[Federal Register Volume 62, Number 215 (Thursday, November 6, 1997)]
[Notices]
[Pages 60104-60108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29370]
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DEPARTMENT OF LABOR
Employment and Training Administration
Federal-State Unemployment Compensation Program: Unemployment
Insurance Program Letters Interpreting Federal Unemployment Insurance
Law
The Employment and Training Administration interprets Federal law
requirements pertaining to unemployment compensation (UC) as part of
its role in the administration of the Federal-State UC program. These
interpretations are issued in Unemployment Insurance Program Letters
(UIPLs) to the State Employment Security Agencies. The UIPLs described
below are published in the Federal Register in order to inform the
public.
UIPL 41-97
UIPL 40-79, dated August 3, 1979, set forth the Department of
Labor's position on whether Head Start agencies are ``educational
institutions'' for purposes of the ``between and within terms denial''
provisions of Section 3304(a)(6)(A) of the Federal Unemployment Tax Act
(FUTA). This section of FUTA has been amended since that time. As such,
questions have been raised as to whether the treatment of Head Start
services has changed as a result of the amendments. UIPL 41-97
reiterates the Department's position regarding Head Start agencies and
provides specific discussion of the application of the between and
within terms denial to Head Start program personnel.
UIPL 44-97
The Balanced Budget Act of 1997 (BBA) and the Taxpayer Relief Act
of 1997 (TPRA), both enacted on August 6, 1997, made several changes
affecting the UC program. UIPL 44-97 provides information on the
amendments made by the BBA and the TPRA. This UIPL also discusses
whether States are required to amend their UC laws regarding disclosure
of UC information, Reed Act transfers, and levy on payments of UC as a
result of the amendments to these Acts.
Dated: October 31, 1997.
Raymond J. Uhalde,
Acting Assistant Secretary of Labor.
U.S. Department of Labor, Employment and Training Administration,
Washington, D.C. 20210
Classification: UI
Correspondence Symbol: TEUL
Date: 09/30/97
Rescissions: None
Expiration Date: Continuing
Directive: Unemployment Insurance Program Letter No. 41-97
To: All State Employment Security Agencies
From: Grace A. Kilbane, Director, Unemployment Insurance Service
Subject: Application of Between and Within Terms Denial to Head
Start Program Personnel
1. Purpose. To clarify the application of the between and within
terms denial provisions of Section 3304(a)(6)(A) of the Federal
Unemployment Tax Act (FUTA) to Head Start program personnel.
2. References. Section 3304(a)(6)(A), FUTA; P.L. 94-566; P.L.
95-19, Draft Language and Commentary to Implement the Unemployment
Compensation Amendments of 1976--P.L. 94-566 and Supplement 4, 1976
Draft Legislation, dated August 26, 1977; Unemployment Insurance
Program Letter (UIPL) No. 40-79, dated August 3, 1979; UIPL No. 41-
83, dated September 13, 1983; UIPL No. 30-85, dated July 12, 1985;
UIPL No. 15-92, dated January 27, 1992; and UIPL No. 43-93, dated
September 13, 1993.
3. Background. UIPL No. 40-79 set forth the Department's
position on whether Head Start agencies are ``educational
institutions'' for purposes of the ``between and within terms
denial'' provisions required and/or allowed by Section
3304(a)(6)(A), FUTA. Subsequent amendments to the ``between and
within terms denial'' provisions have raised questions about whether
the treatment of Head Start services has changed. This UIPL
reiterates the Department's position and provides specific
discussion of the amendments made following the issuance of UIPL 40-
79.
