26 U.S.C. § 3302 : US Code - Section 3302: Credits against tax

Search 26 U.S.C. § 3302 : US Code - Section 3302: Credits against tax

(a) Contributions to State unemployment funds
(1) The taxpayer may, to the extent provided in this subsection
and subsection (c), credit against the tax imposed by section 3301
the amount of contributions paid by him into an unemployment fund
maintained during the taxable year under the unemployment
compensation law of a State which is certified as provided in
section 3304 for the 12-month period ending on October 31 of such
year.
(2) The credit shall be permitted against the tax for the taxable
year only for the amount of contributions paid with respect to such
taxable year.
(3) The credit against the tax for any taxable year shall be
permitted only for contributions paid on or before the last day
upon which the taxpayer is required under section 6071 to file a
return for such year; except that credit shall be permitted for
contributions paid after such last day, but such credit shall not
exceed 90 percent of the amount which would have been allowable as
credit on account of such contributions had they been paid on or
before such last day.
(4) Upon the payment of contributions into the unemployment fund
of a State which are required under the unemployment compensation
law of that State with respect to remuneration on the basis of
which, prior to such payment into the proper fund, the taxpayer
erroneously paid an amount as contributions under another
unemployment compensation law, the payment into the proper fund
shall, for purposes of credit against the tax, be deemed to have
been made at the time of the erroneous payment. If, by reason of
such other law, the taxpayer was entitled to cease paying
contributions with respect to services subject to such other law,
the payment into the proper fund shall, for purposes of credit
against the tax, be deemed to have been made on the date the return
for the taxable year was filed under section 6071.
(5) In the case of wages paid by the trustee of an estate under
title 11 of the United States Code, if the failure to pay
contributions on time was without fault by the trustee, paragraph
(3) shall be applied by substituting "100 percent" for "90
percent".
(b) Additional credit
In addition to the credit allowed under subsection (a), a
taxpayer may credit against the tax imposed by section 3301 for any
taxable year an amount, with respect to the unemployment
compensation law of each State certified as provided in section
3303 for the 12-month period ending on October 31 of such year, or
with respect to any provisions thereof so certified, equal to the
amount, if any, by which the contributions required to be paid by
him with respect to the taxable year were less than the
contributions such taxpayer would have been required to pay if
throughout the taxable year he had been subject under such State
law to the highest rate applied thereunder in such 12-month period
to any person having individuals in his employ, or to a rate of 5.4
percent, whichever rate is lower.
(c) Limit on total credits
(1) The total credits allowed to a taxpayer under this section
shall not exceed 90 percent of the tax against which such credits
are allowable.
(2) If an advance or advances have been made to the unemployment
account of a State under title XII of the Social Security Act, then
the total credits (after applying subsections (a) and (b) and
paragraph (1) of this subsection) otherwise allowable under this
section for the taxable year in the case of a taxpayer subject to
the unemployment compensation law of such State shall be reduced -
(A)(i) in the case of a taxable year beginning with the second
consecutive January 1 as of the beginning of which there is a
balance of such advances, by 5 percent of the tax imposed by
section 3301 with respect to the wages paid by such taxpayer
during such taxable year which are attributable to such State;
and
(ii) in the case of any succeeding taxable year beginning with
a consecutive January 1 as of the beginning of which there is a
balance of such advances, by an additional 5 percent, for each
such succeeding taxable year, of the tax imposed by section 3301
with respect to the wages paid by such taxpayer during such
taxable year which are attributable to such State;
(B) in the case of a taxable year beginning with the third or
fourth consecutive January 1 as of the beginning of which there
is a balance of such advances, by the amount determined by
multiplying the wages paid by such taxpayer during such taxable
year which are attributable to such State by the percentage (if
any), multiplied by a fraction, the numerator of which is the
State's average annual wage in covered employment for the
calendar year in which the determination is made and the
denominator of which is the wage base under this chapter, by
which -
(i) 2.7 percent multiplied by a fraction, the numerator of
which is the wage base under this chapter and the denominator
of which is the estimated United States average annual wage in
covered employment for the calendar year in which the
determination is to be made, exceeds
(ii) the average employer contribution rate for such State
for the calendar year preceding such taxable year; and
(C) in the case of a taxable year beginning with the fifth or
any succeeding consecutive January 1 as of the beginning of which
there is a balance of such advances, by the amount determined by
multiplying the wages paid by such taxpayer during such taxable
year which are attributable to such State by the percentage (if
any) by which -
(i) the 5-year benefit cost rate applicable to such State for
such taxable year or (if higher) 2.7 percent, exceeds
(ii) the average employer contribution rate for such State
for the calendar year preceding such taxable year.
