I
107TH CONGRESS
1ST SESSION
H. R. 2962
To reduce employer taxes and simplify tax filing, to reform the administrative
funding of the unemployment compensation and employment service pro-
grams, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 25, 2001
Mr. MCCRERY introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To reduce employer taxes and simplify tax filing, to reform
the administrative funding of the unemployment com-
pensation and employment service programs, 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
‘‘Employment Security Reform Act of 2001’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—TAX PROVISIONS
Sec. 101. Repeal of surtax.
Sec. 102. Reduced rate.
Sec. 103. Disclosure of tax information to facilitate combined employment tax
reporting.
Sec. 104. Quarterly payment of unemployment taxes.
TITLE II—BENEFIT PROVISIONS
Sec. 201. Repeal of certain State law extended benefit requirements.
Sec. 202. Effective date.
TITLE III—ADMINISTRATIVE PROVISIONS
Sec. 301. Funding for administration of State unemployment compensation,
State systems of public employment offices and veterans em-
ployment service programs.
Sec. 302. Transitional funding of administrative costs through the Reed Act.
TITLE IV—MISCELLANEOUS PROVISIONS
Sec. 401. Adjustment to Federal unemployment account ceiling.
Sec. 402. Repeal of special rules for State Reed Act appropriations.
Sec. 403. Repeal of special conditions on recent Reed Act distributions.
Sec. 404. State use of compensating balances and interest earned on clearing
account to pay associated banking costs.
Sec. 405. Treatment of short-time compensation programs.
Sec. 406. Method of verifying citizenship status for unemployment benefits.
Sec. 407. Use of new hire information to assist in administration of unemploy-
ment compensation programs.
TITLE I—TAX PROVISIONS
SEC. 101. REPEAL OF SURTAX.
(a) TAX RATE.—Section 3301 of the Internal Rev-
enue Code of 1986 is amended—
(1) in paragraph (1), by striking ‘‘2007’’ and
inserting ‘‘2001’’; and
(2) in paragraph (2), by striking ‘‘2008’’ and
inserting ‘‘2002’’.
(b) CONFORMING AMENDMENT.—
(1) TRANSFERS TO EUCA.—Section 905(b)(1)
of the Social Security Act (42 U.S.C. 1105(b)(1)) is
amended by striking ‘‘20 percent’’ and inserting ‘‘10
percent’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on January 1,
2002.
SEC. 102. REDUCED RATE.
(a) DEFINITION.—Paragraph (8) of section 3303(c)
of the Internal Revenue Code of 1986 is amended to read
as follows:
‘‘(8) REDUCED RATE.—The term ‘reduced rate’
means a rate of contributions of less than 5.4 per-
cent.’’.
(b) CONFORMING AMENDMENT.—Section 3302(b) of
the Internal Revenue Code of 1986 is amended by striking
all that follows ‘‘State law’’ and inserting ‘‘to a rate of
5.4 percent.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 2002.
SEC. 103. DISCLOSURE OF TAX INFORMATION TO FACILI-
TATE COMBINED EMPLOYMENT TAX REPORT-
ING.
Paragraph (5) of section 6103(d) of the Internal Rev-
enue Code of 1986 is amended to read as follows:
‘‘(5) DISCLOSURE
FOR
COMBINED
EMPLOY-
MENT TAX REPORTING.—The Secretary may disclose
taxpayer identities and signatures to any agency,
body, or commission of any State for the purpose of
carrying out with such agency, body, or commission
a combined Federal and State employment tax re-
porting program approved by the Secretary. Sub-
sections (a)(2) and (p)(4) and sections 7213 and
7213A shall not apply with respect to disclosures or
inspections made pursuant to this paragraph.’’.
SEC. 104. QUARTERLY PAYMENT OF UNEMPLOYMENT
TAXES.
(a) GENERAL RULE.—Section 6157(a) of the Inter-
nal Revenue Code of 1986 is amended by striking in the
last sentence all that follows ‘‘subsection (c),’’ and insert-
ing ‘‘be due and payable not more often than on the last
day of the first calendar month following the close of the
preceding calendar quarter and shall be paid in such a
manner as may be provided in regulations prescribed by
the Secretary.’’.
