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U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEURL

ISSUE DATE

January 27, 1992

RESCISSIONS

None

EXPIRATION DATE

January 31, 1993

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 15-92

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

DONALD J. KULICK
Administrator
for Regional Management

 

SUBJECT

:

The Emergency Unemployment Compensation Act of 1991 (Public Law 102-164)[151]Provisions Amending the Federal Unemployment Tax Act

  1. Purpose. To advise State employment security agencies (SESAs) of the provisions of the Emergency Unemployment Compensation Act of 1991, P.L. 102-164, which amend the Federal Unemployment Tax Act (FUTA).

  2. References. Sections 302 and 402 of P.L. 102-164; the Federal Unemployment Tax Act (Sections 3301-3311 of the Internal Revenue Code of 1986); UIPL 18-78, dated March 6, 1978; UIPL 4-83, dated November 15, 1982; UIPL 41-83, dated September 13, 1983; UIPL 30-85, dated July 12, 1985 (50 FR 48274, 48280); UIPL 11-86, dated January 31, 1986; the Draft Legislation to Implement the Employment Security Amendments of 1970 . . . H.R. 14705 ("1970 Draft Language"); the Draft Language and Commentary to Implement the Unemployment Compensation Amendments of 1976-P.L. 94-566 ("1976 Draft Language"); and Supplements 1 through 5 to the 1976 Draft Language.

  3. Background. On November 15, 1991, the President signed into law the Emergency Unemployment Compensation Act of 1991, P.L. 102-164. P.L. 102-164 created a temporary emergency unemployment compensation (UC) program, amended the law pertaining to UC for ex-servicemembers, and made other changes affecting the Federal-State UC program. This issuance is limited to the two amendments made to the FUTA which affect the Federal-State UC program. The first amendment makes the "between and within terms denial" provisions optional with respect to "nonprofessional" services. The second amendment extends the 0.2 percent temporary tax under FUTA for one year. The last year for this tax is now calendar year 1996. Only the first amendment may require changes in State laws.

  4. Between and Within Terms Denial. 

    1. Text of Amendment.

      SEC. 302. OPTIONAL BENEFITS FOR CERTAIN SCHOOL EMPLOYEES.

        (a)  IN GENERAL.--

          (1)  Subclause (I) of section 3304(a)(6)(A)(ii) of the Internal Revenue Code of 1986 is amended by striking "shall be denied" and inserting "may be denied".

          (2)  Subparagraph (A) of section 3304(a)(6) of such Code is amended by striking "and" at the end of clauses (iii) and (iv) and by inserting after clause (v) the following new clause:

            "(vi)  with respect to services described in clause (ii), clauses (iii) and (iv) shall be applied by substituting 'may be denied' for 'shall be denied', and".

        (b)  EFFECTIVE DATE.[151]  The amendments made by this section shall apply in the case of compensation paid for weeks beginning on or after the date of the enactment of this Act.

    2. Discussion.

        (1)  Between and Within Terms Denial[151]Situation Prior to Enactment of P.L. 102-164 with Additional Background Information.  Section 3304(a)(6)(A), FUTA, (a part of the Internal Revenue Code of 1986) requires each State to pay UC based on services performed for certain governmental entities and nonprofit organizations on the same terms and conditions as are applicable to other services covered by the State law. Exceptions to this requirement were found in five distinct clauses of Section 3304(a)(6)(A). The exceptions in clauses (i) through (iii) provided that an employee of an educational institution was ineligible to receive UC (based on such services) between academic years or terms and during vacation periods and holiday recesses within terms if the employee had a "reasonable assurance" of performing services in such educational employment in the following academic year, term, or remainder of a term. Clause (iv) provided for the same denials for an employee of an educational service agency (ESA) who performed services in an educational institution. Clause (v) provided for the same denials based on services provided to or on behalf of an educational institution. These clauses are referred to as the "between and within terms denial" provisions. The between and within terms denial provisions are applicable to services commonly called "professional" and "nonprofessional" services. "Professional" is the name given to the services described in clause (i) of Section 3304(a)(6)(A) as services performed in an "instructional, research, or principal administrative capacity." "Nonprofessional" is the name given to services described in clause (ii) as services performed in "any other capacity." Although clauses (i) and (ii) apply only to services performed for an educational institution, the distinction between professional and nonprofessional services also applies to the services performed for an entity to which clauses (iv) and (v) apply. Individuals who might normally be considered professional employees (e.g., librarians) may be "nonprofessionals" for purposes of the between and within terms denial if the services are not performed in an instructional, research, or principal administrative capacity. Prior to the enactment of P.L. 102-164, clauses (i) through (iv) were mandatory for both professional and nonprofessional services. Clause (v) was optional. However, if State law contained a provision implementing clause (v), it was required to apply equally to all services described in Section 3304(a)(6)(A)(i) [150](iv). (See UIPL 41-83, Attachment I, page 4.)

