Title: Combatting COVID Unemployment Fraud Act of 2021
Policy area: Labor and Employment

Summary:
Combatting COVID Unemployment Fraud Act of 2021
This bill requires additional documentation for individuals seeking pandemic unemployment assistance, requires state unemployment agencies to use designated fraud prevention tools, and otherwise addresses pandemic-related unemployment benefits.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1699 Introduced in Senate (IS)]

<DOC>






117th CONGRESS
  1st Session
                                S. 1699

 To prevent fraud in COVID unemployment programs, recover fraudulently 
paid benefits, provide relief for taxpayers and victims of unemployment 
                     fraud, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 19, 2021

   Mr. Crapo introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To prevent fraud in COVID unemployment programs, recover fraudulently 
paid benefits, provide relief for taxpayers and victims of unemployment 
                     fraud, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Combatting COVID Unemployment Fraud 
Act of 2021''.

SEC. 2. PREVENTING FRAUD IN PANDEMIC UNEMPLOYMENT ASSISTANCE.

    (a) Verification of Eligibility for Pandemic Unemployment 
Assistance Prior to Authorizing Benefits.--
            (1) In general.--Section 2102 of the CARES Act (15 U.S.C. 
        9021) is amended--
                    (A) in subsection (a)(3)(A)--
                            (i) in clause (ii)--
                                    (I) in the matter preceding 
                                subclause (I), by striking ``provides 
                                self-certification'' and inserting 
                                ``provides, not later than 30 days 
                                after the date of application, such 
                                documentation as the State may require, 
                                demonstrating'';
                                    (II) in subclause (I), in the 
                                matter preceding item (aa), by 
                                inserting ``in the employment or 
                                service described in clause (iv)'' 
                                after ``unavailable to work''; and
                                    (III) in subclause (II), by 
                                striking ``and'' at the end;
                            (ii) by amending clause (iii) to read as 
                        follows:
                            ``(iii)(I) provides, not later than 30 days 
                        after the date of application and prior to the 
                        authorization of pandemic unemployment 
                        assistance, such documentation as the State 
                        agency may require (in accordance with section 
                        625.6(e) of title 20, Code of Federal 
                        Regulations, or any successor thereto, except 
                        with respect to the deadline for submission) to 
                        substantiate prior employment or self-
                        employment or the planned commencement of 
                        employment and earnings, as applicable, except 
                        that the deadline for submission may be 
                        extended if the individual has shown good cause 
                        under applicable State law that justifies a 
                        delay in submitting such documentation; and
                            ``(II) provides documentation to the 
                        satisfaction of the State agency, or the entity 
                        verifying identify on behalf of the State 
                        agency, verifying the individual's identity 
                        prior to authorizing benefits; and''; and
                            (iii) by adding at the end the following:
                            ``(iv) provides self-certification that the 
                        principal source of income and livelihood of 
                        the individual are dependent upon the 
                        individual's employment for wages or the 
                        individual's performance of service in self-
                        employment; and''.
                    (B) in subsection (f)(1), by inserting ``prior to 
                authorizing benefits'' after ``validation''; and
                    (C) in subsection (f)(2)(B), by striking the period 
                at the end and inserting at the end the following: ``: 
                Provided, That such expenses shall be claimed by States 
                on a reimbursable basis and shall not be subject to 
                restrictions imposed by the Department of Labor's 
                resource justification model.''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to individuals who apply for pandemic unemployment 
        assistance on or after the date that is 30 days after the date 
        of enactment of this Act
    (b) Limitation on Backdating Claims for Pandemic Unemployment 
Assistance.--In the case of a covered individual whose first 
application for pandemic unemployment assistance under section 2102 of 
the CARES Act is filed after the date of enactment of this Act, 
subsection (c)(1)(A)(i) of such section 2102 of the CARES Act shall be 
applied by substituting ``April 1, 2021'' for ``January 27, 2020''.
    (c) Application Deadline for Pandemic Unemployment Assistance.--
Subsection (c) of section 2102 of the CARES Act (15 U.S.C. 9021) is 
amended by adding at the end the following:
            ``(7) Application deadline.--Notwithstanding any other 
        provision of this subsection, no application for pandemic 
        unemployment assistance may be filed after the date that is 14 
        days after the date specified in paragraph (1)(A)(ii) unless 
        the individual has shown good cause under the applicable State 
        law for failing to file before such date.''.
    (d) Issuance of Guidance.--Section 2102 of the CARES Act (15 U.S.C. 
9021) is amended by adding at the end the following:
    ``(i) Department of Labor Guidance on Verification of Eligibility 
for Pandemic Unemployment Assistance Prior to Authorizing Benefits.--
Not later than 60 days after the enactment of this subsection, the 
Secretary of Labor, in consultation with the Director of the National 
Institute of Standards and Technology, shall issue guidance to State 
workforce agencies outlining the latest industry practices with regard 
to cybersecurity, digital identity proofing services, standards for 
privacy, and procedures for verifying and validating the identity of 
individuals, pursuant to subsection (f)(1), and the availability of 
third-party income verification technology to prevent fraud in the 
pandemic unemployment assistance program.''.

