Case Studies
Case Study: How a Nonprofit Navigates the New 'One, Big, Beautiful Bill' Regulations
With fresh rules under OBBB, nonprofits must reassess compensation, organizational structure, and reporting to stay compliant—see how one typical 501(c)(3) charity adapts.
By NomadicTax Research Team • 5-8 min read • July 21, 2026
“Helping Hearts International” is a mid-sized U.S. 501(c)(3) nonprofit focusing on global relief. With recent policy shifts under the One, Big, Beautiful Bill (OBBB), the organization faces new challenges. This case study shows how such nonprofits adapt.
## What’s New under the OBBB for Nonprofits
- **Expanded Covered Employees Definition:** Now any employee earning over **$1 million** could be considered a “covered employee,” not just the top five salaried individuals. Excise taxes and reporting obligations may apply to a broader range of leadership. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-announce-intent-to-issue-proposed-regulations-for-excise-tax-on-excess-tax-exempt-organization-executive-compensation-under-the-one-big-beautiful-bill?utm_source=openai))
- **Exceptions in development:** The Treasury will propose regulations for “limited hours” or “non-exempt funds” exceptions. These may exempt some workers who don’t connect deeply with the organization’s core compensated structure. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-announce-intent-to-issue-proposed-regulations-for-excise-tax-on-excess-tax-exempt-organization-executive-compensation-under-the-one-big-beautiful-bill?utm_source=openai))
- **Effective dates & post-law coverage:** The new definition applies for tax years beginning after Dec. 31, 2025. Note that some retroactive impacts may apply for those already in covered roles under earlier law. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-announce-intent-to-issue-proposed-regulations-for-excise-tax-on-excess-tax-exempt-organization-executive-compensation-under-the-one-big-beautiful-bill?utm_source=openai))
## How “Helping Hearts International” Adjusts
| Area | Actions Taken | Benefit / Avoided Risk |
|---|---|---|
| **Employee compensation review** | Audited all employees earning over ~$900,000 to see who might trigger the $1M threshold. Defer bonuses where possible into future periods if safe and compliant. | Avoids unexpected excise taxes if someone otherwise becomes “covered”. |
| **Contract structure adjustments** | Shifted some payments into stipends or honoraria where “nonexempt fund” status could apply; restructured certain roles to limit hours tied to strategic decisions. | Potentially qualifies for planned exceptions; reduces liability. |
| **Organizational transparency and reporting** | Enhanced salary disclosures, implemented internal policies to track duties and activities; updated bylaws. | Supports compliance under new EO notification requirements; reduces audit exposure. |
| **Board oversight** | Board hired external legal counsel to review pay arrangements; approved policies around severance (“parachute payments”) to ensure excess payments are scrutinized. | Ensures parachute payments aren’t flagged improperly; builds board accountability. |
## Lessons Learned
- **Audit compensation as early as possible** – move perfectly within tax year boundaries to avoid crossing thresholds.
- **Track time & funds carefully** – what counts as ‘nonexempt’ or limited hours may be critical.
- **Get ahead of regulation proposals** – the IRS is asking for comments by **August 4, 2026** on Notice 2026-36. Organizations should monitor and engage. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-announce-intent-to-issue-proposed-regulations-for-excise-tax-on-excess-tax-exempt-organization-executive-compensation-under-the-one-big-beautiful-bill?utm_source=openai))
- **Prepare documentation** – group exemption letter obligations and new forms like **Form 15644** require accurate, timely subordinate data. ([irs.gov](https://www.irs.gov/charities-non-profits/exempt-organizations-update?utm_source=openai))
## Takeaways for Similar Nonprofits
- Review whether any employees are or may become “covered”—budgeting proactively.
- Evaluate duties and hours to see if exceptions (limited hours or nonexempt funds) could apply.
- Ensure bylaws and contracts reflect possible changes.
- Prepare for enhanced reporting, especially for group exemption structures.
**Helping Hearts International** repositioned operations, policies, and reporting ahead of effective dates to avoid surprises—and you can too.