Nonprofit organizations are anchors in their communities, critical lifelines for those in need, and trusted partners for government leaders. While doing this essential work, nonprofits also create a massive economic impact. In fact, nearly 10 percent of the private workforce in the United States is employed by a nonprofit, making the nonprofit sector America’s third-largest employment sector. And, despite their “tax-exempt” status, nonprofit organizations pay an estimated $65 billion each year in payroll taxes.
Yet, these major employers and economic contributors are excluded from a wide range of employer tax credits that are currently made available to for-profit employers only. This disparity hampers nonprofits’ ability to hire, retain, and support their workforce, and it limits the effectiveness of these incentives. Nonprofit employers who take the same beneficial actions envisioned by Congress to hire and invest in workers should have access to the same tax incentives as their for-profit counterparts.
Independent Sector commissioned Ernst & Young to calculate the impact of including nonprofit employers in the following key tax incentives:
- Employer-Provided Childcare Credit
- Work Opportunity Tax Credit
- Employer Credit for Paid Family and Medical Leave
- Indian Employment Credit
- Small Employer Pension Plan Start-Up Cost and Automatic Enrollment Credit
- Disabled Access Credit
Overall, this analysis estimates that extending these six tax credits to 501(c)(3) organizations would support 27,570 jobs, $1.2 billion in annual wages and benefits, and $1.8 billion in annual Gross Domestic Product (GDP) at an annual cost to the Treasury of less than $270 million, on average. The analysis describes cost and economic impact totals for each of the six credits, in addition to credit-specific analyses with more robust impact data.
