Public Policy Update – May 14, 2025
House Committee Approves Big Hike in Private Foundation Excise Tax
This morning, after a marathon markup session that began Tuesday afternoon, the House Ways & Means Committee, which oversees tax policy, approved its portion of a massive legislative package moving its way through Congress.
The legislation contains several provisions that will impact philanthropy and the charitable sector – and many of them threaten philanthropy’s ability to support communities during a time of need.
A roundup of the key provisions in the bill follows and our partners at Integer have provided a detailed analysis of the hearing and all amendments considered for those interested.
Increase in the Private Foundation Excise Tax: The bill would massively increase the private foundation excise tax on net investment income for the largest foundations. Currently, all private foundations pay a simplified, flat rate of 1.39 percent. Under the new legislation, private foundations with assets under management above $50 million would see a tax increase. Here are the details:
The increase in the private foundation excise tax would deprive community nonprofits of resources, even as the support they receive via federal grants is on the decline. You can join the effort to oppose this tax increase by calling your representatives in Congress and urging them to remove this language from the bill on the House floor.
Universal Charitable Deduction: The bill creates a universal charitable deduction available to all tax filers, regardless of whether they itemize their return. It would allow a $150 deduction for single filers and $300 for joint returns. While this is far smaller than the deduction proposed in the Charitable Act – which would allow a deduction up to one-third of the standard deduction – it does represent some progress on an issue important to the charitable sector.
Floor for Corporate Charitable Contributions: The bill would require that corporations contribute at least 1 percent of their taxable income to qualify for a charitable tax deduction.
This proposal would reduce incentives for corporate giving. According to CECP, the median corporate grantmaker donates 0.92 percent of its pre-tax profit – under this bill, that level of giving would not be incentivized.
The “Parking Lot Tax” Returns: The bill would increase a nonprofit’s unrelated business taxable income (UBIT) for fringe benefits, including transportation or parking benefits. The sector successfully fought to remove a similar provision from legislation in 2017, but it has been revived, this time with an exception for religious organizations. Another provision would also extend UBIT to include name and logo royalties.
Other provisions of the bill include:
- Allowing the Treasury Secretary to designate any organization a terrorist supporting organization that, during the 3-year period, provided material support or resources to a terrorist organization. Many in the nonprofit sector are concerned the language is too broad and would make it far too easy to punish organizations engaging in legal activity without affording them adequate due process rights. This provision may not survive due to Senate rules that limit the bill to changes in taxes and spending and prohibit other policy changes.
- Expanding the current treatment of excess compensation at tax-exempt organizations to be tied to all employees making more than $1 million. Current law limits the excise tax to the top-five highest paid employees.
- Retroactively amending the excess business holdings rules so certain voting stock repurchased by a business enterprise is treated as outstanding stock when calculating a private foundation’s present and permitted holdings in the business enterprise under the excess business holdings rules. The proposal is effective for taxable years after the date of enactment and to purchases made in 2020 and beyond.
What’s Next
House leaders are planning to bring the bill to a vote before the Memorial Day recess. Republicans, however, have a slim majority and are still working to resolve disputes in their caucus over a number of issues, particularly cuts to Medicaid and the state and local tax deduction.
The Senate will take up the legislation following House passage, but the two chambers could end up passing significantly different bills, requiring them to find a compromise.
What You Can Do Now
With the bill on its way to the House floor, it’s vital that representatives know how the bill’s provisions, especially in the increase in the private foundation excise tax, would hurt charitable giving in their communities.
If you reach out to lawmakers, share with them how this tax increase would deprive community nonprofits of resources during a time of budget cuts and uncertainty around federal funding.
You can view key messages for phone calls and emails here. If you need to look up your member of Congress and their contact information, you can find that here.
While there will be other opportunities to help shape this legislation, it's important that philanthropy's voice be heard at every stage of the process.
Keep an eye on your email and our website for further updates as this legislation makes its way through Congress. Thank you for being a voice for philanthropy and communities in the South!
