Universal Deduction Secured Through Advocacy Efforts, But Challenges Remain in Final Tax Bill

Last Friday, July 4, President Trump signed into law H.R. 1, the budget and tax legislation known as the “One Big Beautiful Bill Act.” This final bill comes after several months of debate and reconciliation between the House and Senate versions. For nonprofits, what was signed into law is far from the ideal that the sector had pushed for, but it does include key provisions that serve as a silver lining, thanks in large part to the coordinated advocacy efforts of the nonprofit community and AFP members. 

When the House Ways and Means Committee released the initial draft of the bill in May, AFP and its partners mobilized nonprofit professionals across the country to contact their legislators, submit testimony, and raise public awareness about the potential impact of the bill. As a result, some of the most harmful proposals, such as allowing the IRS to revoke an organization’s tax-exempt status without due process, were removed before the bill was passed. The addition of new taxes on foundations and nonprofits was also rejected. Additionally, the universal charitable deduction, which was temporary and capped at $150 for individuals and $300 for joint filers in the House version, was made permanent and increased to $1,000/$2,000 in the Senate version, and ultimately included in the final bill. 

These victories do not eliminate the challenges that remain. The final bill still includes a 1% floor on corporate charitable deductions—projected to reduce giving by $4.2–$4.8 billion annually—and a cap on the value of deductions for high-income taxpayers, which could cut giving by another $4.1–$6.1 billion. At the same time, significant cuts to programs like Medicaid and SNAP are expected to increase demand for the very services nonprofits provide, placing additional strain on already-stretched organizations. However, the advocacy in the months leading up to the passage of this bill, as well as the years of work prior to this, by AFP and others on behalf of the Charitable Act, are a roadmap for what our sector can accomplish together. 

Restoring the universal charitable deduction has been AFP’s top legislative priority since the 2020 CARES Act provision, which included a $300 deduction for non-itemizers, was allowed to expire in 2021. 
In the subsequent years, the deduction was reintroduced several times, most recently as the Charitable Act, but it did not gain enough traction to pass as its own legislation. 

Knowing the 2017 Tax Cuts and Jobs Act was due to expire this year, AFP and its sector partners once again ramped up advocacy efforts, encouraging nonprofit professionals to reach out to their representatives, to ensure the universal charitable deduction remained on the agenda for the 2025 tax debate. 

It is thanks to this outreach, as well as the tireless work of AFP’s lobbyist, Sally Schaeffer, volunteers from the AFP U.S. Government Relations Committee, and champions in Congress like Senators James Lankford (R OK) and Chris Coons (D DE) and Representatives Blake Moore (R UT), Danny Davis (D IL), Carol Miller (R WV), and Chris Pappas (D NH), that this deduction was included in H.R. 1. 

While it may not be enough to offset the losses from other provisions, an analysis commissioned by the Charitable Giving Coalition, that AFP co-leads, projects the inclusion of the universal charitable deduction will generate tens of billions of additional giving over ten years. Importantly, much of those funds likely will come from small donors, a segment which, according to recent Fundraising Effectiveness Project reports, has seen significant decline in the past few years.

The passage of H.R. 1 is a mixed outcome for the nonprofit sector, bringing both hard-fought wins and ongoing concerns. While provisions like the 1% corporate giving floor and deduction caps for high-income taxpayers will undoubtedly pose new challenges, the inclusion of a permanent, expanded universal charitable deduction is a meaningful step forward. It’s a testament to what’s possible when the sector speaks with a united voice. 

AFP and its partners remain committed to monitoring the impact of new law, continuing to push for policies that encourage giving at all levels, and protecting the vital role nonprofits play in our communities. When we show up together, we can help shape a more supportive future for philanthropy.