4. Discussion. Section 3304(a)(6)(A), FUTA, requires, as a
condition for employers in a State to receive credit against the
Federal unemployment tax, that the State law provide that
unemployment compensation (UC) be payable based on services to which
Section 3309(a)(1), FUTA, applies, in the same amount, on the same
terms, and subject to the same conditions as UC payable on the basis
of other service subject to State law. The major mandates of this
Section are: (1) coverage of services performed for State and local
governments and their instrumentalities and nonprofit organizations
as defined under Section 3309(a)(1), FUTA; (2) equal treatment in
the payment of UC to employees of such entities; and (3) denial of
UC based on certain educational services performed for such entities
between and within academic terms. These conditions are required for
employers in a State to receive credit against the Federal
unemployment tax. UIPL No. 43-93 describes the optional and required
denial provisions in clauses (i) through (vi) of Section
3304(a)(6)(A), FUTA. The six clauses are described below:
Clause (i) requires, unless the specified conditions
are met, the denial between two successive academic years or terms
based on instructional, research, and principal administrative
services performed for an educational institution.
Clause (ii) permits, under specified conditions, the
between years or terms denial based on all other (i.e.,
``nonprofessional'') services performed for an educational
institution, and retroactive payment based on those services, if no
work is available in the second term, and the individuals have
otherwise met the eligibility requirements.
Clause (iii) requires the within terms denial of
benefits during an established and customary vacation period or
holiday recess based on all services performed for an educational
institution.
Clause (iv) requires the between and within terms
denial of benefits based on all services performed in an educational
institution while in the employ of an educational service agency
(ESA).
Clause (v) permits the State to implement the denial
provisions of (i) through (iv) for services performed by
governmental entities or nonprofit organizations if such services
are provided to or on behalf of an educational institution.
Clause (vi) permits the State to make the between and
within terms denial provisions of clauses (iii) and (iv) optional
based on the ``nonprofessional'' services described in clause (ii).
5. Interpretation and Application. The between and within terms
denial provisions apply only to services performed (1) for an
educational institution, (2) in an educational
[[Page 60105]]
institution while employed by an ESA, or (3) to or on behalf of an
educational institution by a governmental entity or nonprofit
organization.
Whether Head Start Agencies are Educational Institutions under
Clauses (i) and (ii) of Section 3304(a)(6)(A), FUTA. Head Start
programs are comprehensive developmental programs designed to meet
children's needs in the health (medical, dental, mental,
nutritional), social, and education areas. The goal is child
adjustment and development at the emotional and social levels,
rather than school-type training.
Whether Head Start agencies are ``educational institutions'' was
discussed in UIPL 40-79. That UIPL stated that Head Start programs
operated by Community Action Groups do not meet the criteria of
``educational institutions,'' and the between and within terms
denial does not, therefore, apply to services performed for such
groups. UIPL 40-79 stated, however, that when a local board of
education operates a Head Start program as an integral part of the
school system in facilities of an educational institution, with Head
Start workers as employees of the board and the schools in every
respect, subject to all employing policies, such as hiring, firing,
working conditions, as other employees performing services for the
educational institution, then such workers are considered to be
employed by an educational institution. As such, these workers are
subject to the denial provisions in the same manner as are all other
educational institution employees. This remains the Department's
position.
Application of Clauses (iv) and (v), Section 3304(a)(6)(A), FUTA
to Head Start Services. UIPL 40-79 did not address clauses (iv) and
(v), as these provisions were not added until 1983. UIPL 41-83
advised the States of the addition of these clauses to Federal law,
but did not discuss Head Start agencies.
Clause (iv) applies to services performed for an ESA. Clause
(iv) defines an ESA as ``a governmental agency or governmental
entity which is established and operated exclusively for the purpose
of providing such services to one or more educational
institutions.'' Since Head Start agencies do not exist exclusively
for the purpose of providing services to educational institutions,
they are not ESAs.
Clause (v) permits States to apply the between and within terms
denial to services ``provided to or on behalf of'' an educational
institution by a governmental entity or nonprofit organization to
which Section 3309(a)(1), FUTA, applies. UIPL 41-83 states that the
words ``provided to'' require only that the services provided to the
educational institution give some benefit or support to the
institution. The words ``on behalf of'' are more restrictive. They
apply--
to those employees of a governmental entity or nonprofit
organization who perform services as an agent of or on the part of
an educational institution. This situation could arise, therefore,
only where an employee of a governmental entity or nonprofit
organization performed services as an agent of or on the part of an
educational institution in such a representative capacity.
