employment during the calendar year | viduals in his employ. Notwithstanding 1936, 1937, or 1938), may be paid into the provision limiting the term to paythe State fund on or after October 9, 1939, subject, however, to the provisions of $ 400.503, relating to the statutory period of limitations applicable to credits. (ii) The contributions of a taxpayer whose assets, at any time during the period August 11, 1939, to October 8, 1939, inclusive, are in the custody or control of a receiver, trustee, or fiduciary appointed by, or under the control of, a court of competent jurisdiction, may be paid into the State fund at any time, subject, however, to the provisions of § 400.503, relating to the statutory period of limitations applicable to credits. (iii) The contributions paid into the unemployment fund of a State which are required under the unemployment compensation law of that State, with respect to remuneration on the basis of which the taxpayer had, prior to such payment, erroneously paid an amount as contributions under another unemployment compensation law, shall be deemed to have been made at the time of the erroneous payment. If, by reason of such other law, the taxpayer was entitled to cease paying contributions with respect to services subject to such other law, the payment into the proper fund shall be deemed to have been made on the date the return for the taxable year was actually filed under section 905 of the Social Security Act. (3) The contributions must have been paid with respect to employment as defined in section 907 (c) of the Social Security Act, that is, with respect to services performed by an employee within the United States and not excepted by such Act. (See §§ 400.206400.206 (7).) (4) The contributions must have been paid with respect to services performed during the calendar year covered by the return. (c) Contributions. The term "contributions" for purposes of credit against the tax means payments required to be made by an employer pursuant to a State law into the unemployment fund of such State, to the extent that such payments are made by the employer without any part thereof being deducted or deductible from the wages of indi ments required by a State law, the term also includes so much of any payments made as contributions for the calendar year 1936 or 1937 into the unemployment fund of a State which payments are held by the highest court of such State not to be required payments under the unemployment compensation law of such State, as are not returned to the taxpayer. (d) If, subsequent to the filing of the return, a refund is made by a State to the taxpayer of any part of his contributions which had been credited against the tax, the taxpayer is required to advise the Commissioner under oath of the date and amount of such refund and the reason therefor, and to pay the tax, if any, due as a result of such refund, together with interest from the date when the tax was due. (Sec. 908, 49 Stat. 643, sec. 902 (c), 53 Stat. 1399; 42 U.S.C., Sup., 1108, 1102 (note)) amended by T.D. 4937, Sept. 9, 1939; 4 F.R. 38931 [As "(1) The taxpayer may, to the extent provided in this subsection and subsection (c), credit against the tax imposed by section 1600 the amount of contributions paid by him into an unemployment fund maintained during the taxable year under the unemployment compensation law of a State which is certified for the taxable year as provided in section 1603. "(2) The credit shall be permitted against the tax for the taxable year only for the amount of contributions paid with respect to such taxable year. "(3) The credit against the tax for any taxable year shall be permitted only for contributions paid on or before the last day upon which the taxpayer is required under section 1604 to file a return for such year: except that credit shall be permitted for contributions paid after such last day but before July 1 next following such last day, but such credit shall not exceed 90 per centum of the amount which would have been allowable as credit on account of such con tributions had they been paid on or before | allowance of contributions as credit against the tax for the calendar year 1939 is subject to the following limitations: under the control of, a court of competent jurisdiction. "(4) Upon the payment of contributions into the unemployment fund of a State which are required under the unemployment compensation law of that State with respect to remuneration on the basis of which, prior to such payment into the proper fund, the taxpayer erroneously paid an amount as contributions under another unemployment compensation law, the payment into the proper fund shall, for purposes of credit against the tax, be deemed to have been made at the time of the erroneous payment. If, by reason of such other law, the taxpayer was entitled to cease paying contributions with respect to services subject to such other law, the payment into the proper fund shall, for purposes of credit against the tax, be deemed to have been made on the date the return for the taxable year was filed under section 1604. "(5) Refund of the tax (including penalty and interest collected with respect thereto, if any), based on any credit allowable under this section, may be made in accordance with the provisions of law applicable in the case of erroneous or illegal collection of the tax. No interest shall be