Rev. Proc. 68-5

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to announce that there will be no reduction in credit against the tax reportable on Form 940, Employer's Annual Federal Unemployment Tax Return, for the calendar year 1967, with respect to wages paid in 1967 for services performed in a State which has not restored to the United States Treasury amounts which were made available under title XII of the Social Security Act or under section 104 of the Temporary Unemployment Compensation Act of 1958.

SEC. 2. BACKGROUND.

Section 3302 of the Federal Unemployment Tax Act (chapter 23, subtitle C, of the Internal Revenue Code of 1954) provides for credits against the Federal unemployment tax imposed by section 3301 of the Act on employers of four or more employees. The credits are based on contributions into State unemployment funds. The maximum credit allowable against the Federal unemployment tax reportable on Form 940 for a calendar year is 2.7 percent of the wages subject to that tax.

Under section 3302(c)(2) of the Act, reductions in the amount of credit otherwise allowable were required for each of the years 1961 through 1966. The reductions applied to employers who paid wages for services performed in States that had not paid into the United States Treasury amounts which were made available under title XII of the Social Security Act. For the calendar year 1967, all States concerned with possible credit reductions forestalled the reductions by making payments, before November 10, 1967, as provided in section 3302(c)(2) of the Act, of amounts not less than the additional Federal unemployment tax which otherwise would have become due for 1967 if the credit reductions had been required. As of November 10, 1967, only Alaska and Michigan have amounts to pay before November 10, 1968, in order to forestall credit reductions for the calendar year 1968.

Credit reductions under section 104 of the Temporary Unemployment Compensation Act of 1958 also applied for each of the years 1963 through 1966, with respect to States that had not restored to the United States Treasury amounts with had been made available under the Act. The only States with an amount remaining due in 1967 were Michigan, New Jersey and West Virginia; and, by paying the full amount due, those States forestalled any further credit reductions. Accordingly, there will be no credit reduction for 1967 or any subsequent year under section 104 of the Temporary Unemployment Compensation Act of 1958.

SEC. 3. RATES AND COMPUTATION OF CREDIT REDUCTIONS.

Revenue Procedure 67-9, C.B. 1967-1, 583, lists the rates of credit reductions for the years 1961 through 1966, identifies the States affected, and describes the computation to be made on Form 940.

SEC. 4. EFFECT ON OTHER DOCUMENTS.

This Revenue Procedure amplifies Revenue Procedure 67-9, C.B. 1967-1, 583.