Stop Unemployment Fraud Act

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7847 Introduced in House (IH)]

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119th CONGRESS
  2d Session
                                H. R. 7847

     To amend title III of the Social Security Act and the Federal
 Unemployment Tax Act to require identity verification procedures and
 data matching, to prevent unemployment fraud, and to strengthen work
              search requirements, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 5, 2026

  Mr. Smucker (for himself, Mr. Smith of Nebraska, Mr. Buchanan, Mr.
Fong, Ms. Van Duyne, Mr. Feenstra, Mr. Miller of Ohio, Ms. Tenney, Mr.
  Kelly of Pennsylvania, Mr. Arrington, Mr. Moore of Utah, Mr. Moran,
 Mrs. Miller of West Virginia, Mr. Bean of Florida, Mr. Yakym, and Mr.
    Estes) introduced the following bill; which was referred to the
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL

     To amend title III of the Social Security Act and the Federal
 Unemployment Tax Act to require identity verification procedures and
 data matching, to prevent unemployment fraud, and to strengthen work
              search requirements, 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 ``Stop Unemployment Fraud Act''.

SEC. 2. VERIFICATION OF APPLICANT IDENTITY.

    (a) In General.--Section 303 of the Social Security Act (42 U.S.C.
503) is amended by adding at the end the following:
    ``(n)(1) The State agency charged with the administration of the
State law shall certify that the State has procedures in place to
verify the identity of claimants of unemployment compensation,
including requiring the claimant to provide documentation of their
identity, which shall consist of--
            ``(A) at least one currently valid Federal or State
        government-issued identification document; and
            ``(B) one or more supporting documents, which may include
        utility bills, lease agreements, voter registration cards,
        vehicle registration, insurance documents, or other reliable
        documents, so long as such documents are--
                    ``(i) determined by the State to be sufficient to
                verify the identity of the claimant; or
                    ``(ii) approved by the Secretary for such purpose.
    ``(2) Not later than 12 months after the date of enactment of this
subsection, the Secretary of Labor shall promulgate regulations
governing identity verification procedures for claimants of
unemployment compensation used by State agencies. Such regulations
shall--
            ``(A) take into account--
                    ``(i) administrative costs, including for
                technology and cybersecurity systems; and
                    ``(ii) any other factors the Secretary determines
                appropriate;
            ``(B) provide due process protections for claimants;
            ``(C) specify methods to ensure that the documentation
        required under paragraph (1)(A)--
                    ``(i) is accurate, current, and reliable; and
                    ``(ii) does not produce systematic mismatches that
                unfairly deny or delay the payment of unemployment
                compensation;
            ``(D) require safeguards to ensure that the procedures--
                    ``(i) minimize false positive or negative rates;
                    ``(ii) do not result in the flagging, denial, or
                delay of claims based on the personal characteristics
                of an individual, including race, color, religion, sex,
                national origin, age, disability, or political
                affiliation or belief; and
                    ``(iii) comply with applicable civil rights laws;
            ``(E) require that such procedures comply with best
        practices for privacy and cybersecurity, as determined by the
        Secretary of Labor;
            ``(F) any other factors the Secretary determines
        appropriate; and
            ``(G) include any other provisions necessary to ensure the
        proper implementation, oversight, and continuous improvement of
        data-matching practices under this subsection.
    ``(3) In this subsection, the term `unemployment compensation' has
the meaning given the term in subsection (d)(2)(A).''.
    (b) Effective Date.--The amendments made by this Act shall apply,
with respect to a State, to initial applications for unemployment
compensation received by such State on or after the date that is 2
years after the date of enactment of this Act.

SEC. 3. PREVENTING UNEMPLOYMENT COMPENSATION FRAUD THROUGH DATA
              MATCHING.

    (a) In General.--Section 3304 of the Internal Revenue Code of 1986
is amended--
            (1) by redesignating subsection (f) as subsection (g); and
            (2) by inserting after subsection (e) the following:
    ``(f) Preventing Unemployment Compensation Fraud Through Data
Matching.--As a condition of eligibility of a State to implement the
exceptions to the withdrawal standard described in subparagraphs (H)
and (I) of subsection (a)(4), the State shall certify to the Secretary
of Labor 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.--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 claimants
                        of 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
                        subparagraph (A) are employed; and
                            ``(iii) upon making a verification
                        described in clause (ii), to take appropriate
                        action to deny or reduce unemployment
                        compensation payments, and to initiate recovery
                        of any overpayments 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 request for information from the
                State workforce agencies.
                    ``(C) Incarcerated individuals.--Request
                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 individuals 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.''.

SEC. 4. STOPPING THE PAY AND CHASE MODEL; PROHIBITION ON SELF-
              ATTESTATION.

