The U.S. Senate unanimously passed a bill that would save nonprofit organizations from a provision in recent Labor Department guidance that would have accidentally increased their required unemployment insurance payments to state governments, according to Accounting Today. The House later passed the bill, which then headed to the president for his signature.

The bill, called the Protecting Nonprofits From Catastrophic Cash Flow Strain Act of 2020, essentially addresses a technical glitch from the CARES Act that was not meant to affect nonprofits the same way as other entities. It was introduced by members of the Senate Finance Committee: Chairman Chuck Grassley (R-Iowa), along with Sens. Sherrod Brown (D-Ohio), Tim Scott (R-S.C.) and Ron Wyden (D-Ore.)

The issue is that many nonprofit organizations operate as "reimbursing employers," that is, they pay their share of unemployment taxes by reimbursing states for 100 percent of the benefits collected by their own former employees. Under the CARES Act, in recognition that nonprofits would have trouble paying 100 percent, these organizations would only need to reimburse states 50 percent of the benefits with the federal government covering the other half.

This, however, led to trouble when the Department of Labor, in April, released new guidance saying that states must collect all unemployment costs from nonprofits up front and reimburse them later. The bill would clarify that, even in this event, nonprofits are required to pay only 50 percent of those up-front costs, with the federal government, once more, paying for the other half. While on the whole, this would not change the costs to either nonprofits or the federal government, lawmakers believe it would still serve to free up money that nonprofits could use to stay afloat.