H.R.1, the “One Big Beautiful Bill Act,” which President Trump signed into law on July 4, 2025, is certain to impact climate philanthropy and calls for a collaborative response. Putting aside its effects on the national deficit, economic growth, healthcare coverage, immigration, and more, the following update outlines some of the law’s potential effects on climate philanthropy.
The “One Big Beautiful Bill Act” risks decreasing philanthropic funding, hindering climate philanthropy’s ability to support climate organizations. On the positive side, the law permanently adds a charitable deduction for nonitemizers capped at $1,000 for individuals ($2,000 for couples), expanding the charitable deduction beyond itemizers (The New York Times). On its own, Capital Policy Analytics estimates that this provision could increase charitable giving by $40 billion annually. However, this increase would be counterbalanced by a series of provisions that may disincentivize philanthropic giving among the wealthy, including:
- The law increases the standard deduction and caps the charitable tax deduction for the wealthiest donors at 35% rather than the 37% top marginal tax rate (The Chronicle of Philanthropy). In practice, this means that fewer taxpayers will qualify for the charitable deduction and those that do will qualify for a smaller deduction in taxes (e.g., whereas before every $1,000 contributed would result in a $370 reduction in taxes, now every $1,000 contributed would result in a $350 reduction) (Brookings Institute). Given that ~53% of all charitable dollars in the United States in 2024 came from “supersize” donors giving $50,000 or more and ~25% from “major” donors giving $5,000-$50,000, according to data compiled by the Association of Fundraising Professionals Foundation for Philanthropy and GivingTuesday’s Fundraising Effectiveness Project, disincentivizing giving among top earners could result in a disproportionate decrease in charitable giving.
- The law also introduces a new floor of 0.5% of an individual’s income on charitable deductions for individuals who itemize deductions, meaning that itemizers would receive no charitable deduction until their donations exceed 0.5% of their income (Ropes & Gray). This may reduce smaller-scale individual giving among wealthy individuals who itemize deductions.
- The law creates a 1% floor on charitable contributions from corporations, which may “disincentivize smaller-scale corporate giving” (The Nonprofit Alliance, United Philanthropy Forum, the Association of Fundraising Professionals, and Charity Navigator).
While the final version of the law removed an excise tax on large foundations’ net investment income—a proposed tax increase of approximately $2.9 billion, according to a joint letter from the Nonprofit Alliance, United Philanthropy Forum, the Association of Fundraising Professionals, and Charity Navigator—the above provisions may result in a net decrease in philanthropic funding in the United States, threatening climate nonprofits not only in the United States but around the world. Even before the bill, federal spending cuts to date have resulted in over 20,000 nonprofit jobs lost through May 31st, according to The Chronicle of Philanthropy. A reduction in philanthropic spending, on top of additional government cuts, could further erode the nonprofit and climate sectors.
The law is likely to reduce investment in the climate sector. The law rolls back many, though not all, of the Inflation Reduction Act’s (IRA’s) climate credits, including:
- Wind and solar tax credits for businesses: The law phases out tax credits for businesses that build large-scale wind and solar power plants. Under the law, wind and solar projects must begin construction within one year of the bill’s enactment to claim the full tax credits and projects that start after that window must be fully operational by the end of 2027. While this is less severe than the House language, which would have required wind and solar projects to commence construction within 60 days of the bill’s enactment, it still represents a major loss in support for wind and solar projects (The New York Times).
- Nuclear, geothermal, and battery storage credits: The law also phases out credits for nuclear, geothermal, and battery storage projects. The law requires nuclear, geothermal, or battery projects to begin construction before the end of 2033 to remain eligible (versus 60 days after the bill’s enactment for battery, geothermal, and other low-carbon electricity projects and by the end of 2028 for nuclear projects under the original House version). The credits would then phase out completely by 2036 (The New York Times).
