---
kind: "section"
citation: "26 U.S.C. § 3305"
title: "26"
title_heading: "Internal Revenue Code"
number: "3305"
heading: "Applicability of State law"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/3305"
units:
  - "Subtitle C — Employment Taxes"
  - "Chapter 23 — Federal Unemployment Tax Act"
---

# §3305. Applicability of State law

- (a) **Interstate and foreign commerce—** No person required under a [State](/usc/26/3121.md?p=e-1) law to make payments to an [unemployment fund](/usc/26/3306.md?p=f) shall be relieved from compliance therewith on the ground that he is engaged in interstate or foreign commerce, or that the [State](/usc/26/3121.md?p=e-1) law does not distinguish between [employees](/usc/26/3121.md?p=d) engaged in interstate or foreign commerce and those engaged in intrastate commerce.
- (b) **Federal instrumentalities in general—** The legislature of any [State](/usc/26/3121.md?p=e-1) may require any instrumentality of the [United States](/usc/26/3121.md?p=e-2) (other than an instrumentality to which [section 3306(c)(6)](/usc/26/3306.md?p=c-6) applies), and the individuals in its employ, to make [contributions](/usc/26/3306.md?p=g) to an [unemployment fund](/usc/26/3306.md?p=f) under a [State](/usc/26/3121.md?p=e-1) unemployment [compensation](/usc/26/3231.md?p=e-1) law approved by the Secretary of Labor under [section 3304](/usc/26/3304.md) and (except as provided in section 5240 of the Revised Statutes, as amended (12 U.S.C., sec. 484), and as modified by [subsection (c)](#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](/usc/26/3121.md?p=d) of such persons, respectively, the [contributions](/usc/26/3306.md?p=g) 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](/usc/26/3121.md?p=d), 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](/usc/26/3121.md?p=d), the determination shall be based solely upon unemployment experience and other factors bearing a direct relation to unemployment risk; (B) only if such [State](/usc/26/3121.md?p=e-1) law makes provision for the refund of any [contributions](/usc/26/3306.md?p=g) required under such law from an instrumentality of the [United States](/usc/26/3121.md?p=e-2) or its [employees](/usc/26/3121.md?p=d) for any year in the event such [State](/usc/26/3121.md?p=e-1) is not certified by the Secretary of Labor under [section 3304](/usc/26/3304.md) with respect to such year; and (C) only if such [State](/usc/26/3121.md?p=e-1) law makes provision for the payment of unemployment [compensation](/usc/26/3231.md?p=e-1) to any [employee](/usc/26/3121.md?p=d) of any such instrumentality of the [United States](/usc/26/3121.md?p=e-2) in the same amount, on the same terms, and subject to the same conditions as unemployment [compensation](/usc/26/3231.md?p=e-1) is payable to [employees](/usc/26/3121.md?p=d) of other [employers](/usc/26/3231.md?p=a) under the [State](/usc/26/3121.md?p=e-1) unemployment [compensation](/usc/26/3231.md?p=e-1) law.
- (c) **National banks—** Nothing contained in section 5240 of the Revised Statutes, as amended ([12 U.S.C. 484](/usc/12/484.md)), shall prevent any [State](/usc/26/3121.md?p=e-1) from requiring any national banking association to render returns and reports relative to the association’s [employees](/usc/26/3121.md?p=d), their remuneration and [services](/usc/26/3231.md?p=e-2-C-i), to the same extent that other persons are required to render like returns and reports under a [State](/usc/26/3121.md?p=e-1) law requiring [contributions](/usc/26/3306.md?p=g) to an [unemployment fund](/usc/26/3306.md?p=f). The Comptroller of the Currency shall, upon receipt of a copy of any such return or report of a national banking association from, and upon request of, any duly authorized official, body, or commission of a [State](/usc/26/3121.md?p=e-1), cause an examination of the correctness of such return or report to be made at the time of the next succeeding examination of such association, and shall thereupon transmit to such official, body, or commission a complete statement of his findings respecting the accuracy of such returns or reports.
- (d) **Federal property—** No person shall be relieved from compliance with a [State](/usc/26/3121.md?p=e-1) unemployment [compensation](/usc/26/3231.md?p=e-1) law on the ground that [services](/usc/26/3231.md?p=e-2-C-i) were performed on land or premises owned, held, or possessed by the [United States](/usc/26/3121.md?p=e-2), and any [State](/usc/26/3121.md?p=e-1) shall have full jurisdiction and power to enforce the provisions of such law to the same extent and with the same effect as though such place were not owned, held, or possessed by the [United States](/usc/26/3121.md?p=e-2).
- (e) **Repealed. Sept. 1, 1954, ch. 1212, § 4(c), 68 Stat. 1135—**
- (f) **American vessels—** The legislature of any [State](/usc/26/3121.md?p=e-1) in which a person maintains the operating office, from which the operations of an [American vessel](/usc/26/3121.md?p=f) operating on navigable waters within or within and without the [United States](/usc/26/3121.md?p=e-2) are ordinarily and regularly supervised, managed, directed and controlled, may require such person and the officers and members of the crew of such vessel to make [contributions](/usc/26/3306.md?p=g) to its [unemployment fund](/usc/26/3306.md?p=f) under its [State](/usc/26/3121.md?p=e-1) unemployment [compensation](/usc/26/3231.md?p=e-1) law approved by the Secretary of Labor under [section 3304](/usc/26/3304.md) and otherwise to comply with its unemployment [compensation](/usc/26/3231.md?p=e-1) law with respect to the service performed by an officer or member of the crew on or in connection with such vessel to the same extent and with the same effect as though such service was performed entirely within such [State](/usc/26/3121.md?p=e-1). Such person and the officers and members of the crew of such vessel shall not be required to make [contributions](/usc/26/3306.md?p=g), with respect to such service, to the [unemployment fund](/usc/26/3306.md?p=f) of any other [State](/usc/26/3121.md?p=e-1). The permission granted by this subsection is subject to the condition that such service shall be treated, for purposes of wage credits given [employees](/usc/26/3121.md?p=d), like other service subject to such [State](/usc/26/3121.md?p=e-1) unemployment [compensation](/usc/26/3231.md?p=e-1) law performed for such person in such [State](/usc/26/3121.md?p=e-1), and also subject to the same limitation, with respect to [contributions](/usc/26/3306.md?p=g) required from such person and from the officers and members of the crew of such vessel, as is imposed by the second sentence (other than clause (B) thereof) of [subsection (b)](#b) with respect to [contributions](/usc/26/3306.md?p=g) required from instrumentalities of the [United States](/usc/26/3121.md?p=e-2) and from individuals in their employ.
- (g) **Vessels operated by general agents of United States—** The permission granted by [subsection (f)](#f) shall apply in the same manner and under the same conditions (including the obligation to comply with all requirements of [State](/usc/26/3121.md?p=e-1) unemployment [compensation](/usc/26/3231.md?p=e-1) laws) to general agents of the Secretary of Transportation with respect to service performed by officers and members of the crew on or in connection with [American vessels](/usc/26/3121.md?p=f)—
  - (1) owned by or bareboat chartered to the [United States](/usc/26/3121.md?p=e-2), and
  - (2) whose business is conducted by such general agents.

