WASHINGTON – After passing the U.S. House of Representatives today, the Protecting Nonprofits from Catastrophic Cash Flow Strain Act, will head to the White House for the president’s signature. This legislation, which passed the U.S. Senate last week, was introduced by U.S. Sens. Tim Scott (R-SC), Sherrod Brown (D-OH), Chuck Grassley (R-IA), and Ron Wyden (D-OR), 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. 

“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.”

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.

Full text of the bill can be found HERE.