Supreme Court sided with Catholic Charities in tax exemption case
The Supreme Court ruled that the state of Wisconsin violated the First Amendment by denying tax exemptions to chapters of Catholic Charities.
Unbranded – Newsworthy
If you go on vacation, return to work, and realize that something is missing, you’re probably right.
President Donald Trump’s flagship tax and spending package cuts certain corporate tax credits, forcing companies to consider whether to continue offering some workplace perks. For example, tax credits for snacks, meals and charity work have changed, while credits for bike commuting allowances and most moving expenses have been permanently eliminated.
Many Americans were probably caught off guard. Most people are aware of the major tax provisions that directly affect them, such as tax exemptions for tips and overtime, and the super-senior exemption, but they have not paid attention to changes in companies. But some of these changes could affect compensation and benefits for mid-sized and larger employers who help pay for the headline-grabbing tax provisions, tax experts say.
“Companies evaluated how the changes affected their business and what benefits they could or could not provide,” said Miklos Ringbauer, a certified public accountant in Los Angeles.
“Is it time to donate?”
Starting this year, businesses will have to clear a 1% hurdle before they can begin receiving charitable deductions. The maximum deduction remains at 10% of taxable income.
Amounts in excess of the 10% limit and the 1% minimum amount can be carried forward and deducted for five years. Otherwise, you will permanently lose your 1% floor amount.
- If a company’s 1% floor is $10,000 and contributions reach $50,000, the company can deduct $40,000 and carry forward $0. If donations reach $110,000, the company can deduct $90,000 and carry forward $20,000.
Joe Phoenix, chief executive of giving platform Givinga, said the 1% floor is also important from a numbers perspective because it “happens to match the amount that companies have given to charity year after year since the 1990s, which is 1% of their taxable income.” “What we’re watching is how American companies respond.”
The Congressional Joint Committee on Taxation (JCT) estimates that the new floor will generate about $16.6 billion in federal tax revenue over 10 years.
The fear is that with the incentive to donate gone, companies will withdraw their corporate donations, such as by eliminating internal matching with employees. A study commissioned by the Independent Sector estimates the average annual decline in corporate philanthropy to be around $4.5 billion.
The 1% floor “effectively penalizes low-to-moderate corporate philanthropy,” Jake Wood, CEO of giving platform Groundswell, said in a LinkedIn post. “So a company with tight profit margins that donates only 0.5% of its profits to charity will no longer be able to deduct that amount. What are you going to do with doubling your donation? The chances are almost zero.”
Mark Gallegos, a partner at accounting firm PorteBrown, said so far the companies he has worked with have not stopped donating. The lost charitable contribution deduction can be made up with other provisions that benefit businesses, he said.
The 100% bonus depreciation deduction was permanently reinstated for eligible assets and extended to new categories of assets retroactively in 2025, and the cap that small businesses can immediately deduct for assets purchased and in use, for example, was doubled to $2.5 million.
Additionally, Gallegos pointed out that this floor only applies to C corporations, which make up the smallest percentage of businesses. The Tax Foundation estimates that in 2014, sole proprietorships accounted for 69.8% of all private businesses, compared to 8.1% for C corporations.
pack a lunch box
Business deductions for the cost of food provided to employees expired on December 31st. That means food and benefits given to employees to pay for food will be taxed, forcing companies to reevaluate whether to keep the perks.
According to the 2025 Society for Human Resources Management Employee Benefits Survey, 44% of companies surveyed said they offered free snacks and drinks, 78% offered free coffee, and 10% offered free or subsidized company meals in their company cafeterias. JCT estimates that eliminating the deduction would result in more than $32 billion in additional taxes for employers by 2034.
Many companies, especially giants like Google, probably won’t eliminate meal service. Because research shows that meal perks bring people to the office and make them work harder. According to data from food ordering platform ezCater, two out of three workers say free meals make them more productive, and 54% say free or subsidized meals are the perk they appreciate most at work.
Instead, companies may scale back their offerings or offer less lavish spreads, experts said.
It’s cheaper to stay still
Deductions for bike commuting and moving expenses have been permanently abolished. Employers can no longer reduce federal taxes by reimbursing employees $20 a month to bike to work or paying for employees’ transportation to work. The moving expense deduction is currently available only to eligible active duty military and members of the intelligence community.
In 2017, some experts estimated that commuter benefits cost the government $5 million a year. Junction estimates it will save $852 million over 10 years through limited moving expense deductions.
Eliminating the relocation deduction means the cost will be taxed to the company and its employees. Law firm Cromwell wrote in a post that this “continues to catch employers and employees by surprise.” “Payments are subject to all applicable withholding taxes, so employers often need to increase the amount they pay for moving expenses or discuss the tax implications with employees before payments are made.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