allowed or paid on the amount of any such refund. (1) The total credit allowed to any taxpayer for contributions to State unemployment funds shall not exceed 90 percent of the tax against which such credit is applied. (2) The contributions must have been actually paid into the State unemployment fund. Such payment must have been made on or before the last day upon which the return for the taxable year is required to be filed (see. $$ 400.303, 400.304, and 400.305), except that: (i) Contributions may be paid into a State unemployment fund after such last day but before July 1, 1940, and, in such case, may be credited against the tax in an amount not to exceed 90 percent of the amount which would have been allowable as credit on account of such contributions had they been paid into the State unemployment fund on or before such last day. (See examples A, B, and C of this paragraph.) (ii) Contributions of a taxpayer whose assets, at any time during the period from such last day for filing a return for the calendar year 1939, to June 30, 1940, both dates inclusive, are in the custody or control of a receiver, trustee, or other fiduciary appointed by, or under the control of, a court of competent jurisdiction, "(c) LIMIT ON TOTAL CREDITS. The total credits allowed to a taxpayer under this subchapter shall not exceed 90 per centum of the tax against which such credits are allowable." § 400.211a Credit against tax for calendar year 1939 for contributions paid—may be paid into the State fund at any (a) General. Subject to the limitations time (subject, however, to the provisions hereinafter prescribed in paragraph (b), of § 400.503 relating to the statutory pethe taxpayer may credit against the tax riod of limitations applicable to credits), for the calendar year 1939 the total and upon such payment may be credamount of contributions paid by him ited against the tax in the same amount under all State laws which have been that would have been allowable as credit found by the Social Security Board to had the contributions been paid on or contain the provisions specified in sec- before the last day upon which the retion 1603 (a) of the Federal Unemploy-turn for the taxable year was required ment Tax Act; Provided, That no credit to be filed. may be taken for a contribution under a State law if such State has not been duly certified for the calendar year to the Secretary by the Social Security Board. The contributions may be credited against the tax whether or not they are paid with respect to employment as defined in the Federal Unemployment Tax Act. (b) Limitations on allowance of contributions as credit against tax. The (iii) Contributions for the calendar year 1939 paid into the unemployment fund of a State which are required under the unemployment compensation law of that State, but which are paid with respect to remuneration on the basis of which the taxpayer had, prior to such payment, erroneously paid an amount as contributions under another unemployment compensation law, shall be deemed for purposes of credit to have been paid at the time of the erroneous payment. tributions of $9,000 for such year. The If, by reason of such other law, the taxpayer was entitled to cease paying contributions for the calendar year 1939 with respect to services subject to such other law, the payment into the proper fund shall be deemed for purposes of credit to have been made on the date the return for the calendar year 1939 was actually filed under section 1604 of the Federal Unemployment Tax Act. (See example D of this paragraph.) (3) The contributions must have been paid with respect to the calendar year 1939. (See examples E and F of this paragraph.) Example A, illustrating § 400.211a (b) (2) (i). The Federal return of the M Company for the calendar year 1939 discloses a total tax of $12,000. The company is liable for total State contributions of $8,000 for such year. The due date of the company's Federal return is January 31, 1940, no extension of time for filing the return having been granted. The contributions are not paid until February 1, 1940. If the contributions had been paid on or before January 31, 1940, the entire amount could have been credited against the tax (such amount not exceeding 90 percent of the Federal tax of $12,000). Since the contributions were paid after January 31, but before July 1, 1940, the M Company is entitled to a credit of 90 percent of the amount of the contributions ($8,000), or $7,200, the net liability for Federal tax being $4,800 ($12,000 minus $7,200). Example B, illustrating § 400.211a (b) (2) (i). The facts are the same as in example A, except that the M Company is liable for and pays total State contributions of $12,000, instead of $8,000. If the contributions had been paid on or before January 31, 1940, the amount allowable as credit would have been $10,800 (90 percent of the Federal tax of $12,000). Since the contributions were paid after January 31, but before July 1, 1940, the M Company is entitled to a credit of 90 percent of $10,800, or $9,720, the net liability for Federal tax being $2,280 ($12,000 minus $9,720). Example C, illustrating § 400.211a (b) (2) (i). The Federal return of the R Company for the calendar year 1939 discloses a total tax of $10,000. The company is liable for total State con due date of the company's Federal return is January 31, 1940, no extension