I 
110TH CONGRESS 
1ST SESSION H. R. 2806 
To reform the Federal unemployment benefits system, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 21, 2007 
Mr. ENGLISH of Pennsylvania (for himself, Mr. MCCOTTER, Mrs. CAPITO, and 
Mr. GERLACH) introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committee on 
Education and Labor, for a period to be subsequently determined by the 
Speaker, in each case for consideration of such provisions as fall within 
the jurisdiction of the committee concerned 
A BILL 
To reform the Federal unemployment benefits system, and 
for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Safety Net Enhancement Act’’. 
(b) TABLE OF CONTENTS.—The table of contents is 
as follows: 
Sec. 1. Short title; table of contents. 
TITLE I—ADMINISTRATIVE REFORMS 
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Sec. 101. Extended benefits trigger. 
Sec. 102. Increase and decrease in earnings credited to State accounts when 
States meet or fail to meet funding goals. 
Sec. 103. Interest-free advances to State accounts in Unemployment Trust 
Fund restricted to States which meet funding goals. 
Sec. 104. State collection of Federal unemployment tax. 
Sec. 105. Required distribution of State-specific information packets. 
TITLE II—REPEAL OF TAX ON UNEMPLOYMENT COMPENSATION 
Sec. 201. Repeal of tax on unemployment compensation. 
TITLE III—SAFETY NET REVIEW COMMISSION 
Sec. 301. Establishment. 
Sec. 302. Function. 
Sec. 303. Members. 
Sec. 304. Staff and other assistance. 
Sec. 305. Compensation. 
Sec. 306. Report. 
Sec. 307. Termination. 
TITLE I—ADMINISTRATIVE 
REFORMS 
SEC. 101. EXTENDED BENEFITS TRIGGER. 
(a) IN GENERAL.—Section 203(d) of the Federal- 
State Extended Unemployment Compensation Act of 1970 
(26 U.S.C. 3304 note) is amended— 
(1) in subparagraph (B) of paragraph (1), by 
striking ‘‘5 per centum’’ and inserting ‘‘4 per cen-
tum’’, and 
(2) in the first flush sentence following para-
graph (2), by striking ‘‘5’’ and inserting ‘‘4’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to weeks of unemployment be-
ginning 6 months or more after the date of the enactment 
of this Act. 
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SEC. 102. INCREASE AND DECREASE IN EARNINGS CRED-
ITED 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: 
‘‘(h) INCREASE
AND DECREASE
IN AMOUNT
OF 
EARNINGS ALLOCATED
TO STATE ACCOUNTS WHEN 
STATES MEET OR FAIL TO MEET FUNDING GOALS.—(1) 
If the average daily balance in a State account in the Un-
employment Trust Fund for any calendar quarter exceeds 
the funding goal of such State, the amount otherwise cred-
itable to such account under subsection (e) for such quar-
ter shall be increased by the interest premium on such 
excess. If the average daily balance in such a State ac-
count 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 ‘inter-
est premium’ means, for any calendar quarter— 
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‘‘(A) with respect to the State with the largest 
percentage value of excess of the average daily bal-
ance 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 ex-
cess, and 
‘‘(B) with respect to each other State, the prod-
uct of— 
‘‘(i) the amount of the excess of the aver-
age 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 ex-
cess, bears to 
‘‘(II) the percentage value of the ex-
cess of the State referred to in subpara-
graph (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 ag-
gregate interest penalties for such quarter. 
‘‘(4) For purposes of this subsection, the term ‘inter-
est penalty’ means, for any calendar quarter— 
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‘‘(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 prod-
uct 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 ex-
cess of the State referred to in subpara-
graph (A). 
‘‘(5) For purposes of this subsection, the term ‘fund-
ing 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 cal-
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endar quarter, during which the State paid the greatest 
amount of unemployment benefits. 
‘‘(6) For purposes of this subsection, the term ‘per-
centage value’ means— 
‘‘(A) with respect to any excess of the average 
daily balance in a State account in the Unemploy-
ment 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
AC-
COUNTS.—Subsection (e) of section 904 of the So-
cial Security Act (42 U.S.C. 1104(e)) is amended in 
the first sentence by inserting ‘‘(as modified by sub-
section (h))’’ after ‘‘a proportionate part’’. 
(2) INTEREST RATE ON REPAYMENT OF AD-
VANCES DETERMINED WITHOUT REGARD TO INTER-
EST PREMIUMS OR PENALTIES ON AMOUNTS CRED-
ITED 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 
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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 sub-
section (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, 2010. 
SEC. 103. INTEREST-FREE ADVANCES TO STATE ACCOUNTS 
IN 
UNEMPLOYMENT 
TRUST 
FUND 
RE-
STRICTED 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 
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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. 
SEC. 104. STATE COLLECTION OF FEDERAL UNEMPLOY-
MENT TAX. 
