A bill to provide for special transfers of funds to States to promote certain improvements in State unemployment compensation laws.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Unemployment Insurance Modernization 
Act''.

SEC. 2. SPECIAL TRANSFERS TO STATE ACCOUNTS IN THE UNEMPLOYMENT TRUST 
              FUND.

    (a) In General.--Section 903 of the Social Security Act (42 U.S.C. 
1103) is amended by adding at the end the following:

         ``Special Transfers in Fiscal Years 2008 Through 2012

    ``(f)(1)(A) In addition to any other amounts, the Secretary of 
Labor shall provide for the making of unemployment compensation 
modernization incentive payments (in this subsection referred to as 
`incentive payments') to the accounts of the States in the Unemployment 
Trust Fund, by transfer from amounts reserved for that purpose in the 
Federal unemployment account, in accordance with succeeding provisions 
of this subsection.
    ``(B) Subject to paragraph (5), the maximum incentive payment 
allowable under this subsection with respect to any State shall, as 
determined by the Secretary of Labor, be equal to the amount obtained 
by multiplying $7,000,000,000 times the same ratio as is applicable 
under subsection (a)(2)(B) for purposes of determining such State's 
share of any funds to be transferred under subsection (a) as of October 
1, 2007.
    ``(C) Of the maximum incentive payment determined under 
subparagraph (B) with respect to a State--
            ``(i) one-third shall be transferred upon a certification 
        under paragraph (4)(B) that the State law of such State meets 
        the requirements of paragraph (2); and
            ``(ii) the remainder shall be transferred upon a 
        certification under paragraph (4)(B) that the State law of such 
        State meets the requirements of paragraph (3).
    ``(2) The State law of a State meets the requirements of this 
paragraph if such State law--
            ``(A) uses a base period that includes the most recently 
        completed calendar quarter before the start of the benefit year 
        for purposes of determining eligibility for unemployment 
        compensation; or
            ``(B) provides that, in the case of an individual who would 
        not otherwise be eligible for unemployment compensation under 
        the State law because of the use of a base period that does not 
        include the most recently completed calendar quarter before the 
        start of the benefit year, eligibility shall be determined 
        using a base period that includes such calendar quarter.
    ``(3) The State law of a State meets the requirements of this 
paragraph if such law includes provisions to carry out at least 2 of 
the following subparagraphs:
            ``(A) An individual shall not be denied compensation under 
        any State law provisions relating to availability for work, 
        active search for work, or refusal to accept work, solely 
        because such individual is seeking only part-time (and not 
        full-time) work, except that such law may provide for the 
        provisions carrying out this subparagraph to require up to, but 
        not to exceed, a majority of weeks of work of such individual's 
        base period to consist of part-time employment.
            ``(B) An individual shall not be disqualified from 
        compensation for separating from work for compelling family 
        reasons, which, for purposes of this subparagraph, shall 
        include at least the following:
                    ``(i) A separation from employment in which 
                domestic violence causes the individual reasonably to 
                believe that such separation is necessary for the 
                safety of the individual or the individual's family, as 
                verified by such reasonable and confidential 
                documentation that may be required by the State.
                    ``(ii) A separation from employment resulting from 
                the illness or disability of a member of the 
                individual's immediate family.
                    ``(iii) A separation from employment resulting from 
                the individual's need to accompany a spouse--
                            ``(I) to a place from which it is 
                        impractical for such individual to commute; and
                            ``(II) due to a change in location of the 
                        spouse's employment.
            ``(C) Weekly unemployment compensation is payable under 
        this subparagraph to any individual who is unemployed (as 
        determined under the State unemployment compensation law), has 
        exhausted all rights to regular and (if applicable) extended 
        unemployment compensation under the State law, and is enrolled 
        and making satisfactory progress in a State-approved training 
        program or in a job training program authorized under the 
        Workforce Investment Act of 1998. Such program shall prepare 
        individuals who have been separated from a declining 
        occupation, or who have been involuntarily and indefinitely 
        separated from employment as a result of a permanent reduction 
        of operations at the individual's place of employment, for 
        entry into a high-demand occupation. In addition, such program 
        may prepare other unemployed individuals deemed eligible by the 
        State. The amount of unemployment compensation payable under 
        this subparagraph to an individual for a week of unemployment 
        shall be equal to the individual's average weekly benefit 
        amount (including dependents' allowances) for the most recent 
        benefit year, and the total amount of unemployment compensation 
        payable under this subparagraph to any individual shall be 
        equal to at least 26 times the individual's average weekly 
        benefit amount (including dependents' allowances) for the most 
        recent benefit year.
            ``(D) The maximum amount of compensation--
                    ``(i) payable to the individual during a benefit 
                year is equal to at least 26 times the individual's 
                weekly benefit amount; or
                    ``(ii) the individual receives during a benefit 
                year exceeds half of the individual's total wages 
                during the base period.
        A State shall not be considered to satisfy clause (i) if it 
        reduced the maximum weekly benefit amount of compensation 
        payable to an individual during a benefit year below the amount 
