Economic Recovery / Jobs

Nonprofits can save the cost of payroll taxes through 2010

On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment Act (HIRE Act), a $17 billion jobs package that includes temporary tax incentives to encourage employers to hire new workers. The main job-creation incentive allows most employers, including nonprofits, to keep the 6.2 percent payroll taxes on certain new hires, thus lowering their cost. This payroll tax forgiveness provision expires at the end of the year, so nonprofits will save more the sooner they hire eligible unemployed workers. 

American Jobs and Closing Tax Loopholes Act

The House and Senate continue to work on a second piece of legislation designed to stimulate the economy. The American Jobs and Closing Tax Loopholes Act contains several components that would benefit many nonprofit organizations, including extension of the IRA rollover and other charitable giving incentives through 2010 and temporary funding relief to nonprofit and for-profit sponsors of defined benefit pension plans. The House passed a slimmed-down version of the legislation on May 28, and the Senate is expected to take it up in June, although more changes may be made.

Obama Administration

Small Business Jobs and Wages Tax Cut

On January 29, 2010, President Obama announced his more expansive proposal to spur hiring by employers, including nonprofits. As part of the President's plan, businesses and nonprofits would get a $5,000 payroll tax credit for every new employee they hire in 2010 (up to a maximum benefit of $500,000 per organization). In addition, if a nonprofit or for-profit organization increases the hours or wages of employees earning less than $106,800, the employer would also be reimbursed for the additional Social Security taxes. The National Council applauded the White House for recognizing the vital role nonprofits play as employers and engines of economic growth in communities across the country.

Small Business Lending Program

The White House has also proposed a Small Business Lending Program to transfer $30 billion of TARP funding to small community banks - or banks with less than $10 billion in assets - to spur lending to businesses and small employers.  This program, as proposed, could be beneficial to nonprofit employers because local banks would determine their own lending programs.

House of Representatives

Jobs for Main Street Act

The House passed its version of a jobs creation bill last year, the Jobs for Main Street Act, which does not include incentives for hiring new workers. The House may act soon on the Hiring Incentives to Restore Employment Act, which the Senate passed last month.

What Nonprofits Can Do

Contact your Senators and Representatives and urge them to ensure that job-creation legislation includes incentives for nonprofit employers to hire new workers.