A bill to amend the Federal Unemployment Tax Act to provide for a cap on the increase in the Federal unemployment tax in the case of States meeting certain requirements.

Amends the Internal Revenue Code to place a limitation on the amount of credit reduction with respect to the unemployment tax applied to States which have not repaid advances from the Federal Unemployment Insurance Trust Fund. Limits the maximum credit reduction to the greater of: (1) 20 percent of the unemployment tax; or (2) the maximum percentage credit reduction in effect for the State in question for any preceding taxable year.

Limits eligibility for such a ceiling on credit reduction to any State whose unemployment insurance program has: (1) an average tax rate compared to total wages which exceeds the average annual benefit cost for the preceding ten years; (2) a minimum tax rate not less than one percent of total wages; (3) an average tax rate compared to total wages 50 percent higher than the national average; and (4) a maximum tax rate which exceeds 2.7 percent. Prohibits an eligible State from lowering its tax rate schedules until the advances are fully repaid, except with the approval of the Secretary of Labor upon a determination that the State's unemployment compensation law provides sufficient financial stability to warrant a waiver.