By Payroll and Entitlements Editorial Staff
Sections 3302(c)(2)(A) and 3302(d)(3) of the FUTA provide that employers in a state that has outstanding advances under Title XII of the Social Security Act on January 1 of two or more consecutive years are subject to a reduction in credits otherwise available against the FUTA tax for the calendar year in which the most recent January 1 occurs, if advances remain on November 10 of that year. Further, Section 3302(c)(2)(C) of the FUTA provides for an additional credit reduction for a year if a state has outstanding advances on January 1 for five or more consecutive years and has a balance on November 10 for those years. This section also provides for waiver of the additional credit reduction and substitution of the credit reduction provided in Section 3302(c)(2)(B) if a state meets certain conditions.
Employers in the U.S. Virgin Islands (USVI) were potentially liable for the additional credit reduction under Section 3302(c)(2)(C) of the FUTA but applied for a waiver. The Employment and Training Administration determined that the USVI met all of the criteria necessary to qualify for the waiver. Therefore, employers in the USVI will have no additional credit reduction applied for calendar year 2020. However, as a result of having outstanding advances on each January 1 of 2010 through 2020, as well as outstanding balances on November 10, 2020, employers in the USVI are subject to a FUTA credit reduction of 3.0 percent in 2020. See 85 Fed. Reg. 73514, November 18, 2020.
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