With OBBBA reshaping corporate giving and executive compensation, nonprofits have a timely opportunity to plan ahead and strengthen both donor and leadership strategies. Here’s a closer look at key planning considerations.

What is the OBBBA and how does it impact nonprofits?

The One Big Beautiful Bill Act (OBBBA) brings sweeping tax reforms that impact nonprofit operations, donor behavior, and executive compensation. Check out our blog, One Big Beautiful Bill Becomes Law: What Nonprofits Need to Know for a comprehensive overview of the changes. 

Quick Recap: Two Big Shifts Nonprofits Can’t Ignore

Two OBBBA provisions have immediate strategic implications for nonprofits:

• Corporate Charitable Giving Limits Tightened – Under the new rules, corporations can only deduct charitable contributions to the extent they exceed 1% of taxable income, capped at 10%. Any unused deductions may be carried forward for five years.
• Excise Tax on High Compensation Expanded – The 21% excise tax on nonprofit executive compensation over $1 million no longer applies only to the top five highest-paid employees; it now applies to any employee crossing that threshold.

These changes don’t just affect tax reporting, they influence fundraising strategy, donor messaging, board planning, and compensation structures. Here are some things to consider.

OBBBA Corporate Giving Limits: How Nonprofits Should Adjust Their Approach

1. Expect More Scrutiny from Corporate Donors

With reduced deductibility, corporations may become more selective about where they give. Donors will be looking to prioritize partnerships with clear ROI, visibility, or alignment with Environmental, Social Governance (ESG) or community impact goals.

How nonprofits can respond:

• Shift messaging from tax benefit-focused to mission/value-focused impact.
• Provide metrics, outcomes, and partnership visibility to justify continued giving.
• Offer tiered recognition or strategic engagement opportunities to keep corporate giving attractive.

2. Timing Matters More Now

The 1% threshold tied to taxable income means corporations might delay or bunch giving into years with higher profits. Development teams should proactively speak with key corporate donors about fiscal-year planning and encourage multi-year pledges or structured giving agreements that ensure commitment despite shifting tax incentives.

3. Strengthen Corporate Donor Stewardship

Corporate philanthropy teams will likely need to reassess budgets. Now is the time to ramp up relationship management, not just solicitation.

Development officers will want to:

• Schedule strategy reviews with top corporate donors.
• Offer impact briefings tied to their business goals.
• Provide customized reporting that makes corporate giving justifiable internally even with lower tax advantages.

Executive Compensation Excise Tax Expansion: Key Considerations for Boards and Finance Teams

1. High Compensation is No Longer a “Top Five” Issue

Previously, nonprofits only worried about the highest-paid five employees triggering the excise tax. Now, any employee over $1 million, regardless of rank or role, can create tax liability.

This could apply to:

• Surgeon leaders or medical executives in nonprofit healthcare systems
• Chief investment officers or endowment managers at universities
• Deferred compensation payouts to retiring long-term executives

2. Deferred Compensation Needs Immediate Review

Many nonprofits use retirement payouts, longevity bonuses, or contract buyouts to retain leadership. These payouts could unintentionally push compensation over the threshold in a single tax year.

Board Action Items:

• Model compensation exposure now, including planned deferred payouts and severance agreements.
• Consider smoothing payouts over multiple years to avoid spikes that trigger tax.
• Update Form 990 disclosures and policy documentation to reflect new IRS scrutiny.

3. Governance and Documentation Will Be Under High Scrutiny

The IRS has signaled more aggressive review of compensation justifications. Boards should ensure that compensation committee minutes, benchmarking data, and rationale are well-documented.

Questions Boards Should Be Asking Now:

• Do we have any employees or accruals that could exceed $1M in 2026?
• Have we conducted a compensation stress test under the new rules?
• Are our policies aligned with the expanded excise tax standard?

Why this is important

While these changes don’t take full effect until 2026, waiting until then to act could result in lost donor dollars or surprise tax costs. Organizations that respond strategically with clear donor communication, compensation planning, and governance updates will be positioned for success for 2026 and beyond.