Nonprofit leaders are working to decipher tax policy changes included in the “One Big Beautiful Bill Act” and how it will change the way they fundraise.

In some ways, the new law could severely limit donations to nonprofits. In other ways, the law could pave the way for new funding sources.

Lynn Gaumer, senior gift planning consultant with the Stetler Co., said at an event Monday that the deciding factor in the effects on nonprofits is how donors will view the tax law changes, making it important that nonprofits communicate effectively to their donor base, especially corporate donors.

Gaumer spoke to the more than 320 nonprofit and community leaders who attended the Community Foundation of Greater Des Moines’ discussion covering what the new tax law means for charitable giving.

The One Big Beautiful Bill Act was signed into law on July 4. The nearly 1,000-page law covers a range of tax and spending rules. It makes some provisions in the 2017 Tax Cuts and Jobs Act permanent before they could expire at the end of this year. As the new law includes many caveats and complex rules, Gaumer recommended each nonprofit also reach out to their attorney to better understand how the new rules will affect their organization.

Corporate giving changes
Starting next year, corporations that make charitable contributions must donate at least 1% of their taxable income to qualified charities to maintain eligibility for certain tax deductions.

Some worry that this change could reduce corporate gifts or may be unattainable for struggling businesses, among other potential issues.

“The downside of this is that, according to a recent Ernst and Young report, this could reduce corporate giving to the tune of $4.2 billion to $4.8 billion annually,” Gaumer said.

On the flip side, there could be businesses that in the past haven’t given as much, and decide to give more to meet that $1 million threshold, she said.

“There could be some corporations out there that don’t really come up to this threshold and think, ‘Maybe we’ll give more to get to that threshold,’” she said. “It’s going to be interesting to see how this actually all pans out. Before year end, reach out to your corporate partners about the 1% implications.”

Corporations may begin bunching gifts, which has not been common in the past, she added. A trend from the initial 2017 Tax Cuts and Jobs Act was “bunching” charitable donations to nonprofits. Bunching gifts refers to taking several years of charitable gifts and putting them all in one year.

Kristi Knous, president of the Community Foundation, emphasized advocacy work related to the tax changes.

“Let’s not forget that we need to put time into advocacy and communication with our legislators,” she said. “That’s really critical and has been critical for this year.”

Standard deductions
In the new law, there are some deduction changes that could affect donations, Gaumer said.

For 2025, the standard deduction is $15,750 for single filers and $31,500 for those filing jointly. Those 65 and older will receive an additional $6,000 annual deduction for the years 2025-2028.

“President [Donald] Trump during his campaign said there was going to be no tax on Social Security. This [$6,000 deduction] basically replaced that. They decided to continue with the tax on Social Security, but give those 65 and older this additional deduction,” she said. “It does phase out at certain increments, so your donors will have to work with their financial advisers to see if they can actually take the full $6,000 or not.”

About 90% of taxpayers take the standard deduction, with 10% itemizing.

“And what’s the charitable deduction, except an itemized deduction?” she said.

Nonprofits might consider discussing Qualified Charitable Deductions with donors, which allow people 70.5 years old and older to donate up to $108,000 from their traditional IRA to a qualified charity, potentially reducing their taxable income, she said. 

“It’s a gift directly from their IRA to the charity, without having to recognize income tax,” Gaumer said.

Gaumer also suggested talking to donors about giving appreciated stock or real estate. Research by Russell James at Texas Tech University suggests that nonprofits that are marketing, promoting and receiving gifts of non-cash assets have planned giving programs that grow six times faster than those that are focused on cash only.

“Maybe they are going to take that standard deduction but want some sort of tax benefit; maybe they can give some appreciated stock,” she said. “There are a lot of gains in the market. If they gave the stock directly to the charity, they would eliminate the capital gains tax.”

When it comes to standardized versus itemized deductions and charitable giving, nonprofits need to communicate carefully with donors.

“Be careful with your wording here,” Gaumer said. “You could say, ‘If you make a cash gift or make a gift of appreciated stock, when you itemize, you can qualify for a deduction.’ Really avoid implying that all donors are going to receive a cash deduction.”

Bunching donations may become more popular.

“A donor may say, ‘You know what? I want to go above that standard deduction. I want to itemize this year, and I’m going to give $25,000 this year, but I’m not going to give anything else in 2026 or 2027. Then I’ll do the same thing in 2028, I’ll give another $25,000,” Gaumer said.

If that happens, it may, in turn, make donor-advised funds more popular as well, she added.

The 60% deduction limit on charitable giving and the high estate tax exemption remain in place with the new law. The high estate tax exemption is now $15 million for individuals and $30 million for couples and applies to 0.1% of taxpayers, Gaumer said.

“In your marketing and promotional materials, do not be talking about, ‘If you give through your will, you’re going to get a federal estate tax exemption or a charitable deduction,’” she said.

Changes for private universities and colleges
Fundraising leaders at private universities and colleges need to talk with donors about new changes to giving, Gaumer said. There are new tiered tax rates for private university and college endowments. The excise tax rate was at 1.4% but will increase based on the new tiers.

Ultimately, the new tiered system could create changes in how endowments are used in financial aid for students.

For endowments of $500,000 to $750,000 per student, the rate will stay at 1.4%. For endowments of $750,000 to $2 million per student, the rate is now 4%, and for more than $2 million per student, the rate is 8%, Gaumer said. The higher rate means schools will need to figure out where the money will come from to pay the new taxes.

There are idiosyncrasies to the new system, so private universities and colleges need to discuss the changes with their legal and accounting teams, Gaumer said.