ment of contributions to the wrong State. For general provisions relating to refunds, credits, and abatements of the tax, see $$ 301.6402-2 and 301.6404-1 of this chapter (Regulations on Procedure and

Administration).

Example (1). The Federal return of the M Company for the calendar year 1961 discloses total wages of $400,000. The Federal tax, imposed at the rate of 3.1 percent, is $12,400. The company is liable for total State contributions of $8,000 for 1961. The due date of the Federal return is January 31, 1962, no extension of time for filing the return having been granted. The contributions are not paid until February 1, 1962. If the contributions had been paid on or before January 31, 1962, the entire amount of $8,000 could have been credited against the tax. (Credits could not exceed 2.7 percent of the wages, or $10,800. See § 31.3302 (c)-1.) Since the contributions were paid after January 31, 1962, the M Company is entitled to a credit of 90 percent of the amount which would have been allowable as credit had the contributions been paid on time (90 percent of $8,000, or $7,200), the net liability for Federal tax being $5,200 ($12,400 minus $7,200).

Example (2). The facts are the same as in example (1), except that the M Company is liable for and pays total State contributions of $12,000, instead of $8,000. If the contributions had been paid on or before January 31, 1962, the amount allowable as credit would have been $10,800 (2.7 percent of wages of $400,000). Since the contributions were paid after January 31, 1962, the M Company is entitled to a credit of 90 percent of $10,800, or $9,720, the net liability for Federal tax being $2,680 ($12,400 minus $9,720).

Example (3). The Federal return of the R Company for the calendar year 1961 discloses a total tax of $3,100. The company is liable for total State contributions of $2,700 for such year. The due date of the Federal return is January 31, 1962, no extension of time for filing the return having been granted. The R Company pays $1,700 of the total State contributions on or before such date, and the remaining $1,000 on February 1, 1962. If the $1,000 had been paid on or before January 31, 1962, that amount could have been credited against the tax (such amount plus the $1,700 paid on or before January 31, 1962, not exceeding the aggregate credit allowable). Since the $1,000 was paid after January 31, 1962, the R Company is entitled to a credit of 90 percent of this amount or $900, plus the credit of $1,700 allowable for the contributions paid on or before January 31, 1962. The net liability for Federal tax is thus $500 ($3,100 minus $2,600).

(4) Amount of credit allowable when contributions are paid to wrong State. Contributions for the taxable year paid

into a State unemployment fund wh are required under the unemploym compensation law of that State, which are paid with respect to rem neration on the basis of which the payer had, prior to such payment, er neously paid an amount as contributic under another unemployment compens tion law, shall be deemed for purpo of the credit to have been paid at time of the erroneous payment. If, reason of such other law, the taxpay was entitled to cease paying contributio for such taxable year with respect services subject to such other law, payment into the proper fund shall deemed for purposes of credit to ha been made on the date the Federal retu for such year was actually filed by t taxpayer under § 31.6011(a)-3.

Example. Employee N, whose Federal r turn for the calendar year 1961 disclos a total tax of $3,100, employs individuals i State X and State Y during the calend year 1961. N assumes in good faith that tỉ services of his employees are covered by tr unemployment compensation law of State! and pays as contributions to State Y th amount of $2,700 based upon the remunera tion of the employees. All of the service were in fact covered by the unemploymen compensation law of State X, and none b the law of State Y. The payment to Stat Y was made on January 31, 1962. When th error was discovered thereafter, N paid t State X contributions in the amount o $2.700 based upon such remuneration. Sinc the contributions were paid to State Y or January 31, 1962, the contributions to Stat X are, for purposes of the credit, deemed t have been paid on such date. N is entitled t a credit of $2,700 against the Federal tax o $3,100, the net liability for Federal tax beins $400 ($3,100 minus $2,700).

[T.D. 6516, 25 F.R. 13032, Dec. 20, 1960, as amended by T.D. 6658, 28 FR. 6632, June 27, 1963]

§ 31.3302(a)-2 Refund of State contributions.

