UPDATED 7/9/25
President Trump signed H.R.1 into law on 7.4.25 after the Senate and House each passed their version of the tax package mostly along partisan lines. The final version is projected to increase deficits over the 2025‑2034 period by $3.4 trillion, and contains a myriad of tax law changes that will impact nonprofit organizations, programs like Medicaid and SNAP, and people nonprofit sector stakeholders care about. On the whole, the package takes more than it gives to nonprofits and those we serve. The cost to the state of Illinois may be as high as $1.2 billion annually. Below are key summaries provided by Forefront’s national partners, followed by more details, with items organized according to Forefront’s position on each (support, oppose, monitor), and finally, proposed provisions that Forefront opposed that were ultimately not included in the final law.
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SUPPORT
New / Expanded Non-Itemizer Charitable Income Tax Deduction (Section 70424)
For nonprofits, this is the bright spot in an otherwise concerning law. Thanks to effective advocacy from nonprofit organizations across the nation, the final law creates a permanent non-itemizer tax deduction of up to $1,000 for an individual filer, and up to $2,000 for joint filers for tax years beginning after December 31, 2025. This deduction is generally based on the previously filed Charitable Act (H.R.801), a bipartisan bill sponsored by six IL Congressional officials. The deduction does not apply to contributions to donor-advised funds.
OPPOSE
Largest Medicaid Cuts in History
Approximately 3.4 million Illinoisans are covered by Medicaid (about 1/4th of the state population; 40% of childbirths and 69% of nursing home care). According to the Congressional Budget Office, combined, the changes to Medicaid enacted in the final bill will cause 11.8 million people nationwide to lose their health insurance as it cuts $1 trillion from Medicaid and the Affordable Care Act over the next ten years. According to estimates, in Illinois over the next decade, this represents a reduction in federal spending of $48-52 billion (20%) on Medicaid, and will cause 330,000 people to lose coverage. Read KFF, Urban Institute, and Social Current‘s analyses, all of which go beyond the summary below. Also see Protect Our Care Illinois’ statement.
- Cost Sharing: As of 10/1/28, the final law requires states that have expanded Medicaid, which includes Illinois, to charge enrollees up to $35 and capped at 5% of an individual’s income for certain services if their incomes are between 100% and 138% of the the federal poverty level that amount (currently, $15,650 – $21,597 for an individual). This excludes mental health care, substance use treatment, primary care, prenatal care, pediatric services, and emergency care (except for non-emergency use of emergency rooms), services provided by federally qualified health centers (FQHCs), certified community behavioral health centers, and rural health clinics. Cost-sharing limits on prescription drugs for those at or below 150% FPL are unchanged at $4/$8 for preferred/non-preferred.
- Gender Affirming Care: Prohibits federal matching funds for “gender transition procedures,” defined to include puberty blockers, hormone treatment, and surgery, for any individuals enrolled in Medicaid and CHIP.
- Provider Taxes: Provider taxes would be reduced from a max of 6% to a max of 3.5% by 2032. Every state but Alaska relies on these provider taxes to draw down additional federal dollars for Medicaid. The American Hospital Association estimated the provider tax change would reduce federal spending on hospitals by $232 billion over 10 years (about $8.5 billion in Illinois, excluding nursing homes). On 7/9, Gov. Pritzker said nine rural hospitals and 90 nursing homes state-wide could close because of the cap on provider taxes.
- Redeterminations/Re-enrollment: H.R. 1 increases the frequency of Medicaid re-enrollment from annually to every six months beginning Dec. 31, 2026 for those covered under the Affordable Care Act (ACA) expansion. Enrollees will also have to provide additional income and residency verifications. The Congressional Budget Office estimated that just this change will increase the number of uninsured by 700,000 by 2034. Additionally, states are required, beginning Oct. 1, 2029, to submit verification materials to the U.S. Department of Health and Human Services secretary to determine whether an enrollee continues to be eligible for Medicaid.
