The Department of the Treasury and the Internal Revenue Service (IRS) issued proposed regulations to apply and clarify federal law regarding eligibility requirements for taxpayer-funded refundable individual income tax credits, according to a press release.
“Under President Trump, the days of illegal aliens collecting taxpayer-funded benefits are over. The federal law is clear, and Treasury is enforcing it,” said Treasury Secretary Scott Bessent. “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 administration said the proposed regulations would strengthen enforcement of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) by clarifying that the refunded portion of certain refundable individual income tax credits are federal public benefits. They would also establish rules regarding who is legally eligible to receive them, according to the release.
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“Under PRWORA, only U.S. citizens, U.S. nationals, and qualified aliens are eligible to receive federal public benefits. The proposal follows legal analysis by the Department of Justice’s Office of Legal Counsel concluding that the refunded portions of the affected credits are federal public benefits,” the release said.
The proposed regulations would apply PRWORA to four individual income tax credits: the adoption tax credit, the child tax credit, the American opportunity tax credit and the earned income tax credit. To receive the refunded portion of an affected credit, taxpayers must be U.S. citizens, U.S. nationals or qualified aliens on the date they file the federal income tax return first claiming the affected credit.
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Qualified aliens include lawful permanent residents, asylees, refugees and certain other groups defined or specified under PRWORA. Taxpayers would also have to declare on their tax returns, under penalty of perjury, that they are eligible to receive the refunded portion of the credit. For a joint return, only one spouse would need to be a U.S. citizen, U.S. national or qualified alien.
The release also said the proposed regulations would apply to tax years ending on or after the date the regulations are published as final regulations. The changes come as immigration and visa policies face increased scrutiny under the Trump administration.