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References. Employment & Training Administration Handbook 401, and Employment & Training Administration Handbook 301. Background. BTQ measures were detailed in UIPL 10-96. The first reports required were quality evaluations of nonmonetary determinations, submitted for the quarter ending September 30, 1996. Timeliness measures, including nonmonetary determinations timeliness and nonmonetary issue detection timeliness, were required beginning with the month of January 1997. Availability. UI PERFORMS: A Look at Nonmonetary Performance of SESAs can be accessed at www.itsc.org, under UI Data & Statistics. It will also be distributed to Regional Offices and SESA UI Directors by compact disk (CD). State-specific pages can be downloaded and/or printed from the website or the CD. No hard copies are available. Action Required. SESA Administrators are requested to provide this information to appropriate staff. Inquires. Direct inquiries to the appropriate Regional Office.

References: The Small Business Job Protection Act of 1996 (P.L. 104-188), the Health Coverage Availability and Affordability Act of 1996 (P.L. 104-191); and the Internal Revenue Code of 1986 (IRC), including the Federal Unemployment Tax Act (FUTA). Background: The Small Business Job Protection Act of 1996 (SBJPA), P.L. 104-188, enacted on August 20, 1996, and the Health Coverage Availability and Affordability Act (HCAAA) of 1996, P.L. 104-191, enacted on August 21, 1996, made several changes which affect the UC program. As none of the amendments made by the SBJPA or the HCAAA involve the conformity provisions of Federal law, they do not require States to amend their laws. This UIPL provides information on five of the amendments made by the SBJPA and one amendment made by the HCAAA. The authority for interpreting all six amendments rests with the Internal Revenue Service. This UIPL does not discuss amendments made by Section 1122, SBJPA, to the "safe harbor" provisions of Section 530 of the Revenue Act of 1978. Section 1116(a), SBJPA: Fishermen. Section 3306(c)(18), FUTA, excludes from the definition of employment, and, therefore, from the FUTA tax, service described in Section 3121(b)(20), IRC. Section 3121(b)(20), IRC, applies to service performed by an individual on a boat engaged in catching fish or other forms of aquatic animal life provided certain conditions are met. The Conference Report describes present law and the amendment made by the SBJPA: Present law Under present law, service as a crew member on a fishing vessel is generally excluded from the definition of employment for purposes of income tax withholding on wages and for purposes of the Federal Insurance Contri-butions Act (FICA) [i.e., Section 3121 (b)(20), IRC] and the Federal Unemployment Tax Act (FUTA) taxes if the operating crew of the boat normally consists of fewer than 10 individuals, the individual receives a share of the catch based on the total catch, and the individual does not receive cash remuneration other than proceeds from the sale of the individual's share of the catch. If a crew member receives any other cash, e.g., payment for services as an engineer, the exemption from FICA and FUTA taxes does not apply. Crew members to which the exemp-tion applies are subject to self-employment taxes. Special reporting requirements apply to the operators of boats on which exempt crew members serve. House bill The operating crew of a boat is treated as normally made up of fewer than 10 individuals if the average size of the operating crew on trips made during the preceding 4 calendar quarters consisted of fewer than 10 individ-uals. In addition, the exemption applies if the crew member receives certain cash payments. The cash payments cannot exceed $100 per trip, is contingent on a minimum catch, and is paid solely for additional duties (e.g., as mate, engineer, or cook) for which additional cash remuneration is customary. [H. Rep. 104-737, as quoted in the Congressional Record for August 1, 1996, page H9615.] The amendments apply to remuneration paid after December 31, 1994. In addition, the amendments apply to remuneration paid after December 31, 1984, and before January 1, 1995, unless the payer treated such remuneration when paid as subject to FICA taxes. Section 1118, SBJPA: Newspaper Distributors Treated as Direct Sellers. Section 3508, IRC, provides that "direct sellers," as defined at Section 3508(b)(2), IRC, will not be treated as an employee for employment tax purposes. As a result, direct sellers are treated as independent contractors for FUTA tax purposes. The SBJPA has amended this "direct seller" provision to provide that a person engaged in the trade or business of the delivering or distribution of newspapers or shopping news (including any services that are directly related to such trade or business) qualifies as a direct seller. The Conference Report, which accepted the Senate amendment, states that-- The Senate amendment clarifies the treatment of quali-fying newspaper distributors and carriers as direct sellers. Under the Senate amendment, a person engaged in the trade or business of the delivery or distribution of newspapers or shopping news (including any services that are directly related to such trade or business such as solicitation of customers of [sic - probably should be "or"] collection of receipts) qualifies as a direct seller, provided substantially all the remuneration for the performance of the services is directly related to sales or other output rather than to the number of hours worked, and the services performed by the person are performed pursuant to a written contract between such person and the service recipient and such contract provides that the person will not be treated as an employee