The provisions of the preceding sentence shall not be applicable
with respect to the taxable year beginning January 1, 1975, or any
succeeding taxable year which begins before January 1, 1980; and,
for purposes of such sentence, January 1, 1980, shall be deemed to
be the first January 1 occurring after January 1, 1974, and
consecutive taxable years in the period commencing January 1, 1980,
shall be determined as if the taxable year which begins on January
1, 1980, were the taxable year immediately succeeding the taxable
year which began on January 1, 1974. Subparagraph (C) shall not
apply with respect to any taxable year to which it would otherwise
apply (but subparagraph (B) shall apply to such taxable year) if
the Secretary of Labor determines (on or before November 10 of such
taxable year) that the State meets the requirements of subsection
(f)(2)(B) for such taxable year.
(3) If the Secretary of Labor determines that a State, or State
agency, has not -
(A) entered into the agreement described in section 239 of the
Trade Act of 1974, with the Secretary of Labor before July 15,
1975, or
(B) fulfilled its commitments under an agreement with the
Secretary of Labor as described in section 239 of the Trade Act
of 1974,
then, in the case of a taxpayer subject to the unemployment
compensation law of such State, the total credits (after applying
subsections (a) and (b) and paragraphs (1) and (2) of this section)
otherwise allowable under this section for a year during which such
State or agency does not enter into or fulfill such an agreement
shall be reduced by 7 1/2 percent of the tax imposed with respect
to wages paid by such taxpayer during such year which are
attributable to such State.
(d) Definitions and special rules relating to subsection (c)
(1) Rate of tax deemed to be 6 percent
In applying subsection (c), the tax imposed by section 3301
shall be computed at the rate of 6 percent in lieu of the rate
provided by such section.
(2) Wages attributable to a particular State
For purposes of subsection (c), wages shall be attributable to
a particular State if they are subject to the unemployment
compensation law of the State, or (if not subject to the
unemployment compensation law of any State) if they are
determined (under rules or regulations prescribed by the
Secretary) to be attributable to such State.
(3) Additional taxes inapplicable where advances are repaid
before November 10 of taxable year
Paragraph (2) of subsection (c) shall not apply with respect to
any State for the taxable year if (as of the beginning of
November 10 of such year) there is no balance of advances
referred to in such paragraph.
(4) Average employer contribution rate
For purposes of subparagraphs (B) and (C) of subsection (c)(2),
the average employer contribution rate for any State for any
calendar year is that percentage obtained by dividing -
(A) the total of the contributions paid into the State
unemployment fund with respect to such calendar year, by
(B)(i) for purposes of subparagraph (B) of subsection (c)(2),
the total of the wages (as determined without any limitation on
amount) attributable to such State subject to contributions
under this chapter with respect to such calendar year, and
(ii) for purposes of subparagraph (C) of subsection (c)(2),
the total of the remuneration subject to contributions under
the State unemployment compensation law with respect to such
calendar year.
For purposes of subparagraph (C) of subsection (c)(2), if the
average employer contribution rate for any State for any calendar
year (determined without regard to this sentence) equals or
exceeds 2.7 percent, such rate shall be determined by increasing
the amount taken into account under subparagraph (A) of the
preceding sentence by the aggregate amount of employee payments
(if any) into the unemployment fund of such State with respect to
such calendar year which are to be used solely in the payment of
unemployment compensation.
(5) 5-year benefit cost rate
For purposes of subparagraph (C) of subsection (c)(2), the 5-
year benefit cost rate applicable to any State for any taxable
year is that percentage obtained by dividing -
(A) one-fifth of the total of the compensation paid under the
State unemployment compensation law during the 5-year period
ending at the close of the second calendar year preceding such
taxable year, by
(B) the total of the remuneration subject to contributions
under the State unemployment compensation law with respect to
the first calendar year preceding such taxable year.
(6) Rounding
If any percentage referred to in either subparagraph (B) or (C)
of subsection (c)(2) is not a multiple of .1 percent, it shall be
rounded to the nearest multiple of .1 percent.
(7) Determination and certification of percentages
The percentage referred to in subsection (c)(2)(B) or (C) for
any taxable year for any State having a balance referred to
therein shall be determined by the Secretary of Labor, and shall
be certified by him to the Secretary of the Treasury before June
1 of such year, on the basis of a report furnished by such State
to the Secretary of Labor before May 1 of such year. Any such
State report shall be made as of the close of March 31 of the
taxable year, and shall be made on such forms, and shall contain
such information, as the Secretary of Labor deems necessary to
the performance of his duties under this section.
