Jul 17, 2020 - 3:45pm

Clarification Check: Congress Ensures Relief for Nonprofits


Special Assistant to the President

Since the passage of the CARES Act, the narrative surrounding the economic stimulus package has been centered on the essential support provided to businesses and unemployed individuals. One of the lesser known provisions in the CARES Act includes relief for nonprofit organizations. Last week, congress passed legislation ensuring that nonprofits can enjoy this benefit without having to cut through bureaucratic red tape.

When it comes to Unemployment Insurance (UI), there are generally two types of employers, contributing and reimbursing. Contributing employers, usually for-profit businesses, pay a UI tax based on a variety of factors. These taxes fund a state’s unemployment trust fund. Reimbursing employers are comprised of 501(c)(3)s, state government agencies, and Indian Tribes. As the name suggests, reimbursing employers reimburse the state dollar-for-dollar for all UI benefits claimed by former employees. The CARES Act provided relief to reimbursing employers by picking up half the tab owed to each state. However, guidance published by the Department of Labor forced reimbursing employers to pay 100% of their bill in full before receiving a 50% reimbursement check. Congress now seems to have fixed this problem.

In a June 9 statement to the Senate Finance Committee, the National Council of Nonprofits explained the debilitating effects the DOL guidance was having on nonprofit organizations across the country. Specifically, organizations that provide essential services to underserved populations were prepared to greatly reduce or cease operations should the full UI bill become due. Within two weeks, the Senate and House passed S. 4209, “Protecting Nonprofits from Catastrophic Cash Flow Strain Act,” which will ensure reimbursing employers only need to pay 50% of their unemployment bill upfront. This important legislation will protect nonprofits’ abilities to continue to operate throughout the pandemic.

The bill is on the way to the President’s desk and is anticipated to be signed into law. Be sure to track its progress and other employment policy news here.

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Special Assistant to the President