The One Big Beautiful Bill Act: Implications for Non-Profit Organizations

The One Big Beautiful Bill Act: Implications for Non-Profit Organizations
July 30, 2026 14 mins

The One Big Beautiful Bill Act: Implications for Non-Profit Organizations

One Big Beautiful Bill Act (OBBBA): Implications for Non-Profits

The One Big Beautiful Bill Act introduces significant tax, funding, and regulatory changes that could affect non-profit organizations across healthcare, higher education, and foundations. Organizations should assess potential impacts now to prepare for both immediate challenges and long-term change.

Key Takeaways
  1. The OBBBA creates both financial and operational challenges for non-profits, making impact assessment and strategic planning a near-term priority.
  2. Major provisions include a higher endowment tax, federal funding cuts in several areas, including the Supplemental Nutrition Assistance Program (SNAP) program, Grad PLUS and Pell Grants, and reforms to Medicaid and Medicare.
  3. Organizations should take a proactive approach to evaluating investment portfolios by assessing asset allocation, spending, and liquidity risks.

The One Big Beautiful Bill Act (OBBBA) was passed by Congress and signed into law by President Donald Trump on July 4, 2025. OBBBA makes wide-ranging changes to federal taxes, credits, and deductions, with several provisions that both directly and indirectly affect non-profit organizations. The direct impacts fall heavily on private endowments/foundations, healthcare organizations, and higher education institutions.

Private endowments/foundations are now subject to stricter rules on charitable deductions and broader tax obligations. In addition, depending on their mission, other aspects of the OBBBA, such as reduced SNAP program funding, will impact endowments/foundations by straining their grantmaking capacity and long-term spending plans. Healthcare organizations are facing major Medicaid and Medicare changes, stricter state financing rules, and the elimination of certain tax benefits, all of which are collectively increasing uncompensated care, intensifying financial pressures, and elevating event risk. Colleges and universities with large endowments now face more extensive and complex tax obligations, along with a tighter, earnings-based federal aid framework. Together, these changes raise the overall financial burden and place additional pressure on resources that support students and essential academic programs.

Key areas impacting endowments/foundations, healthcare, and higher education institutions are summarized in the table below, with additional detail provided in the narrative that follows:

Endowment/Foundations Healthcare Higher Education
• Charitable contributions
• Clean energy tax credits
• Reduction of SNAP funding 		• Medicaid and Medicare
• Clean energy tax credits
• Elevated Operational and Financial Risk 		• Endowment tax changes
• Grad PLUS program
• Pell Grants
• Changes to other grant programs
• Clean energy tax credits

How OBBBA Affects Non-Profit Foundations1

1. Changes to Charitable Contributions

OBBBA changes the rules governing corporate charitable contributions by requiring that, in addition to the existing deduction limit of 10% of taxable income, corporations must meet a new minimum (floor) equal to 1% of taxable income for their charitable contributions to be deductible. Starting January 1, 2026, contributions below 1% of taxable income for the year cannot be deducted. A similar revision was made for individuals, where a 0.5% floor was added for charitable contributions. Corporate and individual minimum thresholds on charitable donations affect donor-advised funds and corporate foundations more directly than other foundations, since they are likely to reduce the tax incentives for making smaller gifts. This shift could lead to fewer modest donations, increase volatility and “bunching” in giving patterns, and heighten reliance on a smaller number of major donors. Over time, it may also slow portfolio growth for some foundations and prompt them to adjust fundraising strategies and reconsider their long-term spending assumptions.

2. Clean Energy Tax Credits2

Many clean energy tax credits and incentives for both corporations and individuals are being phased out under the OBBBA, with most provisions set to expire by July 2026. Clean energy projects that begin after these provisions expire will no longer qualify for tax credits. This phase-out has significant implications for foundations (and other investors) focused on climate and environmental initiatives. As tax credits disappear, many clean energy projects will face higher costs and lower financial returns, making them more challenging to finance. As a result, foundations can expect increased demand for funding to sustain existing projects and start new ones, which may in turn crowd out support for other program areas. In response, some foundations may need to re-evaluate their impact investing strategies and grantmaking priorities to determine where, and to what extent, they are prepared to help fill the funding gaps created by the loss of tax incentives.

