(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 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.