(b) STATE LAW REQUIREMENT.—
(1) IN GENERAL.—Section 303(a) of the Social
Security Act (42 U.S.C. 503(a)) is amended—
(A) in paragraph (10), by striking the pe-
riod and inserting ‘‘; and’’; and
(B) by adding at the end the following new
paragraph:
‘‘(11) A requirement that contributions to un-
employment funds for a calendar quarter be due and
payable on the last day of the first calendar month
following the close of such quarter, except—
‘‘(A) for payments in lieu of contributions
described in section 3304(a)(6)(B) of the Inter-
nal Revenue Code of 1986, and
‘‘(B) as otherwise provided in sections
3510 and 6157(c) of such Code.’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the first day
of the first calendar year beginning more than 2
years after the date of the enactment of this Act.
TITLE II—BENEFIT PROVISIONS
SEC. 201. REPEAL OF CERTAIN STATE LAW EXTENDED BEN-
EFIT REQUIREMENTS.
Section 202 of the Federal-State Extended Unem-
ployment Compensation Act of 1970 is amended—
(1) in subsection (a), by striking paragraphs
(3) through (7); and
(2) by striking subsection (c).
SEC. 202. EFFECTIVE DATE.
The amendments made by this title shall apply to
weeks of unemployment beginning after June 30, 2003.
TITLE III—ADMINISTRATIVE
PROVISIONS
SEC. 301. FUNDING FOR ADMINISTRATION OF STATE UNEM-
PLOYMENT COMPENSATION, STATE SYSTEMS
OF PUBLIC EMPLOYMENT OFFICES AND VET-
ERANS EMPLOYMENT SERVICE PROGRAMS.
(a) IN GENERAL.—Paragraph (1) of section 901(c)
of the Social Security Act (42 U.S.C. 1101(c)(1)) is
amended by striking all that precedes clause (i) of sub-
paragraph (B) and inserting the following:
‘‘(c)(1)(A) There are hereby appropriated out of the
employment security administration account for each fis-
cal year—
‘‘(i) the amount determined under subsection
(g) for such year for assisting the States in the ad-
ministration of their unemployment compensation
laws as provided in title III (including administra-
tion pursuant to agreements under any Federal un-
employment compensation law),
‘‘(ii) the amount determined under subsection
(h) for such year for providing reemployment serv-
ices, including administering the work test for the
State unemployment compensation system and pro-
viding job finding and placement services, to unem-
ployment compensation claimants,
‘‘(iii) the amount determined under subsection
(i) for such year for the establishment and mainte-
nance of systems of public employment offices in ac-
cordance with the Wagner-Peyser Act (29 U.S.C. 49
et seq.), and
‘‘(iv) the amounts determined under sections
4103A(a)(1) and 4104(a)(1) of title 38 of the
United States Code for such year for carrying out
sections 4103A and 4104 of such title, respectively.
The Secretary of Labor may reserve not more than 0.4
percent of the funds appropriated under clauses (i) and
(ii), respectively, for any fiscal year to carry out national
activities that benefit the Federal-State unemployment
compensation system as a whole, are interstate or
multistate in nature, or are more efficiently and effectively
performed on a centralized basis.
‘‘(B) There are hereby authorized to be made avail-
able for expenditure out of the employment security ad-
ministration account for each fiscal year such amounts
(not in excess of the limit provided by paragraph (4) with
respect to clause (iii)) as the Congress may deem appro-
priate for the necessary expenses of the Department of
Labor for the performance of its functions under—’’.
(b) FUNDING FORMULAS.—Section 901 of the Social
Security Act (42 U.S.C. 1101) is amended by adding at
the end the following:
‘‘Amounts Appropriated for Administrative Costs of
State Unemployment Compensation Programs
‘‘(g)(1) For fiscal year 2002 and each fiscal year
thereafter, the amount appropriated for funding costs of
administering State unemployment compensation pro-
grams under subsection (c)(1)(A)(i), shall be the sum of—
‘‘(A)(i) the amount determined under this
clause for the prior fiscal year (except that in deter-
mining funding for fiscal year 2003, the amount for
the prior fiscal year shall equal $789) multiplied by
the projected change in the gross domestic product
price index for the fiscal year for which the deter-
mination is being made, multiplied by
‘‘(ii) the projected average weekly number of in-
dividuals filing claims for compensation (within the
meaning of section 85(b) of the Internal Revenue
Code of 1986) for such fiscal year, except that an
individual shall not be included in such number sole-
ly by reason of filing a claim for assistance under
section 410(a) of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42 U.S.C.
