America's nonprofits are seeing mixed effects from the One Big Beautiful Bill Act (OBBBA). As outlined below, alongside some promising incentives for the nonprofit industry lie significant, often concerning offsets.  

New Charitable Deduction for Non-Itemizers

A permanent above-the-line ($1,000 single filer / $2,000 joint filers) deduction effective for tax years after December 31, 2025, is included in the bill. This change may help encourage giving among non-itemizers -- a group that dropped below 10% after the Tax Cut and Jobs Act was implemented in 2017. This change could help nonprofits expand their donor base especially among younger or middle-income individuals.

Limits on Itemized Charitable Deductions

Some nonprofits may see reduced giving from major individual donors due to a 0.5% Adjusted Gross Income (AGI) floor for itemizers (e.g., the first half-percent of AGI cannot be deducted) and itemizers in the top bracket are limited to 35% deduction.

In addition, corporations can deduct giving only exceeding 1% of taxable income (thus a 1% floor for corporate itemized gifts). This may discourage smaller corporate gifts and complicate nonprofit fundraising strategies.

Scholarship Granting Organization (SGO) Credit

Individual taxpayers will receive a non-refundable credit equal to the greater of 1 % of AGI or $5,000 for cash contributions to qualified SGOs that fund K–12 tuition scholarships.  This may help benefit education-focused nonprofits.

Expanded Compensation Excise Tax

The excise tax of 21% now applies to all nonprofit employees earning over $1M (previously, this only affected the top five executives. This change will be particularly burdensome for health systems, universities, and communal organizations looking to retain key staff.

Endowment Excise Tax

These tax rates apply to private colleges and universities with an adjusted endowment of at least $500,000 and enroll at least 3,000 tuition-paying students (including part-time students) who are located in the U.S.

Cuts to Safety-Net Programs

Major reductions were included in the bill for Medicaid, SNAP, and Medical Insurance Marketplace subsidies, plus new work and verification requirements. The Congressional Budget Office projects these reductions will result in approximately 11 million fewer insured Americans with between 13-17 million Americans losing food and health benefits.  This, in turn, may lead to more demand placed on nonprofits, especially hospitals, food banks, and those providing homelessness services.

What Nonprofit Leaders Should Consider Doing Next

-- Refresh fundraising strategies and look to increase contributions from non-itemizers and through workplace giving channels.

-- Budget for higher taxes for those affected by the increase in excise tax rates.

-- Prepare for service demand surge especially for those nonprofits providing services that are targeted through the reductions in Medicaid and SNAP. 

-- Track IRS and Treasury guidance on deduction floors and excise taxes.

The Big Beautiful Bill offers modest new tools for nonprofits, such as non-itemizer deductions and scholarship credits, but it also shrinks the financial headroom for nonprofits by limiting deductions from major individual and corporate donors, taxing excess compensation and benefits, and exacerbating demand through safety-net cuts. A shift in fundraising focus, proactive financial planning, and community advocacy will be key to navigating these changes.

Beginning July 1, 2025, a new law in Florida (Senate Bill 700) will prohibit those involved in charitable solicitations or sales promotions from receiving or soliciting funds from individuals and entities associated with the foreign countries listed below. Because of this, nonprofits that operate in Florida should carefully review their contribution sources and revise any contribution forms to include both questions and affirmations about whether a donor has ties to any of the countries listed below.

A voluntary disclosure safe harbor is included in the law for first-time violations if certain conditions are met. These conditions include the nonprofit's receipt of an inaccurate certification from the donor that they do not have prohibited foreign ties, the nonprofit's refund of the contribution to the foreign source within 30 days of notifying the Florida Department of Agriculture and Consumer Services of the restricted contribution, and providing the Department with a plan of action to prevent the future acceptance of contribution from a foreign country or source of concern.

If your organization may potentially have donors, staff, board members, or vendors associated with one of the countries listed below, review your transactions with those persons to determine if any reporting requirements or restrictions are required. 

