the Federal tax will be levied on the services until they can form the basis for benefit rights under State laws. (The bill follows:) A BILL To extend the unemployment compensation program Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SHORT TITLE SECTION 1. This Act may be cited as the "Unemployment Compensation Amendments of 1959". "FEDERAL INSTRUMENTALITIES SEC. 2. (a) Section 3305 (b) of the Internal Revenue Code of 1954 is amended to read as follows: "(b) FEDERAL INSTRUMENTALITIES IN GENERAL.-The legislature of any State may require any instrumentality of the United States (other than an instrumentality to which section 3306(c)(6) applies), and the individuals in its employ, to make contributions to an unemployment fund under a State unemployment compensation law approved by the Secretary of Labor under section 3304 and (except as provided in section 5240 of the Revised Statutes, as amended (12 U.S.C. 484), and as modified by subsection (c)), to comply otherwise with such law. The permission granted in this subsection shall apply (A) only to the extent that no discrimination is made against such instrumentality, so that if the rate of contribution is uniform upon all other persons subject to such law on account of having individuals in their employ, and upon all employees of such persons, respectively, the contributions required of such instrumentality or the individuals in its employ shall not be at a greater rate than is required of such other persons and such employees, and if the rates are determined separately for different persons or classes of persons having individuals in their employ or for different classes of employees, the determination shall be based solely upon unemployment experience and other factors bearing a direct relation to unemployment risk; (B) only if such State law makes provision for the refund of any contributions required under such law from an instrumentality of the United States or its employees for any year in the event said State is not certified by the Secretary of Labor under section 3304 with respect to such year; and (C) only if such State law makes provision for the payment of unemployment compensation to any employee of any such instrumentality of the United States in the same amount, on the same terms, and subject to the same conditions as unemployment compensation is payable to employees of other employers under the State unemployment compensation law." (b) The third sentence of section 3305 (g) of such Code is amended by striking out "not wholly" and inserting in lieu thereof "neither wholly nor partially." (c) Paragraph (6) of section 3306 (c) of such Code is amended to read as follows: "(6) service performed in the employ of the United States Government or of an instrumentality of the United States which is— "(A) wholly or partially owned by the United States, or "(B) exempt by virtue of a provision of law which grants a specific exemption by reference to section 3301 (or the corresponding section of prior law) from the tax imposed by such section ;". (d) (1) Chapter 23 of such Code is amended by renumbering section 3308 as section 3309 and by inserting after section 3307 the following new section: "SEC. 3308. INSTRUMENTALITIES OF THE UNITED STATES. "Notwithstanding any provision of law (whether enacted before or after the enactment of this section) which grants to any instrumentality of the United States an exemption from taxation, such instrumentality shall not be exempt from the tax imposed by section 3301 unless such other provision of law grants a specific exemption, by reference to section 3301 (or the corresponding section of prior law), from the tax imposed by such section." (2) The table of sections for such chapter is amended by striking out the last line and inserting in lieu thereof the following: "Sec. 3308. Instrumentalities of the United States. (e) The first sentence of section 1501 (a) of the Social Security Act is amended by striking out "wholly" and inserting in lieu thereof "wholly or partially". (f) The first sentence of section 1507 (a) of the Social Security Act is amended by striking out "wholly" and inserting in lieu thereof "wholly or partially". EMPLOYERS OF ONE OR MORE WORKERS SEC. 3. (a) Section 3306 of the Internal Revenue Code of 1954 is hereby amended by striking out subsection (a) and references thereto. (b) Section 3301 of the Internal Revenue Code of 1954 is hereby amended to read as follows: "In addition to other taxes, there is hereby imposed on every employer an excise tax, with respect to having individuals in his employ, equal to 3 percent of the total wages (as defined in section 3306 (b)) paid by him during each calendar year beginning after December 31, 1959, with respect to employment (as defined in section 3306 (c)) after December 31, 1958." AMERICAN AIRCRAFT SEC. 4. (a) So much of section 3306 (c) of the Internal Revenue Code of 1954 as precedes paragraph (1) thereof is amended by striking out "or (B) on or in connection with an American vessel" and all that follows down through the phrase "outside the United States," and by inserting in lieu thereof the following: "or (B) 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,". (b) Paragraph (4) of section 3306 (c) of such Code is amended to read as follows: "(4) service performed on or in connection with a vessel or aircraft not an American vessel or American aircraft by an employee, if the employee is employed on and in connection with such vessel or aircraft when outside the United States;". (c) Section 3306 (m) of such Code is amended (1) by striking out the heading and inserting in lieu thereof the following: "(m) AMERICAN VESSEL AND AIRCRAFT.