The One Big Beautiful Bill Act that was signed into law on July 4, 2025 includes many provisions impacting businesses, individual taxpayers, and employers.

But how does OBBBA impact nonprofit organizations and their donors?

While the House and Senate versions of the bill featured a few provisions that would directly impact nonprofits—including new taxes on transportation benefits and granting the Department of Treasury the power to revoke tax-exempt status without due process—these provisions were left out of the final version of the bill. However, there are still several new provisions that will impact nonprofits both directly and indirectly in the coming years.

Let’s look at the provisions we think most nonprofits should be aware of:

New “Universal Charitable Deduction”

• What it does:

  • Allows non-itemizing taxpayers to deduct up to $1,000 (individual) or $2,000 (married couples) for charitable giving.

• Why it matters:

  • Encourages more everyday people to donate by giving them a tax break, estimated to bring in $74 billion for nonprofits over 10 years (per Joint Committee on Taxation)

Limits on High-Income Charitable Deductions

• What it does:

  • Caps the deduction rate for wealthy individuals and introduces a 0.5% minimum floor on itemized charitable deductions.

• Why it matters:

  • Reduces the tax incentive for large donors, which may reduce the appeal of giving large gifts.

Corporate Giving Requirement

• What it does:

  • Corporations must give at least 1% of taxable income to charity to receive tax deductions. The ceiling remains the same as current law at 10%.

• Why it matters:

  • Small to midsized businesses that do not meet the threshold (under 1% of taxable income) may end their giving programs in response, potentially shrinking overall corporate support for nonprofits.

Higher Taxes on College/University Endowments

• What it does:

  • Applies a tiered excise tax on net investment income from private college/university endowments with ≥ 3,000 tuition-paying students and endowment assets of $500K+ per student:
    • 1.4% for small schools (this was the flat rate for all endowments prior to the passage of OBBBA)
      • Endowment between $500k-$750k per student
    • 4% for mid sized endowments
      • $750k-$2m per student
    • 8% for larger ones
      • Above $2m per student

• Why it matters:

  • Could reduce the amount of endowment earnings available to fund scholarships, research, and community-serving programs.

Expanded Tax on Highly Compensated NPO Employees

• What it does:

  • Expands the existing 21% excise tax beyond executives to apply to all nonprofit employees earning over $1 million.

• Why it matters:

  • Adds extra costs to hiring & retaining highly compensated employees.

Tax Credit for Scholarship Granting Charities

• What it does:

  • Offers donors a nonrefundable federal tax credit up to $1,700/year for contributions to qualifying 501(c)(3) charities that award scholarships. The credit is reduced if a similar state credit is claimed and can be carried forward for up to five years. Starts in 2027.

• Why it matters:

  • Encourages more giving to scholarship-focused nonprofits.

Other provisions that may have downstream impacts on some nonprofits:

Changes to Standard Deduction

• What it does:

  • Slightly increases standard deductions ($750 single, $1,500 joint), but fewer taxpayers will itemize.

• Why it matters:

  • May indirectly reduce charitable giving incentives if donors don’t itemize.

Medicaid & SNAP cuts

• What it does:

  • Reduces federal funding for Medicaid (starting in October 2026) and Supplemental Nutrition Assistance Program (SNAP) benefits (starting in January 2027) by tightening eligibility and imposing new administrative rules.

• Why it matters:

  • This could result in increased demand for services especially for nonprofits who offer food assistance, healthcare, and social services.

Plan Ahead to Remain Resilient

The bill contains both opportunities and challenges for nonprofit organizations. On one hand, a new universal charitable deduction and scholarship-related tax credit may encourage more giving from everyday donors. On the other hand, changes to high-income deductions, stricter corporate giving thresholds, and excise taxes on large nonprofit employers and university endowments may limit access to traditional funding sources.

According to the National Council of Nonprofits and Joint Committee on Taxation, cumulatively these changes are expected to reduce nonprofit resources by $81 billion over the next decade. But the future is not written in stone, and there’s no need for immediate alarm. The most resilient nonprofits will be those that take proactive steps today:

• Strengthen donor engagement and communication
• Build flexible budgets and thoughtful risk management strategies
• Develop policies and procedures that promote adaptability and financial sustainability

The Wegner CPAs nonprofit advisors are here to help you navigate these changes and support your long-term planning. Don’t wait until challenges arise—developing a plan now can support your organization’s mission and financial success for years to come.