The US Department of Labor has posted the potential FUTA offset credit reductions for employers by state for 2026. At the initial posting only California and the Virgin Islands had outstanding loans to be repaid. Employers in these states were at risk of reduced offset credits (including an additional Benefit Cost Rate (BCR) that would result in increased FUTA tax rates. See potential_credit_states_2026.xlsx
The Virgin Islands subsequently paid off its outstanding loan from the federal government so that the FUTA tax rate for employers in the Virgin Islands will be dramatically reduced for 2026 as compared to 2025. California is now the only state with an outstanding federal loan and at risk of imposition of reduced offset credits and FUTA tax increases for employers in the state. As of July 22, 2026, the outstanding federal loan amount that is due from California is more than $19 billion.
California requested a waiver of the BCR additional offset credit reduction by the July 1st deadline. Approval of the waiver would significantly reduce the increase in FUTA taxes. Without approval of the waiver, employers would be required to pay approximately $371.00 per employee and with the waiver employers would be required to pay approximately $147.00 per employee instead of the regular FUTA tax paid in all other states of approximately $42.00 per employee.
In addition to FUTA offset credit reductions due to unpaid loans from the Federal Unemployment Account, states must pay interest on loans. Interest payments are due on September 30, 2026. Failure by states to make interest payments by the due date can result in states no longer qualifying to receive FUTA offset credits and no longer meeting requirements to receive federal funding for administration of state UI administration.
As of July 22, 2026, states with interest due as of September 30, 2026 include:
California 525,099,862.29
Connecticut 297,551.27
Texas 1,180,906.99
See Advances to State Unemployment Funds | U.S. Treasury Fiscal Data
UWC supports the California BCR waiver request and continues to monitor the status of state UI trust fund solvency. We are working with states, business representatives, and other stakeholders to manage tax rates and benefit payments in preparation for the next recession.
