118TH CONGRESS 

1ST SESSION H. R. 1163 

AN ACT 

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, 
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1 SECTION 1. SHORT TITLE. 

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

3 and Victims of Unemployment Fraud Act’’. 

4 SEC. 2. RECOVERING FEDERAL FRAUDULENT COVID UNEM5 PLOYMENT COMPENSATION PAYMENTS. 

6 (a) ALLOWING STATES TO RETAIN PERCENTAGE OF

7 OVERPAYMENTS FOR PROGRAM INTEGRITY.— 

8 (1) PANDEMIC UNEMPLOYMENT ASSISTANCE.— 

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

10 9021(d)) is amended by amending paragraph (4) to 

11 read as follows: 

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

13 2107(e) shall apply with respect to pandemic unem14 ployment assistance under this section by sub15 stituting ‘pandemic unemployment assistance’ for 

16 ‘pandemic emergency unemployment compensation’ 

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

18 (2) FEDERAL PANDEMIC UNEMPLOYMENT COM19 PENSATION.—Section 2104(f)(3) of such Act (15 

20 U.S.C. 9023(f)(3)) is amended— 

21 (A) in subparagraph (A)— 

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

23 ‘‘10-year’’; and 

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

25 may retain a percentage of any amounts 
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1 recovered as described in subparagraph 

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

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

4 ‘‘(C) RETENTION OF PERCENTAGE OF RE5 COVERED FUNDS.—The State agency may re6 tain 25 percent of any amount recovered from 

7 overpayments of Federal Pandemic Unemploy8 ment Compensation or Mixed Earner Unem9 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 fol12 lowing: 

13 ‘‘(i) Modernizing unemployment com14 pensation systems and information tech15 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 overpay20 ments. 

21 ‘‘(iii) Hiring fraud investigators and 

22 prosecutors. 

23 ‘‘(iv) Other program integrity activi24 ties as determined by the State.’’; 
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1 (3) PANDEMIC EMERGENCY UNEMPLOYMENT

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

3 (15 U.S.C. 9025(e)(3)) is amended— 

4 (A) in subparagraph (A)— 

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

6 ‘‘10-year’’; and 

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

8 may retain a percentage of any amounts 

9 recovered as described in subparagraph 

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

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

12 ‘‘(C) RETENTION OF PERCENTAGE OF RE13 COVERED FUNDS.—The State agency may re14 tain 25 percent of any amount recovered from 

15 overpayments of pandemic emergency unem16 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 fol19 lowing: 

20 ‘‘(i) Modernizing unemployment com21 pensation systems and information tech22 nology to improve identity verification and 

23 validation of applicants. 

24 ‘‘(ii) Reimbursement of administrative 

25 costs incurred by the State to identify and 
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1 pursue recovery of fraudulent overpay2 ments. 

3 ‘‘(iii) Hiring fraud investigators and 

4 prosecutors. 

5 ‘‘(iv) Other program integrity activi6 ties as determined by the State.’’. 

7 (4) EXTENDED UNEMPLOYMENT COMPENSA8 TION.—A State to which section 4105 of the Fami9 lies First Coronavirus Response Act (26 U.S.C. 

10 3304 note) applied may retain 25 percent of any 

11 amount recovered from overpayments of sharable ex12 tended compensation and sharable regular com13 pensation (as such terms are defined in section 204 

14 of the Federal-State Extended Unemployment Com15 pensation Act of 1970) paid for weeks of unemploy16 ment described in such section 4105 that were deter17 mined to be made due to fraud. Amounts so retained 

18 by the State agency shall be used for any of the pur19 poses described in section 2107(e)(3)(C) of the 

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

21 (5) FIRST WEEK OF REGULAR COMPENSA22 TION.—A State that was a party to an agreement 

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

24 9024) may retain 25 percent of any amount recov25 ered from overpayments of regular compensation 
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1 paid to individuals by the State for their first week 

2 of regular unemployment for which the State re3 ceived full Federal funding under such agreement in 

4 any case in which such overpayments were deter5 mined to be made due to fraud. Amounts so retained 

6 by the State agency shall be used for any of the pur7 poses described in section 2107(e)(3)(C) of the 

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

9 (b) TREATMENT UNDER WITHDRAWAL STANDARD

10 AND IMMEDIATE DEPOSIT REQUIREMENTS.—Any amount 

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

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

13 2104(f)(3)(C), or 2107(e)(3)(C) of the CARES Act, and 

14 used for the purposes described therein, shall not be con15 sidered to violate the withdrawal standard and immediate 

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

17 303(a) of the Social Security Act (42 U.S.C. 503(a)) or 

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

19 Revenue Code of 1986. 

20 (c) LIMITATION ON RETENTION AUTHORITY.—The 

21 authority of a State to retain any amount pursuant to 

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

23 2102(d)(4), section 2104(f)(3)(C), and 2107(e)(3)(C) of 

24 the CARES Act shall apply only— 
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1 (1) with respect to an amount recovered on or 

2 after the date of enactment of this Act; and 

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

4 date on which such amount was received by an indi5 vidual not entitled to such amount. 

6 SEC. 3. PERMISSIBLE USES OF UNEMPLOYMENT FUND FOR 

7 PROGRAM ADMINISTRATION. 

8 (a) WITHDRAWAL STANDARD IN THE INTERNAL

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

10 Revenue Code of 1986 is amended— 

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

12 after the semicolon; and 

13 (2) by inserting after subparagraph (G) the fol14 lowing new subparagraphs: 

15 ‘‘(H) provided the certifications made by 

16 the State as described in section 4 of the Pro17 tecting Taxpayers and Victims of Unemploy18 ment Fraud Act are in effect at the time of ap19 proval of the State law under this subsection, 

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

21 overpayment of compensation recovered by the 

22 State (other than an overpayment made as the 

23 result of agency error) may, immediately fol24 lowing the State’s receipt of such recovered 
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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 pay5 ments; 

6 ‘‘(ii) purposes relating to the proper 

7 classification of employees and the provi8 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 unem15 ployment insurance technology infrastruc16 ture; or 

17 ‘‘(v) otherwise assisting the State in 

18 improving the timely and accurate admin19 istration of the State’s unemployment com20 pensation law; and 

21 ‘‘(I) provided the certifications made by 

22 the State as described in section 4 of the Pro23 tecting Taxpayers and Victims of Unemploy24 ment Fraud Act are in effect at the time of ap25 proval of the State law under this subsection, 
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1 an amount, not to exceed 5 percent, of any pay2 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.—Sec10 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 Se14 curity Act, or any other provision of Federal unemploy15 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 oth20 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 IN24 TERNAL REVENUE CODE.—Section 3304(a)(3) of the In-
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1 ternal Revenue Code of 1986 is amended to read as fol2 lows: 

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

4 fund shall immediately upon such receipt be paid 

5 over to the Secretary of the Treasury to the credit 

6 of the Unemployment Trust Fund established by 

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

8 1104), except for— 

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

10 such fund; 

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

12 provisions of section 3305(b); and 

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

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

15 paragraph (4);’’. 

16 (e) IMMEDIATE DEPOSIT REQUIREMENT IN SOCIAL

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

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

19 striking the parenthetical and inserting ‘‘(except as other20 wise provided in this section, section 3304(a)(3) of the In21 ternal Revenue Code of 1986, or any other provisions of 

22 Federal unemployment compensation law)’’. 

23 (f) APPLICATION TO FEDERAL PAYMENTS.—When 

24 administering any Federal program providing compensa25 tion (as defined in section 3306 of the Internal Revenue 
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1 Code of 1986), the State shall use the authority provided 

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

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

4 used with respect to improper payments made under the 

5 State unemployment compensation law. With respect to 

6 improper Federal payments recovered consistent with the 

7 authority under subparagraphs (H) and (I) of such sec8 tion, the State shall immediately deposit the same percent9 age of the recovered payments into the same State fund 

10 as provided in the State law implementing that section. 

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

12 this section shall apply to overpayments or payments or 

13 contributions (or payments in lieu of contributions) that 

14 are collected as a result of an investigation and assessment 

15 by the State agency after the end of the 2-year period be16 ginning on the date of the enactment of this Act, except 

17 that nothing in this section shall be interpreted to prevent 

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

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

20 Act. 

21 SEC. 4. PREVENTING UNEMPLOYMENT COMPENSATION 

22 FRAUD THROUGH DATA MATCHING. 

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

24 of a State to implement the exceptions to the withdrawal 

25 standard described in subparagraphs (H) and (I) of sec-
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1 tion 3304(a)(4) of the Internal Revenue Code, the State 

2 shall certify each of the following: 

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

4 system designated by the Secretary of Labor (or an5 other system at the discretion of the State) for 

6 cross-matching claimants of unemployment com7 pensation to prevent and detect fraud and improper 

8 payments. 

9 (2) USE OF FRAUD PREVENTION AND DETEC10 TION SYSTEMS.—The State has established proce11 dures to do the following: 

12 (A) NATIONAL DIRECTORY OF NEW

13 HIRES.—Use the National Directory of New 

14 Hires established under section 453(i) of the 

15 Social Security Act— 

16 (i) to compare information in such Di17 rectory against information about individ18 uals claiming unemployment compensation 

19 to identify any such individuals who may 

20 have become employed; 

21 (ii) to take timely action to verify 

22 whether the individuals identified pursuant 

23 to clause (i) are employed; and 

24 (iii) upon verification pursuant to 

25 clause (ii), to take appropriate action to 
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1 suspend or modify unemployment com2 pensation payments, and to initiate recov3 ery of any improper payments that have 

4 been made. 

5 (B) STATE INFORMATION DATA EXCHANGE

6 SYSTEM.—Use the State Information Data Ex7 change System (or another system at the dis8 cretion of the State) to facilitate employer re9 sponses to requests for information from State 

10 workforce agencies. 

11 (C) INCARCERATED INDIVIDUALS.—Seek 

12 information from the Commissioner of Social 

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

14 1611(e)(1)(I)(iii) of the Social Security Act, or 

15 from such other sources as the State agency de16 termines appropriate, to obtain the information 

17 necessary to carry out the provisions of a State 

18 law under which an individual who is confined 

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

20 correctional facility is ineligible for unemploy21 ment compensation on account of such individ22 uals inability to satisfy the requirement under 

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

24 (D) DECEASED INDIVIDUALS.—Compare 

25 information of individuals claiming unemploy-
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1 ment compensation against the information re2 garding deceased individuals furnished to or 

3 maintained by the Commissioner of Social Se4 curity under section 205(r) of the Social Secu5 rity Act. 

6 (b) UNEMPLOYMENT COMPENSATION.—For the pur7 poses of this section, any reference to unemployment com8 pensation shall be considered to refer to compensation as 

9 defined in section 3306 of the Internal Revenue Code of 

10 1986. 

11 SEC. 5. EXTENSION OF EMERGENCY STATE STAFFING 

12 FLEXIBILITY. 

13 If a State modifies its unemployment compensation 

14 law and policies with respect to personnel standards on 

15 a merit basis on an emergency temporary basis as deter16 mined by the Secretary, including for detection, pursuit, 

17 and recovery of fraudulent overpayments under Federal 

18 pandemic unemployment compensation programs author19 ized under the CARES Act (15 U.S.C. 9021 et seq.), sub20 ject to the succeeding sentence, such modifications shall 

21 be disregarded for the purposes of applying section 303 

22 of the Social Security Act (42 U.S.C. 503) and section 

23 3304 of the Internal Revenue Code of 1986 to such State 

24 law. Such modifications may continue through December 

25 31, 2030. 
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1 SEC. 6. FRAUD ENFORCEMENT HARMONIZATION. 

2 Notwithstanding any other provision of law, any 

3 criminal charge or civil enforcement action alleging that 

4 an individual engaged in fraud with respect to compensa5 tion (as defined in section 3306 of the Internal Revenue 

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

7 the offense was committed. 

8 SEC. 7. BUDGET OFFSET. 

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

10 is repealed. 

11 SEC. 8. STATE FUND CONTINGENCY. 

12 Subject to appropriations, the unobligated balance as 

13 of the day before the date of the enactment of this Act 

14 of amounts made available under section 2118 of the 

15 CARES Act (15 U.S.C. 9034) shall be transferred to the 

16 Secretary of the Treasury and periodically credited, on an 

17 as-needed basis, to the appropriate State account in the 

18 Unemployment Trust Fund established by section 904 of 

19 the Social Security Act (42 U.S.C. 1104) in an amount 

20 that replaces the amount deposited by a State in a State 

21 fund in accordance with subparagraph (H) or (I) of sec22 tion 3304(a)(4) of the Internal Revenue Code of 1986 (as 

23 amended by section 3(a) of this Act) if the amount in such 

24 State account is less than the amount that would be in 
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1 such State account if such subparagraphs had not been 

2 enacted. 

Passed the House of Representatives May 11, 2023. 

Attest: 

Clerk. 

118TH CONGRESS 

1ST SESSION H. R. 1163 

AN ACT 

To provide incentives for States to recover frauducompensation, and for other purposes. lently paid Federal and State unemployment