—”; and (2) by striking out the period at the end thereof and inserting in lieu thereof a semicolon and the following: "and the term 'American aircraft' means an aircraft registered under the laws of the United States." NONPROFIT ORGANIZATIONS SEC. 5. (a) Paragraph (8) of section 3306 (c) of the Internal Revenue Code of 1954 is amended to read as follows: "(8) (A) service performed 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; "(B) service performed in a sheltered workshop owned or operated by an organization described in section 501 (c) (3) which is exempt from income tax under section 501 (a) other than service performed by instructors, foremen, or other regular staff of the workshop. As used in this subparagraph the term 'sheltered workshop' means a facility conducted for the purpose (i) of carrying out a program of rehabilitation for individuals whose earning capacity is impaired by age or physical or mental deficiency or injury, or (ii) of providing remunerative work for individuals who because of their impaired physical or mental capacity cannot be readily absorbed in the competitive labor market." (b) Paragraph (10) of section 3306 (c) of the Internal Revenue Code of 1954 is amended to read as follows: "(10) (A) service performed in any calendar quarter in the employ of any organization exempt from income tax under section 501 (a) (other than an organization described in section 401(a)) or under section 521, if the remuneration for such service is less than $50 a calendar quarter, or "(B) service performed in the employ of a school, college, or university, if such service is performed by a student who is enrolled and is regularly attending classes at such school, college, or university." EFFECTIVE DATE SEC. 6. The amendments made by sections 2 and 4 of this Act (other than the amendments made by subsections (e) and (f) of section 2) shall apply with respect to services performed after December 31, 1959. The amendments made by subsections (e) and (f) of section 2 shall apply with respect to any week of unemployment which begins after December 31, 1959. The amendments made by section 3 shall be effective January 1, 1960. The amendments made by section 5 shall apply with respect to services performed after December 31, 1961. STATEMENT IN EXPLANATION OF A BILL TO EXTEND THE FEDERAL-STATE UNEMPLOYMENT COMPENSATION PROGRAM TO PUERTO RICO, AND FOR OTHER PURPOSES This draft bill is designed to include the Commonwealth of Puerto Rico in the present Federal-State unemployment compensation program and to recognize the fact that the status of Alaska has changed from a Territory to a State. The proposal is part of the legislative program of the Department of Labor. PUERTO RICO The draft bill would include the Commonwealth of Puerto Rico in the present Federal-State unemployment compensation program by (1) making Puerto Rico employers subject to the Federal unemployment tax, (2) requiring the Puerto Rico unemployment insurance law to meet the requirements specified in the Federal Unemployment Tax Act, (3) making title III of the Social Security Act applicable to Puerto Rico thereby providing grants to the Commonwealth for administration of its unemployment insurance law, (4) making title IX of the Social Security Act applicable to Puerto Rico thereby making the Commonwealth eligible for the distribution provided in section 903 and (5) making title XII of the Social Security Act applicable to Puerto Rico thereby permitting the Commonwealth to apply for advances if they were needed for the payment of benefits. Unemployment insurance program in Puerto Rico The Puerto Rican Legislature has passed legislation establishing an unemployment insurance program for Puerto Rico. This legislation, which was enacted into law on June 21, 1956, and took effect on January 1, 1957, is such that minor changes would enable its approval for incorporation into the existing FederalState system. Thus the Federal-State unemployment insurance program could come into operation within a reasonable time after the enactment of this proposal and Puerto Rico would be afforded the advantages of the Federal-State system, which are provided for the States, and Hawaii. In addition, unemployment insurance protection is presently provided in Puerto Rico under Federal programs for employees of the Federal Government, ex-servicemen, and veterans. Reasons why Puerto Rico should be included within the Federal-State system 1. Puerto Rico, by depositing its unemployment tax collections in the unemployment trust fund in the U.S. Treasury, would have the advantage of Federal investment management. 