Will a Tax Law Change Discourage Corporate Giving?
At 870 pages, the 2025 One Big Beautiful Bill Act of Trump administration priorities is a hefty document. Its policy shifts have taken time to evaluate.
On Jan. 1, a key provision took effect. It didn’t receive much news coverage or attention from the public before the bill was passed and signed into law. The act included a change in the deductibility of corporate contributions to charities.
Under the new law, corporations may only deduct contributions that exceed 1% of their taxable income. The cap on deductibility, at 10% of taxable income, remains the same.
Previously, corporations could deduct any gift amount to charity, no matter how small a percentage of their taxable income, up to the 10% ceiling. Historically, many small- to medium-sized businesses made contributions of less than 1%. A small business would support its local youth sports team or food bank and could deduct even small contributions to qualified charities.
Now, both corporate social responsibility staff and nonprofits that receive corporate donations are recalibrating their expectations. Until the end of the current tax year, no one knows precisely what may result, but many predictions are unsettling.
Candid, a respected data source for the nonprofit sector, estimates that the shift could mean a reduction of more than $1.5 billion in charitable gifts from businesses and corporations annually. Ernst & Young’s Quantitative Economics and Statistics practice (QUEST) makes an even more dire prediction on behalf of Independent Sector, a membership organization for nonprofits and philanthropies, estimating that $4.2 billion to $4.8 billion in annual contributions are at risk.
How did they do the math?
“According to Chief Executives for Corporate Purpose (CECP), only 28.2% of surveyed corporations gave at least 1% in 2025, which means more than 70% of corporations no longer have any tax incentive to give. … What will no longer be tax deductible—contributions from corporations giving up to 1% and the first 1% from those giving more—will amount to about 26% of total corporate giving,” Candid reports.
Ernst & Young does the math a little differently. The firm describes the amount a corporation gives to charity that’s less than 1% of taxable income as “a dead zone,” since gifts in this range will lose their deductibility.
Not so fast, says Andrea Wood, president of the Association of Corporate Citizenship Professionals (ACCP). Wood, formerly vice president of social impact at Best Buy and executive director of the Best Buy Foundation, now leads the national association of giving officers of some 260 corporations, including Minnesota-based members such as 3M, Best Buy, Cargill, Ecolab, and Land O’Lakes.
In its own recent survey, ACCP found that 79% of respondents predicted that their corporate giving budgets would increase or remain unchanged. Why? Tax incentives are only one of the reasons that businesses give to charity.
Joe Kiser, president of the Old National Bank Foundation, whose giving in Minnesota is increasing since its purchase of Bremer Bank, concurs. “The public face of giving has importance beyond the tax benefits,” he says. “Giving affects employee engagement and other factors. There is so much social good and good feeling involved in giving. It’s part of being a good community member.” He cites Old National’s support of Exodus Lending and the Lake Street Council among the bank’s Minnesota grantees.
“Companies are really trying to figure this out,” Wood says. “Some will stay the course because they are not doing it for the tax benefit. Some are reclassifying their corporate giving as a business expense so that it’s ‘above the line’ when calculating taxable income. Still others are looking at ways to ‘bunch’ or ‘bundle’ contributions by making more than one year’s contributions in a given year in order to reach the 1% threshold.” These decisions involve not only corporate social responsibility teams but also legal departments, CFOs, and tax departments.
The EY analysis identifies risks to all of these choices. The report states: “An overreliance on timing strategies such as ‘bunching’ may disrupt nonprofit funding and attract stakeholder scrutiny. Reclassifying donations as business expenses requires careful documentation and may blur lines between philanthropy and marketing. And fluctuating giving levels can impact internal and external feedback and sustainability ratings.”
“Corporate social responsibility teams are under considerable stress and strain right now,” Wood says. “In the turbulent economy and with shifting policy incentives, some are seeing more constriction in team size and fewer overall resources for the work.”
Minnesota nonprofits and businesses have been important partners in strengthening Minnesota’s vitality and supporting our quality of life. Let’s hope that this robust partnership continues, even when tax incentives change.
