FUTA covers a federal share of unemployment insurance (UI) and job service program administration costs in every state.
Certain credits are allowed with respect to state unemployment taxes paid that may reduce the effective FUTA rate to 0.8%.
[2][3] The credit against the federal tax may be reduced if the state has an outstanding advance (commonly called a "loan").
When states lack the funds to pay unemployment insurance, they may obtain loans from the federal government.
For example, for taxable years 2012 and 2013, the Virgin Islands had a 2.7% "add-on" when its tax rate on total wages was below a national minimum.
Based on their loan status on November 10, 2016, California and the Virgin Islands are the only two jurisdictions that received reduced FUTA credit for taxable year 2016.