    (a) Payments Due When Eligibility Is Confirmed.--Section 303 of the
Social Security Act (42 U.S.C. 503) is amended--
            (1) in subsection (a)(1), by inserting ``(as described in
        subsection (n))'' after ``when due''; and
            (2) by adding at the end the following:
    ``(o)(1) When Payments Are Due.--For the purposes of subsection
(a)(1), a payment is due on the date that an individual has established
eligibility for a benefit year or period, filed a weekly claim for
unemployment compensation (as defined in subsection (d)(2)(A)), and has
been determined to have met the requirements of weekly eligibility
described in paragraphs (10) and (12) of subsection (a), and any
additional requirements pursuant to State law. Such a payment shall be
made to the individual after payment is due, and such a payment shall
not be made prior to the determination that an individual is eligible
to receive such payment, including through the identification
verification required under subsection (n)(1).
    ``(2) Promulgation of Regulation.--Not later than 180 days after
the date of enactment of the Stop Unemployment Fraud Act, the Secretary
of Labor shall promulgate a regulation, for the purposes of carrying
out paragraph (1), that establishes maximum time frames for benefit
payment following an initial eligibility determination, including
standards for periods in which there is a high volume of claims.''.
    (b) Self-Attestation Prohibition.--Section 303 of the Social
Security Act (42 U.S.C. 503) is further amended by adding at the end
the following:
    ``(p) Self-Attestation Prohibition.--For the purpose of determining
whether a claimant is eligible for unemployment compensation (as
defined under subsection (d)(2)(A)) for any week, a claimant's self-
attestation or self-certification shall not be sufficient on its own to
prove the claimant is eligible for such compensation.''.
    (c) Effective Date.--The amendments made by this section shall
apply to certifications for payment made after the date that is 2 years
after the date of enactment of this Act.

SEC. 5. SECRETARIAL MONITORING.

    Section 303 of the Social Security Act (42 U.S.C. 503) is further
amended by adding at the end the following:
    ``(q) Monitoring Required.--
            ``(1) In general.--The Secretary of Labor shall monitor
        each State's compliance with subsection (r).
            ``(2) Withholding of funds.--In the case that the Secretary
        identifies a State that is not in compliance with subsection
        (n) or (o), the Secretary may, after reasonable notice and
        hearing--
                    ``(A) withhold 5 percent of the funds appropriated
                pursuant to section 901(c)(1)(A) for such State; and
                    ``(B) implement for the State a corrective action
                plan to bring the State into compliance with such
                subsections.''.

SEC. 6. STRENGTHENING WORK SEARCH REQUIREMENTS.

    (a) In General.--Section 303 of the Social Security Act (42 U.S.C.
503(a)(12)) is further amended--
            (1) in subsection (a)(12), by striking ``and actively'' and
        inserting ``and, subject to subsection (r), actively''; and
            (2) by adding at the end the following:
    ``(r)(1) Actively Seeking Work.--For the purposes of subsection
(a)(12), subject to paragraph (2), a claimant of unemployment
compensation (as defined in subsection (d)(2)(A)) shall only be
considered to be actively seeking work if the individual--
                    ``(A) is registered for employment services in such
                a manner and to such extent as prescribed by the State
                agency;
                    ``(B) maintains a record of such work search,
                including employers contacted, method of contact, and
                date contacted; and
                    ``(C) provides such record to the State agency each
                week the individual receives unemployment benefits.
            ``(2) Verification of work search record.--The State shall
        verify the work search records received pursuant to paragraph
        (1)(C).
            ``(3) Regulation.--Not later than 6 months after the date
        of enactment of the Stop Unemployment Fraud Act, the Secretary
        shall issue guidance outlining standards for--
                    ``(A) employment service registration; and
                    ``(B) verifying work search records.''.
    (b) Effective Date.--The amendments made by this section shall
apply to claimants who receive regular unemployment compensation
beginning on the date that is 2 years after the date of enactment of
this Act.

SEC. 7. 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'' after the
        semicolon;
            (2) in subparagraph (G), by adding ``and'' at the end; and
            (3) by adding at the end the following:
    ``(H) provided the certifications made by the State as described in
section 3304(f) of the Internal Revenue Code of 1986 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 used for--
            ``(1) the payment of costs of deterring, detecting, and
        preventing improper payments;
            ``(2) purposes related to the proper classification of
        individuals as being in employment (as defined in section
        3306(c) of the Internal Revenue Code of 1986), an independent
        contract, or as an employer (as defined in section 3306(a) of
        such Code), and the provisions of State law implementing
        section 303(k) of the Social Security Act;
            ``(3) the payment to the Secretary of the Treasury to the
        credit of the account of the State in the Unemployment Trust
        Fund;
            ``(4) modernizing the State's unemployment insurance
        technology infrastructure; or
            ``(5) 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 Stop 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 the following: ``, 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 the
following: ``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 receipt be paid over to the Secretary of the
        Treasury to the credit of the Unemployment Trust Fund
        established under 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.--Section
303(a)(4) of the Social Security Act (42 U.S.C. 503(a)(4)) is amended
by striking ``(except for refunds of sums erroneously paid into such
fund and except for refunds paid in accordance with the provisions of
3305(b) of the Federal Unemployment Tax Act)'' 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 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.
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