Whether services are ``provided to or performed on behalf'' of
an educational institution depends on the facts present in each
individual case. Thus, if State law contains a provision
implementing optional clause (v), a case-by-case determination must
be made to determine if Head Start services are ``provided to or on
behalf of an educational institution,'' assuming that the Head Start
agency is a governmental entity or nonprofit organization to which
Section 3309(a)(1), FUTA, applies.
If a State law implements optional clause (v), the application
to Head Start programs may be limited as to scope and/or time by a
State, but, as discussed in UIPL 43-93, the limitation must be
uniformly applied throughout the State. A State may not treat Head
Start services ``provided to or on behalf of'' one school district
differently from Head Start services ``provided to or on behalf of''
those performed for another school district. Also, a State may not
treat the services performed for a governmental entity differently
from services performed for a nonprofit organization.
6. Action Required. Administrators are to provide this
information to appropriate staff.
7. Inquiries. Inquiries should be directed to the appropriate
Regional Office.
U.S. Department of Labor, Employment and Training Administration,
Washington, D.C. 20210
Classification: UI
Correspondence School: TEUL
Date: October 9, 1997
Rescissions: None
Expiration Date: Continuing
Directive: Unemployment Insurance Program Letter No. 44-97
To: All State Employment Security Agencies
From: Grace A. Kilbane, Director, Unemployment Insurance Service
Subject: The Balanced Budget Act of 1997 and the Taxpayer Relief Act
of 1997
1. Purpose. To advise the States of amendments made to Federal
law by the Balanced Budget Act of 1997 and the Taxpayer Relief Act
of 1997 affecting the Federal-State Unemployment Compensation (UC)
program.
2. References. The Balanced Budget Act of 1997 (BBA), P.L. 105-
33; the Taxpayer Relief Act of 1997 (TPRA), P.L. 105-34; the
Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (PRWORA), P.L. 104-193; the Internal Revenue Code of 1986
(IRC), including the Federal Unemployment Tax Act (FUTA); the Social
Security Act (SSA); and Unemployment Insurance Program Letters
(UIPLs) Nos. 28-87, 45-89, 12-91, 11-92 and 37-96.
3. Background. The BBA and the TPRA, both enacted on August 6,
1997, made several changes affecting the UC program. This UIPL
provides information on eleven amendments made by the BBA and four
amendments made by the TPRA. The amendment discussed in item 4.a.,
related to disclosure of UC information, may require States to amend
their laws to meet Federal UC law requirements. In addition, States
will need to amend their laws to implement the special Reed Act
transfers discussed in item 6.b. Finally, States will need to
determine whether they need to amend their laws to permit the
continuous levy discussed in item 12.
4. Sections 5201 and 5533, BBA: National Directory of New Hires
(``National Directory'').
a. Section 5201, BBA, Disclosure to National Directory. Section
303(h)(1), SSA, as amended by the PRWORA, requires States, as a
condition of receiving UC administrative grants, to disclose wage
and claim information to the Secretary of Health and Human Services
for purposes of the National Directory. Section 303(h)(1)(C), as
amended by the PRWORA, also required States to establish such
safeguards as the Secretary of Labor determines are necessary to
insure that such information is used ``only for purposes of section
453(i)(1) [SSA] in carrying out the child support enforcement
program under title IV'' of the SSA. (Emphasis added.) The BBA
deleted the underscored language and substituted ``subsections
(i)(1), (i)(3) and (j) of section 453.'' This amendment makes clear
that States must authorize the disclosure of UC information to the
National Director for:
Use by programs funded under the Transitional
Assistance to Needy Families program, the child support enforcement
program, and any ``other purposes'' specified in Section 453.