        (2)  Between and Within Terms Denial[151]Effect of P.L. 102-164.  The amendments made by Section 302 of P.L. 102-164 substitute the phrase "may be denied" for "shall be denied" in clause (ii)(I) of Section 3304(a)(6)(A), FUTA, which pertains to the between terms denial based on services performed by "nonprofessional" employees. The amendments also add new clause (vi), which provides that, with respect to the nonprofessional services described in clause (ii), the phrase "shall be denied" shall be applied by substituting "may be denied" for purposes of clause (iii) and clause (iv). Clause (iii) addresses the within terms denial, and clause (iv) addresses both the between and within terms denials based on services performed in an educational institution while in the employ of an ESA. The sole effect of these amendments is to make the between and within terms denial provisions of clauses (ii), (iii), and (iv) optional for all services performed in a "nonprofessional" capacity. No State legislative amendments are required for purposes of conformity/compliance. However, if the State chooses to no longer apply a between and within terms denial provision to nonprofessional services, then the State law must be amended to remove the disqualifying language.

        (3)  Application of Amendments made by P.L. 102-164.  A State may not apply the optional denial to some nonprofessional services while excluding other nonprofessional services. For example, a State may not exempt janitorial services from the between terms denial while applying the between terms denial to other nonprofessional services. This reinstates the position taken by the Department prior to clauses (ii), (iii), and (iv) being made mandatory by the 1983 enactment of P.L. 98-21. (See Supplement 5 to the 1976 Draft Language at pages 20[150]21, UIPL 18-78 at page 3, and UIPL 4-83, Attachment II, page 14.) Similarly, a State electing to deny nonprofessionals between terms under clause (ii)(I), must incorporate the entire clause, including clause (ii)(II) pertaining to retroactive payment of compensation. (See UIPL 4-83, Attachment II, page 14.) States do have the option of adopting a more restrictive test than the "reasonable assurance" test for nonprofessional services. For example, instead of requiring the reasonable assurance requirement as specified under clause (ii), the State law may include a provision requiring a contract to return to work in the next year or term. (See UIPL 41-83, Attachment I, at page 7.) States may not introduce a less restrictive test than the reasonable assurance test which would result in the denial of compensation in circumstances to which Section 3304(a)(6)(A) applies. Finally, because the clauses of Section 3304(a)(6)(A) are distinct from one another, a State may choose to adopt any one or more of the clauses in regard to "nonprofessional" employees. For example, a State may deny benefits within terms based on services performed by nonprofessionals, but permit payment between years and terms based on these same services. (See Supplement 3 to the 1976 Draft Language at page 7.)

        (4)  Draft Language.  Two versions of draft language are provided in the Attachment to this program letter. The first applies the between and within terms denial provisions to all services performed by professional and nonprofessional employees. The second implements the new amendments by applying the between and within terms denial provisions only to professional employees.

        (5)  Conforming State Laws.  Conformity and compliance with the requirements of Section 3304(a)(6)(A) is a condition for employers in a State receiving credit against the Federal unemployment tax. As such, it is important that State law provisions be consistent with Federal law provisions. Since the Department continues to find technical problems in State law provisions implementing the between and within terms denial clauses, States are encouraged to compare their provisions with the draft language to assure consistency with these Federal law requirements.

