Timeline for Big, Beautiful Bill for nonprofits:
- The current legislative proposal threatening nonprofits is known as “The One, Big, Beautiful Bill,” introduced as an amendment by Representative Jason Smith of Missouri.
- This bill incorporates provisions similar to the previously defeated H.R. 9495, that removes due process to revoke a nonprofit’s 501(c)(3) status
- Specifically, the provisions grant broad powers to the Executive Branch (specifically the Treasury) to revoke the tax-exempt status (501(c)(3)) of nonprofits labeled as supporting terrorism, without requiring full transparency, substantial evidence, or sufficient due process.
- 5/14/2025: Approved by the Ways and Means Committee and is Currently in the House
- 5/19: Killer nonprofit provision that revokes status is removed from the Big, Beautiful Bill
- 5/23: House passed bill to Congress with many embedded issues for nonprofits
The Nonprofit Scorecard: 5 Key Threats
- The Foundation Tax Bomb – Tiered excise taxes up to 10% that could slash billions in grantmaking
- The Major Donor Disincentive – Reduced tax benefits for wealthy givers who provide over half of all charitable dollars
- The Small Business Giving Killer – 1% minimum threshold that eliminates tax incentives for smaller corporate donors
- The Nonprofit Payroll Penalty – Expanded taxes on high-paid staff and employee benefits like parking
- The Service Demand Explosion – Federal program cuts creating greater need just as nonprofit funding shrinks
One Silver Lining: The Charitable Act provision allowing small deductions for non-itemizers (up to $150/$300)
Defeated Threats: The “Zombie Provision” for revoking tax-exempt status and the brand sponsorship tax were both removed.
1. Tax bomb: Retribution Taxes on Private Foundations
This tax is a targeted retribution rather than a real revenue driver and potentially decreases the amount of funds dispersed to the nonprofit sector.
- Imposes higher taxes on foundations, diverting critical resources away from community services:
- Assets above $5 billion: 10% tax
- $250 million-$5 billion: 5% tax
- $50 million-$250 million: 2.8% tax
Revenue Estimates by Asset Tier
| Asset Tier | Estimated Assets | Proposed Tax Rate | Estimated Revenue |
|---|---|---|---|
| Over $5 billion | $300 billion | 10% | $30 billion |
| $250 million – $5 billion | $500 billion | 5% | $25 billion |
| $50 million – $250 million | $300 billion | 2.8% | $8.4 billion |
| Under $50 million | $380 billion | 1.4% | $5.32 billion |
| Total | $1.48 trillion | $68.72 billion |
Implementing this tiered excise tax could significantly increase the financial burden on private foundations, potentially reducing the funds available for charitable activities. This change may also influence the philanthropic strategies of foundations, especially those in higher asset brackets.
For a more detailed analysis or to incorporate these estimates into your article, please let me know if you need further assistance or specific data points.
2. Major Donor Disincentive: Reduced Charitable Giving Incentives
Major Donor Disincentives:
- Itemized deductions capped at $0.35 per dollar (down from $0.37)
- Charitable contribution limit drops from 60% to 50% of adjusted gross income
- Could significantly impact major gifts (donors giving $50,000+ represent over half of all charitable dollars)
3. Corporate Giving Killer: Reducing Corporate Giving
The proposed legislation creates additional barriers for nonprofit fundraising beyond just discouraging small business donations. “The One, Big, Beautiful Bill” includes provisions that would impose new excise taxes on private foundations based on their asset levels – ranging from 1.4% for foundations under $50 million to 10% for those over $5 billion. These foundation taxes could reduce charitable funding by an estimated $68.72 billion that would otherwise flow to nonprofits.
Combined with the 1% minimum threshold for corporate tax deductions, these measures create a double squeeze on nonprofit funding: fewer incentives for small businesses to give, and reduced grant-making capacity from foundations facing higher tax burdens. As federal safety net programs face cuts to Medicaid, SNAP, and child tax credits, nonprofits are being asked to fill larger gaps in social services precisely when multiple provisions in this legislation would shrink their available resources.
4. Benefit & Payroll Penalty: Limitations on Charitable Deductions + UBIT:
- High-income earners face reduced incentives to donate, lowering overall charitable contributions.
- Unrelated Business Income Tax (UBIT) Expansion: Taxing expenses such as employee parking benefits, leading to unnecessary financial strain.
Medicaid, Safety Net, Child Credit, SNAP Cuts:
- Stricter work requirements and funding cuts could leave millions without adequate healthcare coverage, directly impacting vulnerable populations served by nonprofits.
- Restrictions on Child Tax Credit and SNAP: Limits on these benefits disproportionately affect low-income families, placing additional burdens on nonprofit social services.
Action Steps: Urgent Advocacy Required
Nonprofits must urgently engage with Congress to prevent harmful provisions:
- Oppose expanded executive authority to revoke nonprofit statuses without due process.
- Oppose increased taxes on nonprofit foundations.
- Support the inclusion and expansion of charitable giving incentives like the non-itemizer tax deduction.
Act now by contacting Republican Representatives and Senators:
- Independent Sector Advocacy
- National Council of Nonprofits resources and advocacy guidance available online.
[Defeated] How Could The Zombie Provision Affect Nonprofits?
P.S. This was removed from the current Big, Beautiful Bill thanks to nonprofit advocacy but we call it a zombie provision for a reason…
Return of HR 9495 – The Zombie Provision
The nonprofit sector, particularly progressive organizations, faces significant threats from recent legislative proposals. Although H.R 9495, which is like a “Zombie Provision” for its repeated resurrection despite prior defeat, aimed at stopping terror financing, it is effectively designed to target progressive nonprofits without due process. Similar provisions have resurfaced in an amendment to the current House tax reconciliation bill, titled “The One, Big, Beautiful Bill,” proposed by Representative Smith of Missouri. These provisions grant unprecedented powers to the administration to revoke nonprofit status without adequate due process, posing serious risks to nonprofit autonomy and operations.
Hundreds of leading nonprofits, including the National Council of Nonprofits, have raised strong objections and urge immediate advocacy to protect the nonprofit sector.
As of 5/19 this zombie provision was killed faster than an extra on The Last of Us, while this is some good news, the bill still has many negative provisions for nonprofits.
Removing Due Process:
- Grants the Treasury unprecedented unilateral power to revoke nonprofit status based on undisclosed evidence without due process.
- Could be misused ideologically by any administration, significantly impacting nonprofit independence.
Consequences of Losing 501(c)(3) Status
If a nonprofit’s status is revoked under these new provisions:
- Operational Impact: Loss of federal and state tax exemptions severely restrict fundraising.
- Asset Freezing: If designated by OFAC, assets could be frozen, prohibiting transactions without special licenses.
- Banking Challenges: Difficulty maintaining financial services due to perceived risk.
- Reputational Damage: Irreparable harm to trust among donors and communities.
Risk to Immigration Nonprofits:
- Broad and Vague Criteria: Claims that advocating for humane immigration policies constitutes indirect support for terrorism due to tenuous and unproven links.
- Misinterpretation of Humanitarian Aid: Providing essential services like food, shelter, or legal assistance could be wrongly categorized as “material support” to terrorism.
Risk to Public Radio and Media Nonprofits:
- Editorial Independence Under Threat: Accusations of promoting “anti-administration” content could lead to revocation of tax-exempt status based on ideological disagreements.
- Unfounded Financial Allegations: Potential targeting based on unverified claims about funding sources linked to terrorism.
