Employment and Training Administration
Washington, D. C. 20213






March 20, 1978




March 30, 1979











Acting Administrator
Field Operations




Amendments Made to the Federal Unemployment Tax Act By P.L. 95-216


  1. Purpose. To inform State agencies of the amendments made to the Federal Unemployment Tax Act in P.L. 95-216, which impose a new Federal requirement under section 3304(a) for disclosure of information and define tax liability in cases of concurrent employment by two or more employers for purposes of sections 3301, 3302 and 3306 (b) (1) .

  2. Reference. Sections 314(b) and 403(b) and (c) of P.L. 95-216, adding new section 3306 (p), and amending section 3304(a), FUTA, to add a new paragraph (16).

  3. Access to Wage Information by AFDC Agencies. Section 403 (b) of P.L. 95-216 which became effective December 20, 1977, amended section 3304(a) by redesignating paragraph (16) as paragraph (17) and by inserting after paragraph (15) the following new paragraph:

    "(16)(A) wage information contained in the records of the agency administering the State law which is necessary (as determined by the Secretary of Health, Education and Welfare in regulations) for purposes of determining an individual's eligibility for aid or services, or the amount of such aid or services, under a State plan for aid and services to needy families with children approved under Part A of title IV of the Social Security Act, shall be made available to a State or political subdivision thereof when such information is specifically requested by such State or political subdivision for such purposes, and

    "(B) such safeguards are established as are necessary (as determined by the Secretary of Health, Education, and Welfare in regulations) to insure that such information is used only for the purposes authorized under subparagraph (A);".

    The explanation provided on page 22 of the Conference Report to accompany H.R. 9346, December 14, 1977, states that this amendment "specifically authorized State AFDC agencies to obtain wage information from the wage records maintained by the Social Security Administration and the wage records maintained by the State unemployment compensation agencies for purposes of determining eligibility for (or amount of) AFDC. The Secretary of HEW would establish the necessary safeguards to prevent the improper use of such information. Effective October 1, 1979, State AFDC agencies would be required to request and make use of this wage information either from the State unemployment compensation agency (if available there) or from the Social Security Administration."

    The provisions in new section 3304(a)(16), FUTA, became effective December 20, 1977, and therefore, must be implemented immediately. Implementation of. this requirement is necessary as a condition for certification of States under section 3304(c), FUTA. This means that all State unemployment compensation agencies must, if the data are in their records, and upon specific request made in proper form, furnish wage information (as described by the regulations of the Secretary of HEW) to an agency of a State or political subdivision thereof administering aid under the AFDC program established pursuant to a State plan approved under Part A of Title IV of the Social Security Act.

    There should be no difficulty in meeting this requirement since most State laws now permit information in the records of unemployment compensation agencies to be disclosed to public officials in the performance of their public duties, consistent with present Federal law requirements. This should be sufficient authority for the purposes of disclosing information required to be released by section 3304(a)(16). Further, we note that several States recently amended their laws to specifically permit release of certain UC information to AFDC agencies pursuant to the amendments in section 508 of P.L. 94-566, amending the Wagner-Peyser Act to require that State employment offices furnish certain specified information to AFDC and child support agencies. However; any SESA whose law does not permit it to furnish such information should seek an appropriate amendment to include such permission to assure consistency with the requirements of new section 3304 (a)(16), FUTA. Legislative action for this purpose should be sought at the earliest opportunity.

    Regulations (Title 20, Chapter III, Part 401, Subpart A, Code of Federal Regulations) were published by the Social Security Administration in the Federal register on January 30, 1978, (43 FR 3907) setting forth the type of information that will be needed and the safeguards that will have to be established to assure that the information released to AFDC agencies will be used only for the purposes designated in section 3304(a)(16), FUTA. At this time the regulations provide only for disclosures by the SSA. They will be revised soon to include provisions applicable to disclosures by SESA's as agreed upon by the Department of Labor and HEW. SESA's will be required to provide the same wage information specified in the HEW regulations cited above. Generally speaking the information required will be that identifying the name of the employer, the employer's identification number, and the amount of wages earned in covered employment. Since AFDC agencies will assume responsibility for the costs of furnishing the information, appropriate arrangements should be made by SESA's for obtaining reimbursement of any costs incurred in this activity.

    The safeguards required by subparagraph (B) of section 3304 (a)(16) will only be applicable to AFDC agencies. Thus it will not be necessary for SESAs to take any action to implement this requirement. A request to a SESA for wage information should contain identification of the requesting party as an AFDC agency operating under a State plan approved under Part A of title IV-A of the Social Security Act, and the assurance that it will observe all of the measures specified in regulations published by the Secretary of HEW to protect the confidentiality of the information against inappropriate or illegal access or disclosure.

    Further information as appropriate regarding the procedural and workload implications of the new requirement in section 3304(a)(16) will be forwarded at a later date.

  4. Liability for Wages Paid individuals employed by two or more related corporations. Section 314(b) of P.L. 95-216 amended section 3306 of the Federal Unemployment Tax Act by adding at the end thereof the following new subsection (p):

    "(p)  Concurrent Employment by Two or More Employers. -- For purposes of sections 3301, 3302, and 3306(b)(1), if two or more related corporations concurrently employ the same individual and compensate such individual through a common paymaster which is one of such corporations, each such corporation shall be considered to have paid as remuneration to such individual only the amounts actually disbursed by it to such individual and shall not be considered to have paid as remuneration to such individual amounts actually disbursed to such individual by another of such corporations."

    The amendment made by section 314 (b) of P.L. 95-216 applies with respect to wages paid after December 31,1978.

    Explanations provided by the Internal Revenue Service, indicate that prior to this amendment and until January 1, 1979, each of the related corporations employing individuals who are concurrently employed by the other related corporations, was liable for the Federal unemployment tax even though only one of these corporations actually paid the wages to such individuals. Under new subsection (p) this liability will be changed so that only the corporation that actually disburses the wages paid to these individuals will be liable for the Federal unemployment tax. Although this is not a Federal law requirement, State agencies that wish to amend their laws to coincide with the change in FUTA to assure application of State law consistent with this amendment should seek an appropriate amendment, if deemed necessary, during the 1978 legislative session with an effective date of January 1, 1979.

  5. Action Required.  All States should take appropriate action immediately to ensure the availability of wage information in their records to AFDC agencies on request made in proper form, in accordance with the requirements of section 3304 (a)(16), FUTA, which are now in effect. Those States whose laws do not permit or which cannot be interpreted to allow disclosure of wage information to AFDC agencies as required by new section 3304(a)(16), FUTA, should notify the appropriate ETA regional office immediately and indicate what action will be taken to obtain the needed changes in the law to authorize such disclosure as soon as possible. In view of the fact that new section 3304 (a) (16), FUTA, was enacted during the certification period which ends on October 31, 1978, and some States may need an opportunity to bring their laws into conformity, we do not plan to institute any proceedings this year under section 3304(c), FUTA with respect to certification on October 31, 1978. However, full compliance with respect to the requirements of section 3304(a)(16) is expected, however, through the certification period ending October 31, 1979.