Treasury and the Internal Revenue Service proposed regulations to restrict undocumented immigrants’ access to refundable tax credits on Aug. 19. The targeted credits — the Child Tax Credit and the Earned Income Tax Credit — together distribute more than $100 billion annually to working families.
The proposed rules add further eligibility verification steps beyond existing Social Security number requirements, targeting what Treasury described as protecting refundable credits from abuse. A public comment period is open before the rules are finalized.
The Child Tax Credit and Earned Income Tax Credit are among the most powerful anti-poverty tools in the U.S. tax code. The proposed changes to eligibility verification could reduce access for mixed-status families and affect millions of American-citizen children living with undocumented parents.
Existing law already restricts many refundable credits by requiring valid Social Security numbers for qualifying individuals. The proposed rules go further by adding identity and status verification requirements at additional stages of the filing and claims process.
Immigration advocates and tax policy groups are expected to challenge the regulations, arguing that existing law already prevents unauthorized access to refundable credits and that additional restrictions will primarily harm U.S.-citizen children in mixed-status households.
The Treasury Department framed the proposal as a fiscal integrity measure. IRS enforcement data on improper payments of refundable credits has shown error rates that the agency has worked to reduce through existing compliance programs.
The EITC provides up to approximately $7,800 for qualifying families with three or more children, while the expanded Child Tax Credit provides up to $2,000 per qualifying child. Both credits are refundable, meaning they can result in payments to families that owe no income tax.
Tax practitioners said the proposed rules could increase compliance burdens for all filers claiming the credits, not only those in mixed-status households.