5177(a)); and
‘‘(B)(i) the amount determined under this
clause for the prior fiscal year (except that in deter-
mining the funding for fiscal year 2003, the amount
for the prior fiscal year shall equal $138) multiplied
by the projected change in the gross domestic prod-
uct price index for the fiscal year for which the de-
termination is being made, multiplied by
‘‘(ii) the average quarterly number of employers
subject to State unemployment compensation laws
projected for such fiscal year.
‘‘(2) In addition to the amounts determined under
paragraph (1) for a fiscal year, if the weekly average of
insured unemployed individuals for such fiscal year (as
projected using the economic assumptions released by the
President during such fiscal year under section 1106 of
title 31, United States Code, and excluding the same
claimants as are excluded under paragraph (1)(A)(ii)) ex-
ceeds the projection used in such paragraph (1)(A)(ii),
then additional amounts shall be appropriated under sub-
section (c)(1)(A)(i) for funding the costs of administering
the State unemployment compensation programs equal
to—
‘‘(A)(i) the amount determined under this sub-
paragraph for the prior fiscal year (except that in
determining funding for fiscal year 2003, the
amount for the prior fiscal year shall equal $298)
multiplied by the projected change in the gross do-
mestic product price index for the fiscal year for
which the determination is being made, multiplied by
‘‘(ii) the difference between the weekly average
of insured unemployed individuals (as measured
using the most recent economic assumptions re-
leased by the President during such fiscal year) and
the weekly average of insured unemployed individ-
uals projected under paragraph (1)(A)(ii) for such
fiscal year.
The additional amounts made available pursuant to this
paragraph for a fiscal year shall be available to be allo-
cated to the States only to the extent that the projected
weekly average of insured unemployed individuals for such
fiscal year, as referred to in the preceding sentence (in
the matter preceding subparagraph (A)) exceeds the pro-
jection used in paragraph (1)(A)(ii).
‘‘Amounts Appropriated to States for the Provision of
Reemployment Services
‘‘(h) For fiscal year 2003 and each fiscal year there-
after, the amount appropriated for funding costs of pro-
viding reemployment services to unemployment compensa-
tion claimants under subsection (c)(1)(A)(ii) shall be—
‘‘(1) the amount determined under this para-
graph for the prior fiscal year (except that in deter-
mining funding for fiscal year 2003, the amount for
the prior fiscal year shall equal $11.10) multiplied
by the projected change in the gross domestic prod-
uct price index for the fiscal year for which the de-
termination is being made, multiplied by
‘‘(2) the projected number of payments of un-
employment compensation representing first weeks
compensated in a benefit year for such fiscal year.
‘‘Amounts Appropriated for Administration of State
Public Employment Offices
‘‘(i) For fiscal year 2003 and each fiscal year there-
after, the amount appropriated for funding the costs of
administering the State system of public employment of-
fices under subsection (c)(1)(A)(iii) shall be—
‘‘(1) the amount determined under this para-
graph for the prior fiscal year (except that in deter-
mining funding for fiscal year 2003, the amount for
the prior fiscal year shall equal $7.30) multiplied by
the projected change in the gross domestic product
price index for the fiscal year for which the deter-
mination is being made, multiplied by
‘‘(2) the projected average monthly number of
individuals in the civilian labor force for such fiscal
year.
‘‘Calculation of Appropriated Amounts by the Secretary
of Labor
‘‘(j) For purposes of subsections (g), (h) and (i)—
‘‘(1) each projection shall be made by the Sec-
retary of Labor using the economic assumptions re-
leased by the President for such fiscal year, during
the preceding fiscal year, under section 1106 of title
31, United States Code, except as otherwise pro-
vided under subsection (g)(2) or (h)(2), and
‘‘(2) the projected change in the gross domestic
product price index for the fiscal year for which the
determination is being made shall equal the sum of
1 and the quotient of the percent change in the
gross domestic product price index projected for
such fiscal year divided by 100.
‘‘Special Rules Relating to Use of Amounts Appropriated
‘‘(k)(1) Amounts appropriated under paragraphs
(1)(A)(i)–(ii) and (6) of subsection (c) with respect to a
fiscal year shall remain available for obligation by the
States during such fiscal year and the first quarter of the
following fiscal year, except that funds used for automa-
tion acquisitions shall remain available for obligation by
the States through the end of the second fiscal year fol-
lowing the fiscal year in which such funds are appro-
priated.
‘‘(2) Amounts reserved by the Secretary of Labor
under the second sentence of subsection (c)(1)(A) may be
obligated in contracts, grants, or agreements with non-
State entities.