The foreign countries named in this Bill are China, Iran, Russia, Cuba, North Korea, Syria, and Venezuela.   

Effective July 31, 2025, nonprofit organizations operating in New York are no longer required to provide COVID-19 sick leave. Organizations affected by this change should consider updating any applicable policies.

Nonprofit organizations that paid hotel occupancy and sales taxes, plus interest, in Washington, DC, may be eligible for a refund of due to a recent class action lawsuit. More information and the online form you should submit if you wish to submit a claim can be found at http://dctaxrefundclassaction.com. Claims must be submitted by June 6, 2025.

Beginning June 30, 2024, the District of Columbia will have a stronger wage transparency law, which applies to employers of all sizes.  Below is a summary of the changes:

Screening and Salary Inquiries Prohibited
Under the amended law, employers won’t be allowed to screen job applicants based on their wage history, including by requiring that an applicant’s previous compensation fall between, above, or below certain minimums and maximums. Employers also can’t request or require that applicants provide their wage history as a condition of being interviewed or considered for employment. Employers also can’t seek an applicant’s wage history from their prior employer.

Wage history includes all information related to compensation from other employment, including but not limited to pay structure, bonus plans, benefits, paid time off, non-monetary perks, and salary increases.

Pay Ranges Required in Job Postings
Employers in D.C. will have to provide a good faith estimate of the salary or hourly pay range they expect to pay for the position being advertised. The estimate must include a minimum and maximum. This applies to all job listings and position descriptions, including internal postings for promotions and transfers.

Healthcare Benefits Disclosure
Employers will need to inform applicants about healthcare benefits they’d be eligible for if hired, and this needs to be done prior to interviewing. Employers can meet this obligation by putting the information in the job ad.

On July 1, 2024, the minimum hourly wage increased in the following jurisdictions:

Alameda: $17

Berkeley: $18.67

Emeryville: $19.36

Fremont: $17.30

Long Beach hotels with 100+ guest rooms: $18.16

Los Angeles City: $17.28

Unincorporated Los Angeles County: $17.27

Malibu: $17.27

Milpitas: $17.70

Pasadena: $17.50

San Francisco: $18.67

Santa Monica: $17.27

On July 1, 2024, the District of Columbia minimum hourly wage increased to $17.50. The minimum base wage for tipped employees will increase to $10 per hour.

On July 1, 2024, the minimum hourly wage in Montgomery County increased to the following: 

• 1–10 employees: $15
• 11–50 employees: $15.50
• 51 or more employees: $17.15
• 11 or more employees and the employer is tax exempt under § 501(c)(3): $15.50
• 11 or more employees and the employer provides home health services or home or community-based services (as defined by federal law) and receives at least 75% of gross revenues through Medicaid: $15.50
• The minimum base wage for tipped employees remains $4 per hour.

In 2023, Fidelity Charitable, the largest grant maker in the US, distributed a record-setting $11.8B to nonprofits according to an article from the Associated Press.  Given the increased use of donor advised funds (DAFs), the IRS is proposing new regulations that could potentially include a 20% excise tax on donations that provide a significant benefit to the donor.

Recently, nearly one million donor records were discovered in an unprotected online database owned by DonorView, a cloud-based donor management tool used by more than 200,000 nonprofit organizations. A cybersecurity researcher discovered the exposed data and reported to DonorView in early October and, although the data was secured several days later, it is unclear how long the information was openly available. 

The data included non-password-protected Excel, CSV, and PDF files and contained detailed information on donors, including contact information, amounts donated, payment methods, and donation history. The exposed database also contained email templates used to communicate with donors, which would provide bad actors with templates for conducting phishing scams.

If your organization uses DonorView, consider contacting to your donors and advising them of a potential exposure. You may suggest for donors to change passwords to financial sites and monitor their accounts for signs of fraud.