Internal Revenue Code:Sec. 3303. Conditions of additional credit allowance
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
(Redirected from Sec. 3303. Conditions of additional credit allowance)
Contents |
Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 23 - FEDERAL UNEMPLOYMENT TAX ACT
Statute
Sec. 3303. Conditions of additional credit allowance
(a) State standards
A taxpayer shall be allowed an additional credit under section
3302(b) with respect to any reduced rate of contributions permitted
by a State law, only if the Secretary of Labor finds that under
such law -
(1) no reduced rate of contributions to a pooled fund or to a
partially pooled account is permitted to a person (or group of
persons) having individuals in his (or their) employ except on
the basis of his (or their) experience with respect to
unemployment or other factors bearing a direct relation to
unemployment risk during not less than the 3 consecutive years
immediately preceding the computation date;
(2) no reduced rate of contributions to a guaranteed employment
account is permitted to a person (or a group of persons) having
individuals in his (or their) employ unless -
(A) the guaranty of remuneration was fulfilled in the year
preceding the computation date; and
(B) the balance of such account amounts to not less than 2
1/2 percent of that part of the payroll or payrolls for the 3
years preceding the computation date by which contributions to
such account were measured; and
(C) such contributions were payable to such account with
respect to 3 years preceding the computation date;
(3) no reduced rate of contributions to a reserve account is
permitted to a person (or group of persons) having individuals in
his (or their) employ unless -
(A) compensation has been payable from such account
throughout the year preceding the computation date, and
(B) the balance of such account amounts to not less than five
times the largest amount of compensation paid from such account
within any 1 of the 3 years preceding such date, and
(C) the balance of such account amounts to not less than 2
1/2 percent of that part of the payroll or payrolls for the 3
years preceding such date by which contributions to such
account were measured, and
(D) such contributions were payable to such account with
respect to the 3 years preceding the computation date.
For any person (or group of persons) who has (or have) not been
subject to the State law for a period of time sufficient to compute
the reduced rates permitted by paragraphs (1), (2), and (3) of this
subsection on a 3-year basis (i) the period of time required may be
reduced to the amount of time the person (or group of persons) has
(or have) had experience under or has (or have) been subject to the
State law, whichever is appropriate, but in no case less than 1
year immediately preceding the computation date, or (ii) a reduced
rate (not less than 1 percent) may be permitted by the State law on
a reasonable basis other than as permitted by paragraph (1), (2),
or (3).
(b) Certification by the Secretary of Labor with respect to
additional credit allowance
(1) On October 31 of each calendar year, the Secretary of Labor
shall certify to the Secretary of the Treasury the law of each
State (certified by the Secretary of Labor as provided in section
3304 for the 12-month period ending on such October 31), with
respect to which he finds that reduced rates of contributions were
allowable with respect to such 12-month period only in accordance
with the provisions of subsection (a).
(2) If the Secretary of Labor finds that under the law of a
single State (certified by the Secretary of Labor as provided in
section 3304) more than one type of fund or account is maintained,
and reduced rates of contributions to more than one type of fund or
account were allowable with respect to any 12-month period ending
on October 31, and one or more of such reduced rates were allowable
under conditions not fulfilling the requirements of subsection (a),
the Secretary of Labor shall, on such October 31, certify to the
Secretary of the Treasury only those provisions of the State law
pursuant to which reduced rates of contributions were allowable
with respect to such 12-month period under conditions fulfilling
the requirements of subsection (a), and shall, in connection
therewith, designate the kind of fund or account, as defined in
subsection (c), established by the provisions so certified. If the
Secretary of Labor finds that a part of any reduced rate of
contributions payable under such law or under such provisions is
required to be paid into one fund or account and a part into
another fund or account, the Secretary of Labor shall make such
certification pursuant to this paragraph as he finds will assure
the allowance of additional credits only with respect to that part
of the reduced rate of contributions which is allowed under
provisions which do fulfill the requirements of subsection (a).