- Rural Health: Establishes a new rural health transformation program that will provide $50 billion in grants to states between fiscal years 2026 and 2030, to be used for payments to rural health care providers and other purposes. This was intended to offset cuts elsewhere that specifically threatened rural hospitals, but is generally considered wholly inadequate to mitigate impact; Illinois might receive about $3 billion from this fund over ten years, which doesn’t match projected losses mentioned elsewhere. Additionally, Crain’s Chicago Business reported that ten Chicago hospitals have at least 70 percent Medicaid utilization by patients, which this rural fund will not support.
- Work/Volunteer Requirements: Medicaid work requirements are generally considered unnecessary by health advocates, since 64% of adults insured under Medicaid work now (KFF). Additionally, folks that are working may make paperwork mistakes (e.g., due to relocations, etc.) that result in terminated coverage even if they are eligible. Despite these concerns, the final law creates work requirements + regular related paperwork as of 12/31/26 for states that participate in the ACA expansion which includes IL; this does not apply to parents of children 14 and younger or those experiencing certain short-term hardships. States are required to continue providing coverage during the 30-day window following notification of non-compliance.
Supplemental Nutrition Assistance Program (SNAP) Cuts
The Congressional Budget Office estimates that more than 3 million Americans will lose access to SNAP benefits as a result of the SNAP cuts in the tax bill, which total $287 billion over the next decade. In Illinois, 1.9 million residents (14% of the population) receive SNAP benefits, including 891,000 people in Cook County and 44,217 veterans; 37% of households have older adults; 45% of households have children; 44% of households have a person with a disability. 360,000 Illinoisans are estimated to lose SNAP benefits due to the new law.
Since SNAP’s creation, the federal government has fully funded the program. But, the new tax law shifts some SNAP costs to states in multiple ways while also implementing new work requirements for SNAP customers. Advocates estimate these changes will eliminate 6-9 billion meals annually, which is roughly the same number of meals provided annually by the network of food banks in this county (Politico). In other words, food banks will have to double their output to replace these cuts. Before enactment, Governors joined forces to send a letter opposing the cost-shifts to states.
First, the law decreases the administrative costs the federal government pays by 25% beginning in fiscal year 2027. Second, able-bodied adults, ages 18 to 64, receiving SNAP benefits will be required to work, volunteer, or attend school at least 80 hours a month to remain eligible, as soon as 2025. Third, the law penalizes states that have an error rate above 6% beginning in 2028 as follows, which will impact Illinois to the tune of over $700 million/year if we do not make progress in this area:
- <6%: 0% state match
- 6-7.99%: 5% state match
- 8-9.99%: 10% state match
- >/= 10%: 15% state match
A 2019 study published by the USDA noted that SNAP generates $1.5 of economic activity per dollar spent (so, a hypothetical $1B increase in SNAP would increase GDP by $1.54B, support 13,560 jobs, and create $32M in farm income).
New 1% Floor on Corporate Charitable Deductions (Section 70426)
The new tax law stipulates that corporations may only deduct charitable contributions that exceed 1% of their taxable income and also retains the ceiling (cap) on corporate charitable deductions that was already in place (10%, with a 5-year carry forward for gifts above 10% ceiling). Under the new law, charitable contributions disallowed under the 1% floor may be carried forward only from years in which the corporation’s charitable contributions exceed the 10% limit. The Joint Committee on Taxation estimates that the provision will raise $16.6 billion over a 10-year period. The 1% floor on corporate charitable giving is estimated to eliminate $4.2-$4.8 billion in charitable donations per year, according to a study by Ernst & Young. This includes small, local companies such as those that make small gifts (i.e. donating jerseys to the local team). This reduction in charitable funds will negatively impact services and charitable activities in local communities, which is why charitable sector advocates generally oppose both floors and ceilings on charitable giving incentives.
New 0.5% Floor on Charitable Giving for Itemizers (Sections 70111 and 70425)
The final law caps the value of all itemized deductions at 35% of taxable income for high income taxpayers (or $0.35 for each dollar of itemized deductions. Current law caps this at 37% (or $0.37 per dollar). The 35% limit on itemized deductions would eliminate at least $4.1-$6.1 billion in charitable donations per year, according to research from the Lilly Family School of Philanthropy at Indiana University.
Additionally, the new law creates a 0.5% floor on charitable contributions for itemizers, meaning individuals who itemize would only earn a charitable deduction for giving that exceeds 0.5% of their adjusted gross income (AGI). Similar to the corporate changes above, this combination of a floor and a lower ceiling weaken the incentives giving incentives for major donors.
MONITOR
Increased Standard Deduction (Section 70102)
The final law makes permanent the increased standard deduction from the 2017 tax cuts, further increases it to $16,000 ($32,000 for joint filers) for 2026, and pegs it to inflation in future years. This will further limit the number of tax filers who itemize their deductions. As a result, there will be fewer itemized donations to charitable organizations, which may impact charitable giving overall – but the inclusion of the non-itemizer deduction should help offset this. Charitable giving advocates will be watching the net impact of these changes in the coming years.
Increased Taxes on Private University Endowments (Section 70415)
Similarly to the proposed foundation excise tax increase (below; removed from final law), private universities and colleges with more than 3,000 students that hold endowments will see higher excise tax rates, although the final rates are significantly lower than what the House originally proposed. While Forefront did not take a position on the higher ed endowment tax increase, as stated by Council on Foundations, “this does not directly impact charitable grantmaking foundations, but it reflects continued skepticism among lawmakers toward endowed funds and the policies and practices for how such funds are distributed” [emphasis added]. New tax tiers would be as follows based on endowment-dollars-per-student:
- >$2 million per student = 8%
- $750,000 – $2 million = 4%
- $500,000 – $750,000 = 1.4% (current rate)
Charitable Contributions to Scholarship-Granting Organizations (Section 70411)
Currently, charitable contributions to scholarship-granting organizations are treated like any other contribution to a charitable organization. The new tax law creates a permanent, nonrefundable tax credit of up to $1,700 for cash contributions made to organizations granting scholarships to private or religious elementary and secondary schools, for all taxpayers, including those who do not itemize. JCT estimates the House provision would cost $25.9 billion over 10 years. While Forefront does not historically take a position on private school scholarships, we have concerns about this provision, because it creates a charitable credit for one specific type of charitable organization, rather than to all section 501(c)(3) public charities, which is inequitable. This program is akin to Illinois’ former Invest in Kids State Income Tax Credit, which the General Assembly allowed to expire in 2024.
Money Account for Growth and Advancement (Section 70204)
In general, private foundations cannot make charitable distributions to individuals except in certain cases (e.g., scholarships, fellowships, prizes or awards) and with IRS pre-approval. In a departure from this norm, the final law creates tax-preferred accounts, which are a trust created or organized for the exclusive benefit of a child, jump-started with a contribution from the government. The accounts may accept after-tax contributions until the child is eighteen, up to a maximum of $5,000 a year. Section 501(c)(3) charitable organizations can contribute to these accounts and are exempt from the $5,000 maximum. But, 501c3s must provide equal contributions to a large group of these accounts that share a similar location, residence of the children, school districts, or another basis deemed appropriate by the Secretary. Once the child turns eighteen, withdrawals from the account, which would be taxable, can be used for certain qualifying expenses, including education and the purchase of a home – which is more broad in purpose than is currently allowed under 529 accounts. JCT estimates the House provision would cost $4.47 billion over 10 years. This provision may provide an additional tool for foundations to support children in a given community. However, the tax benefits are limited and many advisors recommend maxing out on 529s first.
Other Key Provisions
- Child Tax Credit: The final bill permanently increases the CTC to $2,200 per child beginning in the 2025 tax year, and indexes this max credit to inflation in future years
- Debt Limit: The final version increased the debt limit by $5 trillion
- Expanded Deduction for Seniors: The final law includes an additional income tax deduction for individuals 65+ of $6,000 that make <$75,000. Contrary to some accounts, the law does not eliminate all taxes on Social Security. But this expanded deduction helps offset the cost of some tax.
