(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 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.
