Hochul Tax Plan for Charities Could Reshape Business Philanthropy

New York Gov. Kathy Hochul’s (D) proposal to safeguard the deductibility of charitable donations against state taxation—even when tax-exempt status may be revoked at the federal level—is being pitched as a defensive measure to protect donors and institutions from political and regulatory crosscurrents.

But the plan carries broader implications for businesses. It has the potential to reshape how corporate philanthropy is planned, how risk is priced into charitable partnerships, and how New York is positioning itself as a buffer against federal tax uncertainty while sticking to opposition in Albany to raising taxes.

New York is moving to preserve the status quo for donors as much as possible as Washington sharpens its scrutiny of nonprofits and universities. At its core, the governor’s proposal would narrowly decouple New York’s treatment of charitable deductions from federal determinations about tax exempt status.

Donations to organizations that lose their federal tax-exempt status would continue to qualify for a charitable deduction for New York income tax purposes, provided the organization otherwise meets state criteria.

The measure is a direct response to heightened federal scrutiny of nonprofits and universities, especially those that have found themselves in politically or culturally oriented crosshairs of the second Trump administration. By insulating donors from the downstream tax effects of federal enforcement actions, the proposal hopes to signal that Washington’s priorities would at most dull the impact on the flow of charitable capital within New York.

But that insulation only goes so far. Preserving state income tax deductibility does nothing to restore the valuable federal charitable deduction once an organization loses its tax-exempt status. For some donors, the federal component of deductibility may be significant enough by itself that the state’s preservation of the deduction won’t be enough to change their minds about donating.

The measure isn’t designed as a cure-all; it aims to reduce the financial and behavioral shock that might otherwise cause donations to dry up overnight. For many businesses, especially those with significant New York tax exposure, preserving state deductibility still materially lowers the after-tax cost of giving and keeps long-term partnerships viable while federal disputes play out.

That insulation could translate into an important layer of predictability in corporate giving. Large companies routinely make multimillion-dollar donations to universities, hospital systems, research institutions, and community nonprofits as part of long-term strategic planning. Those gifts often are intertwined with workforce development pipelines, sponsored research agreements, brand positioning, and environmental, social, and governance commitments.

Federal uncertainty—especially the prospect that a recipient’s tax status could change midstream—creates risk that could delay or derail those investments. Hochul’s proposal effectively would assure businesses that their New York tax treatment would remain stable even during volatile periods.

The implications are particularly significant for corporations with deep ties to higher education. Universities aren’t just charitable recipients; they’re major employers, innovation hubs, and economic anchors. Corporate donors frequently support endowed programs, research initiatives, and capital projects that span decades.

The new proposal aims to stabilize funding avenues that support those broader economic ecosystems as much as possible. In practical terms, this could make businesses more willing to maintain or expand partnerships with institutions that might otherwise be viewed as presenting added risk for political or cultural reasons.

The proposal also raises practical, nuts-and-bolts considerations for tax, finance, and compliance teams. If enacted, businesses would need to navigate a split regime in which charitable deductions are treated differently for federal and New York purposes, increasing tracking, documentation, and reporting complexity.

Pass-through entities would need to assess owner-level implications under New York’s personal income tax, while multistate corporations may need to factor state-only deductions into effective tax rate calculations and deferred tax accounting. Companies also could revisit internal approval processes for charitable giving—particularly where recipient organizations face heightened federal scrutiny—to ensure continued eligibility under New York standards and alignment with broader risk-management policies.

By preserving state deductibility, New York could subtly influence where corporate philanthropy is directed. There are still unknown details, including how broadly the protections would apply, how state eligibility would be defined, and whether additional guardrails would be needed.

Similar state-level decoupling measures may spread, and New York may become a template for at least partially insulating local economies from the impacts of federal tax determinations.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

David C. Wilkes is property tax and valuation strategy partner in Cullen and Dykman’s corporate department in New York.

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