Nonprofits and businesses developing corporate partnerships in 2026 must prepare for a significant shift in the tax landscape. The One Big Beautiful Bill Act is set to introduce a 1% floor on corporate charitable deductions. This means a corporation’s charitable contributions will only be deductible if they exceed 1% of the company’s taxable income. For businesses with smaller or less consistent giving programs, this change may severely reduce the tax incentive for philanthropy, potentially leading some to reduce or halt their annual giving.
Strategic Adaptations for 2026 and Beyond
To meet this evolving challenge, both sectors must adapt their partnership strategies.
For Businesses and Nonprofits
Implement “Bunching” Strategies
- Focus on negotiating larger, multi-year partnership commitments. This allows the company to concentrate contributions into specific tax years, ensuring the total donation clears the 1% threshold and maximizes the tax benefit.
- Explore Alternative Structuring of Cause Marketing Programs: Companies engaging in cause marketing can explore structuring of its cause marketing partnerships to generate royalty payments (in exchange for the use of the nonprofit’s name or logo) rather than traditional charitable donations, which may offer a different path for deductibility.
For Nonprofits
Deepen CSR Alignment
- Shift the focus from short-term campaigns to long-term partnerships that are inextricably linked to the corporate partner’s core values and robust CSR goals. Partnerships that demonstrate strong, long-term social impact will prove more sustainable than those driven purely by annual tax incentives.
By proactively adjusting their financial and engagement strategies now, both businesses and nonprofits can ensure their collaborations continue to thrive and generate meaningful impact despite the evolving tax rules.
This update was originally published in the December 2025 email newsletter of the firm’s long-term partner, Engage for Good— the leading community where cause meets commerce.
