§ 3309. — State law coverage of services performed for nonprofit organizations or governmental entities.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 26USC3309]
TITLE 26--INTERNAL REVENUE CODE
Subtitle C--Employment Taxes
CHAPTER 23--FEDERAL UNEMPLOYMENT TAX ACT
Sec. 3309. State law coverage of services performed for
nonprofit organizations or governmental entities
(a) State law requirements
For purposes of section 3304(a)(6)--
(1) except as otherwise provided in subsections (b) and (c), the
services to which this paragraph applies are--
(A) service excluded from the term ``employment'' solely by
reason of paragraph (8) of section 3306(c), and
(B) service excluded from the term ``employment'' solely by
reason of paragraph (7) of section 3306(c); and
(2) the State law shall provide that a governmental entity,
including an Indian tribe, or any other organization (or group of
governmental entities or other organizations) which, but for the
requirements of this paragraph, would be liable for contributions
with respect to service to which paragraph (1) applies may elect,
for such minimum period and at such time as may be provided by State
law, to pay (in lieu of such contributions) into the State
unemployment fund amounts equal to the amounts of compensation
attributable under the State law to such service. The State law may
provide safeguards to ensure that governmental entities or other
organizations so electing will make the payments required under such
elections.
(b) Section not to apply to certain service
This section shall not apply to service performed--
(1) in the employ of (A) a church or convention or association
of churches, (B) an organization which is operated primarily for
religious purposes and which is operated, supervised, controlled, or
principally supported by a church or convention or association of
churches, or (C) an elementary or secondary school which is operated
primarily for religious purposes, which is described in section
501(c)(3), and which is exempt from tax under section 501(a);
(2) by a duly ordained, commissioned, or licensed minister of a
church in the exercise of his ministry or by a member of a religious
order in the exercise of duties required by such order;
(3) in the employ of a governmental entity referred to in
paragraph (7) of section 3306(c), if such service is performed by an
individual in the exercise of his duties--
(A) as an elected official;
(B) as a member of a legislative body, or a member of the
judiciary, of a State or political subdivision thereof, or of an
Indian tribe;
(C) as a member of the State National Guard or Air National
Guard;
(D) as an employee serving on a temporary basis in case of
fire, storm, snow, earthquake, flood, or similar emergency;
(E) in a position which, under or pursuant to the State or
tribal law, is designated as (i) a major nontenured policymaking
or advisory position, or (ii) a policymaking or advisory
position the performance of the duties of which ordinarily does
not require more than 8 hours per week; or
(F) as an election official or election worker if the amount
of remuneration received by the individual during the calendar
year for services as an election official or election worker is
less than $1,000;
(4) in a facility conducted for the purpose of carrying out a
program of--
(A) rehabilitation for individuals whose earning capacity is
impaired by age or physical or mental deficiency or injury, or
(B) providing remunerative work for individuals who because
of their impaired physical or mental capacity cannot be readily
absorbed in the competitive labor market,
by an individual receiving such rehabilitation or remunerative work;
(5) as part of an unemployment work-relief or work-training
program assisted or financed in whole or in part by any Federal
agency or an agency of a State or political subdivision thereof or
of an Indian tribe, by an individual receiving such work relief or
work training; and
(6) by an inmate of a custodial or penal institution.
(c) Nonprofit organizations must employ 4 or more
This section shall not apply to service performed during any
calendar year in the employ of any organization unless on each of some
20 days during such calendar year or the preceding calendar year, each
day being in a different calendar week, the total number of individuals
who were employed by such organization in employment (determined without
regard to section 3306(c)(8) and by excluding service to which this
section does not apply by reason of subsection (b)) for some portion of
the day (whether or not at the same moment of time) was 4 or more.
(d) Election by Indian tribe
The State law shall provide that an Indian tribe may make
contributions for employment as if the employment is within the meaning
of section 3306 or make payments in lieu of contributions under this
section, and shall provide that an Indian tribe may make separate
elections for itself and each subdivision, subsidiary, or business
enterprise wholly owned by such Indian tribe. State law may require a
tribe to post a payment bond or take other reasonable measures to assure
the making of payments in lieu of contributions under this section.
Notwithstanding the requirements of section 3306(a)(6), if, within 90
days of having received a notice of delinquency, a tribe fails to make
contributions, payments in lieu of contributions, or payment of
penalties or interest (at amounts or rates comparable to those applied
to all other employers covered under the State law) assessed with
respect to such failure, or if the tribe fails to post a required
payment bond, then service for the tribe shall not be excepted from
employment under section 3306(c)(7) until any such failure is corrected.
This subsection shall apply to an Indian tribe within the meaning of
section 4(e) of the Indian Self-Determination and Education Assistance
Act (25 U.S.C. 450b(e)).
(Added Pub. L. 91-373, title I, Sec. 104(b)(1), Aug. 10, 1970, 84 Stat.
697; amended Pub. L. 94-566, title I, Sec. 115(a), (b), (c)(2), (3),
title V, Sec. 506(a), Oct. 20, 1976, 90 Stat. 2670, 2671, 2687; Pub. L.
