To reform the Federal unemployment benefits system, and for other purposes.

Summary: Safety Net Enhancement Act - Amends the Federal-State Extended Unemployment Compensation Act of 1970 to revise the federal-state extended unemployment compensation program established under the Social Security Act (SSA) to revise the formula for "on" and "off" indicators on the state level used to determine extended unemployment compensation benefit periods.

Amends the SSA to require: (1) an increase in earnings credited to a state account in the Unemployment Trust Fund when a state meets funding goals; and (2) a decrease in such earnings credited to a state account when the state fails to meet funding goals.

Excludes any interest premium or penalty from such requirement to the extent that it would result in an increase or decrease of more than $2.5 million in the amount creditable to any state account for any calendar quarter.

Amends the SSA to restrict interest-free advances to state accounts in the Fund to states which meet funding goals.

Amends the Internal Revenue Code to require: (1) state collection of federal unemployment tax; and (2) state distribution to unemployed individuals of state-specific information packets explaining unemployment insurance eligibility conditions.

Repeals the tax on unemployment compensation.

Requires the Secretary of Labor to establish a Safety Net Review Commission.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Safety Net 
Enhancement Act''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title; table of contents.
                    TITLE I--ADMINISTRATIVE REFORMS

Sec. 101. Extended benefits trigger.
Sec. 102. Increase and decrease in earnings credited to State accounts 
                            when States meet or fail to meet funding 
                            goals.
Sec. 103. Interest-free advances to State accounts in Unemployment 
                            Trust Fund restricted to States which meet 
                            funding goals.
Sec. 104. State collection of Federal unemployment tax.
Sec. 105. Required distribution of State-specific information packets.
          TITLE II--REPEAL OF TAX ON UNEMPLOYMENT COMPENSATION

Sec. 201. Repeal of tax on unemployment compensation.
                TITLE III--SAFETY NET REVIEW COMMISSION

Sec. 301. Establishment.
Sec. 302. Function.
Sec. 303. Members.
Sec. 304. Staff and other assistance.
Sec. 305. Compensation.
Sec. 306. Report.
Sec. 307. Termination.

                    TITLE I--ADMINISTRATIVE REFORMS

SEC. 101. EXTENDED BENEFITS TRIGGER.

    (a) In General.--Section 203(d) of the Federal-State Extended 
Unemployment Compensation Act of 1970 (26 U.S.C. 3304 note) is 
amended--
            (1) in subparagraph (B) of paragraph (1), by striking ``5 
        per centum'' and inserting ``4 per centum'', and
            (2) in the first flush sentence following paragraph (2), by 
        striking ``5'' and inserting ``4''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to weeks of unemployment beginning 6 months or more after the 
date of the enactment of this Act.

SEC. 102. INCREASE AND DECREASE IN EARNINGS CREDITED TO STATE ACCOUNTS 
              WHEN STATES MEET OR FAIL TO MEET FUNDING GOALS.

