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The New Floor and Ceiling: How Tax Law Changes Will Impact Corporate Giving

Every day, we partner with companies of all sizes to align charitable giving with both the business’s goals and community needs. Many businesses support local nonprofits through direct contributions or by establishing a corporate fund with us, and this type of planning not only benefits the community but also allows companies to take advantage of the charitable tax deduction.

New rules are on the horizon, though, and they may significantly change how your business approaches giving in the future. If you lead a company, now is the time to take a closer look at your strategy.

A New Floor on Deductibility

Beginning in 2026, corporate charitable deductions will be subject to a new “floor.” Corporations will only be able to deduct donations that exceed 1% of their taxable income. This means smaller gifts will no longer qualify.

Say a company reports $100 million in taxable income. The first $1 million in donations is not deductible, but contributions above that threshold become eligible. The worry here is that this change could slow down corporate giving, which has reached record levels recently.

The Ceiling Still Applies

The long-standing IRS rule that caps corporate charitable deductions at 10% of taxable income will remain in effect. That means both the 1% floor and the 10% ceiling will apply simultaneously. In practice, deductions will be allowed only for contributions that fall between those two limits.

While donations outside of the deductible range can be carried forward for up to five years, the carryforward rules are not straightforward. In a future year, carried-forward contributions can only be deducted if your total giving exceeds the 1% floor and does not push you over the 10% ceiling. This adds a new layer of complexity to corporate giving strategies.

What Companies Should Do Now

Even though the new rules do not begin until 2026, businesses should act quickly. Reviewing your company’s giving strategy in 2025 can help maximize deductions under the current system. A corporate donor-advised fund at the community foundation may be a particularly effective tool for planning and flexibility before the floor goes into effect.

Consider Sponsorships

It’s also worth remembering that charitable sponsorships may still be deductible as marketing expenses if they provide a clear business benefit, such as advertising. To qualify, the sponsorship must offer measurable promotional value to your business. On the nonprofit’s side, the organization may need to report the support as unrelated business income. This makes it important to work closely with both your accountant and the nonprofit to get the details right.

Partner with the Community Foundation

The upcoming changes to corporate deduction rules highlight the value of careful planning. Corporate giving is more than writing a check—it’s about creating impact while making smart financial decisions for your business. Our team at the community foundation is here to help you navigate these shifts so your generosity continues to benefit both your company and the community.