With the introduction of the tax package dubbed the “One, Big, Beautiful Bill,” Congress has made its intentions clear: extend key provisions of the 2017 Tax Cuts and Jobs Act while adding a range of new rules that would reshape the tax landscape for nonprofits, foundations, and charitable donors. While parts of the bill offer some modest incentives for individual giving, the bulk of the proposed changes raise serious concerns for the nonprofit sector.
The legislation is being advanced through the budget reconciliation process, meaning it can pass with a simple majority in the Senate. That process also means certain provisions that lack a clear budgetary impact could be stripped before final passage. For now, the sector must take the bill seriously and begin preparing for its potential impact. Congressional leaders are pushing for passage by early July.
Foundation Excise Tax Hike
The bill includes a tiered excise tax on private foundations’ net investment income, with rates ranging from 1.39 percent for smaller foundations to 10 percent for those with more than $5 billion in assets. This is a dramatic increase from current law and would significantly reduce the funds available for grantmaking.
Expanded Compensation Tax for Nonprofits
It also expands the 21 percent excise tax on nonprofit executive compensation over $1 million to apply to all employees at that compensation level, not just the five highest-paid. While this mirrors recent changes for publicly traded corporations, it goes further in the nonprofit context by applying to employees of related organizations including government entities in some cases. This provision could create real recruitment and retention challenges for nonprofits that rely on experienced professionals to manage large-scale service delivery, especially in health, education, and international development.
New Floor on Corporate Giving
Corporate giving is also targeted. The bill introduces a 1 percent floor on corporate charitable deductions, meaning corporations would need to donate at least 1 percent of taxable income before any charitable deductions are allowed. This could discourage smaller or more sporadic donations and undermine the work of corporate foundations and corporate matching programs.
Limited Non-Itemizer Deduction Reinstated
On the individual side, the bill reinstates a limited non-itemizer deduction for charitable contributions through 2028: $150 for single filers and $300 for joint filers. Notably, contributions to donor-advised funds are excluded. While the deduction is small, it sends an important message about the value of broad-based giving. The sector has long advocated for a universal charitable deduction, and this represents partial progress.
UBIT Expansion Raises Costs and Confusion
Of greater concern is the expansion of unrelated business income tax (UBIT) provisions. Under the proposed changes, nonprofits would be taxed on parking benefits provided to employees, royalties from the use of their name or logo, and certain research income that is not publicly available. These changes would increase both the tax burden and compliance complexity for nonprofits.
Politicized Revocation of Tax-Exempt Status
Another deeply troubling provision allows the Treasury Secretary to unilaterally revoke a nonprofit’s tax-exempt status for alleged support of terrorism, with limited due process protections. Though similar provisions have been floated in previous sessions, this one goes further by giving broad discretion to the executive branch to take action against organizations based on suspicion rather than clear evidence. This has raised alarms across the sector, not just for its constitutional implications, but for the chilling effect it could have on legitimate humanitarian and advocacy work.
Foundations and MAGA Accounts
The bill also introduces MAGA accounts, a new type of tax-advantaged savings vehicle for children. Private foundations would be allowed to contribute to these accounts, provided contributions are made to a large group based on geography or other criteria. While this provision appears benign, it introduces a host of administrative and fairness issues and represents a significant shift in how foundations could be expected to structure their giving.
Nonprofits Asked to Do More with Less
Beyond the provisions targeting nonprofits directly, the bill also proposes deep cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP), while denying the full Child Tax Credit to the lowest-income families. These changes would shift more burden onto nonprofits to meet basic needs in their communities just as the bill reduces their capacity to do so.
Conflicting Messages and Rising Tensions
Taken together, this bill sends mixed messages. On one hand, it acknowledges the role of the nonprofit sector in civil society by preserving and modestly expanding the charitable deduction. On the other, it undermines the financial foundations of that sector through increased taxes, new compliance burdens, and vague enforcement mechanisms.
The bill also surfaces a tension that has been simmering for some time. There’s growing discomfort in some corners about the increasing concentration of philanthropic dollars in the hands of a few wealthy individuals and families. Books like “The Givers” and “Winners Take All” have framed this as a threat to democratic accountability—arguing that elite philanthropists are shaping public priorities without public input or oversight.
But if that’s one end of the spectrum, this bill introduces the opposite risk: a growing willingness to let political actors—who may lack nonprofit expertise or neutrality—direct how charitable dollars are spent. The provision allowing the Treasury Secretary to unilaterally strip tax-exempt status, for example, opens the door to politicized enforcement. Neither centralized private power nor unchecked government control is good for the sector. We need clear rules, sound governance, and a system that trusts well-run charities to do their work without micromanagement from either billionaires or bureaucrats.
Call to Action
The nonprofit community should not view this bill as business as usual. The risks are substantial, and the stakes are high. Now is the time to pick up the phone, write your representatives, and make some noise. Remind Congress that charitable dollars serve public needs best when they are stewarded by local organizations grounded in their communities, not by executive branch officials with unchecked discretion or one-size-fits-all mandates from Washington. Advocates must act now to educate lawmakers, engage constituents, and push for amendments that reflect the real-world needs of charitable organizations and the communities they serve.
If passed in its current form, the One, Big, Beautiful Bill would amount to one, big, expensive hit to philanthropy.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.