[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2962 Introduced in House (IH)]







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 programs, 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 compensation and employment 
               service programs, 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; 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 employment 
                            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 
                            unemployment compensation programs.

                        TITLE I--TAX PROVISIONS

SEC. 101. REPEAL OF SURTAX.

    (a) Tax Rate.--Section 3301 of the Internal Revenue 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 percent.''.
    (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 FACILITATE COMBINED 
              EMPLOYMENT TAX REPORTING.

    Paragraph (5) of section 6103(d) of the Internal Revenue Code of 
1986 is amended to read as follows:
            ``(5) Disclosure for combined employment 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 reporting program 
        approved by the Secretary. Subsections (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 Internal Revenue Code of 
1986 is amended by striking in the last sentence all that follows 
``subsection (c),'' and inserting ``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 period and 
                inserting ``; and''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(11) A requirement that contributions to unemployment 
        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 Internal 
                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 BENEFIT REQUIREMENTS.

    Section 202 of the Federal-State Extended Unemployment 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 UNEMPLOYMENT 
              COMPENSATION, STATE SYSTEMS OF PUBLIC EMPLOYMENT OFFICES 
              AND VETERANS 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 subparagraph (B) and inserting the following:
    ``(c)(1)(A) There are hereby appropriated out of the employment 
security administration account for each fiscal year--
            ``(i) the amount determined under subsection (g) for such 
        year for assisting the States in the administration of their 
        unemployment compensation laws as provided in title III 
        (including administration pursuant to agreements under any 
        Federal unemployment compensation law),
            ``(ii) the amount determined under subsection (h) for such 
        year for providing reemployment services, including 
        administering the work test for the State unemployment 
        compensation system and providing job finding and placement 
        services, to unemployment compensation claimants,
            ``(iii) the amount determined under subsection (i) for such 
        year for the establishment and maintenance of systems of public 
        employment offices in accordance 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 available for 
expenditure out of the employment security administration 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 
appropriate 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 programs 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 determining 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 
        determination is being made, multiplied by
            ``(ii) the projected average weekly number of individuals 
        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 solely 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 determining 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 product price index for the fiscal year for which the 
        determination 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)) exceeds the projection used in 
such paragraph (1)(A)(ii), then additional amounts shall be 
appropriated under subsection (c)(1)(A)(i) for funding the costs of 
administering the State unemployment compensation programs equal to--
            ``(A)(i) the amount determined under this subparagraph 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 
        domestic 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 released by the President during such 
        fiscal year) and the weekly average of insured unemployed 
        individuals 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 allocated 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 
projection 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 thereafter, the 
amount appropriated for funding costs of providing reemployment 
services to unemployment compensation claimants under subsection 
(c)(1)(A)(ii) shall be--
            ``(1) the amount determined under this paragraph for the 
        prior fiscal year (except that in determining 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 product price index for the fiscal year for which the 
        determination is being made, multiplied by
            ``(2) the projected number of payments of unemployment 
        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 thereafter, the 
amount appropriated for funding the costs of administering the State 
system of public employment offices under subsection (c)(1)(A)(iii) 
shall be--
            ``(1) the amount determined under this paragraph for the 
        prior fiscal year (except that in determining 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 
        determination 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 Secretary of 
        Labor using the economic assumptions released by the President 
        for such fiscal year, during the preceding fiscal year, under 
        section 1106 of title 31, United States Code, except as 
        otherwise provided 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 
automation acquisitions shall remain available for obligation by the 
States through the end of the second fiscal year following the fiscal 
year in which such funds are appropriated.
    ``(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 unemployment compensation automation efforts 
notwithstanding the cost allocation principles prescribed under Office 
of Management and Budget Circular No. A-87.''.
    (c) Funding for Improved Technology To Assist 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 
paragraph:
    ``(6) In addition to amounts provided under paragraph (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 assisting States in funding technology and other costs that 
accelerate access to wage and employment information in order to 
determine eligibility for unemployment compensation.''.
    (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 determines appropriate for providing reemployment 
services, including administering the work test for the State 
unemployment compensation system and providing job finding and 
placement services, to claimants for unemployment compensation.''.
            (2) Expenditure of funds for reemployment 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 received pursuant to 
                section 302(d) of this title which, because of any 
                action or contingency, have been lost or have been 
                expended for purposes 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 Security 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 Security Act 
                (42 U.S.C. 1101(c)(1)(B)) is amended by moving clauses 
                (i) through (v) 2 ems to the left, and by striking 
                clause (iii) and inserting 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 semicolon and 
                inserting a period; and
                    (C) by striking clause (v).
            (7) Appropriation reference in the wagner-peyser act.--
        Section 5 of the Wagner-Peyser Act (29 U.S.C. 49d) is amended--
                    (A) by striking subsection (a) and inserting 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 subsection 
                (b).
    (e) Budget Justification.--No funds may be expended under the 
amendments made by this section unless the Secretary of Labor includes 
in the Department of Labor'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 subsection (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 remaining 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 expenses 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 allocated 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 period.
Nothing in this paragraph shall preclude the application of subsection 
(b) of this section with respect to any allocation determined under 
this subparagraph.
    ``(C) Any amounts in excess of those described in subparagraph (A) 
(remaining in the employment security administration account as of the 
close of any fiscal year specified in such subparagraph) shall, as of 
the beginning of the succeeding fiscal year, accrue to the Federal 
unemployment 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 incurred by it for the administration of its 
unemployment compensation law'' and inserting ``to pay costs of 
administration in the amounts and for the purposes described in 
subsection (a)(3)(A)''.