        that was in effect as of the date of enactment of this 
        subsection.
            ``(E) Dependents' allowances are provided to all 
        individuals with a dependent (as defined by State law) equal to 
        at least $15 per dependent per week, subject to any aggregate 
        limitation on such allowances which the State law may establish 
        (but which aggregate limitation on the total allowance for 
        dependents paid to an individual may not be less than the 
        lesser of $50 for each week of unemployment or 50 percent of 
        the individual's weekly benefit amount for the benefit year).
    ``(4)(A) Any State seeking an incentive payment under this 
subsection shall submit an application therefor at such time and in 
such manner as the Secretary of Labor shall by regulation prescribe. 
Such application shall include information on how the State intends to 
use incentive payments to improve or strengthen the State's 
unemployment compensation program. The Secretary of Labor shall, within 
90 days after receiving any such application, notify the State agency 
of the State as to the Secretary's findings with respect to the 
requirements of paragraph (2) or (3) (as the case may be).
    ``(B) If the Secretary of Labor finds that the State law provisions 
(disregarding any State law provisions which are not then currently in 
effect or which are subject to discontinuation under certain 
conditions) meet the requirements of paragraph (2) or (3) (as the case 
may be) and that unemployment compensation claimants have begun to 
qualify for benefits under such requirements, the Secretary of Labor 
shall thereupon make a certification to that effect to the Secretary of 
the Treasury, together with a certification as to the amount of the 
incentive payment to be transferred to the State account pursuant to 
that finding. The Secretary of the Treasury shall make the appropriate 
transfer within 30 days after receiving such certification.
    ``(C)(i) No certification of compliance with the requirements of 
paragraph (2) or (3) may be made with respect to any State whose State 
law is not otherwise eligible for certification under section 303 or 
approvable under section 3304 of the Federal Unemployment Tax Act.
    ``(ii) No certification of compliance with the requirements of 
paragraph (3) may be made with respect to any State whose State law is 
not in compliance with the requirements of paragraph (2).
    ``(iii) No application under subparagraph (A) may be considered if 
submitted before October 1, 2007, or after the latest date by which it 
must be submitted (as specified by the Secretary of Labor in 
regulations) to ensure that all incentive payments under this 
subsection are made before October 1, 2012.
    ``(5)(A) If the Secretary of Labor determines, within 30 days after 
the deadline described in paragraph (4)(C)(iii), that there are amounts 
reserved for incentive payments under paragraph (7) for which the 
Secretary of the Treasury has not received a certification under 
paragraph (4)(B), from such amounts--
            ``(i) first, 10 percent of such amounts shall be made 
        available for transfer to the accounts of States under 
        subsection (g); and
            ``(ii) second, from the remainder of such amounts, 
        incentive payments that are in addition to those made under 
        paragraph (1) shall be made to States described in subparagraph 
        (E).
    ``(B)(i) The amount of additional incentive payments to a State 
under subparagraph (A)(ii) shall be an amount equal to the sum of--
            ``(I) the amount obtained by multiplying the total amount 
        determined by the Secretary of Labor under subparagraph (A) 
        (after application of clause (i) of such subparagraph) times 
        the same ratio as is applicable under subsection (a)(2)(B) for 
        purposes of determining such State's share of any funds to be 
        transferred under subsection (a) as of October 1, 2007; and
            ``(II) an amount equal to the total amount determined by 
        the Secretary of Labor under subparagraph (A) (after 
        application of clause (i) of such subparagraph) less the total 
        amount of additional incentive payments under subclause (I) for 
        all States, divided by the total number of States receiving 
        additional incentive payments.
    ``(ii) In no case may the amount of an additional incentive payment 
transferred to a State under this paragraph exceed an amount equal to 2 
times the total amount of the incentive payment transferred to the 
State under paragraph (1)(C).
    ``(C) For each State described in subparagraph (E), the Secretary 
shall make a certification to that effect to the Secretary of the 
Treasury, together with a certification as to the amount of the 
additional incentive payment to be transferred to the State account 
pursuant this paragraph. The Secretary of the Treasury shall make the 
appropriate transfer within 30 days after receiving such certification.
    ``(D) The Secretary of Labor shall certify to the Secretary of the 
Treasury the amount to be made available for transfer under 
subparagraph (A)(i).
    ``(E) For purposes of subparagraph (A), a State is described in 
this subparagraph if the Secretary of the Treasury received a 
certification under paragraph (4)(B) that the State law of such State 
meets the requirements of paragraphs (2) and (3).
    ``(6)(A) Except as provided in subparagraph (B), amounts 
transferred to a State account pursuant to paragraphs (4)(B) and (5)(C) 
may be used only in the payment of cash benefits to individuals with 
respect to their unemployment.
    ``(B) A State may, subject to the same conditions as set forth in 
subsection (c)(2) (excluding subparagraph (B) thereof, and deeming the 
reference to `subsections (a) and (b)' in subparagraph (D) thereof to 
include this subsection), use any amount transferred to the account of 
such State under paragraphs (4)(B) and (5)(C) for the administration of 
its unemployment compensation law and public employment offices.
    ``(7) Out of any money in the Federal unemployment account not 
otherwise appropriated, the Secretary of the Treasury shall reserve 
$7,000,000,000 to carry out this subsection. For purposes of section 
902, the net balance in the Federal unemployment account as of any time 
is the amount in such account as of such time reduced by an amount 
equal to the total amount so reserved less the total of the incentive 
payments transferred under this subsection (and the total amount 
transferred under paragraph (5)(A)(i)) as of such time.