95-19, title III, Sec. 302(b), Apr. 12, 1977, 91 Stat. 44; Pub. L. 105-
33, title V, Secs. 5405(a), 5407(a), Aug. 5, 1997, 111 Stat. 604, 605;
Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 166(b), (c)], Dec. 21,
2000, 114 Stat. 2763, 2763A-627.)
Prior Provisions
A prior section 3309 was renumbered section 3311 of this title.
Amendments
2000--Subsec. (a)(2). Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 166(b)(1)], inserted ``, including an Indian tribe,'' after ``the
State law shall provide that a governmental entity''.
Subsec. (b)(3)(B). Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 166(b)(2)], inserted ``, or of an Indian tribe'' before semicolon
at end.
Subsec. (b)(3)(E). Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 166(b)(3)], inserted ``or tribal'' after ``the State''.
Subsec. (b)(5). Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 166(b)(4)], inserted ``or of an Indian tribe'' after ``an agency of
a State or political subdivision thereof''.
Subsec. (d). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 166(c)],
added subsec. (d).
1997--Subsec. (b)(1)(C). Pub. L. 105-33, Sec. 5407(a), added subpar.
(C).
Subsec. (b)(3)(F). Pub. L. 105-33, Sec. 5405(a), added subpar. (F).
1977--Subsec. (a)(2). Pub. L. 95-19 substituted ``(or group of
governmental entities or other organizations)'' for ``(or group of
organizations)''.
1976--Pub. L. 94-566, Sec. 115(c)(3), substituted ``services
performed for nonprofit organizations or governmental entities'' for
``certain services performed for nonprofit organizations and for State
hospitals and institutions of higher education'' in section catchline.
Subsec. (a)(1)(B). Pub. L. 94-566, Sec. 115(a), struck out
``performed in the employ of the State, or any instrumentality of the
State or of the State and one or more other States, for a hospital or
institution of higher education located in the State, if such service
is'' after ``service''.
Subsec. (a)(2). Pub. L. 94-566, Sec. 506(a), substituted ``a
governmental entity or any other organization'' for ``an organization'',
``paragraph (1)'' for ``paragraph (1)(A)'', and ``that governmental
entities or other organizations'' for ``that organizations''.
Subsec. (b)(3). Pub. L. 94-566, Sec. 115(b)(1), substituted
reference to services performed in the employ of a governmental entity
referred to in paragraph (7) of section 3306(c), if such services are
performed by an individual in the exercise of his duties as an elected
official, as a member of a legislative body, or a member of the
judiciary, of a State or political subdivision thereof, as a member of
the State National Guard or Air National Guard, as an employee serving
on a temporary basis in case of fire, storm, snow, earthquake, flood, or
similar emergency, or in a position which, under or pursuant to the
State law, is designated as a major nontenured policymaker or advisory
position or a policymaking or advisory position the performance of the
duties of which ordinarily does not require more than 8 hours per week,
for reference to services performed in the employ of a school which is
not an institution of higher education.
Subsec. (b)(6). Pub. L. 94-566, Sec. 115(b)(2), substituted ``by an
inmate of a custodial or penal institution'' for ``for a hospital in a
State prison or other State correctional institution by an inmate of the
prison or correctional institution''.
Subsec. (d). Pub. L. 94-566, Sec. 115(c)(2), struck out subsec. (d)
which defined ``institution of higher education''. See section 3304(f)
of this title.
Effective Date of 2000 Amendment
Amendment by Pub. L. 106-554 applicable to service performed on or
after Dec. 21, 2000, with transition rule for service performed in the
employ of an Indian tribe, see section 166(e) of Pub. L. 106-554, set
out as a note under section 3306 of this title.
Effective Date of 1997 Amendment
Section 5405(b) of Pub. L. 105-33 provided that: ``The amendments
made by this section [amending this section] shall apply with respect to
service performed after the date of the enactment of this Act [Aug. 5,
1997].''
Section 5407(b) of Pub. L. 105-33 provided that: ``The amendments
made by this section [amending this section] shall apply with respect to
service performed after the date of the enactment of this Act [Aug. 5,
1997].''
Effective Date of 1977 Amendment
Section 302(d)(2) of Pub. L. 95-19 provided that: ``The amendment
made by subsection (b) [amending this section] shall take effect as if
included in the amendments made by section 506 of the Unemployment
Compensation Amendments of 1976 [which amended this section in 1976, see
Effective Date of 1976 Amendment note below].''
Effective Date of 1976 Amendment
For effective date of amendment by section 115(a), (b), (c)(2), (3)
of Pub. L. 94-566, see section 115(d) of Pub. L. 94-566, set out as a
note under section 3304 of this title.
For effective date of amendment by section 506(a) of Pub. L. 94-566,
see section 506(c) of Pub. L. 94-566, set out as a note under section
3304 of this title.
Effective Date
Section applicable with respect to certifications of State laws for
1972 and subsequent years, but only with respect to service performed
after Dec. 31, 1971, see section 104(d)(1) of Pub. L. 91-373, set out as
a note under section 3304 of this title.
Section Referred to in Other Sections
This section is referred to in sections 3303, 3304 of this title.