‘‘(3) Amounts appropriated under paragraph (1)(A)
and paragraph (6) of subsection (c) may be used by the
States to fund integrated employment service and unem-
ployment compensation automation efforts notwith-
standing the cost allocation principles prescribed under
Office of Management and Budget Circular No. A–87.’’.
(c) FUNDING FOR IMPROVED TECHNOLOGY TO AS-
SIST IN DETERMINING BENEFIT ELIGIBILITY.—Section
901(c) of the Social Security Act (42 U.S.C. 1101(c)) is
amended by adding at the end the following new para-
graph:
‘‘(6) In addition to amounts provided under para-
graph (1)(A)(i)–(ii), there is hereby appropriated out of
the 
employment 
security 
administration 
account
$60,000,000 for fiscal year 2002 for the purpose of assist-
ing States in funding technology and other costs that ac-
celerate access to wage and employment information in
order to determine eligibility for unemployment compensa-
tion.’’.
(d) CONFORMING AMENDMENTS.—
(1) PAYMENTS TO STATES FOR REEMPLOYMENT
SERVICES.—Section 302 of the Social Security Act
(42 U.S.C. 502) is amended by adding at the end
the following:
‘‘(d) The Secretary of Labor shall from time to time
certify to the Secretary of the Treasury for payment to
each State such amounts as the Secretary of Labor deter-
mines appropriate for providing reemployment services, in-
cluding administering the work test for the State unem-
ployment compensation system and providing job finding
and placement services, to claimants for unemployment
compensation.’’.
(2) EXPENDITURE OF FUNDS FOR REEMPLOY-
MENT SERVICES.—Section 303(a)(8) of the Social
Security Act (42 U.S.C. 503(a)(8)) is amended—
(A) by inserting ‘‘subsections (a) and (b)
of’’ after ‘‘pursuant to’’; and
(B) by inserting before the semicolon at
the end the following: ‘‘and the expenditure of
all moneys received pursuant to section 302(d)
of this title solely for the purposes and in the
amounts found necessary by the Secretary of
Labor for providing reemployment services to
claimants for unemployment compensation’’.
(3) REPLENISHMENT OF FUNDS NOT USED FOR
REEMPLOYMENT
SERVICES.—Section 303(a)(9) of
the Social Security Act (42 U.S.C. 503(a)(9)) is
amended—
(A) by inserting ‘‘subsections (a) and (b)
of’’ after ‘‘pursuant to’’; and
(B) by inserting before the semicolon at
the end the following: ‘‘and the replacement,
within a reasonable time, of any moneys re-
ceived pursuant to section 302(d) of this title
which, because of any action or contingency,
have been lost or have been expended for pur-
poses other than, or in amounts in excess of,
those found necessary by the Secretary of
Labor for providing reemployment services to
claimants for unemployment compensation’’.
(4) REPEALS.—The following provisions of the
Social Security Act are repealed:
(A) Paragraph (3) of section 901(c).
(B) The second sentence of section
901(f)(3)(A).
(5) AMOUNT OF AUTHORIZATION UNDER THE
WAGNER-PEYSER ACT.—
(A) Section 901(c)(4) of the Social Secu-
rity Act (42 U.S.C. 1101(c)(4)) is amended—
(i) by striking ‘‘paragraphs (1)(A)(ii)
and’’ and inserting ‘‘paragraph’’;
(ii) by striking ‘‘the proportion of the
total cost of administering the system of
public employment offices in accordance
with the Act of June 6, 1933, as amended,
and of’’; and
(iii) by striking the last sentence.
(B) Section 901(c)(1)(B) of the Social Se-
curity Act (42 U.S.C. 1101(c)(1)(B)) is amend-
ed by moving clauses (i) through (v) 2 ems to
the left, and by striking clause (iii) and insert-
ing the following:
‘‘(iii) the Wagner-Peyser Act (29 U.S.C. 49 et
seq.),’’.
(6) REPEAL OF ADDITIONAL APPROPRIATIONS
FOR FISCAL YEAR 2002.—Section 901(c)(5)(A) of the
Social Security Act (42 U.S.C. 1101(c)(5)(A)) is
amended—
(A) in clause (iii), by inserting ‘‘and’’ after
the semicolon at the end;
(B) in clause (iv), by striking the semi-
colon and inserting a period; and
(C) by striking clause (v).
