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State agency may, immediately following receipt of such payments, be deposited in a State fund from which moneys may be withdrawn for the purposes specified in subparagraph (H)..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.