Frequently Asked Questions
Who is eligible for the Nonprofit Election for Reimbursement Financing?
Organizations described in section 501(c)(3) that are exempt from income tax under section 501(a).
How does the Nonprofit Election for Reimbursement Financing work?
501(c)(3) organizations can elect to reimburse the state fund for actual benefits paid to former employees instead of paying standard unemployment tax rates.
What law authorizes the Nonprofit Election for Reimbursement Financing?
The Nonprofit Election for Reimbursement Financing is authorized under IRC §3303(e) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §3303
Source: Internal Revenue Code, Title 26, United States Code
§ 3303. Conditions of additional credit allowance(a) State standardsA taxpayer shall be allowed an additional credit under section 3302(b) with respect to any reduced rate of contributions permitted by a State law, only if the Secretary of Labor finds that under such law—(1) no reduced rate of contributions to a pooled fund or to a partially pooled account is permitted to a person (or group of persons) having individuals in his (or their) employ except on the basis of his (or their) experience with respect to unemployment or other factors bearing a direct relation to unemployment risk during not less than the 3 consecutive years immediately preceding the computation date;
(2) no reduced rate of contributions to a guaranteed employment account is permitted to a person (or a group of persons) having individuals in his (or their) employ unless—(A) the guaranty of remuneration was fulfilled in the year preceding the computation date; and
(B) the balance of such account amounts to not less than 2½ percent of that part of the payroll or payrolls for the 3 years preceding the computation date by which contributions to such account were measured; and
(C) such contributions were payable to such account with respect to 3 years preceding the computation date;
(3) no reduced rate of contributions to a reserve account is permitted to a person (or group of persons) having individuals in his (or their) employ unless—(A) compensation has been payable from such account throughout the year preceding the computation date, and
(B) the balance of such account amounts to not less than five times the largest amount of compensation paid from such account within any 1 of the 3 years preceding such date, and
(C) the balance of such account amounts to not less than 2½ percent of that part of the payroll or payrolls for the 3 years preceding such date by which contributions to such account were measured, and
(D) such contributions were payable to such account with respect to the 3 years preceding the computation date; and
(4) if the taxpayer is a certified professional employer organization (as defined in section 7705) that is treated as the employer under section 3511, such certified professional employer organization is permitted to collect and remit, in accordance with paragraphs (1), (2), and (3), contributions during the taxable year to the State unemployment fund with respect to a work site employee.
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