II
118THCONGRESS
1
STSESSION 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
MAY11, 2023
Mr. C
RAPO(for himself, Mr. RISCH, Mr. MARSHALL, Mr. BRAUN, Mrs. CAP-
ITO, Mr. THUNE, Mr. SCOTTof Florida, Mr. ROMNEY, Mr. BARRASSO,
Mr. B
UDD, Mrs. BLACKBURN, Mr. KENNEDY, Mr. YOUNG, Mr. CASSIDY,
and Ms. C
OLLINS) 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) S
HORTTITLE.—This Act may be cited as the 4
‘‘Protecting Taxpayers and Victims of Unemployment 5
Fraud Act’’. 6
(b) T
ABLE OFCONTENTS.—The table of contents of 7
this Act is as follows: 8
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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) A
LLOWINGSTATESTORETAINPERCENTAGE OF 3
O
VERPAYMENTS FOR PROGRAMINTEGRITY.— 4
(1) P
ANDEMIC 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) F
RAUD 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) F
EDERAL 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
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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 new 3
subparagraph: 4
‘‘(C) R
ETENTION 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
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(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) R
ETENTION 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
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‘‘(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) E
XTENDED 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) F
IRST 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
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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) T
REATMENTUNDERWITHDRAWALSTANDARD 11
ANDIMMEDIATEDEPOSITREQUIREMENTS.—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) L
IMITATION ONRETENTIONAUTHORITY.—The 22
authority of a State to retain any amount pursuant to 23
paragraph (4) or (5) of subsection (a) and under section 24
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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) W
ITHDRAWAL STANDARD IN THE INTERNAL 10
R
EVENUECODE.—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
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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
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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) D
EFINITION OFUNEMPLOYMENT 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) W
ITHDRAWALSTANDARD INSOCIALSECURITY 17
A
CT.—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) I
MMEDIATEDEPOSITREQUIREMENTS IN THE IN-24
TERNALREVENUECODE.—Section 3304(a)(3) of the In-25
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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) I
MMEDIATEDEPOSITREQUIREMENT IN SOCIAL 16
S
ECURITYACTREQUIREMENT.—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) A
PPLICATION TOFEDERALPAYMENTS.—When 23
administering any Federal program providing compensa-24
tion (as defined in section 3306 of the Internal Revenue 25
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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) E
FFECTIVEDATE.—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) I
NGENERAL.—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
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tion 3304(a)(4) of the Internal Revenue Code, the State 1
shall certify each of the following: 2
(1) I
NTEGRITY 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) U
SE OF FRAUD PREVENTION AND DETEC -9
TION SYSTEMS.—The State has established proce-10
dures to do the following: 11
(A) N
ATIONAL 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
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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) S
TATE 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) I
NCARCERATED 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
ual’s inability to satisfy the requirement under 22
section 303(a)(12) of such Act. 23
(D) D
ECEASED INDIVIDUALS .—Compare 24
information of individuals claiming unemploy-25
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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) U
NEMPLOYMENT 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 succeeding sentence, such modifications shall 20
be disregarded for the purposes of applying section 303 21
of the Social Security Act (42 U.S.C. 503) and section 22
3304 of the Internal Revenue Code of 1986 to such State 23
law. Such modifications may continue through December 24
31, 2030. 25
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SEC. 6. FRAUD ENFORCEMENT HARMONIZATION. 1
Notwithstanding any other provision of law, any 2
criminal charge or civil enforcement action alleging that 3
an individual engaged in fraud with respect to compensa-4
tion (as defined in section 3306 of the Internal Revenue 5
Code of 1986) shall be filed not later than 10 years after 6
the offense was committed. 7
SEC. 7. BUDGET OFFSET. 8
Section 2118 of the CARES Act (15 U.S.C. 9034) 9
is repealed. 10
SEC. 8. STATE FUND CONTINGENCY. 11
Subject to appropriations, the unobligated balance as 12
of the day before the date of enactment of this Act of 13
amounts made available under section 2118 of the CARES 14
Act (15 U.S.C. 9034) shall be transferred to the Secretary 15
of the Treasury and periodically credited, on an as-needed 16
basis, to the appropriate State account in the Unemploy-17
ment Trust Fund established by section 904 of the Social 18
Security Act (42 U.S.C. 1104) in an amount that replaces 19
the amount deposited by a State in a State fund in accord-20
ance with subparagraph (H) or (I) of section 3304(a)(4) 21
of the Internal Revenue Code of 1986 (as amended by sec-22
tion 3(a) of this Act) if the amount in such State account 23
is less than the amount that would be in such State ac-24
count if such subparagraphs had not been enacted. 25
Æ
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