Unemployment Insurance Modernization Act - Amends the Social Security Act to require the Secretary of Labor to make unemployment compensation modernization incentive payments in FY2008-FY2012 by certain transfers from the federal unemployment account to the accounts of the states in the Unemployment Trust Fund.
Prescribes a formula for determining the maximum allowable incentive payments.
Specifies requirements state law must meet for the state to qualify for such a payment.
Limits the use of transferred amounts to the payment of cash unemployment benefits to individuals (including for dependents' allowances and for unemployment compensation, exclusive of administrative expenses).
Requires the Secretary of the Treasury to reserve specified funds out of the federal unemployment account for such incentive payments.
Amends the Internal Revenue Code to extend through FY2013 the Federal Unemployment Tax Act (FUTA) excise tax imposed on every employer.