  As to any such vessel, the [State](/usc/26/3121.md?p=e-1) permitted to require [contributions](/usc/26/3306.md?p=g) on account of such service shall be the [State](/usc/26/3121.md?p=e-1) to which the general agent would make [contributions](/usc/26/3306.md?p=g) if the vessel were operated for his own account. Such general agents are designated, for this purpose, instrumentalities of the [United States](/usc/26/3121.md?p=e-2) neither wholly nor partially owned by it and shall not be exempt from the tax imposed by section 3301. The permission granted by this subsection is subject to the same conditions and limitations as are imposed in [subsection (f)](#f), except that clause (B) of the second sentence of [subsection (b)](#b) shall apply.

- (h) **Requirement by State of contributions—** Any [State](/usc/26/3121.md?p=e-1) may, as to service performed on account of which [contributions](/usc/26/3306.md?p=g) are made pursuant to [subsection (g)](#g)—
  - (1) require [contributions](/usc/26/3306.md?p=g) from persons performing such service under its unemployment [compensation](/usc/26/3231.md?p=e-1) law or temporary disability insurance law administered in connection therewith, and
  - (2) require general agents of the Secretary of Transportation to make [contributions](/usc/26/3306.md?p=g) under such temporary disability insurance law and to make such deductions from [wages](/usc/26/3121.md?p=a) or remuneration as are required by such unemployment [compensation](/usc/26/3231.md?p=e-1) or temporary disability insurance law.
- (i) **General agent as legal entity—** Each general agent of the Secretary of Transportation making [contributions](/usc/26/3306.md?p=g) pursuant to subsection [(g)](#g) or [(h)](#h) shall, for purposes of such subsections, be considered a legal entity in his capacity as an instrumentality of the [United States](/usc/26/3121.md?p=e-2), separate and distinct from his identity as a person employing individuals on his own account.
- (j) **Denial of credits in certain cases—** Any person required, pursuant to the permission granted by this section, to make [contributions](/usc/26/3306.md?p=g) to an [unemployment fund](/usc/26/3306.md?p=f) under a [State](/usc/26/3121.md?p=e-1) unemployment [compensation](/usc/26/3231.md?p=e-1) law approved by the Secretary of Labor under [section 3304](/usc/26/3304.md) shall not be entitled to the credits permitted, with respect to the unemployment [compensation](/usc/26/3231.md?p=e-1) law of a [State](/usc/26/3121.md?p=e-1), by subsections [(a)](/usc/26/3302.md?p=a) and [(b)](/usc/26/3302.md?p=b) of section 3302 against the tax imposed by [section 3301](/usc/26/3301.md) for any taxable year if, on October 31 of such taxable year, the Secretary of Labor certifies to the Secretary of the Treasury his finding, after reasonable notice and opportunity for hearing to the [State agency](/usc/26/3306.md?p=e), that the unemployment [compensation](/usc/26/3231.md?p=e-1) law of such [State](/usc/26/3121.md?p=e-1) 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](/usc/26/3121.md?p=e-1) law with respect to the 12-month period ending on such October 31, there has been a substantial failure to comply with any one or more of such conditions. For purposes of [section 3310](/usc/26/3310.md), a finding of the Secretary of Labor under this subsection shall be treated as a finding under [section 3304(c)](/usc/26/3304.md?p=c).

