Nonprofits are concerned about the ramifications of recent health care reform proposals being debated in Washington, one of which is a for-profit tax credit. When it comes to employee benefits, nonprofits already are not viewed as being on a level playing field with for-profit companies, and the disparity in this regard could become even greater if certain health care reform proposals pass.

Current Proposals

Current proposals would provide a tax credit to for-profit companies that provide health insurance to their employees. Since nonprofit employers do not pay taxes, this benefit would not ensue to them. According to Tim Delaney, president and CEO of the National Council of Nonprofits in Washington, D.C., without the benefit of the credit, nonprofits could wind up directing money that could have been used for charitable services toward employee health benefits instead or risk losing employees if they do otherwise. Many nonprofits worry that they will be forced to shift more of the cost of health care on to their employees because health care costs are rising so fast, and they would like the government to offer them an incentive to offer such insurance like for-profit companies. One hindrance to nonprofits working directly with the government on such endeavors are the strict laws about how much nonprofits can get involved in politics. As a result, many nonprofits are turning to professional organizations such as Independent Sector and the National Council for Nonprofits to lobby on their behalf.


Many nonprofit executives believe that nonprofit employers would endure “massive ramifications” if for-profit employers are provided with a tax credit for offering health insurance to employees Proposalsbut nonprofits are not. Even though some nonprofits (such as United Way of Greater Cleveland, which would continue to provide health insurance for about 120 employees in certain branches) would continue to offer health benefits, many nonprofits will have a tough time continuing to do so. Nonprofits typically offer generous health care benefits, since they are unable to offer perks such as stock options and profit sharing that for-profit employers provide. Although it is difficult to determine whether people would pass up working for nonprofits with no health insurance (because nonprofit employees tend to believe in the mission of the organization’s work), some argue that women and children could be disproportionately hurt if nonprofits are forced to shift more of the health care cost to employees because the nonprofit field is dominated by women.

Alternative Tax Credit

Independent Sector, based in Washington, is working with federal lawmakers to create an alternative tax credit for nonprofits that would allow nonprofits to keep some of the money their employees are required to pay for federal income taxes to be used in whatever way the individual nonprofits see fit. Federal lawmakers have been receptive to the alternative tax credit, and Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, included the provision in the health reform bill he released September 16, which is now in the Senate Finance Committee. However, the provision remains controversial.