Nonprofits fall into one of three categories for the purposes of UI laws:
- Some charitable nonprofits pay state unemployment taxes (SUTA) like other businesses. These organizations pay quarterly taxes based on their “experience rating,” a formula based on the recent history of unemployment claims by their former employees.
- Charitable nonprofits have the option of electing of self-insuring rather than paying SUTA. Nonprofits that elect to take this option are required to reimburse their state unemployment insurance trust funds for the amount of benefits their terminated or laid off employees claim. In North Carolina, self-insuring nonprofits must also maintain an escrow account with the state with 1% of their annual payroll.
- Some nonprofits are exempt from unemployment laws. These include houses of worship, religious organizations that are affiliated with houses of worship, and religious schools. Nonprofits with fewer than four employees who work during 20 weeks of the year are also exempt. Employees of SUTA exempt charitable organizations are not eligible to receive state unemployment insurance benefits if they lose their jobs.
