WASHINGTON, D.C. – Late yesterday, the Senate unanimously passed legislation introduced by U.S. Sens. Sherrod Brown (D-OH), Tim Scott (R-SC), Ron Wyden (D-OR) and Chuck Grassley (R-IA), the Protecting Nonprofits from Catastrophic Cash Flow Strain Act, to help nonprofits, state and local governments and federally recognized Tribes remain financially viable during the COVID-19 pandemic.
Many nonprofits operate as ‘reimbursing employers,’ which means they pay their share of unemployment taxes by reimbursing states for 100 percent of the unemployment benefits collected by their former employees. Recognizing that reimbursing employers would be unable to cover all of their unemployment costs, the CARES Act allows nonprofits to reimburse only 50 percent to the states while the federal government covered the other 50.
Guidance issued by the Department of Labor in April, however, requires states to collect 100 percent of unemployment costs from nonprofits up front and reimburse them later, putting a further strain on organizations hit hard by COVID-19. The Senators’ bill would clarify that nonprofits are only required to provide 50 percent in payments up front. The net cost to the employer and the federal government would remain the same, but would free up much needed money to help nonprofits stay afloat.
“Nonprofits are on the frontlines of the COVID-19 pandemic and our constituents are increasingly looking to local nonprofits to help feed their families or make ends meet,” said Sen. Brown. “We shouldn’t be putting added financial strains on nonprofits at a time when they need this money to better serve our communities.”
“Nonprofit organizations play a vital role in our communities, especially during this time of uncertainty for so many American families,” said Sen. Tim Scott. “This bipartisan legislation protects these vulnerable organizations from being placed in unnecessary hardship in the midst of the pandemic. I’m grateful for the support of my colleagues on this issue and looking forward to this being signed into law.”
“Nonprofit groups like food banks have been critical in helping their communities through the pandemic and economic crisis,” said Sen. Wyden. “Many are struggling to maintain services as they have been forced to furlough their own employees. Our proposal is a commonsense fix that will help nonprofits maintain the cashflow needed to survive this crisis and continue serving others in need.”
“The CARES Act provided substantial relief to nonprofits forced to furlough or lay off staff,” said Sen. Grassley. “Without this fix, some nonprofits would have to make large payment to the state now—when they’re least able to afford it—and then wait for a reimbursement later. This bill would make sure they don’t have to wait for further relief.”
For many nonprofit employers, the requirement to pay 100% of the UI bill before securing relief exacerbates the financial impact of historically high claims triggered by the pandemic, increasing the risk of further layoffs, closures, or substantial reductions in services. This legislation would enable states to provide the CARES Act’s 50% emergency relief to reimbursing employers without requiring these nonprofits or other entities to pay their full bill first.
More information on the bill can be found HERE.