Protecting Taxpayers and Victims of Unemployment Fraud Act

Subjects: Labor and Employment, Cardiovascular and respiratory health, Congressional oversight, Criminal investigation, prosecution, interrogation, Debt collection, Emergency medical services and trauma care, Employee hiring, Fraud offenses and financial crimes, Government employee pay, benefits, personnel management, Government information and archives, Infectious and parasitic diseases, State and local government operations, Unemployment

Summary:  <p><b>Protecting Taxpayers and Victims of Unemployment Fraud Act</b></p> <p>This bill addresses fraud and overpayments of pandemic unemployment insurance (UI) benefits, including by providing incentives for states to investigate and recover overpayments of these benefits.</p> <p>Specifically, the bill allows states to retain 25% of any recovered fraudulent overpayments. These retained funds may be used for modernizing unemployment compensation systems and information technology, reimbursing administrative costs, hiring fraud investigators and prosecutors, and for other program integrity activities.</p> <p>Additionally, the bill allows states to retain 5% of any overpayments of regular and extended UI benefits. A state must, in order to retain these overpayments, certify that it has met certain conditions for data matching.</p> <p>Next, the bill extends from 3 to 10 years the time during which states can recover overpayments of pandemic UI benefits.</p> <p>Further, the bill extends flexibilities for states to hire temporary staff on a noncompetitive basis to identify, pursue, and recover fraudulent overpayments under federal pandemic unemployment compensation programs authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).</p> <p>The bill also extends from 5 to 10 years the statute of limitations for federal criminal charges or civil enforcement actions related to UI fraud.</p> <p>Finally, the bill repeals a section of the CARES Act (as amended by the American Rescue Plan of 2021) that provided funding for UI program integrity activities. Subject to appropriations, the unobligated balance of this funding shall be transferred to the Department of the Treasury and periodically credited to the appropriate state account in the Unemployment Trust Fund, as outlined by the bill.</p>

<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1163 Introduced in House (IH)]

&lt;DOC&gt;






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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Protecting Taxpayers and Victims of 
Unemployment Fraud Act''.

SEC. 2. RECOVERING FEDERAL FRAUDULENT COVID UNEMPLOYMENT COMPENSATION 
              PAYMENTS.

