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.

6/26/25 UPDATE: We’re now in the closing moments to advocate to the Senate. From Independent Sector:

Specifically, please reach out to Senators Thune, Barrasso, Cotton, Capito, Tim Scott, Blackburn, Cornyn, Tillis, Collins, Young, and Murkowski.

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.

Talking Points from Independent Sector:

• The House-passed H.R 1, the One Big, Beautiful Bill Act (OBBBA), includes a new floor on the corporate tax deduction for charitable contributions.
• If enacted, corporate taxpayers will be denied a tax deduction for charitable contributions below 1% of their taxable income and will create an unpresented limit on the tax deduction for charitable contributions.
• While messaged as a tax increase on business taxpayers, effectively raising their corporate tax rate, the real impact will be felt by charities.
• The new 1% floor will result in less charitable giving by corporate taxpayers. According to an Ernst & Young (EY) study commissioned by Independent Sector, the 1% floor will reduce charitable giving by $4.5 billion annually or $45 billion over the next 10 years.
• Among corporate taxpayers, this new tax will disproportionately harm small businesses.
• IRS data on corporate expenses show that businesses with less than $2.5 billion in assets spent 1% of taxable income on average in charitable contributions.
• The denial of charitable deductions of 1% or less will wipe out the tax deduction for most small business corporate taxpayers and severely limit the tax deduction for charitable giving for all corporate taxpayers.
• The loss of a tax deduction for charitable contributions will increase the cost of giving and result in less funds flowing to essential charitable causes.
• Recipient charities dependent on business contributions could face funding disruptions or need to scale back services and lay off workers.
• Small local charities that rely on a local small business to support their annual fundraiser will be harmed the most from this misguided tax increase.

The 1% floor on corporate charitable donations will raise taxes on small business taxpayers, limit charitable giving, harm charities and essential community support and must be removed from the tax bill. This provision could be particularly damaging in small, rural communities which often rely on the deep relationship between small business donors and local charities.

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