By Angela Crawford, CPA, Director and Emilie Knieriem, CPA, Senior Manager at Blue & Co.
The One Big Beautiful Bill Act (“OBBB”), enacted on July 4, 2025, introduces changes affecting not-for-profit organizations. This bill changed from the House-passed version we covered earlier this summer, referenced in our previous article: How the One Big Beautiful Bill Act Will Impact Not-For-Profit Organizations – Blue & Co., LLC. Below, we summarize the key provisions specific to not-for-profit organizations and their implications.
Key Provisions That Weren’t In The Enacted Legislation
- Proposals to increase the private foundation excise tax up to 10 percent with a tiered tax rate system based on the value of the foundation’s assets. The private foundation excise tax is kept at the current 1.39 percent flat tax rate.
- Proposals to reintroduce the “parking tax” on transportation and parking fringe benefits. This provision was removed when the bill was in the Senate.
Key Enacted Provisions
Charitable Contributions
Individuals who itemize deductions are now subject to a 0.5 percent floor, based on their adjusted gross income, before charitable contributions become deductible.
Individuals who do not itemize may now deduct up to $1,000 ($2,000 for married joint filers) for cash gifts to public charities, excluding 509(a)(3) supporting organizations, or donor-advised funds as defined in section 4966(d)(2).
For corporations, the deduction for charitable contributions is now subject to a one percent floor of taxable income, while the 10 percent ceiling remains in effect. Contribution deductions limited by the 10 percent ceiling are carried forward to subsequent years.
Excess Compensation Excise Tax
A 21 percent excise tax is imposed on excess compensation paid to “covered employees.” OBBB expands the definition of “covered employees” to include all current and former employees of the tax-exempt organization earning over $1 million in compensation or any excess parachute payment. Under prior law, “covered employees” included only the top five highest-compensated employees of the organization in the current year and prior years.
College and University Endowment Excise Tax
Certain private colleges and universities are subject to a 1.4 percent excise tax on net investment income. OBBB expands that excise tax with a tiered tax rate system of 1.4 percent to eight percent based on a student-adjusted endowment.
| Student-Adjusted Endowment | Excise Tax Rate |
| ≥$500,000 to ≤ $750,000 | 1.4% |
| >$750,000 to ≤ $2,000,000 | 4% |
| >$2,000,000 | 8% |
As always, please contact your local Blue & Co. advisor with any questions.