    (a) In General.--Section 904 of the Social Security Act (42 U.S.C. 
1104) is amended by adding at the end the following new subsection:
    ``(h) Increase and Decrease in Amount of Earnings Allocated to 
State Accounts When States Meet or Fail To Meet Funding Goals.--(1) If 
the average daily balance in a State account in the Unemployment Trust 
Fund for any calendar quarter exceeds the funding goal of such State, 
the amount otherwise creditable to such account under subsection (e) 
for such quarter shall be increased by the interest premium on such 
excess. If the average daily balance in such a State account for any 
calendar quarter is less than the funding goal of such State, the 
amount otherwise creditable to such account under subsection (e) for 
such quarter shall be decreased by the interest penalty.
    ``(2) Paragraph (1) shall not apply with respect to any interest 
premium or interest penalty to the extent that such application would 
result in an increase or decrease of more than $2,500,000 in the amount 
creditable to any State account for any calendar quarter.
    ``(3) For purposes of this subsection, the term `interest premium' 
means, for any calendar quarter--
            ``(A) with respect to the State with the largest percentage 
        value of excess of the average daily balance in the State 
        account in the Unemployment Trust Fund over the funding goal of 
        such State, one-half of one percent of the amount of such 
        excess, and
            ``(B) with respect to each other State, the product of--
                    ``(i) the amount of the excess of the average daily 
                balance in the State account in the Unemployment Trust 
                Fund over the funding goal of such State, and
                    ``(ii) the percentage which bears the same ratio to 
                one-half of one percent as--
                            ``(I) the percentage value of such excess, 
                        bears to
                            ``(II) the percentage value of the excess 
                        of the State referred to in subparagraph (A).
The Secretary shall make appropriate adjustments in the interest 
premium for any calendar quarter if the aggregate interest premiums 
payable for such quarter exceed the aggregate interest penalties for 
such quarter.
    ``(4) For purposes of this subsection, the term `interest penalty' 
means, for any calendar quarter--
            ``(A) with respect to the State with the largest percentage 
        value of excess of the funding goal of such State over the 
        average daily balance in the State account in the Unemployment 
        Trust Fund, one-half of one percent of the amount otherwise 
        creditable to such account under subsection (e), and
            ``(B) with respect to each other State, the product of--
                    ``(i) the amount otherwise creditable to such 
                account under subsection (e), and
                    ``(ii) the percentage which bears the same ratio to 
                one-half of one percent as--
                            ``(I) the percentage value of the excess of 
                        the funding goal of the State over such average 
                        daily balance of such State, bears to
                            ``(II) the percentage value of such excess 
                        of the State referred to in subparagraph (A).
    ``(5) For purposes of this subsection, the term `funding goal' 
means, for any State for any calendar quarter, the average of the 
unemployment insurance benefits paid by such State during each of the 3 
years, in the 20-year period ending with the calendar year containing 
such calendar quarter, during which the State paid the greatest amount 
of unemployment benefits.
    ``(6) For purposes of this subsection, the term `percentage value' 
means--
            ``(A) with respect to any excess of the average daily 
        balance in a State account in the Unemployment Trust Fund over 
        the funding goal of such State, the percentage which such 
        excess bears to such funding goal, and
            ``(B) with respect to any excess of such funding goal over 
        such average daily balance, the percentage which such excess 
        bears to such funding goal.''.
    (b) Conforming Amendments.--
            (1) Amounts credited to state accounts.--Subsection (e) of 
        section 904 of the Social Security Act (42 U.S.C. 1104(e)) is 
        amended in the first sentence by inserting ``(as modified by 
        subsection (h))'' after ``a proportionate part''.
            (2) Interest rate on repayment of advances determined 
        without regard to interest premiums or penalties on amounts 
        credited to state accounts.--Subparagraph (A) of section 
        1202(b)(4) of such Act (42 U.S.C. 1322(b)(4)) is amended by 
        inserting ``(determined without regard to section 904(h))'' 
        after ``preceding calendar year''.
    (c) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Secretary of Labor shall submit to the 
Congress a report recommending sources of funding for the crediting of 
interest premiums under subsection (h) of section 904 of the Social 
Security Act (42 U.S.C. 1104), as added by this section, in the event 
that the imposition of interest penalties under such subsection is 
insufficient to fund such premiums.
    (d) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2010.

SEC. 103. INTEREST-FREE ADVANCES TO STATE ACCOUNTS IN UNEMPLOYMENT 
              TRUST FUND RESTRICTED TO STATES WHICH MEET FUNDING GOALS.

    (a) In General.--Subparagraph (C) of section 1202(b)(2) of the 
Social Security Act (42 U.S.C. 1322(b)(2)) is amended to read as 
follows:
            ``(C) the average daily balance in the account of such 
        State in the Unemployment Trust Fund for each of 4 of the 5 
        calendar quarters preceding the calendar quarter in which such 
        advances were made exceeds the funding goal of such State (as 
        defined in section 904(h)).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to calendar years beginning after the date of the enactment of 
this Act.

SEC. 104. STATE COLLECTION OF FEDERAL UNEMPLOYMENT TAX.

    (a) In General.--Chapter 23 of the Internal Revenue Code of 1986 
(relating to Federal Unemployment Tax Act) is amended by redesignating 
section 3311 as section 3312 and by inserting after section 3310 the 
following new section:

``SEC. 3311. STATE COLLECTION OF TAX.

    ``(a) In General.--At the election of any State which is certified 
as provided in section 3304, each employer who pays contributions, with 
respect to any wages, into an unemployment fund maintained under the 
unemployment compensation law of such State shall submit the tax 
imposed by this chapter with respect to such wages to such State rather 
than to the Secretary.
    ``(b) Coordination With Depositary Requirements.--Payment under 
subsection (a) of the tax imposed by this chapter with respect to any 
wages shall be treated as timely paid for purposes of this title if 
paid by the employer to the State at the same time as a timely paid 
payment, with respect to such wages, of contributions into an 
unemployment fund maintained under the unemployment compensation law of 
such State.
    ``(c) Exception for Payments Not Timely Paid.--Subsection (a) shall 
not apply to any payment of the tax imposed by this chapter which is 
not paid by an employer on or before the last date on which such 
payment would be treated as timely paid under subsection (b).
    ``(d) Federal Tax Transferred to Secretary.--Each State making an 
election under subsection (a) shall transmit to the Secretary, at the 
time and in the manner prescribed by the Secretary, the amount of the 
tax imposed by this chapter which is submitted to such State under 
subsection (a) and a copy of the State tax return of each employer 
making such a submission. The Secretary may, after consultation with 
such organizations or other entities as the Secretary considers 
appropriate, prescribe regulations requiring that additional 
information be submitted by such State with respect to the amount of 
such tax payable by such employer.''.
    (b) Clerical Amendment.--The table of sections for chapter 23 of 
such Code is amended by striking the item relating to section 3311 and 
inserting the following new items:

``Sec. 3311. State collection of tax.
``Sec. 3312. Short title.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 105. REQUIRED DISTRIBUTION OF STATE-SPECIFIC INFORMATION PACKETS.