        (6)  Effective Date.  Under Section 302(b) of P.L. 102-164, the amendments are effective for UC paid for weeks of unemployment beginning on or after the date of enactment. Since the date of enactment was November 15, 1991, States are no longer required to apply the between and within terms denial provisions to nonprofessional services for weeks of unemployment beginning on or after November 17, 1991. No question will be raised with any State that construes its law as authorizing it to give effect to these amendments prior to the enactment of conforming amendments to the State law.

    3. Extension of Temporary 0.2 Percent FUTA Tax. 

      1. Text of Amendment.

        SEC. 402. EXTENSION OF FUTA SURTAX.

          Section 3301 of the Internal Revenue Code of 1986 (relating to rate of unemployment tax) is amended--

            (1) by striking "1995" in paragraph (1) and inserting "1996", and

            (2) by striking "1996" in paragraph (2) and inserting "1997".

      2. Discussion. Section 11333 of the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) amended Section 3301, FUTA, to extend the 0.2 percent temporary tax through 1995. Section 402 of P.L. 102-164 extends the tax for one additional year through 1996. No change was made in the distribution of the tax among the various accounts in the Unemployment Trust Fund.

    4. Action Required. SESAs are requested to notify appropriate staff of these amendments. SESAs are encouraged to review State laws pertaining to the between and within terms denial provisions to assure consistency with Federal law requirements.

    5. Inquires. Inquiries should be directed to your Regional Office.

    6. Attachment. Draft Language to Implement the Between and Within Terms Denial Provisions

     

     


     

     

    Attachment to UIPL 15-92

    DRAFT LANGUAGE FOR STATE LAWS

     

     

    1. The following language is intended for States choosing to require the between and within terms denial based on both professional and nonprofessional services. It consolidates and replaces the draft language provided in UIPLs 41-83 and 4-83 and in the 1976 Draft Language. Section citations follow those used in the Manual of State Employment Security Legislation (Revised September 1950) and subsequent issuances of draft language. The draft language pertaining to the optional denial in clause (v). (The "Commentary" provided in the 1970 Draft Language is not updated by this UIPL. States needing additional information are advised to refer to the issuances found in the "References" section of the UIPL. The Department plans on consolidating these issuances into a single UIPL addressing the requirements of Section 3304(a)(6)(A), FUTA.) To avoid creating the crossover problems described in UIPL 30-85, State law should not intertwine professional or nonprofessional services in the same provision. To emphasize this point, in subparagraphs (C) and (D) the reference to "(A) and (B)" is changed to "(A) or (B)." This revision also tracks more closely to the language in FUTA. Similarly, States should not intertwine services performed for different types of employers (educational institutions, educational service agencies, or other employers who provide services to or on behalf of an educational institution); instead a distinct provision should address each type of employer. The draft language provided below applies only to the services required to be covered by Section 3304(a)(6)(A), FUTA (e.g., State and local governmental entities and certain nonprofit organizations). As a result, the draft language does not apply the between and within terms denial to services performed in Federal or other schools. A State wishing to apply the denial clauses to services performed for these Federal and other schools should fashion its law to apply to services performed for all educational institutions, and not just those to which Section 3304(a)(6)(A) pertains. This may be done by separating the "equal treatment" requirement of paragraph (3) of the draft language given below, which pertains only to services to which Section 3304(a)(6)(A) applies, from the between and within terms denial provisions. (See UIPL 11-86.)