Reduction of SNAP Funding3

OBBBA includes several provisions that, in practice, reduce SNAP support by changing eligibility criteria, benefit calculation methods, and state administrative responsibilities.4 The legislation is estimated to cut SNAP funding $186 billion over 10 years, and the Congressional Budget Office (CBO) estimates that 3 million Americans will drop out or lose benefits from SNAP4. As a result, more individuals are expected to seek assistance outside of SNAP, and non-profit organizations should anticipate higher demand for emergency food and related services as state agencies face new fiscal and administrative pressures.

3M

Estimated 3 million Americans will lose SNAP benefits.4

How OBBBA Affects Healthcare Organizations

1. Medicaid and Medicare Changes

OBBBA introduces significant changes to Medicaid and Medicare, while cutting funding for certain medical programs, resulting in major impacts on coverage and financing. The Medicaid provisions alone are estimated to reduce spending by approximately $1 trillion over 10 years and could leave about 10 million more people uninsured by 2034.5 At the same time, OBBBA restricts state funding flexibility by tightening rules on provider taxes and state‑directed payments, which may force states to cut enrollment or operate financially strained programs. Collectively, these changes are likely to increase uncompensated care and widen access gaps, particularly for low-income communities, placing additional pressure on healthcare systems to support growing numbers of uninsured or underinsured patients.

2. Elevated Operational and Financial Risk

Although rating agencies currently characterize the healthcare sector as broadly stable, they concur that OBBBA significantly elevates event risk for providers.6 Its staged implementation, with major provisions taking effect through 2027, creates a multiyear period of uncertainty in which changing payer dynamics, tighter Medicaid and Medicare eligibility, and higher premiums shift the payer mix and strain revenues, with uneven effects across markets and provider types.

In the near-term, federal and state supplemental payments may offer some relief for rural and smaller hospitals, but these measures are expected to be temporary and increasingly tied to stricter regulatory requirements. Over the longer-term, projected cuts in Medicaid spending and supplemental payments, coupled with growth in the uninsured and underinsured patient population, are widely cited as key risks to provider margins. Consequently, most providers and rating agencies anticipate greater dispersion in operating performance and growing concerns about healthcare affordability, raising questions about whether the implementation runway will be sufficient to allow meaningful course correction.

$1T

Estimated $1 Trillion Reduction in Medicaid Funding Over the Next Decade.5 OBBBA is projected to significantly reduce Medicaid spending, increasing financial pressure across healthcare systems and expanding coverage gaps.

How OBBBA Affects Higher Education Institutions

1. Endowment Tax Changes7

The endowment tax and changes to federally funded grants are two key areas in which OBBBA directly affects many higher educational institutions. In addition, issues discussed earlier in this article—such as changes to charitable contributions—may also impact certain educational institutions.

Regarding the endowment tax, OBBBA replaces the current flat 1.4% excise tax on private non-profit college endowments with a tiered system of 1.4%, 4%, or 8%, determined by a “student‑adjusted endowment” (endowment size divided by number of students). It also broadens the definition of “net investment income” to capture institutional student loan interest and certain federally subsidized royalty income. In addition, OBBBA raises the institutional size threshold from 500 to 3,000 tuition‑paying students, requires that international students be included in the headcount, and removes the exemption for certain religiously affiliated institutions. For large higher education organizations, OBBBA increases both the rate and broadens the base of taxation on endowment income, reducing the investment return available to support financial aid, research, and other institutional programs.

2. Changes to Federal Student Aid Programs8

Effective July 1, 2026, OBBBA significantly restructures federally funded loans for both undergraduate and graduate students in several ways, including:

  • Restricting new borrowers to one standard fixed-payment plan and one income-driven repayment plan, and expanding Pell Grants only to short-term, accredited job training programs.
  • Linking access to federal student loans to graduate earnings: undergraduate program graduates must earn more than typical high school workers in their state, and graduate program graduates must out-earn typical bachelor’s degree holders in the same field and region. Programs that fail these earnings benchmarks in two out of three years would lose loan eligibility.
  • Eliminating Graduate PLUS loans and imposing new borrowing caps of $100,000 for graduate students, $200,000 for professional programs, and $65,000 in Parent PLUS loans per student intended to curb tuition inflation and excessive debt, but which could potentially reduce graduate enrollment and disproportionately affect minority families.
  • Revamping federal aid into a more restrictive, earnings-based system, which may increase both the importance of and pressure on institutional endowments. Colleges and universities may face greater demand to use endowment funds for student aid, potentially diverting resources from other priorities such as research and capital projects.