SEC. 3. LIMITATION ON PAYMENTS OF FEDERAL PANDEMIC UNEMPLOYMENT 
              COMPENSATION.

    Subsection (b) of 2104 of the CARES Act (15 U.S.C. 9023) is amended 
by adding at the end the following:
            ``(5) Limitation.--Notwithstanding any other provision of 
        this subsection, no Federal pandemic unemployment compensation 
        may be paid retroactively for a week of unemployment to 
        claimants who apply for regular compensation for such week more 
        than 14 days after the dates specified in clauses (i) and (ii) 
        of subsection (b)(3)(A) with respect to such week.''.

SEC. 4. PREVENTING UNEMPLOYMENT COMPENSATION FRAUD AND IMPROPER 
              PAYMENTS THROUGH DATA MATCHING.

    (a) Unemployment Compensation Data Integrity Hub.--
            (1) In general.--Section 303(a) of the Social Security Act 
        (42 U.S.C. 503(a)) is amended by adding at the end the 
        following:
            ``(13) The State agency charged with administration of the 
        State law shall use the system designated by the Secretary of 
        Labor for cross-matching claimants of unemployment compensation 
        under State law against any databases in the system to prevent 
        and detect fraud and improper payments.''.
    (b) Use of Unemployment Claims Data To Prevent and Detect Fraud.--
Section 303 of the Social Security Act (42 U.S.C. 503) is amended by 
adding at the end the following:
    ``(n) Use of Unemployment Claims Data To Prevent and Detect 
Fraud.--The Inspector General of the Department of Labor shall, for the 
purpose of conducting audits, investigations, and other oversight 
activities authorized under the Inspector General Act of 1978 (5 U.S.C. 
App.) relating to unemployment compensation programs, have direct 
access to each of the following systems:
            ``(1) The system designated by the Secretary of Labor for 
        the electronic transmission of requests for information 
        relating to interstate claims for unemployment compensation.
            ``(2) The system designated by the Secretary of Labor for 
        cross-matching claimants of unemployment compensation under 
        State law against databases to prevent and detect fraud and 
        improper payments (as described in subsection (a)(13)).''.
    (c) Use of Fraud Prevention and Detection Systems in Administration 
of Unemployment Compensation Programs.--
            (1) In general.--Section 303 of the Social Security Act (42 
        U.S.C. 503), as amended by subsection (b), is further amended 
        by adding at the end the following:
    ``(o) State Use of Fraud Prevention and Detection Systems.--
            ``(1) In general.--The State agency charged with 
        administration of the State law shall establish procedures to 
        do the following:
                    ``(A) National directory of new hires.--Use the 
                National Directory of New Hires established under 
                section 453(i)--
                            ``(i) to compare information in such 
                        Directory against information about individuals 
                        claiming unemployment compensation to identify 
                        any such individuals who may have become 
                        employed, in accordance with any regulations 
                        that the Secretary of Health and Human Services 
                        may issue and consistent with the computer 
                        matching provisions of the Privacy Act of 1974;
                            ``(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 unemployment compensation payments 
                        that have been made.
                    ``(B) State information data exchange system.--Use 
                the Department of Labor's State Information Data 
                Exchange System 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), and 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 subsection (a)(12).
                    ``(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).
            ``(2) Enforcement.--Whenever the Secretary of Labor, after 
        reasonable notice and opportunity for hearing to the State 
        agency charged with the administration of the State law, finds 
        that the State agency fails to comply substantially with the 
        requirements of paragraph (1), the Secretary of Labor shall 
        notify such State agency that further payments will not be made 
        to the State until the Secretary of Labor is satisfied that 
        there is no longer any such failure. Until the Secretary of 
        Labor is so satisfied, such Secretary shall make no future 
        certification to the Secretary of the Treasury with respect to 
        such State.
            ``(3) Unemployment compensation.--For the purposes of this 
        subsection, any reference to unemployment compensation 
        described in this paragraph shall be considered to refer to--
                    ``(A) regular or extended compensation (as defined 
                by section 205 of the Federal-State Extended 
                Unemployment Compensation Act of 1970);
                    ``(B) regular compensation (as defined by section 
                85(b) of the Internal Revenue Code of 1986) provided 
                under any program administered by a State under an 
                agreement with the Secretary;
                    ``(C) pandemic unemployment assistance under 
                section 2102 of the Relief for Workers Affected by 
                Coronavirus Act (15 U.S.C. 9021);
                    ``(D) pandemic emergency unemployment compensation 
                under section 2107 of the Relief for Workers Affected 
                by Coronavirus Act (15 U.S.C. 2025); and
                    ``(E) short-time compensation under a short-time 
                compensation program (as defined in section 3306(v) of 
                the Internal Revenue Code of 1986).''.
    (d) Effective Date.--The amendments made by subsections (a) and (c) 
shall take effect with respect to each State to weeks of unemployment 
beginning on or after the earlier of--
            (1) the date the State changes its statutes, regulations, 
        or policies in order to comply with such amendment; or
            (2) October 1, 2022.

SEC. 5. RECOVERING FRAUDULENT COVID UNEMPLOYMENT COMPENSATION BENEFIT 
              PAYMENTS.

