Accounting

OBBBA impact on charitable donation strategies

Published

11 months ago

September 12, 2025

Financial advisors and tax professionals may soon be getting questions from wealthy clients about whether they should ramp up charitable donations before the end of the year.

That’s because the One Big Beautiful Bill Act will trim a small portion of the tax deductions for philanthropy next year among wealthy itemizers. But experts say that other provisions of the massive legislation exempting most estates from taxes or opening other charitable donation avenues could also affect clients’ decisions and long-term plans.

Certainty above the line?

Predicting how new laws will affect charitable giving is inevitably tricky.

“In our experience, why people give isn’t driven by taxes, but maybe how they structure that philanthropy is informed by taxes,” said Sara Montgomery, a partner with the family legacy practice of audit, tax, consulting and wealth management firm Plante Moran. The passage of the law in July filled in some details that advisors and their clients needed to know by the end of the year. Of course, those details could shift with political momentum.

“One thing that is helpful to clients is clarity, for the time being. As simple as that sounds, clarity is a really powerful thing for clients,” Montgomery said. “For those individuals that have larger balance sheets, it could influence the amount that they leave to charity, because they now have such a large amount to pass on estate-tax free.”

She expressed particular interest in watching the ramifications to middle-class donors who will receive a permanent “above-the-line” deduction for non-itemizers beginning in 2026 of $1,000 for individuals and $2,000 for couples filing jointly. The new deduction — a type that directly shrinks a taxpayer’s yearly earnings in its position on the Form 1040 above the calculation of adjusted gross income — will add savings on top of the standard deduction.

It also shows how the alterations to charitable strategies under OBBBA generally will vary based on income, wealth and, especially, whether a household itemizes or not, noted Mike Bisaro, president and CEO of Troy, Michigan-based registered investment advisory firm StraightLine. Non-itemizers could once get the same type of deduction of up to $300 for individuals and $600 for couples, but that was only for 2020 and 2021 through temporary pandemic-era legislation.

“That’s an advantage, and that’s an advantage that can be used by the vast, vast majority of people who are not itemizing anymore,” Bisaro said of the new charitable deduction under OBBA. “For real high earners, it slightly reduced the benefits.”

‘A new adventure’

Importantly, the new deduction applies only to cash donations, and contributions to donor-advised funds do not qualify, according to a guide last month from Leimberg Information Services, which provides training, newsletters and other resources for advisors and other pros with high net worth clients, that was compiled by certified public accountant Robert Keebler of Keebler & Associates and tax lawyer Bradley Burnett of Bradley Burnett Tax Seminars.

That provision and three kinds of limits on charitable deductions available to itemizers constitute the most important ones for individuals’ philanthropic gifts in OBBBA, their guide said. Two of the latter restrictions — a rule that the first 0.5% of a taxpayer’s modified adjusted gross income must be subtracted from any itemizer’s deduction, and a drop of two percentage points for the deductions counted by those in the top income bracket — represent new statutes going into effect in 2026. The third, an existing ceiling of 60% of adjusted gross income for cash donations to qualifying public charities, will remain in place permanently under the new law.

Overall, OBBBA’s charitable-giving provisions amount to much more of a “new adventure” than a simple change in the rules, Keebler and Burnett wrote. Planning and deduction strategies “are suddenly more interesting and bring with them a host of challenges and opportunities,” they concluded. And itemization specifically will loom large in the equation.

“Two camps of individuals are affected: non-itemizers and itemizers,” they wrote. “Planning to optimize the tax benefits of charitable giving is different for each. Bunching of contributions into a particular year is often, but not always, a good move. Sometimes use of a donor-advised fund works well, while other times it’s a disaster. Either way, this new game is all about timing, timing and timing.”

