July 21, 2025
Written by Megan Ryan, CPA, and Danielle Wright, CPA
While much of the public discourse surrounding the “Big Beautiful Bill” has focused on its implications for individual and business taxpayers, the bill contains a few provisions specific to non-for-profit organizations, and several other provisions that that could significantly impact the nonprofit sector. Below is a summary of these provisions, followed by a list of topics that did not survive in the final bill. The latter is provided as a reference point so readers may verify what is and is not included in the law.
Provisions Specific to Not-for-Profits
College and University Endowment Excise Tax
OBBBA modifies the excise tax imposed on net investment income of certain private colleges and universities. The bill imposes a tiered tax rate structure ranging from 1.4% to 8%, depending on the educational institution’s student-adjusted endowment. The law also expands the definition of net investment income to include student loan interest and royalties earned on intellectual property developed with federal funding. The exception for state colleges and universities continues to apply, and while religious institutions were excluded in earlier versions of the bill, the final law contains no such exception.
Effective Date: Tax years beginning after December 31, 2025.
Excise Tax on Excess Remuneration
The law broadens the definition of covered employee to include any current or former employee who receives remuneration in excess of $1 million. A covered employee is no longer limited to the five highest compensated employees for each tax year. Therefore, organizations no longer have to track the top five covered employees each year. While this decreases the burden of tracking the five highest compensated employees on an annual basis, for some organizations, this will expand the reach of employees subject to the excise tax on excess remuneration.
Effective Date: Tax years beginning after December 31, 2025.
General Taxpayer Provisions
Energy Credits
The Act places severe limitations on nearly every energy credit under the Inflation Reduction Act. The proposal includes termination of certain clean energy credits, including credits for electric vehicles and installation of EV charging stations, and the phase-out or new restrictions on other ‘clean’ environmental credits. Credits most likely to be utilized by not-for-profits are summarized below.
| Credit | Revised |
|---|---|
| Commercial electric vehicle credit | Available for vehicles purchased through September 30, 2025 (previously December 31, 2032). |
| EV charging station credit | Available for stations placed in service by June 30, 2026 (was December 31, 2032). |
| Investment tax credit | The credit for wind and solar facilities is available where construction begins by July 4, 2026, and the property is placed in service by December 31, 2027. |
Employer-Provided Childcare Credit
OBBBA increases the credit to 40% of qualified expenses (previously 25%) with a maximum credit of $500,000, adjusted for inflation (was a fixed $150,000).
Effective Date: Amounts paid or incurred after December 31, 2025.
Charitable Giving – Corporations
OBBBA introduces a 1% floor on charitable giving by corporations. This means corporations qualify for the charitable contribution deduction only if total giving for the tax year exceeds 1% of taxable income. The 10% ceiling on corporate charitable contribution deductions remains in place.
Effective Date: Tax years beginning after December 31, 2025.
Charitable Giving – Individuals
Several different provisions impact charitable contribution deductions for individuals:
- Create a charitable deduction for individuals who do not itemize deductions. The deduction is $1,000 for individual filers and $2,000 for joint filers. The deduction is permanently available starting in 2026.
- Imposes a 0.5% floor on itemized charitable contribution deductions and makes the 60% limit on cash contributions permanent. Effective beginning in 2026.
- Repeal the Pease limitation and replace it with an overall limitation on itemized deductions for high-income households. Effective beginning in 2026.
Form 1099 Reporting Threshold
The law increases the filing threshold for information reporting on Forms 1099 from $600 to $2,000. The law also indexes this threshold for inflation.
Effective Date: Payments made after December 31, 2025.
Provisions Considered, But Excluded from Final Bill
The following provisions were included in various drafts of the bill but removed from the final version.
- Return of the tax on qualified transportation benefits, originally introduced with the Tax Cuts and Jobs Act of 2017 and retroactively repealed two years later.
- Modifications to the private foundation excise tax on net investment income.
- Changes to the private foundation excess business holding rules.
- Adjustment to the existing exclusion from unrelated business income for research revenue.
- Expansion of existing rules related to revocation of exempt status for NFPs supporting terrorism.
- Unrelated business income treatment of royalties received from an organization’s name and/or logo.
Moving Forward
OBBBA raises many questions and is the subject of much discussion. Clark Nuber will continue to update the information most relevant to the nonprofit sector as updates become available. For more articles related to OBBBA, visit our information and resource page. If you have questions about the bill or are interested in the next steps to take in accounting for these changes, please reach out to a Clark Nuber team member.
Danielle Wright is a senior manager in Clark Nuber’s Tax Services Group.
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