I 

118TH CONGRESS 

1ST SESSION H. R. 1163 

To provide incentives for States to recover fraudulently paid Federal and 

State unemployment compensation, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 24, 2023 

Mr. SMITH of Missouri (for himself, Mr. BUCHANAN, Mr. FERGUSON, Mr. 

STEUBE, Mr. WENSTRUP, Mr. FEENSTRA, Mr. MOORE of Utah, Mr. 

SMUCKER, Mrs. MILLER of West Virginia, Mr. ESTES, Ms. VAN DUYNE, 

Mrs. STEEL, Ms. TENNEY, Ms. MALLIOTAKIS, Mr. CAREY, Mr. 

KUSTOFF, Mr. KELLY of Pennsylvania, Mr. FITZPATRICK, Mr. MURPHY, 

Mr. SMITH of Nebraska, Mrs. FISCHBACH, Mr. LAHOOD, Mr. 

SCHWEIKERT, Mr. ARRINGTON, Mr. COMER, and Mr. HERN) introduced 

the following bill; which was referred to the Committee on Ways and 

Means 

A BILL 

To provide incentives for States to recover fraudulently paid 

Federal and State unemployment compensation, and for 

other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Protecting Taxpayers 

5 and Victims of Unemployment Fraud Act’’. 


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1 SEC. 2. RECOVERING FEDERAL FRAUDULENT COVID UNEM2 PLOYMENT COMPENSATION PAYMENTS. 

3 (a) ALLOWING STATES TO RETAIN PERCENTAGE OF

4 OVERPAYMENTS FOR PROGRAM INTEGRITY.— 

5 (1) PANDEMIC UNEMPLOYMENT ASSISTANCE.— 

6 Section 2102(d) of the CARES Act (15 U.S.C. 

7 9021(d)) is amended by amending paragraph (4) to 

8 read as follows: 

9 ‘‘(4) FRAUD AND OVERPAYMENTS.—Section 

10 2107(e) shall apply with respect to pandemic unem11 ployment assistance under this section by sub12 stituting ‘pandemic unemployment assistance’ for 

13 ‘pandemic emergency unemployment compensation’ 

14 each place it appears in such section 2107(e).’’. 

15 (2) FEDERAL PANDEMIC UNEMPLOYMENT COM16 PENSATION.—Section 2104(f)(3) of such Act (15 

17 U.S.C. 9023(f)(3)) is amended— 

18 (A) in subparagraph (A)— 

19 (i) by striking ‘‘3-year’’ and inserting 

20 ‘‘10-year’’; and 

21 (ii) by inserting ‘‘, except that a State 

22 may retain a percentage of any amounts 

23 recovered as described in subparagraph 

24 (C)’’ before the period at the end; and 

25 (B) by adding at the end the following: 


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1 ‘‘(C) RETENTION OF PERCENTAGE OF RE2 COVERED FUNDS.—The State agency may re3 tain 25 percent of any amount recovered from 

4 overpayments of Federal Pandemic Unemploy5 ment Compensation or Mixed Earner Unem6 ployment Compensation that were determined 

7 to be made due to fraud. Amounts so retained 

8 by the State agency shall be used for any of fol9 lowing: 

10 ‘‘(i) Modernizing unemployment com11 pensation systems and information tech12 nology to improve identity verification and 

13 validation of applicants. 

14 ‘‘(ii) Reimbursement of administrative 

15 costs incurred by the State to identify and 

16 pursue recovery of fraudulent overpay17 ments. 

18 ‘‘(iii) Hiring fraud investigators and 

19 prosecutors. 

20 ‘‘(iv) Other program integrity activi21 ties as determined by the State.’’. 

22 (3) PANDEMIC EMERGENCY UNEMPLOYMENT

23 COMPENSATION.—Section 2107(e)(3) of such Act 

24 (15 U.S.C. 9025(e)(3)) is amended— 

25 (A) in subparagraph (A)— 


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1 (i) by striking ‘‘3-year’’ and inserting 

2 ‘‘10-year’’; and 

3 (ii) by inserting ‘‘, except that a State 

4 may retain a percentage of any amounts 

5 recovered as described in subparagraph 

6 (C)’’ before the period at the end; and 

7 (B) by adding at the end the following: 

8 ‘‘(C) RETENTION OF PERCENTAGE OF RE9 COVERED FUNDS.—The State agency may re10 tain 25 percent of any amount recovered from 

11 overpayments of pandemic emergency unem12 ployment compensation that were determined to 

13 be made due to fraud. Amounts so retained by 

14 the State agency shall be used for any of fol15 lowing: 

16 ‘‘(i) Modernizing unemployment com17 pensation systems and information tech18 nology to improve identity verification and 

19 validation of applicants. 

20 ‘‘(ii) Reimbursement of administrative 

21 costs incurred by the State to identify and 

22 pursue recovery of fraudulent overpay23 ments. 

24 ‘‘(iii) Hiring fraud investigators and 

25 prosecutors. 


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1 ‘‘(iv) Other program integrity activi2 ties as determined by the State.’’. 

3 (4) EXTENDED UNEMPLOYMENT COMPENSA4 TION.—A State to which section 4105 of the Fami5 lies First Coronavirus Response Act (26 U.S.C. 

6 3304 note) applied may retain 25 percent of any 

7 amount recovered from overpayments of sharable ex8 tended compensation and sharable regular com9 pensation (as such terms are defined in section 204 

10 of the Federal-State Extended Unemployment Com11 pensation Act of 1970) paid for weeks of unemploy12 ment described in such section 4105 that were deter13 mined to be made due to fraud. Amounts so retained 

14 by the State agency shall be used for any of the pur15 poses described in section 2107(e)(3)(C) of the 

16 CARES Act (15 U.S.C. 9025(e)(3)(C)). 

17 (5) FIRST WEEK OF REGULAR COMPENSA18 TION.—A State that was a party to an agreement 

19 under section 4105 of the CARES Act (15 U.S.C. 

20 9024) may retain 25 percent of any amount recov21 ered from overpayments of regular compensation 

22 paid to individuals by the State for their first week 

23 of regular unemployment for which the State re24 ceived full Federal funding under such agreement in 

25 any case in which such overpayments were deterVerDate Sep 11 2014 21:39 Mar 09, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1163.IH H1163

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1 mined to be made due to fraud. Amounts so retained 

2 by the State agency shall be used for any of the pur3 poses described in section 2107(e)(3)(C) of the 

4 CARES Act (15 U.S.C. 9025(e)(3)(C)). 

5 (b) TREATMENT UNDER WITHDRAWAL STANDARD

6 AND IMMEDIATE DEPOSIT REQUIREMENTS.—Any amount 

7 retained by a State pursuant to paragraph (4) or (5) of 

8 subsection (a) or under section 2102(d)(4), section 

9 2104(f)(3)(C), or 2107(e)(3)(C) of the CARES Act, and 

10 used for the purposes described therein, shall not be con11 sidered to violate the withdrawal standard and immediate 

12 deposit requirements of paragraph (4) or (5) of section 

13 303(a) of the Social Security Act (42 U.S.C. 503(a)) or 

14 paragraph (3) or (4) of section 3304(a) of the Internal 

15 Revenue Code of 1986. 

16 (c) LIMITATION ON RETENTION AUTHORITY.—The 

17 authority of a State to retain any amount pursuant to 

18 paragraph (4) or (5) of subsection (a) and under section 

19 2102(d)(4), section 2104(f)(3)(C), and 2107(e)(3)(C) of 

20 the CARES Act shall apply only— 

21 (1) with respect to an amount recovered on or 

22 after the date of enactment of this Act; and 

23 (2) during the 10-year period beginning on the 

24 date on which such amount was received by an indi25 vidual not entitled to such amount. 


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1 SEC. 3. PERMISSIBLE USES OF UNEMPLOYMENT FUND FOR 

2 PROGRAM ADMINISTRATION. 

3 (a) WITHDRAWAL STANDARD IN THE INTERNAL

4 REVENUE CODE.—Section 3304(a)(4) of the Internal 

5 Revenue Code of 1986 is amended— 

6 (1) in subparagraph (F), by striking ‘‘and’’ 

7 after the semicolon; and 

8 (2) by inserting after subparagraph (G) the fol9 lowing new subparagraphs: 

10 ‘‘(H) provided the certifications made by 

11 the State as described in section 4 of the Pro12 tecting Taxpayers and Victims of Unemploy13 ment Fraud Act are in effect at the time of ap14 proval of the State law under this subsection, 

15 an amount, not to exceed 5 percent, of any 

16 overpayment of compensation recovered by the 

17 State (other than an overpayment made as the 

18 result of agency error) may, immediately fol19 lowing the State’s receipt of such recovered 

20 amount, be deposited in a State fund from 

21 which money may be withdrawn for— 

22 ‘‘(i) the payment of costs of deterring, 

23 detecting, and preventing improper pay24 ments; 

25 ‘‘(ii) purposes relating to the classi26 fication of employees and the provisions of 


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1 State law implementing section 303(k) of 

2 the Social Security Act; 

3 ‘‘(iii) the payment to the Secretary of 

4 the Treasury to the credit of the account 

5 of the State in the Unemployment Trust 

6 Fund; 

7 ‘‘(iv) modernizing the State’s unem8 ployment insurance technology infrastruc9 ture; or 

10 ‘‘(v) otherwise assisting the State in 

11 improving the timely and accurate admin12 istration of the State’s unemployment com13 pensation law; and 

14 ‘‘(I) provided the certifications made by 

15 the State as described in section 4 of the Pro16 tecting Taxpayers and Victims of Unemploy17 ment Fraud Act are in effect at the time of ap18 proval of the State law under this subsection, 

19 an amount, not to exceed 5 percent, of any pay20 ments of contributions, or payments in lieu of 

21 contributions, that are collected as a result of 

22 an investigation and assessment by the State 

23 agency may, immediately following receipt of 

24 such payments, be deposited in a State fund 


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1 from which moneys may be withdrawn for the 

2 purposes specified in subparagraph (H);’’. 

3 (b) DEFINITION OF UNEMPLOYMENT FUND.—Sec4 tion 3306(f) of the Internal Revenue Code of 1986 is 

5 amended by striking ‘‘and for refunds of sums’’ and all 

6 that follows and inserting ‘‘, except as otherwise provided 

7 in section 3304(a)(4), section 303(a)(5) of the Social Se8 curity Act, or any other provision of Federal unemploy9 ment compensation law.’’. 

10 (c) WITHDRAWAL STANDARD IN SOCIAL SECURITY

11 ACT.—Section 303(a)(5) of the Social Security Act (42 

12 U.S.C. 503(a)(5)) is amended by striking ‘‘and for refunds 

13 of sums’’ and all that follows and inserting ‘‘except as oth14 erwise provided in this section, section 3304(a)(4) of the 

15 Internal Revenue Code of 1986, or any other provisions 

16 of Federal unemployment compensation law; and’’. 

17 (d) IMMEDIATE DEPOSIT REQUIREMENTS IN THE IN18 TERNAL REVENUE CODE.—Section 3304(a)(3) of the In19 ternal Revenue Code of 1986 is amended to read as fol20 lows: 

21 ‘‘(3) all money received in the unemployment 

22 fund shall immediately upon such receipt be paid 

23 over to the Secretary of the Treasury to the credit 

24 of the Unemployment Trust Fund established by 


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1 section 904 of the Social Security Act (42 U.S.C. 

2 1104), except for— 

3 ‘‘(A) refunds of sums improperly paid into 

4 such fund; 

5 ‘‘(B) refunds paid in accordance with the 

6 provisions of section 3305(b); and 

7 ‘‘(C) amounts deposited in a State fund in 

8 accordance with subparagraph (H) or (I) of 

9 paragraph (4);’’. 

10 (e) IMMEDIATE DEPOSIT REQUIREMENT IN SOCIAL

11 SECURITY ACT REQUIREMENT.—Section 303(a)(4) of the 

12 Social Security Act (42 U.S.C. 503(a)(4)) is amended by 

13 striking the parenthetical and inserting ‘‘(except as other14 wise provided in this section, section 3304(a)(3) of the In15 ternal Revenue Code of 1986, or any other provisions of 

16 Federal unemployment compensation law)’’. 

17 (f) APPLICATION TO FEDERAL PAYMENTS.—When 

18 administering any Federal program providing compensa19 tion (as defined in section 3306 of the Internal Revenue 

20 Code of 1986), the State shall use the authority provided 

21 under subparagraphs (H) and (I) of section 3304(a)(4) 

22 of such Code in the same manner as such authority is 

23 used with respect to improper payments made under the 

24 State unemployment compensation law. With respect to 

25 improper Federal payments recovered consistent with the 


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1 authority under subparagraphs (H) and (I) of such sec2 tion, the State shall immediately deposit the same percent3 age of the recovered payments into the same State fund 

4 as provided in the State law implementing that section. 