of time for filing the return having been granted. The R Company pays $8,000 of the total State contributions on or before such date, and the remaining $1,000 on February 1, 1940. If the $1,000 had been paid on or before January 31, 1940, that amount could have been credited against the tax (such amount plus the $8,000 paid on or before January 31, 1940, not exceeding 90 percent of the Federal tax of $10,000). Since the $1,000 was paid after January 31, but before July 1, 1940, the R Company is entitled to a credit of 90 percent of this amount or $900, plus the credit of $8,000 allowable for the contributions paid on or before January 31, 1940. The net liability for Federal tax is thus $1,100 ($10,000 minus $8,900). Example D, illustrating § 400.211a (b) (2) (iii). Employer N, whose Federal return for the calendar year 1939 discloses a total tax of $1,000, employs individuals in State X and State Y during the calendar year 1939. N assumes in good faith that the services of his employees are covered by the unemployment compensation law of State Y, and pays as contributions to State Y the amount of $900 based upon the remuneration of the employees. All of the services were in fact covered by the unemployment compensation law of State X, and none by the law of State Y. The payment to State Y was made on January 31, 1940. When the error was discovered thereafter, N paid to State X contributions in the amount of $900 based upon such remuneration. Since the contributions were paid to State Y on January 31, 1940, the contributions to State X are, for purposes of the credit, deemed to have been paid on such date. N is entitled to a credit of $900 against the Federal tax of $1,000, the net liability for Federal tax being $100 ($1,000 minus $900). Example E, illustrating § 400.211a (b) (3). Under the employment compensation law of State X, employer M is required to report in his contribution return for the quarter ended December 31, 1939, all remuneration payable for services rendered in such quarter. portion of such remuneration is not paid to his employees until February 1, 1940. A On January 20, 1940, M pays to the State | the total amount of contributions due with respect to all remuneration so required to be reported. Such contributions, including those with respect to the remuneration paid on February 1, 1940, may be included in computing the credit against the tax for the calendar year 1939. This is true even though the remuneration paid on February 1, 1940 (if it constitutes "wages") is required to be reported in the Federal return for 1940 and not in the Federal return for 1939. taxpayer may credit against the tax imposed by section 1600 for any taxable year an amount, with respect to the unemployment compensation law of each State certified for the taxable year as provided in section 1602 (or with respect to any provisions thereof by which the contributions required to be so certified), equal to the amount, if any, paid by him with respect to the taxable year were less than the contributions such taxpayer would have been required to pay if throughout the taxable year he had been subject under such State law to the highest rate applied thereunder in the taxable year to any person having individuals in his employ, or to a rate of 2.7 per centum, whichever rate is lower. * Example F, illustrating § 400.211a (b) (3). Under the unemployment compen- $ 400.212 Additional credit against sation law of State Y, employer N is tax for calendar year 1939-(a) Genrequired to include in his contribution eral. In addition to the credit against return for the quarter ended December the tax allowable under section 1601 (a) 31, 1939, certain remuneration paid on of the Federal Unemployment Tax Act December 30, 1939, to an employee for for contributions actually paid to State services to be rendered after December unemployment funds (see § 400.211a), 31. On January 20, 1940, N pays to the the taxpayer may be entitled to a furState the total amount of contributions ther credit under section 1601 (b) of due with respect to all remuneration re- such Act. This further or additional quired to be reported on the contribu- credit is allowable to the taxpayer with tion return. Such contributions, includ-respect to the amount of contributions ing those with respect to the remunera- which he is relieved from paying to an tion paid on December 30, 1939, may be unemployment fund under the provisions included in computing the credit against of a State law which have been certified the tax for the calendar year 1939. for the calendar year 1939 as provided in section 1602 (b) of such Act. Generally, an additional credit is available to an employer, if, by reason of having stabilized the employment of his employees in any State, or for some other reason, he is permitted to pay contributions to such State for the calendar year 1939, or portion thereof, at a lower rate than the highest rate applied under such law in such year. poses of this section and § 400.213, the phrase "highest rate applied" means the highest rate which is actually applied under the State law in the calendar year 1939 to any person having individuals in his employ. The computation of the additional credit and the limitations upon its allowance are set forth in the remaining paragraphs of this section. (c) If, subsequent to the filing of the return for the calendar year 