The IRS and Department of the Treasury issued proposed regulations on Aug. 19 that would tighten eligibility requirements for refundable income tax credits, specifically targeting access by individuals without legal immigration status.
The proposed rules would establish new documentation and verification requirements to confirm legal work authorization before credits including the Earned Income Tax Credit and Child Tax Credit are paid, the agencies said.
Together, the EITC and CTC represent tens of billions of dollars in annual federal outlays and are the government’s largest anti-poverty tax programs. Refundable credits are paid out even when they exceed a filer’s tax liability, functioning as direct cash transfers to qualifying households.
The action sits at the intersection of immigration enforcement and tax policy — two of the highest-priority areas for the current administration, according to the Treasury Department. Existing law requires a valid Social Security number for the EITC but has been less restrictive for certain other credits.
The proposed rules would require additional documentation proving legal work authorization at the time of filing, a step that Treasury and IRS said would prevent claims by individuals not legally authorized to work in the United States.
Immigration advocacy groups have previously argued that restricting tax credits based on immigration status harms U.S. citizen children in mixed-status families who are legally entitled to benefits. Legal challenges are expected.
Tax policy experts have noted that the IRS has limited capacity to verify immigration status independently and would need to coordinate with the Department of Homeland Security to implement the new requirements.
A formal public comment period will follow Federal Register publication. The regulations, if finalized, would take effect for tax years following their adoption.
For American taxpayers, the administration frames the action as protecting the integrity of the tax credit system. Critics argue it could reduce benefits reaching eligible citizen children.