Notice of the Federal Unemployment Tax Act (FUTA) Credit Reductions Applicable for 2025
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Abstract
Sections 3302(c)(2)(A) and 3302(d)(3) of FUTA provide that employers in a state that has outstanding advances under Title XII of the Social Security Act on January first 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 such January first occurs, if advances remain on November 10 of that year. Further, Section 3302(c)(2)(C) of FUTA provides for an additional credit reduction for a year if a state has outstanding advances on five or more consecutive January firsts and has a balance on November 10 for such years. Section 3302(c)(2)(C) provides for waiver of this additional credit reduction and substitution of the credit reduction provided in Section 3302(c)(2)(B) if a state meets certain conditions. As of January 1, 2025, California, Connecticut, New York, and the U.S. Virgin Islands had outstanding advances for two or more consecutive years and employers in these states were potentially subject to a FUTA credit reduction for 2025. Connecticut and New York each repaid their outstanding advances before November 10, 2025. As a result, employers in Connecticut and New York are not subject to a FUTA credit reduction for 2025. Neither California nor the U.S. Virgin Islands repaid all outstanding advances before November 10, 2025. California has had outstanding advances on January first for five consecutive years, and the U.S. Virgin Islands has had outstanding advances on January first for sixteen consecutive years. As such, employers in California and the U.S. Virgin Islands are subject to the basic credit reduction under Section 3302(c)(2)(A), FUTA, and were potentially liable for an additional reduction under Section 3302(c)(2)(C), FUTA. Both California and the U.S. Virgin Islands applied for a waiver of this additional credit reduction and ETA determined that each state legally satisfied the conditions for this waiver per Section 3302(f)(2)(B), FUTA. Therefore, there will be no additional add-on credit reduction in California or the U.S. Virgin Islands. Employers in California are subject to a FUTA credit reduction of 1.2 percent for 2025. Employers in the U.S. Virgin Islands are subject to a FUTA credit reduction of 4.5 percent for 2025.
Full Text
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<title>Federal Register, Volume 91 Issue 7 (Monday, January 12, 2026)</title>
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[Federal Register Volume 91, Number 7 (Monday, January 12, 2026)]
[Notices]
[Page 1198]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-00342]
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DEPARTMENT OF LABOR
Employment and Training Administration
Notice of the Federal Unemployment Tax Act (FUTA) Credit
Reductions Applicable for 2025
AGENCY: Employment and Training Administration, Department of Labor.
ACTION: Notice.
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SUMMARY: Sections 3302(c)(2)(A) and 3302(d)(3) of FUTA provide that
employers in a state that has outstanding advances under Title XII of
the Social Security Act on January first 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 such
January first occurs, if advances remain on November 10 of that year.
Further, Section 3302(c)(2)(C) of FUTA provides for an additional
credit reduction for a year if a state has outstanding advances on five
or more consecutive January firsts and has a balance on November 10 for
such years. Section 3302(c)(2)(C) provides for waiver of this
additional credit reduction and substitution of the credit reduction
provided in Section 3302(c)(2)(B) if a state meets certain conditions.
As of January 1, 2025, California, Connecticut, New York, and the
U.S. Virgin Islands had outstanding advances for two or more
consecutive years and employers in these states were potentially
subject to a FUTA credit reduction for 2025. Connecticut and New York
each repaid their outstanding advances before November 10, 2025. As a
result, employers in Connecticut and New York are not subject to a FUTA
credit reduction for 2025. Neither California nor the U.S. Virgin
Islands repaid all outstanding advances before November 10, 2025.
California has had outstanding advances on January first for five
consecutive years, and the U.S. Virgin Islands has had outstanding
advances on January first for sixteen consecutive years. As such,
employers in California and the U.S. Virgin Islands are subject to the
basic credit reduction under Section 3302(c)(2)(A), FUTA, and were
potentially liable for an additional reduction under Section
3302(c)(2)(C), FUTA. Both California and the U.S. Virgin Islands
applied for a waiver of this additional credit reduction and ETA
determined that each state legally satisfied the conditions for this
waiver per Section 3302(f)(2)(B), FUTA. Therefore, there will be no
additional add-on credit reduction in California or the U.S. Virgin
Islands.
Employers in California are subject to a FUTA credit reduction of
1.2 percent for 2025. Employers in the U.S. Virgin Islands are subject
to a FUTA credit reduction of 4.5 percent for 2025.
Susan Frazier,
Acting Assistant Secretary for Employment and Training, Labor.
[FR Doc. 2026-00342 Filed 1-9-26; 8:45 am]
BILLING CODE 4510-FW-P
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