The potential increase in net FUTA taxes due to the Benefit Cost Rate offset credit reduction for employers in Connecticut, New York and California is shown in the attached posting from the US Department of Law.
Because these states had outstanding loans as of January 1st of 2024 and 2025 and have not repaid the outstanding loan as of January 1st for five years the Benefit Cost Rate offset credit reduction is triggered for calendar year 2025 to be paid by January 31st of 2026. The net FUTA increase for employers in California due to the BCR offset credit reduction would be the largest FUTA tax increase for employers in California in the history of the program.
We are conferring with all three states, the US Department of Labor, and business representatives in each state to ensure that the procedure for a state to request a waiver of the BCR Add On offset credit reduction is clear.
We are urging states to apply for the BCR waiver or to repay the outstanding loan amounts to avoid the significant increase in FUTA taxes for 2025 that would otherwise apply.
The deadline for waiver requests is July 1, 2025.
Attached is the most recent US DOL memo describing the law and US DOL interpretation with respect to the imposition of reduced offset credits against the FUTA tax (including the Benefit Cost Rate reduction). States may avoid the imposition of the offset credit reductions (net FUTA increases) under certain circumstances described.