(Section 453(i)(1), SSA.) The ``other purposes'' are specified in
Section 453(i)(3) and (j), SSA, described below.
Use in the administration of the earned income tax
credit by the Internal Revenue Service (IRS). (Section 453(i)(3),
SSA.)
Verification of information in the National Directory
by the Social Security Administration; comparisons with the Federal
Case Registry of Child Support Orders and other child support
enforcement purposes; use by the Social Security Administration; and
research related to Transitional Assistance to Needy Families or
child support enforcement. In the case of research, personal
identifiers may not be used. (Section 453(j), SSA.)
As no effective date is provided, this amendment is effective as
of the date of enactment of the BBA. However, as discussed in UIPL
37-96, pages 6 and 7, the effective date of the disclosure
requirements in Section 303(h), SSA, for UC conformity purposes is
either October 1, 1997, or, if the State qualifies for a grace
period, January 1, 1998.
States will need to review their UC laws and regulations to
determine if their laws permit disclosure in view of the above
requirement concerning redisclosures of information provided to the
National Directory. Each State must take all actions necessary to
ensure that it will make such disclosures by the effective date
discussed in the previous paragraph.
b. Section 5533, BBA: Technical Amendment. Section 453A, SSA,
requires each State to establish a Directory of New Hires. Section
453A(g)(2)(B), SSA, as added by PRWORA, specifically cited a
provision of Federal UC law:
Wage and Unemployment Compensation Information.--The State
Directory of New Hires shall, on a quarterly basis, furnish to the
National Directory of New Hires extracts of the reports required
under section 303(a)(6) [SSA] to be made to the Secretary of Labor
concerning the wages and unemployment compensation paid to
[[Page 60106]]
individuals, by such dates, in such format, and containing such
information as the Secretary of Health and Human Services shall
specify in regulations. [Emphasis added.]
Since the Secretary of Labor does not require the submittal of
data on individuals under Section 303(a)(6), SSA, this provision
created a technical problem. The BBA deleted the underscored
language and substituted ``information.'' This amendment does not
affect what information must be provided to the Secretary of Health
and Human Services. Nor does it change the fact that both the FUTA
and the SSA continue to require UC agencies to provide wage and
claim information to the State directory. See UIPL 37-96.
5. Section 5401, BBA: Base Periods and the Pennington Case. In
1994 and 1997, the U.S. Court of Appeals for the Seventh Circuit
issued two opinions in litigation commonly known as Pennington. 22
F.3d 1376 (7th Cir. 1994), 110 F.3d. 502 (7th Cir. 1997). In its
1994 decision, the Court decided that a State's base period was not
an eligibility requirement, but instead was a ``method of
administration'' under Section 303(a)(1), SSA, and, therefore,
subject to Federal jurisdiction. In its 1997 decision, the Court
ruled that Illinois' base period, consisting of the first four of
the last five completed calendar quarters, was not consistent with
the ``methods of administration'' requirement. This was because the
existence of the lag period between the base period and benefit year
meant some claimants had to wait for their recent wages to fall
within the based period to qualify for UC. As a result of these
decisions, States anticipated that they might be required to provide
for alternative base periods to reduce the lag.
The BBA clarifies that the base period is not subject to the
``methods of administration'' requirement. Therefore, in the
Department's view, this legislation frees States to determine their
base periods without regard to the ``methods of administration''
requirement. Section 5401, BBA, provides as follows:
(a) In General. No provision of a State law under which the base
period for such State is defined or otherwise determined shall, for
purposes of section 303(a)(1) of the Social Security Act (42 U.S.C.
503(a)(1)), be considered a provision for a method of
administration.
(b) Definitions. For purposes of this section, the terms ``State
law'', ``base period'', and ``State'' shall have the meanings given
them under section 205 of the Federal-State Extended Unemployment
Compensation Act of 1970 [EUCA] (26 U.S.C. 3304 note.)
