Puerto Rico Nonprofit Unemployment: Who Pays and How to Save

April 25, 2024

Puerto Rico Nonprofit Unemployment: Who Pays and How to Save

501(c)(3) nonprofit, governmental, and tribal entities are all exempt from paying Federal Unemployment Taxes (FUTA). However, in Puerto Rico, most employers must pay state unemployment taxes (SUTA), with only religious entities that operate exclusively for religious purposes exempt from Puerto Rico SUTA. But the following organizations have a unique savings option for paying SUTA:

– Nonprofits: Organizations that are exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code

– Native American Indian tribes: Tribes and their wholly owned businesses

– Government entities: Government entities such as federal, state, and local government agencies

These entities can cover their mandatory unemployment costs in one of two ways: paying the state unemployment insurance tax (SUTA) or choosing reimbursement financing (self-insurance). The latter option is a legal right allowing these organizations to opt out of paying SUI taxes and to reimburse their state unemployment agency dollar-for-dollar for unemployment claims paid to former employees.

Though opting out of paying SUTA can save employers money in the short term, a well-thought-out strategic plan should accompany the decision to change unemployment financing and how to pay for future unemployment to limit claim liability. First Nonprofit (FNP) helps nonprofit employers utilize this option with the Puerto Rico Department of Labor and Human Resources, saving organizations as much as 50% annually! Contact FNP to help determine eligibility for reimbursement financing. Click here to request a free, no-obligation savings evaluation on your organization’s unemployment costs.

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