2. The enactment of this bill would make the entire employment security program in Puerto Rico a part of the Federal-State system and would thereby simplify administration. The Puerto Rico Employment Service, which has been affiliated with the U.S. Employment Service since 1950, is financed entirely from Federal grants, and the unemployment insurance program is financed by Commonwealth taxes. The establishment of one source of funds would simplify accounting procedures; in addition, it would be likely to result in economies, greater efficiency, and in better coordination of activities. 3. The enactment of this bill would treat the Commonwealth of Puerto Rico the same as the Territory of Hawaii is now treated (and the same as the former Territory of Alaska was treated). They would both be part of the Federal-State employment security system. 4. The enactment of this bill would complete the social security program in Puerto Rico. The desirability and feasibility of meeting serious social problems in Puerto Rico has long been recognized by Congress and is reflected in its inclusion in a number of remedial statutes. All of the provisions of the Social Security Act except the unemployment compensation program have already been extended to Puerto Rico. The maternal and child welfare program was extended to the Commonwealth as early as January 1, 1940; the program for old-age assistance, aid to dependent children, aid to the blind, and aid to the permanently disabled was extended on October 1, 1950; and the old-age and survivors' insurance programs were made effective to Puerto Rico on January 1, 1951. Including Puerto Rico in the unemployment compensation program would round out the social security program for the Commonwealth. 5. Puerto Rico would gain from being able to participate on an equal footing with other jurisdictions in interstate arrangements and in the Interstate Conference of Employment Security Agencies. 6. Puerto Rico would benefit from being protected, as are the 49 States and Hawaii, by the advances provided by the Employment Security Administrative Financing Act of 1954. There is no reason, however, to believe that Puerto Rico would be in need of such an advance. Although unemployment in the labor force covered by the Puerto Rico unemployment insurance law has averaged between 14 and 19 percent during the past few years, the Puerto Rico unemployment insurance program has been planned on a sound, conservative basis. Over $10.7 million was collected in contributions during 1957 and the first quarter of 1958, and it is anticipated that about $16 million will be in their reserve fund when benefits become payable in 1959. The benefits provided are modest in amount and duration and it is estimated that benefits costs will average 2.0 percent of payrolls. 7. Puerto Rico is anxious to be included in the Federal-State unemployment insurance program. Its officials have had frequent conferences with staff members of the Department of Labor in their efforts to develop a financially sound and acceptable plan. The Puerto Rican Legislative Assembly passed a concurrent resolution on Feburary 18, 1955, expressing its desire that the program be extended to the Commonwealth. This resolution was presented to the U.S. House of Representatives on February 28, 1955, and to the U.S. Senate on March 2, 1955. Inclusion of Puerto Rico would not be financial burden The enactment of this bill would not result in an additional financial burden on the Federal Government for costs of administration. (The Federal Government now grants to Puerto Rico approximately $1 million each year to defray the administrative costs of the employment service and the Federal unemployment compensation programs.) The estimated Federal unemployment tax receipts from Puerto Rico, if this bill is enacted, would be in excess of the grants to Puerto Rico to finance the additional costs of administering its unemployment compensation law. ALASKA The proposed bill would make appropriate changes in paragraphs (1) and (2) of section 1101 (a) and in sections 1501 (a), 1502(b), and 1503 (b) and (d) of the Social Security Act, and in section 3306 (j) of the Internal Revenue Code of 1954 in view of the fact that Alaska is now a State instead of a Territory. (The bill follows.) A BILL To extend the Federal-State unemployment compensation program to Puerto Rico, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That paragraph (2) of section 901 (b) of the Social Security Act is amended to read as follows: "(2) The amount estimated by the Secretary of Labor as equal to the necessary expenses incurred during the fiscal year for the performance by the Department of Labor of its functions under (i) this