(e) Successor employer
Subject to the limits provided by subsection (c), if -
(1) an employer acquires during any calendar year substantially
all the property used in the trade or business of another person,
or used in a separate unit of a trade or business of such other
person, and immediately after the acquisition employs in his
trade or business one or more individuals who immediately prior
to the acquisition were employed in the trade or business of such
other person, and
(2) such other person is not an employer for the calendar year
in which the acquisition takes place,
then, for the calendar year in which the acquisition takes place,
in addition to the credits allowed under subsections (a) and (b),
such employer may credit against the tax imposed by section 3301
for such year an amount equal to the credits which (without regard
to subsection (c)) would have been allowable to such other person
under subsections (a) and (b) and this subsection for such year, if
such other person had been an employer, with respect to
remuneration subject to contributions under the unemployment
compensation law of a State paid by such other person to the
individual or individuals described in paragraph (1).
(f) Limitation on credit reduction
(1) Limitation
In the case of any State which meets the requirements of
paragraph (2) with respect to any taxable year the reduction
under subsection (c)(2) in credits otherwise applicable to
taxpayers subject to the unemployment compensation law of such
State shall not exceed the greater of -
(A) the reduction which was in effect with respect to such
State under subsection (c)(2) for the preceding taxable year,
or
(B) 0.6 percent of the wages paid by the taxpayer during such
taxable year which are attributable to such State.
(2) Requirements
The requirements of this paragraph are met by any State with
respect to any taxable year if the Secretary of Labor determines
(on or before November 10 of such taxable year) that -
(A) no State action was taken during the 12-month period
ending on September 30 of such taxable year (excluding any
action required under State law as in effect prior to the date
of the enactment of this subsection) which has resulted or will
result in a reduction in such State's unemployment tax effort
(as defined by the Secretary of Labor in regulations),
(B) no State action was taken during the 12-month period
ending on September 30 of such taxable year (excluding any
action required under State law as in effect prior to the date
of the enactment of this subsection) which has resulted or will
result in a net decrease in the solvency of the State
unemployment compensation system (as defined by the Secretary
of Labor in regulations),
(C) the State unemployment tax rate for the taxable year
equals or exceeds the average benefit cost ratio for calendar
years in the 5-calendar year period ending with the last
calendar year before the taxable year, and
(D) the outstanding balance for such State of advances under
title XII of the Social Security Act on September 30 of such
taxable year was not greater than the outstanding balance for
such State of such advances on September 30 of the third
preceding taxable year (or, for purposes of applying this
subparagraph to taxable year 1983, September 30, 1981).
The requirements of subparagraphs (C) and (D) shall not apply to
taxable years 1981 and 1982.
(3) Credit reductions for subsequent years
If the credit reduction under subsection (c)(2) is limited by
reason of paragraph (1) of this subsection for any taxable year,
for purposes of applying subsection (c)(2) to subsequent taxable
years (including years after 1987), the taxable year for which
the credit reduction was so limited (and January 1 thereof) shall
not be taken into account.
(4) State unemployment tax rate
For purposes of this subsection -
(A) In general
The State unemployment tax rate for any taxable year is the
percentage obtained by dividing -
(i) the total amount of contributions paid into the State
unemployment fund with respect to such taxable year, by
(ii) the total amount of the remuneration subject to
contributions under the State unemployment compensation law
with respect to such taxable year (determined without regard
to any limitation on the amount of wages subject to
contribution under the State law).
(B) Treatment of additional tax under this chapter
(i) Taxable year 1983
In the case of taxable year 1983, any additional tax
imposed under this chapter with respect to any State by
reason of subsection (c)(2) shall be treated as contributions
paid into the State unemployment fund with respect to such
taxable year.
(ii) Taxable year 1984
In the case of taxable year 1984, any additional tax
imposed under this chapter with respect to any State by
reason of subsection (c)(2) shall (to the extent such
additional tax is attributable to a credit reduction in
excess of 0.6 of wages attributable to such State) be treated
as contributions paid into the State unemployment fund with
respect to such taxable year.
(5) Benefit cost ratio
For purposes of this subsection -
(A) In general
The benefit cost ratio for any calendar year is the
percentage determined by dividing -
(i) the sum of the total of the compensation paid under the
State unemployment compensation law during such calendar year
and any interest paid during such calendar year on advances
made to the State under title XII of the Social Security Act,
by
(ii) the total amount of the remuneration subject to
contributions under the State unemployment compensation law
with respect to such calendar year (determined without regard
to any limitation on the amount of remuneration subject to
contribution under the State law).
