Small Nonprofit Retirement Security Act of 2025

This bill amends the Internal Revenue Code to make two retirement plan tax credits available to tax-exempt small employers, such as nonprofits. It allows these employers to claim the credits against their payroll taxes instead of income taxes, since they do not pay income tax. The changes apply to taxable years beginning after December 31, 2024, and funds are appropriated to Social Security trust funds to offset any revenue loss.

Sec. 2, Retirement credits made available to tax-exempt small employers: This section modifies the credit for small employer pension plan startup costs (Section 45E) and the retirement auto-enrollment credit (Section 45T). For tax-exempt eligible employers, those described in Section 501(c) and exempt from tax under Section 501(a), the credit amount is treated as a credit against the employer's payroll tax (the tax imposed by Section 3111(a)), rather than as a credit against income tax. The credit is limited to the lesser of the credit amount otherwise determined or the payroll tax paid by the employer during the calendar year.

Sec. 2(c), Payroll credit: This adds a new subsection (g) to Section 3111 of the Internal Revenue Code. It allows tax-exempt eligible employers to claim a credit against the employer's portion of Social Security taxes (Section 3111(a)) for calendar quarters in an applicable year. The credit amount equals the amount determined under the startup cost or auto-enrollment credit provisions. The total credit for a year cannot exceed the employer's total Section 3111(a) tax liability for that year.

Sec. 2(d), Effective date: The amendments apply to taxable years beginning after December 31, 2024.

Sec. 2(e), Transfers of funds: Amounts equal to the reduction in revenues to the Treasury from these amendments are appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund. These amounts are to be transferred from the general fund to replicate the transfers that would have occurred without the amendments.