A minor tax tweak in Trump’s ‘Big Beautiful Bill’ may have nonprofits rethinking how they fundraise, operate, and define their value. While headlines spotlight corporate cuts and individual brackets, the nonprofit sector may face ripple effects that will force schools and charities to reevaluate their revenue streams and fundraising strategies.
The proposed legislation addresses three critical areas: education funding systems, charitable tax deductions, and compliance requirements for tax-exempt organizations.
Who will be the winners — or losers — when these tax changes become law? Some nonprofits will likely see funding boosts through new tax credits, while others may suffer reduced corporate donations and higher compliance costs.
Here’s a summary of the most relevant provisions impacting the nonprofit and charitable sectors and our read on how they may play out:
Education and Scholarship Programs
- Tax Credit for Contributions to Scholarship Organizations
The bill offers a dollar-for-dollar tax credit to individuals who donate to eligible Scholarship Organizations. The credit is limited to the greater of 10% of the donor’s adjusted gross income (AGI) or $5,000. To qualify, these organizations must be registered 501(c)(3)s and meet strict regulatory standards.
Winners: Individual donors will benefit from a direct dollar-for-dollar reduction in their tax bill for every dollar they donate, up to the prescribed credit limit. At the same time, education nonprofits that qualify as Scholarship Organizations will benefit from increased donations.
Losers: Non-education nonprofits may lose out if stiffer competition evolves and more giving shifts toward tax-advantaged educational causes.
- Expansion of 529 College Savings Account
The bill expands the use of 529 savings plans beyond college expenses to include K–12 education costs, such as private and religious school tuition. It also allows funds to be used for certain credentialing and professional certification programs.
Like an IRA, a 529 plan grows tax-free, so by the time account holders need to use it for education expenses, the funds have had time to grow—and withdrawals remain tax-free when used for qualified purposes.
This change means 529 plans are no longer limited to just college expenses—they now offer broader support for educational and career development at multiple stages.
Winners: Private and religious schools may benefit indirectly as schools become more accessible to families through the expanded use of 529 accounts, which can now be applied to K–12 tuition.
Losers: Public schools may bear some negative effects as private alternatives become more financially attractive and students and support are drawn away from the public system. Colleges may also lose out, as families redirect their 529 savings toward K–12 education or certification programs instead of traditional higher education degrees.
Individual Charitable Deductions
- Charitable Deduction for Non-Itemizers
For a limited period—between 2025 and 2029—taxpayers who do not itemize deductions will be able to claim a modest charitable deduction ($150 for individuals and $300 for joint filers).
Winners include charities, which will enjoy a broader donor base, and smaller nonprofits that rely on modest individual donations, as they too may see a boost in contributions.
Losers: The temporary nature of the deduction may create uncertainty and affect organizations’ long-term fundraising strategies. Additionally, charities could potentially see donations drop off after 2029, when the deduction expires.
Overall, because the amounts are very modest, we don’t believe this provision will have a significant impact.
New Compliance Requirements for Nonprofits
- Changes to Unrelated Business Taxable Income (UBTI) Rules:
- Qualified Transportation and Parking Fringe Benefits and Name and Likeness Royalties Now Subject to UBTI
Unrelated Business Taxable Income, or UBTI, is income derived from non-exempt organization activities. For example, the income a nonprofit hospital derives from a gift shop it operates for the public would be UBTI. The proceeds it earns from its shop are derived from a commercial activity not substantially related to its charitable purpose and is taxable.
Under the new provisions, certain payments made by non-religious nonprofits for qualified transportation and parking fringe benefits will now be taxable as UBTI.
Also, starting in 2026, Royalties Derived from Publicity Rights (monies that nonprofits earn when others use their name, image, or reputation) will no longer qualify for the traditional UBTI royalty exception and will be taxable as UBTI.
Losers: Universities, media organizations, and branded nonprofits that rely on name and likeness royalties, will be taxed on this income—potentially reducing their net revenue. To learn more about UBTI, see our article here.
Nonprofits that don’t earn income from name and likeness royalties will see no impact.
Corporate Charitable Giving Changes
- New Floor for Corporate Charitable Deductions
Corporations can currently deduct charitable contributions of up to 10% of their taxable income. Under the proposed bill, companies that give less than 1% of their taxable income in a year would lose access to the charitable deduction entirely.
Winners: Nonprofits with strong corporate partnerships will benefit from this provision, as companies may increase donations to meet the 1% threshold, and larger charities, which are more likely to receive increased corporate giving as businesses increase their giving to reach the threshold.
Losers: Corporations that give less than 1% in donations will miss out on their deduction for the year, though they are allowed to carry the donation forward to the next year when they do meet the minimum threshold.
Overall Impact
- Bottom Line for Nonprofits
We don’t expect the provisions of Trump’s new “Big Beautiful Bill” to impose a significant tax burden on nonprofits. New donor incentives—like the scholarship credit and corporate deduction floor—could boost fundraising, but the added tax burdens relating to fringe benefits and royalty proceeds could reduce revenues. Educational organizations will benefit from the scholarship tax credit provision as a new source of funds.
For our clients and community, the expansion of the 529 College Savings Account is the legislation’s biggest win, enabling families and breadwinners to set aside tax-free funds for schooling for a broader range of students.
As always, nonprofits should be aware and informed of their exposures and vulnerabilities and stay adaptable as tax laws continue to shift and evolve.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