(7) APPROPRIATION REFERENCE IN THE WAG-
NER-PEYSER ACT.—Section 5 of the Wagner-Peyser
Act (29 U.S.C. 49d) is amended—
(A) by striking subsection (a) and insert-
ing the following:
‘‘(a) The amounts available to carry out sections 1
through 13 of this Act shall be appropriated in accordance
with section 901 of the Social Security Act.’’;
(B) by striking subsection (b); and
(C) by redesignating subsection (c) as sub-
section (b).
(e) BUDGET JUSTIFICATION.—No funds may be ex-
pended under the amendments made by this section unless
the Secretary of Labor includes in the Department of La-
bor’s annual budget justification to Congress a detailed
description of the specific activities for which the funds
made available by such amendments have been used in the
prior and current years (if applicable) and the activities
and costs planned for the budget year.
(f) EFFECTIVE DATE.—Except as provided in sub-
section (d)(6), the amendments made by this section shall
apply to fiscal year 2003 and subsequent fiscal years.
SEC. 302. TRANSITIONAL FUNDING OF ADMINISTRATIVE
COSTS THROUGH THE REED ACT.
(a) IN GENERAL.—Paragraph (3) of section 903(a)
of the Social Security Act (42 U.S.C. 1103(a)(3)) is
amended to read as follows:
‘‘(3)(A) Notwithstanding any other provision of this
section, for purposes of carrying out this subsection with
respect to any excess amount (referred to in paragraph
(1)) remaining in the employment security administration
account as of the close of fiscal year 2001, the resulting
amount to be transferred to the accounts of the States
at the beginning of the succeeding fiscal year shall not
exceed $1,071,000,000 for amounts to be transferred at
the beginning of fiscal year 2002 (based on amounts re-
maining at the close of fiscal year 2001), of which—
‘‘(i) $660,000,000 may be used to pay expenses
incurred by the States in the administration of their
unemployment compensation laws,
‘‘(ii) $93,000,000 may be used for the purpose
of providing reemployment services to claimants for
unemployment compensation, and
‘‘(iii) $318,000,000 may be used to pay ex-
penses incurred by a State for the administration of
its public employment offices.
‘‘(B) Paragraphs (1) and (2) shall apply with respect
to any amounts described in subparagraph (A), except
that in carrying out the provisions of paragraph (2)(B)
with respect to such amounts (to determine the portion
of such amounts which is to be allocated to a State for
a succeeding fiscal year), the ratios, as determined by the
Secretary of Labor, to be applied under such provisions
shall—
‘‘(i) with respect to amounts referred to in
clauses (i) and (ii) of subparagraph (A), be the same
as the ratio that—
‘‘(I) the amount of funds to be allocated to
such State for such fiscal year pursuant to the
base allocation formula under title III, bears to
‘‘(II) the total amount of funds to be allo-
cated to all States for such fiscal year pursuant
to the base allocation formula under title III,
and
‘‘(ii) with respect to amounts referred to in
clause (iii) of subparagraph (A), be the same as the
ratio that—
‘‘(I) the amount allocated to a State under
section 6 of the Wagner-Peyser Act (29 U.S.C.
49e) for the period beginning on July 1, 2001
and ending on June 30, 2002, bears to
‘‘(II) the total amount allocated to all
States under section 6 of that Act for such pe-
riod.
Nothing in this paragraph shall preclude the application
of subsection (b) of this section with respect to any alloca-
tion determined under this subparagraph.
‘‘(C) Any amounts in excess of those described in sub-
paragraph (A) (remaining in the employment security ad-
ministration account as of the close of any fiscal year spec-
ified in such subparagraph) shall, as of the beginning of
the succeeding fiscal year, accrue to the Federal unem-
ployment account.’’.
(b) CONFORMING AMENDMENT.—The last sentence
of paragraph (2) of section 903(c) of such Act (42 U.S.C.
1103(c)(2)) is amended by striking ‘‘to pay expenses in-
curred by it for the administration of its unemployment
compensation law’’ and inserting ‘‘to pay costs of adminis-
tration in the amounts and for the purposes described in
subsection (a)(3)(A)’’.
TITLE IV—MISCELLANEOUS
PROVISIONS
SEC. 401. ADJUSTMENT TO FEDERAL UNEMPLOYMENT AC-
COUNT CEILING.
