The U.S. Department of the Treasury announced it will introduce new regulations clarifying the eligibility requirements for certain refundable individual income tax credits under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA).
According to the Treasury, a forthcoming notice of proposed rulemaking will specify that refunded portions of several tax credits—including the Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Tax Credit, and Saver’s Match Credit—are considered “federal public benefits” as defined by PRWORA. As a result, individuals who are in the United States without legal status and other non-qualified aliens would be excluded from receiving these taxpayer-funded benefits.
Secretary of the Treasury Scott Bessent stated: “Under President Trump’s leadership we are enforcing the law and preventing illegal aliens from claiming tax benefits intended for American citizens. Treasury’s Office of Tax Policy and the Internal Revenue Service have worked tirelessly to advance this initiative and ensure its successful implementation. Their diligence and professionalism reflect this Administration’s determination to uphold the integrity of our tax system. We will continue to ensure that taxpayer resources are directed only to those who are entitled under the law.”
This regulatory move follows an opinion issued by the Department of Justice’s Office of Legal Counsel adopting this interpretation. The Treasury intends to issue its proposed rule promptly in alignment with this legal analysis, with final regulations expected to take effect starting in tax year 2026.
For more information on the Department of Justice opinion, see here.
