(a) Payment of interest. Except as otherwise provided in paragraph (b) of this section each State shall pay interest on any advance made to such State under title XII of the Social Security Act.
(b) Cash flow loans—(1) Availability of interest-free advances. Advances are deemed cash flow loans and shall be free of interest provided that:
(i) The advances are repaid in full prior to October 1 of the calendar year in which the advances are made;
(ii) The State does not receive an additional advance after September 30 of the same calendar year in which the advance is made. If the State receives an additional advance after September 30 of the same calendar year in which earlier advances were made, interest on the fully repaid earlier advance(s) is due and payable not later than the day following the date of the first such additional advance. The administrator of the State agency must notify the Secretary of Labor no later than September 10 of the same calendar year of those loans deemed to be cash flow loans and not subject to interest. This notification must include the date and amount of each loan made beginning January 01 through September 30 of the same calendar year, and a copy of documentation sent to the Secretary of the Treasury requesting loan repayment transfer(s) from the State's account in the UTF to the Federal unemployment account in the UTF; and
(iii) The State has met the funding goals described in paragraph (b)(2) or (b)(3) of this section.
(2) Funding goals. This paragraph (b)(2) is applicable to all States as of January 1, 2019. A State has met the funding goals requirement if:
(i) The State, as of December 31 of any of the 5 consecutive calendar years preceding the calendar year in which such advances are made, had an AHCM of at least 1.00, as determined under § 606.3; and
(ii) The State maintained tax effort as determined under paragraph (b)(4) of this section.
(3) Phasing in funding goals. This paragraph (b)(3) applies for calendar years 2014 through 2018. A State has met the funding goals requirement if it has satisfied the solvency criterion in paragraph (i), and the maintenance of tax effort criteria in paragraph (ii), of this § 606.32(b)(3).
(i) A State has met the solvency criterion if:
(A) For calendar year 2014, as of December 31 of any of the 5 consecutively preceding calendar years, the State had an AHCM of at least 0.50, as determined under § 606.3;
(B) For calendar year 2015, as of December 31 of any of the 5 consecutively preceding calendar years, the State had an AHCM of at least 0.60, as determined under § 606.3;
(C) For calendar year 2016, as of December 31 of any of the 5 consecutively preceding calendar years, the State had an AHCM of at least 0.70, as determined under § 606.3;
(D) For calendar year 2017, as of December 31 of any of the 5 consecutively preceding calendar years, the State had an AHCM of at least 0.80, as determined under § 606.3;
(E) For calendar year 2018, as of December 31 of any of the 5 consecutively preceding calendar years, the State had an AHCM of at least 0.90, as determined under § 606.3;
(ii) A State has met the maintenance of tax effort criteria if it maintained tax effort as determined under paragraph (b)(4) of this section.
(4) Maintenance of tax effort criteria. A State has maintained tax effort if, for every year between the last calendar year in which it met the solvency criterion in paragraph (b)(2)(i) or (b)(3)(i) of this section and the calendar year in which an interest-free advance is taken, the State's unemployment tax rate as defined in § 606.3 for the calendar year is at least—
(i) 80 percent of the prior year's unemployment tax rate; and
(ii) 75 percent of the State 5-year average benefit-cost ratio, as determined under § 606.21(d).