If, subsequent to the filing of the return, a refund is made by a State to the taxpayer of any part of his contribution credited against the tax, the taxpayer is required to advise the district director of the date and amount of such refund and the reason therefor, and to pay the tax, if any, due as a result of such refund, together with interest from the date when the tax was due.

§ 31.3302(a)-3 Proof of credit under section 3302(a).

Credit against the tax for any calendar year for contributions paid into State

employment funds shall not be alved unless there is submitted to the trict director:

(a) A certificate of the proper officer each State (the laws of which required e contributions to be paid) showing, r the taxpayer:

(1) The total amount of contributions quired to be paid under the State law ith respect to such calendar year (exusive of penalties and interest) which as actually paid on or before the date le Federal return is required to be filed; nd

(2) The amounts and dates of such equired payments (exclusive of penales and interest) actually paid after the ate the Federal return is required to be led.

(b) A statement by the taxpayer that 10 part of any payment made by him nto a State unemployment fund for uch calendar year, which is claimed as credit against the tax, was deducted r is to be deducted from the remuneraion of individuals in his employ. Such tatement shall contain or be verified by A written declaration that it is made under the penalties of perjury.

(c) Such other or additional proof as the Commissioner or the district director may deem necessary to establish the right to the credit provided for under section 3302(a).

31.3302(b) Statutory provisions; credits against tax; additional credit. SEC. 3302. Credits against tax. ▾

(b) Additional credit. In addition to the credit allowed under subsection (a), a taxpayer may credit against the tax imposed by section 3301 for any taxable year an amount, with respect to the unemployment compensation law of each State certified for the taxable year as provided in section 3303 (or with respect to any provision thereof so certified), equal to the amount, if any, by which the contributions required to be paid by him with respect to the taxable year were less than the contributions such taxpayer Would have been required to pay if throughout the taxable year he had been subject under such State law to the highest rate applied thereunder in the taxable year to any person having individuals in his employ, or to a rate of 2.7 percent, whichever rate is lower.

the taxpayer may be entitled to a credit under section 3302 (b). This additional credit is allowable to the taxpayer with respect to the amount of contributions which he is relieved from paying to an unemployment fund under the provisions of a State law which have been certified for the taxable year as provided in section 3303. Generally, an additional credit is available to an employer, if under the provisions of a State law which have been so certified he is permitted to pay contributions to such State for the taxable year, or portion thereof, at a rate which is both lower than the highest rate applied under such law in such year and lower than 2.7 percent. No additional credit is allowable except with respect to a State law certified by the Secretary of Labor for the taxable year as provided in section 3303 (or with respect to any provisions thereof certified).

(b) Method of computing amount of additional credit allowable with respect to a State law--(1) Certification of a State law as a whole. In ascertaining the additional credit for any taxable year with respect to a particular State law which the Secretary of Labor certifies as a whole to the Secretary of the Treasury in accordance with the provisions of section 3303, the taxpayer must first compute the following amounts:

(i) The amount of contributions (whether or not with respect to employment as defined in section 3306 (c)) which the taxpayer would have been required to pay under the State law for such year if throughout the year he had been subject to the highest rate applied under such law in such year, or to a rate of 2.7 percent, whichever rate is lower.

(ii) The amount of contributions (whether or not with respect to employment as defined in section 3306 (c)) he was required to pay under the State law with respect to such year, whether or not paid.

The amount computed under subdivision (ii) of this subparagraph should then be subtracted from the amount computed under subdivision (i) of this subparagraph and the result will be the additional credit for the taxable year with respect to the law of that State.

Example. A employs individuals only in State X during the calendar year 1955. The unemployment compensation law of State X has been certified in its entirety to the Secretary of the Treasury by the Secretary of Labor for such year. The highest rate

Since the 2.7 percent rate is less than the highest rate applied (3 percent), the 2.7 percent rate is used in computing the amount ($675) from which the amount of contributions required to be paid at the 1 percent rate ($250) is deducted in order to ascertain the additional credit ($425).