- Residential energy and electric vehicle tax credits: The law eliminates residential energy (e.g., rooftop solar, electric heat pumps) tax credits by the end of 2025 and eliminates the $7,500 electric vehicle tax credit by September 30, 2025 (The New York Times).
- Clean hydrogen fuels credit: To remain eligible for credits, the law requires companies that produce clean hydrogen fuels to begin construction on projects by 2027 (versus 2025 under the original House language) (The New York Times).
- Clean energy factory tax breaks: The law terminates the credit for wind power factory components after 2027 and places limits on the credit for companies with ties to “foreign entities of concern.” More on that to come (The New York Times).
Cumulatively, the Tax Foundation estimates that the law will reduce approximately $500 billion in clean energy incentives related to these tax credits over the next half a decade (Tax Foundation). As a result, the cost of new clean energy projects in the United States will rise. For example, the Princeton Zero Lab calculates that future clean energy projects will cost 50% more than those that received the credits (The Atlantic). That said, even as the law slows down renewable investments, investors are likely to continue supporting clean energy projects, since some analysts now calculate that wind and solar energy, even without subsidies, are cheaper than electricity from fossil fuel plants (Scientific American).
The law may also disrupt clean energy supply chains and inject uncertainty into investment decisions. In the end, the final law does not include a tax on “wind and solar projects completed after 2027 if they use a certain percentage of components from China” that industry groups warned would have massively disrupted production (The Wall Street Journal). It also does not include a “revenge tax against countries the US deems to be leveling discriminatory taxes against US firms” after the US struck a deal with G-7 countries (CNN). Some industry leaders feared the provision would have decreased foreign direct investment in the US energy sector, which amounted to over $766 billion in 2023 (Semafor Net Zero). However, the law excludes most manufacturing companies from claiming the electric car and solar panel factory credits if their supply chains are connected to “foreign entities of concern” (e.g., governments, businesses, or individuals associated with China, Russia, North Korea, and Iran). While the final law “narrows” the definition of “foreign entities of concern,” according to The New York Times, uncertainty remains about how regulatory agencies will interpret “material assistance” (Tax Foundation). Given that China is one of the largest suppliers to America’s wind and solar industries, this provision could disrupt the wind and solar industries and inject uncertainty into projects as the industries await final Treasury rules (White & Case).
Taken together, the “One Big Beautiful Bill Act” is likely to reduce climate investments and undermine climate philanthropy’s ability to respond, threatening global climate progress. These effects would be on top of the federal spending cuts in the first half of the year that are already impacting the climate sector. On his first day in office, President Trump signed an executive order to freeze distribution of Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law funds for clean energy (Time Magazine). President Trump has since appealed several legal rulings and has not yet released the funds (Rolling Stone). This executive order is part of a broader effort to scale back climate laws and regulations at the federal and state (e.g., California) levels, as tracked by the Sabin Center for Climate Change Law. The Trump administration’s moves are already resulting in a reduction in investment in climate technology. As reported in The Wall Street Journal, “45 announced projects have been canceled, closed or downsized resulting in 20,000 jobs being lost and $16.7 billion in investments abandoned according to environmental policy advocacy group E2.”
It is vital that climate philanthropy works together to respond to and weather this backlash against the climate sector. The “One Big Beautiful Bill Act’s” impact will not be limited to any one organization; its effects, alongside those of executive orders and regulatory actions hostile to the climate movement, will be felt across the climate ecosystem. Climate philanthropy cannot afford to “wait and see” or try to tackle the crisis alone. Instead, this moment calls for a field-wide, systems-level approach to equip the climate sector with the tools, services, and resources needed to endure and adapt. To that end, Redstone, in the coming months, will share additional ideas for how climate philanthropy can collaboratively mitigate risks, promote resilience, and continue making climate progress even in the face of backlash.
Redstone Strategy Group is sharing its initial thoughts about potential impacts of the Bill and is not providing legal, tax or investment advice. Your legal and financial advisors can provide specific guidance on the Bill’s terms.