Sweeping OBBBA Law Triggers Major Tax Changes for Nonprofits

Written by

OBBBA Passage Introduces Broad Tax and Compliance Changes Reshaping the Nonprofit Sector Nationwide

Tulsa, United States – April 23, 2026 / Church & Charity Law /

TULSA, OK — Church & Charity Law has published a new legal analysis examining the implications of the One Big Beautiful Bill Act (OBBBA), identifying a series of federal tax and compliance changes that could significantly alter how nonprofit organizations manage compensation, fundraising, and reporting obligations beginning in 2026.

The article positions these developments as a critical moment for nonprofit leaders, as multiple provisions take effect simultaneously and expand the scope of existing tax rules. The firm’s breakdown offers non-profit law advice aimed at helping organizations understand how these legislative updates may influence both internal operations and donor engagement strategies.

church & nonprofit law advice in tulsa

Expanded Compensation Tax Signals Increased Oversight

Among the most impactful provisions is the expansion of the excise tax on high compensation. Under the new law, the 21% tax on compensation exceeding $1 million will apply beyond the five highest-paid employees to include any current employee, as well as certain former employees who worked for the organization after January 31, 2016.

Set to take effect for tax years beginning January 1, 2026, this change broadens the range of organizations subject to the tax and may require nonprofits to reevaluate executive compensation structures and long-term financial planning.

Revised Charitable Deduction Rules May Shift Donor Behavior

The legislation also introduces updates to charitable deduction limits that could influence giving patterns. Taxpayers who do not itemize deductions will be allowed to deduct up to $1,000 for individuals and $2,000 for joint filers, replacing lower prior thresholds.

For itemizing taxpayers, contributions will only be deductible once they exceed 0.5% of adjusted gross income, while the 60% cap on deductions is now permanent. Corporate donors face similar changes, with deductions limited to contributions exceeding 1% and up to 10% of taxable income, along with provisions allowing excess contributions to be carried forward.

These adjustments may require nonprofits to revisit fundraising strategies as donor incentives evolve under the new framework.

Targeted Credits and Reporting Changes Add Complexity

The OBBBA also introduces a new tax credit of up to $1,700 for contributions to qualifying scholarship granting organizations, provided those organizations meet specific criteria, including maintaining 501(c)(3) status and allocating at least 90% of income toward scholarships.

Additional changes affect private colleges and universities, including tiered endowment tax rates and expanded Form 990 reporting requirements. These provisions add layers of compliance that may require closer financial oversight and documentation.

Heightened Importance of Strategic Compliance

Taken together, the updates outlined in the article highlight a broader shift toward increased regulatory scrutiny and structural changes in how nonprofit finances are taxed and reported. Organizations navigating these updates may need to reassess governance practices, compensation policies, and donor engagement approaches to remain aligned with federal requirements.

About Church & Charity Law

Church & Charity Law, part of the Law Office of Dan Beirute, focuses on legal matters affecting churches, ministries, and nonprofit organizations. The firm provides guidance on entity formation, governance, compliance, and operational legal issues, supporting organizations as they address evolving regulatory environments.