(2) Certification with respect to particular provisions of a State law. If the Secretary of Labor makes a certification to the Secretary of the Treasury with respect to particular provisions of a State law for any taxable year pursuant to section 3303, the additional credit of the taxpayer for such year with respect to such law shall be computed in such manner as the Commissioner shall determine.

(c) Amount of additional credit allowable to taxpayer with respect to more than one State law. If the taxpayer is entitled to additional credit with respect to more than one State law in any taxable year, the additional credit allowable with respect to each State law shall be computed separately (in accordance with paragraph (b) of this section) and the total additional credit allowable against the tax for such year shall be the aggregate of the additional credits allowable with respect to such State laws. For limitation on total credits, see § 31.3302 (c)-1.

[T.D. 6516, 25 F.R. 13032, Dec. 20, 1960, as amended by T.D. 6658, 28 F.R. 6632, June 27, 1963]

§ 31.3302 (b)-2 Proof of additional credit under section 3302 (b).

Additional credit under section 3302(b) shall not be allowed against the tax for any calendar year unless there is submitted

(a) To the Commissioner a certificate of the proper officer of each State (with respect to the law of which the additional credit is claimed) showing the highest

rate of contributions applied under ti State law in such calendar year to an person having individuals in his emplo and

(b) To the district director a certi cate of the proper officer of each Sta (with respect to the law of which t additional credit is claimed) showing f the taxpayer

(1) The total remuneration with r spect to which contributions were r quired to be paid by the taxpayer und the State law with respect to such cale dar year; and

(2) The rate of contributions appli to the taxpayer under the State law wit respect to such calendar year.

If under the law of such State differe rates of contributions were applied to th taxpayer during particular periods such calendar year, the certificate sha set forth the information called for i subparagraphs (1) and (2) of this para graph with respect to each such period.

(c) Such other or additional proof a the Commissioner or the district directo may deem necessary to establish the righ to the additional credit provided for under section 3302(b).

§ 31.3302 (c) Statutory provisions credits against tax; limit on total credits.

SEC. 3302, Credits against tax. *

(c) Limit on total credits. (1) The total credits allowed to a taxpayer under this sec tion shall not exceed 90 percent of the tax against which such credits are allowable.

(2) If an advance or advances have been made to the unemployment account of a State under the title XII of the Social Security Act before the date of the enactment of the Employment Security Act of 1960, then the total credits (after applying subsections (a) and (b) and paragraph (1) of this subsection) otherwise allowable under this sec tion for the taxable year in the case of a taxpayer subject to the unemployment compensation law of such State shall be reduced

(A) In the case of a taxable year beginning on January 1, 1963 (and in the case of any succeeding taxable year beginning before January 1, 1968), as of the beginning of which there is a balance of such advances, by 5 percent of the tax imposed by section 3301 with respect to the wages paid by such taxpayer during such taxable year which are attributable to such State; and

(B) In the case of any succeeding taxable year beginning on or after January 1, 1968, as of the beginning of which there is a balance of such advances, by an additional 5 percent, for each such succeeding taxable year, of the tax imposed by section 3301 with respect to the wages paid by such taxpayer

ing such taxable year which are attributato such State.

It the request (made before November 1 the taxable year) of the Governor of any te, the Secretary of Labor shall, as soon practicable after June 30 or (if later) date of the receipt of such request, certo such Governor and to the Secretary the Treasury the amount he estimates tals .15 percent (plus an additional .15 cent for each additional 5-percent reducn, provided by subparagraph (B)) of the al of the remuneration which would ve been subject to contributions under the te unemployment compensation law with pect to the calendar year preceding such tification if the dollar limit on remuneron subject to contributions under such law re equal to the dollar limit under section )6(b)(1) for such calender year. If, after eiving such certification and before Nomber 10 of the taxable year, the State ys into the Federal unemployment account › amount so certified (and designates such yment as being made for purposes of this îtence), the reduction provided by the first atence of this paragraph shall not apply : such taxable year.