      Section 4(a)(3)

        (3)  Benefits based on service in employment defined in section 2(k)(1)(B)Coverage of State and local government employment1 and (C)Coverage of 501(c)(3) nonprofit organization2 shall be payable in the same amount, on the same terms, and subject to the same conditions as benefits payable on the basis of other service subject to this Act; except that--

          (A)  With respect to service performed in an instructional, research, or principal administrative capacity for an educational institution, benefits shall not be paid based on such services for any week of unemployment commencing during the period between two successive academic years or terms (or when an agreement provides instead for a similar period between two regular but not successive terms, during such period) or during a period of paid sabbatical leave provided for in the individual's contract, to any individual if such individual performs such services in the first of such academic years or terms and if there is a contract or a reasonable assurance that such individual will perform services in any such capacity for any educational institution in the second of such academic years or terms;

          (B)  With respect to services performed in any other capacity for an educational institution, benefits shall not be payable on the basis of such services to any individual for any week which commences during a period between two successive academic years or terms if such individual performs such services in the first of such academic years or terms and there is a reasonable assurance that such individual will perform such services in the second of such academic years on terms; except that, if compensation is denied to any individual under this subparagraph and such individual was not offered an opportunity to perform such services for the educational institution for the second of such academic years or terms, such individual shall be entitled to a retroactive payment of compensation for each week for which the individual filed a timely claim for compensation and for which compensation was denied solely by reason of this subparagraph;

          (C)  With respect to any services described in subparagraph (A) or (B), benefits shall not be payable on the basis of services in any such capacity to any individual for any week which commences during an established and customary vacation period or holiday recess if such individual performs such services in the period immediately before such vacation period or holiday recess, and there is a reasonable assurance that such individual will perform such services in the period immediately following such vacation period or holiday recess;

          (D)  With respect to any services described in subparagraph (A) or (B), benefits shall not be payable on the basis of services in any such capacity as specified in subparagraphs (A), (B) and (C) to any individual who performed such services in an educational institution while in the employ of an educational service agency. For purposes of this subparagraph the term "educational service agency" means 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; and

          (E)  With respect to services to which sections 2(k)(1)(B) and (C) apply, if such services are provided to or on behalf of an educational institution, benefits shall be denied under the same circumstances as described in subparagraphs (A), (B), (C), and (D).

    2. The following language is intended for use by States choosing to not apply the between and within terms denial provisions to any nonprofessional services. It includes language implementing optional clause (v) of Section 3304(a)(6)(A), FUTA, pertaining to services provided to or on behalf of an educational institution, but limits its application to professional services. States are referred to the discussion in Section I above, concerning intertwining services performed for different types of employers and treatment of services performed in Federal or other schools. Section 4(a)(3)

        (3) Benefits based on service in employment defined in section 2(k)(1)(B)Coverage of State and local government employment1 and (C)Coverage of 501(c)(3) nonprofit organizations2 shall be payable in the same amount, on the same terms and subject to the same conditions as benefits payable on the basis of other service subject to this Act; except that--

          (A)  With respect to service performed in an instructional, research, or principal administrative capacity for an educational institution, benefits shall not be paid based on such services for any week of unemployment commencing during the period between two successive academic years or terms (or, when an agreement provides instead for a similar period between two regular but not successive terms, during such period) or during a period of paid sabbatical leave provided for in the individual's contract, to any individual if such individual performs such services in the first of such academic years or terms and if there is a contract or a reasonable assurance that such individual will perform services in any such capacity for any educational institution in the second of such academic years or terms;

          (B)  With respect to any services described in subparagraph (A), benefits shall not be payable on the basis of services in any such capacity to any individual for any week which commences during an established and customary vacation period or holiday recess if such individual performs such services in the period immediately before such vacation period or holiday recess, and there is a reasonable assurance that such individual will perform such services in the period following such vacation period or holiday recess;

          (C)  With respect to any services described in subparagraph (A), benefits shall not be payable on the basis of services in any such capacity as specified in subparagraphs (A) and (B) to any individual who performed such services in an educational institution while in the employ of an educational service agency. For purposes of this subparagraph the term "educational service agency" means 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; and

          (D)   With respect to services to which sections 2(k)(1)(B) and (C) apply, if such services are provided to or on behalf of an educational institution, benefits shall be denied under the same circumstances as described in subparagraphs (A), (B), and (C).