Earlier this month, Independent Sector, the Council on Foundations, and United Philanthropy Forum presented a webinar – The Proposed 1% Floor on Corporate Charitable Giving: What to Know and What Comes Next. Some highlights of the webinar follow. As with all of our posts capturing highlights of events, my interpretations and opinions may be sprinkled into the highlights along with some supplemental information.

Notes:

The One, Big, Beautiful Bill passed by the House and currently being considered by the Senate includes a 1% floor on charitable contributions by corporations. This would mean that corporations would no longer be able to take a charitable contribution deduction for the amount of their charitable contributions until such contributions exceeded one percent of their taxable income. So, if a corporation had $1 million in taxable income and donated $9,999 to a charity, it would no longer be able to take a charitable contribution for that gift.

It remains unclear whether a corporation could take a deduction for all of its charitable contributions if it reached the 1% floor or only for the amount of its charitable contributions in excess of the 1% floor.

The vast majority of small business giving (e.g., for little league uniforms) does not reach 1% of a business’ taxable income. See, e.g., Big Beautiful Bill’s Ugly Impact On Corporate And Foundation Giving (Timothy J. McClimon, Forbes). For all of these businesses, there would no longer be any tax incentive to make a gift to a charity. While an income tax deduction may not be the primary motivator of corporate giving, it has been shown to be an important factor. Consequently, a new law imposing a 1% floor may significantly chill corporate giving to charities.

This disincentive to charitable giving must also be considered in the context of an environment in which charitable giving is already in decline, particularly in the number of donors and the amounts contributed by most donors other than the very wealthy.

The reduction in corporate giving could disproportionately harm smaller, community-based organizations, especially in rural areas and in fields that rely on small business giving. Because the rationale for the 1% floor on charitable contributions by corporations is to offset tax cuts primarily benefiting the wealthy, this provision of the bill seems particularly cruel.

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The 10% cap on the charitable contributions by C corporations would remain. The cap refers to the maximum deduction these corporations can take – 10 percent of their taxable income in a given year. So, if such corporation had $1 million in taxable income and donated $500,000 to a charity, it can only take a charitable contribution deduction of $100,000 in such year. It would be possible to get a carryover deduction in a subsequent year (up to 5 years).

Advocacy

Because the tax bill is now in consideration by the Senate, charities should advocate to their Senators about how the 1% floor and other aspects of the bill would harm their ability to serve their communities. See Class II – Senators Whose Terms of Service Expire in 2027.

Advocating as part of a coalition may provide greater credibility, influence, and impact. It may also be more defensive than advocating alone. Moreover, a coalition can expand an organization’s thinking on strategy and communications and reduce advocacy-related costs. See Nonprofits and the Draft Tax Bill: Lobbying & Advocacy.

Additional Resources

Independent Sector – Opportunities to Engage on the 1% Corporate Charitable Giving Floor Provision

Council on Foundations – One, Big, Beautiful Bill: Impact on Philanthropy

United Philanthropy Forum – Defend & Advance Philanthropic Freedom