(3) If an advance or advances have been de to the unemployment account of a ate under title XII of the Social Security it on or after the date of the enactment the Employment Security Act of 1960, en the total credits (after applying subctions (a) and (b) and paragraphs (1) id (2) of this subsection) otherwise allowle under this section for the taxable year the case of a taxpayer subject to the unnployment compensation law of such State tall be reduced

(A) (i) In the case of a taxable year benning with the second consecutive Janary 1 as of the beginning of which there is balance of such advances, by 10 percent of he tax imposed by section 3301 with respect › the wages paid by such taxpayer during ich taxable year which are attributable to ich State; and

(ii) In the case of any succeeding taxable ear beginning with a consecutive January 1 s of the beginning of which there is a balnce of such advances, by an additional 10 ercent, for each such succeeding taxable ear, of the tax imposed by section 3301 with espect to the wages paid by such taxpayer luring such taxable year which are attributble to such State;

(B) In the case of a taxable year beginhing with the third or fourth consecutive January 1 as of the beginning of which there s a balance of such advances, by the amount determined by multiplying the wages paid by such taxpayer during such taxable year which are attributable to such State by the percentage (if any) by which

(i) 2.7 percent, exceeds

(ii) The average employer contribution rate for such State for the calendar year preceding such taxable year; and

(C) In the case of a taxable year beginning with the fifth or any succeeding consecutive January 1 as of the beginning of which there is a balance of such advances, by the amount determined by multiplying the wages paid by such taxpayer during such taxable year which are attributable to such State by the percentage (if any) by which—

(i) The 5-year benefit cost rate applicable to such State for such taxable year or (if higher) 2.7 percent, exceeds

(ii) The average employer contribution rate for such State for the calendar year preceding such taxable year.

[Sec. 3302(c) as emended by sec. 523(b), Social Security Amendments 1960; sec. 1, Act of Nov. 7, 1963 (Pub. Law 88-173, 77 Stat. 305)] Sec. 522(b). [Social Security Amendments of 1960]

** *

(1) No amount shall be transferred on or after the date of the enactment of this Act from the Federal unemployment account to the account of any State in the Unemployment Trust Fund pursuant to any application made under section 1201 (a) of the Social Security Act as in effect before such date; except that, if

(A) Some but not all of an amount certified by the Secretary of Labor to the Secretary of the Treasury for transfer to the account of any State was transferred to such account before such date, and

(B) The Governor of such State, after the date of the enactment of this Act, requests the Secretary of the Treasury to transfer all or any part of the remainder to such account,

the Secretary of the Treasury shall, prior to audit or settlement by the General Accounting Office, transfer from the Federal unemployment account to the account of such State in the Unemployment Trust Fund the amount so requested or (if smaller) the amount available in the Federal unemployment account at the time of the transfer. No such amount shall be transferred under this paragraph after the one-year period beginning on the date of the enactment of this Act.

(2) For purposes of section 3302(c) of the Federal Unemployment Tax Act and titles IX and XII of the Social Security Act, if any amount is transferred pursuant to paragraph (1) to the unemployment account of any State, such amount shall be treated as an advance made before the date of the enactment of this Act.

SEC. 104. [Temporary Unemployment Compensation Act of 1958 (72 Stat 173)]. The total credits allowed under section 3302 (c) of the Federal Unemployment Tax Act (26 U.S.C. 3302 (c)) to taxpayers with respect to wages attributable to a State shall be reduced

(1) For the taxable year beginning on January 1, 1963, by 5 percent of the tax imposed by section 3301 of the Federal Unemployment Tax Act, and