    (a) State Unemployment Fraud Recoupment Plans.--
            (1) In general.--Section 2118(b)(3) of the CARES Act (15 
        U.S.C. 9034(b)(3)) is amended to read as follows:
            ``(3) to make grants to States or territories administering 
        unemployment compensation programs described in subsection (a) 
        (including territories administering the Pandemic Unemployment 
        Assistance program under section 2102) for such purposes, 
        including for--
                    ``(A) building State capacity to prevent and reduce 
                unemployment fraud through--
                            ``(i) the procurement of technology 
                        capabilities and building of infrastructure to 
                        verify and validate identity and earnings of 
                        unemployment compensation claimants;
                            ``(ii) the establishment of procedures to 
                        implement Federal guidance regarding prevention 
                        of overpayments and fraud detection and 
                        prevention; and
                            ``(iii) improving the efficiency and 
                        integrity of claims administration or 
                        processing of claims backlogs due to the 
                        pandemic; and
                    ``(B) the development and implementation of State 
                unemployment fraud recoupment plans, which shall 
                include--
                            ``(i) an assessment of the amount and 
                        extent of fraudulently paid unemployment 
                        benefits in 2020 and 2021, as applicable;
                            ``(ii) an explanation of the causes of 
                        fraudulent payments, including any weaknesses 
                        in the State's internal control procedures;
                            ``(iii) a description of State efforts to 
                        recover fraudulent unemployment payments;
                            ``(iv) a description of State actions taken 
                        to reduce and prevent fraudulent payments; and
                            ``(v) the identification of additional 
                        resources or authority needed to facilitate 
                        recovery of fraudulently paid benefits; and
                    ``(C) targeted funding to support State efforts to 
                claw back fraudulent payments, which may be done by an 
                independent third party contracted by the State, 
                through State prosecution of criminal unemployment 
                fraud schemes in coordination with Federal law 
                enforcement officials, as applicable.''.
            (2) Reservation of funds.--Section 2118(a) of the CARES Act 
        (15 U.S.C. 9034(a)) is amended by adding at the end the 
        following: ``Of the amount made available under this 
        subsection, not less than $200,000,000 shall be used for grants 
        to States or territories as described in subsection (b)(3)''.
            (3) Effective date.--Not later than 60 days after the date 
        of enactment of this Act, each State with an agreement under 
        section 2102 of the CARES Act shall, as a condition of such 
        agreement, submit to the Secretary of Labor and make publicly 
        available a State unemployment fraud recoupment plan as 