(c) Effective Date. This section shall apply for purposes of any
period beginning before, on, or after the date of the enactment of
this Act.
``State law,'' as defined in Section 205(10), EUCA, ``means the
unemployment compensation law of the State, approved by the
Secretary under section 3304'' of the FUTA. ``Base period,'' as
defined in Section 205(6), EUCA, ``means the base period as
determined under applicable State law for the benefit year.''
``State,'' as defined in Section 205(8), EUCA, includes the 50
States, the District of Columbia, Puerto Rico, and the U.S. Virgin
Islands.
This amendment does not require States to amend their laws.
6. Sections 5402 and 5403, BBA: Increase in Federal Unemployment
Account (FUA) Ceiling and Special Distribution to States from the
Unemployment Trust Fund. Section 903, SSA, provides that when, among
other things, three accounts in the Unemployment Trust Fund reach
their statutory limits, the excess amounts will be transferred to
the States. These are called ``Reed Act'' distributions. The three
accounts are the Employment Security Administration Account (ESAA),
which pays for the administration of the UC and employment service
programs; the Extended Unemployment Compensation Account, which pays
for the Federal share of extended benefits; and the FUA, which
provides for advances to States for the payment of UC.
a. Section 5402, BBA: Increase in FUC Ceiling. Prior to
amendment, the balance in the FUA as of the end of any Federal
fiscal year (September 30) could not exceed 0.25 percent of the
total wages subject to contributions under all State UC laws. The
BBA changes this maximum balance to 0.5 percent effective October 1,
2001.
b. Sections 5403, BBA: Special Distribution to States from the
Unemployment Trust Fund. The BBA amended Section 903 of the SSA to
cap the amount of Reed Act transfers made with respect to the
Federal fiscal years ending in 1999, 2000 and 2001 at $100,000,000
per year. Each State's share of these transfers will be based on the
ratio of the amount of ``funds to be allocated to such State for
such fiscal year pursuant to the base allocation formula under title
III'', SSA, to ``the total amount of funds to be allocated to all
States for such fiscal year pursuant to the base allocation formula
under title III.'' Any amounts in excess of the $100,000,000 which,
but for the BBA amendments, would have been transferred to the
States ``shall, as of the beginning of the succeeding fiscal year,
accrue to the Federal unemployment account, without regard'' to its
statutory limit.
Reed Act moneys transferred with respect to these fiscal years
may be used ``only to pay expenses incurred by [the State] for the
administration of its'' UC law. Unlike previous Reed Act transfers,
States are prohibited from using the amounts transferred with
respect to these three years for the payment of UC or the
administration of State public employment offices. However, among
other uses, States may, as in the past, use these Reed Act moneys
for purchasing real property for UC purposes. These purchases could
be amortized against UC grant funds consistent with the UC grant
agreement.
Finally, the restrictions applicable to Reed Act transfers in
Section 903(c)(2), SSA, are not applicable to the transfers made
with respect to fiscal years 1999, 2000 and 2001. This means the
amounts transferred to the States may be used without obtaining an
appropriation from the State's legislative body.
State UC laws usually contain provisions addressing the use of
Reed Act moneys transferred under Section 903, SSA. These laws
usually mirror the requirements of Section 903(c)2), SSA, including
a requirement that the moneys be used for the payment of UC unless
appropriated by the legislative body. States must amend these
provisions to prohibit the use of transfers made with respect to
fiscal years 1999, 2000, and 2001 for the payment of UC. States may
further amend these provisions to authorize use for administrative
purposes without a specific appropriation from the State
legislature. Nothing prohibits a State legislature from
appropriating such money or from attaching conditions to the use of
such money, provided the money is used for UC administration.
Draft language for State Reed Act provisions was provided in
UIPL 12-91. We recommend that, using that language as a basis,
States insert the following language in State law:
(4) Notwithstanding paragraph (1), money credited with respect
to Federal fiscal years 1999, 2000 and 2001, shall be used solely
for the administration of the UC program and are not subject to
appropriation by the legislature. [Emphasis added.]
