[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: 20CFR606.23]

[Page 37-38]
 
                      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. 606.23  Avoidance of tax credit reduction.

    (a) Applicability. Subsection (g) of section 3302 of FUTA authorizes 
a State to avoid a tax credit reduction for a taxable year by meeting 
the three requirements of subsection (g). These requirements are met if 
the UIS Director determines that:
    (1) Advances were repaid by the State during the one-year period 
ending on November 9 of the taxable year in an amount not less than the 
sum of--
    (i) The potential additional taxes (as estimated by the UIS 
Director) that

[[Page 38]]

would be payable by the State's employers if paragraph (2) of section 
3302(c) of FUTA were applied for such taxable year (as estimated with 
regard to the cap on tax credit reduction for which the State qualifies 
under Secs. 606.20 to 606.22 with respect to such taxable year), and
    (ii) Any advances made to such State during such one-year period 
under title XII of the Social Security Act;
    (2) There will be adequate funds in the State unemployment fund (as 
estimated by the UIS Director) sufficient to pay all benefits when due 
and payable under the State law during the three-month period beginning 
on November 1 of such taxable year without receiving any advance under 
title XII of the Social Security Act; and
    (3) There is a net increase (as estimated by the UIS Director) in 
the solvency of the State unemployment compensation system for the 
taxable year and such net increase equals or exceeds the potential 
additional taxes for such taxable year as estimated under paragraph 
(a)(1)(i) of this section.
    (b) Net increase in solvency. (1) The net increase in solvency for a 
taxable year, as determined for the purposes of paragraph (a)(3) of this 
section, must be attributable to legislative changes made in the State 
law after the later of--
    (i) September 3, 1982, or
    (ii) The date on which the first advance is taken into account in 
determining the amount of the potential additional taxes.
    (2) The UIS Director shall determine the net increase in solvency by 
first estimating the difference between revenue receipts and benefit 
outlays under the law in effect for the year for which avoidance is 
requested, as if the relevant changes in State law referred to in 
paragraph (b)(1) of this section were not in effect for such year. The 
UIS Director shall then estimate the difference between revenue receipts 
and benefit outlays under the law in effect for the year for which the 
avoidance is requested, taking into account the relevant changes in 
State law referred to in paragraph (b)(1) of this section. The amount 
(if any) by which the second estimated difference exceeds the first 
estimated difference shall constitute the net increase in solvency for 
the purposes of this section.
    (c) Year taken into account. If a State qualifies for avoidance for 
any year, that year and January 1 of that year to which the avoidance 
applies will be taken into account for purposes of determining reduction 
of tax credits for subsequent taxable years.