To extend the Temporary Extended Unemployment Compensation Act of 2002, and for other purposes.

Summary: Neighbors in Need Act - Amends the Temporary Extended Unemployment Compensation Act of 2002 (TEUCA) to provide a program extension for States experiencing high unemployment.

Amends the Social Security Act to require: (1) increases and decreases in the earnings credited to State accounts when States meet or fail to meet funding goals; and (2) restriction of interest-free advances to State accounts in the Unemployment Trust Fund to States which meet funding goals.

Amends the Internal Revenue Code to: (1) suspend the tax on individual unemployment compensation for 2004 and 2005; (2) allow certified States to elect to collect Federal unemployment taxes under the Federal Unemployment Tax Act (FUTA); and (3) require States to distribute to unemployed individuals State-specific information packets explaining unemployment insurance eligibility conditions.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Neighbors in Need 
Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
         TITLE I--TEMPORARY EXTENDED UNEMPLOYMENT COMPENSATION

Sec. 101. Program extension for States experiencing high unemployment.
         TITLE II--FEDERAL UNEMPLOYMENT BENEFIT SYSTEM REFORMS

Sec. 201. Increase and decrease in earnings credited to State accounts 
                            when States meet or fail to meet funding 
                            goals.
Sec. 202. Interest-free advances to State accounts in Unemployment 
                            Trust Fund restricted to States which meet 
                            funding goals.
       TITLE III--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

Sec. 301. 2-year suspension of tax on unemployment compensation.
Sec. 302. State collection of Federal unemployment tax.
Sec. 303. Required distribution of State-specific information packets.

         TITLE I--TEMPORARY EXTENDED UNEMPLOYMENT COMPENSATION

SEC. 101. PROGRAM EXTENSION FOR STATES EXPERIENCING HIGH UNEMPLOYMENT.

    (a) In General.--The Temporary Extended Unemployment Compensation 
Act of 2002 (26 U.S.C. 3304 note) is amended by inserting after section 
208 the following:
``Sec. 208a. Program extension for States experiencing high 
              unemployment
    ``(a) In General.--Notwithstanding any other provision of this 
title, an agreement under section 202(a) shall be considered to provide 
that, in the case of a State described in subsection (b), the State 
agency of such State will make payments of temporary extended 
unemployment compensation--
            ``(1) to individuals described in subsection (d)(1); and
            ``(2) for any week of unemployment which begins in the 
        individual's period of eligibility (as defined in subsection 
        (e)).
    ``(b) State Eligibility Requirements.--A State described in this 
subsection is any State that, during the week in which occurs the date 
of the enactment of this Act--
            ``(1) is in an extended benefit period (as described in 
        section 203 of the Federal-State Extended Unemployment 
        Compensation Act of 1970); or
            ``(2) would be in such a period (as so defined) if section 
        203(d) of such Act were applied--
                    ``(A) by disregarding subparagraph (A) of paragraph 
                (1) thereof and any reference to such subparagraph; and
                    ``(B) by substituting `3' for `5' each place it 
                appears.
    ``(c) Terms and Conditions.--Except as otherwise provided in this 
section, the preceding provisions of this title shall apply in the case 
of any individual qualifying for temporary extended unemployment 
compensation benefits by virtue of this section.
    ``(d) Amount in Account.--In determining the amount to be 
established in an account under section 203(a) for purposes of this 
section--
            ``(1) section 203(b)(1) shall be applied--
                    ``(A) in the case of an individual who first 
                satisfies the exhaustion requirements of this title (as 
                set forth in section 202(b)(1)-(3)) during a week 
                beginning after December 31, 2003, and before the first 
                day of the week in which occurs the date of the 
                enactment of this section, by substituting `33\1/3\' 
                for `50' in section 203(b)(1)(A) and `8' for `13' in 
                section 203(b)(1)(B); and
                    ``(B) in the case of an individual who first 
                satisfies such requirements during a week beginning on 
                or after the first day of the week in which occurs the 
                date of the enactment of this section and before the 
                close of the 12th week following the week in which 
                occurs the date of the enactment of this section, by 
                applying subparagraphs (A) and (B) of section 203(b)(1) 
                in accordance with their terms; and
            ``(2) section 203(c) shall be disregarded.
    ``(e) Period of Eligibility.--An individual's period of eligibility 
consists of any week which begins on or after the first day of the week 
in which occurs the date of the enactment of this section and which 
(except as provided in subsection (f)) begins before the close of the 
12th week following the week in which occurs the date of the enactment 
of this section.
    ``(f) Transition.--In the case of an individual who is receiving 
benefits under this section for any week beginning before the close of 
the 12th week following the week in which occurs the date of the 
enactment of this section, temporary extended unemployment compensation 
shall continue to be payable to such individual for any week thereafter 
for which the individual meets the eligibility requirements of this 
title. No compensation shall be payable by virtue of the preceding 
sentence for any week beginning after the 25th week following the week 
in which occurs the date of the enactment of this section.''.
    (b) Technical and Conforming Amendments.--(1) Section 208(a) of the 
Temporary Extended Unemployment Compensation Act of 2002 is amended in 
the matter before paragraph (1) by striking ``subsection (b),'' and 
inserting ``subsection (b) or section 208a,''.
    (2) The table of contents of Public Law 107-147 is amended by 
inserting after the item relating to section 208 the following:

``208a. Program extension for States experiencing high unemployment.''.

         TITLE II--FEDERAL UNEMPLOYMENT BENEFIT SYSTEM REFORMS

SEC. 201. 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:

   ``Increase and Decrease in Amount of Earnings Allocated to State 
        Accounts When States Meet or Fail to Meet Funding Goals

    ``(h)(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, 2007.

SEC. 202. 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.

       TITLE III--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

SECTION 301. 2-YEAR SUSPENSION OF TAX ON UNEMPLOYMENT COMPENSATION.

    (a) In General.--Section 85 of the Internal Revenue Code of 1986 
(relating to unemployment compensation) is amended by adding at the end 
the following new subsection:
    ``(c) Moratorium.--This section shall not apply to taxable years 
beginning in 2004 or 2005.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 302. 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 calendar years beginning after December 31, 2004.

SEC. 303. 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 2005, except that section 
3304(a)(20) of such Code, as added by subsection (a), shall not be a 
requirement for the State law of any State prior to July 1, 2006, if 
the legislature of such State does not meet in a regular session which 
closes during the calendar year 2005.