Tax Provisions Affecting Nonprofits in the One Big Beautiful Bill Act

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Last updated: June 17, 2025 at 3:05 p.m.

On Thursday, May 22, the U.S. House of Representatives passed the One Big Beautiful Bill Act in a 215-214 vote. The One Big Beautiful Bill Act is a 1,038-page budget reconciliation bill that Congress is hoping to pass to enact many parts of President Trump's tax and spending policy agenda in 2025. Among other things, it would make permanent and expand many parts of the 2017 Tax Cuts and Jobs Act that are scheduled to expire after 2025 and would make a variety of other changes to federal tax laws. The U.S. Senate Finance Committee released its initial proposals for tax provisions in the bill on Monday, June 16.

Quick refresher on the budget reconciliation process: While most legislation requires 60 votes to pass the U.S. Senate, a budget reconciliation bill can be used to pass major legislation that affects federal taxes or spending with a simple majority vote in the Senate. Budget reconciliation is most frequently used when the same party controls both houses of Congress and the White House. In the past, Congress has passed bills like the 2010 Affordable Care Act, the 2017 Tax Cuts and Jobs Act, and the 2022 Inflation Reduction Act through the budget reconciliation process.

Many of the provisions in the tax bill could have significant implications for the operations of charitable nonprofits in North Carolina. This post highlights some of these provisions, along with a few other parts of the One Big Beautiful Bill Act that could affect the work of nonprofits and the lives of the people they serve.

Provisions affecting nonprofit revenue sources

Several tax provisions in the bill would affect revenue sources for nonprofits. These include:

Universal charitable deduction (Section 110112). The bill would re-establish a temporary, limited, above-the-line tax deduction for charitable contributions. This universal charitable deduction would be capped at $150 per year for individuals and $300 per year for married couples. These caps are significantly lower than those in the Charitable Act, a bipartisan bill introduced in both the U.S. Senate and U.S. House of Representatives this year. However, even the limited universal charitable deduction would lead to an increase in charitable giving, particularly small donations. This provision would be in effect from 2025-2028. The Center is supportive of this provision, and we are encouraging the Senate to increase the caps when it considers the bill. The Senate Finance Committee made significant improvements to this provision in its initial version of the bill, increasing the caps to $1,000 per year for individuals and $2,000 per year for married couples, and making the universal charitable deduction permanent.
Increase in tax on investment income of private foundations (Section 112022). This provision would increase the tax rate for investment income of large private foundations. Currently, the private foundation investment income tax rate is set at a flat rate of 1.4%. This provision would increase this rate to 2.8% for private foundations with assets between $50 million and $250 million, to 5% for private foundations with assets between $250 million and $5 million, and to 10% for private foundations with assets of $10 million or more. Practically, these higher taxes would mean that large private foundations would have fewer assets available to make grants to charitable nonprofits, both now and in the future. The Senate Finance Committee did not include this provision in its initial proposal for the bill.
Limit on corporate charitable deductions (Section 112027). This provision would set a floor of 1% of taxable income on charitable deductions for corporations. It also limits the amount of charitable contributions that corporations may carry forward to the next five years (essentially not counting contributions that are below the 1% floor for the five-year carry-forward). These changes could lead to a reduction in corporate giving, particularly by small businesses. The Senate Finance Committee included an identical provision in its version of the bill.
Extension and expansion of higher standard deduction (Section 110002). This provision would make permanent the higher standard deduction from the 2017 Tax Cuts and Jobs Act, which is set to expire after 2025. It would also include an automatic inflation adjustment for the standard deduction. For 2025-2028, the provision also would increase the standard deduction by an additional $1,000 for individuals and $2,000 for married couples. While the higher standard deduction has reduced taxes for many low and middle income families, it has significantly reduced the number of Americans who itemize their deductions on their taxes. This means that far fewer people now have tax incentives to make charitable contributions, leading to an overall decline in giving in the past few years. The temporary expansion of the higher standard deduction would mean that even fewer people would use the charitable deduction on their taxes over the next four years, potentially leading to further reductions in individual giving. The Senate Finance Committee's initial proposal would permanently increase the standard deduction by an additional $1,000 for individuals and $2,000 for married couples and would increase it for inflation in future years.
Limit on itemized deductions (Section 110011). This provision would reduce the value of itemized deductions for high-income taxpayers who are in the 37% income tax bracket. This would likely mean that some wealthy donors would give slightly less to nonprofits, since the tax savings of their charitable contributions would be reduced. The original version of the bill would have simply reduced the value of itemized deductions by 2/37 for those in the 37% tax bracket, but a late change to the bill created a more complicated formula for how much itemized deductions would be reduced, with greater reductions for taxpayers who pay high amounts of state and local taxes (which isn't many North Carolinians). The Senate Finance Committee's initial proposal would follow the original House plan by reducing the value of itemized deductions by 2/37 for those in the 37% tax bracket. It also would create a 0.5% floor on charitable contributions for taxpayers who itemize their deductions.
Bonus deduction for seniors (Section 110103). This provision would create a $4,000 per year bonus tax deduction for seniors aged 65 and older. While this provision does not directly incentivize charitable giving by seniors, if it were to become law, nonprofits may have the opportunity to encourage seniors to contribute a portion of their tax savings to charitable organizations. The Senate Finance Committee did not include this provision in its initial proposal.
Extension and expansion of limitations on estate tax (Section 110006). This provision would permanently exempt the first $15 million of an estate from the estate tax and would increase this exemption each year to adjust for inflation. Under current law, the first $10 million (plus an inflation adjustment) is exempted from the estate tax through 2025, and the first $5 million (plus an inflation adjustment) is exempted from the estate tax starting in 2026 (the inflation adjustment would make the exemption about $7.14 million in 2026). Because bequests to nonprofits are not taxed, many people with large estates make large bequests to nonprofits in their wills to avoid paying the estate tax on at least part of their assets. Consequently, a higher exemption from the estate tax will lead to fewer and smaller charitable bequests in the future. The Senate Finance Committee included an identical provision to the House in its initial proposal for the bill.
Trump accounts (Section 110115). This provision would create a new type of savings account, known as a Trump Account (they had been called Money Accounts for Growth and Advancement or MAGA accounts until a last-minute name change in the final version of the House bill), that parents of children under the age of eight years old could create for their children. Contributions to Trump accounts would be tax-free. When Trump account holders turn 18, they would be able to use half of the money in these accounts for higher education, training, small business loans, or first-time home purchase, and they would then have access to the full amount of the accounts when they are 30 years old. Individuals (and businesses) could contribute up to $5,000 per year (indexed for inflation) to Trump accounts. Tax-exempt nonprofits, including private foundations, could make unlimited contributions to Trump accounts to all children within a qualified group, such as a school district or educational institution or any other type of group that the Treasury Secretary "deems appropriate." The creation of Trump accounts would create more competitive for limited philanthropic resources as some individual and foundation contributions would be diverted from supporting charitable nonprofits to supporting Trump accounts. Note that, because these new accounts would be codified in Section 530A of the Internal Revenue Code, it's quite possible that some people will wind up calling them "530A accounts" instead of Trump accounts. The Senate Finance Committee included an identical provision to the House version in its initial proposal for the bill.
Tax credit for contributions to scholarship granting organizations (Section 110109). This provision would create a new tax credit for individuals who make contributions to 501(c)(3) public charities (but not private foundations) whose primary purposes are to provide scholarships to elementary or secondary school students. This provision could lead to increases in contributions to nonprofits that provide scholarships for K-12 students. However, it also could encourage some donors to give more money to these scholarship granting organizations instead of contributing to other charitable nonprofits. The Senate Finance Committee included the same proposal as the House in its initial proposal for the bill.

New taxes on (some) nonprofits

Several tax provisions in the bill would create new taxes on some charitable nonprofits. These include:

UBIT on parking and transit expenses (Section 112024). This provision, which is similar to a repealed provision in the 2017 Tax Cuts and Jobs Act, would impose a new tax on nonprofits that provide transportation and parking benefits to their employees. The provision would require nonprofits to pay unrelated business income tax (UBIT) - an income tax - on expenses that they incur to cover parking and transit costs of their employees. Unlike the previous 2017 version of the provision (which limited taxable expenses to $260 per month per employee), there are no limits on the amount of parking and transportation expenses that would be taxed. The provision in this year's bill would exempt churches and church-affiliated nonprofits from having to pay this tax. When this tax was in place in 2018 and 2019 (before being repealed retroactively by a bipartisan vote of Congress in 2019), the IRS published guidance with a cumbersome and confusing four-step process that nonprofits would need to undertake to calculate the amount of their parking and transportation expenses that would be subject to UBIT. At the time, the Center heard from nonprofits in Charlotte, Raleigh, Durham, Wilmington, Asheville, and other urban areas that the administrative cost of calculating the tax (including staff time and accounting fees) was often significantly higher than the cost of the tax itself. The Senate Finance Committee did not include this provision in its initial proposal for the bill.
UBIT on name and logo royalties (originally Section 112025). This provision would have required nonprofits to pay UBIT on income derived from the sale or licensing of their name or logo. This would likely have created new taxes on nonprofits that raise revenue by selling products or services that feature their organization's name and/or logo. Congress considered, but ultimately rejected, a similar proposal as part of the 2017 Tax Cuts and Jobs Act. It was removed by the House Rules Committee so it was not a part of the House-passed version of the bill. The Senate Finance Committee did not include this provision in its initial proposal for the bill.
Expansion of UBIT on research income (Section 112025). This provision would apply UBIT to more income that nonprofits receive from research activities. Under current law, many types of income that nonprofits receive from research-related activities are excluded from UBIT. This provision would limit this exclusion to cover only income from research that is available to the public for free. Congress considered, but ultimately rejected, a similar proposal as part of the 2017 Tax Cuts and Jobs Act. The Senate Finance Committee included the same provision as the House in its initial proposal for the bill.
Tax increase on endowments of some nonprofit colleges and universities (Section 112021). This provision would increase the tax on nonprofit colleges and universities with large endowments. The 2017 Tax Cuts and Jobs Act imposed a 1.4% tax on the investment income of nonprofit colleges and universities with endowments with assets of $500,000 per enrolled student or higher. This provision would create higher tax rates of 7%, 14%, and 21% for some nonprofits colleges and universities with larger endowments. Under the provision, certain religiously-affiliated nonprofit colleges and universities would be exempt from the tax on investment income. This change could significantly reduce the resources that some nonprofit colleges and universities in North Carolina have for need-based financial aid and other important services. It could mean that these colleges and universities would need to be more active in their private fundraising, creating greater competition with other local nonprofits for limited philanthropic resources. The Senate Finance Committee included a watered-down version of this provision in its initial proposal for the bill, with higher tax rates of 4% and 8% for some nonprofit colleges and universities with larger endowments.
Expansion of tax on certain highly-compensated nonprofit employees (Section 112020). This provision would expand an existing tax 21% excise tax on tax-exempt organizations that pay more than $1 million in compensation to employees in any year. Under current law, this excise tax is only applicable to payments made to the five highest compensated employees of the organization. This provision would expand its coverage to all current and former employees of tax-exempt nonprofits who receive $1 million or more in compensation in any year. This could increase taxes for some very large nonprofit institutions with multiple staff who earn more than $1 million per year. The Senate Finance Committee included the same provision as the House in its initial proposal for the bill.

Challenge to tax-exempt status of some nonprofits

One tax provision in the original version of the bill (Section 112209) would have gives the U.S. Treasury Secretary broad authority to revoke the tax-exempt status of “terrorist supporting organizations." This provision is virtually identical to a bill (H.R. 9495) that the House passed in November 2024 by a 219-184 margin. The provision was removed by the House Rules Committee, so it wasn't included in the House-passed bill. It remains possible that the House could take it up as separate legislation, which would require 60 votes to pass the Senate.

Under existing law, the Treasury Secretary can revoke the tax-exempt status of organizations that the federal government has designated as terrorist organizations. Only nine organizations (none of which is based in North Carolina) have currently lost their tax-exempt status under the existing statute. Section 112209 of tax provisions in the One Big Beautiful Bill Act would expand the Treasury Secretary’s ability to revoke the tax-exempt status of “terrorist supporting organizations,” which is a much broader and less clearly defined set of nonprofits than those that are covered by the current law. Because the designation of an organization as a “terrorist supporting organization” would be made by the Treasury Secretary and is somewhat subjective, the Center and other nonprofits are concerned that the provision could give the Treasury Secretary broad authority to revoke the tax-exempt status of a nonprofit largely because they disagreed with the organization’s mission or policy positions. The provision would not require the Treasury Secretary to share their full evidence or reasoning with accused nonprofits and would provide little due process for accused nonprofits since they would have the burden of proof and only 90 days to demonstrate their innocence.

