The Internal Revenue Service and the Treasury Department posted a set of
The proposed regulations aim to apply and clarify a federal law passed in 1996, the Personal Responsibility and Work Opportunity Reconciliation Act, during the Clinton Administration. But they also reflect the priorities of the Trump administration, which has sought to curb illegal immigration through increased enforcement by the Department of Homeland Security's Immigration and Customs Enforcement unit, as well as provisions of the One Big Beautiful Bill Act that congressional Republicans passed last year denying various tax breaks to undocumented workers. The Trump administration has invoked a number of earlier laws dating back to the 18th century, such as the Alien Enemies Act of 1798, to justify its efforts to curb immigration.
"Refundable tax credits, like the Earned Income Tax Credit, were enacted to help low-to-middle income American families and workers receive critical financial support," said IRS CEO Frank Bisignano in a statement Wednesday. "Today's proposed regulations ensure that federally funded benefits are reserved for eligible taxpayers and protect the integrity of every taxpayer dollar."
Under the Personal Responsibility and Work Opportunity Reconciliation Act, only U.S. citizens, U.S. nationals and qualified aliens are eligible to receive federal public benefits. The proposal unveiled Wednesday uses a legal analysis by the Justice Department's Office of Legal Counsel concluding that the refunded portions of the affected credits are federal public benefits.
The
To receive the refunded portion of an affected credit:
- The taxpayer must be a U.S. citizen, U.S. national, or qualified alien on the date the taxpayer files the federal income tax return first claiming the affected credit. Qualified aliens include lawful permanent residents, asylees, refugees and certain other groups defined or specified under PRWORA.
- The taxpayer must declare on the tax return, under penalty of perjury, that the taxpayer is eligible to receive the refunded portion of the credit.
- For a joint return, only one spouse must be a U.S. citizen, U.S. national or qualified alien.
Only the refunded portion of the affected credits would be treated as a federal public benefit. The refunded portion is the aggregate amount of the affected refundable credits that exceeds the income tax liability imposed for the tax year. A taxpayer who is not qualified to receive the refunded portion could still claim any portion of an affected credit for which the taxpayer otherwise qualifies that generally offsets income tax liability. However, the proposed rules are likely to severely limit the size of the benefit for many recipients.
The proposed regulations would apply to tax years ending on or after the date the regulations are published as final regulations.
"Under President Trump, the days of illegal aliens collecting taxpayer-funded benefits are over," said Treasury Secretary Scott Bessent in a statement. "The federal law is clear, and Treasury is enforcing it. American taxpayers should not be forced to foot the bill for benefits going to those who are barred by law from receiving them. These proposed regulations end the abuse, protect the integrity of the tax system, and put Americans first."
The Treasury and the IRS are asking for public comments and requests for a public hearing on all aspects of the proposed regulations. The complete instructions for submitting comments are included in the proposed regulations.
