have accepted the provisions of the Wagner-Peyser Act and whether their plans of operation for public employment offices comply with the provisions of said act.

Normal and additional tax credit is given to taxpayers against taxes imposed by section 1600 of the Internal Revenue Code.

Grants of funds are made to States for administration of their employment security laws if their unemployment compensation laws and their plans of operation for public employment offices meet required conditions of Federal law. (Section 303 (a) of the Social Security Act; section 1603 (a) of the Internal Revenue Code; sections 6, 7 and 8 of the Wagner-Peyser Act.)

§ 601.2

Approval of State unemployment compensation laws. States may at their option submit their unemployment compensation laws for approval (section 1603 (a) of the Internal Revenue Code).

(a) Submission. The States submit to the regional representative of the Bureau of Employment Security four copies of the State unemployment compensation law, properly certified by an authorized State official to be true and complete, together with a written request for approval.

(b) Review of State law. The Regional Representative reviews the State law and forwards three copies to the central office of the Bureau with his comments. The Bureau reviews the regional representative's comments and analyzes the State law from the standpoint of the requirements of section 1603 (a) of the Internal Revenue Code. Bureau Director makes recommendations to the Commissioner for Social Security regarding approval of the State law.

The

(c) Approval. The Commissioner for Social Security determines whether the State law contains the provisions required by section 1603 (a) of the Internal Revenue Code. If the State law is approved, the Commissioner notifies the Governor of the State within 30 days of the submission of such law.

(d) Certification. On December 31, of each taxable year the Commissioner for Social Security certifies, for the purposes of normal tax credit (section 1601 (a) (1) of the Internal Revenue Code), to the Secretary of the Treasury each State the law of which he has previously approved. (See also § 601.5.)

§ 601.3 Findings with respect to State laws and plans of operation. For purposes of grants, findings are made regarding the inclusion in State unemployment compensation laws, approved under section 1603 (a) of the Internal Revenue Code, of provisions required by section 303 (a) of the Social Security Act (see § 601.2); findings are also made whether a State has accepted the provisions of the Wagner-Peyser Act and whether its plan of operation for public employment offices complies with the provisions of said act. For purposes of additional tax credit, findings are made regarding reduced rates of contributions permitted by the State law (section 1602 (a) (1) of the Internal Revenue Code).

So that the Commissioner for Social Security may be enabled to determine the status of State laws and plans of operation, all relevant State materials, such as statutes, executive and administrative orders, legal opinions, rules, regulations, interpretations, court decisions, etc., are required to be submitted currently.

(a) Submission. The States submit currently to the regional representative four copies of relevant State material, properly certified by an authorized State official to be true and complete.

(b) Review. The regional representative reviews the State material and forwards three copies to the central office of the Bureau with his comments. The Bureau reviews the material from the standpoint of its conformity with section 303 (a) of the Social Security Act, section 1602 (a) of the Internal Revenue Code, or the Wagner-Peyser Act, as the case may be. If questions are raised concerning such conformity, negotiations to resolve them are undertaken with State officials. Any questions then remaining unresolved are presented to the Commissioner with appropriate recommendations. If a State plan of operation for public employment offices, and any amendment thereto, complies with the provisions of the Wagner-Peyser Act, the State agency is notified of the approval of the plan or the amendment as the case may require.

(c) Findings. The Commissioner makes findings as provided in the cited sections of the Federal law. In the event that the Commissioner is unable to make the findings required for certification for payment or for certification of the law for purposes of additional tax credit,

further discussions with State officials are undertaken.

§ 601.4

Certification for tax credit. Within 30 days after submittal of a State unemployment compensation law for such purpose, the Commissioner certifies to the State agency, in accordance with the provisions of section 1602 (b) (3) of the Internal Revenue Code, his findings regarding reduced rates of contributions allowable under such law. On December 31 of each taxable year the Commissioner certifies to the Secretary of the Treasury the law of each State, certified with respect to such year under section 1603 of the Internal Revenue Code (see § 601.2), which he finds allows reduced rates with respect to such taxable year only in accordance with the provisions of section 1602 (a) of the Internal Revenue Code. With regard to certification for payment, see § 601.6.