(3) The Secretary of Labor shall, within 30 days after any State
law is submitted to him for such purpose, certify to the State
agency his findings with respect to reduced rates of contributions
to a type of fund or account, as defined in subsection (c), which
are allowable under such State law only in accordance with the
provisions of subsection (a). After making such findings, the
Secretary of Labor shall not withhold his certification to the
Secretary of the Treasury of such State law, or of the provisions
thereof with respect to which such findings were made, for any
12-month period ending on October 31 pursuant to paragraph (1) or
(2) unless, after reasonable notice and opportunity for hearing to
the State agency, the Secretary of Labor finds the State law no
longer contains the provisions specified in subsection (a) or the
State has, with respect to such 12-month period, failed to comply
substantially with any such provision.
(c) Definitions
As used in this section -
(1) Reserve account
The term ''reserve account'' means a separate account in an
unemployment fund, maintained with respect to a person (or group
of persons) having individuals in his (or their) employ, from
which account, unless such account is exhausted, is paid all and
only compensation payable on the basis of services performed for
such person (or for one or more of the persons comprising the
group).
(2) Pooled fund
The term ''pooled fund'' means an unemployment fund or any part
thereof (other than a reserve account or a guaranteed employment
account) into which the total contributions of persons
contributing thereto are payable, in which all contributions are
mingled and undivided, and from which compensation is payable to
all individuals eligible for compensation from such fund.
(3) Partially pooled account
The term ''partially pooled account'' means a part of an
unemployment fund in which part of the fund all contributions
thereto are mingled and undivided, and from which part of the
fund compensation is payable only to individuals to whom
compensation would be payable from a reserve account or from a
guaranteed employment account but for the exhaustion or
termination of such reserve account or of such guaranteed
employment account. Payments from a reserve account or
guaranteed employment account into a partially pooled account
shall not be construed to be inconsistent with the provisions of
paragraph (1) or (4).
(4) Guaranteed employment account
The term ''guaranteed employment account'' means a separate
account, in an unemployment fund, maintained with respect to a
person (or group of persons) having individuals in his (or their)
employ who, in accordance with the provisions of the State law or
of a plan thereunder approved by the State agency,
(A) guarantees in advance at least 30 hours of work, for
which remuneration will be paid at not less than stated rates,
for each of 40 weeks (or if more, 1 weekly hour may be deducted
for each added week guaranteed) in a year, to all the
individuals who are in his (or their) employ in, and who
continue to be available for suitable work in, one or more
distinct establishments, except that any such individual's
guaranty may commence after a probationary period (included
within the 11 or less consecutive weeks immediately following
the first week in which the individual renders services), and
(B) gives security or assurance, satisfactory to the State
agency, for the fulfillment of such guaranties, from which
account, unless such account is exhausted or terminated, is
paid all and only compensation, payable on the basis of
services performed for such person (or for one or more of the
persons comprising the group), to any such individual whose
guaranteed remuneration has not been paid (either pursuant to
the guaranty or from the security or assurance provided for the
fulfillment of the guaranty), or whose guaranty is not renewed
and who is otherwise eligible for compensation under the State
law.
(5) Year
The term ''year'' means any 12 consecutive calendar months.
(6) Balance
The term ''balance'', with respect to a reserve account or a
guaranteed employment account, means the amount standing to the
credit of the account as of the computation date; except that, if
subsequent to January 1, 1940, any moneys have been paid into or
credited to such account other than payments thereto by persons
having individuals in their employ, such term shall mean the
amount in such account as of the computation date less the total
of such other moneys paid into or credited to such account
subsequent to January 1, 1940.
(7) Computation date
The term ''computation date'' means the date, occurring at
least once in each calendar year and within 27 weeks prior to the
effective date of new rates of contributions, as of which such
rates are computed.
(8) Reduced rate
The term ''reduced rate'' means a rate of contributions lower
than the standard rate applicable under the State law, and the
term ''standard rate'' means the rate on the basis of which
variations therefrom are computed.