(B) Reimbursable benefits not taken into account
For purposes of subparagraph (A), compensation shall not be
taken into account to the extent -
(i) the State is entitled to reimbursement for such
compensation under the provisions of any Federal law, or
(ii) such compensation is attributable to services
performed for a reimbursing employer.
(C) Reimbursing employer
The term "reimbursing employer" means any governmental entity
or other organization (or group of governmental entities or any
other organizations) which makes reimbursements in lieu of
contributions to the State unemployment fund.
(D) Special rules for years before 1985
(i) Taxable year 1983
For purposes of determining whether a State meets the
requirements of paragraph (2)(C) for taxable year 1983, only
regular compensation (as defined in section 205 of the
Federal-State Extended Unemployment Compensation Act of 1970)
shall be taken into account for purposes of determining the
benefit ratio for any preceding calendar year before 1982.
(ii) Taxable year 1984
For purposes of determining whether a State meets the
requirements of paragraph (2)(C) for taxable year 1984, only
regular compensation (as so defined) shall be taken into
account for purposes of determining the benefit ratio for any
preceding calendar year before 1981.
(E) Rounding
If any percentage determined under subparagraph (A) is not a
multiple of .1 percent, such percentage shall be reduced to the
nearest multiple of .1 percent.
(6) Reports
The Secretary of Labor may, by regulations, require a State to
furnish such information at such time and in such manner as may
be necessary for purposes of this subsection.
(7) Definitions and special rules
The definitions and special rules set forth in subsection (d)
shall apply to this subsection in the same manner as they apply
to subsection (c).
(8) Partial limitation
(A) In the case of a State which would meet the requirements of
this subsection for a taxable year prior to 1986 but for its
failure to meet one of the requirements contained in subparagraph
(C) or (D) of paragraph (2), the reduction under subsection
(c)(2) in credits otherwise applicable to taxpayers in such State
for such taxable year and each subsequent year (in a period of
consecutive years for each of which a credit reduction is in
effect for taxpayers in such State) shall be reduced by 0.1
percentage point.
(B) In the case of a State which does not meet the requirements
of paragraph (2) but meets the requirements of subparagraphs (A)
and (B) of paragraph (2) and which also meets the requirements of
section 1202(b)(8)(B) of the Social Security Act with respect to
such taxable year, the reduction under subsection (c)(2) in
credits otherwise applicable to taxpayers in such State for such
taxable year and each subsequent year (in a period of consecutive
years for each of which a credit reduction is in effect for
taxpayers in such State) shall be further reduced by an
additional 0.1 percentage point.
(C) In no case shall the application of subparagraphs (A) and
(B) reduce the credit reduction otherwise applicable under
subsection (c)(2) below the limitation under paragraph (1).
(g) Credit reduction not to apply when State makes certain
repayments
(1) In general
In the case of any State which meets requirements of paragraph
(2) with respect to any taxable year, subsection (c)(2) shall not
apply to such taxable year; except that such taxable year (and
January 1 of such taxable year) shall (except as provided in
subsection (f)(3)) be taken into account for purposes of applying
subsection (c)(2) to succeeding taxable years.
(2) Requirements
The requirements of this paragraph are met by any State with
respect to any taxable year if the Secretary of Labor determines
that -
(A) the repayments during the 1-year period ending on
November 9 of such taxable year made by such State of advances
under title XII of the Social Security Act are not less than
the sum of -
(i) the potential additional taxes for such taxable year,
and
(ii) any advances made to such State during such 1-year
period under such title XII,
(B) there will be sufficient amounts in the State
unemployment fund to pay all compensation during the 3-month
period beginning on November 1 of such taxable year without
receiving any advance under title XII of the Social Security
Act, and
(C) there is a net increase in the solvency of the State
unemployment compensation system for the taxable year
attributable to changes made in the State law after the date on
which the first advance taken into account in determining the
amount of the potential additional taxes was made (or, if
later, after the date of the enactment of this subsection) and
such net increase equals or exceeds the potential additional
taxes for such taxable year.
(3) Definitions
For purposes of paragraph (2) -
(A) Potential additional taxes
The term "potential additional taxes" means, with respect to
any State for any taxable year, the aggregate amount of the
additional tax which would be payable under this chapter for
such taxable year by all taxpayers subject to the unemployment
compensation law of such State for such taxable year if
paragraph (2) of subsection (c) had applied to such taxable
year and any preceding taxable year without regard to this
subsection but with regard to subsection (f).
(B) Treatment of certain reductions
Any reduction in the State's balance under section 901(d)(1)
of the Social Security Act shall not be treated as a repayment
made by such State.
(4) Reports
The Secretary of Labor may require a State to furnish such
information at such time and in such manner as may be necessary
for purposes of paragraph (2).