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Opting Out Of State Unemployment Taxes

In every state 501(c)(3) organizations are required to pay for unemployment claims. These claims are payable either through the state unemployment insurance tax (SUI) or by reimbursing the state for claims only paid out to former employees.

The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. Section 3309 of the Federal Unemployment Tax Act enables 501(c)(3) organizations to opt out of the tax system and reimburse the state only for unemployment claims the state has paid out to the nonprofits’ former employees.

There are both pros and cons for reimbursing the state. Regardless you should take the time to weight all your options to “opting out” if might be right for you.

The following is a list of companies you may wish to contact to discussion your options:

First Nonprofit Insurance Company
111 North Canal Street, Suite 801
Chicago, Illinois 60606
Phoe: 1-800-526-4352 Fax: 312-930-0375


241 West Fayette Street
Syracuse, NY 13202
Phone: 1-800-234-4632 Fax: 315-471-2872

Unemployment Services Trust (UST)
1155 Eugenia Place
Carpinteria, CA 93013-2062
Phone: 1-800- 249-4788 Ext.5 Fax: 1-805-556-4921

Additional Information

US Department of Labor, Employment & Training Administration

US Department of Labor Bureau of Labor Statistics

UWC Strategic Services on Unemployment & Workers Compensation

RUIC – Renaissance Unemployment Insurance Consultants

DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.

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