The "Big Beautiful Bill" (H.R. 1) passed the House 215-214 on May 22 and heads to the Senate, where significant changes are expected. While it's impossible to predict the final outcome, advisors need to understand the potential implications for their clients' charitable strategies.
Three Key Provisions Impacting Charitable Planning:
Estate Tax Exemption Permanence The bill would make permanent the 2017 Tax Cuts and Jobs Act provisions, including the doubled estate tax exemption. Currently set to sunset at the end of 2025, the exemption would remain at approximately $13.61 million per individual ($27.22 million for married couples) rather than reverting to roughly $7 million.
This permanence reduces the pool of clients motivated by estate tax avoidance, but don't expect charitable giving to disappear. Research consistently shows that while tax benefits enhance giving, they rarely serve as the primary motivation. Your clients' philanthropic interests remain strong, and many are seeking ways to create meaningful impact regardless of tax implications. Advisors should consider pivoting conversations from tax avoidance to legacy building and community impact.
Standard Deduction Changes The higher standard deduction levels from TCJA would not only become permanent but receive an additional temporary boost through 2028. This means even fewer taxpayers will itemize deductions, further reducing the population eligible for charitable deductions.
However, the bill introduces a modest "above-the-line" charitable deduction for non-itemizers—$150 for individuals and $300 for joint filers. While relatively small, this provision acknowledges the policy goal of encouraging charitable giving across all income levels. Advisors should help clients understand that even without itemizing, strategic charitable giving through vehicles like donor advised funds can still provide significant benefits beyond tax deductions.
Private Foundation Tax Increases Perhaps most significantly for wealthy clients, the bill sharply increases excise taxes on private foundation investment income. Large foundations with over $50 million in assets would see rates jump from the current 1.39% to as much as 10%—a dramatic increase that could significantly impact foundation economics.
This change makes donor-advised funds at community foundations increasingly attractive. Unlike private foundations, donor-advised funds face no excise taxes, distribution requirements, or self-dealing restrictions while offering similar control and family engagement opportunities.
Strategic Planning in Uncertain Times Senate markup begins in June, with reconciliation likely extending into July or August. Smart advisors are helping clients prepare for multiple scenarios while emphasizing that effective charitable planning transcends any single tax provision.
The community foundation remains committed to helping you navigate these changes and structure giving strategies that work under any legislative outcome. Contact us to discuss how pending changes might affect your clients' specific situations.