title and titles III and XII of this Act, (ii) the Federal Unemployment Tax Act, (iii) the provisions of the Act of June 6, 1933, (iv) subchapter II (except sec. 2012), chapter 41 of title 38, United States Code, and (v) subchapter I, chapter 41, of title 38, United States Code; and". SEC. 2. Paragraph (1) of section 1101 (a) of the Social Security Act is amended to read as follows: "(1) The term 'State', except where otherwise provided, includes Hawaii, the District of Columbia, and the Commonwealth of Puerto Rico, and when used in titles I, IV, V, VII, X, and XIV includes the Virgin Islands and Guam." SEC. 3. Paragraph (2) of section 1101 (a) of the Social Security Act is amended to read as follows: (2) The term 'United States' when used in a geographical sense means, except where otherwise provided, the States, Hawaii, the District of Columbia, and the Commonwealth of Puerto Rico." SEC. 4. The last sentence of section 1501 (a) of the Social Security Act is amended by deleting "Alaska." SEC. 5. Section 1502 (b) is amended by changing the period at the end thereof to a semicolon and by adding thereafter: "except that in the case of Puerto Rico the agreement shall provide that compensation will be paid by the State to any Federal employee, with respect to unemployment after Puerto Rico becomes a 'State' within the meaning of section 1101 (a) (1) of the Social Security Act, in the same amount, on the same terms, and subject to the same conditions as the compensation which would be payable to such employee under the unemployment compensation law of the District of Columbia if such employee's Federal service and Federal wages had been included as employment and wages under such law: Provided, however, That if such employee, without regard to his Federal service and Federal wages, has employment and wages sufficient to qualify for any compensation during the benefit year under the unemployment compensation law of the District of Columbia, then payments of compensation under this subsection shall be made only on the basis of his Federal service and Federal wages: Provided, further, That if such employee has employment and wages under the unemployment compensation law of Puerto Rico such employment and wages shall not be included for any purpose in connection with the computation or payment of his compensation under this subsection." SEC. 6. (a) Paragraph (b) of section 1503 of the Social Security Act is amended by deleting "Puerto Rico or". (b) Paragraph (d) of section 1503 of the Social Security Act is amended to read as follows: "(d) The Secretary may utilize for the purposes of this section the personnel and facilities of the agency in the Virgin Islands cooperating with the United States Employment Service under the Act of June 6, 1933 (48 Stat. 113), as amended, and may delegate to officials of such agency any authority granted to him by this section whenever the Secretary determines such delegation to be necessary in carrying out the purposes of this title. For the purpose of payments made to such agency under such Act, the furnishing of such personnel and facilities shall be deemed to be a part of the administration of the public employment offices of such agency." SEC. 7. (a) Paragraph (e) of section 1511 of the Social Security Act is amended by deleting "or Puerto Rico". (b) Paragraph (i) of section 1511 of the Social Security Act is amended by deleting "title IV of the Veterans' Readjustment Assistance Act of 1952 (38 U.S.C. 991 et seq.)" and substituting therefor "subchapter I, chapter 41, of title 38, United States Code". SEC. 8. Section 3306 (j) of the Internal Revenue Code of 1954 is amended to read as follows: "(j) STATE, UNITED STATES, AND CITIZEN.-For purposes of this chapter"(1) STATE. The term 'State' includes Hawaii, the District of Columbia, and the Commonwealth of Puerto Rico. "(2) UNITED STATES.-The term 'United States' when used in a geographical sense includes the States, Hawaii, the District of Columbia, and the Commonwealth of Puerto Rico. An individual who is a citizen of the Commonwealth of Puerto Rico (but not otherwise a citizen of the United States) shall be considered, for purposes of this section, as a citizen of the United States." SEC. 9. EFFECTIVE DATE.— (a) Section 1 of these amendments shall be effective on January 1 of the first calendar year following the date on which the President of the United States receives a certification from the Governor of Puerto Rico that the Legislature of Puerto Rico has, by concurrent resolution, resolved that it desires the extention to Puerto Rico of the provisions of titles III, IX, and XII of the Social Security Act and the Federal Unemployment Tax Act. (b) Sections 2, 3, 5, 7, and 8 of these amendments, insofar as they relate to Puerto Rico, shall be effective on the date on which the President of the United States receives a certification from the Governor of Puerto Rico that the Legislature of Puerto Rico has, by concurrent resolution, resolved that it desires the |