What the One, Big, Beautiful Bill Means for Not-for-Profit Organizations

On July 4, 2025, President Trump signed the One, Big, Beautiful Bill Act (“OBBBA”) into law. While the final bill omitted several items impacting not-for-profits (“NFPs”), it did include some changes that will affect certain NFPs. Key changes are outlined below.

1. Excise Tax on Investment Income for Certain Private Colleges and Universities

   The current 1.4% tax on net investment income for well-endowed private colleges is being replaced with a graduated rate structure based on endowment assets per student. Institutions with over $2 million in endowment funds per full-time student could now face a top rate of 8%, depending on whether they meet the definition of applicable educational institution. That definition was revised to require at least 3,000 tuition-paying students (up from 500 students). Additionally, the definition of investment income for purposes of the tax was expanded to include interest income from student loans made by the institution and any federally subsidized royalty income.
   
   What this means: Schools with lower enrollments may find themselves no longer subject to the tax. Other schools may face a much higher tax bill, either due to an increased tax rate and/or the expansion of the income subject to the tax.

2. Excise Tax on Excess Exempt Organization Executive Compensation

   The excise tax on excess executive compensation (compensation over $1 million and excess parachute payments) which was previously limited to the top five highest-paid employees for the tax year along with any prior covered employees is now broader. Under the new law, any employee or former employee (for any tax year beginning after December 31, 2016) must be considered for purposes of this tax.
   
   

   What this means: While the update may likely mean that more compensation is subject to the tax, it should simplify the calculation of the tax by making the determination of which employees are included more straightforward.

3. Limits on Energy Related Tax Credits

   Many NFPs have taken advantage of clean energy credits which recently became more easily monetizable through refundable credits claimed on Form 990-T. The new law tightens access to
   those credits, potentially affecting future sustainability projects.
   
   What this means: NFPs planning to claim clean energy credits from ongoing projects should review the updated provisions carefully to ensure that they will continue to be eligible for such credits.

4. Giving Incentives/Changes

   Non-itemizers may now deduct up to $1,000 (single) or $2,000 (married filing jointly) for qualified charitable contributions. However, for those taxpayers that itemize, their charitable deduction will now be subject to a floor - .5% for individuals and 1% for corporations. This means that a portion of their contributions will no longer be deductible. For contributions made to qualified scholarship granting organizations, individual taxpayers may elect to treat up to $1,700 as a non-refundable tax credit rather than claiming as a charitable deduction.
   
   What this means: While it is hard to predict how changes to the deductibility of contributions will impact the level of giving to the not-for-profit sector, it is helpful for organizations to stay abreast of current tax laws affecting charitable giving in case there are certain solicitation strategies that may be more beneficial than others. Qualified scholarship granting organizations will have numerous requirements to satisfy.

How Citrin Cooperman Can Help

The implications of new tax laws and how they are implemented are frequently an evolving challenge. Citrin Cooperman’s Not-for-Profit Industry Practice can assist with any questions you may have about how the OBBBA affects your NFP organization. If you have any questions or would like further information about how we can assist your organization, please contact Amanda Adams or your Citrin Cooperman advisor.