1939, a refund is made by a State to the taxpayer of any part of his contributions for such year which had been credited against the tax, the taxpayer is required to advise the Commissioner under oath of the date and amount of such refund and the reason therefor, and to pay the tax, if any, due as a result of such refund, together with interest from the date when the tax was due. (I.R.C. 1600, 1601, 1604 (b), 1609, 1611, 53 Stat. 188, 1387, 1391, 1396; 26 U.S.C., Sup., 1600, 1601, 1604 (b), 1609, 1611) [As added by T.D. 4953, Nov. 9, 1939; 4 F.R. 4585] NOTE: This section is applicable only to the period governed by the Internal Revenue Code. [Insert following statutory quotation preceding § 400.2121 SECTION 609 OF THE SOCIAL SECURITY ACT For the pur (b) Method of computing amount of additional credit allowable with respect to a State law. (1) In ascertaining the additional credit for the calendar year 1939 with respect to a particular State Section 1601 of the Internal Revenue Code law as to which the Social Security is amended to read as follows: "SEC. 1601. CREDITS AGAINST TAX. * Board, in accordance with the provisions of section 1602 (b) (1) of the Federal Unemployment Tax Act, certifies to the the credit allowed under subsection (a), a Secretary that reduced rates of contri "(b) ADDITIONAL CREDIT. In addition to butions were allowable with respect to such year only in accordance with the provisions of section 1602 (a) of such Act, the taxpayer must first compute the following amounts: (i) The amount of contributions (whether or not with respect to employment as defined in the Federal Unemployment Tax Act) which the taxpayer would have been required to pay under the State law for such year if throughout the year he had been subjected to the highest rate applied under such law in such year, or to a rate of 2.7 percent, whichever rate is lower. the reduced rate ($250) is deducted in order to ascertain the additional credit ($425). Thus, A is entitled to an additional credit under section 1601 (b) of the Federal Unemployment Tax Act of $425. (2) If the Social Security Board makes a certification to the Secretary with respect to a particular State law for the calendar year 1939 pursuant to section 1602 (b) (2) of the Federal Unemployment Tax Act, the additional credit of the taxpayer for such year with respect to such law shall be computed in such manner as the Commissioner (c) Amount of additional credit al (ii) The amount of contributions shall determine. (whether or not with respect to employment as defined in the Federal Unem-lowable where contributions are paid ployment Tax Act) he was required to pay under the State law with respect to such year, whether or not paid. The amount computed under (ii) should then be subtracted from the amount computed under (i), and the result will be the additional credit for the taxable year with respect to the law of that State. Example. A employs individuals in State X only during the calendar year 1939. The highest rate applied in such year under the unemployment compensation law of State X to any taxpayer was 3 percent. However, A had obtained a reduced rate of 1 percent under the law of such State and was required to pay his entire year's contributions at that rate. The amount of remuneration of A's employees subject to contributions under such State law was $25,000. The amount of wages paid by A during that year with respect to employment under the Federal law likewise was $25,000, the Federal tax at the 3 percent rate being $750. A's additional credit under section 1601 (b) is $425, computed as follows: Remuneration subject to contributions. Contributions at 2.7 percent rate____ Less: $25,000 under more than one State law. If the taxpayer is permitted to pay contributions at a reduced rate under more than one State law in the calendar year 1939, the additional credit allowable with respect to each State law shall be computed separately (in accordance with (b) above), and the total additional credit allowable against the tax shall be the aggregate of the additional credits allowable with respect to such State laws. (d) Limitations on allowance of additional credit. The allowance of the additional credit under section 1601 (b) of the Federal Unemployment Tax Act is subject to the following limitations: (1) In no case is a taxpayer entitled to an additional credit unless under the State law he is permitted to pay contributions for the calendar year 1939, or portion thereof, at a rate which is lower than the highest rate applied under such law in such year. If the State law does not make provision for such a lower rate no additional credit is available to the taxpayer and he can take only the credit allowable under section 1601 (a) of such Act for contributions actually paid. (See § 400.211a.) (2) The aggregate of such additional credit and the credit under section 1601 (a) of such Act (see $ 400.211a) shall 250 not exceed 90 percent of the tax against which credit is taken. 425 Contributions required to be paid at reduced rate of 1 percent____ Additional credit to A----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 (3) No additional credit shall be allowed except to the extent that the State unemployment compensation law under which such reduced rate is permitted is certified for the calendar year 1939 to the Secretary by the Social Security Board as |