As charitable organizations review their long-term giving strategies for 2025 and beyond, a proposed tax bill from the GOP is drawing intense attention across the nonprofit and legal sectors. The bill introduces sweeping changes that could directly affect foundations, donors, and advisors alike. For any charitable giving lawyer working with philanthropic institutions, understanding these potential shifts is imperative to guiding clients through what may be a new era of compliance, contribution limits, and IRS scrutiny.
This legislation, currently under review in the House, targets several fundamental areas of the nonprofit tax code, including deductions, private foundation taxation, and conditions tied to corporate donations. The ripple effects could impact how charitable entities are formed, funded, and managed.
High-Asset Foundations Brace For New Tax Rates
Among the most widely discussed provisions is a tiered excise tax structure for private foundations with significant investment assets. Under the new proposal, foundations holding over $5 billion in assets could be taxed at rates up to 10% on their net investment income, far above the current standard.
This move is positioned as a way to encourage spending and discourage the long-term hoarding of assets, but it has drawn criticism from institutional donors and legal professionals who warn it could undermine the financial longevity of large charitable funds. Legal advisors must now help boards and executives model out the long-term impact of this change on grantmaking portfolios.
Scrutiny Rises For Gifts Made During Litigation
The proposed bill also allows for closer IRS oversight of contributions made in the shadow of litigation. Specifically, it tightens reporting obligations for retirement plan contributions, such as PRPs and IRAs, made with charitable intent during ongoing or anticipated legal disputes.
This provision could particularly affect individuals and corporate donors using charitable vehicles as part of broader estate and liability planning. Firms handling these strategies will need to advise clients on how to mitigate perceived abuse while preserving legitimate philanthropic goals.
Bill Sets Higher Bar For Charitable Write-Offs
In an attempt to encourage more consistent and substantial giving, the bill ties corporate charitable deductions to a threshold: companies must contribute at least 1% of their taxable income in order to qualify. This approach is intended to weed out performative giving strategies, where companies donate minimal amounts for marketing purposes while claiming deductions.
The rule’s impact on CSR programs remains uncertain. Legal counsel may be asked to review or rework charitable alignment and compliance procedures, especially for multi-state or multinational corporations managing overlapping tax jurisdictions.
Regulatory Shifts Demand Proactive Legal Advice
For legal teams supporting foundations, donor-advised funds, or philanthropic family offices, the proposed tax bill presents both a challenge and an opportunity. Proactive communication with clients, timely updates to governance documents, and scenario-based planning will all be necessary in the months ahead. Likewise, firms advising on charitable gifts as part of estate or tax planning may need to reassess the viability of certain vehicles if thresholds and tax burdens shift. The ability to interpret the language of the bill and translate it into actionable guidance will set firms apart.
For firms that serve the charitable sector, staying informed is no longer optional; it’s imperative. If you’re a charitable giving lawyer or legal team helping clients stay compliant in this evolving space, consider listing your firm with Estate Planning Pros to connect with others leading in nonprofit law. Join our team today and stay positioned as a resource in the rapidly changing world of tax-exempt giving.