S-5010-119
Read twice and referred to the Committee on Finance.
Sponsored by Christopher Coons (D-DE)
What it does
This bill would amend the Internal Revenue Code to loosen two eligibility rules for state-run Self-Employment Assistance (SEA) programs, which allow unemployed workers to receive unemployment benefits while starting a business instead of actively job-searching. First, it would remove the requirement that participants must be likely to exhaust their regular unemployment benefits. Second, it would broaden the definition of qualifying self-employment activities to include either formal entrepreneurial training or a self-submitted business plan approved by the state. The bill would take effect two years after enactment, and would direct the Secretary of Labor to issue regulations and guidance — including a model list of qualifying activities and best practices for verification.
Who benefits
Unemployed workers who want to start a business but currently do not qualify for SEA programs because they are not projected to exhaust their unemployment benefits — a group that may include recently laid-off workers with shorter benefit histories. Workers with viable business plans who lack access to formal entrepreneurial training programs. Small business development organizations and entrepreneurial training providers who may see increased demand for their services. State workforce agencies that gain more flexibility in designing their SEA programs. Rural or underserved communities where formal training programs are scarce but self-directed business plans may be more accessible.
Who is hurt
Employers in local labor markets who may face a modestly reduced pool of active job-seekers if more unemployed workers shift into SEA programs rather than traditional job searches. Taxpayers who fund unemployment insurance trust funds, which could face increased draws if more participants receive benefits without actively seeking traditional employment. Workers who do not start viable businesses and exhaust their benefits in SEA programs without finding employment or achieving self-sufficiency. State unemployment insurance trust funds, which bear the cost of extended benefit payments to SEA participants.
Supporters argue
Supporters argue that the current "likely to exhaust" requirement arbitrarily excludes workers who have strong entrepreneurial potential but shorter benefit windows, limiting a program that has demonstrated success in converting unemployment spells into business creation. They contend that broadening qualifying activities — particularly by allowing self-submitted business plans — removes a structural barrier for workers in areas with limited access to formal training, and that the two-year implementation window and required federal guidance give states adequate time to build verification safeguards against misuse.
Opponents argue
Opponents argue that removing the "likely to exhaust" requirement eliminates a key targeting mechanism that focused SEA resources on workers with the greatest need and the longest expected unemployment spells, potentially diluting program effectiveness and increasing costs to unemployment trust funds that are already strained in many states. They contend that allowing self-submitted business plans as a qualifying pathway — without a mandatory third-party review standard — creates a verification gap that could be exploited, and that the bill delegates too much discretion to states without establishing minimum outcome accountability measures.
Constitutional context
This bill modifies the Internal Revenue Code's rules governing state unemployment programs, which Congress funds and regulates under the Taxing and Spending Clause (Art. I, §8, cl. 1). No active constitutional tension is implicated; Congress has well-established authority to set conditions on federal unemployment funds that states receive, and this bill adjusts existing conditions rather than creating new structural mandates.
Checks and balances
The executive branch (Secretary of Labor) gains rulemaking and guidance authority to implement the expanded program; this authority is checked by the required public notice-and-comment process and OMB approval of regulations, and states retain discretion in how they design qualifying activities within federal parameters.
Historical precedent
Self-Employment Assistance programs were first authorized under federal law in 1993 (P.L. 103-152), and only a small number of states have adopted them; prior modifications have similarly adjusted eligibility and activity requirements without major constitutional challenge.