Tax Reconciliation 3.0: What Nonprofits Should Watch

What happened:  On July 22, the House narrowly passed H.Con.Res. 113, 216-214, along party lines, adopting the budget resolution that opens the door to a third partisan reconciliation bill this Congress. Two Republicans and one Independent, joined all Democrats in voting no. The resolution instructs four House committees to write $95 billion in new spending: Armed Services ($60 billion) and Intelligence ($13 billion) — together roughly $73 billion tied to the cost of the ongoing U.S.-Iran conflict — Agriculture ($12 billion) for farm assistance tied to tariff- and war-related cost increases, and House Administration ($10 billion) for election-related grants designed to incentivize states to adopt elements of the SAVE America Act, including voter ID and proof-of-citizenship requirements. 

The nonprofit angle:  As passed, this version of Reconciliation 3.0 does not currently reopen the tax code. But he Nation Council of Nonprofits (NCN) is not waiting to find out whether that changes: it has published a new set of principles — Protecting America’s Charitable Nonprofits — urging Congress to ensure any 2026 tax reconciliation package: (1) rejects further cuts to safety-net programs that push demand onto nonprofits; (2) extends employer tax incentives (like the Work Opportunity Tax Credit and family/medical leave credits) to nonprofit employers, who are currently shut out because they don’t pay income tax; (3) protects and strengthens charitable giving incentives rather than adding new floors or caps; (4) avoids new taxes or fees on foundations and nonprofits as a funding offset; (5) protects nonprofit tax-exempt status from politically motivated revocation; and (6) rejects new criminal liability, foreign-funding restrictions, advocacy limits, or reporting burdens of the kind now moving through Ways and Means (see above). 

Why it matters:  Some House Republicans have already voiced disappointment that this package doesn’t go further, and discussion of a possible “Reconciliation 4.0” has begun — meaning the tax-writing committees could still be brought into a future reconciliation vehicle later this year. NCN’s principles are meant to be ready if and when that happens. 

Where things stand:  The measure now heads to the Senate, where Majority Leader John Thune has not committed to floor time before the August recess, and several Senate Republicans have expressed reservations about the package — both its lack of spending offsets and the political exposure of an amendment-heavy “vote-a-rama.” Budget experts also doubt the SAVE America Act-related grant provisions would survive the Senate’s Byrd Rule review, which strips non-budgetary provisions from reconciliation bills. PANO and NCN will continue to track whether the tax-writing committees are added to this or a future package.