(a) IN GENERAL.—Paragraph (2) of Section 902(a)
of the Social Security Act (42 U.S.C. 1102(a)) is amended
to read as follows:
‘‘(2)(A) for fiscal year 2002, the amount (deter-
mined by the Secretary of Labor and certified by
such Secretary to the Secretary of the Treasury)
equal to the difference between—
‘‘(i) 0.5 percent of the total wages subject
(determined without any limitation on amount)
to contributions under all State unemployment
compensation laws for the calendar year ending
during the fiscal year for which the excess is
determined, and
‘‘(ii) $620,000,000;
‘‘(B) except as provided in subparagraph (C),
for each subsequent fiscal year, the amount (deter-
mined by the Secretary of Labor and certified by
such Secretary to the Secretary of the Treasury)
equal to the difference between—
‘‘(i) the amount determined under sub-
paragraph (A) or this subparagraph for the
prior fiscal year, and
‘‘(ii) $620,000,000; and
‘‘(C) if, for any fiscal year, the amount (deter-
mined by the Secretary of Labor and certified by
such Secretary to the Secretary of the Treasury
under subparagraph (B)) does not exceed 0.25 per-
cent of the total wages (determined without any lim-
itation on amount) subject to contributions under all
State unemployment compensation laws for the cal-
endar year ending during the fiscal year for which
the excess is determined, the amount for that fiscal
year and each subsequent fiscal year shall be equal
to 0.25 percent of such total wages for the calendar
year during the fiscal year ending for which the ex-
cess is determined.’’.
(b) TRANSFERS DUE TO LOWERING OF FEDERAL
UNEMPLOYMENT ACCOUNT CEILING.—Section 902 of the
Social Security Act (42 U.S.C. 1102) is amended by add-
ing at the end the following:
‘‘Transfers to the Accounts of the States
‘‘(d)(1) For fiscal year 2002, $620,000,000 shall be
transferred to the accounts of the States in the Unemploy-
ment Trust Fund at the beginning of the following fiscal
year.
‘‘(2) Unless subsection (a)(2)(C) applies, for fiscal
year 2003 and each subsequent fiscal year, a portion of
any amounts to be transferred under subsection (b) shall
be set aside for transfer to the accounts of the States in
the Unemployment Trust Fund at the beginning of the
following fiscal year. Such portion, not to exceed the
amount determined under subsection (b), shall equal the
difference between—
‘‘(A) the amount determined under subsection
(a)(2)(B) for the fiscal year preceding the year for
which the portion is being determined multiplied by
the quotient of—
‘‘(i) the total wages subject (determined
without any limitation on amount) to contribu-
tions under all State unemployment compensa-
tion laws for the preceding calendar year, di-
vided by
‘‘(ii) the total wages subject (determined
without any limitation on amount) to contribu-
tions under all State unemployment compensa-
tion laws for the second preceding calendar
year; and
‘‘(B) the amount determined under subsection
(a)(2)(B) for the fiscal year for which the portion is
being determined.
‘‘(3)(A) Each State’s share of the funds to be trans-
ferred under this subsection at the beginning of any fiscal
year shall be determined by the Secretary of Labor and
certified by such Secretary to the Secretary of the Treas-
ury before such year and shall equal the amount deter-
mined under subparagraph (B).
‘‘(B)(i) Subject to clause (ii), the amount determined
under this subparagraph is the sum of—
‘‘(I) $5,000,000, and
‘‘(II) with respect to any remaining amount, the
State’s share of such amount shall bear the same
ratio to the remaining amount to be so transferred
as the number of initial claims filed in the State
during the preceding calendar year bears to the total
number of initial claims filed during such year.
‘‘(ii) If the amount to be transferred is insufficient
to provide $5,000,000 to each State, then the share of
each State shall be determined by using the ratio estab-
lished by clause (i)(II).
‘‘(4) If either of the circumstances described in sec-
tion 903(b) exists, any amounts that would otherwise be
available for transfer under this subsection to a State’s
account shall instead be retained in the Federal unemploy-
ment account, subject to the same conditions as described
in paragraph (1) or (2) of such section (as appropriate).’’.
SEC. 402. REPEAL OF SPECIAL RULES FOR STATE REED
ACT APPROPRIATIONS.
Section 903(c)(2) of the Social Security Act (42
U.S.C. 1103(c)(2)) is amended—
(1) by striking ‘‘if and only if—’’ and inserting
a period; and
(2) by striking subparagraphs (A) through (E).
SEC. 403. REPEAL OF SPECIAL CONDITIONS ON RECENT
REED ACT DISTRIBUTIONS.
(a) IN GENERAL.—Section 903(a) of the Social Secu-
rity Act (42 U.S.C. 1103(a)) is amended by striking para-
graph (3).
