Trust Taxation, Other Types of Taxation, Unemployment Taxation, and Exempt Organizations.
The One Big Beautiful Bill Act impacts trust and estate taxation, unemployment benefits, and tax rules for exempt organizations and charitable deductions. For trusts and estates, while the income tax brackets remain compressed and largely unchanged, the Act makes permanent the increased estate and gift tax exemptions starting January 1st, 2026. This permanence allows individuals and advisors to employ more sophisticated long-term planning strategies with greater certainty.
A notable modification in unemployment taxes focuses on means-testing for benefits. Now, individuals whose annual income exceeds $1 million—based on their most recent tax return—are no longer eligible for unemployment payments, a significant shift from the prior system where benefits were available regardless of other income. This adjustment, effective immediately upon the law’s enactment, aims to direct support where it is most needed, ensuring resources for the majority while generating cost savings.
For tax-exempt organizations and charitable giving, the Act expands the excise tax on excess compensation and introduces a graduated system for large private foundations and universities, with higher rates tied to asset levels beginning January 1, 2025. Additionally, new floors have been established for charitable deductions: individuals must surpass 0.5% of AGI, and corporations 1% of taxable income, to claim deductions. The non-itemizer deduction is also revived and expanded, allowing taxpayers who take the standard deduction to still benefit from charitable contributions up to $1,000 (single) or $2,000 (married). These reforms are designed to enhance revenue from the largest nonprofits and simplify deduction rules while preserving incentives for charitable giving.
Trust and Estate Tax Modifications
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The Act maintains the current income tax treatment of trusts and estates while providing benefits through the increased estate and gift tax exemptions.
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Trust and estate taxation remained largely unchanged from pre-TCJA law.
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The estate tax changes are permanent beginning January 1, 2026.
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Trusts and estates continue to be subject to compressed income tax brackets, with the highest rate applying to income over approximately $15,200.
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The increased estate tax exemptions provide significant benefits for trust and estate planning, while the income tax treatment remains unchanged. The permanent nature of the exemption increases allows for more sophisticated long-term planning strategies.
Unemployment Tax Changes (§73001)
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The Act implements means testing for unemployment benefits, ending payments to individuals with annual incomes exceeding $1 million.
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Unemployment benefits were available regardless of the recipient's other income sources.
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Effective upon enactment.
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The provision applies to individuals whose annual income exceeds $1 million, based on their most recent tax return.
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This change targets unemployment benefits to those who need them most while generating savings for the unemployment insurance system. The $1 million threshold ensures the provision affects only very high earners while maintaining benefits for the vast majority of recipients.
Charitable Deduction Modifications
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The Act establishes floors for charitable deductions (0.5% of AGI for individuals, 1% for corporations) while expanding the non-itemizer deduction.
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No floors existed for charitable deductions, and the non-itemizer deduction had expired.
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Permanent, effective January 1, 2025.
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Individual itemizers must exceed 0.5% of AGI to claim charitable deductions, while corporations face a 1% of taxable income floor. Non-itemizers can deduct up to $1,000 (single) or $2,000 (married) in charitable contributions.
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These changes simplify the charitable deduction while maintaining incentives for giving. The floors prevent nominal deductions from affecting tax liability, while the non-itemizer provision encourages charitable giving among taxpayers who use the standard deduction.
Exempt Organization Tax Changes
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The Act expands the excise tax on excess compensation for tax-exempt organizations and creates graduated tax rates for private foundations and universities.
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The excise tax applied to the five highest-compensated employees of tax-exempt organizations at a flat rate.
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Permanent, effective January 1, 2025.
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The tax now applies to current and former employees, with graduated rates for private foundations (up to 10%) and universities (up to 21%) based on asset levels.
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These changes increase revenue from large tax-exempt organizations while maintaining their fundamental tax-exempt status. The graduated rates target the largest and wealthiest organizations while having minimal impact on smaller nonprofits.