(2) For any succeeding taxable year, by 10 percent of the tax imposed by said section 3301,

unless and until the Secretary of the Treasury finds that before November 10 of the taxable year there have been restored to the Treasury the amounts of temporary unemployment compensation paid in the State under this Act (except amounts paid to individuals who exhausted their unemployment compensation under title XV of the Social Security Act and title IV of the Veterans' Readjustment Assistance Act of 1952 prior to their making their first claims under this Act), the amount of costs incurred in the administration of this Act with respect to the State, and the amount estimated by the Secretary of Labor as the State's proportionate share of other costs incurred in the administration of this Act. In applying clauses (1) and (2) of the preceding sentence, the tax imposed by section 3301 of the Federal Unemployment Tax Act shall be computed at the rate of 3 percent in lieu of the rate provided by such section. At the request (made before November 1 of the taxable year) of the Governor of any State, the Secretary of Labor shall, as soon as practicable after June 30 or (if later) the date of the receipt of such request, certify to such Governor and to the Secretary of the Treasury the amount he estimates for the taxable year beginning on January 1, 1963, equals .15 percent (and for any succeeding taxable year equals .3 percent) of the total of the remuneration which would have been subject to contributions under the State unemployment compensation law with respect to the calendar year preceding such certification if the dollar limit on remuneration subject to contributions under such law were equal to the dollar limit under section 3306(b)(1) of the Federal Unemployment Tax Act for such calendar year. If, after receiving such certification and before November 10 of the taxable year, the State restores to the general fund of the Treasury the amount so certified (and designates such restoration as being made for purposes of this sentence), the reduction provided by the first sentence of this section shall not apply for such taxable year. [Sec. 104 as amended by sec. 524 (b), Social Security Amendments 1960; sec. 2, Act of Nov. 7, 1963 (Pub. Law 88-173, 77 Stat. 306)] [T.D. 6658, 28 F.R. 6632, June 27, 1963, as amended by T.D. 6708, 29 F.R. 3198, Mar. 10, 1964]

§ 31.3302(c)-1 Limit on total credits.

(a) In general. Paragraph (b) of this section relates to the limitation on the aggregate of the credits allowable under section 3302 (a) and (b). Paragraph (c) of this section relates to reductions, under certain circumstances, of the total credits allowable after applying section 3302 (a). (b), and (c) (1). In paragraph

(c) of this section, subparagraphs (2), and (3) relate, respectively, to ductions of credits in respect of advan under title XII of the Social Security. before September 13, 1960, advances u der title XII of the Social Security A after September 12, 1960, and payme under the Temporary Unemployme Compensation Act of 1958. A reducti of credit under subparagraph (1), ( or (3) of paragraph (c) of this secti applies separately from, and in additi to, a reduction under any other such su paragraph. See section 3302(d) al § 31.3302(d)-1 for definitions and spec rules relating to section 3302(c), and a provision that, in applying secti 3302(c), the Federal tax shall be co puted at the rate of 3 percent.

(b) Limitation on aggregate cred The aggregate of the credit under sectio 3302(a) and the additional credit und section 3302(b) shall not exceed 90 pe cent of the tax against which credit taken, computed as if the tax were im posed at the rate of 3 percent. Thu the aggregate of the credit which is al lowable to an employer for any taxabl year shall not exceed 2.7 percent of th wages paid by the employer during th year.

(c) Reductions of amount of credi otherwise allowable-(1) Advances be fore September 13, 1960, under title XI of Social Security Act-(i) Credit re ductions for 1961 and 1962. Pursuant to section 3302(c) (2), as applicable to credit allowable for any year ended before 1963, the total credits otherwise allowable under section 3302 to a taxpayer subject to the unemployment compensation law of the State of

(a) Alaska shall be reduced for the taxable year 1961 by an amount equal to 0.15 percent of the wages paid by the taxpayer during 1961 which are attributable to Alaska, and shall be reduced for the taxable year 1962 by an amount equal to 0.3 percent of the wages paid by the taxpayer during 1962 which are attributable to Alaska; or

(b) Michigan shall be reduced for the taxable year 1962 by an amount equal to 0.15 percent of the wages paid by the taxpayer during 1962 which are attributable to Michigan.

(ii) Credit reductions for 1963 and subsequent years. If any balance of an advance or advances under title XII of the Social Security Act, made before September 13, 1960, to the unemployment account of a State, remains un