“The One Big, Beautiful Bill”

On Friday, July 4, 2025, President Donald Trump signed H.R. 1, a major budget reconciliation package, into law. This followed passage of the bill by the Senate on Tues., July 1, 2025 (51-50) and the House on Thurs., July 3, 2025 (218-214).  

Here is a summary of key tax provisions in the final bill affecting schools, colleges, and universities:

Increased Excise Taxes on Certain Private College and University Endowments

The bill increases the current excise tax on net investment income for certain private college and universities. The tax would apply to private colleges and universities with the following endowment values:

• Less than $500,000 per student - no tax
• $500,000 per student* not in excess of $750,000 per student – 1.4% tax
• $750,000 per student* not in excess of $2,000,000 per student – 4% tax
• In excess of $2,000,000 per student* – 8% tax

In addition to the criteria above, the tax only applies to private colleges and universities that:

• Enroll more than 3,000 tuition-paying students
• Enroll more than 50% of tuition-paying students located in U.S.

Provisions exempting certain religious institutions and disallowing international students to be counted as eligible students were removed from the final bill. The new endowment tax rates and thresholds will take effect in 2026. 
 

Permanent Restoration of a Charitable Deduction for Non-itemizers 

The bill restores a permanent charitable deduction for non-itemizers that is much more generous than the modest and temporary provision included in the House bill. Non-itemizing taxpayers would be able to deduct:

• $1,000 for individuals
• $2,000 for joint filers

The deduction will be permanent and will take effect in 2026. 
 

New Floor on Deduction for Itemized Charitable Giving

To cover the cost of the permanent charitable deduction for non-itemizers, the final bill includes a .5% of Adjusted Gross Income (AGI) floor on itemized charitable giving. A donor would only be allowed to deduct the amount of his or her charitable donations above the .5% of AGI floor moving forward. Will take effect in 2026.  
 

Permanent Extension of 60% AGI Limitation on Cash Gifts 

The bill permanently extends the 60% Adjusted Gross Income (AGI) limitation for cash gifts that was temporarily extended in the Tax Cuts and Jobs Act. This limitation was 50% of AGI prior to passage of the TCJA. 
 

1% Floor on Deduction for Corporate Charitable Contributions 

Under this provision, corporations would only be able to deduct charitable contributions above 1% of their corporate taxable income. Contributions below the 1% of taxable income threshold would not be deductible. Will take effect in 2026. 
 

Limitation on the Value of Itemized Deductions 

Itemized deductions, including the charitable deduction, for taxpayers in the 37% marginal tax bracket would be reduced by 2/37 of the lessor of the amount of:

• Itemized deductions allowable for the year, or
• So much of the taxable income as exceeds that dollar amount at which the 37% bracket begins.

This provision effectively caps the value of the charitable deduction at 35% for taxpayers in the 37% bracket. Will take effect in 2026. 
 

Tax Credit for Contributions of Individuals to Scholarship Granting Organizations 

The bill introduces a new, permanent tax credit for individuals making charitable contributions to tax-exempt organizations that provide scholarships to elementary and secondary school students. The provision, however, is much more limited than a provision included in the original House bill due to objections by the Senate Parliamentarian. 

• Individuals can claim a credit up to $1,700.
• Students who benefit must be members of a household with an income not greater than 300 percent of the area median gross income and be eligible to enroll in a public elementary or secondary school.
• States must opt in to the provision and would also be charged with regulatory oversight of the scholarship-granting organizations.
• Note: This tax credit does not apply to contributions to organizations providing scholarships for postsecondary institutions.

The new credit would take effect in 2027. 

Expansion of application of tax on excess compensation at tax-exempt organizations 

The bill expands the tax on excess compensation, now applying a 21% tax on compensation above $1 million for any employee and any former employee of a tax-exempt organization. This expands on current law, which only applies the tax to the top five highest-compensated employees. The final bill does include language limiting the pool of employees and former employees covered to individuals who were employees of the tax-exempt organization beginning in 2017.  This treatment is different than for-profit corporations that are required to pay this tax only on the top 10 compensated employees. Will take effect in 2026. 
 

Permanent Increase in the Estate Tax Exemption Rate 

The bill would permanently increase the unified estate and gift tax exemption to an inflation-indexed $15 million starting in tax year 2026. Currently, the estate and gift tax exemption rate is $12.92 million for tax year (2025) indexed for inflation. Will take effect in 2026. 
 
This information is provided as a service to CASE members. It is subject to change as the legislation is updated or changed. CASE is making every attempt to ensure accuracy of information but as the situation is fluid, we encourage you to seek additional information from your government relations staff or counsel.

Updated July 4, 2025