CCA 201016076: Nonprofit employee services are excluded from FUTA for quarters below the wage threshold

Plain-English summary

Chief Counsel Advice explains a historical change to the Federal Unemployment Tax Act provision in section 3306(c)(10). It states that services performed for certain nonprofit organizations described in sections 501(c)(5) and 501(c)(9) may be excluded for a quarter when the employee earns less than $50. The advice contrasts this rule with the prior statutory exclusions and cites the 1960 legislative digest describing the amendment.

Ruling snapshot

• Question: How did the 1960 amendment to section 3306(c)(10) affect FUTA treatment of services for certain nonprofit organizations?
• Outcome: Advice given
• Key authorities: IRC § 3306(c)(10); IRC §§ 501(c)(5) and 501(c)(9); Public Law 86-413

Full text (IRS public release)

ID: CCA_2010032916173965 Number: 201016076
Release Date: 4/23/2010
Office: ----------------------------
UILC: 3306.03-00

From: ----------------------------------
Sent: Monday, March 29, 2010 4:17:42 PM
To: --------------------
Cc: ---------------------------------------------------
Subject: FW: FUTA Requirements

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See applicable explanation below on the change made to section 3306(c)(10) in 1960. Prior to the amendment section 3306(c)(10)(B) had an exclusion relating to section 501(c)(5) and section 3306(c)(10)(C) had an exclusion relating to section 501(c)(9). Now services of an employee in these types of non-profit organizations can only be excluded for a quarter in which the employee earns less than $50.

1960-2 C.B. 656; 1960 IRB LEXIS 2210,
DIGEST OF PUBLIC LAWS ENACTED DURING THE SECOND SESSION OF THE 86TH CONGRESS WHICH PERTAIN TO INTERNAL REVENUE MATTERS 1960-2 C.B. 656; 1960 IRB LEXIS 2210
July 1960
Following [2] is a brief explanation of the provisions of the above public laws and the respective Code sections amended thereby. The statements explaining Code sections before amendment and the amendments thereto are not intended as interpretations but are intended merely to indicate the general nature or effect of the provisions involved. Alcohol, tobacco and firearm provisions are omitted. AMENDMENTS TO THE 1954 CODE PUBLIC LAW 86-413 (C.B. 1960-1,786).
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3306 (c) (10)

Fraternal beneficiary societies, agricultural organizations, voluntary employees beneficiary association, etc.-Section 3306 (c) (10) is amended to cover services performed in the employ of the various non-profit organizations previously described therein, [*31] except that the services of an employee will continue to be excluded for any quarter in which the employee earns less than $50, and the services of a student will continue to be excluded if performed in the employ of the school he attends. This amendment is effective with respect to remuneration paid after 1961 for services performed after 1961.