(b) USE OF FUNDS.—Section 903(c)(2) of the Social
Security Act (42 U.S.C. 1103(c)(2)), as amended by sec-
tion 302(b), is amended by striking the last sentence.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on October 1, 2002.
SEC. 404. STATE USE OF COMPENSATING BALANCES AND
INTEREST EARNED ON CLEARING ACCOUNT
TO PAY ASSOCIATED BANKING COSTS.
(a) IMMEDIATE DEPOSIT REQUIREMENT.—
(1) SOCIAL
SECURITY
ACT
REQUIREMENT.—
Paragraph (4) of section 303(a) of the Social Secu-
rity Act (42 U.S.C. 503(a)) is amended to read as
follows:
‘‘(4) The payment of all money received in the
unemployment fund of such State, immediately upon
receipt, to the Secretary of the Treasury to the cred-
it of the Unemployment Trust Fund established by
section 904, except for—
‘‘(A) refunds of sums erroneously paid into
such fund;
‘‘(B) refunds paid in accordance with the
provisions of section 3305(b) of the Federal
Unemployment Tax Act; and
‘‘(C) such portion of the money as may be
necessary to generate earnings credit or actual
interest earnings sufficient to pay reasonable
charges for banking services and for services
provided by a bank in connection with the re-
ceipt and processing of direct remittances from
employers; and’’.
(2) FEDERAL
UNEMPLOYMENT
TAX
ACT
RE-
QUIREMENT.—Paragraph (3) of section 3304(a) 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, except for—
‘‘(A) refunds of sums erroneously paid into
such fund;
‘‘(B) refunds paid in accordance with the
provisions of section 3305(b); and
‘‘(C) such portion of the money as may be
necessary to generate earnings credit or actual
interest earnings sufficient to pay reasonable
charges for banking services and for services
provided by a bank in connection with the re-
ceipt and processing of direct remittances from
employers;’’.
(b) WITHDRAWAL STANDARD.—
(1) SOCIAL
SECURITY
ACT
REQUIREMENT.—
Section 303(a)(5) of the Social Security Act (42
U.S.C. 503(a)(5)) is amended by inserting before
the semicolon at the end the following: ‘‘: Provided
further, That earnings credit or actual interest earn-
ings on money not immediately paid to the Secretary
of the Treasury pursuant to paragraph (4) may be
used to pay reasonable charges for banking services
and for services provided by a bank in connection
with the receipt and processing of direct remittances
from employers’’.
(2) FEDERAL
UNEMPLOYMENT
TAX
ACT
RE-
QUIREMENT.—Section 3304(a)(4) of the Internal
Revenue Code of 1986 is amended—
(A) in subparagraph (E), by striking
‘‘and’’ at the end;
(B) in subparagraph (F), by adding ‘‘and’’
at the end; and
(C) by adding at the end the following new
subparagraph:
‘‘(G) earnings credit or actual interest
earnings on money not immediately paid to the
Secretary of the Treasury pursuant to para-
graph (3) may be used to pay reasonable
charges for banking services and for services
provided by a bank in connection with the re-
ceipt and processing of direct remittances from
employers;’’.
(c) UNEMPLOYMENT FUND.—Section 3306(f) of the
Internal Revenue Code of 1986 is amended—
(1) in the first paragraph (5), by striking
‘‘and’’ at the end;
(2)(A) by redesignating the second paragraph
(5) as paragraph (6); and
(B) by striking the period at the end of para-
graph (6) (as so redesignated) and inserting ‘‘;
and’’; and
(3) by adding at the end the following new
paragraph:
‘‘(7) earnings credit or actual interest earnings
may be used to pay reasonable charges for banking
services and for services provided by a bank in con-
nection with the receipt and processing of direct re-
mittances from employers.’’.
(d) 
CONFORMING
AMENDMENT.—Section
1201(a)(3)(B) 
of 
the 
Social 
Security 
Act 
(42
U.S.C.1321(a)(3)(B)) is amended by inserting after
‘‘month,’’ the following: ‘‘except that such amount shall
not include earnings credit or actual interest earnings
used to pay reasonable charges for banking services and
for services provided by a bank in connection with the re-
ceipt and processing of direct remittances from employers
pursuant to the exceptions in paragraphs (4) and (5) of
section 303 and paragraphs (3) and (4) of section 3304(a)
of the Federal Unemployment Tax Act,’’.