(a) IN GENERAL.—Chapter 23 of the Internal Rev-
enue Code of 1986 (relating to Federal Unemployment 
Tax Act) is amended by redesignating section 3311 as sec-
tion 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 em-
ployer who pays contributions, with respect to any wages, 
into an unemployment fund maintained under the unem-
ployment 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 REQUIRE-
MENTS.—Payment under subsection (a) of the tax im-
posed 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 
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paid payment, with respect to such wages, of contributions 
into an unemployment fund maintained under the unem-
ployment 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
SEC-
RETARY.—Each State making an election under sub-
section (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 sub-
mitted to such State under subsection (a) and a copy of 
the State tax return of each employer making such a sub-
mission. The Secretary may, after consultation with such 
organizations or other entities as the Secretary considers 
appropriate, prescribe regulations requiring that addi-
tional 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.’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
SEC. 105. REQUIRED DISTRIBUTION OF STATE-SPECIFIC IN-
FORMATION 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 ex-
plaining unemployment insurance eligibility condi-
tions.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to certifications of States for 
2008 and thereafter, except that section 3304(a)(20) of 
the Internal Revenue Code of 1986, as added by sub-
section (a), shall not be a requirement for the State law 
of any State prior to July 1, 2009, if the legislature of 
such State does not meet in a regular session which closes 
during the calendar year 2008. 
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TITLE II—REPEAL OF TAX ON 
UNEMPLOYMENT COMPENSA-
TION 
SEC. 201. REPEAL OF TAX ON UNEMPLOYMENT COMPENSA-
TION. 
(a) IN GENERAL.—Section 85 of the Internal Rev-
enue Code of 1986 is hereby repealed. 
(b) CONFORMING AMENDMENTS.— 
(1) Subsection (p) of section 3402 of such Code 
is amended by striking paragraph (2) and by redes-
ignating paragraph (3) as paragraph (2). 
(2) Section 6050B of such Code (relating to re-
turns relating to unemployment compensation) is 
hereby repealed. 
(3) The table of sections for part II of sub-
chapter B of chapter 1 of such Code is amended by 
striking the item relating to section 85. 
(4) The table of sections for subpart B of part 
III of subchapter A of chapter 61 of such Code is 
amended by striking the item relating to section 
6050B. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts received after Decem-
ber 31, 2007. 
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TITLE III—SAFETY NET REVIEW 
COMMISSION 
SEC. 301. ESTABLISHMENT. 
The Secretary of Labor shall establish an advisory 
commission to be known as the ‘‘Safety Net Review Com-
mission’’ (hereinafter in this title referred to as the ‘‘Com-
mission’’). 
SEC. 302. FUNCTION. 
It shall be the function of the Commission to evaluate 
the unemployment compensation program, the Trade Ad-
justment Assistance program, the Job Corps program, a 
program under the Workforce Investment Act, and other 
employment assistance programs, including the purpose, 
goals, countercyclical effectiveness, coverage, benefit ade-
quacy, trust fund solvency, funding of State administra-
tive costs, administrative efficiency, and any other aspects 
of each such program, as well as any related provisions 
of the Internal Revenue Code of 1986, and to make rec-
ommendations for their improvement. 
SEC. 303. MEMBERS. 
(a) IN GENERAL.—The Commission shall consist of 
11 members as follows: 
(1) 5 members appointed by the President, to 
include representatives of business, labor, State gov-
ernment, and the public. 
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(2) 3 members appointed by the President pro 
tempore of the Senate, in consultation with the 
Chairman and ranking member of the Committee on 
Finance of the Senate. 
(3) 3 members appointed by the Speaker of the 
House of Representatives, in consultation with the 
Chairman and ranking member of the Committee on 
Ways and Means of the House of Representatives. 
(b) QUALIFICATIONS.—In appointing members under 
paragraphs (2) and (3) of subsection (a), the President 
pro tempore of the Senate and the Speaker of the House 
of Representatives shall each appoint— 
(1) 1 representative of the interests of business, 
(2) 1 representative of the interests of labor, 
and 
(3) 1 representative of the interests of State 
governments. 
(c) VACANCIES.—A vacancy in the Commission shall 
be filled in the manner in which the original appointment 
was made. 
(d) CHAIRMAN.—The President shall appoint the 
Chairman of the Commission from among its members. 
SEC. 304. STAFF AND OTHER ASSISTANCE. 
(a) IN GENERAL.—The Commission may engage any 
technical assistance (including actuarial services) required 
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by the Commission to carry out its functions under this 
title. 
(b) ASSISTANCE FROM SECRETARY OF LABOR.—The 
Secretary of Labor shall provide the Commission with any 
staff, office facilities, and other assistance, and any data 
prepared by the Department of Labor, required by the 
Commission to carry out its functions under this title. 
SEC. 305. COMPENSATION. 
Each member of the Commission— 
(1) shall be entitled to receive compensation at 
the rate of pay for level V of the Executive Schedule 
under section 5316 of title 5, United States Code, 
for each day (including travel time) during which 
such member is engaged in the actual performance 
of duties vested in the Commission; and 
(2) while engaged in the performance of such 
duties away from such member’s home or regular 
place of business, shall be allowed travel expenses 
(including per diem in lieu of subsistence) as author-
ized by section 5703 of such title 5 for persons in 
the Government employed intermittently. 
SEC. 306. REPORT. 
Not later than 6 months after the date of the enact-
ment of this Act, the Commission shall submit to the 
President and the Congress a report setting forth the find-
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ings and recommendations of the Commission as a result 
of its evaluation under this title. 
SEC. 307. TERMINATION. 
The Commission shall terminate 2 months after sub-
mitting its report pursuant to section 306. 
Æ 
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