consider speaking to their donors about funding this increased need.

Several provisions in the Act may benefit community development programs, increasing funding for affordable rental homes and encouraging investment in low-income communities. The Act includes a permanent extension of the New Markets Tax Credit with an annual $5 billion allocation, providing a tax credit to private investors who make certain equity investments in qualified Community Development Entities. It also permanently expands the Low-Income Housing Tax Credit by increasing the 9% housing credit allocation to 12%, reducing the bond-financed threshold from 50-25%; and makes permanent Opportunity Zones, reinstating previously removed reporting and transparency requirements. The permanence of these provisions may incentivize investors, particularly institutional investors, who were previously hesitant to invest due to the potential of the program’s expiration.[2]

Taxes on nonprofit organizations

Excise tax on universities expanded

The 1.4% excise tax on the net investment income of private colleges and universities has been expanded, with a new tiered tax structure being applied to net investment income on university endowments for tax years beginning after December 31, 2025:

  • Endowments per student (EPS) above $2 million will pay an 8% excise tax.
  • Endowments with EPS between $750,000 and $2 million will pay 4% tax.
  • Endowments with EPS between $500,000 and $750,000 will pay 1.4%.
  • Universities with fewer than 3,000 students or less than $500,000 EPS will be exempted.

It is unclear whether these new taxes will deter donors from contributing to university endowments. Nevertheless, university investment committees should reevaluate their spending policies in preparation for possible impacts.

Excise tax on highly compensated employees expanded

For tax years beginning after December 31, 2025, the excise tax on excess compensation paid to current or former executives of a tax-exempt organization is no longer limited to the five most highly compensated employees. A charitable organization must pay a 21% tax on employee compensation exceeding $1 million per year.

Update on the Employee Retention Credit (ERC) deadline

ERC refund claims filed after January 31, 2024, will be rejected, regardless of whether the claim was timely filed or previously valid.  

What was not included in the Act

  • The House version of the bill included a provision that would have allowed the administration to withdraw the tax-exempt status of nonprofits without due process if deemed a “terrorist supporting organization.” The Senate removed that provision.
  • The House version of the bill included a significant increase for foundations with assets above $50 million. The Senate version removed these increases keeping the excise tax on net investment income at 1.39%.
  • The House proposed levying Unrelated Business Income Tax on nonprofits that license their name or logo, or that offer qualified transportation fringe benefits, such as transit or parking benefits. The final bill does not contain either.

Plan and prepare: actions for nonprofits

Perform cashflow forecasting and scenario planning

It may take a few years to fully realize the impact of the OBBB on nonprofits and their donors. It is important to be ready for any scenario. Create a cashflow forecast to better understand your income streams and timing. Consider which events may impact these indicators such as a loss of a government or corporate grant. A financial analyst can create economic models, review past budgets and test different scenarios based on revenue and expenses. There are also many tools, including some that are free or low cost for nonprofits, that can help with this exercise. Even a simple spreadsheet that includes key indicators such as expected revenue and month-over-month expenses can help you visualize your organization’s activity. Any of these exercises can arm your organization with the information needed to respond to and plan for future challenges. 

Build a financial safety net

Reserve funds and endowments are great tools that help nonprofit organizations maintain long-term stability. Both can be created for a specific purpose or a general rainy day or emergency fund. Ideally, the funds are unrestricted or board restricted, allowing the organization to use the funds in unforeseen circumstances, but even a program-restricted endowment can be valuable in that it helps to provide consistent funding to an important key program. Often donors and grantmakers like to see and invest in organizations with these financial safety nets as they tend to indicate financial strength and resilience. 

Engage in financial storytelling 

This is a great time to speak with your donors about the potential impact the OBBB may have on your organization. Whether it be loss of funding or increased community need, many donors stand ready to help fill these gaps. Do not be afraid to speak about your need to fund critical but indirect line items such as overhead, staff salaries, or a reserve fund or endowment. Explain how unrestricted and multi-year funding provide stability when navigating future challenges. These conversations are all helpful in maintaining a strong, resilient organization that can weather any economic or other challenges.  

Evaluate your fundraising strategy

The changes in tax incentives are predicted to impact giving across various categories. It is important to consider where your development team is spending their limited time and resources. For example, you may want to reconsider your corporate fundraising strategy. While many companies will continue giving regardless of the tax benefits, some may pull back. Speak to your current corporate funders about any planned adjustments to their giving strategy. In these conversations, remind them of your mission alignment and the importance of your work in the community.

Also, consider refocusing on other sources of funding. With the increase in the standard charitable giving deduction, it may make sense to focus on donations from individuals, ensuring they know about these new incentives for giving, and asking your major donors if they plan to max out their charitable tax deduction before the changes go into effect in 2026. Additionally, discuss multi-year giving pledges that may allow donors to optimize their deduction across years. 

PNC Can Help

PNC’s Nonprofit Strategy & Solutions group serves as a dedicated partner committed to empowering nonprofit organizations to achieve their mission. By combining national expertise with local knowledge, we provide comprehensive education and advice on governance, philanthropy and financial sustainability — going beyond asset management to deliver actionable insights that address the most pressing challenges nonprofits face. With our deep community ties, practical nonprofit leadership experience and strong local market presence, we provide meaningful solutions that optimize resources and deliver a sustainable impact. For more information, contact the team at IAMNonprofitStrategy@pnc.com.

Sources

1. Ernest Young Study on Corporate Charitable Donations

2. An Expert Guide to the Changes in the One Big Beautiful Bill