Protecting Taxpayers and Victims of Unemployment Fraud Act

Bill: 118-s-1587
Sponsor: full_name: Sen. Crapo, Mike [R-ID]
Introduced: 2023-05-11
Policy area: Labor and Employment
Latest action: action_date: 2023-05-11
text: Read twice and referred to the Committee on Finance.

Summaries:
action_date: 2023-05-11
action_desc: Introduced in Senate
text: <p><b>Protecting Taxpayers and Victims of Unemployment Fraud Act</b></p> <p>This bill addresses overpayments of unemployment insurance (UI) benefits, including by providing incentives for states to investigate and recover these funds. </p> <p>Specifically, the bill allows a state to retain 25% of any funds recovered from fraudulent overpayments of certain UI benefits that were provided during the COVID-19 pandemic. These retained funds must be used for specified program integrity measures, such as modernizing UI systems and information technology and hiring fraud investigators. </p> <p>The bill allows a state to retain up to 5% of (1) any UI overpayment it recovers, except where the overpayment is due to state agency error; and (2) any unpaid employer contributions that the state recovers, if the state certifies that it has enacted certain fraud detection measures. A state must use the retained funds for specified purposes, such as deterring, detecting, and preventing improper payments. </p> <p>Additionally, the bill extends from 3 to 10 years the time during which states must recover overpayments of pandemic UI benefits through benefit offsets. The bill also extends from 5 to 10 years the statute of limitations for federal criminal charges or civil enforcement actions related to UI fraud.</p> <p>Further, the bill extends an exception to the federal requirement that state UI personnel be hired on a merit basis. The bill allows a state to hire temporary staff on a noncompetitive basis through December 31, 2030. </p> <p>Finally, the bill repeals a provision that provided funding to the Department of Labor for UI program integrity activities. </p>

tv_txt: II 118th CONGRESS 1st Session S. 1587 IN THE SENATE OF THE UNITED STATES May 11, 2023 Mr. Crapo (for himself, Mr. Risch , Mr. Marshall , Mr. Braun , Mrs. Capito , Mr. Thune , Mr. Scott of Florida , Mr. Romney , Mr. Barrasso , Mr. Budd , Mrs. Blackburn , Mr. Kennedy , Mr. Young , Mr. Cassidy , and Ms. Collins ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To provide incentives for States to recover fraudulently paid Federal and State unemployment compensation, and for other purposes.

