The tax and budget bill became law on July 4, 2025. Your Part-Time Controller’s federal awards experts followed the development of President Trump’s signature policy bill closely; and would like to share this brief analysis of those provisions that may affect nonprofits most.  We have obtained this information from various sources, which may have differing opinions on the positive and negative impacts on nonprofit organizations.  The overall potential impacts will remain unknown until this bill is fully implemented.

YPTC is the nonprofit accounting specialist, with over three decades of experience helping nonprofits that are managing—or hoping to receive—federal awards. YPTC has posted numerous free Federal Funding Resources. Sign up to be notified about new ones!

WHAT NONPROFITS SHOULD KNOW:

  • The tax and budget bill is now law. President Trump signed the bill into law on July 4th, a day after the House ratified the Senate’s changes to the original bill. The bill determines the level of federal expenditures when the new fiscal year begins on October 1, and will also affect the taxes individuals and corporations pay next year.
  • Standard charitable giving deduction increases. The bill raises the standard charitable deduction for non-itemizers to $1,000 per individual or $2,000 per married couple. Because 90% of Americans do not itemize their deductions, this may encourage charitable giving. The Joint Committee on Taxation estimates nonprofits will receive an additional $74 billion over the next ten years thanks to this increase. At the same time, the bill sets both a floor (0.5% of Adjusted Gross Income) and a cap for deductions (35% of AGI, including any state and local tax deductions, known as “SALT”), both of which could deter wealthy donors as amounts below or above these levels will not be deductible at all.
  • Corporate contributions subject to a new floor. Corporations that make gifts to nonprofits will not receive a tax deduction until the level of contributions is at least 1% of the corporation’s taxable earnings. The ceiling remains unchanged at 10% of its taxable income. New in this law, corporations that make larger contributions can now carry them forward for five years. A study commissioned by Independent Sector estimates the floor will reduce corporate contributions by $45 billion over ten years. It is unclear how the carry forward will affect contributions.
  • Threat to tax exemption avoided. The House version of the bill included a much-feared provision that would have allowed the Administration to strip the tax-exempt status of nonprofits without due process. The Senate removed that provision, and the bill that was signed into law remains silent on this issue.
  • Excise taxes will not climb. Foundations must pay an excise tax on net investment income. In the House version of the bill, the current rate of 1.39% was set to double for foundations with assets between $50 million and $250 million, rise to 5% for foundations with assets between $250 million and $5 billion and top out at 10% for the 27 foundations with assets in excess of $5 billion. The Senate version removed these drastic increases and the bill was signed into law without them—a relief for charities hoping to rely more on foundation grants in the absence of federal support.
  • New tax on the largest university endowments. The wealthiest universities—those with more than $2 million in endowment per student (“EPS”)—will face an 8% tax on their endowment’s net investment income. This is much lower than the 21% rate in the earlier House version of the bill. Universities with EPS between $750,000 and $2 million will pay 4% tax; those with EPS between $500,000 and $750,000 will pay 1.4%. Universities with fewer than 3,000 students will be exempted, as will universities with less than $500,000 EPS.
  • No new UBITs. The House proposed levying Unrelated Business Income Tax on nonprofits that license their name or logo, or that offer qualified transportation fringe benefits, such as transit or parking benefits. The Senate removed these provisions, and the final bill does not contain them either.

 

WHAT NONPROFITS SHOULD DO:

  • Amid the ongoing uncertainty, remember you are not alone, and there is strength in numbers. Your state nonprofit association can point you to resources (the National Council of Nonprofits gives information about nonprofit networks in every state). Consider speaking with other nonprofit organizations in your region; or with similar nonprofits in other regions.
  • Prepare rolling cashflow forecasts in whatever cadence makes the most sense for your situation. Monthly? Weekly? Accurate and timely reports are essential planning tools.
  • Engage in scenario planning. Create separate forecasts that include unfavorable outcomes. How would you meet your mission with less money available? Would you spend less? Spend differently? Together with your Board, think through your options before trouble hits. YPTC’s free May 2025 webinar: Scenario Planning for Nonprofits is an excellent resource.
  • Explore revenue diversification to reduce risk further. For example, can your organization replace or supplement government funding with foundation grants or individual gifts? If your forecasts suggest a gap in cash flow, it may be appropriate to apply for a line of credit.

The YPTC Federal Awards Team salutes your ongoing efforts to meet your mission and looks forward to hearing from you anytime at federalawards@yptc.com. To subscribe for regular updates on federal award news and resources, fill out the form below: