When Policy Shifts, Strategy Should Too: What H.R. 1 Means for Nonprofits
The One Big Beautiful Bill Act could reshape your funding, services, and compliance obligations. Here’s what to watch.
The One Big Beautiful Bill Act is now law. On the surface, it’s a sweeping tax and budget package. Underneath, it’s a pile of new constraints nonprofits can’t afford to ignore. Some parts sound technical. Others, abstract. However, for any organization providing food, healthcare, housing, or advocacy, the implications are very real.
First: cuts.
The bill tightens work requirements for Medicaid and SNAP. States will have to enforce stricter eligibility, pushing millions off these programs. When the safety net shrinks, guess who catches the fallout? Nonprofits. Expect higher demand and thinner margins right as funders may start pulling back.
Then come the tax changes.
OBBBA increases the excise tax on investment income for certain private foundations and expands it to include more institutions, such as wealthy colleges with large endowments. This could reduce the amount available for grants or programming, although the tax rate for foundations with assets under $50 million will remain unchanged. It also broadens the 21% tax on high nonprofit executive pay to include some former employees, not just current ones. This change may discourage competitive compensation packages or create hesitation around deferred payouts. Foundations and institutions affected may shift how they structure leadership roles or manage long-term planning.
On the flip side, the new universal charitable deduction, $150 for individuals, $300 for couples, is better than nothing, but it’s not a game-changer. It might encourage casual giving, especially among those who don’t itemize, but it’s not likely to move the needle for most nonprofits. The deduction is capped low and doesn’t meaningfully offset the foundation excise tax hikes or reductions in other incentives. In short, it’s a political talking point, not a structural solution. Organizations relying on small-dollar donors shouldn’t bank on a spike in giving.
What this means:
Foundation giving might tighten. Donor incentives won’t stretch far. If you rely on large grants or high-net-worth donors, your forecasts may need revisiting.
And then there’s the wildcard: tax-exempt status.
The Treasury now has the authority to revoke a tax-exempt status if an organization is labeled as supporting terrorism without a court process or right to appeal. Most nonprofits won’t get flagged, but the provision opens the door to political pressure and overreach, especially for advocacy organizations, immigration groups, and anyone pushing against the grain.
Strategy, Funding, and Advocacy Must Shift Too
Whether you agree with the bill’s politics or not, the implications are hard to ignore. H.R. 1 isn’t just a policy shift; it’s a stress test for your organization’s adaptability. Now is the time to examine your strategy, operations, and risk tolerance with fresh eyes.
The One Big Beautiful Bill Act (H.R. 1) includes key provisions that will take effect at varying times, depending on the section. Many of the tax laws go into effect this year, while Medicaid’s funding changes under the law are not scheduled to take effect until 2028, well past the upcoming 2026 midterm elections. Some work requirements could come earlier, however. They are to begin no later than Dec. 31, 2026. Furthermore, the law does not specifically state when the updated work requirements will begin to take effect for SNAP. There hasn’t been a statement at the time of writing this article from the U.S. Department of Agriculture, which operates the program, regarding a timetable.
Nonprofits should begin planning now, as some changes could affect funding and compliance in the next budget cycle.
Start by asking these and other similar questions:
What happens if your primary funder gives less next year?
What programs become unsustainable if public benefits decline?
Does your team understand what’s changing, and have you clarified your response?
These aren’t theoretical questions. They’re strategic priorities for the next two quarters and beyond.
What to Do Now. With Intention
1. Revisit your strategic plan with urgency.
Pull it off the shelf. Don’t wait for your next board retreat. Does it reflect current realities: increased service demand, tighter funding, and policy risk? If it’s too rigid or outdated, adjust it now. A static plan won’t hold up in a shifting landscape.
2. Scenario plan for real demand shifts.
Pull out your projections for the next few quarters. Don’t just adjust for inflation, model what happens if service demand jumps by 10–20%. Where’s the strain? What could you scale up fast, and what would break under pressure?
3. Reassess your funding mix.
If excise tax hikes make some foundations more conservative, are you exposed? Start flagging which funding relationships might shift. Look at donor trends, too, especially if your base skews toward those affected by the compensation tax or low-level deduction cap. Diversification isn’t a buzzword here; it’s a buffer.
4. Model worst-case funding scenarios.
What happens if your largest grant is reduced by 25%? Or if government reimbursements slow? Build a version of your 2026 budget that includes those stressors so you’re not caught flat-footed.
5. Evaluate program capacity against likely public assistance cuts.
If your organization supports basic needs such as food, housing, or health, anticipate more people showing up. What can you scale? What will need to wait? Create tiers of response based on resource availability.
6. Identify internal risks and decision-making bottlenecks.
If your ED, CFO, or development director left tomorrow, how fast could you adapt? Do you have clear authority and workflows for financial triage, external messaging, and advocacy? Now’s the time to tighten those systems.
7. Map out your advocacy stance.
You don’t need to be a lobbying organization to have a point of view. Clarify what issues matter most to your mission. Consider joining coalitions or making space for public education work. Even if you're not taking a stand, understand the ground you're standing on.
8. Strengthen your policy awareness.
If your work touches advocacy, organizing, or policy, read the fine print. The expanded authority to revoke tax-exempt status carries serious implications. Make sure you understand how this law intersects with your legal and communications strategies. If your org hasn’t done a compliance check-in lately, now would be smart.
9. Reposition internally and externally.
This isn’t just a board-level conversation. Your staff, funders, and partners should understand how these shifts affect your strategy. Get clear on what you will prioritize, where you might pause, and what support you'll need. Alignment now prevents chaos later.
10. Plan for strategic communications, not just services.
As the policy climate changes, stakeholders will have questions. Funders will want clarity. Staff will need direction. Have talking points and public messages ready. Don’t be reactive
The fallout from OBBBA won’t happen all at once. It’ll come slowly. Less grant flexibility here, more demand there, and eventually, a moment when your plan either flexes or falters. Plan like you know it’s coming. Because it is. Strategy isn’t about guessing the future. It’s about preparing to act when the moment shifts. Start now, while you still have room to move with intention.
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