Protecting Taxpayers and Victims of Unemployment Fraud Act

II 118TH CONGRESS 1ST SESSION S. 1587 To provide incentives for States to recover fraudulently paid Federal and State unemployment compensation, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 11, 2023 Mr. CRAPO (for himself, Mr. RISCH, Mr. MARSHALL, Mr. BRAUN, Mrs. CAP- ITO, Mr. THUNE, Mr. SCOTT of Florida, Mr. ROMNEY, Mr. BARRASSO, Mr. BUDD, Mrs. BLACKBURN, Mr. KENNEDY, Mr. YOUNG, Mr. CASSIDY, and Ms. COLLINS) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL 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 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Protecting Taxpayers and Victims of Unemployment 5 Fraud Act’’. 6 (b) TABLE OF CONTENTS.—The table of contents of 7 this Act is as follows: 8 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1587 IS Sec. 1. Short title; table of contents. Sec. 2. Recovering Federal fraudulent COVID unemployment compensation payments. Sec. 3. Permissible uses of unemployment fund for program administration. Sec. 4. Preventing unemployment compensation fraud through data matching. Sec. 5. Extension of emergency State staffing flexibility. Sec. 6. Fraud enforcement harmonization. Sec. 7. Budget offset. Sec. 8. State fund contingency. SEC. 2. RECOVERING FEDERAL FRAUDULENT COVID UNEM- 1 PLOYMENT COMPENSATION PAYMENTS. 2 (a) ALLOWING STATES TO RETAIN PERCENTAGE OF 3 OVERPAYMENTS FOR PROGRAM INTEGRITY.— 4 (1) PANDEMIC UNEMPLOYMENT ASSISTANCE.— 5 Section 2102(d)(4) of the CARES Act (15 U.S.C. 6 9021(d)(4)) is amended to read as follows: 7 ‘‘(4) FRAUD AND OVERPAYMENTS.—Section 8 2107(e) shall apply with respect to pandemic unem- 9 ployment assistance under this section by sub- 10 stituting ‘pandemic unemployment assistance’ for 11 ‘pandemic emergency unemployment compensation’ 12 each place it appears in such section 2107(e).’’. 13 (2) FEDERAL PANDEMIC UNEMPLOYMENT COM- 14 PENSATION.—Section 2104(f)(3) of such Act (15 15 U.S.C. 9023(f)(3)) is amended— 16 (A) in subparagraph (A)— 17 (i) by striking ‘‘3-year’’ and inserting 18 ‘‘10-year’’; and 19 (ii) by inserting ‘‘, except that a State 20 may retain a percentage of any amounts 21 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1587 IS recovered as described in subparagraph 1 (C)’’ before the period at the end; and 2 (B) by adding at the end the following new 3 subparagraph: 4 ‘‘(C) RETENTION OF PERCENTAGE OF RE- 5 COVERED FUNDS.—The State agency may re- 6 tain 25 percent of any amount recovered from 7 overpayments of Federal Pandemic Unemploy- 8 ment Compensation or Mixed Earner Unem- 9 ployment Compensation that were determined 10 to be made due to fraud. Amounts so retained 11 by the State agency shall be used for any of fol- 12 lowing: 13 ‘‘(i) Modernizing unemployment com- 14 pensation systems and information tech- 15 nology to improve identity verification and 16 validation of applicants. 17 ‘‘(ii) Reimbursement of administrative 18 costs incurred by the State to identify and 19 pursue recovery of fraudulent overpay- 20 ments. 21 ‘‘(iii) Hiring fraud investigators and 22 prosecutors. 23 ‘‘(iv) Other program integrity activi- 24 ties as determined by the State.’’. 25 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1587 IS (3) PANDEMIC EMERGENCY UNEMPLOYMENT 1 COMPENSATION.—Section 2107(e)(3) of the CARES 2 Act (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 new 11 subparagraph: 12 ‘‘(C) RETENTION OF PERCENTAGE OF RE- 13 COVERED FUNDS.—The State agency may re- 14 tain 25 percent of any amount recovered from 15 overpayments of pandemic emergency unem- 16 ployment compensation that were determined to 17 be made due to fraud. Amounts so retained by 18 the State agency shall be used for any of fol- 19 lowing: 20 ‘‘(i) Modernizing unemployment com- 21 pensation systems and information tech- 22 nology to improve identity verification and 23 validation of applicants. 24 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1587 IS ‘‘(ii) Reimbursement of administrative 1 costs incurred by the State to identify and 2 pursue recovery of fraudulent overpay- 3 ments. 4 ‘‘(iii) Hiring fraud investigators and 5 prosecutors. 6 ‘‘(iv) Other program integrity activi- 7 ties as determined by the State.’’. 8 (4) EXTENDED UNEMPLOYMENT COMPENSA- 9 TION.—A State to which section 4105 of the Fami- 10 lies First Coronavirus Response Act (26 U.S.C. 11 3304 note) applied may retain 25 percent of any 12 amount recovered from overpayments of sharable ex- 13 tended compensation and sharable regular com- 14 pensation (as such terms are defined in section 204 15 of the Federal-State Extended Unemployment Com- 16 pensation Act of 1970) paid for weeks of unemploy- 17 ment described in such section 4105 that were deter- 18 mined to be made due to fraud. Amounts so retained 19 by the State agency shall be used for any of the pur- 20 poses described in section 2107(e)(3)(C) of the 21 CARES Act (15 U.S.C. 9025(e)(3)(C)). 22 (5) FIRST WEEK OF REGULAR COMPENSA- 23 TION.