[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: 20CFR606.21]

[Page 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. 606.21  Criteria for cap.

    (a) Reduction in unemployment tax effort. (1) For purposes of 
paragraph (a)(1) of Sec. 606.20, a reduction in a State's unemployment 
tax effort will have occurred with respect to a taxable year if any 
action is or was taken (legislative, judicial, or administrative,) that 
is effective during the 12-month period ending on September 30 of such 
taxable year, which has resulted in or will result in a reduction of the 
amount of contributions paid or payable or the amounts that were or 
would have been paid or payable but for such action.
    (2) Actions that will result in a reduction in tax effort include, 
but are not limited to, a reduction in the taxable wage base, the tax 
rate schedule, tax rates, or taxes payable (including surtaxes) that 
would not have gone into effect but for the legislative, judicial, or 
administrative action taken. Notwithstanding the foregoing criterion, a 
reduction in unemployment tax effort resulting from any provision of the 
State law enacted prior to August 13, 1981, will not be taken into 
account as a reduction in the State's unemployment tax effort for the 
purposes of this section.
    (b) Net decrease in solvency. For purposes of paragraph (a)(2) of 
Sec. 606.20, a net decrease in the solvency of the State's unemployment 
compensation system will have occurred with respect to a taxable year if 
any action is or was taken (legislative, judicial, or administrative), 
that is effective during the 12-month period ending on September 30 of 
such taxable year, which has resulted in or will result in an increase 
in benefits without at least an equal increase in taxes, or a decrease 
in taxes without at least an equal decrease in benefits. Notwithstanding 
the foregoing criterion, a decrease in solvency resulting from any 
provision of the State law enacted prior to August 13, 1981, will not be 
taken into account as a reduction in solvency of the State's 
unemployment compensation system for the purposes of this section.
    (c) State unemployment tax rate. For purposes of paragraph (a)(3) of 
Sec. 606.20, the State unemployment tax rate is defined in 
Sec. 606.3(j). If such percentage is not a multiple of 0.1 percent, the 
percentage shall remain unrounded.
    (d) State five-year average benefit cost ratio. For purposes of 
paragraph (a)(3) of Sec. 606.20, the average benefit cost ratio for the 
five preceding calendar years is the percentage determined by dividing 
the sum of the benefit cost ratios for the five years by five. If such 
percentage is not a multiple of 0.1 percent, the percentage shall remain 
unrounded.