What This Bill Does
This bill allows states to keep some of the money they recover from people who got fraudulent unemployment benefits. The money states keep must be used to fight fraud and improve their unemployment systems. The bill also changes how long states have to try recovering this money from 3 years to 10 years.
Who It Affects
States that administer unemployment benefits; people who received fraudulent unemployment payments; state agencies pursuing fraud recovery; employers who report new hires to the government.
Key Provisions
• States can keep 25 percent of money recovered from fraudulent pandemic unemployment payments if they use it for fraud prevention, system improvements, or paying investigators (Sec. 2)
• States can keep up to 5 percent of recovered overpayments and contributions (money businesses owe) for fraud prevention and modernizing technology systems (Sec. 3)
• States must use fraud prevention systems like the National Directory of New Hires to check if unemployment claimants are actually employed (Sec. 4)
• States can modify personnel standards on an emergency temporary basis through December 31, 2030 to detect and recover fraudulent overpayments (Sec. 5)
• Criminal or civil fraud cases involving unemployment benefits must be filed within 10 years of the offense (Sec. 6)
What Changes
States gain the ability to retain portions of recovered fraudulent payment money instead of returning it all to the federal government. The time window for pursuing recovery expands from 3 years to 10 years. States get explicit authority to use unemployment trust funds for fraud detection technology and personnel. States must implement specific data matching systems to identify fraud.
Important Definitions
The bill defines "compensation" as referenced in Section 3306 of the Internal Revenue Code but does not provide the definition within the bill text itself.
Effective Date
Section 3 amendments apply to overpayments collected after 2 years from the bill's enactment date (Sec. 3(g)). Not specified in bill text for other provisions.
118TH CONGRESS
1ST SESSION H. R. 1163
AN ACT
To provide incentives for States to recover fraudulently paid
Federal and State unemployment compensation, and for
other purposes.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
2
2
•HR 1163 EH
SECTION 1. SHORT TITLE.
1
This Act may be cited as the ‘‘Protecting Taxpayers
2
and Victims of Unemployment Fraud Act’’.
3
SEC. 2. RECOVERING FEDERAL FRAUDULENT COVID UNEM-
4
PLOYMENT COMPENSATION PAYMENTS.
5
(a) ALLOWING STATES TO RETAIN PERCENTAGE OF
6
OVERPAYMENTS FOR PROGRAM INTEGRITY.—
7
(1) PANDEMIC UNEMPLOYMENT ASSISTANCE.—
8
Section 2102(d) of the CARES Act (15 U.S.C.
9
9021(d)) is amended by amending paragraph (4) to
10
read as follows:
11
‘‘(4) FRAUD
AND
OVERPAYMENTS.—Section
12
2107(e) shall apply with respect to pandemic unem-
13
ployment assistance under this section by sub-
14
stituting ‘pandemic unemployment assistance’ for
15
‘pandemic emergency unemployment compensation’
16
each place it appears in such section 2107(e).’’.
17
(2) FEDERAL PANDEMIC UNEMPLOYMENT COM-
18
PENSATION.—Section 2104(f)(3) of such Act (15
19
U.S.C. 9023(f)(3)) is amended—
20
(A) in subparagraph (A)—
21
(i) by striking ‘‘3-year’’ and inserting
22
‘‘10-year’’; and
23
(ii) by inserting ‘‘, except that a State
24
may retain a percentage of any amounts
25
3
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recovered as described in subparagraph
1
(C)’’ before the period at the end; and
2
(B) by adding at the end the following:
3
‘‘(C) RETENTION OF PERCENTAGE OF RE-
4
COVERED FUNDS.—The State agency may re-
5
tain 25 percent of any amount recovered from
6
overpayments of Federal Pandemic Unemploy-
7
ment Compensation or Mixed Earner Unem-
8
ployment Compensation that were determined
9
to be made due to fraud. Amounts so retained
10
by the State agency shall be used for any of fol-
11
lowing:
12
‘‘(i) Modernizing unemployment com-
13
pensation systems and information tech-
14
nology to improve identity verification and
15
validation of applicants.
16
‘‘(ii) Reimbursement of administrative
17
costs incurred by the State to identify and
18
pursue recovery of fraudulent overpay-
19
ments.
20
‘‘(iii) Hiring fraud investigators and
21
prosecutors.
