IB 
Union Calendar No. 21 
118TH CONGRESS 
1ST SESSION H. R. 1163 
[Report No. 118–34] 
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 
APRIL 6, 2023 
Additional sponsors: Mr. SESSIONS, Mr. POSEY, Mr. SANTOS, Ms. GREENE of 
Georgia, Mr. DONALDS, Mr. HILL, Mr. JACKSON of Texas, Mr. YAKYM, 
Mr. ROGERS of Alabama, and Mr. MAST 
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 
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on February 24, 2023] 
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A BILL 
To provide incentives for States to recover fraudulently paid 
Federal and State unemployment compensation, and for 
other purposes. 
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Be it enacted by the Senate and House of Representa-
tives 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 UNEM-
PLOYMENT 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 unem-
ployment 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 COM-
PENSATION.—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 
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(ii) by inserting ‘‘, except that a State 
may retain a percentage of any amounts re-
covered 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 RE-
COVERED FUNDS.—The State agency may retain 
25 percent of any amount recovered from over-
payments 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 com-
pensation systems and information tech-
nology 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 activi-
ties as determined by the State.’’; 
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(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 re-
covered 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 RE-
COVERED FUNDS.—The State agency may retain 
25 percent of any amount recovered from over-
payments 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 com-
pensation systems and information tech-
nology 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. 
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‘‘(iii) Hiring fraud investigators and 
prosecutors. 
‘‘(iv) Other program integrity activi-
ties as determined by the State.’’. 
(4) 
EXTENDED
UNEMPLOYMENT
COMPENSA-
TION.—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 agen-
cy 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 sec-
tion 4105 of the CARES Act (15 U.S.C. 9024) may 
retain 25 percent of any amount recovered from over-
payments of regular compensation paid to individ-
uals by the State for their first week of regular unem-
ployment for which the State received full Federal 
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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 re-
tained by a State pursuant to paragraph (4) or (5) of sub-
section 
(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 au-
thority of a State to retain any amount pursuant to para-
graph (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 
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(2) during the 10-year period beginning on the 
date on which such amount was received by an indi-
vidual not entitled to such amount. 
SEC. 3. PERMISSIBLE USES OF UNEMPLOYMENT FUND FOR 
PROGRAM ADMINISTRATION. 
(a) WITHDRAWAL STANDARD IN THE INTERNAL REV-
ENUE 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 fol-
lowing new subparagraphs: 
‘‘(H) provided the certifications made by 
the State as described in section 4 of the Pro-
tecting 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 overpay-
ment 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 de-
posited in a State fund from which money may 
be withdrawn for— 
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‘‘(i) the payment of costs of deterring, 
detecting, and preventing improper pay-
ments; 
‘‘(ii) purposes relating to the proper 
classification of employees and the provi-
sions 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 unem-
ployment insurance technology infrastruc-
ture; or 
‘‘(v) otherwise assisting the State in 
improving the timely and accurate admin-
istration of the State’s unemployment com-
pensation 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 contribu-
tions, or payments in lieu of contributions, that 
are collected as a result of an investigation and 
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assessment by the State agency may, imme-
diately following receipt of such payments, be de-
posited in a State fund from which moneys may 
be withdrawn for the purposes specified in sub-
paragraph (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 other-
wise provided in this section, section 3304(a)(4) of the In-
ternal Revenue Code of 1986, or any other provisions of 
Federal unemployment compensation law; and’’. 
(d) IMMEDIATE DEPOSIT REQUIREMENTS IN THE IN-
TERNAL REVENUE CODE.—Section 3304(a)(3) of the Inter-
nal 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 
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the Unemployment Trust Fund established by section 
904 of the Social Security Act (42 U.S.C. 1104), ex-
cept 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 other-
wise provided in this section, section 3304(a)(3) of the In-
ternal Revenue Code of 1986, or any other provisions of 
Federal unemployment compensation law)’’. 
(f) APPLICATION TO FEDERAL PAYMENTS.—When ad-
ministering 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 unem-
ployment compensation law. With respect to improper Fed-
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eral 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 con-
tributions (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 begin-
ning 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 cer-
tify each of the following: 
(1) INTEGRITY DATA HUB.—The State uses the 
system designated by the Secretary of Labor (or an-
other system at the discretion of the State) for cross- 
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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 So-
cial Security Act— 
(i) to compare information in such Di-
rectory against information about individ-
uals 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 com-
pensation payments, and to initiate recov-
ery of any improper payments that have 
been made. 
(B) STATE INFORMATION DATA EXCHANGE 
SYSTEM.—Use the State Information Data Ex-
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change System (or another system at the discre-
tion of the State) to facilitate employer responses 
to requests for information from State workforce 
agencies. 
(C) INCARCERATED INDIVIDUALS.—Seek in-
formation from the Commissioner of Social Secu-
rity 
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 de-
termines 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 unemploy-
ment compensation on account of such individ-
uals inability to satisfy the requirement under 
section 303(a)(12) of such Act. 
(D) DECEASED INDIVIDUALS.—Compare in-
formation of individuals claiming unemploy-
ment compensation against the information re-
garding deceased individuals furnished to or 
maintained by the Commissioner of Social Secu-
rity under section 205(r) of the Social Security 
Act. 
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(b) UNEMPLOYMENT COMPENSATION.—For the pur-
poses of this section, any reference to unemployment com-
pensation 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 re-
covery of fraudulent overpayments under Federal pandemic 
unemployment compensation programs authorized under 
the CARES Act (15 U.S.C. 9021 et seq.), subject to the suc-
ceeding 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 Rev-
enue 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 compensa-
tion (as defined in section 3306 of the Internal Revenue 
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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. 
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Union Calendar No. 21 
118TH CONGRESS 
1ST SESSION 
H. R. 1163 
[Report No. 118–34] 
A BILL 
To provide incentives for States to recover fraudu-
lently paid Federal and State unemployment 
compensation, and for other purposes. 
APRIL 6, 2023 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
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