## Source credit

(Aug. 16, 1954, ch. 736, 68A Stat. 445; Sept. 1, 1954, ch. 1212, § 4(c), 68 Stat. 1135; Pub. L. 86–778, title V, § 531(a), (b), Sept. 13, 1960, 74 Stat. 983; Pub. L. 91–373, title I, § 123, Aug. 10, 1970, 84 Stat. 702; Pub. L. 94–455, title XIX, §§ 1903(a)(15), 1906(b)(13)(C), Oct. 4, 1976, 90 Stat. 1809, 1834; Pub. L. 114–92, div. C, title XXXV, § 3503, Nov. 25, 2015, 129 Stat. 1219.)

## Notes

### Editorial Notes

### Amendments

2015—Subsecs. (g), (h)(2), (i). Pub. L. 114–92 substituted “Secretary of Transportation” for “Secretary of Commerce”.

1976—Subsec. (g). Pub. L. 94–455, § 1903(a)(15)(A), struck out “on or after July 1, 1953,” after “respect to service performed”.

Subsec. (h). Pub. L. 94–455, 1903(a)(15)(B), struck out “on or after July 1, 1953, and” after “as to service performed”.

Subsec. (j). Pub. L. 94–455, §§ 1903(a)(15)(C), 1906(b)(13)(C), struck out “after December 31, 1971,” after “for any taxable year” and substituted “to the Secretary of the Treasury” for “to the Secretary”.

1970—Subsec. (j). Pub. L. 91–373 added subsec. (j).

1960—Subsec. (b). Pub. L. 86–778, § 531(a), substituted “(other than an instrumentality to which section 3306(c)(6) applies)” for “except such as are (1) wholly owned by the United States, or (2) exempt from the tax imposed by section 3301 by virtue of any other provision of law,” and added cl. (C).

Subsec. (g). Pub. L. 86–778, § 531(b), substituted “neither wholly nor partially” for “not wholly”.

1954—Subsec. (e). Act Sept. 1, 1954, repealed subsec. (e) which related to the Bonneville Power Administrator.

### Statutory Notes and Related Subsidiaries

### Effective Date of 1960 Amendment

Pub. L. 86–778, title V, § 535, Sept. 13, 1960, 74 Stat. 985, provided that: “The amendments made by this part [part 3 (§§ 531–535) of title V of Pub. L. 86–778, enacting section 3308 and amending this section and section 3306 of this title] (other than the amendments made by subsections (e) and (f) of section 531 [amending sections 1361 and 1367 of Title 42, The Public Health and Welfare]) shall apply with respect to remuneration paid after 1961 for services performed after 1961. The amendments made by subsections (e) and (f) of section 531 shall apply with respect to any week of unemployment which begins after December 31, 1960.” [The second sentence of section 535 was repealed by Pub. L. 89–554, § 8(a), Sept. 6, 1966, 80 Stat. 661.]

### Effective Date of 1954 Amendment

Act Sept. 1, 1954, ch. 1212, § 4(c), 68 Stat. 1135, provided that the amendment made by that section is effective with respect to services performed after Dec. 31, 1954.

### Applicability to Federal Land Banks, Federal Intermediate Credit Banks, and Banks for Cooperatives

Pub. L. 86–778, title V, § 531(g), Sept. 13, 1960, 74 Stat. 984, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “Notwithstanding section 203(b) of the Farm Credit Act of 1959, sections 3305(b), 3306(c)(6), and 3308 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], and sections 1501(a) and 1507(a) of the Social Security Act [sections 1361(a) and 1367 of Title 42, The Public Health and Welfare] shall be applicable, according to their terms, to the Federal land banks, Federal intermediate credit banks, and banks for cooperatives.”