Private school scholarship incentives … to a point

Tax experts who have analyzed OBBBA’s new charitable donation rules generally agree on the significance of itemization under the law. They also point out a completely new tax credit modeled after state-level incentives for scholarships to eligible private schools: The new federal credit of up to $1,700 per taxpayer for contributions to groups called “scholarship-granting organizations” will slash as much as that amount out of their overall bills to Uncle Sam, rather than acting as a deduction from their income, Bisaro and Montgomery noted.

“That could create some additional shifts in how dollars are contributed to nonprofits, because that is a tax credit, which is a unique thing in the world of charitable giving,” Montgomery said. “That credit is available to all individual taxpayers, regardless of whether or not they’re itemizing. That could create some additional incentive.”

The credit will begin in 2027 and add new benefits for donations to organizations that grant scholarships to private K-12 schools, Bisaro noted.

“It’s not a donation that can go directly to the institution, and my understanding is it’s also not a contribution that can be used for a specific beneficiary, like a particular child,” he said. “So that could be something that changes some things around in the future, both on the giving side and what it sounds like the real goal is, to encourage more school choice.”

Other notable guardrails on the credit include those capping the collective national federal benefits at $10 billion, subtracting the level of any state-level credits for such donations and mandating that the organizations cannot favor particular schools or religious groups, according to a briefing on the details last month by the National Association of Tax Professionals.

“While the details are still evolving, the opportunity for taxpayers, especially those with a philanthropic focus to reduce their federal tax liability while supporting education, is worth a closer look,” the brief noted. And the credits “will be awarded on a first-come, first-served basis through an allocation system managed by the IRS.”

Key numbers for itemizers: 0.5% and 2/37 (or 5.4%)

In contrast, the light shave to itemized charitable deductions apply on a more uniform level — with the caveat that the so-called floor of 0.5% will reach every itemizer, and the new dent of two percentage points, also known as a 2/37 limit (basically 5.4%), hits every household in the top federal tax bracket. Essentially, that second restriction means that those high-earning clients will be able to deduct 35% of their donations after adjusting to the new floor, instead of 37%.

“We might see some folks who are wanting to get the most bang for their buck accelerate their giving in 2025,” Montgomery said. “They might do some bunching.”

The combined effect of those new rules and other OBBBA provisions such as the guidelines for an expanded deduction for state and local taxes has prompted some discussions about whether the law could hamper charitable gifts, Bisaro noted.

“I kind of doubt it, personally,” he said. “Some people are going to front-load some things into 2025 where things are a little bit more liberal.”

Focusing on the long term

For charitable donations by individuals, none of OBBBA’s provisions “are earth-shattering, from my perspective,” but they have indeed created circumstances in which “a lot of our clients are really asking themselves, should they be accelerating their giving,” Montgomery said. Advisors and their clients will be taking a fresh look at the implications of OBBBA across the board.

“We always recommend that clients and individuals who are charitably inclined do their philanthropy in the context of their overall plan,” she said. “Sometimes philanthropy gets done in a bit of a vacuum, and it can have ripples as far as someone’s overall financial well-being.”

Accounting

AI-Driven Automation and Continuous Accounting Frameworks

Published

2 days ago

August 15, 2026

Business Finance News

The accounting profession is undergoing a fundamental structural transition as enterprise finance departments shift from periodic month-end closes toward automated continuous accounting models. By integrating specialized machine learning algorithms directly into enterprise resource planning (ERP) platforms, chief accounting officers are transforming financial reporting from a retrospective exercise into a real-time operational asset.

The Shift from Periodic Close to Continuous Financial Reporting
Traditional accounting workflows heavily relied on manual data reconciliation, spreadsheet calculations, and multi-week closing cycles at the end of each fiscal period. In contrast, continuous accounting frameworks utilize automated software agents to process, validate, and post transactional data in real time as business activities occur.

Automated bank reconciliation tools cross-reference incoming bank feeds, invoice records, and purchase orders automatically. By resolving transactional variances instantly throughout the month, corporate accounting teams eliminate the traditional workload spikes associated with quarterly and annual closes.