    (a) Allowing States To Retain Percentage of Overpayments for 
Program Integrity.--
            (1) Pandemic unemployment assistance.--Section 2102(d) of 
        the CARES Act (15 U.S.C. 9021(d)) is amended by amending 
        paragraph (4) to read as follows:
            ``(4) Fraud and overpayments.--Section 2107(e) shall apply 
        with respect to pandemic unemployment assistance under this 
        section by substituting `pandemic unemployment assistance' for 
        `pandemic emergency unemployment compensation' each place it 
        appears in such section 2107(e).''.
            (2) Federal pandemic unemployment compensation.--Section 
        2104(f)(3) of such Act (15 U.S.C. 9023(f)(3)) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``3-year'' and inserting 
                        ``10-year''; and
                            (ii) by inserting ``, except that a State 
                        may retain a percentage of any amounts 
                        recovered as described in subparagraph (C)'' 
                        before the period at the end; and
                    (B) by adding at the end the following:
                    ``(C) Retention of percentage of recovered funds.--
                The State agency may retain 25 percent of any amount 
                recovered from overpayments of Federal Pandemic 
                Unemployment Compensation or Mixed Earner Unemployment 
                Compensation that were determined to be made due to 
                fraud. Amounts so retained by the State agency shall be 
                used for any of following:
                            ``(i) Modernizing unemployment compensation 
                        systems and information technology to improve 
                        identity verification and validation of 
                        applicants.
                            ``(ii) Reimbursement of administrative 
                        costs incurred by the State to identify and 
                        pursue recovery of fraudulent overpayments.
                            ``(iii) Hiring fraud investigators and 
                        prosecutors.
                            ``(iv) Other program integrity activities 
                        as determined by the State.''.
            (3) Pandemic emergency unemployment compensation.--Section 
        2107(e)(3) of such Act (15 U.S.C. 9025(e)(3)) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``3-year'' and inserting 
                        ``10-year''; and
                            (ii) by inserting ``, except that a State 
                        may retain a percentage of any amounts 
                        recovered as described in subparagraph (C)'' 
                        before the period at the end; and
                    (B) by adding at the end the following:
                    ``(C) Retention of percentage of recovered funds.--
                The State agency may retain 25 percent of any amount 
                recovered from overpayments of pandemic emergency 
                unemployment compensation that were determined to be 
                made due to fraud. Amounts so retained by the State 
                agency shall be used for any of following:
                            ``(i) Modernizing unemployment compensation 
                        systems and information technology to improve 
                        identity verification and validation of 
                        applicants.
                            ``(ii) Reimbursement of administrative 
                        costs incurred by the State to identify and 
                        pursue recovery of fraudulent overpayments.
                            ``(iii) Hiring fraud investigators and 
                        prosecutors.
                            ``(iv) Other program integrity activities 
                        as determined by the State.''.
            (4) Extended unemployment compensation.--A State to which 
        section 4105 of the Families First Coronavirus Response Act (26 
        U.S.C. 3304 note) applied may retain 25 percent of any amount 
        recovered from overpayments of sharable extended compensation 
        and sharable regular compensation (as such terms are defined in 
        section 204 of the Federal-State Extended Unemployment 
        Compensation Act of 1970) paid for weeks of unemployment 
        described in such section 4105 that were determined to be made 
        due to fraud. Amounts so retained by the State agency shall be 
        used for any of the purposes described in section 2107(e)(3)(C) 
        of the CARES Act (15 U.S.C. 9025(e)(3)(C)).
            (5) First week of regular compensation.--A State that was a 
        party to an agreement under section 4105 of the CARES Act (15 
        U.S.C. 9024) may retain 25 percent of any amount recovered from 
        overpayments of regular compensation paid to individuals by the 
        State for their first week of regular unemployment for which 
        the State received full Federal funding under such agreement in 
        any case in which such overpayments were determined to be made 
        due to fraud. Amounts so retained by the State agency shall be 
        used for any of the purposes described in section 2107(e)(3)(C) 
        of the CARES Act (15 U.S.C. 9025(e)(3)(C)).
    (b) Treatment Under Withdrawal Standard and Immediate Deposit 
Requirements.--Any amount retained by a State pursuant to paragraph (4) 
or (5) of subsection (a) or under section 2102(d)(4), section 
2104(f)(3)(C), or 2107(e)(3)(C) of the CARES Act, and used for the 
purposes described therein, shall not be considered to violate the 
withdrawal standard and immediate deposit requirements of paragraph (4) 
or (5) of section 303(a) of the Social Security Act (42 U.S.C. 503(a)) 
or paragraph (3) or (4) of section 3304(a) of the Internal Revenue Code 
of 1986.
    (c) Limitation on Retention Authority.--The authority of a State to 
retain any amount pursuant to paragraph (4) or (5) of subsection (a) 
and under section 2102(d)(4), section 2104(f)(3)(C), and 2107(e)(3)(C) 
of the CARES Act shall apply only--
            (1) with respect to an amount recovered on or after the 
        date of enactment of this Act; and
            (2) during the 10-year period beginning on the date on 
        which such amount was received by an individual not entitled to 
        such amount.

SEC. 3. PERMISSIBLE USES OF UNEMPLOYMENT FUND FOR PROGRAM 
              ADMINISTRATION.

