[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3302(b)-1]

[Page 152-153]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
 
  Subpart D_Federal Unemployment Tax Act (Chapter 23, Internal Revenue 
                              Code of 1954)
 
Sec. 31.3302(b)-1  Additional credit against tax.

    (a) In general. In addition to the credit against the tax allowable 
for contributions actually paid to State unemployment funds (see Sec. 
31.3302(a)-1), 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 so 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

[[Page 153]]

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 paragraph (b)(1)(ii) of this section should 
then be subtracted from the amount computed under paragraph (b)(1)(i) of 
this section 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 applied in such year 
under such State law to any taxpayer is 3 percent. However, A has 
obtained a rate of 1 percent under the law of such State and is required 
to pay his entire year's contribution at that rate. The amount of 
remuneration of A's employees subject to contributions under such State 
law is $25,000. A's additional credit under section 3302(b) is $425, 
computed as follows:

Remuneration subject to contributions.........................   $25,000
                                                               =========
Contributions at 2.7 percent rate.............................       675
Less:
  Contributions required to be paid at 1 percent rate.........       250
                                                               ---------
Additional credit to A........................................       425



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 Sec. 
31.3302(c)-1.

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