    (a) In General.--Subsection (a) of section 3304 of the Internal 
Revenue Code of 1986 (relating to approval of State laws) is amended by 
striking ``and'' at the end of paragraph (18), by striking the period 
at the end of paragraph (19) and inserting ``; and'', and by adding at 
the end the following new paragraph:
            ``(20) the State will distribute to unemployed individuals 
        State-specific information packets explaining unemployment 
        insurance eligibility conditions.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to certifications of States for 2008 and thereafter, except that 
section 3304(a)(20) of the Internal Revenue Code of 1986, as added by 
subsection (a), shall not be a requirement for the State law of any 
State prior to July 1, 2009, if the legislature of such State does not 
meet in a regular session which closes during the calendar year 2008.

          TITLE II--REPEAL OF TAX ON UNEMPLOYMENT COMPENSATION

SEC. 201. REPEAL OF TAX ON UNEMPLOYMENT COMPENSATION.

    (a) In General.--Section 85 of the Internal Revenue Code of 1986 is 
hereby repealed.
    (b) Conforming Amendments.--
            (1) Subsection (p) of section 3402 of such Code is amended 
        by striking paragraph (2) and by redesignating paragraph (3) as 
        paragraph (2).
            (2) Section 6050B of such Code (relating to returns 
        relating to unemployment compensation) is hereby repealed.
            (3) The table of sections for part II of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 85.
            (4) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 of such Code is amended by striking 
        the item relating to section 6050B.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts received after December 31, 2007.

                TITLE III--SAFETY NET REVIEW COMMISSION

SEC. 301. ESTABLISHMENT.

    The Secretary of Labor shall establish an advisory commission to be 
known as the ``Safety Net Review Commission'' (hereinafter in this 
title referred to as the ``Commission'').

SEC. 302. FUNCTION.

    It shall be the function of the Commission to evaluate the 
unemployment compensation program, the Trade Adjustment Assistance 
program, the Job Corps program, a program under the Workforce 
Investment Act, and other employment assistance programs, including the 
purpose, goals, countercyclical effectiveness, coverage, benefit 
adequacy, trust fund solvency, funding of State administrative costs, 
administrative efficiency, and any other aspects of each such program, 
as well as any related provisions of the Internal Revenue Code of 1986, 
and to make recommendations for their improvement.

SEC. 303. MEMBERS.

    (a) In General.--The Commission shall consist of 11 members as 
follows:
            (1) 5 members appointed by the President, to include 
        representatives of business, labor, State government, and the 
        public.
            (2) 3 members appointed by the President pro tempore of the 
        Senate, in consultation with the Chairman and ranking member of 
        the Committee on Finance of the Senate.
            (3) 3 members appointed by the Speaker of the House of 
        Representatives, in consultation with the Chairman and ranking 
        member of the Committee on Ways and Means of the House of 
        Representatives.
    (b) Qualifications.--In appointing members under paragraphs (2) and 
(3) of subsection (a), the President pro tempore of the Senate and the 
Speaker of the House of Representatives shall each appoint--
            (1) 1 representative of the interests of business,
            (2) 1 representative of the interests of labor, and
            (3) 1 representative of the interests of State governments.
    (c) Vacancies.--A vacancy in the Commission shall be filled in the 
manner in which the original appointment was made.
    (d) Chairman.--The President shall appoint the Chairman of the 
Commission from among its members.

SEC. 304. STAFF AND OTHER ASSISTANCE.

    (a) In General.--The Commission may engage any technical assistance 
(including actuarial services) required by the Commission to carry out 
its functions under this title.
    (b) Assistance From Secretary of Labor.--The Secretary of Labor 
shall provide the Commission with any staff, office facilities, and 
other assistance, and any data prepared by the Department of Labor, 
required by the Commission to carry out its functions under this title.

SEC. 305. COMPENSATION.

    Each member of the Commission--
            (1) shall be entitled to receive compensation at the rate 
        of pay for level V of the Executive Schedule under section 5316 
        of title 5, United States Code, for each day (including travel 
        time) during which such member is engaged in the actual 
        performance of duties vested in the Commission; and
            (2) while engaged in the performance of such duties away 
        from such member's home or regular place of business, shall be 
        allowed travel expenses (including per diem in lieu of 
        subsistence) as authorized by section 5703 of such title 5 for 
        persons in the Government employed intermittently.

SEC. 306. REPORT.

    Not later than 6 months after the date of the enactment of this 
Act, the Commission shall submit to the President and the Congress a 
report setting forth the findings and recommendations of the Commission 
as a result of its evaluation under this title.

SEC. 307. TERMINATION.

    The Commission shall terminate 2 months after submitting its report 
pursuant to section 306.