        described in section 2118(b)(3)(B) of such Act.
    (b) Establishment of the COVID Unemployment Fraud Taskforce.--
Section 2118 of the CARES Act (15 U.S.C. 9034) is amended by adding at 
the end the following:
    ``(d) Establishment of the COVID Unemployment Fraud Taskforce.--
            ``(1) In general.--Not later than 30 days after the date of 
        enactment of this paragraph, the Secretary of Labor, the 
        Attorney General, and the Secretary of Homeland Security shall 
        establish a joint taskforce, to be known as the `COVID 
        Unemployment Fraud Taskforce', to combat fraud in unemployment 
        compensation programs. The taskforce shall--
                    ``(A) coordinate and support State and Federal 
                unemployment insurance fraud detection;
                    ``(B) identify fraud prevention tools and make them 
                available to States at no cost or substantially reduced 
                cost;
                    ``(C) take the lead with respect to violations of 
                Federal law on prosecution of individuals suspected of 
                unemployment fraud;
                    ``(D) facilitate information sharing regarding 
                unemployment fraud, particularly with regard to 
                international and multi-State organized crime rings;
                    ``(E) coordinate with State workforce agencies to 
                develop State unemployment fraud recoupment plans as 
                described in subsection (b)(3)(B); and
                    ``(F) coordinate with the Internal Revenue Service 
                to assist taxpayers who were victims of unemployment 
                fraud.
            ``(2) State dashboard.--Not later than 60 days after the 
        date of enactment of this paragraph, the COVID Unemployment 
        Fraud Taskforce shall make available on a public website, and 
        shall update on a regular basis, a dashboard that shows the 
        status of each State's efforts to prevent fraud and recover 
        fraudulently paid funds, including the amount of overpayments, 
        prosecutions of unemployment fraud, and information provided by 
        each State pursuant to (b)(3)(B).
            ``(3) Reservation of funds.--Of the amount made available 
        under subsection (a), not less than $20,000,000 shall be used 
        for the administration and operations of the COVID Unemployment 
        Fraud Taskforce established under paragraph (1), including for 
        hiring of personnel to identify and combat fraud schemes 
        targeting State unemployment compensation systems.''.
    (c) Allowing States To Retain Percentage of Overpayments for 
Administration and Program Integrity.--The Department of Labor shall 
issue guidance to States that allows State workforce agencies to retain 
5 percent of any amounts recovered in fraudulent or improperly paid 
State or Federal unemployment benefits made in 2020 or 2021 for use in 
administration of the State's unemployment compensation program, 
including for hiring fraud investigators and for other program 
integrity purposes. Recovered amounts retained by a State and used for 
the purposes described in this subsection shall not be considered to 
violate the withdrawal requirements of section 303(a)(5) of the Social 
Security Act or section 3304(a)(4) of the Internal Revenue Code of 
1986.

