Congress Helps Non-Profits With Cash Flow Problems

The Protecting Nonprofits from Catastrophic Cash Flow Strain Act of 2020 provides much needed relief to non-profits who have experienced cash flow problems as a result of the COVID-19 outbreak

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A new bill passed by Congress is on its way to the president’s desk. The bipartisan legislation — called the Protecting Nonprofits from Catastrophic Cash Flow Strain Act of 2020 — provides much needed relief to non-profits who have experienced cash flow problems as a result of the COVID-19 outbreak. The Act clarifies and updates unemployment benefits cost relief for non-profits. 

Currently, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the federal government pays 50% of unemployment benefits costs. Self-insured non-profit entities are required to pay state unemployment insurance (UI) agencies. 

The relief began March 13, 2020 and continues through the end of the year.

Before the CARES Act, non-profits paid their share of unemployment taxes by reimbursing state authorities for 100% percent of UI benefits collected by former employees. The CARES Act allowed non-profits to reimburse only 50% to their state with the federal government covering the other 50% of payments due. Under CARES, non-profits were required to make a 50% payment to state authorities and apply to the federal government for reimbursement. 

Best intentions now better executed

For some non-profits, the cost-sharing provision has not provided relief. Non-profits were required to pay their share of unemployment insurance payments to their state agencies on request, then apply to the federal government for reimbursement. While relief for non-profits was the intent, the burden to pay the UI share up front and wait for reimbursement caused financial hardship.

The new bill, passed with broad bipartisan support, clarifies that before a non-profit pays its UI reimbursement, a federal transfer to their state fund will cover 50% percent of the cost. Guidance on how non-profits access or verify these funds has not yet been provided.Relief for those who provide relief 

As non-profits, like food banks and other services, work to assist Americans during this unprecedented pandemic, cash on hand is a necessity. Many non-profits are debating whether to provide necessary services, or remitting quarterly UI payments to the state. 

Failure to do so could result in fines and penalties from their state authority. The CARES Act cut non-profit UI payments in half: the legislation removes the need to pay and wait for reimbursement. 

With the historic rates of unemployed due to the COVID-19 outbreak, all businesses are experiencing high levels of unemployment, along with increased UI benefits costs. In addition, for many non-profits, as the rate of unemployment rises, the rate of donations have fallen. 

This puts additional pressure on these agencies to provide services with less available funding. Quarterly UI payments often put non-profit organizations, critical to provide services to Americans during the outbreak, in an impossible position. Make the necessary payments or potentially risk fines and penalties, or provide services to the community. 

The Act hopes to ease some of the cash-flow challenges these vital services provide so they can continue their good work during the pandemic and recovery.  

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