located in the State, if such service is excluded from the term "(2) the State law shall provide that an organization (or group of organizations) which, but for the requirements of this paragraph, would be liable for contributions with respect to service to which paragraph (1)(A) 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 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, or (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; "(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 school which is not an institution of higher education; "(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, by an individual receiving such work relief or work training; and "(6) for a hospital in a State prison or other State correctional institution by an inmate of the prison or correctional institution. 84 STAT. 698 68A Stat. 449. 26 USC 3306. "(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 74 Stat. 984. 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) DEFINITION OF INSTITUTION OF HIGHER EDUCATION.-For purposes of this section, the term 'institution of higher education' means an educational institution in any State which "(1) admits as regular students only individuals having a certificate of graduation from a high school, or the recognized equivalent of such a certificate; "(2) is legally authorized within such State to provide a program of education beyond high school; 84 STAT. 699 "(3) provides an educational program for which it awards a bachelor's or higher degree, or provides a program which is acceptable for full credit toward such a degree, or offers a program of training to prepare students for gainful employment in a recognized occupation; and "(4) is a public or other nonprofit institution." (2) The table of sections for such chapter 23 is amended by redesignating the last item as section 3311 and by inserting after the item for section 3308 the following new item: "Sec. 3309. State law coverage of certain services performed for nonprofit organizations and for State hospitals and institutions of higher education." (c) Section 3303 of the Internal Revenue Code of 1954 is amended 68 Stat. 1130. by adding at the end thereof the following new subsections: 68A Stat. 440; 26 USC 3303. Ante, p. 697. Effective date. 68A Stat. 449; 74 Stat. 984. "(e) PAYMENTS BY CERTAIN NONPROFIT ORGANIZATIONS. A State may, without being deemed to violate the standards set forth in subsection (a), permit an organization (or a group of organizations) described in section 501 (c) (3) which is exempt from income tax under section 501 (a) to elect (in lieu of paying contributions) to pay into the State unemployment fund amounts equal to the amounts of compensation attributable under the State law to service performed in the employ of such organization (or group). "(f) TRANSITION.-To facilitate the orderly transition to coverage of service to which section 3309 (a)(1)(A) applies, a State law may provide that an organization (or group of organizations) which elects, when such election first becomes available under the State law, to make payments (in lieu of contributions) into the State unemployment fund as provided in section 3309 (a)(2), and which had paid contributions into such fund under the State law with respect to such service performed in its employ before January 1, 1969, is not required to make any such payment (in lieu of contributions) on account of compensation paid after its election as heretofore described which is attributable under the State law to service performed in its employ, until the total of such compensation equals the amount (1) by which the contributions paid by such organization (or group) with respect to a period before the election provided by section 3309 (a) (2), exceed "(2) the unemployment compensation for the same period which was charged to the experience-rating account of such organization (or group) or paid under the State law on the basis of wages paid by it or service performed in its employ, whichever is appropriate.' (d) (1) Subject to the provisions of paragraph (2), the amendments made by subsections (a) and (b) shall apply with respect to certifications of State laws for 1972 and subsequent years, but only with respect to service performed after December 31, 1971. The amendment made by subsection (c) shall take effect January 1, 1970. (2) Section 3304 (a) (6) of the Internal Revenue Code of 1954 (as added by subsection (a) of this section) shall not be a requirement for the State law of any State prior to July 1, 1972, if the legislature of such State does not meet in a regular session which closes during the calendar year 1971. SEC. 105. COVERAGE OF CERTAIN SERVICES PERFORMED OUTSIDE (a) That portion of section 3306 (c) of the Internal Revenue Code of 1954 which precedes paragraph (1) thereof is amended to read as follows: 84 STAT. 700 "(c) EMPLOYMENT.