The underscored language is necessary only if the State chooses
to avoid the appropriation process. As an alternative, a State could
appropriate the moneys without subjecting them to the various
restrictions found in Section 901(c)(3), SSA. (For example, under
Section 901(c)(2), SSA, Reed Act moneys may be used only for
expenses incurred after the date of enactment of the State
appropriation.) In this case, the following language is recommended:
(4) Notwithstanding paragraph (1), money credited with respect
to Federal fiscal years 1999, 2000 and 2001, shall be used solely
for the administration of the UC program, and such money shall not
otherwise be subject to the requirements of paragraph (1) when
appropriated by the legislature.
c. Reasons for Change. The House Report describes the reason for
increasing the FUA ceiling and providing for the special transfers:
The provision has two main effects: (1) raising the ceiling in
the Federal Unemployment Account whole [sic] limiting Reed Act
transfers allows for further buildup of funds pending a future
recession requiring increased administrative resources; and (2)
allowing $100 million in Reed Act transfers will assist States in
the administration of their UI programs. (H. Rep. No. 105-149, 104th
Cong. 1st Sess. 106 (1997).)
7. Section 5404, BBA: Interest-Free Advances from the
Unemployment Trust Fund. Under Section 1202(b)(2), SSA, advances
made from the FUA during a calendar year are interest free if the
following conditions are met:
The advance is repaid in full before the close of
September 30 of the calendar year in which the advances were made,
and
Following this repayment, no other advance was made to
the State during the calendar year.
The BBA adds a third condition to Section 1202(b)(2). States
must now meet ``funding goals, established under regulations issued
by the Secretary of Labor, relating to the
[[Page 60107]]
accounts of the States in the Unemployment Trust Fund.'' The
amendment applies to calendar years beginning after the date of
enactment of the BBA. The Department is commencing work on the
required regulations.
According to the House Committee report, this amendment is
intended to encourage solvency of State unemployment funds:
Should a State account become insolvent during an economic
downturn, adverse conditions can result for the State and its
employers. Borrowing Federal funds imposes a cost on the State at a
time when it may face other financial difficulties. The State may
react by raising taxes on its employers, thereby discouraging
economic activity during a period when its economy is already in
decline * * *. The provision would encourage States to maintain
sufficient unemployment trust fund balances to cover the needs of
unemployed workers in the event of a recession. (H. Rep. No. 105-
149, 104th Cong. 1st Sess. 108 (1997).)
8. Sections 5405 and 5407, BBA: Election Workers and Employees
of Schools Operated Primarily for Religious Purposes. Section
3304(a)(6)(A), FUTA, requires, as a condition for employers in a
State to receive credit against the Federal unemployment tax, that
UC be payable based on services performed for State and local
governmental entities, their instrumentalities, and certain
nonprofit organizations. The BBA amended FUTA to provide for two new
exceptions to this required coverage.
Section 5405 of the BBA added new subparagraph (F) to Section
3309(b)(3), FUTA, to permit States to exclude services performed:
as an election official or election worker if the amount of
remuneration received by the individual during the calendar year for
services as an election official or election worker is less than
$1,000.
Section 5407 of the BBA added new subparagraph (C) to Section
3309(b)(1) to permit States to exclude services performed for:
(C) an elementary or secondary school which is operated
primarily for religious purposes, which is described in section
501(c)(3), and which is exempt from tax under section 501(a).
States were not previously permitted to exclude services
performed for a religiously-oriented school from coverage where the
school was not operated, supervised, controlled, or principally
supported by a church or convention or association of churches. See
UIPL 28-87. Since the new exclusion is limited to elementary and
secondary schools, services performed by employees of other
nonaffiliated religiously-oriented entities are still required to be
covered. (For example, day-care centers, post-secondary schools or
cemetery associations.) Both exclusions ``apply with respect to
service performed after the date of the enactment of'' the BBA. With
respect to election workers, this means that, if the individual
earned less than $1,000 in calendar year 1997, the services are not
required to be covered after August 6, 1997.
