What the OBBBA Means for Non-Profits
Published on by John Keller in Not-for-Profit, Tax Services
The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, introduces substantial changes to the tax code, many of which directly impact non-profit organizations and the broader philanthropic ecosystem. For non-profit leaders, understanding the nuances of these changes is essential, not only for regulatory compliance but also for sustaining strategic direction and long-term financial success.
Executive compensation
A key provision of the OBBBA is the expansion of the executive compensation excise tax. Beginning January 1, 2025, any employee earning over $1 million annually will be considered a “covered employee,” extending to former employees employed any time after December 31, 2016.
This is a considerable shift from the previous statute, which only applied to the five highest-compensated employees. The change creates new pressure on non-profits to reassess executive pay policies and maintain accurate records of past compensation arrangements.
Endowment taxes for higher education institutions
Higher education institutions will be affected by these changes as well. The OBBBA increases the tax rate on net investment income for colleges and universities with at least 3,000 students, where over half are based in the U.S. The law includes amounts previously excluded from the definition of net investment income, such as student loan interest and royalties from intellectual property developed using federal funds.
These changes could influence how institutions structure their endowments and how they plan long-term financial strategies for innovation and scholarships.
Boosting charitable giving
For charitable giving, the OBBBA reinstates the charitable deduction for non-itemizers starting in 2026. Single filers can deduct up to $1,000, and married couples filing jointly can claim up to $2,000. While this change is expected to encourage more charitable contributions, the legislation also includes other provisions that may influence donation patterns, particularly among higher-income individuals and corporations.
These provisions include a 35% of taxable income cap on charitable deductions for individual donors in the top tax bracket, in addition to charitable deduction floors of 1% of taxable income for corporations and 0.5% for individuals. The new legislation also makes permanent the 60% of taxable income cap for individual cash donations, which was previously set to revert to 50%. Together, these measures are intended to balance incentives for charitable giving with limits designed to shape how and when deductions are applied.
It’s worth noting that the charitable deduction doesn’t lower the taxpayer’s adjusted gross income (AGI) but reduces taxable income. For non-profits, understanding these adjustments will be important in shaping donor engagement strategies and anticipating potential shifts in contribution levels.
New incentives for education-focused giving
The OBBBA also introduces an income tax credit of up to $1,700 for contributions to scholarship-granting organizations that support elementary and secondary education. This targeted credit could drive increased donations to organizations that provide access to K-12 educational resources, particularly in underserved communities.
Student loan support
The OBBBA reinforces workforce support by mandating the permanent inclusion of student loan repayment assistance as part of an Educational Assistance Program. Created by the CARES Act in 2020, this provision allows employers to offer employees up to $5,250 per year in tax-free educational assistance for tuition and student loan repayment. Under the OBBBA, this benefit is now permanent and will be adjusted for inflation in future years, enabling employers to receive greater support over time.
This change presents a strategic opportunity for non-profits to attract and retain talent in a competitive labor market, especially among mission-driven, early-career professionals.
Clean energy credit changes
Beyond financial and charitable giving provisions, the OBBBA also modifies several clean energy tax credits, with alterations to the timeline and eligibility criteria. Non-profits exploring sustainability initiatives or renewable energy investments will need to revisit project plans to ensure alignment with the revised regulations and deadlines.
Final thoughts
The OBBBA signifies both opportunities and challenges for non-profits. Navigating this new legal landscape requires understanding and assessing the implications and timelines for these changes. Non-profits will need to adjust their processes and strategies accordingly, ensuring their operations align with the new legislation.
Have questions about how the OBBBA could impact your non-profit’s tax and donor strategy? Contact us today to schedule a free consultation with one of our nonprofit tax pros. You may also be interested in how the OBBBA affects individuals and businesses. You can find our entire coverage of the OBBBA here. As always, we’re here to help.
