On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, ushering in transformative changes for nonprofit organizations and their donors. This landmark legislation introduces sweeping updates to tax policies, including key provisions affecting charitable contribution deductions and nonprofit compensation structures. With a confident vision for the future, nonprofits must adapt to these changes to maximize opportunities and maintain compliance. Let’s explore the most impactful provisions of the One Big Beautiful Bill Act and what they mean for your organization.
Read Also: One Big Beautiful Bill Act Becomes Law
Expanded Excise Tax On Excess Compensation
The One Big Beautiful Bill Act significantly broadens the scope of the excise tax on nonprofit compensation, effective January 2026. Since 2018, a 21% excise tax has applied to compensation exceeding $1 million for “covered employees” (typically the five highest-paid employees or former employees). The OBBBA now extends this tax to any employee earning over $1 million, potentially affecting a wider range of nonprofits, particularly larger ones.
Key Details Of The Excise Tax Expansion
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Taxable Compensation: The 21% excise tax applies to:
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Remuneration (salary, bonuses, deferred compensation) exceeding $1 million.
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Any “excess” parachute payments.
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Who’s Affected: Starting in 2026, all employees—not just the top five—are subject to this tax if their compensation exceeds the threshold.
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Action Steps: Nonprofits, especially those with high-earning staff, should review compensation policies now to ensure compliance and optimize financial strategies.
While this change primarily impacts larger organizations, every nonprofit should proactively assess its compensation framework to prepare for the One Big Beautiful Bill Act’s new rules.
Revolutionizing Charitable Contribution Deductions
The One Big Beautiful Bill Act reshapes charitable contribution deductions, offering new opportunities for donors while introducing nuanced changes for itemizers and corporations. These updates, effective in 2026, empower nonprofits to engage donors more effectively while navigating new tax considerations.
New Opportunities For Nonitemizing Donors
For the first time since 2018, the One Big Beautiful Bill Act allows taxpayers who take the standard deduction to claim charitable contribution deductions. This change is a boon for nonprofits seeking to broaden their donor base:
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Deduction Limits: Nonitemizers can deduct up to $1,000 in cash donations ($2,000 for joint filers) to qualified charities.
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Impact: With the standard deduction now permanently higher, more taxpayers opt not to itemize. This provision encourages giving among a larger pool of donors, amplifying nonprofit outreach.
Changes For Itemizing Donors
For donors who itemize, the One Big Beautiful Bill Act refines the rules for charitable contribution deductions:
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Permanent 60% AGI Ceiling: The existing cap on cash donations (60% of adjusted gross income) is now permanent, ensuring stability for high-value donors.
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New 0.5% AGI Floor: Starting in 2026, itemizers can only deduct charitable contribution deductions exceeding 0.5% of their AGI. For example, a donor with a $100,000 AGI cannot deduct the first $500 of donations.
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Implications: While this floor slightly reduces tax benefits for itemizers, strategic donors can still maximize their impact by planning gifts carefully.
Corporate Giving Updates
The One Big Beautiful Bill Act also introduces a 1% taxable income floor for corporate charitable contribution deductions starting in 2026:
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Carryforward Provision: Disallowed deductions can be carried forward for up to five years, offering flexibility for corporations.
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Strategic Opportunity: Nonprofits can leverage this provision to encourage sustained corporate partnerships, emphasizing long-term giving strategies.
Reduced Incentive For Wealthy Donors
A separate provision in the One Big Beautiful Bill Act may indirectly affect charitable contribution deductions. By making the $15 million lifetime gift and estate tax exemption permanent (with annual inflation adjustments post-2026), the law reduces the tax-driven incentive for wealthy individuals to make charitable gifts. Nonprofits targeting high-net-worth donors should emphasize mission-driven appeals to maintain engagement.
Additional Considerations For Nonprofits
Beyond compensation and charitable contribution deductions, the One Big Beautiful Bill Act includes provisions that may affect specific nonprofit sectors:
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Private Colleges and Universities: The act increases the excise tax on institutions with net investment income exceeding $750,000 per student, potentially impacting endowment strategies.
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Tailored Implications: Depending on your nonprofit’s structure and mission, other tax changes may apply. Consulting with financial experts is critical to understanding the full scope of The One Big Beautiful Bill Act.
Seize The Opportunities Of The One Big Beautiful Bill Act
The One Big Beautiful Bill Act is a pivotal moment for nonprofits, offering both challenges and opportunities. By understanding the expanded excise tax and leveraging new charitable contribution deductions, your organization can strengthen donor relationships, optimize financial strategies, and advance your mission with confidence. Let’s work together to navigate these changes, ensuring your nonprofit thrives in this new landscape. Contact GBQ to explore the full implications of The One Big Beautiful Bill Act for your organization.
Want to learn more about changes resulting from the OBBBA? Check out these resources:
What Does The One Big Beautiful Bill Act Mean For Research & Development Costs?
OBBBA Provisions To Impact Real Estate, High Net-Worth Property Owners
[ON-DEMAND WEBINAR] A Lot Can Happen In 6 Months: Tariff & Tax Developments In 2025