1. Short title; table of contents (a) Short title This Act may be cited as the Protecting Taxpayers and Victims of Unemployment Fraud Act . (b) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Recovering Federal fraudulent COVID unemployment compensation payments. Sec. 3. Permissible uses of unemployment fund for program administration. Sec. 4. Preventing unemployment compensation fraud through data matching. Sec. 5. Extension of emergency State staffing flexibility. Sec. 6. Fraud enforcement harmonization. Sec. 7. Budget offset. Sec. 8. State fund contingency. 2. Recovering Federal fraudulent COVID unemployment compensation payments (a) Allowing States To retain percentage of overpayments for program integrity (1) Pandemic unemployment assistance Section 2102(d)(4) of the CARES Act ( 15 U.S.C. 9021(d)(4) ) is amended to read as follows: (4) Fraud and overpayments Section 2107(e) shall apply with respect to pandemic unemployment 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 Compensation 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 (ii) by inserting , except that a State may retain a percentage of any amounts recovered as described in subparagraph (C) before the period at the end; and (B) by adding at the end the following new subparagraph: (C) Retention of percentage of recovered funds The State agency may retain 25 percent of any amount recovered from overpayments 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 compensation systems and information technology 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 activities as determined by the State. . (3) Pandemic emergency unemployment compensation Section 2107(e)(3) of the CARES 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 recovered as described in subparagraph (C) before the period at the end; and (B) by adding at the end the following new subparagraph: (C) Retention of percentage of recovered funds The State agency may retain 25 percent of any amount recovered from overpayments 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 compensation systems and information technology 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 activities as determined by the State. . (4) Extended unemployment compensation 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 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) ). (5) First week of regular compensation A State that was a party to an agreement under section 4105 of the CARES Act ( 15 U.S.C. 9024 ) may retain 25 percent of any amount recovered from overpayments of regular compensation paid to individuals by the State for their first week of regular unemployment for which the State received full Federal 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 retained by a State pursuant to paragraph (4) or (5) of subsection (a) or under section 2102(d)(4), section 2104(f)(3)(C), or section 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 authority of a State to retain any amount pursuant to paragraph (4) or (5) of subsection (a) and under section 2102(d)(4), section 2104(f)(3)(C), and section 2107(e)(3)(C) of the CARES Act shall apply only— (1) with respect to an amount recovered on or after the date of the enactment of this Act; and (2) during the 10-year period beginning on the date on which such amount was received by an individual not entitled to such amount. 3. Permissible uses of unemployment fund for program administration (a) Withdrawal standard in the Internal Revenue Code Section 3304(a)(4) of the Internal Revenue Code of 1986 is amended— (1) in subparagraph (F), by striking and at the end; and (2) by inserting after subparagraph (G) the following new subparagraphs: (H) 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 overpayment 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 deposited in a State fund from which money may be withdrawn for— (i) the payment of costs of deterring, detecting, and preventing improper payments; (ii) purposes relating to the proper classification of employees and the provisions 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 unemployment insurance technology infrastructure; or (v) otherwise assisting the State in improving the timely and accurate administration of the State’s unemployment compensation 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 contributions, or payments in lieu of contributions, that are collected as a result of an investigation and assessment by the State agency may, immediately following receipt of such payments, be deposited in a State fund from which moneys may be withdrawn for the purposes specified in subparagraph (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 otherwise provided in this section, section 3304(a)(4) of the Internal Revenue Code of 1986, or any other provisions of Federal unemployment compensation law; and . (d) Immediate deposit requirements in the internal revenue code Section 3304(a)(3) 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 ( 42 U.S.C. 1104 ), except 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 otherwise provided in this section, section 3304(a)(3) of the Internal Revenue Code of 1986, or any other provisions of Federal unemployment compensation law) . (f) Application to Federal payments When administering 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 unemployment compensation law. With respect to improper Federal 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 contributions (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 beginning 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. 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 certify each of the following: (1) Integrity data hub The State uses the system designated by the Secretary of Labor (or another system at the discretion of the State) for cross-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 Social Security Act— (i) to compare information in such Directory against information about individuals 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 compensation payments, and to initiate recovery of any improper payments that have been made. (B) State Information Data Exchange System Use the State Information Data Exchange System (or another system at the discretion of the State) 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) of the Social Security Act, or 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 individual's inability to satisfy the requirement under section 303(a)(12) of such Act. (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) of the Social Security Act. (b) Unemployment compensation For the purposes of this section, any reference to unemployment compensation shall be considered to refer to compensation as defined in section 3306 of the Internal Revenue Code of 1986. 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 recovery of fraudulent overpayments under Federal pandemic unemployment compensation programs authorized under the CARES Act ( 15 U.S.C. 9021 et seq. ), subject to the succeeding 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 Revenue Code of 1986 to such State law. Such modifications may continue through December 31, 2030. 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 compensation (as defined in section 3306 of the Internal Revenue Code of 1986) shall be filed not later than 10 years after the offense was committed. 7. Budget offset Section 2118 of the CARES Act ( 15 U.S.C. 9034 ) is repealed. 8. State fund contingency Subject to appropriations, the unobligated balance as of the day before the date of enactment of this Act of amounts made available under section 2118 of the CARES Act ( 15 U.S.C. 9034 ) shall be transferred to the Secretary of the Treasury and periodically credited, on an as-needed basis, to the appropriate State account in the Unemployment Trust Fund established by section 904 of the Social Security Act ( 42 U.S.C. 1104 ) in an amount that replaces the amount deposited by a State in a State fund in accordance with subparagraph (H) or (I) of section 3304(a)(4) of the Internal Revenue Code of 1986 (as amended by section 3(a) of this Act) if the amount in such State account is less than the amount that would be in such State account if such subparagraphs had not been enacted.