§ 601.5 Withholding payments and certifications-(a) When withheld. Payments are not made where the provisions required by section 303 (a) of the Social Security Act are found no longer to be included in the State unemployment compensation law. In addition, payments of funds to States and/or yearend certification of State laws are withheld, after reasonable notice and opportunity for hearing, in the following circumstances as required by indicated statutory provisions:

(1) Where the State unemployment compensation law has been so changed as no longer to meet the conditions required by Federal law (sections 1602 (b) (3) and 1603 (c) of the Internal Revenue Code); or

(2) Where in the administration of the State unemployment compensation law there has been a failure to comply with required provisions of such law (section 303 (b) (2) of the Social Security Act and sections 1602 (b) (3), and 1603 (c) of the Internal Revenue Code); or

(3) Where in the administration of the State unemployment compensation law there has been a denial, in a substantial number of cases, of benefits due under such law (section 303 (b) (1) of the Social Security Act); or

(4) Where a State fails to make its unemployment compensation records available to the Railroad Retirement Board or fails to cooperate with Federal agencies charged with the administration of unemployment compensation

laws (section 303 (c) of the Social Security Act); or

(5) Where a State no longer has a plan of operation for public employment offices complying with the provisions of the Wagner-Peyser Act; or

(6) Where a State agency has not properly expended, in accordance with an approved plan of operation, the Federal monies paid it for administration of its public employment service.

(b) Informal discussion. Such hearings are generally not called, however, until after every reasonable effort has been made by regional and central office representatives to resolve the question involved by conference and discussion with State officials. Formal notification of the date and place of a hearing does not foreclose further negotiations with State officials.

(c) Notice of noncertification. If, at any time during the taxable year, the Commissioner for Social Security has reason to believe that a State whose unemployment compensation law he has previously approved may not be certified, he promptly notifies the Governor of the State to that effect (section 1603 (d) of the Internal Revenue Code).

(d) Hearings. Hearings are held pursuant to the provisions of section 303 (b) and (c) of the Social Security Act, sections 1602 (b) (3) and (c) of the Internal Revenue Code and the Regulations of the United States Employment Service.

(1) Notice of hearing is sent by the Commissioner for Social Security to the State employment security agency. The notice sets forth the purpose of the hearing and the time, date and place at which the hearing will be held. At a hearing the State is given an opportunity to present arguments and all relevant evidence, written or oral. The Commissioner presides at hearings and makes the necessary determination or findings, on the basis of the record of such hearings. A notice of the Commissioner's determination or finding is sent to the State employment security agency.

SUBPART B-GRANTS, ADVANCES AND AUDITS § 601.6 Grants for administration of unemployment insurance and employment service. Grants of funds for administration of State unemployment insurance and public employment service programs are made to States under sec

tion 302 (a) of the Social Security Act, the Wagner-Peyser Act, and the Appropriation Acts.

(a) Requests for funds. The forms and instructions used by State agencies in requesting funds are available upon request from the Bureau of Employment Security, Social Security Administration, Washington 25, D. C., and at the regional offices. The forms and instructions call for detailed information for each budgetary period concerning the specific amounts requested for personal services and other current expenses of State agencies, supported by work-load and unit-cost estimates. Supplementary budget requests are processed in the same manner as regular requests. The Bureau's representatives in the regional offices furnish assistance to the State agencies in preparing requests for funds.

(b) Processing of requests. State agencies send their requests for funds to the regional representative of the Bureau who reviews the requests and forwards them to the central office of the Bureau with his recommendation as to the amounts necessary for proper and efficient administration of the State unemployment compensation law and employment service program.

The Bureau appraises the requests and the recommendations of the regional representatives from a Nation-wide point of view, examining each State's request in the light of the experience of other States to insure equitable treatment among the States in the allocation of funds made available by Congress for the administration of State unemployment compensation laws and public employment service programs. The request is then presented to the Commissioner with the recommendation of the Bureau.

If the

(c) Action by Commissioner. Commissioner approves the State's budget request, the State agency is notified; and, provided the conditions precedent to grants continue during the budgetary period, certifications for payment, under the approved budget, stating the amounts, are made by the Commissioner to the Secretary of the Treasury quarterly. Upon denial of a request, in whole or in part, the State agency is notified and the Bureau's Regional Representative is instructed to negotiate with the State with a view to removing the basis for denial.