(d) Voluntary contributions
A State law may, without being deemed to violate the standards
set forth in subsection (a), permit voluntary contributions to be
used in the computation of reduced rates if such contributions are
paid prior to the expiration of 120 days after the beginning of the
year for which such rates are effective.
(e) Payments by certain nonprofit organizations
A State may, without being deemed to violate the standards set
forth in subsection (a), permit an organization (or a group of
organizations) described in section 501(c)(3) which is exempt from
income tax under section 501(a) to elect (in lieu of paying
contributions) to pay into the State unemployment fund amounts
equal to the amounts of compensation attributable under the State
law to service performed in the employ of such organization (or
group).
(f) Transition
To facilitate the orderly transition to coverage of service to
which section 3309(a)(1)(A) applies, a State law may provide that
an organization (or group of organizations) which elects before
April 1, 1972, to make payments (in lieu of contributions) into the
State unemployment fund as provided in section 3309(a)(2), and
which had paid contributions into such fund under the State law
with respect to such service performed in its employ before January
1, 1969, is not required to make any such payment (in lieu of
contributions) on account of compensation paid after its election
as heretofore described which is attributable under the State law
to service performed in its employ, until the total of such
compensation equals the amount -
(1) by which the contributions paid by such organization (or
group) with respect to a period before the election provided by
section 3309(a)(2), exceed
(2) the unemployment compensation for the same period which was
charged to the experience-rating account of such organization (or
group) or paid under the State law on the basis of wages paid by
it or service performed in its employ, whichever is appropriate.
(g) Transitional rule for Unemployment Compensation Amendments of
1976
To facilitate the orderly transition to coverage of service to
which section 3309(a)(1)(A) applies by reason of the enactment of
the Unemployment Compensation Amendments of 1976, a State law may
provide that an organization (or group of organizations) which
elects, when such election first becomes available under the State
law with respect to such service, to make payments (in lieu of
contributions) into the State unemployment fund as provided in
section 3309(a)(2), and which had paid contributions into such fund
under the State law with respect to such service performed in its
employ before the date of the enactment of this subsection, is not
required to make any such payment (in lieu of contributions) on
account of compensation paid after its election as heretofore
described which is attributable under the State law to such service
performed in its employ, until the total of such compensation
equals the amount -
(1) by which the contributions paid by such organization (or
group) on the basis of wages for such service with respect to a
period before the election provided by section 3309(a)(2), exceed
(2) the unemployment compensation for the same period which was
charged to the experience-rating account of such organization (or
group) or paid under the State law on the basis of such service
performed in its employ or wages paid for such service, whichever
is appropriate.
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 440; Sept. 1, 1954, ch. 1212,
Sec. 2, 68 Stat. 1130; Pub. L. 91-373, title I, Sec. 104(c),
122(a), 142(c)-(e), Aug. 10, 1970, 84 Stat. 699, 702, 707; Pub. L.
94-455, title XIX, Sec. 1903(a)(13), 1906(b)(13)(C), Oct. 4, 1976,
90 Stat. 1809, 1834; Pub. L. 94-566, title I, Sec. 122(a), (b),
Oct. 20, 1976, 90 Stat. 2675, 2676.)
References in Text
REFERENCES IN TEXT
The Unemployment Compensation Amendments of 1976, referred to in
subsec. (g), is Pub. L. 94-566, Oct. 20, 1976, 90 Stat. 2667, as
amended. For complete classification of this Act to the Code, see
Short Title of 1976 Amendment note set out under section 3311 of
this title and Tables.
The date of enactment of this subsection, referred to in subsec.
(g), is the date of enactment of Pub. L. 94-566, which was approved
Oct. 20, 1976.
