Protecting Taxpayers and Victims of Unemployment Fraud Act

To provide incentives for States to recover fraudulently paid Federal and State unemployment compensation, and for other purposes. 1. Short title This Act may be cited as the Protecting Taxpayers and Victims of Unemployment Fraud Act 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) (4) Fraud and overpayments Section 2107(e) shall apply with respect to pandemic unemployment assistance under this section by substituting pandemic unemployment assistance pandemic emergency unemployment compensation . (2) Federal Pandemic Unemployment Compensation Section 2104(f)(3) of such Act ( 15 U.S.C. 9023(f)(3) (A) in subparagraph (A)— (i) by striking 3-year 10-year (ii) by inserting , except that a State may retain a percentage of any amounts recovered as described in subparagraph (C) (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) (A) in subparagraph (A)— (i) by striking 3-year 10-year (ii) by inserting , except that a State may retain a percentage of any amounts recovered as described in subparagraph (C) (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 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 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) section 3304(a) (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. 3. Permissible uses of unemployment fund for program administration (a) Withdrawal standard in the Internal Revenue Code Section 3304(a)(4) (1) in subparagraph (F), by striking 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 (i) the payment of costs of deterring, detecting, and preventing improper payments; (ii) purposes relating to the proper 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 . (b) Definition of unemployment fund Section 3306(f) and for refunds of sums , 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) and for refunds of sums except as otherwise provided in this section, section 3304(a)(4) (d) Immediate deposit requirements in the internal revenue code Section 3304(a)(3) (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 (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) (except as otherwise provided in this section, section 3304(a)(3) (f) Application to Federal payments When administering any Federal program providing compensation (as defined in section 3306 (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. 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 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 under Federal pandemic unemployment compensation programs authorized under the CARES Act ( 15 U.S.C. 9021 et seq. 42 U.S.C. 503 section 3304 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 7. Budget offset Section 2118 of the CARES Act ( 15 U.S.C. 9034 April 6, 2023 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed

Summary: Protecting Taxpayers and Victims of Unemployment Fraud Act 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. 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. 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. Next, the bill extends from 3 to 10 years the time during which states can recover overpayments of pandemic UI benefits. 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). 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. 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.