top of page

What the New Federal Spending Bill Means for Your Nonprofit

  • Writer: Rachel Fesperman
    Rachel Fesperman
  • Sep 30
  • 2 min read

Why This Matters

Big changes in federal tax law and grantmaking are shaking up the nonprofit sector. ZIM has tracked these shifts and pulled together a clear guide to help your organization understand what’s happening and what to do next.


What Changed?

The 2025 Federal Spending Bill at a Glance

  • Formerly called the One Big Beautiful Bill Act (P.L. 119-21)

  • Signed July 4, 2025 and will be enacted starting January 1, 2026.

  • Extends 2017 tax cuts but changes how charitable giving is deducted.

  • Includes caps on state and local tax deductions, a 12% cut to Medicaid, and raises the federal debt ceiling by $5T.


Impact on Charitable Giving

  • Donors may give earlier. Many will “front-load” donations in 2025 before rules change in 2026.

  • New caps = new concerns. Nonprofits may need to rethink timing of campaigns, galas, and year-end drives.


Donor-Advised Funds (DAFs)

  • No deductions for DAF contributions.

  • New rules:

    • Non-itemizers = only $1,000 maximum deduction.

    • Itemizers = deduction only if gifts exceed 0.5% of adjusted gross income.

  • This could slow casual giving through DAFs.


Federal Grant Decisions

  • August 7 Executive Order:

    • Each federal granting agency now has a political appointee to enforce administration priorities.

    • Agencies could end grants at any time.



Action Steps for Nonprofits

  • Strategize now: Plan year-end campaigns before 2026 tax changes.

  • Engage donors transparently: Let them know why their timing matters.

  • Prioritize unrestricted funding: Private foundations and corporate partners may be more flexible.

  • Don’t forget in-kind support: Wish lists for goods or services can keep community giving strong.



Takeaways

  • New tax rules will make it more challenging for some donors to give.

  • These rules also create an opportunity to encourage giving in 2025 before the changes take effect.

  • Federal grants could shift quickly under new policies, so nonprofits need a backup plan.

  • Diversifying your funding base through individual donors, corporations, foundations, and earned revenue is more important than ever.

  • Acting sooner rather than later will better prepare your organization to navigate the changes coming in 2026.


 
 
bottom of page