Machine Learning in Audit Trails and Anomaly Detection
Advanced natural language processing (NLP) and machine learning tools are redefining internal audit and financial control environments. Automated systems analyze 100% of general ledger entries, identifying anomalous transactions, duplicate payments, and unauthorized journal entries in real time.

Rather than relying on random statistical sampling, corporate internal auditors can focus their attention on high-risk flags automatically surfaced by algorithmic monitoring platforms. This continuous risk assessment strengthens internal controls over financial reporting (ICFR) and significantly reduces fraud risk.

Evolving Roles for Accounting Professionals
As routine data entry and manual reconciliation tasks become fully automated, the skill set required for accounting professionals is shifting toward data analysis, system design, and strategic business advisory.
– Systems Governance: Accountants are increasingly responsible for monitoring algorithmic accuracy and managing data integration pipelines.
– Business Partnership: Finance professionals leverage real-time financial dashboards to advise operational leaders on margin management and working capital allocation.
– Regulatory Compliance Management: Accounting teams utilize automated platforms to ensure compliance with dynamic tax codes and international accounting standards.

Core Implementation Recommendations
1. Deploy Automated Reconciliation Tools: Integrate continuous transaction processing modules into existing enterprise ERP architectures.
2. Establish Algorithmic Governance Controls: Implement strict internal testing protocols to ensure automated accounting rules comply with GAAP/IFRS standards.
3. Reskill Accounting Teams: Invest in training finance staff on data analytics, workflow automation, and predictive financial modeling.

Accounting

Global ESG Reporting Standards and Double Materiality Compliance

Published

1 week ago

August 9, 2026

Business Finance News

Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

Accounting

Modernizing Internal Controls: Machine Learning and Continuous Monitoring in Auditing

Published

2 weeks ago

August 5, 2026

Business Finance News

Internal audit departments and corporate risk managers are modernizing internal control frameworks by shifting from periodic sampling techniques to continuous monitoring and machine learning analytics. As operational data volumes increase across enterprise organizations, automated control testing ensures financial integrity, prevents corporate fraud, and streamlines annual audit engagements.

The Limitation of Periodic Audit Sampling
Historically, internal and external auditors evaluated internal controls by reviewing random samples of financial transactions—often analyzing less than five percent of total ledger entries. In complex enterprise environments, periodic sampling methods carry inherent risks of overlooking localized financial misstatements, unauthorized disbursements, or operational control breakdowns.

In 2026, progressive internal audit functions are utilizing automated continuous monitoring platforms that evaluate one hundred percent of financial transactions in real time. Continuous control auditing systems continuously monitor general ledger entries, procurement approvals, and expense reimbursements across all operating subsidiaries.

AI-Powered Fraud Detection and Anomaly Identification
Machine learning models trained on historical corporate financial data excel at identifying subtle transactional anomalies that indicate potential fraud or operational error. Automated systems instantly flag duplicate invoice payments, unapproved vendor creation, unusual journal entry timing, and unauthorized override of authority thresholds.

When an anomaly is detected, the automated auditing platform generates an instant risk alert, allowing internal audit teams to investigate root causes immediately. Early detection prevents minor operational errors from escalating into material weaknesses in financial reporting.

Streamlining External Audit Preparation
Continuous internal control monitoring delivers significant benefits during annual external financial audits. External audit firms can review continuous audit logs and automated control testing documentation, reducing the time required for manual field testing.

This integrated approach lowers overall audit compliance fees, reduces administrative burdens on corporate accounting staff, and provides senior management and audit committees with real-time visibility into the organization’s overall risk profile.

Core Implementation Guidelines
1. Transition to 100% Data Testing: Replace legacy sampling methods with automated continuous audit monitoring systems.
2. Deploy Anomaly Detection Algorithms: Implement machine learning models to identify unauthorized transactions and operational control overrides.
3. Align Internal and External Audit Workflows: Coordinate continuous control testing protocols with external auditors to optimize annual compliance cycles.