Impacts of H.R.1 ‘Big Beautiful Bill’ on nonprofits

The federal reconciliation package (H.R. 1, also known as the “One Big Beautiful Bill Act” or “OBBBA”) will have very significant impacts on the nonprofits sector and the communities nonprofits support. H.R. 1, of the 119th Congress, was signed into law by President Donald Trump on July 4, 2025. This is meant to be an overview, and not a comprehensive analysis of all the ways the legislation may impact nonprofits or communities. 

H.R. 1’s policies will be implemented over the next decade, and will cause communities to rely more heavily on nonprofits for services they need, although it is impossible for the nonprofit sector to replace the scale, reach, or guarantee of these federal safety net programs. 

The bill decimates health care and nutrition for vulnerable populations (changes to Medicaid work requirements alone are estimated to put 9.9 million to 14.9 million people at risk of losing Medicaid coverage in 2034), and the burden for ensuring healthy communities will fall squarely on states and local governments who rely heavily on local nonprofits. 

According to MCN’s 2025 Current Conditions Report: 

  • “[Minnesota] nonprofits continue to report financial challenges driven by stagnant or decreased funding, increased expenses, and increased demand for services. 70 percent of respondents reported that they have seen an increase in the demand for services over the past year.”  
  • The report continues: “A record 82 percent of respondents reported that their business expenses have increased. While 53 percent of respondents reported a decrease in grants from foundations, 46 percent of respondents reported a decrease in government funds, and 35% of respondents reported a decrease in individual giving.” 

Medicaid & SNAP

The most widespread concern for nonprofits in H.R. 1 are cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP, otherwise known as food stamps). These programs help millions of Americans access health care and put food on the table. But under H.R. 1, eligibility will shrink, benefits will be slashed, and fewer people will receive the help they need. 

For nonprofits, this will mean an immediate surge in demand when the policies go into effect. When families lose access to medical care or food support, they will turn to trusted community organizations like food shelves and health clinics, among others. While nonprofits are expected to fill service gaps; these gaps are enormous, and nonprofits have already been stretched thin.  

In addition, many nonprofits that provide health and food related services are also contracted and compensated by the federal government for their services through Medicaid reimbursements or SNAP-related programming. H.R. 1 will increase demand for nonprofit services while simultaneously cutting the funding these organizations use to provide them.  

Immigration

H.R. 1 drastically increases funding for Immigrations and Customs Enforcement (ICE) by $180 billion over the next four years, largely for mass deportation and detention programs that will dramatically increase raids, holds, and removals of immigrants. These extreme increases in ICE and DHS activity, as well as negative policy changes, includes not just undocumented people but also refugees, victims of domestic violence and their dependents, and survivors of labor or sex trafficking. Congress has previously exempted these immigrants from the five-year bar.  

There have been numerous reports on the inhumane practices that are used to deport and detain people, often tearing families and communities apart. In addition, these programs will have a negative impact on Minnesota’s economy; undocumented Minnesotans alone contribute nearly $222 million in state and local taxes. New Americans pay to ensure Minnesotans have access to affordable childcare, homes, and medical support services – even though they do not qualify for many of these programs themselves. Deportation of immigrants will lead to shortages of workers and result in a predicable decline in the number of jobs for US citizens and negatively impact the ability of employers to find the employees they need. 

Because of the priorities of the federal administration, many nonprofits serving immigrant populations have already been forced to shift into defensive mode and move their focus to crisis response.  

As issues impact nonprofits are intersectional, it is important to note here that the Medicaid provisions in the law change the eligibility rules for people with a wide range of citizenship status. According to the Minnesota Department of Human Services, as many as 140,000 Minnesotans are expected to lose their health coverage under this provision.  The changes made by the package will end food assistance for roughly 4,000 Minnesotan refugees, or immigrants who were granted asylum, and others who may have been eligible previously due to their humanitarian status. 