                   TITLE IV--MISCELLANEOUS PROVISIONS

SEC. 401. ADJUSTMENT TO FEDERAL UNEMPLOYMENT ACCOUNT 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 (determined 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 (determined 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 subparagraph (A) 
                or this subparagraph for the prior fiscal year, and
                    ``(ii) $620,000,000; and
            ``(C) if, for any fiscal year, the amount (determined by 
        the Secretary of Labor and certified by such Secretary to the 
        Secretary of the Treasury under subparagraph (B)) does not 
        exceed 0.25 percent of the total wages (determined without any 
        limitation on amount) subject to contributions under all State 
        unemployment compensation laws for the calendar 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 
        excess 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 adding 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 Unemployment 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 contributions under all 
                State unemployment compensation laws for the preceding 
                calendar year, divided by
                    ``(ii) the total wages subject (determined without 
                any limitation on amount) to contributions under all 
                State unemployment compensation 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 transferred 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 Treasury before such year and shall equal the amount 
determined 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 established by clause (i)(II).
    ``(4) If either of the circumstances described in section 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 unemployment 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 Security Act (42 
U.S.C. 1103(a)) is amended by striking paragraph (3).
    (b) Use of Funds.--Section 903(c)(2) of the Social Security Act (42 
U.S.C. 1103(c)(2)), as amended by section 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 Security 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 credit 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 receipt and processing of direct 
                remittances from employers; and''.
            (2) Federal unemployment tax act requirement.--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 receipt 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 
        earnings 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 requirement.--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 paragraph (3) 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;''.
    (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 paragraph (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 connection with the receipt and 
        processing of direct remittances 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 receipt 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 compensation program' means a program 
under which--
            ``(1) the participation of an employer is voluntary;
            ``(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 compensation payable to 
        any such employee is a pro rata portion of the unemployment 
        compensation which would be payable to the employee if such 
        employee were totally unemployed;
            ``(5) such employees are not required to meet the 
        availability for work or work search test requirements while 
        collecting short-time compensation benefits, 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 retirement 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 collective 
        bargaining agreement) to submit a written plan describing the 
        manner in which the requirements 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.--Paragraph (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 payment 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 
        compensation 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 COMPENSATION 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 disclosure to assist in 
        administration of unemployment compensation programs.--
                    ``(A) In general.--If a State agency responsible 
                for the administration of an unemployment 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 
                information in the National Directory of New Hires 
                indicates that the individual may be employed, disclose 
                to the State agency the name and address of any 
                putative employer of the individual and the quarterly 
                wages reported for such individual, subject to this 
                paragraph.
                    ``(B) Condition on disclosure.--The Secretary shall 
                make a disclosure under subparagraph (A) only to the 
                extent that the Secretary determines that the 
                disclosure would not interfere with the effective 
                operation of the program 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).''.