SEC. 405. TREATMENT OF SHORT-TIME COMPENSATION
PROGRAMS.
(a) GENERAL RULE.—Section 3306 of the Internal
Revenue Code of 1986 is amended by adding at the end
the following new subsection:
‘‘(v) SHORT-TIME COMPENSATION PROGRAM.—For
purposes of this chapter, the term ‘short-time compensa-
tion program’ means a program under which—
‘‘(1) the participation of an employer is vol-
untary;
‘‘(2) an employer reduces the number of hours
worked by employees in lieu of temporary layoffs;
‘‘(3) such employees whose workweeks have
been reduced by at least 10 percent are eligible for
unemployment compensation;
‘‘(4) the amount of unemployment compensa-
tion payable to any such employee is a pro rata por-
tion of the unemployment compensation which would
be payable to the employee if such employee were to-
tally unemployed;
‘‘(5) such employees are not required to meet
the availability for work or work search test require-
ments while collecting short-time compensation bene-
fits, but are required to be available for their normal
workweek;
‘‘(6) eligible employees may participate in an
employer-sponsored training program to enhance job
skills if such program has been approved by the
State agency;
‘‘(7) the State agency may require an employer
to continue to provide health benefits, and retire-
ment benefits under a defined benefit pension plan
(as defined in section 414(j)) to any employee whose
workweek is reduced pursuant to the program as
though the workweek of such employee had not been
reduced; and
‘‘(8) the State agency may require an employer
(or an employers’ association which is party to a col-
lective bargaining agreement) to submit a written
plan describing the manner in which the require-
ments of this subsection will be implemented and
containing such other information as the Secretary
of Labor determines is appropriate.’’.
(b) CONFORMING AMENDMENTS.—
(1) WITHDRAWAL
OF
AMOUNTS
FROM
THE
STATE UNEMPLOYMENT FUND.—Subparagraph (E)
of section 3304(a)(4) of the Internal Revenue Code
of 1986 is amended to read as follows:
‘‘(E) amounts may be withdrawn for the
payment of short-time compensation under a
short-time compensation program (as defined
under section 3306(v));’’.
(2) UNEMPLOYMENT
FUND
DEFINED.—Para-
graph (5) of section 3306(f) of such Code, as
amended by section 404(c)(1), is amended to read as
follows:
‘‘(5) amounts may be withdrawn for the pay-
ment of short-time compensation under a short-time
compensation program (as defined in subsection (v));
and’’.
(3) PROVISIONS
OF
STATE
LAWS.—Section
303(a)(5) of the Social Security Act (42 U.S.C.
503(a)(5)) is amended by striking ‘‘the payment of
short-time compensation under a plan approved by
the Secretary of Labor’’ and inserting ‘‘the payment
of short-time compensation under a short-time com-
pensation program (as defined in section 3306(v) of
the Internal Revenue Code of 1986)’’.
SEC. 406. METHOD OF VERIFYING CITIZENSHIP STATUS
FOR UNEMPLOYMENT BENEFITS.
Nothing in Federal law shall be construed to require
applicants for unemployment benefits to present proof of
citizenship or alien status in person.
SEC. 407. USE OF NEW HIRE INFORMATION TO ASSIST IN
ADMINISTRATION OF UNEMPLOYMENT COM-
PENSATION PROGRAMS.
Section 453(j) of the Social Security Act (42 U.S.C.
653(j)) is amended by adding at the end the following new
paragraph:
‘‘(7) INFORMATION COMPARISONS AND DISCLO-
SURE TO ASSIST IN ADMINISTRATION OF UNEMPLOY-
MENT COMPENSATION PROGRAMS.—
‘‘(A) IN GENERAL.—If a State agency re-
sponsible for the administration of an unem-
ployment compensation program under Federal
or State law transmits to the Secretary the
name and social security account number of an
individual, the Secretary shall, if the informa-
tion in the National Directory of New Hires in-
dicates that the individual may be employed,
disclose to the State agency the name and ad-
dress of any putative employer of the individual
and the quarterly wages reported for such indi-
vidual, subject to this paragraph.
‘‘(B) CONDITION
ON
DISCLOSURE.—The
Secretary shall make a disclosure under sub-
paragraph (A) only to the extent that the Sec-
retary determines that the disclosure would not
interfere with the effective operation of the pro-
gram under this part.
‘‘(C) USE
OF
INFORMATION.—A State
agency may use information provided under this
paragraph only for purposes of administering a
program referred to in subparagraph (A).’’.