While this provision is troubling for nonprofits, it appears likely that - even if it were included in the bill when it passes the House - it would violate the Byrd Rule in the Senate, which prohibits provisions in a budget reconciliation bill that would not have a budgetary affect (in other words, things that would neither affect federal spending or federal tax revenue). Consequently, it is likely that the Senate parliamentarian will not allow it to be included in the final version of the One Big Beautiful Bill Act. The Senate Finance Committee didn't include it in its initial proposal for the bill.

Other provisions that could affect some nonprofits and people served by nonprofits

Several other provisions that the House Ways and Means Committee and other House committees are proposing for the One Big Beautiful Bill Act could affect the work of nonprofits and the people served by them. These include:

Extension, expansion, and stricter eligibility requirements for the increased child tax credit (Section 110004). This provision would make permanent, expand, and make changes to the enhanced child tax credit that was a part of the 2017 Tax Cuts and Jobs Act. TCJA had increased the maximum amount of the child tax credit to $2,000 per child through 2025. This provision would make that change permanent, would temporarily increase the maximum credit to $2,500 per child from 2025-2028, and would adjust the maximum amount for inflation after 2028. It would retain a current rule that $500 of the credit is non-refundable, meaning that many low-income families that frequently receive services from nonprofits would not receive the full value of the tax credit. It also would deny eligibility for the child tax credit for any families where the taxpayer, their spouse, or their qualifying children are not U.S. citizens, potentially meaning that more working families will become ineligible for the child tax credit. The Senate Finance Committee's initial proposal would make permanent an expanded child tax credit with a maximum credit of $2,200 per child.
Tax deductions for tips (Section 110101) and overtime compensation (Section 110102). These provisions would provide tax cuts for many working class people, including people who receive services from nonprofits and, in the case of overtime pay, some people who work for nonprofits. The Senate Finance Committee included a similar provision in its initial proposal for the bill, but included caps on the amount of tips and overtime compensation that would not be taxed.
Limitations on the Employee Retention Tax Credit (Section 122205). This provision would create new penalties for COVID-19 Employee Retention Tax Credit (ERTC) promoters (potentially including some nonprofits) that don't meet due diligence or disclosure requirements. It also would provide that nonprofits and businesses would be ineligible for ERTC refunds or credits that were no filed on or before January 1, 2024. The Senate Finance Committee included the same provision as the House in its initial proposal for the bill.
Elimination of clean energy tax credits (Sections 112001-112016). These provisions would terminate a variety of individual and business tax credits intended to promote clean energy.
Earned Income Tax Credit changes (Section 112206). This provision would add a certification requirement for families taking advantage of the Earned Income Tax Credit (EITC). This change could lead to higher taxes for some working families.
Limitations of health care tax credits for non-citizens (Sections 112101-112103). These provisions would limit the ability of non-U.S. citizens who pay taxes to receive tax credits for subsidized health coverage under the Affordable Care Act exchange. This change could mean that fewer people would have health coverage, potentially increasing the need for nonprofits to provide more basic services to them.
Supplemental Nutrition Assistance Program changes. Several provisions in the One Big Beautiful Bill Act would make changes to the Supplemental Nutrition Assistance Program (SNAP). One provision would shift a portion of the cost of SNAP to states, based on their current "error rates" for SNAP beneficiaries. North Carolina would likely be responsible for paying for 20% of the cost of SNAP benefits in our state, which would place significant financial burdens on our state budget. Other provisions would increase the maximum age for work requirements under SNAP from 54 to 64 and would eliminate SNAP eligibility for people who are not U.S. citizens or green card holders.
Medicaid changes. Several provisions in the One Big Beautiful Bill Act would make changes to Medicaid, including provisions to require work requirements for Medicaid recipients, new requirements for verification of citizenship and immigration status of Medicaid recipients, reductions in the federal cost share for Medicaid expansion (from 90% to 80%) for states that allow "illegal immigrants" to access Medicaid benefits, and limits on the ability of states to finance their portion of Medicaid through "provider taxes." These changes could reduce the number of North Carolinians receiving health care through Medicaid and could increase the cost to the state of North Carolina of provide health care services.