5 (g) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to overpayments or payments or 

7 contributions (or payments in lieu of contributions) that 

8 are collected as a result of an investigation and assessment 

9 by the State agency after the end of the 2-year period be10 ginning on the date of the enactment of this Act, except 

11 that nothing in this section shall be interpreted to prevent 

12 a State from amending its law before the end of the 2- 

13 year period beginning on the date of the enactment of this 

14 Act. 

15 SEC. 4. PREVENTING UNEMPLOYMENT COMPENSATION 

16 FRAUD THROUGH DATA MATCHING. 

17 (a) IN GENERAL.—As a condition for the eligibility 

18 of a State to implement the exceptions to the withdrawal 

19 standard described in subparagraphs (H) and (I) of sec20 tion 3304(a)(4) of the Internal Revenue Code, the State 

21 shall certify each of the following: 

22 (1) INTEGRITY DATA HUB.—The State uses the 

23 system designated by the Secretary of Labor (or an24 other system at the discretion of the State) for 

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1 pensation to prevent and detect fraud and improper 

2 payments. 

3 (2) USE OF FRAUD PREVENTION AND DETEC4 TION SYSTEMS.—The State has established proce5 dures to do the following: 

6 (A) NATIONAL DIRECTORY OF NEW

7 HIRES.—Use the National Directory of New 

8 Hires established under section 453(i) of the 

9 Social Security Act— 

10 (i) to compare information in such Di11 rectory against information about individ12 uals claiming unemployment compensation 

13 to identify any such individuals who may 

14 have become employed; 

15 (ii) to take timely action to verify 

16 whether the individuals identified pursuant 

17 to clause (i) are employed; and 

18 (iii) upon verification pursuant to 

19 clause (ii), to take appropriate action to 

20 suspend or modify unemployment com21 pensation payments, and to initiate recov22 ery of any improper payments that have 

23 been made. 

24 (B) STATE INFORMATION DATA EXCHANGE

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1 change System (or another system at the dis2 cretion of the State) to facilitate employer re3 sponses to requests for information from State 

4 workforce agencies. 

5 (C) INCARCERATED INDIVIDUALS.—Seek 

6 information from the Commissioner of Social 

7 Security under sections 202(x)(3)(B)(iv) and 

8 1611(e)(1)(I)(iii) of the Social Security Act, or 

9 from such other sources as the State agency de10 termines appropriate, to obtain the information 

11 necessary to carry out the provisions of a State 

12 law under which an individual who is confined 

13 in a jail, prison, or other penal institution or 

14 correctional facility is ineligible for unemploy15 ment compensation on account of such individ16 uals inability to satisfy the requirement under 

17 section 303(a)(12) of such Act. 

18 (D) DECEASED INDIVIDUALS.—Compare 

19 information of individuals claiming unemploy20 ment compensation against the information re21 garding deceased individuals furnished to or 

22 maintained by the Commissioner of Social Se23 curity under section 205(r) of the Social Secu24 rity Act. 


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1 (b) UNEMPLOYMENT COMPENSATION.—For the pur2 poses of this section, any reference to unemployment com3 pensation shall be considered to refer to compensation as 

4 defined in section 3306 of the Internal Revenue Code of 

5 1986. 

6 SEC. 5. EXTENSION OF EMERGENCY STATE STAFFING 

7 FLEXIBILITY. 

8 If a State modifies its unemployment compensation 

9 law and policies with respect to personnel standards on 

10 a merit basis on an emergency temporary basis as deter11 mined by the Secretary, including for detection, pursuit, 

12 and recovery of fraudulent overpayments, subject to the 

13 succeeding sentence, such modifications shall be dis14 regarded for the purposes of applying section 303 of the 

15 Social Security Act (42 U.S.C. 503) and section 3304 of 

16 the Internal Revenue Code of 1986 to such State law. 

17 Such modifications may continue through December 31, 

18 2030. 

19 SEC. 6. FRAUD ENFORCEMENT HARMONIZATION. 

20 Notwithstanding any other provision of law, any 

21 criminal charge or civil enforcement action alleging that 

22 an individual engaged in fraud with respect to compensa23 tion (as defined in section 3306 of the Internal Revenue 

24 Code of 1986) shall be filed not later than 10 years after 

25 the offense was committed. 


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1 SEC. 7. BUDGET OFFSET. 

2 Section 2118 of the CARES Act (15 U.S.C. 9034) 

3 is repealed. 

Æ 


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