States are not required to exclude these services. The
Department recommends that States choosing to do so follow the
language in Federal law verbatim. However, the language following
``religious purposes'' in subparagraph (C) of Section 3309(b)(1) may
be omitted if, as is commonly the case, State law provisions
relating to coverage of nonprofit organizations are already limited
to those organizations described in Section 501(c)(3), IRC, which
are exempt from tax under Section 501(a), IRC.
9. Section 5406, BBA: Coverage of Services Performed by Inmates.
The BBA added an exclusion to the definition of employment in
Section 3306(c), FUTA, for:
(21) service performed by a person committed to a penal
institution.
This exclusion applies only for purposes of the FUTA tax.
However, as a result of this new exclusion, States may elect to
amend their laws to exclude these services without the employers for
whom the services are performed losing credit against the FUTA tax.
The effective date of this amendment applies ``with respect to
service performed after January 1, 1994.'' Should State law be
amended retroactively, amounts previously paid into the State's
unemployment fund with respect to these services under the State law
in effect at that time may not be refunded to employers. This
prohibition is explained in UIPL 11-92.
10. Section 5608, BBA: State Program Integrity Activities for
Unemployment Compensation. Section 901(c)(1)(A), SSA, authorizes
appropriations from the ESAA for assisting States in the
administration of their UC laws. (Henceforth, these amounts will be
called the ``regular'' grant.) The BBA amended this section to
create a special authorization for State program integrity
activities. Specifically, a new paragraph was added to Section
901(c):
(5)(A) There are authorized to be appropriated out of the
employment security administration account to carry out program
integrity activities, in addition to any amounts available under
paragraph (1)(A)(i)--
(i) $89,000,000 for fiscal year 1998;
(ii) $91,000,000 for fiscal year 1999;
(iii) $93,000,000 for fiscal year 2000;
(iv) $96,000,000 for fiscal year 2001; and
(v) $98,000,000 for fiscal year 2002.
(B) In any fiscal year in which a State receives funds
appropriated pursuant to this paragraph, the State shall expend a
proportion of the funds appropriated pursuant to paragraph (1)(A)(i)
to carry out program integrity activities that is not less than the
proportion of the funds appropriated under such paragraph that was
expended by the State to carry out program integrity activities in
fiscal year 1997.
(C) For purposes of this paragraph, the term ``program integrity
activities'' means initial claims review activities, eligibility
review activities, benefit payments control activities, and employer
liability auditing activities.
This amendment merely authorizes amounts for appropriation for
integrity purposes; Congress must still appropriate the amounts. If
and when ``integrity'' moneys are received by the States, their use
is limited to the integrity activities described in 901 (c)(5)(C),
SSA.
Since Section 901(c)(5)(B), SSA, provides that the State must
expend the same proportion of ``regular'' granted funds on integrity
activities as was expended in fiscal year 1997, States may not use
these integrity moneys to reduce integrity costs to the ``regular''
grant as determined by fiscal year 1997 expenditures.
11. Section 221, TPRA: 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 May 31, 1997. In
the case of tax year 1997, only expenses paid with respect to
courses beginning before July 1, 1997, could be taken into account.
The TPRA extends this exclusion. It now applies to expenses paid
with respect to courses beginning through May 31, 2000. The
amendment applies to taxable years beginning after December 31,
1996. The IRS is responsible for administering this provision.
12. Section 921, TPRA: Securities Brokers. For purposes of
determining whether an individual is an ``employee,'' Section
3306(i), FUTA, references Section 3121(d), IRC. That section
provides that, among other things, an ``employee'' is ``any
individual who, under the usual common law rules applicable in
determining the employer-employee relationship, has the status of
employee.''
The TPRA provides a clarification concerning the employment tax
status of registered representatives of a securities broker-dealer.
