While certain proposals were adjusted during the legislative process, the final version includes significant changes around charitable giving, endowment taxation, and nonprofit compensation rules.

Here’s a Breakdown of the Key Nonprofit-Related Elements in the Final Law:

• Charitable Deduction for Non-Itemizers: Beginning in 2026, the law provides up to $1,000 in charitable deductions for single filers and up to $2,000 for married couples filing jointly who do not itemize their deductions through the end of 2029.
• Corporate Charitable Giving Limits: Corporations now face stricter limits on deductible charitable contributions. Donations are deductible only to the extent they exceed 1% of taxable income, with an overall cap at 10%. Unused deductions can be carried forward for up to five years. This change may significantly affect corporate giving strategies, especially for companies with lower taxable income or those accustomed to larger philanthropic commitments.
• Private College Endowment Tax Brackets: The existing 1.39% tax on large private college endowments has been replaced with a progressive rate structure based on endowment size per student (“student adjusted endowment”). Public colleges and qualifying religious institutions remain exempt. Final rates are:
  • $500,000–$750,000 per student: 1.4%
  • $750,000–$1.25 million per student: 7%
  • $1.25 million–$2 million per student: 14%
  • Over $2 million per student: 21%
• Private Foundation Investment Tax Rates: Beginning January 1, 2026, private foundations now face a tiered tax rate on net investment income, replacing the previous flat 1.39% rate that is based on the Foundation's asset value:
  • Up to $50 million in assets: 1.39% (no change)
  • $50 million–$250 million: 2.78%
  • $250 million–$5 billion: 5%
  • Over $5 billion: 10%
• Unrelated Business Income Expansion: Nonprofits must now treat certain employee fringe benefits as unrelated business taxable income (UBTI).
• Expansion of Excise Tax on High Compensation: The 21% excise tax on compensation of over $1 million has been expanded. It no longer applies only to the five highest-paid employees, it now applies to any employee crossing the $1 million threshold.

What Nonprofits Should Do Now: 

• Review compensation structures focusing on the impact of deferred compensation payments of retiring leadership.
• Reassess endowment strategies.
• Update donor messaging (reassure donors about the organization's financial resilience, encourage multi-year pledges to navigate uncertainty, etc.)

FAQs: One Big Beautiful Bill and Nonprofits

1. Will this reduce donations from major donors? Possibly. The lower benefit for itemizers and new AGI thresholds could dampen incentives for large, tax-motivated gifts, though some donors may remain committed regardless of tax treatment.
2. Are public universities impacted by the endowment tax? No. Public colleges and religious institutions remain exempt under the final bill.
3. Can fringe benefits like transit passes really be taxable now? Yes. Certain employee fringe benefits are now classified as unrelated business income, which may require nonprofits to file Form 990-T and pay tax on them.
4. How will this affect our next audit or 990 filing? Expect greater scrutiny around compensation disclosures, endowment spending, and UBI reporting. Documentation and policy clarity will be essential.
5. When do these changes take effect? Most provisions, especially tax rate changes, kick in January 1, 2026, giving organizations time to plan, restructure, and communicate with stakeholders.

Further regulatory guidance is expected in the coming months. We will keep you up to speed as guidance is released.

Looking for a full overview of how the OBBBA impacts businesses? Explore our comprehensive overview of the new law here.