    (a) Withdrawal Standard in the Internal Revenue Code.--Section 
3304(a)(4) of the Internal Revenue Code of 1986 is amended--
            (1) in subparagraph (F), by striking ``and'' after the 
        semicolon; and
            (2) by inserting after subparagraph (G) the following new 
        subparagraphs:
                    ``(H) provided the certifications made by the State 
                as described in section 4 of the Protecting Taxpayers 
                and Victims of Unemployment Fraud Act are in effect at 
                the time of approval of the State law under this 
                subsection, an amount, not to exceed 5 percent, of any 
                overpayment of compensation recovered by the State 
                (other than an overpayment made as the result of agency 
                error) may, immediately following the State's receipt 
                of such recovered amount, be deposited in a State fund 
                from which money may be withdrawn for--
                            ``(i) the payment of costs of deterring, 
                        detecting, and preventing improper payments;
                            ``(ii) purposes relating to the 
                        classification of employees and the provisions 
                        of State law implementing section 303(k) of the 
                        Social Security Act;
                            ``(iii) the payment to the Secretary of the 
                        Treasury to the credit of the account of the 
                        State in the Unemployment Trust Fund;
                            ``(iv) modernizing the State's unemployment 
                        insurance technology infrastructure; or
                            ``(v) otherwise assisting the State in 
                        improving the timely and accurate 
                        administration of the State's unemployment 
                        compensation law; and
                    ``(I) provided the certifications made by the State 
                as described in section 4 of the Protecting Taxpayers 
                and Victims of Unemployment Fraud Act are in effect at 
                the time of approval of the State law under this 
                subsection, an amount, not to exceed 5 percent, of any 
                payments of contributions, or payments in lieu of 
                contributions, that are collected as a result of an 
                investigation and assessment by the State agency may, 
                immediately following receipt of such payments, be 
                deposited in a State fund from which moneys may be 
                withdrawn for the purposes specified in subparagraph 
                (H);''.
    (b) Definition of Unemployment Fund.--Section 3306(f) of the 
Internal Revenue Code of 1986 is amended by striking ``and for refunds 
of sums'' and all that follows and inserting ``, except as otherwise 
provided in section 3304(a)(4), section 303(a)(5) of the Social 
Security Act, or any other provision of Federal unemployment 
compensation law.''.
    (c) Withdrawal Standard in Social Security Act.--Section 303(a)(5) 
of the Social Security Act (42 U.S.C. 503(a)(5)) is amended by striking 
``and for refunds of sums'' and all that follows and inserting ``except 
as otherwise provided in this section, section 3304(a)(4) of the 
Internal Revenue Code of 1986, or any other provisions of Federal 
unemployment compensation law; and''.
    (d) Immediate Deposit Requirements in the Internal Revenue Code.--
Section 3304(a)(3) of the Internal Revenue Code of 1986 is amended to 
read as follows:
            ``(3) all money received in the unemployment fund shall 
        immediately upon such receipt be paid over to the Secretary of 
        the Treasury to the credit of the Unemployment Trust Fund 
        established by section 904 of the Social Security Act (42 
        U.S.C. 1104), except for--
                    ``(A) refunds of sums improperly paid into such 
                fund;
                    ``(B) refunds paid in accordance with the 
                provisions of section 3305(b); and
                    ``(C) amounts deposited in a State fund in 
                accordance with subparagraph (H) or (I) of paragraph 
                (4);''.
    (e) Immediate Deposit Requirement in Social Security Act 
Requirement.--Section 303(a)(4) of the Social Security Act (42 U.S.C. 
503(a)(4)) is amended by striking the parenthetical and inserting 
``(except as otherwise provided in this section, section 3304(a)(3) of 
the Internal Revenue Code of 1986, or any other provisions of Federal 
unemployment compensation law)''.
    (f) Application to Federal Payments.--When administering any 
Federal program providing compensation (as defined in section 3306 of 
the Internal Revenue Code of 1986), the State shall use the authority 
provided under subparagraphs (H) and (I) of section 3304(a)(4) of such 
Code in the same manner as such authority is used with respect to 
improper payments made under the State unemployment compensation law. 
With respect to improper Federal payments recovered consistent with the 
authority under subparagraphs (H) and (I) of such section, the State 
shall immediately deposit the same percentage of the recovered payments 
into the same State fund as provided in the State law implementing that 
section.
    (g) Effective Date.--The amendments made by this section shall 
apply to overpayments or payments or contributions (or payments in lieu 
of contributions) that are collected as a result of an investigation 
and assessment by the State agency after the end of the 2-year period 
beginning on the date of the enactment of this Act, except that nothing 
in this section shall be interpreted to prevent a State from amending 
its law before the end of the 2-year period beginning on the date of 
the enactment of this Act.

