One Big Beautiful Bill Act, Explained

Read time: 3-4 min

👋🏾 Hey! I’m Sid and this is The Philanthropy Futurist, a weekly advice column preparing you for the future of the nonprofit sector. Each Friday, I tackle reader questions about measuring impact, driving growth, and managing your nonprofit.

This Week’s Newsletter at a glance:

• One Big Beautiful Bill Act, Explained

• Philanthropy News From This Week

• Sid’s Book Recommendation

One Big Beautiful Bill Act, Explained

As many of you know, the Big Beautiful Bill (aka the “One Big Beautiful Bill Act”) passed last week. In my opinion, there are both pros and cons to the new bill, and it impacts different groups in different ways. In today’s newsletter, I am going to talk about how it impacts the Nonprofit Sector. Here’s what you need to know:

Reduced Resources for Nonprofits

Across the board, Nonprofits are expected to have fewer financial resources to work with. According to the Council of Nonprofits, despite some helpful provisions from the recently passed bill, “the tax bill overall reduces resources available to Nonprofit organizations, negatively impacting their ability to provide essential services to their local communities.”

Universal Charitable Deduction (for Non-Itemizers)

Starting in 2026, donors can now deduct up to $1,000 (if single) or $2,000 (if filing jointly), even if they don’t itemize. It’s a nice gesture, but the cap is arguably still low. Not to mention, the deduction is coupled with a sunset provision— meaning it is not permanent unless extended by future legislation. This change may help with grassroots fundraising, but likely won’t offset bigger funding losses in the short-term… however in the long-term, this story may look very different.

Limits on Charitable Deductions (for Itemizers)

For larger donors, the tax break just got smaller. A lower deduction cap at $0.35 per dollar (down from $0.37) and a new 0.5% floor reduces the incentive for large gifts, particularly from high-income individuals. That’s not-so-great news for Nonprofits that rely on these large gifts, because although some people donate out of the kindness of their heart— many donate for the tax incentives.

Corporate Giving Floor

Corporations are now required to donate at least 1% of their taxable income to qualify for charitable deductions. While this might increase giving slightly, many companies may simply aim for the minimum— rather than giving based on values, impact, or long-term partnership. My hope is that businesses rise to the moment and give generously, especially since they can still deduct up to 10% of taxable income for charitable gifts. That said, Nonprofits will need to get creative— by developing a clear value exchange and unique incentives to engage corporate partners. Overall, I see this as a net positive for the sector.

Excise Tax on High Nonprofit Salaries

A new 21% tax applies to Nonprofit compensation above $1 million. This mostly impacts large hospitals, universities, and federated orgs— and may make it harder to attract top leadership, especially in competitive sectors like healthcare.

Expanded Unrelated Business Income Tax (UBIT)

New rules expand what counts as taxable income for Nonprofits, particularly when it comes to activities or revenue streams that aren't directly tied to your mission. These changes don’t just add compliance headaches, but for some orgs, it may pull money away from mission work and create administrative burdens for already stretched teams.

Cuts to Medicaid & Safety Nets

Perhaps the most far-reaching change: significant reductions to Medicaid and food assistance programs. And as millions lose access to certain healthcare benefits and basic needs, Nonprofits will likely face increased demand from local communities with nowhere else to turn.

Increased Excise Tax on Large Foundations

The bill introduces a tiered excise tax on Foundation investment income:

• 1.39% for assets below $50 million

• 2.78% for $50 million - $250 million

• 5% for $250 million - $5 billion

• 10% for assets above $5 billion

As you can see, Foundations with over $5 billion in assets now face up to a 10% excise tax on investment income (previously a 1.39% fixed rate). This could possibly lead to fewer grants, less risk-taking, and more caution— but on the flip side, it could also mean more grants being given away in an attempt to keep assets under $5 billion to pay less taxes. I found this policy change to be particularly interesting, and I look forward to seeing which direction this trends.

These policy shifts may frighten some, but I see this as an opportunity…

These shifts signal a recalibration of how giving is incentivized, how it is taxed, and how much more responsibility Nonprofits will have to take on. And while this newsletter focused on the most immediate implications, I'm sure more info will come to light as we navigate the weeks & months ahead.

This is a moment that calls for adaptability and courage. Whether or not these changes spark innovation vs strain will ultimately depend on how we respond, together.

Hope this breakdown was helpful. See y’all next week! ✌🏾

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Philanthropy News From This Week

• Early support for Texas flood relief efforts tops $29 million

• With Federal Funding Slashed, This Nonprofit Aims to Reinvent Itself

• How the Tax Bill Could Change Giving and Donor Behavior

• 8 Ways Your Board Can Drive Momentum in a Capital Campaign

Sid’s Book Recommendation

Each week, I recommend a book or film that has impacted my life in a positive way. My recommendation this week is:

High Output Management by Andrew S. Grove

This book is a classic guide to effective management, drawing on the author’s experience as the former CEO of Intel. It breaks down the principles and practices that drive high performance in organizations, focusing on how managers can maximize their teams’ output. Learn more.

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