Good afternoon,

What you need to know this week: Impact of Trump’s new tax bill, federal grant losses and gains, IRS says churches can endorse candidates from the pulpit, and more.

—Tamara Straus, senior editor

Evan Vucci/AP

• New stresses: The mega-bill President Trump signed Friday will cut nearly $1 trillion from Medicaid over 10 years and slash billions from food-assistance programs, hurting the poorest Americans that many charities serve. And it will put more financial pressure on many nonprofits already reeling from the president’s executive orders, reports Ben Gose in the Chronicle of Philanthropy. Among the major provisions affecting charities and foundations:
• All taxpayers can take a charitable deduction: $1,000 for individuals, $2,000 for a married couple.
• Tax write-offs for the wealthiest donors will be limited. Itemizers will receive no tax benefit until their gifts exceed 0.5 percent of adjusted gross income and will be limited to a deduction of 35 percent.
• There’s a new hurdle for corporate giving. Companies will have to give at least 1 percent of their taxable income to charity before they can begin taking a tax deduction.
• Big college endowments will be hit with higher taxes. Endowments worth more than $2 million per student will pay an 8 percent tax on net investment income, and those worth $750,000 to $2 million per student will pay 4 percent. The rest will pay the current 1.4 percent.
• The tax on highly compensated nonprofit employees expands. Nonprofits will pay an excise tax of 21 percent on the total amount over $1 million earned by every employee making that amount or more. Current law applies the tax to only the five highest-paid employees.
• Cuts deferred: Republicans postponed some of their most painful spending cuts until after the midterm elections, notably Medicaid and food stamp funding changes, reports the New York Times.

• $45 billion in losses: Environmental and housing programs face the most severe cuts in the new tax and spending bill, according to a sector-by-sector grant analysis from GrantExec. It eliminates $41 billion in federal grant funding for the environment and clean energy and $4 billion in housing funding over the next 10 years.
• $100 billion in gains: The bill also creates $100 billion in new grant funding for border security, defense manufacturing, and rural health: $30 billion for national security, technology, and industrial base; $4.85 billion for agriculture and rural development; $12.67 billion for work force and education; and $49.6 billion for health and human services.
• Massive reorganization: “This dramatic reallocation of spending will have systemic and prolonged effects,” said Ryan Alcorn, CEO of GrantExec. “The result is a federal grant marketplace that looks entirely different in FY 2026, forcing a massive and immediate reorganization of the nonprofit and public sectors.”

• Goodbye Johnson Amendment? In a Monday court filing, the Internal Revenue Service said a 1954 ban on political campaigning by tax-exempt groups should not apply to houses of worship speaking to their own members, the New York Times reports.
• Private vs. public: The agency, in an attempt to settle a lawsuit filed by two Texas churches and an association of Christian broadcasters, said that if a house of worship endorsed a candidate to its congregants, the IRS would view that not as campaigning but as a private matter, like “a family discussion concerning candidates.”
• Rebuttal: The National Council of Nonprofits warned about the consequences of allowing tax-exempt groups to endorse candidates. “This action — long sought by President Trump — is not about religion or free speech, but about radically altering campaign finance laws,” said Diane Yentel, the group’s CEO. “The decree could open the floodgates for political operatives to funnel money to their preferred candidates while receiving generous tax breaks at the expense of taxpayers who may not share those views.”

• COVID recovery: After millions of jobs were lost during the pandemic, nonprofit employment rebounded to almost 10 percent of all U.S. private-sector jobs by 2022, according to a new nonprofit employment analysis from George Mason University, per the Chronicle of Philanthropy’s Stephanie Beasley.
• The details: Government support such as Paycheck Protection Program loans and emergency funding played a role in the nonprofit recovery. “During the pandemic, nonprofits were helped by what the government was doing,” co-author Alan Abramson said. “Now it seems like almost the opposite.”
• Foggy numbers: Although nonprofit employment in 2025 is dropping due to federal budget cuts and an uncertain economy, it is difficult to track the decreases in real time because the Bureau of Labor Statistics issues its nonprofit jobs report only every five years; the next one is coming in 2029. In the meantime, the Chronicle of Philanthropy is providing a rough estimate of nonprofit layoffs.

• Last-minute move: Nearly $7 billion in funding for after-school programs, English-language learning, teacher training, and other services failed to be distributed last week, even though the money was approved by Congress and President Trump. The Office of Management and Budget suggested it needed to investigate whether the money would be used by school districts to fund a “radical leftwing agenda,” according to the Washington Post.
• Public schools reeling: School districts nationwide are scrambling to address budget shortfalls. “It’s too late to be making this kind of a decision,” Eric Mackey, the Alabama state superintendent who describes himself as an “old-fashioned fiscal conservative,” told the Wall Street Journal (requires a subscription).

• Planned Parenthood sues: The reproductive health-care and abortion provider sued the Trump administration Monday over an “unconstitutional” provision in the new tax bill that would strip Medicaid reimbursements to its health centers, reports The Guardian. The nonprofit has estimated that the defunding could force roughly 200 Planned Parenthood clinics to shutter.
• New leader at Ford: Last week, the foundation announced Heather Gerken, dean of Yale Law School and a former Obama adviser, will succeed Darren Walker. A founder of the “nationalist school” of federalism — which emphasizes the importance of state sovereignty and the protection of state interests against potential overreach by the national government — Gerken is expected to focus on democracy-building at Ford, reports the Chronicle’s Alex Daniels.

“You need a movement and individual organizations that are willing to use every lawful lever to defend constitutional, representative, democratic self-governance.”

— Ian Bassin, founder of Protect Democracy, in the Chronicle of Philanthropy’s July cover package on leaders fighting to protect the social sector.

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