SEC. 4. PREVENTING UNEMPLOYMENT COMPENSATION FRAUD THROUGH DATA 
              MATCHING.

    (a) In General.--As a condition for the eligibility of a State to 
implement the exceptions to the withdrawal standard described in 
subparagraphs (H) and (I) of section 3304(a)(4) of the Internal Revenue 
Code, the State shall certify each of the following:
            (1) Integrity data hub.--The State uses the system 
        designated by the Secretary of Labor (or another system at the 
        discretion of the State) for cross-matching claimants of 
        unemployment compensation to prevent and detect fraud and 
        improper payments.
            (2) Use of fraud prevention and detection systems.--The 
        State has established procedures to do the following:
                    (A) National directory of new hires.--Use the 
                National Directory of New Hires established under 
                section 453(i) of the Social Security Act--
                            (i) to compare information in such 
                        Directory against information about individuals 
                        claiming unemployment compensation to identify 
                        any such individuals who may have become 
                        employed;
                            (ii) to take timely action to verify 
                        whether the individuals identified pursuant to 
                        clause (i) are employed; and
                            (iii) upon verification pursuant to clause 
                        (ii), to take appropriate action to suspend or 
                        modify unemployment compensation payments, and 
                        to initiate recovery of any improper payments 
                        that have been made.
                    (B) State information data exchange system.--Use 
                the State Information Data Exchange System (or another 
                system at the discretion of the State) to facilitate 
                employer responses to requests for information from 
                State workforce agencies.
                    (C) Incarcerated individuals.--Seek information 
                from the Commissioner of Social Security under sections 
                202(x)(3)(B)(iv) and 1611(e)(1)(I)(iii) of the Social 
                Security Act, or from such other sources as the State 
                agency determines appropriate, to obtain the 
                information necessary to carry out the provisions of a 
                State law under which an individual who is confined in 
                a jail, prison, or other penal institution or 
                correctional facility is ineligible for unemployment 
                compensation on account of such individuals inability 
                to satisfy the requirement under section 303(a)(12) of 
                such Act.
                    (D) Deceased individuals.--Compare information of 
                individuals claiming unemployment compensation against 
                the information regarding deceased individuals 
                furnished to or maintained by the Commissioner of 
                Social Security under section 205(r) of the Social 
                Security Act.
    (b) Unemployment Compensation.--For the purposes of this section, 
any reference to unemployment compensation shall be considered to refer 
to compensation as defined in section 3306 of the Internal Revenue Code 
of 1986.

SEC. 5. EXTENSION OF EMERGENCY STATE STAFFING FLEXIBILITY.

    If a State modifies its unemployment compensation law and policies 
with respect to personnel standards on a merit basis on an emergency 
temporary basis as determined by the Secretary, including for 
detection, pursuit, and recovery of fraudulent overpayments, subject to 
the succeeding sentence, such modifications shall be disregarded for 
the purposes of applying section 303 of the Social Security Act (42 
U.S.C. 503) and section 3304 of the Internal Revenue Code of 1986 to 
such State law. Such modifications may continue through December 31, 
2030.

SEC. 6. FRAUD ENFORCEMENT HARMONIZATION.

    Notwithstanding any other provision of law, any criminal charge or 
civil enforcement action alleging that an individual engaged in fraud 
with respect to compensation (as defined in section 3306 of the 
Internal Revenue Code of 1986) shall be filed not later than 10 years 
after the offense was committed.

SEC. 7. BUDGET OFFSET.

     Section 2118 of the CARES Act (15 U.S.C. 9034) is repealed.
                                 &lt;all&gt;
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