It provides that ``no weight shall be given to instructions from the
service recipient which are imposed only in compliance with investor
protection standards imposed by the Federal Government, any State
government, or a governing body pursuant to a delegation by a
Federal or State agency.'' The IRS is responsible for administering
this provision.
The provision is effective for ``services performed after
December 31, 1997.''
13. Section 1024, TPRA: Continuous Levy on Payments of UC.
Federal UC law provides that payments of UC may not be subjected to
levy. See UIPL 45-89. (A levy is the seizure of a person's property
or rights to property to pay a debt.) Although the TPRA did not
amend these UC provisions, it authorized the IRS to impose a
continuous levy on certain payments, including UC, until the levy is
released. This continuous levy may be imposed on any individual who
is liable for an internal revenue tax and who does not pay such tax
within 10 days of notice and demand by the IRS. Specifically, the
TPRA added new subsection (h) to Section 6331, IRC--
(1) In General.--The effect of a levy on specified payments to
or received by a taxpayer shall be continuous from the date
[[Page 60108]]
such levy is first made until such levy is released. Notwithstanding
section 6334, such continuous levy shall attach to up to 15 percent
of any specified payment due to the taxpayer.
(2) Specified Payment.--For the purposes of paragraph (1), the
term ``specified payment'' means--
(A) any Federal payment other than a payment for which
eligibility is based on the income or assets (or both) of a payee,
(B) any payment described in paragraph (4) [pertaining to
unemployment benefits], (7) [workers compensation], (9) [wages,
salary and other income], or (11) [certain public assistance] of
section 6334(a), and
(C) any annuity or pension payment under the Railroad Retirement
Act or benefit under the Railroad Unemployment Insurance Act.
Under new Section 6331(h)(2)(C), any payment described in
paragraph (4) of Section 6334(a), IRC, may be continuously levied up
to 15 percent. Paragraph (4) applies to any ``amount payable to an
individual with respect to his unemployment (including any portion
thereof payable with respect to dependents) under an unemployment
compensation law of the United States, or any State, or of the
District of Columbia or of the Commonwealth of Puerto Rico.'' Under
this authority, the IRS may levy any payment under State or Federal
UC law, including payments under the UC for Federal employees
(UCFE), UC for Ex-servicemembers (UCX) and the Disaster Unemployment
Assistance (DUA) programs as well as trade readjustment allowances
(TRA) under the Trade Adjustment Assistance and NAFTA-Transitional
Adjustment Assistance programs.
The IRS may continuously levy up to 15 percent of ``any
specified payment.'' The amendment applies to levies issued after
the August 6, 1997, date of the enactment of the TPRA.
The continuous levy is administered by the IRS. The IRS may
implement the continuous levy through computer crossmatches with
State UC agencies. The UC agencies will be responsible for deducting
amounts levied from UC, UCFE, UCX, DUA, and TRA and for forwarding
such amounts to the IRS. As the IRS does not pay for costs of
levies, the Department is examining the funding implications for the
UC system.
Since, in accordance with Federal UC law, all State laws
currently prohibit the levy of UC, the Department recommends that
States amend their laws to specifically authorize continuous levy in
accordance with Section 6331, IRC. Alternatively, States may view
Section 6331, IRC, as superseding State law.
14. Section 1035, TPRA: Extension of Temporary Tax. Section
3301, FUTA, imposes a tax of 6.2 percent on wages paid in employment
by employers. This tax was to have dropped to 6.0 percent beginning
in calendar year 1999.
Under the TPRA amendments, the 6.2 percent tax will remain in
effect through calendar year 2007. The tax is now scheduled to drop
to 6.0 percent beginning with calendar year 2008.
15 Action. Appropriate staff should be advised of these
amendments.
16. Inquiries. Please direct inquiries to the appropriate
Regional Office.
[FR Doc. 97-29370 Filed 11-5-97; 8:45 am]
BILLING CODE 4510-30-M
