Rev. Proc. 75-8

Section 1. Purpose.

The purpose of this Revenue Procedure is to modify Rev. Proc. 69-10, 1969-1 C.B. 401, and bring up to date the procedure to be followed in computing reductions in the credit against the tax reportable on Form 940, Employer's Annual Federal Unemployment Tax Return, for 1974.

Sec. 2. Background.

Section 3306(a) of the Federal Unemployment Tax Act (chapter 23, subtitle C, Internal Revenue Code of 1954) defines the term "employer," for purposes thereof, as any person who during any calendar quarter in the calendar year or preceding calendar year paid wages of $1,500 or more, or on each of some 20 days during the calendar year or preceding calendar year, each day being in a different calendar week, employed at least one individual for some portion of the day.

Section 3302 of the Act provides for credits against the Federal unemployment tax imposed by section 3301 on "employers" as that term is defined in the Act. Reductions in the amount of credit otherwise allowable are provided for in section 3302(c) of the Act. The reductions may occur if an employer pays wages for services performed in a state that has not restored amounts that were advanced to it under title XII of the Social Security Act. Credit reductions for 1974 or any subsequent year may be forestalled if a state restores to the United States Treasury, before November 10 of that year, the full amount of the advances.

Sec. 3. Credit Reductions for 1974.

Regulations relating to reductions in credit under section 3302(c) of the Federal Unemployment Tax Act for advances after September 12, 1960, under title XII of the Social Security Act are set forth in section 31.3302(c)-1(c)(2) of the Employment Tax Regulations. If the balance of such advances remains unpaid on January 1 of two consecutive taxable years, the total credits otherwise allowable under section 3302 to a taxpayer subject to the unemployment compensation law of the state shall be reduced for the taxable year beginning with the second January 1, unless prior to November 10 of that year the total amount of such advances has been repaid.

As of November 10, 1974, the state of Connecticut had not repaid the advances made to it in 1972. Therefore, the credit reduction will take effect for the state of Connecticut for 1974 as provided for in section 3302(c) of the Act in the amount of 0.3 percent of the wages paid during 1974 for services performed in that state.

Sec. 4. Procedure.

The computation of the tentative credit allowable is reported on line 10 of Form 940 for 1974 based on the computation procedure indicated in Columns 1 through 9 on the Form. If a credit reduction applies, the amount of credit otherwise allowable is first computed as indicated on the Form 940, and the amount of the credit reduction is subtracted from the amount otherwise allowable. The remainder is then subtracted from the gross Federal tax shown on Form 940. Form 940 for 1974 has been revised by the addition of new line 19 where the credit reduction is computed. If the employer is using a Form 940 not designed for 1974, it should be appropriately altered, or the computation should be shown on an attached sheet.

Sec. 5. Effect on Other Documents.

Rev. Proc. 69-10 is modified.