Health care

Beyond Medicaid (a joint federal and state program that helps cover medical costs for some people with limited income and resources), health care costs will increase for average Minnesotans, including lower- and moderate-income people seeking health insurance on the Affordable Health Care Act (ACA) marketplace. MNsure, Minnesota’s health insurance marketplace, estimates that 89,000 Minnesotans, including farmers and small business owners, will see higher health care costs because H.R. 1 ends the enhanced premium tax credits that brought down the cost of health insurance purchased through the ACA marketplace.  

During times when nonprofits struggle with worker and volunteer recruitment and retention, higher health care costs could also affect employer provided health insurance prices, which may motivate nonprofit professionals to seek higher wage jobs that may offer sustainable and robust healthcare – particularly outside of the nonprofit sector.  

Philanthropy

On the whole, H.R. 1’s changes to charitable giving tax law will make it harder for nonprofits to raise money to support their missions, although there is one small bright spot. While it is difficult to predict donor behavior, any barrier that will disincentivize giving adds more burden on an already struggling nonprofit sector. 

Smaller tax incentives for charitable giving for taxpayers who itemize deductions: The legislation creates a minimum threshold of 0.5 percent for charitable tax deductions for taxpayers who itemize their deductions. This means that taxpayers who itemize will not receive a tax break on the first 0.5 percent of their charitable contributions.  

Floor on charitable contributions from corporations: Tax incentives for corporate contributions will now be deductible only when they exceed 1 percent of the corporation’s taxable income.  

Increased tax rate on endowments: The OBBBA will increase the excise tax on nonprofit colleges and universities with large endowments from a flat 1.4% of net investment income to a tiered rate of up to 8% based on school’s investments asset amount per student. 

Excise tax on highly paid nonprofit employees: There will now be a 21 percent excise tax on compensation over $1 million per year for nonprofit employees.  While such high salaries are rare in the nonprofit sector, this may prohibit certain subsectors from recruiting qualified talent from for-profit companies. 

A bright spot – Universal deduction (aka “non-itemizer deduction”) established: Under current law, only taxpayers who itemize their deductions (about 10 percent of taxpayers, most of whom have high incomes) can receive a federal tax incentive for charitable giving. There is no tax incentive for charitable giving for the 90 percent of taxpayers who use the standard deduction. 

This legislation creates an above-the-line tax deduction for charitable contributions for 90 percent of taxpayers. The limit is set at $1,000 for individuals and $2,000 for married couples.  

While modest, this is a meaningful shift toward a more equitable tax system, one that recognizes and supports the generosity of all donors, not just those with the highest incomes.  

MCN has long championed a federal non-itemizer deduction, both to encourage broader giving and to create a more equitable system. We’ll continue pushing to increase the deduction threshold over time. (Note that Minnesota has a state-level non-itemizer charitable deduction, and is one of very few states to offer that provision. MCN has advocated for broadening that tax incentive.) 

Cuts to state funding

The law shifts the burden of cost and responsibility to the states. It is not possible for state and local governments – or nonprofits – to fully fill in the gaps in lost federal funding.  

In the Medicaid provisions alone, Minnesota, along with local and Tribal governments, will see millions of dollars in increased costs from the new work reporting requirements, increased eligibility checks, cost sharing, and funding cuts for Emergency Medicaid Services. The law also shifts costs from the federal budget to critical providers and the state, especially challenging rural hospitals. 

These large new funding challenges will require Minnesota’s policymakers to decide how to balance the state’s budget, including whether to cut spending in other budget areas or increase revenues. 

What comes next?

MCN will be joining advocates asking Minnesota policymakers to reject this law’s skewed priorities and instead prioritize meeting Minnesotans’ basic needs for health care, food, and economic security.   

Nonprofits must speak out. While H.R.1 is a federal law, Minnesota’s state legislators, the governor and the lieutenant governor need to hear the on-the-ground impacts of how proposals to cut funding and services will impact the people and communities nonprofit organizations serve.  

This is not the time to be silent. Nonprofits have the stories, the data, and the moral clarity to show why a strong public safety net matters. Together, we can remind lawmakers that a “big beautiful” policy is about creating thriving communities for everyday people who contribute so much towards a prosperous Minnesota. 

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