WASHINGTON, D.C. — The U.S. Senate late on Thursday unanimously passed legislation to help nonprofits, state and local governments and federally recognized Tribes remain financially viable during the COVID-19 pandemic.
The bipartisan bill, titled the Protecting Nonprofits from Catastrophic Cash Flow Strain Act, was introduced by U.S. Sens. Sherrod Brown (D-OH), Tim Scott (R-SC), Ron Wyden (D-OR) and Chuck Grassley (R-IA).
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 new legislation clarifies 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,” Brown said.
“We shouldn’t be putting added financial strains on nonprofits at a time when they need this money to better serve our communities,” the Mansfield native said.
Scott said nonprofits play a vital role in communites.
“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,” Scott said.
Grassley said the CARES Act provide relief to nonprofits forced to furlough or lay off staff.
“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,” Grassley said.
For many nonprofit employers, the requirement to pay 100 percent of the unemployment insurance 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 percent emergency relief to reimbursing employers without requiring these nonprofits or other entities to pay their full bill first.