for Federal tax purposes. The Senate amendment is intended to apply to newspaper distributors and carriers whether or not they hire others to assist in the delivery of newspapers. The Senate amendment also applies to newspaper distributors and carriers operating under either a buy-sell distribution system (i.e., where the newspaper distributors or carriers purchase the newspapers from the publisher) or an agency distribution system. For example, newspaper distributors and carriers operating under an agency distribution system who are paid based on the number of papers delivered and have an appropriate written agreement qualify as direct sellers. The status of newspaper distributors and carriers who do not qualify as direct sellers under the Senate amendment continue to be determined under present-law rules. No inference is intended with respect to the employment status of newspaper distributors and carriers prior to the effective date of the Senate amendment. Further, the provision is intended to clarify the worker classifi-cation issue for income and employment taxes only. The provision is not intended to have any impact whatsoever on the interpretation or applicability of Federal, State or local labor laws. [H. Rep. 104-737, as quoted in the Congressional Record for August 1, 1996, page H9616.] The provision concerning direct sellers is effective with respect to services performed after December 31, 1995. Section 1202, SBJPA: Employer-Provided Educational Assistance. Section 3306(b)(13), FUTA, excludes from the definition of wages "any payment made, or benefit furnished to or for the benefit of an employee if at the time of such payment or such furnishing it is reasonable to believe that the employee will be able to exclude such payment or benefit from income under section 127 . . ." of the IRC. Section 127, IRC, excludes from gross income of the employee certain amounts paid, or expenses incurred, up to $5,250 in a calendar year, by the employer for educational assistance to the employee. Section 127 did not apply to taxable years beginning after December 31, 1994. The SBJPA extends this exclusion for taxable years beginning after December 31, 1994 through May 31, 1997. In the case of tax year 1997, only expenses paid with respect to courses beginning before July 1, 1997 may be taken into account. Also, the exclusion does not apply to expenses for graduate level education relating to courses beginning after June 1, 1996. Section 1203, SBJPA: H-2A Workers. On January 1, 1995, Section 3306(c)(1)(B), FUTA, ceased to be effective. That section excluded from the definition of employment, and, therefore, from the FUTA tax, agricultural workers who are aliens admitted to the United States to perform agricultural labor pursuant to Sections 214(c) and 1101(a)(15)(H)(ii)(A) of the Immigration and Nationality Act (8 U.S.C. 1101(a)(15)(H)(ii)(A)). These workers are commonly referred to as "H-2A" workers. The SBJPA makes this H-2A exclusion permanent. The provision is effective for labor performed on or after January 1, 1995. Section 1421(b)(8)(A), SBJPA: Amendment to Definition of Wages in Section 3306(b)(5), FUTA, pertaining to Simple Retirement Account. The SBJPA adds subparagraph (H) to Section 3306(b)(5), FUTA. Under this amendment, "wages" does not include any payment made to, or on behalf of, an employee or his beneficiary-- (H) under an arrangement to which section 408(p) applies, other than any elective contributions under paragraph (2)(A)(i) thereof. The Conference Report explains the purpose of Section 408(p), IRC-- The House bill creates a simplified retirement plan for small business called the savings incentive match plan for employees ("SIMPLE") retirement plan. SIMPLE plans can be adopted by employers who employ 100 or fewer employees on any day during the year and who do not maintain another employer-sponsor [sic] retirement plan. Under the Senate amendment, a SIMPLE plan can be adopted by employers who employed 100 employees or less with at least $5,000 in compensation for the preceding year. [H. Rep. 104-737, as quoted in the Congressional Record for August 1, 1996, pages H9627-H9628.] Section 408(p), IRC, as amended, describes the SIMPLE plan in detail. The amendments pertaining to SIMPLE plans apply to taxable years beginning after December 31, 1996. Section 301(c), HCAAA - Amendment to Definition of Wages in Section 3306(b), FUTA, pertaining to Medical Savings Accounts. The HCAAA added new paragraph (17) to Section 3306(b), FUTA. Under this amendment, "wages" does not include-- any payment made to or for the benefit of an employee if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment from income under section 106(b). The House Committee Report explains the purpose of Section 106(b), IRC-- The fact that Americans with low-deductible health insurance have few incentives to lower their health care costs or benefit from staying well is a major factor affecting health care cost growth. One approach to providing incentives for Americans to be more cost conscious purchasers of medical services is to make available alternatives to low-deductible insurance such as medical savings accounts ("MSAs"). MSAs will give people more control over their health care dollars. Because MSAs afford people the opportunity to save unspent MSA funds for future health and long-term care needs, the Committee believes that people will be more prudent in their purchase of health care services. [H. Rep. 104-496, page 110.] Section 106(b), IRC, as amended, describes MSAs in detail. The amendments pertaining to MSAs apply to taxable years beginning after December 31, 1996. (Section 301(j), HCAAA.) Action: Appropriate staff should be advised of these amendments.

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