Miscellaneous
AMENDMENTS
1976 - Subsec. (b)(1) to (3). Pub. L. 94-455 substituted
reference to Secretary of the Treasury for reference to Secretary
and reference to 12-month period for reference to 12 or 10-month
period, as the case may be, and struck out reference to (10-month
period in the case of Oct. 31, 1972) following provisions relating
to 12-month period ending Oct. 31.
Subsec. (f). Pub. L. 94-566, Sec. 122(b), substituted ''which
elects before April 1, 1972,'' for ''which elects, when such
election first becomes available under the State law,''.
Subsec. (g). Pub. L. 94-566, Sec. 122(a), added subsec. (g).
1970 - Subsec. (a). Pub. L. 91-373, Sec. 122(a), added to
provision following par. (3) the authorization for the allowance of
a reduced rate by State law (but not less than 1 percent) on a
reasonable basis other than as permitted by par. (1), (2), or (3).
Subsec. (b). Pub. L. 91-373, Sec. 142(c)-(e), changed the
certification date referred to in pars. (1) to (3) from Dec. 31 to
Oct. 31, with provision for a 10-month period in the case of Oct.
31, 1972, and, except for Oct. 31, 1972, provided for a 12-month
period ending on Oct. 31 each year.
Subsecs. (e), (f). Pub. L. 91-373, Sec. 104(c), added subsecs.
(e) and (f).
1954 - Subsec. (a). Act Sept. 1, 1954, inserted sentence relating
to reduced rates for new employers.
EFFECTIVE DATE OF 1976 AMENDMENTS
Section 122(c) of Pub. L. 94-566 provided that: ''The amendment
made by subsection (a) (amending this section) shall take effect on
the date of the enactment of this Act (Oct. 20, 1976). The
amendment made by subsection (b) (amending this section) shall take
effect on January 1, 1970.''
Amendment by section 1903(a)(13) of Pub. L. 94-455 applicable
with respect to wages paid after Dec. 31, 1976, see section 1903(d)
of Pub. L. 94-455, set out as a note under section 3101 of this
title.
EFFECTIVE DATE OF 1970 AMENDMENT
Amendment by section 104(c) of Pub. L. 91-373 (amending this
section) to take effect Jan. 1, 1970, see section 104(d)(1) of Pub.
L. 91-373, set out as a note under section 3304 of this title.
Section 122(b) of Pub. L. 91-373 provided that: ''The amendments
made by subsection (a) (amending this section) shall apply with
respect to taxable years beginning after December 31, 1971.''
Amendment by section 142(c)-(e) of Pub. L. 91-373 applicable with
respect to taxable year 1972 and taxable years thereafter, see
section 142(i) of Pub. L. 91-373, set out as a note under section
3302 of this title.
EFFECTIVE DATE OF 1954 AMENDMENT
Section 2 of act Sept. 1, 1954, provided that the amendment made
by that section is effective after Dec. 31, 1954.
TREATMENT OF CERTAIN CHARITABLE ORGANIZATIONS RETROACTIVELY
DETERMINED TO BE DESCRIBED IN SECTION 501(C)(3) OF THIS TITLE
Pub. L. 98-21, title V, Sec. 524, Apr. 20, 1983, 97 Stat. 149, as
amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095,
provided that: ''If -
''(1) an organization did not make an election to make payments
(in lieu of contributions) as provided in section 3309(a)(2) of
the Internal Revenue Code of 1986 (formerly I.R.C. 1954) before
April 1, 1972, because such organization, as of such date, was
treated as an organization described in section 501(c)(4) of such
Code,
''(2) the Internal Revenue Service subsequently determined that
such organization was described in section 501(c)(3) of such
Code, and
''(3) such organization made such an election before the
earlier of -
''(A) the date 18 months after such election was first
available to it under the State law, or
''(B) January 1, 1984,
then section 3303(f) of such Code shall be applied with respect to
such organization as if it did not contain the requirement that the
election be made before April 1, 1972, and by substituting 'January
1, 1982' for 'January 1, 1969'.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 3302, 3304, 3310 of this
title.
