The One Big Beautiful Bill Act (OBBBA) bundles together sweeping changes to tax policy, tax-exempt entity compensation and perks, higher education funding and housing.
While some previously popular tax credits are made permanent, other areas of the law could change how organizations pay or offer benefits to their key team members.
We have provided a concise overview of the major provisions in the law that could impact your organization and/or employees.
Please note: While we are aware of the sweeping changes to Medicaid coverage, provider payments and other tax-related provisions that impact health and human services entities and regional centers, we will address those changes in another blog post to give them proper analysis.
Please contact your not-for-profit, affordable housing consultants and tax team at LvHJ for questions about your specific tax impacts and opportunities.
Credits and Tax Breaks
The popular Low Income Housing Tax Credit (LIHTC) received a boost. Starting in 2026, the OBBBA permanently increases the annual per-capita, 9% LIHTC allocation by 12% above the baseline that would otherwise apply. Since the 9% tax credit is often used for new construction, this is a welcome change for multi-family housing developers. For example, a state with 5 million people could receive about $1.8 million more annually in LIHTCs using the 2025 multiplier of $3.00 per person. This could significantly enhance low-income housing production and preservation, particularly for small states.
The 2026 multiplier has not yet been announced.
In addition, the new law lowers the private activity bonding threshold from 50 percent of land and building costs to 25 percent. At least 5 percent of the aggregate land and building costs must be financed by private activity bonds issued after December 31, 2025.
Onto the New Markets Tax Credit (NMTC); the OBBBA makes the NMTC and the Opportunity Zone (OZ) program permanent to stimulate development in designated low-income communities. OZ now defines a low-income community differently from NMTC.
Due to the unilateral elimination of many green energy tax incentives established during the Biden administration, affordable housing developers and owners will no longer have access to the Green and Resilient Retrofit Program for Multifamily Housing. The program was designed to provide allocated federal monies for energy efficiency and resilience upgrades in low-income multifamily housing.
The OBBBA allows individuals and corporations to receive a federal deduction for charitable donations. Individuals can deduct up to $2,000 (married filing jointly); $1,000 for single filers. In addition, corporations can deduct any charitable contributions if the total amount exceeds 1 percent of taxable income; the 10 percent ceiling on charitable deductions remains in place. It is unclear at this time whether this new provision will enhance or inhibit corporate philanthropy due to the extra layer of compliance.
Compensation and Benefits
An excise tax on highly compensated employees of a nonprofit organization has been expanded. The 21 percent tax applied previously to only the top five highest paid employees earning over $1 million annually now applies to all earners compensated above $1 million.
Other Significant Provisions for Not-for-Profits
A significant change for certain private college and university endowments is applied tax through a tiered system.
The excise tax is applied to institutions with at least 3,000 students enrolled.
In addition, not-for-profits that work with disadvantaged or at-risk populations on Medicaid will see a significant change to the laws governing access to Medicaid in the future.
- Beginning January 2027, able bodied adults may need to demonstrate 80 hours per month of work, community service, education or a combination to qualify.
- As of October 1, 2026, Medicaid payments will be limited to US citizens/nationals and lawfully admitted permanent residents.
- States will be required to conduct redeterminations every six months.
- The bill creates a more restrictive environment for Medicaid provider taxes and Medicaid Managed Care payment rates.
- Fewer participating providers and potential hospital closures may make it harder for Medicaid-covered patients and the general population to receive efficient care.
- Coverage for mental health or certain therapies may be limited by States to reduce costs.
Look for our future blog post on Medicaid and Medicare updates.
Here at LvHJ, we continue to review the OBBBA to guide our clients on tax planning and operational strategies at the federal and state levels. Let us know if you have questions about your organization’s planning needs for California or federal compliance.
Next: OBBBA Key Provisions for Individual and Business Taxpayers