         ``Special Transfers in Fiscal Years 2008 Through 2012

    ``(g)(1) Notwithstanding any other provision of this section, the 
total amount available for transfer to the accounts of the States 
pursuant to subsection (a) as of the beginning of each of fiscal years 
2008, 2009, 2010, 2011, and 2012 shall be equal to the total amount 
which (disregarding this subsection) would otherwise be so available, 
increased by $100,000,000 (or, in the case of fiscal year 2012, 
$100,000,000 plus the amount made available for transfer under 
subsection (f)(5)(A)(i)).
    ``(2) Each State's share of any additional amount made available by 
this subsection shall be determined, certified, and computed in the 
same manner as described in subsection (a)(2) and shall be subject to 
the same limitations on transfers as described in subsection (b). For 
purposes of applying subsection (b)(2), the balance of any advances 
made to a State under section 1201 shall be credited against, and 
operate to reduce (but not below zero)--
            ``(A) first, any additional amount which, as a result of 
        the enactment of this subsection, is to be transferred to the 
        account of such State in a fiscal year; and
            ``(B) second, any amount which (disregarding this 
        subsection) is otherwise to be transferred to the account of 
        such State pursuant to subsections (a) and (b) in such fiscal 
        year.
    ``(3) Any additional amount transferred to the account of a State 
as a result of the enactment of this subsection--
            ``(A) may be used by the State agency of such State only in 
        the payment of expenses incurred by it for--
                    ``(i) the administration of the provisions of its 
                State law carrying out the purposes of subsection 
                (f)(2) or any subparagraph of subsection (f)(3);
                    ``(ii) improved outreach to individuals who might 
                be eligible for compensation by virtue of any 
                provisions of the State law which are described in 
                clause (i);
                    ``(iii) the improvement of unemployment benefit and 
                unemployment tax operations; and
                    ``(iv) staff-assisted reemployment services for 
                unemployment insurance claimants; and
            ``(B) shall be excluded from the application of subsection 
        (c).
    ``(4) The total additional amount made available by this subsection 
in a fiscal year shall be taken out of the amounts remaining in the 
employment security administration account after subtracting the total 
amount which (disregarding this subsection) is otherwise required to be 
transferred from such account in such fiscal year pursuant to 
subsections (a) and (b).''.
    (b) Regulations.--The Secretary of Labor may prescribe any 
regulations necessary to carry out the amendment made by subsection 
(a).

SEC. 3. EXTENSION OF FUTA TAX.

    Section 3301 of the Internal Revenue Code of 1986 (relating to rate 
of tax) is amended--
            (1) by striking ``2007'' in paragraph (1) and inserting 
        ``2012'', and
            (2) by striking ``2008'' in paragraph (2) and inserting 
        ``2013''.

Summary: Unemployment Insurance Modernization Act - Amends the Social Security Act to require the Secretary of Labor to make unemployment compensation modernization incentive payments in FY2008-FY2012 by certain transfers from the federal unemployment account to the accounts of the states in the Unemployment Trust Fund.

Prescribes a formula for determining the maximum allowable incentive payments.

Specifies requirements state law must meet for the state to qualify for such a payment.

Limits the use of transferred amounts to the payment of cash unemployment benefits to individuals.

Requires the Secretary of the Treasury to reserve specified funds out of the federal unemployment account for such incentive payments.

Amends the Internal Revenue Code to extend through FY2013 the Federal Unemployment Tax Act (FUTA) excise tax imposed on every employer.