New Legislation Addresses CARES Act Issue for Nonprofits

On August 3^rd, the Protecting Nonprofits from Catastrophic Cash Flow Strain Act (S.4209) was enacted by the President. A recent article from The NonProfit Times offers a helpful overview of the legislation and why it is crucial for nonprofits.

The new act is designed to clarify an issue created by guidance from the Labor Department related to the CARES Act. It is common for nonprofit organizations to function as reimbursing employers for the purposes of unemployment. This means that the nonprofit is responsible for paying the full amount of unemployment benefits collected by former employees—these payments count as the nonprofits’ share of unemployment taxes. The CARES Act made changes to unemployment that made self-insured employers responsible for 100 percent of the up-front costs of unemployment benefits and eligible for a 50 percent reimbursement at a later date.

The recent legislation seeks to rectify the above-described issue by requiring that nonprofits operating as reimbursing employers only pay 50 percent of unemployment costs for their former employees up front. This frees up cash flow for nonprofits in a difficult position. While this relief is welcome, according to the article it is only a partial fix. Self-insured nonprofits are still greatly burdened by the requirement to pay 50 percent of unemployment bills.

For further details, click here to read the article in full at The NonProfit Times.