Updates in Proposed Senate Tax Bill Would Impact Not-for-Profit and Other Tax-Exempt Organizations

In May, the House passed “The One, Big, Beautiful Bill,” which contains broad provisions impacting many areas of taxation, including tax-exempt organizations. On June 17, 2025, the Senate Finance Committee released its version of the sweeping tax package.

Both versions include broad tax reforms that impact tax-exempt organizations, but there are significant differences in key provisions. While the bill could face additional adjustments as it works its way through the reconciliation process to one final version, it provides an overall picture of 2025 tax reform framework.

Below is a summary and comparison of the updated major provisions that would impact exempt organizations.

The legislation broadens the scope of Unrelated Business Income Tax (“UBIT”) and other taxes, causing certain income and expenses of exempt organizations that were previously untaxed to become subject to taxation.

The House version reinstates a tax on certain fringe benefits by treating the expenses for employee parking and transit benefits (such as transit passes, or parking provided by an exempt organization) as taxable Unrelated Business Income (“UBI”), subject to UBIT.

This would revive a previously repealed “parking tax” rule from 2017, effectively imposing a 21% tax on the cost of parking spots, transit subsidies or other qualified transportation fringe benefits that charities provide to staff (notably, the updated version in the House bill exempts churches and church-affiliated organizations from this tax).

However, the Senate Finance Committee removed this proposal entirely, meaning its bill would not tax transportation fringe benefits, and the cost of providing parking or transit passes to employees would remain exempt from UBIT, as under current law.

The House bill would clarify that income from scientific research is exempt from tax only if the results of the research are made freely available to the public.

If an exempt organization conducts proprietary research or research under agreements that restrict public dissemination, the income could be treated as taxable.

As with transportation benefits taxation, the Senate Finance Committee did not include this limitation in its version of the bill, reducing the likelihood it appears in the final version of the bill.

The House tax proposal extends the current 21% excise tax on compensation over $1 million to all employees of a tax-exempt organization (an earlier version would have included its related entities), not just the top five highest-paid employees.

The Senate draft keeps this provision and likewise expands the excise tax to all employees of a nonprofit earning over $1 million, matching the House’s approach.

Organizations with multiple executives, star employees or highly paid medical/research staff should evaluate the impact of this potential change, as this could significantly increase employment costs and seems likely to be in the final version of the bill.

The House version of the BBB expands the college endowment excise tax (currently a flat 1.4%) by adding steep tiers up to a 21% tax on net investment income for some of the wealthiest private colleges and universities (those with assets over $2 million per student).

The Senate draft also increases the endowment excise tax for wealthy schools, but less aggressively, with a top rate of 8% (not 21%) on net investment income. It streamlines the brackets, taxing endowments between $500,000 and $750,000 per student at 1.4%, between $750,000 and $2 million per student at 4%, and over $2 million per student at 8%.

As such, universities with large endowments will still face higher overall taxes in the Senate bill, but not nearly as high as the House’s 21% proposal.Therefore, they should continue to plan around this likely increase in tax obligation.

The House bill replaces the flat 1.39% excise tax with a graduated rate on private foundations’ net investment income:

The Senate version of the bill removes this provision entirely. Its draft does not include any change to the private foundation excise tax, leaving the current flat 1.39% rate in place.

Should this be included in the final bill, large private foundations would face significantly higher tax burdens on their endowments, and may have less funds available for grants, which would impact exempt organizations that depend on their funding. However, foundations will continue to face the single 1.39% rate if the Senate’s position holds.

The House bill would permanently extend the higher standard deduction (currently $15,000 single / $30,000 joint for 2025) and temporarily increase it by an additional $1,000 ($2,000 for joint filers) through 2028.

The Senate draft similarly makes the TCJA-expanded standard deduction permanent (with inflation-adjusted values of $16,000 single, $32,000 joint from 2026 onward).

With an even larger standard deduction seemingly imminent, fewer taxpayers will itemize their deductions, meaning fewer will deduct charitable gifts. Exempt organization fundraisers should prepare for reduced tax-driven giving incentives, emphasizing the intrinsic mission impact of donations to sustain broad-based support.

The Senate bill introduces a brand-new provision not found in the House version: a minimum giving requirement for those who itemize.

Section 70425 of the Senate draft would establish a 0.5% floor on charitable deductions for itemizers. This means an individual who itemizes deductions would only be allowed to deduct charitable contributions to the extent they exceed 0.5% of the taxpayer’s income.

The House bill does not contain any charitable deduction floor, so this is a significant addition.

Overall, the 0.5% floor could discourage some charitable giving at the margins. Whereas high-volume donors likely would surpass the floor, more casual donors who itemize might find their giving no longer deductible.

As with the increased standard deduction, this limitation could reduce donations, and the importance of mission and impact-based fundraising becomes more important than ever.

The House bill reintroduces (through 2028) a tax deduction for charitable donations for taxpayers who do not itemize deductions on their tax returns.

This above-the-line deduction, which had briefly existed in 2020–2021, would allow filers taking the standard deduction to additionally deduct up to $150 of cash donations to charity (or $300 for joint filers) each year. Donations to donor-advised funds and supporting organizations are excluded from this benefit, in line with prior rules.

The Senate Finance Committee embraced and expanded this idea dramatically. In its draft, the nonitemizer charitable deduction would be made permanent and increased to $1,000 for individuals ($2,000 for joint filers) each year (donor-advised funds and supporting orgs would still be excluded).

By raising the cap over sixfold and removing the sunset, the Senate provision substantially enlarges the incentive for nonitemizers to give to charity.

Nonprofits may see an even broader base of donors taking advantage of this universal charitable deduction if the Senate approach prevails, possibly boosting small and medium donations.

The House bill imposes a 1% giving floor for corporate charitable deductions, meaning a business must donate at least 1% of its taxable income for the contributions to be deductible (the existing 10% ceiling remains, with a five-year carryforward for excess).

The Senate’s tax bill carries forward the corporate giving floor essentially as written by the House. There is no divergence between the House and Senate on this, as both chambers’ versions would require businesses to donate at least 1% of taxable income for their charitable contributions to be deductible.

Exempt organizations that rely on corporate sponsorships or gifts should leverage this in discussions with corporate partners, encouraging at least a 1% commitment to ensure deductibility, especially for those near the 1% level.

Throughout the legislative process, several provisions affecting nonprofits were removed or dropped and appear in neither the House-passed bill nor the Senate Finance Committee bill (and thus are not expected to be in any final law). These major “nonprofit-related” proposals, initially floated in early drafts, were eliminated after advocacy and negotiations:

As of mid-June 2025, the “One Big, Beautiful Bill” is still evolving, as the House and Senate must reconcile their differences on this massive budget reconciliation bill.

Senate Republicans aim to pass the bill by July 4, 2025, after which the amended legislation will likely go back to the House for approval of the changes or to a conference committee for final compromise.

Exempt organizations should closely follow the progress of the One Big Beautiful Bill as it moves through Congress and continue to engage in advocacy as needed. Ultimately, being proactive in addressing the changes will be key, and exempt organizations will need to be ready to adapt to the final requirements.