Unemployment tax treatment of Q-visa workers

U.S. Department of Labor
Employment and Training Administration
Washington, D.C. 20210

Classification: UI
Correspondence symbol: TEURL
Issue date: December 15, 1994
Rescissions: None
Expiration date: December 31, 1996
Directive: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 05-95
To: ALL STATE EMPLOYMENT SECURITY AGENCIES
From: MARY ANN WYRSCH, Director, Unemployment Insurance Service
Subject: Social Security Independence and Program Improvements Act of 1994 Change Affecting the Federal-State Unemployment Compensation (UC) Program

1. Purpose. To advise State Employment Security Agencies (SESAs) of the change to Federal UC law made by the Social Security Independence and Program Improvements Act of 1994.

2. References. Social Security Independence and Program Improvements Act of 1994, Pub. L. No. 103-296; the Internal Revenue Code of 1986 (IRC), including the Federal Unemployment Tax Act (FUTA).

3. Background. On August 15, 1994, the President signed into law H.R. 4277, the Social Security Independence and Program Improvements Act of 1994 (the Act) (Pub. L. No. 103-296). The Act affects the Federal-State UC program as it makes a change to Section 3306(c)(19) of FUTA, which is part of the IRC.

   Prior to the change, the IRC did not exempt wages paid to individuals who entered the United States under a special visa, called a "Q" visa, from the payment of FUTA and certain other Federal taxes. The so-called "Q" visa receives its name because it is issued under subparagraph (Q) of Section 101(a)(15) of the Immigration and Nationality Act (INA), as amended. Such individuals, that is, aliens, are issued temporary "Q" visas for a period not to exceed 15 months to come to the United States to participate in international cultural exchange programs approved by the Attorney General. These aliens, who have residence in a foreign country which they have no intention of abandoning, will be employed under the same wages and working conditions as domestic workers.

   Section 320(a)(1) of the Act amended Section 3306(c)(19), FUTA, to exempt services performed by individuals who are admitted to the United States under a "Q" visa from the FUTA tax, thereby giving the States the option of excluding such services from coverage without the loss of tax offset credits to employers of those individuals.

4. Effective date. For Federal tax purposes, the effective date is October 1, 1994.

5. Effect on the UC Program. States have always had the option of excluding from coverage services performed by aliens who are admitted to the United States under a "Q" visa. States may now do so without employers losing Federal tax credits. Many States currently have laws which contain the twenty FUTA exceptions to the definition of employment, including provisions that parallel the language in Section 3306(c)(19), FUTA. States that have laws paralleling the language in Section 3306(c)(19), FUTA, will already contain references to visas known as "J" or "M." Therefore, the reference "or Q" could be added to State laws having these other exceptions. For example, appropriate provisions in State law which refer to "(J), or (M)" could be amended to read "(J), (M), or (Q)."

6. Action Required. SESA administrators are requested to share this information with appropriate staff. Because this new law is optional with respect to State UC laws, States are not required to take action.

7. Inquiries. Inquiries should be directed to your Regional Office.