On July 4, 2025, President Trump signed the bill known as H.R. 1 into law. This bill contains many tax provisions that will impact the American taxpayer. In this alert, our BRC Tax Professionals, will provide an overview of the most relevant nonprofit tax provisions contained in the bill and the impact they may have on you and your business.
The Bill imposes a new tax on the net investment income of applicable educational institutions. Applicable educational institutions include private colleges and universities with enrollment of at least 3,000 students, more than 50% of which are located in the United States, and with a student adjusted endowment of at least $500,000. The tax is imposed at a graduated rate, dependent upon the amount of the student adjusted endowment.
Effective Date: The provision becomes effective for taxable years beginning after December 31, 2025.
Previously, certain tax-exempt organizations were subject to a tax on remuneration paid to their five highest compensated employees, or former employees for any preceding taxable year beginning after December 31, 2016, in excess of $1,000,000. The Bill expands applicability of the tax to all covered employees, including former employees for any preceding taxable year beginning after December 31, 2016, receiving remuneration in excess of $1,000,000, rather than only the five highest compensated employees.
Effective Date: The provision becomes effective for taxable years beginning after December 31, 2025.
Note: The provisions discussed within this alert are federal tax provisions. The various state taxing authorities may or may not conform to these newly enacted federal provisions.
If you have any questions about how this impacts you or your business, please don’t hesitate to reach out to your trusted BRC tax advisor.
To read other alerts associated with the passing of this bill, click here.