Summary and Analysis of the Tax Cuts and Jobs Act on Impact on Philanthropy

As many of the provisions in the Tax Cuts and Jobs Act (TCJA) (P.L 115-97) expire at the end of 2025, the 119th Congress will work to extend, rewrite, or overhaul the tax code once again. This page analyzes key provisions from the TCJA, how they have impacted the philanthropic sector and charitable giving, when and if the provisions expire, and the potential policy outcomes in the 119th Congress.

There are still many unknowns about the makeup and control of the 119th Congress and Executive branch and their resulting tax policy priorities. For additional information and updates, please visit our Tax Reform webpage.

Previous Council Statements and analysis of the of the TCJA:

Summary of the issues relevant to philanthropy from the 2017 enacted Tax Cuts and Jobs Act (P.L. 115-97):

Individual Giving Incentives

All Foundations

Community Foundations

Private Foundations

Other Provisions Affecting Tax-Exempt Organizations

Individual Giving Incentives

Individual Income Tax Rates

  • Current Law: The TCJA adjusted the seven tax bracket rates to: 10%, 12%, 22%, 24%, 32%, 35%, and 37% from the pre-TCJA rates of: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
  • Expiration: December 31, 2025.
  • Impact on Philanthropy: Changing the individual income tax brackets changes how much people owe in taxes. This change could impact taxpayer behavior in a myriad of ways—from someone owing more in taxes and therefore having less discretionary income, to someone owing less in taxes but also having less of an incentive to make charitable contributions due to a lower rate.
  • What policymakers and key stakeholders are saying heading into 2025: Democratic presidential nominee Vice President Kamala Harris’s tax plan proposes a top marginal individual tax rate of 39.6%, returning it to the pre-TCJA rate. Republican presidential nominee former President Donald Trump has stated he intends to extend the individual income tax rates enacted from the TCJA.

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Standard Deduction

  • Current Law: The TCJA nearly doubled the standard deduction to $12,000 for individuals, $18,000 for heads of household, and $24,000 for married couples, indexed for inflation. 
  • Expiration: December 31, 2025.
  • Impact on Philanthropy: Increasing the standard deduction means fewer taxpayers itemize deductions on their taxes. Since the charitable deduction is only available as an itemized deduction, anyone who chooses to take the standard deduction will not have access to the benefit—which could impact whether individuals decide to donate to a charitable nonprofit. According to research by Indiana University, in the first year after the passage of the TCJA, charitable giving fell by $20 billion. 
  • What policymakers and key stakeholders are saying heading into 2025: House Republicans, including Speaker of the House Mike Johnson (R-LA), have expressed that maintaining the increased standard deduction is tax priority for next year. Congressional Democrats have not made any public comments on their plan regarding the standard deduction. However, Vice President Harris has said she would not raise taxes on anyone earning less than $400,000.

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Charitable Contributions

  • Current Law: The TCJA did not enact a universal charitable deduction. It did make two other changes impacting charitable contributions, increasing the adjusted gross income (AGI) limitation for charitable cash contributions from 50% to 60%; and eliminating the alternative gift substantiation, which—in certain cases allows—the receiving organization to file a separate document with its annual IRS return rather than provide a contemporaneous gift receipt to donors for contributions exceeding $250. 
  • Expiration: December 31, 2025.
  • Impact on Philanthropy: The number of taxpayers who itemize their taxes, and therefore can claim a charitable deduction, fell to 9.7% in 2020 from 31% pre-TCJA based on a report from the Taxpayer Advocate Service. Additionally, overall charitable giving has decreased when adjusted for inflation. Researchers from Indiana University and the University of Notre Dame have theorized that the changes to the standard deduction and to the state and local tax deduction (SALT) resulted in 20 percent of all taxpayers switching from itemizing to taking the standard deduction, thus losing an incentive to give charitably. The study reports that charitable giving decreased by about $20 billion as a result of the law. 
  • What policymakers and key stakeholders are saying heading into 2025: In 2023, a bipartisan and bicameral group of lawmakers introduced the Charitable Act (S.566/H.R.3435). The bill creates a charitable deduction of up to one-third the standard deduction for taxpayers who do not itemize for the 2023 and 2024 tax years, including gifts to donor-advised funds.  For additional information, see our Charitable Deduction webpage.

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Itemized Deductions & Pease Limitation