§ 601.7 Request for funds for servicemen's readjustment allowance program.

Allotments of funds for the administration of the servicemen's readjustment allowance program are made to States by the Commissioner for Social Security upon quarterly certification by the Administrator of Veterans' Affairs under section 1100 (f) of the Servicemen's Readjustment Act of 1944. The certifications by the Administrator of Veterans' Affairs are based upon requests submitted to the Veterans' Administration by the State agencies administering unemployment insurance and employment service programs.

§ 601.8 Agreement with Postmaster General. The Social Security Administration and the Postmaster General have been directed by the Congress (Title I of the Supplemental Federal Security Agency Appropriation Act, 1949) to prescribe a mutually satisfactory procedure whereby official State employment security postal matter will be handled without the prepayment of postage. In lieu of such prepayments, the Social Security Administration periodically certifies to the Secretary of the Treasury for payment to the Post Office Department the amount necessary to cover the cost of State agency mailings. The amount of payment is based on a formula agreed upon by the Social Security Administration and the Post Office Department.

§ 601.9 Advances to States; Federal Unemployment Account. Title XII of the Social Security Act provides that if the balance in a State's account in the Unemployment Trust Fund falls below a level specified in the statute, the State employment security agency may apply to the Social Security Administration for an advance from the Federal Unemployment Account, such advance to be repaid by the State at such time as the State fund exceeds a stipulated amount.

Applications for advances are submitted by State agencies to the regional representative of the Bureau for transmittal to the central office of the Bureau. The Bureau reviews applications and makes appropriate recommendations to the Commissioner for Social Security. If the Commissioner finds that the prescribed conditions for the advance are met, he certifies to the Secretary of the Treasury the amount to be transferred from the Federal Unemployment Account to the State's account in the Unemployment Trust Fund.

§ 601.10 Reconversion unemployment benefits for seamen. Payments to States

for reconversion unemployment benefits to seamen are made under section 1305 of the Social Security Act. Each State is entitled to receive, either in advance or by way of reimbursement as determined by the Administrator, an amount equal to the additional cost to the State of payments of compensation made under and in accordance with the State's agreement with the Administrator.

(a) Requests for funds. The forms and instructions used by State agencies in requesting funds are available upon request from the Bureau of Employment Security, Social Security Administration, Washington 25, D. C. In the case of advances, the forms and instructions call for information on the estimated number of reconversion unemployment benefits payable quarterly, the estimated amount of such payments and the estimated amount payable from State funds under the State unemployment compensation law. With respect to reimbursement for benefits already paid, the States submit reports showing the amount chargeable to Federal funds under section 1305. The Bureau's representatives in the regional offices furnish assistance to the State agencies in preparing requests for funds.

(b) Processing of requests. State agencies send their requests for funds directly to the Bureau of Employment Security, Social Security Administration, Washington 25, D. C. The Bureau reviews the requests for correctness of the amounts involved and to insure that the total of all such requests does not exceed the amount appropriated by Congress. Requests are then submitted to the Federal Security Administrator for approval and certification to the Secretary of the Treasury of the amount payable to each State.

(c) Costs of administration. No separate grants are made to States for the administration of reconversion unemployment benefits for seamen. State agencies absorb any such costs within their regular budgets for unemployment insurance and employment service administration.

§ 601.11 Audits. As soon as practicable after the close of each budgetary period, or at other times as necessary, the books of account and records pertaining to employment security administration in each State are audited by the Division of State-Grant-in-Aid Au

dits, Office of Federal-State Relations, to determine whether the expenditures have been made for purposes and in amounts found necessary by the Commissioner for Social Security for proper and efficient administration of the State's unemployment compensation law and public employment service.

(a) If the audit, as reviewed by the regional office, results in no exceptions, the agency is advised by letter of this result. If the regional office concurs in exceptions taken by the examining auditor, the State agency is given an opportunity within 15 days to concur in them or to submit additional facts for purposes of clearing the exceptions. the agency's reply does not result in clearance of the exceptions, they are presented to the Commissioner with the agency's statement of its reasons for nonconcurrence.

If