22
‘‘(iv) Other program integrity activi-
23
ties as determined by the State.’’;
24
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•HR 1163 EH
(3) PANDEMIC
EMERGENCY
UNEMPLOYMENT
1
COMPENSATION.—Section 2107(e)(3) of such Act
2
(15 U.S.C. 9025(e)(3)) is amended—
3
(A) in subparagraph (A)—
4
(i) by striking ‘‘3-year’’ and inserting
5
‘‘10-year’’; and
6
(ii) by inserting ‘‘, except that a State
7
may retain a percentage of any amounts
8
recovered as described in subparagraph
9
(C)’’ before the period at the end; and
10
(B) by adding at the end the following:
11
‘‘(C) RETENTION OF PERCENTAGE OF RE-
12
COVERED FUNDS.—The State agency may re-
13
tain 25 percent of any amount recovered from
14
overpayments of pandemic emergency unem-
15
ployment compensation that were determined to
16
be made due to fraud. Amounts so retained by
17
the State agency shall be used for any of fol-
18
lowing:
19
‘‘(i) Modernizing unemployment com-
20
pensation systems and information tech-
21
nology to improve identity verification and
22
validation of applicants.
23
‘‘(ii) Reimbursement of administrative
24
costs incurred by the State to identify and
25
5
•HR 1163 EH
pursue recovery of fraudulent overpay-
1
ments.
2
‘‘(iii) Hiring fraud investigators and
3
prosecutors.
4
‘‘(iv) Other program integrity activi-
5
ties as determined by the State.’’.
6
(4) EXTENDED
UNEMPLOYMENT
COMPENSA-
7
TION.—A State to which section 4105 of the Fami-
8
lies First Coronavirus Response Act (26 U.S.C.
9
3304 note) applied may retain 25 percent of any
10
amount recovered from overpayments of sharable ex-
11
tended compensation and sharable regular com-
12
pensation (as such terms are defined in section 204
13
of the Federal-State Extended Unemployment Com-
14
pensation Act of 1970) paid for weeks of unemploy-
15
ment described in such section 4105 that were deter-
16
mined to be made due to fraud. Amounts so retained
17
by the State agency shall be used for any of the pur-
18
poses described in section 2107(e)(3)(C) of the
19
CARES Act (15 U.S.C. 9025(e)(3)(C)).
20
(5) FIRST
WEEK
OF
REGULAR
COMPENSA-
21
TION.—A State that was a party to an agreement
22
under section 4105 of the CARES Act (15 U.S.C.
23
9024) may retain 25 percent of any amount recov-
24
ered from overpayments of regular compensation
25
6
•HR 1163 EH
paid to individuals by the State for their first week
1
of regular unemployment for which the State re-
2
ceived full Federal funding under such agreement in
3
any case in which such overpayments were deter-
4
mined to be made due to fraud. Amounts so retained
5
by the State agency shall be used for any of the pur-
6
poses described in section 2107(e)(3)(C) of the
7
CARES Act (15 U.S.C. 9025(e)(3)(C)).
8
(b) TREATMENT UNDER WITHDRAWAL STANDARD
9
AND IMMEDIATE DEPOSIT REQUIREMENTS.—Any amount
10
retained by a State pursuant to paragraph (4) or (5) of
11
subsection (a) or under section 2102(d)(4), section
12
2104(f)(3)(C), or 2107(e)(3)(C) of the CARES Act, and
13
used for the purposes described therein, shall not be con-
14
sidered to violate the withdrawal standard and immediate
15
deposit requirements of paragraph (4) or (5) of section
16
303(a) of the Social Security Act (42 U.S.C. 503(a)) or
17
paragraph (3) or (4) of section 3304(a) of the Internal
18
Revenue Code of 1986.
19
(c) LIMITATION ON RETENTION AUTHORITY.—The
20
authority of a State to retain any amount pursuant to
21
paragraph (4) or (5) of subsection (a) and under section
22
2102(d)(4), section 2104(f)(3)(C), and 2107(e)(3)(C) of
23
the CARES Act shall apply only—
24
7
•HR 1163 EH
(1) with respect to an amount recovered on or
1
after the date of enactment of this Act; and
2
(2) during the 10-year period beginning on the
3
date on which such amount was received by an indi-
4
vidual not entitled to such amount.
5
SEC. 3. PERMISSIBLE USES OF UNEMPLOYMENT FUND FOR
6
PROGRAM ADMINISTRATION.