  • Current Law: The TCJA repealed the Pease Limitation on itemized deductions, removing the limitations on to the total amount of itemized deductions relative to income that upper income taxpayers are allowed to claim. The following itemized deductions were preserved from previous law but modified:
    • Mortgage interest: The TCJA limited the deduction on mortgages up to $750,000, down from $1 million.
    • Charitable contributions: The TCJA increased the limit on deductions for charitable contributions from 50 percent to 60 percent of adjusted gross income (AGI).
    • State and local taxes (SALT): The TCJA limited the SALT deduction to $10,000; 
    • Personal casualty and theft losses: The deduction is limited under the TCJA to federal declared disasters. Prior law allowed an itemized deduction for uncompensated losses from fire, storm, shipwreck, or other casualty, or theft.
    • Medical expenses: The TCJA allows taxpayers to deduct unreimbursed medical expenses that exceed 7.5 percent of their AGI, a reduction from 10 percent before TCJA.
  • Expiration: December 31, 2025.
  • Impact on Philanthropy: The changes made to the standard deduction and other itemized deductions resulted in a drop in the number of taxpayers who itemize their taxes. According to the National Taxpayer Advocate Annual Report to Congress in 2022, only 9.7 percent of returns claimed itemized deductions in 2020, a significant reduction from 2017 when 31 percent itemized.  
  • What policymakers and key stakeholders are saying heading into 2025: In a Tax Foundation report, the group noted that the repeal of the Pease limitation contributes to an estimated $7.4 trillion reduction in federal tax revenue. 

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Estate Tax

  • Current Law: The TCJA doubled the threshold for estates subject to the estate tax for single filers from $5.5 million to $11.4 million and from $11.1 for married couples to $22.8 million. The thresholds are adjusted for inflation. The taxable value of a decedent’s estate was calculated by taking the gross value of an estate and subtracting applicable deductions (including the charitable deduction).
  • Expiration: December 31, 2025.
  • Impact on Philanthropy: According to Giving USA 2024, approximately 8% (or $42.68 billion) of all charitable giving comes from giving by bequest. Often, bequests are part of an individual or family’s estate planning. Changes made to the estate tax (expanding the threshold or repealing it) decrease a taxpayer's incentive to make charitable bequests as a means of lessening the overall impact of the estate tax. In 2010, a year in which the estate tax was temporarily repealed, there was a 37% decrease in charitable giving by bequest.
  • What policymakers and key stakeholders are saying heading into 2025: The Bipartisan Policy Center stated in a report that the adjustment to Estate and Gift Taxes had resulted in a loss of $83 billion in revenue over 10 years (FY 2018-FY 2027), and would cost $167 billion over 10 years to make them permanent. No members of Congress have made public statements on the provision.

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All Foundations

Johnson Amendment

  • Current Law: The TCJA made no changes to the “Johnson Amendment,” which prohibits political intervention or participation (including the publishing and distributing of statements in support or opposition to political candidates), by 501(c)(3) charitable organizations.
  • Expiration: The Johnson Amendment is permanent law with no sunset.
  • Impact on Philanthropy: Charitable nonprofits are granted tax-exempt status because the primary reason for their existence is to further a specific charitable purpose. Political campaigns and organizations are designated under a different part of the tax code and are subject to different rules (and less generous tax treatment) given that the nature of their work and purpose is different. Opening the door to allow for political activity by charities (a classification which includes churches) creates an atmosphere that compromises the integrity of charitable work in a way that could be catastrophic for the sector. For additional information, see our Nonprofit Political Activity webpage.
  • What policymakers and key stakeholders are saying heading into 2025: The repeal of the Johnson Amendment has been noted as a policy priority for former President Donald Trump  and House Republicans since the drafting of the TCJA in 2017. During the 115th Congress consideration of TCJA, a House version of the bill included a provision allowing all 501(c)(3) charitable organizations to engage in political interventions occurring in the “ordinary course of the organization’s regular and customary activities.” The provision was removed in the final bill. Additionally, in 2017, President Donald Trump signed an executive order for the IRS to relax enforcement of the amendment and in 2023 expressed his desire to repeal the Johnson Amendment for the benefit of churches. 

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Unrelated Business Income Tax (UBIT)

  • Current Law: The TCJA required tax-exempt organizations (EOs) to treat each trade or business activity separately for UBIT purposes, with the only offsets allowed being between different tax years for the same trade or business activity. Additionally, certain fringe benefits to employees such as transportation and on-premises gyms and athletic facilities are now characterized as unrelated business taxable income, and tax-exempt entities are required to pay tax on the value of those benefits equal to the corporate tax rate. However, in the FY2020 appropriations package, a provision retroactively repealed UBIT for nonprofit organizations’ fringe transportation benefits.
  • Expiration: UBIT is permanent law with no sunset. 
  • Implications for Philanthropy: The requirement to treat each unrelated business activity separately for the purposes of calculating UBIT was intended largely as a "revenue raiser" (of roughly $3.5 billion over 10 years) to pay for other changes in the tax code overhaul, and immensely complicates the administration of legitimate unrelated business activities. For additional information, see our Unrelated Business Income Tax webpage.
  • What policymakers and key stakeholders are saying heading into 2025: In a 2024 report, the Tax Foundation recommended that UBIT should be replaced and instead 501(c)s should be subject to a net program service income tax at the 21% corporate tax rate. No members of Congress or Presidential candidates have made public statements on the policy.

