WASHINGTON DC (July 9, 2020) — The Senate unanimously passed legislation introduced by Senators Charles "Chuck" Grassley (R-IA), Sherrod Brown (D-OH), Tim Scott (R-SC), and Ron Wyden (D-OR), the Protecting Nonprofits from Catastrophic Cash Flow Strain Act, to help non-profits, state and local governments and federally-recognized Tribes remain financially viable during the COVID-19 pandemic.
Many non-profits 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 non-profits 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 non-profits up front and reimburse them later, putting a further strain on organizations hit hard by COVID-19. The Senators’ bill would clarify that non-profits 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 non-profits stay afloat.
“The CARES Act provided substantial relief to non-profits forced to furlough or lay off staff,” Sen Grassley said. “Without this fix, some non-profits 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.”
“Non-profits are on the frontlines of the COVID-19 pandemic and our constituents are increasingly looking to local non-profits to help feed their families or make ends meet,” Sen Brown said. “We shouldn’t be putting added financial strains on non-profits at a time when they need this money to better serve our communities.”
“Non-profit organizations play a vital role in our communities, especially during this time of uncertainty for so many American families,” Sen Scott said. “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.”
“Non-profit groups like food banks have been critical in helping their communities through the pandemic and economic crisis,” Sen Wyden said. “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 non-profits maintain the cashflow needed to survive this crisis and continue serving others in need.”
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 non-profits or other entities to pay their full bill first.
More information on the bill can be found HERE.
