Internal Revenue Code:Sec. 3303. Conditions of additional credit allowance

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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.
 

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