Opting out of SUI tax pools can help offset new costs encountered by nonprofits

February 5, 2014

Opting out of SUI tax pools can help offset new costs encountered by nonprofits

Nonprofits around the country are holding their breath to see if payment in lieu of tax programs will take hold in their areas. PILOT programs have gained steam on the east coast, according to MiBiz, and could represent a new budget hurdle for tax-exempt organizations.

Under the program, municipalities have the ability to send invoices and bills to nonprofit organizations, regardless of their tax status. Not all nonprofits have been treated equally under the legislation, with many states going after colleges and universities. In many areas, the new program is not a huge surprise.

The reason behind the program in most municipalities is that local governments are struggling to generate revenue so they can begin climbing out of the financial pits that were created during the recession. Massive unemployment and government cutbacks left many local governments in a tough situation.

Nonprofits must shore up budgets to prepare for new costs
Regardless of how nonprofit leaders feel about the legislation, it's another example of why they will need to continue to get creative with budgets and revenue. Many organizations are also feeling budget pressures and during a time when their services are needed most. Increased demand and costs coupled with falling revenue have created the perfect storm for many nonprofits.

Nonprofits can save on unemployment insurance
While the PILOT program represents a hardship for tax-exempt organizations, they are still extended one large cost-saving benefit – the ability to opt out of state UI tax pools. Nonprofits are exempt from federal taxes related to UI, but still must contribute for their state costs. Federal taxes cover most of the administrative costs of running unemployment offices while state taxes provide funding for claims.

For-profit businesses pay a tax every year regardless of their actual UI claim costs, nonprofits can become self-reimbursing employers, a designation under which they reimburse the state only for the actual amount that was paid out to former employees. This means that a nonprofit with no UI claims would have no costs.

The downside is that organizations which opt out can be responsible for a large cost if they see a sudden spike in UI claims and will not have money from the tax pool to help meet the obligation. For this reason, nonprofits that opt out should consider enrollment in a UI savings programs or bonded service program such as those offered by First Nonprofit Companies. Saving programs allow nonprofits to capture many of the benefits of being a self-reimbursing employer with much less risk.

There is a not a one-size-fits-all solution for self-reimbursing employers so it's important to get in touch with a nonprofit UI specialist that can explain how different funding options will save the most money while providing the greatest amount of coverage. Depending on their size, most nonprofits can find a more cost-effective option for meeting their SUI responsibility.

For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Companies at FNCUI@firstnonprofit.com or visit www.firstnonprofitcompanies.com.


Ready to chat?
Get in touch today to request a no-obligation savings evaluation.


First Nonprofit has saved us so much money over the state’s program. We had one little glitch with the state recently and we contacted FNP immediately. FNP staff called us back immediately and moved to remedy the problem.

WI Council of Religious & Independent Schools (WCRIS), Madison, WI

First Nonprofit has been a great partner. They have helped us saved hundreds of thousands of dollars! They have awesome resources for our nonprofit organization. Thanks for the partnership.

Community Care Inc., Milwaukee, WI

Life is certainly busy these days but having business partners like First Nonprofit has made some of the process hassle free. We have worked with this team for years. When we changed payroll systems, they outlined every step. I think this team is terrific and I know they get the job done! Thank you, Cruz, to all the team at FNP.

Gulfside Healthcare Services, New Port Richey, FL

FNP has helped our agency to save thousands of dollars every year on our unemployment coverage. The service is phenomenal, and we are thankful to their team as our partner. My experience working with Marshall on the advocacy around UE for nonprofits was also a highlight as someone who teaches advocacy and lobbying for nonprofits. Really, your whole team is top shelf, so thank YOU!

Advancing Academics, Turtle Creek, PA

Chicago Children’s Theatre has greatly benefited from our partnership with First Nonprofit, and I have always enjoyed working with the staff on our filings and any complicated questions. I would not hesitate to recommend First Nonprofit to fellow nonprofits. We’re very happy customers.

Chicago Children’s Theatre, Chicago, IL

FNP is a great resource for Daniel Kids. To have a TPA that we can count on to take point on not only managing our unemployment claims, but to support and guide any protest hearing, is invaluable. All the professional support staff we have worked with have been excellent, very knowledgeable and responsive. We are grateful for the help and support, thank you.

Daniel Kids, Jacksonville, FL

When I first began in my position at my organization, I hadn’t had experience working with a company like FNP. The staff was so patient and helpful in helping to explain the benefits of First Nonprofit. Anytime I reach out with a question I receive a quick, clear, and thorough response. I’m so thankful that we decided to partner with FNP. Their excellence in customer service, coupled with their variety of packages frees us up to truly serve our staff and community with a peace of mind knowing that our organization is protected against unanticipated unemployment insurance expenses.

Homes of Hope, Chicago, IL

First Nonprofit gets an A+ in my book. You are so easy to work with & very knowledgeable! Whether it is my quarterly correspondence with Kim or my random interactions with Dawn about a bond … I am so pleased that I get to work with such a helpful company. Thank you!

Women's Choice Network, Pittsburgh, PA