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U.S. Senate passes Brown-sponsored bill to aid nonprofits

WASHINGTON, D.C. — The U.S. Senate unanimously passed bipartisan legislation on Thursday introduced by U.S. Sens. Sherrod Brown, D-Ohio, and others, 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,” Brown said in a news release. “We shouldn’t be putting added financial strains on nonprofits at a time when they need this money to better serve our communities.”

For many nonprofit employers, the requirement to pay 100 percent 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 percent emergency relief to reimbursing employers without requiring these nonprofits or other entities to pay their full bill first.