Investment and Fiduciary Considerations for Non-Profit Organizations

Due to the changes introduced by OBBBA, fiduciaries responsible for overseeing investment pools should take a more proactive role in assessing portfolio resilience, flexibility, and alignment with evolving cash flow requirements. In light of this, organizations may wish to:

  1. Conduct an asset allocation and spending study, emphasizing portfolio growth, sustainability, and evolving cash flow needs.
  2. Assess portfolio liquidity, including performance under stressed market conditions.
  3. Identify, measure, and monitor key risk metrics across the portfolio.
  • Asset Allocation and Spending Analysis

    An asset allocation and spending study assesses how well a portfolio’s asset investments align with the cash flows required to meet the organization’s spending policy, distributions, and expenses, including potential increases from OBBBA‑related funding and tax changes. It also examines how these factors may affect the portfolio’s purchasing power over time. A non-profit organization can use the results of this analysis to determine whether adjustments to its asset allocation are needed.

  • Portfolio Liquidity Assessment

    Given the resulting changes to cash flows and the potential for shifts in asset allocation, it is essential to analyze the portfolio’s liquidity profile. The analysis should consider multiple liquidity profiles and evaluate how the portfolio would perform under stressed conditions.

  • Risk Identification and Monitoring9

    A comprehensive risk management framework should incorporate multiple dimensions of portfolio risk:

    • Investment Risk: Assessing risk exposures arising from manager selection and identifying concentrations across asset classes, factors, and investment strategies.
    • Shortfall Risk: Determining whether the current spending policy is sustainable in light of expected returns and whether adjustments to either the investment strategy or spending levels are warranted.
    • Liquidity Risk: Maintaining sufficient access to capital in a variety of market environments so obligations can be met without compromising the long-term investment strategy.

By clearly defining, measuring, and continuously monitoring these risks, fiduciaries can make better-informed decisions, reduce unintended concentrations, and protect their capacity to finance mission-critical programs during periods of market stress. In light of the sweeping changes introduced by OBBBA, we encourage organizations to carefully review how these developments may impact their operations and investment strategies.

Turning Policy into Action

OBBBA marks a meaningful shift in the financial and operational environment for non-profit organizations. Its combined effects, including higher tax burdens, reduced federal support, and increased operational risks, require a proactive and strategic response.

By reassessing asset allocation and spending policies, strengthening liquidity management, and enhancing risk monitoring frameworks, organizations can better withstand short-term disruptions and adjust to the longer-term changes brought about by OBBBA.

Non-Profit Investment Strategy

In this ever-changing environment, non-profit organizations need to be clear on how to meet objectives and how to manage through the economic, regulatory, demographic and geopolitical events which bring new challenges and opportunities. If you are evaluating next steps for your non-profit plan — contact our team for further perspectives tailored to your objectives.

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Aon’s Thought Leaders
  • Eva Berry
    Client Service, Aon Investments USA Inc.
  • Chetan Grover
    Client Service, Aon Investments USA Inc.
  • Heather Myers
    Solutions Leader for Non-Profit Organizations, Aon Investments USA Inc.
  • Emily Stella
    Non-Profit Solutions, Aon Investments USA Inc.

1 The implications of OBBBA are not limited to private foundations and may also affect corporate and public foundations.
2 While discussed here in the context of private foundations, any organization with energy related assets may be affected by the clean energy tax credit changes described in this section, including healthcare organizations and higher education institutions.
3 Refer to the OBBBA for more details on the specific changes to Supplemental Nutrition Assistance Program (SNAP).
4 Big’ legislative package shifts more of SNAP’s costs to states, saving federal dollars but causing fewer Americans to get help paying for food
5 Allocating CBO’s Estimates of Federal Medicaid Spending Reductions Across the States: Enacted Reconciliation Package | KFF
6 Aon 2026 Investment Themes for Non-Profit Healthcare Organizations
7 Additional details regarding the endowment tax are available in the Aon paper, “Endowment Tax for Higher Education: 3 Questions with Heather Myers.”
8 The One Big Beautiful Act: Impacts for Graduate Loan Funding
9 “Strengthening Investment Risk Assessments for Non-Profit Portfolios.”

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