7
(a) WITHDRAWAL STANDARD
IN
THE INTERNAL
8
REVENUE CODE.—Section 3304(a)(4) of the Internal
9
Revenue Code of 1986 is amended—
10
(1) in subparagraph (F), by striking ‘‘and’’
11
after the semicolon; and
12
(2) by inserting after subparagraph (G) the fol-
13
lowing new subparagraphs:
14
‘‘(H) provided the certifications made by
15
the State as described in section 4 of the Pro-
16
tecting Taxpayers and Victims of Unemploy-
17
ment Fraud Act are in effect at the time of ap-
18
proval of the State law under this subsection,
19
an amount, not to exceed 5 percent, of any
20
overpayment of compensation recovered by the
21
State (other than an overpayment made as the
22
result of agency error) may, immediately fol-
23
lowing the State’s receipt of such recovered
24
8
•HR 1163 EH
amount, be deposited in a State fund from
1
which money may be withdrawn for—
2
‘‘(i) the payment of costs of deterring,
3
detecting, and preventing improper pay-
4
ments;
5
‘‘(ii) purposes relating to the proper
6
classification of employees and the provi-
7
sions of State law implementing section
8
303(k) of the Social Security Act;
9
‘‘(iii) the payment to the Secretary of
10
the Treasury to the credit of the account
11
of the State in the Unemployment Trust
12
Fund;
13
‘‘(iv) modernizing the State’s unem-
14
ployment insurance technology infrastruc-
15
ture; or
16
‘‘(v) otherwise assisting the State in
17
improving the timely and accurate admin-
18
istration of the State’s unemployment com-
19
pensation law; and
20
‘‘(I) provided the certifications made by
21
the State as described in section 4 of the Pro-
22
tecting Taxpayers and Victims of Unemploy-
23
ment Fraud Act are in effect at the time of ap-
24
proval of the State law under this subsection,
25
9
•HR 1163 EH
an amount, not to exceed 5 percent, of any pay-
1
ments of contributions, or payments in lieu of
2
contributions, that are collected as a result of
3
an investigation and assessment by the State
4
agency may, immediately following receipt of
5
such payments, be deposited in a State fund
6
from which moneys may be withdrawn for the
7
purposes specified in subparagraph (H);’’.
8
(b) DEFINITION OF UNEMPLOYMENT FUND.—Sec-
9
tion 3306(f) of the Internal Revenue Code of 1986 is
10
amended by striking ‘‘and for refunds of sums’’ and all
11
that follows and inserting ‘‘, except as otherwise provided
12
in section 3304(a)(4), section 303(a)(5) of the Social Se-
13
curity Act, or any other provision of Federal unemploy-
14
ment compensation law.’’.
15
(c) WITHDRAWAL STANDARD IN SOCIAL SECURITY
16
ACT.—Section 303(a)(5) of the Social Security Act (42
17
U.S.C. 503(a)(5)) is amended by striking ‘‘and for refunds
18
of sums’’ and all that follows and inserting ‘‘except as oth-
19
erwise provided in this section, section 3304(a)(4) of the
20
Internal Revenue Code of 1986, or any other provisions
21
of Federal unemployment compensation law; and’’.
22
(d) IMMEDIATE DEPOSIT REQUIREMENTS IN THE IN-
23
TERNAL REVENUE CODE.—Section 3304(a)(3) of the In-
24
10
•HR 1163 EH
ternal Revenue Code of 1986 is amended to read as fol-
1
lows:
2
‘‘(3) all money received in the unemployment
3
fund shall immediately upon such receipt be paid
4
over to the Secretary of the Treasury to the credit
5
of the Unemployment Trust Fund established by
6
section 904 of the Social Security Act (42 U.S.C.
7
1104), except for—
8
‘‘(A) refunds of sums improperly paid into
9
such fund;
10
‘‘(B) refunds paid in accordance with the
11
provisions of section 3305(b); and
12
‘‘(C) amounts deposited in a State fund in
13
accordance with subparagraph (H) or (I) of
14
paragraph (4);’’.
15
(e) IMMEDIATE DEPOSIT REQUIREMENT IN SOCIAL
16
SECURITY ACT REQUIREMENT.—Section 303(a)(4) of the
17
Social Security Act (42 U.S.C. 503(a)(4)) is amended by
18
striking the parenthetical and inserting ‘‘(except as other-
19
wise provided in this section, section 3304(a)(3) of the In-
20
ternal Revenue Code of 1986, or any other provisions of
21
Federal unemployment compensation law)’’.