- Immigrant Impact: See Social Current‘s analysis for immigrant fee info. See National Immigrant Law Center’s full analysis of impact on immigrant communities and more info from Protecting Immigrant Families. The law also creates a new 1% excise tax on international remittances sent by individuals who live in the United States but are not U.S. citizens or nationals; only applies to transfers made with cash, money order or similar forms of money and not to those made from a bank account or financial institution
- Inflation Reduction Act Spending: The new law rescinds many investments made by Congress under the IRA. Previously, National Council of Nonprofits filed litigation – and secured a preliminary injunction – in federal court to prevent the Administration from unlawfully withholding these investments and resources
- Paid Leave Tax Credit: Makes permanent the paid leave tax credit known as Section 45S
- Student Loans: See BGA’s recent report on impact in IL and Social Current‘s analysis
- Taxes on Tipped Wages and Overtime: The final version exempts some tipped wages and overtime pay from income tax, but caps the exempt amount at $25,000 per individual for tips, and at $12,500 per individual and $25,000 per couple for overtime. Those deductions start to phase out $150,000 in income per person.
Proposed, But Not Included in Final Law
Increased Excise Tax on Private Foundations (Oppose)
One of the provisions proposed to “pay for” for other tax cuts was increased excise taxes on private foundations (House Section 112022). Joint Committee on Taxation (JCT) estimated this would generate $15.875 billion over 10 years. The proposal would not have impacted community foundations, but was considered a slippery slope that could lead to more widespread taxes on charitable organizations in the future and significantly reduce grant-making (~$170M est. in IL alone; $2B nationwide) at a time when nonprofits are already losing operating dollars due to federal cuts, inflation, and tariffs. Read Council on Foundations’ (COF) statement in opposition to this proposed tax increase. The proposed rates, which were deleted by the Senate and are not included in the final law, were according to asset size, as follows:
- >$5 billion = 10%
- $250 million to $5 billion = 5%
- $50 million and $250 million = 2.8%
- <$50 million = 1.4% (current rate)
Increased and Expanded Unrelated Business Income Tax (UBIT [Oppose])
Under the House bill, UBIT would have expanded to include any qualified transportation fringe benefits, such as transit benefits or parking benefits, for charitable organizations (except church-affiliated organizations). In essence, this proposal applied an income tax on an expense. UBIT passed in 2017 and was subsequently retroactively repealed on a bipartisan basis, due to the confusing nature of applying an income tax on an expense and the difficulty of quantifying the expense of certain benefits such as the cost of a parking spot already owned by a charitable organization. The Senate deleted this provision, and the final law did not include UBIT. Read NCN’s UBIT Fact Sheet.
Giving Treasury Authority to Revoke Nonprofit Status of Certain Organizations (Oppose)
The House bill originally contained a slightly updated version of 2024’s notorious H.R. 9495, a bill opposed by virtually every nonprofit entity last year (Section 112209). Advocates should remain on guard against the return of this proposal as a stand-alone bill in the future. If enacted, this would allow the Secretary of the U.S. Department of the Treasury to unilaterally revoke the nonprofit status of “terrorist-supporting organizations,” without requiring the Secretary to share full evidence or ensure due process. While nonprofit organizations unequivocally oppose terrorism in all forms, any such enforcement action must still be grounded in transparency, evidence, and the rule of law. This authority could enable any administration of any political party to target charitable organizations based on ideological grounds. Nonprofit organizations wrongfully designated would be irreparably harmed, losing the trust of donors and the communities they serve. Forefront and many others strongly opposed this section of the original House bill; read Independent Sector and Council on Foundations’ joint statement in opposition.
10% Fee on Combined Federal Campaign (CFC) Contributions
The Senate removed a proposed 10% fee on payroll deductions (previously Section 90104), according to CHC: Creating Healthier Communities, which could have negatively impacted CFC donations. Forefront did not take a position on this proposal, but many of our national partners did; see the Nonprofit Aliiance’s letter. It was not included in the final law.
Penalty For Providing Health Insurance to Noncitizens
The final version of the bill does not include a provision penalizing states like Illinois that also provide state-funded health care to noncitizens who do not have lawful status to be in the United States.
Artificial Intelligence Regulation Moratorium
Both the House and Senate bills originally included provisions that would curtail States’ ability to regulate AI. The National Association of Attorneys General opposed this provision in a 5/16 letter to the Speaker. These provisions were stripped in the Senate. Read this Roll Call summary for more information.
Other
The Parliamentarian ruled against a long list of provisions that would have otherwise been included in the law; read more info. The far-right House Freedom Caucus also published a 3-page memo just before final passage about what’s not in the bill – but they voted for it in the end without any of these changes being made.
