Treasury plans to change tax credit eligibility in a move critics say will hurt immigrant taxpayers

WASHINGTON (AP) — The U.S. Treasury Department said Thursday it plans to reclassify some refundable tax credits as “federal public benefits,” which would bar some immigrant taxpayers from receiving the credits even if they file and pay taxes and otherwise qualify.

Tax experts say immigrants Known as DACA (Deferred Action for Childhood Arrivals) recipients, those brought to the United States illegally by their parents as children and immigrants with Temporary Protected Status will most likely be affected by the planned change. They say foreign workers and student visa holders, as well as some families with children who are U.S. citizens, could also be affected depending on how the rule is written.

The Treasury Department’s announcement was the latest sign of what action the Trump administration is taking. entire government Taking that approach when it comes to immigration enforcement and looking at departments across the federal government, not just Homeland Security, to find ways to help implement the president’s hard-line immigration agenda.

Treasury said in its announcement that it plans to create new rules affecting refundable portions of certain individual income tax credits, including the Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Tax Credit and Saver’s Match Credit.

The rulemaking would redefine tax credits as “federal public benefits” under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. As a result, many immigrants with permission to work in the United States will no longer be eligible for these benefits.

Undocumented immigrants who pay taxes, this group of people do not enjoy nearly the same tax benefits as U.S. citizens, according to the Institute on Taxation and Economic Policy. $100 billion in federal, state and local taxes In 2022.

For example, undocumented immigrants Not eligible for Social Security retirement benefits or Medicare health insurancedespite contributing billions of dollars in federal payroll taxes that fund these benefits.

Critics slammed the change as a way to target immigrants as part of Trump’s broader policies.

“It is a terrible and unfair idea to deny tax credits to people who have paid taxes and are eligible because of their immigration status,” said Daniel Costa, director of Immigration Law and Policy Research at the Economic Policy Institute.

“Implementing this would require determining who has status and who does not, which is another way the Trump administration is expanding its deportation net.”

The final regulation is expected to be implemented starting from the 2026 tax year. “We enforce the law and prevent illegal aliens from taking advantage of tax benefits available to American citizens,” Treasury Secretary Scott Bessent said in a press release. The agency said Treasury asked the Justice Department to reinterpret the law to create the new rule.

Carl Davis, director of research at the Institute on Taxation and Economic Policy, said that since people without a work permit don’t qualify for these refundable tax credits anyway, “the people who are really going to be impacted are the people who are actually trying to do the right thing, the people who have a work permit and are paying their taxes.”

He said he believes the administration is trying to make life harder for tax-paying immigrants.

NYU Tax Law Center Policy Director Brandon DeBot said in a statement that Treasury’s reinterpretation of the law to create a new rule for tax credits “invalidates such express provisions of the tax code.”

“Denying tax credits to immigrant families requires clear action by Congress,” DeBot said.

Davis said there likely wouldn’t be majority support for the move in Congress, which would likely lead the administration to act unilaterally on the issue.

“The American people are generally sympathetic to Dreamers and DACA recipients. Targeting them in this way is not a policy change that would have majority support in Congress,” he said.

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Salomon contributed from Miami.