On July 4, 2025, President Trump signed the 2025 Act (formerly known as the One Big Beautiful Bill or OBBB) into law. While most media coverage has focused on businesses, families, and national security, several provisions directly affect tax-exempt organizations. Understanding these changes is critical for nonprofits, charitable trusts, and other exempt organizations aiming to remain compliant and maximize their tax benefits.
This blog breaks down what the 2025 Act means for the nonprofit sector, highlighting key provisions, what the law did not change, and what organizations should consider moving forward.
New Statutory Provisions Affecting Nonprofits
While many provisions of the 2025 Act target broader tax policy, a few focus specifically on charitable contributions and excise taxes for nonprofit organizations.
Charitable Contributions
Key updates for nonprofits include:
- Nonrefundable tax credit: Individuals can claim up to $1,700 for qualified contributions to scholarship-granting Section 501(c)(3) organizations that are not private foundations, applicable for tax years after December 31, 2026.
- Nonitemizer deduction expansion: The law permanently increases the nonitemizer charitable deduction to $1,000 for individuals and $2,000 for joint filers for tax years beginning after December 31, 2025.
- Deduction floors:
- Individuals: 0.5% floor on charitable contribution deductions for itemizers.
- Corporations: 1% floor on charitable contribution deductions.
- Carryforwards include previously disallowed contributions due to these floors.
- Individuals: 0.5% floor on charitable contribution deductions for itemizers.
- Increased standard deduction: Single filers: $15,750; Joint filers: $23,625 for tax years starting after December 31, 2024.
Insight: While some nonprofits worry that higher standard deductions may reduce giving incentives, the expanded nonitemizer deduction may leave donors with more disposable income to contribute.
Excise Taxes
The 2025 Act also updates excise taxes for certain exempt organizations:
- Private colleges and universities: Endowments per full-time student determine excise rates:
- $500k–$750k → 1.4%
- $750k–$2M → 4%
- Over $2M → 8%
- $500k–$750k → 1.4%
- Excess executive compensation: Expanded to include current and former employees for applicable tax years beginning after December 31, 2025.
Tip: Nonprofits with large endowments or highly compensated executives should review internal policies to ensure compliance with the new thresholds.
What the 2025 Act Did Not Change
Despite public discussion, the 2025 Act does not give the President or any other government official authority to revoke tax-exempt status based on political views or advocacy positions.
- IRS authority remains independent: Only the IRS can grant or revoke Section 501(c)(3) status.
- Political campaign intervention: Organizations can lose tax-exempt status if they directly endorse or oppose candidates, though issue advocacy and limited lobbying remain permitted.
- Reputational risks: Controversial policies or high-profile public disputes do not automatically trigger IRS action but may attract scrutiny if they interfere with an organization’s mission.
Example: Universities criticized for DEI policies or campus disruptions are not automatically at risk—but consistent tolerance of conduct that undermines the mission could lead to compliance questions under IRC Sec. 501(c)(3).
The 2025 Act introduces several provisions that nonprofits need to understand, from charitable contribution deductions and nonitemizer benefits to excise taxes and compliance requirements. By reviewing these changes carefully, tax-exempt organizations can plan donations, manage executive compensation, and ensure their operations remain aligned with IRS expectations.
Staying informed on these updates is critical to maintaining compliance, maximizing tax benefits, and safeguarding the organization’s reputation. Nonprofits that proactively adapt to the 2025 Act will be better positioned to thrive in the changing regulatory landscape.
Ensure your nonprofit is prepared for the 2025 Act. Stay compliant, maximize charitable contributions, and understand excise tax obligations. Learn more about IRS rules for tax-exempt organizations today.
