A change buried in the One Big Beautiful Bill Act altered the corporate charitable contribution deduction in a way that is easy to miss but financially meaningful for any larger retail or CPG business with an active giving program. Under prior law, corporations could deduct charitable contributions up to 10% of taxable income, starting with the first dollar contributed. Beginning in 2026, there is a floor. A corporation can only deduct contributions to the extent they exceed 1% of taxable income. Everything below that threshold is no longer deductible. The 10% ceiling still applies. It is just that the first 1% of taxable income in contributions now generates no deduction at all.
For a company with $5 million in taxable income, the floor is $50,000. If that company gives $50,000 to charity this year, it gets zero deduction. If it gives $75,000, it gets a $25,000 deduction, which is the amount above the floor. At a 21% corporate rate, the deduction on that $25,000 is worth $5,250. Compare that to what the same $75,000 contribution was worth under prior law, when the full amount was deductible and the tax value was $15,750. The after-tax cost of giving increased meaningfully for companies in the floor range. For companies with modest giving programs at or below 1% of taxable income, the entire deduction effectively disappeared.
There are a few ways to respond to this. Companies whose giving is spread across many small donations, local event sponsorships, and employee matching programs may find that consolidating contributions into fewer, larger gifts above the floor restores meaningful deductibility. A donor advised fund is a practical tool for this. You contribute a larger amount in one year, claim the deduction in the year the contribution is made, and distribute grants to specific charities over multiple years on whatever schedule works for your giving goals. Companies using philanthropy as part of their retail brand identity should also separate the deductibility analysis from the strategic and brand value analysis. The deduction change may make certain programs less tax efficient, but that does not mean they are not worth doing for other reasons.
Bottom Line: The 1% floor on corporate charitable deductions is in effect now. If your company has a giving program, recalculate the after-tax cost using the new floor, update your 2026 accruals, and consider whether consolidating contributions above the threshold makes sense for your giving strategy.