The U.S. Virgin Islands Department of Labor (VI DOL) announced that the territory officially paid off its outstanding federal unemployment account (FUA) loans [VI DOL, News Release, 5-8-26].
This means it will not face a Federal Unemployment Tax Act (FUTA) credit reduction for 2026 as long as it does not resume borrowing and has no outstanding balance on November 10, 2026. The Virgin Islands had a credit reduction in each of the past 15 years (2011-2025).
Potential FUTA Credit Reductions for 2026
Earlier this year, the U.S. Department of Labor (U.S. DOL) released its list of potential FUTA credit reduction states and territories for 2026: California and the Virgin Islands. The Virgin Islands began borrowing in August 2009 and was subject to a credit reduction of 4.5% for 2025. It is potentially subject to a FUTA credit reduction of 4.8% for 2026 (but will not be if the conditions above are met).
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Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for PayrollOrg.