-For purposes of this chapter, the term 'employment' means any service performed prior to 1955, which was employment for purposes of subchapter C of chapter 9 of the Internal Revenue Code of 1939 under the law applicable to the period in which such 53 Stat. 183. service was performed, and (A) any service, of whatever nature, performed after 1954 by an employee for the person employing him, irrespective of the citizenship or residence of either, (i) within the United States, or (ii) on or in connection with an American vessel or American aircraft under a contract of service which is entered into within the United States or during the performance of which and while the employee is employed on the vessel or aircraft it touches at a port in the United States, if the employee is employed on and in connection with such vessel or aircraft when outside the United States, and (B) any service, of whatever nature, performed after 1971 outside the United States (except in a contiguous country with which the United States has an agreement relating to unemployment compensation or in the Virgin Islands) by a citizen of the United States as an employee of an American employer (as defined in subsection (j) (3)), except-" (b) Section 3306 (j) of the Internal Revenue Code of 1954 is amended by inserting after paragraph (2) the following new paragraph: "(3) AMERICAN EMPLOYER.-The term 'American employer' means a person who is— (A) an individual who is a resident of the United States, (B) a partnership, if two-thirds or more of the partners are residents of the United States, (C) a trust, if all of the trustees are residents of the United States, or (D) a corporation organized under the laws of the United States or of any State." Infra. 74 Stat. 986. 26 USC 3306. (c) The amendments made by this section shall apply with respect Effective to service performed after December 31, 1971. SEC. 106. STUDENTS AND THEIR SPOUSES ENGAGED IN CERTAIN PROGRAMS; HOSPITAL PATIENTS. date. (a) Paragraph (10) of section 3306 (c) of the Internal Revenue 74 Stat. 985. Code of 1954 is amended by striking out subparagraph (B) and inserting in lieu thereof the following new subparagraphs: "(B) service performed in the employ of a school, college, or university, if such service is performed (i) by a student who is enrolled and is regularly attending classes at such school, college, or university, or (ii) by the spouse of such a student, if such spouse is advised, at the time such spouse commences to perform such service, that (I) the employment of such spouse to perform such service is provided under a program to provide financial assistance to such student by such school, college, or university, and (II) such employment will not be covered by any program of unemployment insurance, or "(C) service performed by an individual under the age of 22 who is enrolled at a nonprofit or public educational institution which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on as a student in a full-time program, taken for credit at such institution, which combines academic instruction with work experience, if such service is an integral part of such program, and such institution has so certified to 84 STAT. 701 Effective date. Repeal. 80 Stat. 591. Ante, p. 698. Effective date. the employer, except that this subparagraph shall not apply to service performed in a program established for or on behalf of an employer or group of employers, or "(D) service performed in the employ of a hospital, if such service is performed by a patient of such hospital;". (b) Subsection (a) shall apply with respect to remuneration paid after December 31, 1969. SEC. 107. EX-SERVICEMEN ACCRUED LEAVE TO BE TREATED IN AC- Effective with respect to benefit years which begin more than 30 days after the date of the enactment of this Act, section 8524 of title 5 of the United States Code is repealed. SEC. 108. COVERAGE OF EMPLOYEES OF HOSPITALS AND INSTITU- (a) Section 3304 (a) of the Internal Revenue Code of 1954 (as amended by sections 104, 121(a), and 206 of this Act) is further amended by adding after paragraph (11) (as added by section 206 of this Act) the following new paragraph: "(12) each political subdivision of the State shall have the right to elect to have compensation payable to employees thereof (whose services are not otherwise subject to such law) based on service performed by such employees in the hospitals and institutions of higher education (as defined in section 3309 (d)) operated by such political subdivision; and, if any such political subdivision does elect to have compensation payable to such employees thereof (A) the political subdivision shall pay into the State unemployment fund, with respect to the service of such employees, payments (in lieu of contributions), and (B) such employees will be entitled to receive, on the basis of such service, compensation payable on the same basis, in the same amount, on the same terms, and subject to the same conditions as compensation which is payable on the basis of similar