Navigating the One Big Beautiful Bill Act (OBBBA): What Nonprofits Need to Know

Presented by JMT Consulting
Featuring: Buu-Linh Tran, CPA – SVP of Financial Solutions, JMT Consulting
Guest Expert: Chris Purnell, Partner, CapinCrouse

Why OBBBA Matters for Nonprofits

The One Big Beautiful Bill Act (OBBBA) introduces major tax and funding reforms for nonprofits across the U.S. As one of the most comprehensive changes since the TCJA, this new OBBBA nonprofit legislation reshapes how organizations manage endowments, executive compensation, and charitable deductions.

At JMT Consulting, we know that when large-scale policy shifts disrupt financial operations, technology plays a crucial role in ensuring a smooth transition. This webinar brought together experts from JMT Consulting and CapinCrouse to decode what OBBBA means for nonprofit finance leaders and how ERP tools like Sage Intacct can help teams stay compliant, agile, and audit-ready.

Key Provisions Affecting Nonprofits

1. Higher Education Endowment Excise Tax Expansion

• Who it impacts: Private institutions with 3,000+ tuition-paying students, more than half in the U.S.
• New inclusions: Student loan interest and royalties from federally funded intellectual property.
• Effective date: January 1, 2026.
• What it means: Endowment management and tracking must now integrate these additional revenue streams, increasing the need for transparent, automated reporting.

2. Enhanced Wage & Contractor Reporting

• W-2 changes: Overtime and tips must be itemized starting 2025.
• 1099 threshold: Raised from $600 to $2,000 (beginning 2026) with inflation indexing in 2027.
• Impact: Organizations will need updated HR and payroll workflows to meet higher accuracy standards.

3. Expanded 529 Plan Uses

• Now covers curriculum materials, online learning resources, tutoring, exams, and credentialing programs.
• Primary/secondary cap doubled from $10,000 to $20,000 per student.
• Effective dates: July 4, 2025 and January 1, 2026.

4. Charitable Giving Incentives

• Non-itemizer deduction: $1,000 (single) / $2,000 (joint) for cash gifts to public charities.
• Permanent 60% AGI limit on itemized contributions.
• New 0.5% AGI floor: Only gifts above that threshold qualify for deduction.
• Effective date: January 1, 2026.
• Takeaway: Nonprofits may see shifts in small-donor behavior, requiring proactive communication and stewardship.

5. Scholarship & Education Credits

• New income-tax credit up to $1,700 for donations to scholarship-granting organizations (effective 2027).
• Educational assistance programs: Student-loan repayment permanently tax-free up to $5,250 per employee.
• Result: Greater incentive for workforce education and scholarship partnerships.

6. ERC Enforcement and Audit Extension

• Penalty: $1,000 per violation for COVID-ERTC promoters failing due diligence.
• Assessment window: IRS can review Q3–Q4 2021 claims up to six years.
• Effective date: July 4, 2025.
• Action step: Nonprofits should validate prior ERC filings and document eligibility assessments.

Financial Management in the OBBBA Era

JMT and CapinCrouse emphasized that financial agility is essential as nonprofits adapt to OBBBA’s regulatory shifts. With a unified ERP like Sage Intacct, organizations can:

• Automate complex reporting for endowment-related taxes and multi-entity consolidations.
• Streamline audit preparation through integrated grant and donor tracking.
• Model funding scenarios to forecast the impact of new deductions or credit caps.
• Strengthen governance with transparent workflows across accounting, HR, and compliance.

Practical Takeaways for Nonprofit Leaders

• Start early: Prepare for 2026 implementation by reviewing your chart of accounts and entity structure.
• Prioritize visibility: Automate tax and endowment reporting to align with OBBBA’s expanded definitions.
• Empower your team: Use cloud ERP tools to reduce manual work and centralize compliance documentation.
• Re-engage donors: Update giving campaigns to highlight the new charitable deduction opportunities.

Quick Q&A: The One Big Beautiful Bill Act (OBBBA) and Nonprofits

What is the One Big Beautiful Bill Act (OBBBA)?

The One Big Beautiful Bill Act—often called OBBBA—is a sweeping federal tax and spending package enacted in 2025. It aims to simplify the tax code, expand deductions and credits, and adjust funding priorities across education, philanthropy, and workforce development. For nonprofits, OBBBA introduces new rules on endowments, executive compensation, charitable deductions, and reporting compliance.

When do the nonprofit provisions take effect?

Most of OBBBA’s nonprofit-related changes begin January 1, 2026, with certain credits and enforcement measures rolling out through 2027. Nonprofits should begin reviewing their financial systems now to prepare for reporting, payroll, and donor-management adjustments.

How does OBBBA affect executive compensation?

The existing 21% excise tax on “excess compensation” (IRC §4960) has been expanded. Beginning in 2026, it can apply to any employee earning over $1 million, not just the top five. Nonprofits will need accurate payroll tracking across all related entities to maintain compliance and manage exposure.

What’s changing for endowments?

Private higher-education institutions with at least 3,000 tuition-paying students and more than half of those students in the U.S. will face a tiered excise tax on investment income.
The tax base now includes student-loan interest and royalties from federally funded intellectual property. These changes start January 1, 2026, and require more detailed endowment reporting.

How are charitable deductions and giving incentives different?

OBBBA reshapes how donors give and how nonprofits report contributions:

• Non-itemizers can deduct up to $1,000 (single) or $2,000 (joint) for cash gifts to public charities.
• Itemizers can deduct only the portion of gifts above 0.5% of AGI, while the 60% AGI cap on cash contributions becomes permanent.
• A new tax credit (up to $1,700) begins in 2027 for donations to state-approved scholarship-granting organizations.

Does OBBBA affect 1099s and wage reporting?

Yes. Employers must begin reporting overtime and tips directly on W-2 forms starting in 2025.
The 1099 threshold increases from $600 to $2,000 effective 2026, with automatic inflation indexing in 2027. These changes mean HR and accounting systems should be updated before filings in 2026.

What about education-related funding and 529 plans?

OBBBA expands how families can use 529 plans—covering online learning materials, tutoring, exam fees, and credentialing programs.
It also doubles the primary and secondary education cap from $10,000 to $20,000 per student, effective January 1, 2026.

Are there enforcement or audit changes nonprofits should note?

Yes. The IRS now has an extended six-year assessment window for Employee Retention Credit (ERC) claims from 2021.
Promoters and filers who fail to meet due-diligence requirements face $1,000 penalties per violation, effective July 4, 2025. Nonprofits should review all past ERC submissions and documentation.

What role does technology play in staying compliant?

Modern ERP systems such as Sage Intacct help nonprofit finance teams:

• Automate new tax-reporting rules and donor classifications
• Streamline endowment and grant tracking
• Build flexible budgeting and forecasting models
• Maintain audit-ready documentation for federal reviews

Next Steps with JMT

For more insights on implementing OBBBA-ready financial systems and maintaining compliance through change, reach out to Buu-Linh Tran, CPA at btran@jmtconsulting.com. Or book a free consultation below.