The One Big Beautiful Bill Act (OBBBA) impacted a number of provisions to the Internal Revenue Code — from federal estate, gift and generation-skipping transfer taxes to renewable energy credits and opportunity zones. 

A relatively small provision in the OBBBA with a big impact was an amendment to Code Section 170 that imposes a 1% floor on corporate charitable deductions. The OBBBA kept in place the 10% ceiling.

Beginning January 1, 2026, a corporate taxpayer may claim a charitable deduction under Code Section 170 only if the charitable contribution exceeds 1% of the taxpayer’s taxable income and does not exceed 10% of their taxable income. 

For example, if a corporate taxpayer has $1 million of taxable income, the 1% floor would be $10,000 and the 10% ceiling would be $100,000.

• If contributions are less than $10,000, none of the contributions would be deductible (under the 1% floor)
•  If contributions are $30,000, then only $20,000 would be deductible ($30,000 minus $10,000 floor)
• If contributions are $150,000, then only $90,000 would be deductible (reduced by the 1% floor and capped by the 10% ceiling)

Additionally, the OBBBA amended the carryforward rules for disallowed charitable contributions below the 1% floor and above the 10% ceiling. Disallowed charitable contributions above the 10% ceiling may be carried forward to the succeeding taxable year.

However, disallowed charitable contributions below the 1% floor may only be carried forward to the succeeding taxable year when the 10% ceiling was exceeded. We note that while the statute is silent, we expect the disallowed charitable contributions below the 1% floor to disappear where the ceiling is not exceeded. 

Finally, disallowed charitable contributions may only be carried forward for five years, applied on a first-in, first-out basis.