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Charity-Executive Compensation

  • Current Law: The TCJA subjected tax-exempt organizations to a 21% excise tax on compensation in excess of $1 million paid to any of its five highest paid employees for the tax year. Compensation includes cash and the cash value of benefits other than payments of a tax-qualified retirement plan and amounts that are excludable from the executive’s gross income. The excise tax also applies to “excess parachute payments”—a payment contingent on the employee’s separation from the organization that equals or exceeds three-times the amount of that employee’s base compensation.
  • Impacts on Philanthropy: According to an Indiana University report, the provision had no impact on the compensation of executives in FY2017-2018 and in FY 2019-2020. It was primarily intended for the largest charities—such as hospitals and universities – as a “revenue raiser.” The Joint Committee on Taxation estimated it would raise $1.8 billion over 10 years, helping to offset other changes in the bill. They also noted that it could have implications for how executives, and the tax-exempt organizations they work for, report compensation and benefits.
  • What policymakers and key stakeholders are saying heading into 2025: President Biden’s FY2025 Budget Request included a proposal to expand the $1 million cap on deductions for compensation to any employees of a corporation. 

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Community Foundations

Donor Advised Funds (DAFs)

  • Current Law: The TCJA made no changes to the administration of DAFs. Under current law, 501(c)(3) public charities are permitted to administer donor advised funds (DAFs)—to which donors may give charitable contributions and thereafter provide nonbinding advice or recommendations with regard to distributions from the fund and/or the investment of assets in the fund.
  • Impact on Philanthropy: The TCJA made no changes to the administration of DAFs; however, in the years following the enactment of the TCJA, legislation related to DAFs and a notice of proposed rulemaking from the Treasury Department have proposed potential changes DAFs. For additional information, see our Donor Advised Funds webpage.
  • What policymakers and key stakeholders are saying heading into 2025:
    • In 2021, a small bipartisan and bicameral group of lawmakers introduced the Accelerating Charitable Efforts (ACE) Act in the House and Senate, which the Council opposed. The proposed legislation, which did not see any legislative action.
    • In November 2023, the Treasury Department released a Notice of Proposed Rulemaking related to the definitions and rules surrounding DAFs. Read the Council’s comments to Treasury and the IRS on the proposed changes. A bipartisan group of House lawmakers also sent a letter to Treasury Secretary Janet Yellen, supporting the charitable sector’s concerns about the proposed regulations. 

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Private Foundations

Art Museums Classified as Private Operating Foundations

  • Current Law: The TCJA made no changes to the operating requirements of a private operating foundation, with respect to a minimum number of hours open to the public. With private operating foundations not subject to the same 5% payout rate as private non-operating foundations, some art museums classified as private operating foundations under the Internal Revenue Code are looking to maintain the current operating requirements.
  • Impact on Philanthropy: A House version of the TCJA included a provision that would have required art museums that are currently classified as private operating foundations to be open for admission to the public at least 1,000 hours per year to maintain their tax-exempt status. The provision was ultimately removed before the final bill was considered and passed.
  • What policymakers and key stakeholders are saying heading into 2025: Members of Congress and presidential nominees have not raised the issue of operating requirements for Private Operating Foundations since the enactment of the TCJA.

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Private Foundation Excess Business Holdings

  • Current Law: The TCJA made no changes to the rules pertaining to excess business holdings taxes for philanthropic enterprises with a private foundation. Under current law, a private foundation may not own more than a 20% interest in a for-profit business, and any private foundation that does hold an interest in excess of 20% is subject to a 10% excise tax unless the private foundation divests itself of the excess holdings within 5 years or be subject to an additional 200% excise tax based on the value of that excess holding. The excess business holding rule also applies to donor advised funds held by public charities.
  • Impact on Philanthropy: A provision to make an exception for excess business holding tax rules for philanthropic business holdings (where a foundation 1. holds the interests of the business enterprise at all times during the tax year; 2. acquired ownership interests under the terms of a will or trust; 3. directs all profits toward a charitable purpose; and 4. operates independently from the business enterprise) was included in the House version of the TCJA, as well as the original version of the Senate bill, as written in the CHARITY Act (S.1343). 
  • What Policymakers and key Stakeholders are Saying heading into 2025: Members of Congress and presidential nominees have not raised the issue of operating requirements for private operating foundations since the enactment of the TCJA.

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Other Provisions Affecting Tax-Exempt Organizations

Private College and University Endowments

  • Current Law: The TCJA created 1.4% excise tax on net investment income of private colleges and universities with at least 500 students (of which, at least 50% must be in the United States) and total assets of at least $250 million ($500,000 per a minimum of 500 students; excluding those assets which are used directly for carrying out the institution’s educational purpose. 
  • Expiration: December 31, 2025.
  • Impact on Philanthropy: This new excise tax did not directly impact charitable grantmaking foundations, but it did reflect a sense of skepticism among lawmakers for endowed funds and the policies and practices for how those funds are distributed.
  • What policymakers and key stakeholders are saying heading into 2025: In July 2024, the House Ways and Means Committee reported out the Protecting American Students Act (H.R. 8913), which would expand the number of colleges and universities subject to the 1.4% endowment tax. Republican Vice Presidential candidate and Ohio Senator J.D. Vance introduced the College Endowment Accountability Act (S.3514), that would raise the excise tax on investment income for universities with endowments larger than $10 billion to 35%.
     

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