22
(f) APPLICATION TO FEDERAL PAYMENTS.—When
23
administering any Federal program providing compensa-
24
tion (as defined in section 3306 of the Internal Revenue
25
11
•HR 1163 EH
Code of 1986), the State shall use the authority provided
1
under subparagraphs (H) and (I) of section 3304(a)(4)
2
of such Code in the same manner as such authority is
3
used with respect to improper payments made under the
4
State unemployment compensation law. With respect to
5
improper Federal payments recovered consistent with the
6
authority under subparagraphs (H) and (I) of such sec-
7
tion, the State shall immediately deposit the same percent-
8
age of the recovered payments into the same State fund
9
as provided in the State law implementing that section.
10
(g) EFFECTIVE DATE.—The amendments made by
11
this section shall apply to overpayments or payments or
12
contributions (or payments in lieu of contributions) that
13
are collected as a result of an investigation and assessment
14
by the State agency after the end of the 2-year period be-
15
ginning on the date of the enactment of this Act, except
16
that nothing in this section shall be interpreted to prevent
17
a State from amending its law before the end of the 2-
18
year period beginning on the date of the enactment of this
19
Act.
20
SEC. 4. PREVENTING UNEMPLOYMENT COMPENSATION
21
FRAUD THROUGH DATA MATCHING.
22
(a) IN GENERAL.—As a condition for the eligibility
23
of a State to implement the exceptions to the withdrawal
24
standard described in subparagraphs (H) and (I) of sec-
25
12
•HR 1163 EH
tion 3304(a)(4) of the Internal Revenue Code, the State
1
shall certify each of the following:
2
(1) INTEGRITY DATA HUB.—The State uses the
3
system designated by the Secretary of Labor (or an-
4
other system at the discretion of the State) for
5
cross-matching claimants of unemployment com-
6
pensation to prevent and detect fraud and improper
7
payments.
8
(2) USE OF FRAUD PREVENTION AND DETEC-
9
TION SYSTEMS.—The State has established proce-
10
dures to do the following:
11
(A)
NATIONAL
DIRECTORY
OF
NEW
12
HIRES.—Use the National Directory of New
13
Hires established under section 453(i) of the
14
Social Security Act—
15
(i) to compare information in such Di-
16
rectory against information about individ-
17
uals claiming unemployment compensation
18
to identify any such individuals who may
19
have become employed;
20
(ii) to take timely action to verify
21
whether the individuals identified pursuant
22
to clause (i) are employed; and
23
(iii) upon verification pursuant to
24
clause (ii), to take appropriate action to
25
13
•HR 1163 EH
suspend or modify unemployment com-
1
pensation payments, and to initiate recov-
2
ery of any improper payments that have
3
been made.
4
(B) STATE INFORMATION DATA EXCHANGE
5
SYSTEM.—Use the State Information Data Ex-
6
change System (or another system at the dis-
7
cretion of the State) to facilitate employer re-
8
sponses to requests for information from State
9
workforce agencies.
10
(C) INCARCERATED
INDIVIDUALS.—Seek
11
information from the Commissioner of Social
12
Security under sections 202(x)(3)(B)(iv) and
13
1611(e)(1)(I)(iii) of the Social Security Act, or
14
from such other sources as the State agency de-
15
termines appropriate, to obtain the information
16
necessary to carry out the provisions of a State
17
law under which an individual who is confined
18
in a jail, prison, or other penal institution or
19
correctional facility is ineligible for unemploy-
20
ment compensation on account of such individ-
21
uals inability to satisfy the requirement under
22
section 303(a)(12) of such Act.
23
(D) DECEASED
INDIVIDUALS.—Compare
24
information of individuals claiming unemploy-
25
14
•HR 1163 EH
ment compensation against the information re-
1
garding deceased individuals furnished to or
2
maintained by the Commissioner of Social Se-
3
curity under section 205(r) of the Social Secu-
4
rity Act.
5
(b) UNEMPLOYMENT COMPENSATION.—For the pur-
6
poses of this section, any reference to unemployment com-
7
pensation shall be considered to refer to compensation as
8
defined in section 3306 of the Internal Revenue Code of
9
1986.
10
SEC. 5. EXTENSION OF EMERGENCY STATE STAFFING
11
FLEXIBILITY.
12
If a State modifies its unemployment compensation
13
law and policies with respect to personnel standards on
14
a merit basis on an emergency temporary basis as deter-
15
mined by the Secretary, including for detection, pursuit,
16
and recovery of fraudulent overpayments under Federal
17
pandemic unemployment compensation programs author-
18
ized under the CARES Act (15 U.S.C. 9021 et seq.), sub-
19
ject to the
[Text truncated for display. Full text available on Congress.gov.]