Wyden: Protecting Nonprofits from Catastrophic Cash Flow Strain Act

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By United States Senator Ron Wyden,
Press Release

U.S. Sen. Ron Wyden said that House passage of legislation he introduced to help non-profits will help these key community groups to remain financially viable during the COVID-19 pandemic.

“Nonprofit organizations in Oregon and nationwide are essential pieces of each community’s response to weather the devastating economic and public health challenges leveled by the coronavirus,” Wyden said. “As nonprofits battle to maintain an effective safety net, I am glad this bipartisan bill will help their cashflow during this crisis so they can continue serving others who urgently need help.”

The Protecting Nonprofits from Catastrophic Cash Flow Strain Act was passed by the House after passing the Senate last week on July 2.

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 Protecting Nonprofits from Catastrophic Cash Flow Strain Act 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.

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.

Other senators who joined Wyden in introducing the bipartisan Protecting Nonprofits from Catastrophic Cash Flow Strain Act are U.S. Sens. Sherrod Brown (D-OH), Tim Scott (R-SC) and Chuck Grassley (R-IA).