SEC. 6. PROTECTIONS FOR TAXPAYERS AND VICTIMS OF UNEMPLOYMENT FRAUD.

    (a) Assistance for Victims of Unemployment Fraud.--Section 2118 of 
the CARES Act (15 U.S.C. 9034), as amended by section 5(b), is further 
amended by adding at the end the following:
    ``(e) Assistance for Victims of Unemployment Fraud.--
            ``(1) In general.--The Department of Labor shall establish 
        an agreement with the Federal Trade Commission and other 
        identity theft victim resource centers, as applicable, to 
        assist victims of identity theft and unemployment fraud, 
        including assistance with individual case mitigation and victim 
        assistance.
            ``(2) Reservation of funds.--Of the amount made available 
        under subsection (a), not less than $2,000,000 shall be used 
        for the purposes described under paragraph (1).''.
    (b) Relief for Taxpayers That Were Victims of Identity Theft To 
Commit Unemployment Fraud.--The Commissioner of the Internal Revenue 
Service, in collaboration with the Secretary of Labor, shall implement 
a process to hold harmless taxpayers who are flagged for unreported 
income related to Form 1099-G, Certain Government Payments, in taxable 
years 2020 and 2021, if such taxpayer claims they are victims of 
identity theft, or that fraudulent unemployment benefits were claimed 
in their name, such that no penalties or interest shall accrue against 
the taxpayer, while the matter is being investigated and resolved.
    (c) Reporting Unemployment Compensation Overpayments.--
            (1) In general.--The Secretary of Labor, through the Office 
        of Unemployment Insurance in the Employment and Training 
        Administration, shall collect data from each State on the 
        amounts of overpayments waived in unemployment compensation 
        programs, including a breakdown of overpayments waived and 
        excluded by each State from Form 1099-G, Certain Government 
        Payment during taxable years 2020 and 2021, due to suspected or 
        confirmed fraud.
            (2) Report to congress.--Not later than 120 days after the 
        date of enactment of this Act, the Secretary of Labor shall 
        submit a report to the Committee on Ways and Means of the House 
        of Representatives and the Committee on Finance of the Senate 
        that describes the aggregate amount of overpayments nationally, 
        including the subset of overpayments made specifically due to 
        fraud, and detailed by program as applicable, including a 
        separate accounting for the pandemic unemployment assistance 
        program.
            (3) Expedited collection.--The Secretary of Labor may waive 
        the requirements of subchapter I of chapter 35 of title 44, 
        United States Code (commonly referred to as the ``Paperwork 
        Reduction Act'') with respect to the provisions in the 
        amendments made by this Act.
            (4) Applicability.--For purposes of this section, the term 
        ``unemployment compensation'' shall be considered to refer to--
                    (A) regular compensation and extended compensation 
                (as such terms are defined by section 205 of the 
                Federal-State Extended Unemployment Compensation Act of 
                1970);
                    (B) unemployment compensation (as defined by 
                section 85(b) of the Internal Revenue Code of 1986) 
                provided under any program administered by a State 
                under an agreement with the Secretary;
                    (C) pandemic unemployment assistance under section 
                2102 of the CARES Act;
                    (D) pandemic emergency unemployment compensation 
                under section 2107 of the CARES Act; and
                    (E) short-time compensation under a short-time 
                compensation program (as defined in section 3306(v) of 
                the Internal Revenue Code of 1986).

SEC. 7. REINSTATING FEDERAL WORK SEARCH REQUIREMENT.

    (a) In General.--Section 4102(b) of the Families First Coronavirus 
Relief Act (26 U.S.C. 3304 note) is amended by striking ``work 
search,'' after ``with respect to''.
    (b) Effective Date.--The amendment made under subsection (a) shall 
take effect on the date that is 30 days after the date of enactment of 
this Act.
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