service for the State which is subject to such law;". (b) The amendment made by subsection (a) shall apply with respect to certification of State laws for 1972 and subsequent years; except that section 3304(a)(12) of the Internal Revenue Code of 1954 (as added by subsection (a)) shall not be a requirement for the State law of any State prior to July 1, 1972, if the legislature of such State does not meet in a regular session which closes during the calendar year 1971, or prior to January 1, 1975, if compliance with such requirement would necessitate a change in the constitution of such State. PART B-PROVISIONS OF STATE LAW SEC. 121. PROVISIONS REQUIRED TO BE INCLUDED IN STATE LAWS. "(7) an individual who has received compensation during his benefit year is required to have had work since the beginning of such year in order to qualify for compensation in his next benefit year; "(8) compensation shall not be denied to an individual for any week because he is in training with the approval of the State agency (or because of the application, to any such week in training, of State law provisions relating to availability for work, active search for work, or refusal to accept work); "(9)(A) compensation shall not be denied or reduced to an individual solely because he files a claim in another State (or a contiguous country with which the United States has an agreement with respect to unemployment compensation) or because he resides in another State (or such a contiguous country) at the time he files a claim for unemployment compensation; "(B) the State shall participate in any arrangements for the payment of compensation on the basis of combining an individual's wages and employment covered under the State law with his wages and employment covered under the unemployment compensation law of other States which are approved by the Secretary of Labor in consultation with the State unemployment compensation agencies as reasonably calculated to assure the prompt and full payment of compensation in such situations. Any such arrangement shall include provisions for (i) applying the base period of a single State law to a claim involving the combining of an individual's wages and employment covered under two or more State laws, and (ii) avoiding duplicate use of wages and employment by reason of such combining; "(10) compensation shall not be denied to any individual by reason of cancellation of wage credits or total reduction of his benefit rights for any cause other than discharge for misconduct connected with his work, fraud in connection with a claim for compensation, or receipt of disqualifying income;". 84 STAT. 702 (b) (1) Subject to the provisions of paragraph (2), the amendments Effective made by subsection (a) shall take effect January 1, 1972, and shall date. apply to the taxable year 1972 and taxable years thereafter. (2) Paragraphs (7) through (10) of section 3304 (a) of the Internal Revenue Code of 1954 (as added by subsection (a) of this section) shall not be requirements for the State law of any State prior to July 1, 1972, if the legislature of such State does not meet in a regular session which closes during the calendar year 1971. SEC. 122. ADDITIONAL CREDIT BASED ON REDUCED RATE FOR NEW EMPLOYERS. (a) Section 3303(a) of the Internal Revenue Code of 1954 is 68A Stat. 440; amended by striking out "on a 3-year basis," in the sentence following 68 Stat. 1130. paragraph (3) and inserting in lieu thereof "on a 3-year basis (i) 26 USC 3303. and by striking out the period at the end of such sentence and inserting in lieu thereof ", or (ii) a reduced rate (not less than 1 percent) may be permitted by the State law on a reasonable basis other than as permitted by paragraph (1), (2), or (3).” (b) The amendments made by subsection (a) shall apply with Effective respect to taxable years beginning after December 31, 1971. SEC. 123. CREDITS ALLOWABLE TO CERTAIN EMPLOYERS. date. Section 3305 of the Internal Revenue Code of 1954 is amended by 68A Stat. 445. adding at the end thereof the following new subsection: "(j) DENIAL OF CREDITS IN CERTAIN CASES.-Any person required, pursuant to the permission granted by this section, to make contributions to an unemployment fund under a State unemployment compen sation law approved by the Secretary of Labor under section 3304 shall Ante, p. 697. not be entitled to the credits permitted, with respect to the unemployment compensation law of a State, by subsections (a) and (b) of section 3302 against the tax imposed by section 3301 for any taxable year after December 31, 1971, if, on October 31 of such taxable year, the Secretary of Labor certifies to the Secretary his finding, after reasonable notice and opportunity for hearing to the State agency, that the unemployment compensation law of such State is inconsistent with any one or more of the conditions on the basis of which such permission is granted or that, in the application of the State law with |