—A State that was a party to an agreement 24 under section 4105 of the CARES Act (15 U.S.C. 25 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 6 •S 1587 IS 9024) may retain 25 percent of any amount recov- 1 ered from overpayments of regular compensation 2 paid to individuals by the State for their first week 3 of regular unemployment for which the State re- 4 ceived full Federal funding under such agreement in 5 any case in which such overpayments were deter- 6 mined to be made due to fraud. Amounts so retained 7 by the State agency shall be used for any of the pur- 8 poses described in section 2107(e)(3)(C) of the 9 CARES Act (15 U.S.C. 9025(e)(3)(C)). 10 (b) TREATMENT UNDER WITHDRAWAL STANDARD 11 AND IMMEDIATE DEPOSIT REQUIREMENTS.—Any amount 12 retained by a State pursuant to paragraph (4) or (5) of 13 subsection (a) or under section 2102(d)(4), section 14 2104(f)(3)(C), or section 2107(e)(3)(C) of the CARES 15 Act, and used for the purposes described therein, shall not 16 be considered to violate the withdrawal standard and im- 17 mediate deposit requirements of paragraph (4) or (5) of 18 section 303(a) of the Social Security Act (42 U.S.C. 19 503(a)) or paragraph (3) or (4) of section 3304(a) of the 20 Internal Revenue Code of 1986. 21 (c) LIMITATION ON RETENTION AUTHORITY.—The 22 authority of a State to retain any amount pursuant to 23 paragraph (4) or (5) of subsection (a) and under section 24 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 7 •S 1587 IS 2102(d)(4), section 2104(f)(3)(C), and section 1 2107(e)(3)(C) of the CARES Act shall apply only— 2 (1) with respect to an amount recovered on or 3 after the date of the enactment of this Act; and 4 (2) during the 10-year period beginning on the 5 date on which such amount was received by an indi- 6 vidual not entitled to such amount. 7 SEC. 3. PERMISSIBLE USES OF UNEMPLOYMENT FUND FOR 8 PROGRAM ADMINISTRATION. 9 (a) WITHDRAWAL STANDARD IN THE INTERNAL 10 REVENUE CODE.—Section 3304(a)(4) of the Internal 11 Revenue Code of 1986 is amended— 12 (1) in subparagraph (F), by striking ‘‘and’’ at 13 the end; and 14 (2) by inserting after subparagraph (G) the fol- 15 lowing new subparagraphs: 16 ‘‘(H) provided the certifications made by 17 the State as described in section 4 of the Pro- 18 tecting Taxpayers and Victims of Unemploy- 19 ment Fraud Act are in effect at the time of ap- 20 proval of the State law under this subsection, 21 an amount, not to exceed 5 percent, of any 22 overpayment of compensation recovered by the 23 State (other than an overpayment made as the 24 result of agency error) may, immediately fol- 25 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 8 •S 1587 IS lowing the State’s receipt of such recovered 1 amount, be deposited in a State fund from 2 which money may be withdrawn for— 3 ‘‘(i) the payment of costs of deterring, 4 detecting, and preventing improper pay- 5 ments; 6 ‘‘(ii) purposes relating to the proper 7 classification of employees and the provi- 8 sions of State law implementing section 9 303(k) of the Social Security Act; 10 ‘‘(iii) the payment to the Secretary of 11 the Treasury to the credit of the account 12 of the State in the Unemployment Trust 13 Fund; 14 ‘‘(iv) modernizing the State’s unem- 15 ployment insurance technology infrastruc- 16 ture; or 17 ‘‘(v) otherwise assisting the State in 18 improving the timely and accurate admin- 19 istration of the State’s unemployment com- 20 pensation law; and 21 ‘‘(I) provided the certifications made by 22 the State as described in section 4 of the Pro- 23 tecting Taxpayers and Victims of Unemploy- 24 ment Fraud Act are in effect at the time of ap- 25 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 9 •S 1587 IS proval of the State law under this subsection, 1 an amount, not to exceed 5 percent, of any pay- 2 ments of contributions, or payments in lieu of 3 contributions, that are collected as a result of 4 an investigation and assessment by the State 5 agency may, immediately following receipt of 6 such payments, be deposited in a State fund 7 from which moneys may be withdrawn for the 8 purposes specified in subparagraph (H);’’. 9 (b) DEFINITION OF UNEMPLOYMENT FUND.—Sec- 10 tion 3306(f) of the Internal Revenue Code of 1986 is 11 amended by striking ‘‘and for refunds of sums’’ and all 12 that follows and inserting ‘‘, except as otherwise provided 13 in section 3304(a)(4), section 303(a)(5) of the Social Se- 14 curity Act, or any other provision of Federal unemploy- 15 ment compensation law.’’. 16 (c) WITHDRAWAL STANDARD IN SOCIAL SECURITY 17 ACT.—Section 303(a)(5) of the Social Security Act (42 18 U.S.C. 503(a)(5)) is amended by striking ‘‘and for refunds 19 of sums’’ and all that follows and inserting ‘‘except as oth- 20 erwise provided in this section, section 3304(a)(4) of the 21 Internal Revenue Code of 1986, or any other provisions 22 of Federal unemployment compensation law; and’’. 23 (d) IMMEDIATE DEPOSIT REQUIREMENTS IN THE IN- 24 TERNAL REVENUE CODE.—Section 3304(a)(3) of the In- 25 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 10 •S 1587 IS 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 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 11 •S 1587 IS 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 VerDate Sep 11 2014 01:43 May 24, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1587.IS S1587 kjohnson on DSK79L0C42PROD with BILLS 12 •S 1587 IS 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 T [Text truncated for display. Full text available on Congress.gov.]