[Code of Federal Regulations]
[Title 20, Volume 3]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 20CFR606.20]

[Page 35-36]
 
                      TITLE 20--EMPLOYEES' BENEFITS
 
 CHAPTER V--EMPLOYMENT AND TRAINING ADMINISTRATION, DEPARTMENT OF LABOR
 
PART 606--TAX CREDITS UNDER THE FEDERAL UNEMPLOYMENT TAX ACT; ADVANCES UNDER TITLE XII OF THE SOCIAL SECURITY ACT--Table of Contents
 
               Subpart C--Relief from Tax Credit Reduction
 
Sec. 606.20  Cap on tax credit reduction.


    (a) Applicability. Subsection (f) of section 3302 of FUTA authorizes 
a limitation (cap) on the reduction of tax credits by reason of an 
outstanding balance of advances, if the UIS Director determines with 
respect to a State, on or before November 10 of a taxable year, that--
    (1) No action was taken by the State during the 12-month period 
ending on September 30 of such taxable year which has resulted, or will 
result, in a reduction in the State's unemployment tax effort, as 
defined in Sec. 606.21(a);
    (2) No action was taken by the State during the 12-month period 
ending on September 30 of such taxable year which has resulted, or will 
result, in a net decrease in the solvency of the State unemployment 
compensation system, as defined in Sec. 606.21(b);
    (3) The State unemployment tax rate (as defined in Sec. 606.3(j)) 
for the taxable year equals or exceeds the average benefit-cost ratio 
(as defined in Sec. 606.3(c)) for the calendar years in the five-
calendar year period ending with the calendar year immediately preceding 
the taxable year for which the cap is requested, under the rules 
specified in Sec. 606.21 (c) and (d); and
    (4) The outstanding balance of advances to the State on September 30 
of the taxable year was not greater than the outstanding balance of 
advances to the State on September 30 of the third preceding taxable 
year.
    (b) Maximum tax credit reduction. If a State qualifies for a cap, 
the maximum tax credit reduction for the taxable year shall not exceed 
0.6 percent, or, if higher, the tax credit reduction that was in effect 
for the taxable year preceding the taxable year for which the cap is 
requested.
    (c) Year not taken into account. If a State qualifies for a cap for 
any year, the year and January 1 of the year to which the cap applies 
will not be taken into account for purposes of determining reduction of 
tax credit for subsequent taxable years.
    (d) Partial caps. Partial caps obtained under subsection (f)(8) are 
no longer

[[Page 36]]

available. Nevertheless, for the purposes of applying section 3302(c)(2) 
to subsequent taxable years, partial cap credits earned will be taken 
into account for purposes of determining reduction of tax credits. Also, 
the taxable year to which the partial cap applied (and January 1 
thereof) will be taken into account for purposes of determining 
reduction of tax credits for subsequent taxable years.