Nonprofit organizations incur new fees as tax exemptions disappear

October 17, 2013

Nonprofit organizations incur new fees as tax exemptions disappear

Throughout the country, nonprofits have seen increased fees and reductions in tax credits as governmental bodies struggle to balance budgets following the recession. Nonprofits in Chicago, Illinois and the nearby suburb of Downer's Grove are seeing fees related to water usage for the first time.

Downer's Grove instituted a utility fee to pay for stormwater in place of property taxes, so tax exempt nonprofits are feeling the burden of a new bill. While the village is floating plans to reduce the rate for local nonprofits, they will still be required to pay the fee. In Chicago, nonprofits are dealing with the loss of an exemption from water payments that some organizations claim will affect the services they offer. The city and nonprofits are still discussing a resolution, including a graduated fee based on a nonprofit's net assets.

Illinois is not alone in asking nonprofits to pay more, and different states and local governments have reduced tax exemptions in different ways – such as garbage pick up or public safety fees.

As nonprofits deal with the loss of tax exemptions or immunity to other fees they find themselves coping with new expenses. For some nonprofits, these fees are coming at a time when funding and revenue have already suffered. 

Nonprofits have options to UI tax
While nonprofits and governmental bodies continue to iron out future fees and tax exemptions, nonprofits do have an alternative when it comes to avoiding UI tax. Nonprofits and governmental organizations can opt out of state UI tax and its pooled trust funds under tax law that allows such entities to reimburse the state only for the amount specifically paid to former employees. Private employers pay a set rate each year which is often much greater than the actual amount of reimbursements.

Just as some local governments have started to levy new fees on nonprofits, states have been forced to raise UI tax contributions on employers to pay back federal debt incurred during the recession. Some states borrowed from the federal government to pay UI claims, which spiked during the recession, and did not pay the loan back within the two-year time limit. In states with UI debt to the fed that is over two years old, federal mandates will raise the employer contribution to state UI tax pools every year until the debt is paid back.

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We first started using First Nonprofit’s Unemployment Savings Program when we were a small startup nonprofit.  We didn’t have an HR department and needed expertise in the event that an unemployment claim was made.  We knew we were eligible to be a reimbursing employer, but weren’t sure how to navigate that process.  They made it easy to set things up, plan for, and then manage claims when they came at a very reasonable cost. The amount of time and stress they’ve saved us dealing with all this has been worth way more than the cost.  We’ve now grown to a large nonprofit and do have an HR department but have no plans to stop using their services.  I highly recommend them to every nonprofit I come into contact with!


Throughout our membership in the Unemployment Savings Program, First Nonprofit understood our demands, community dynamics, and the importance of seamless services; that allowed us to serve our constituents better.

Prevent Blindness America, Chicago, IL

Because INCS advocates for the operating conditions that allow charter public schools to provide high quality public education, partnering with First Nonprofit was an easy decision. First Nonprofit’s unemployment programs provide our member schools two operating elements crucial to their ability to provide high quality public education: savings and budget certainty. Capable, committed teachers are the key to student success. By participating in the unemployment insurance savings plan, charter public schools gain peace of mind and are able to invest more money in their teachers.

Illinois Network of Charter Schools, Chicago, IL

It has been our sincere pleasure to maintain a strong, vibrant business partnership with First Nonprofit. We greatly admire their strong industry knowledge, technical expertise, constant professionalism, knowledgeable and dedicated staff. They are always extremely responsive, personable and provide us with the necessary guidance and recommendations on a numerous variety of employment scenarios.

Thresholds, Chicago, IL

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New York Council of Nonprofits, Albany, NY

Visually Impaired Preschool Services has been a client of First Non-Profit since it was first offered as a benefit of VisionServe Alliance. We completed a thorough evaluation of cash savings to our agency before taking advantage of this wonderful benefit and it has been a very wise decision. Our experience with the processes from accounting to claims have been professional, expeditious and easy.

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Neurologic Music Therapy Services of Arizona, Phoenix, AZ

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Visually Impaired Preschool Services, Louisville, KY