The Treasury Department and Internal Revenue Service unveiled proposed regulations on Wednesday that would limit eligibility for refundable tax credits among specific immigrant populations. Under the new rules, the refundable portions of four tax credits—the adoption tax credit, child tax credit, American Opportunity tax credit, and earned income tax credit—would be classified as federal public benefits, a designation that carries significant eligibility implications.
The proposal would affect numerous immigrant groups who currently hold work authorization and Social Security numbers, including individuals with pending asylum applications, those with Temporary Protected Status, and recipients of Deferred Action for Childhood Arrivals protections. Tax policy experts estimate the changes could impact several million people across the country. According to recent data, approximately 2.6 million asylum applicants were recorded in 2023, while roughly 650,000 individuals held Temporary Protected Status that year and approximately 600,000 were enrolled in DACA programs, though these numbers have likely declined following recent enforcement actions.
Under the proposed rules, affected immigrants could still claim the nonrefundable portion of these tax credits, meaning the credits could reduce their annual tax liability to zero but would not generate refunds. Treasury Secretary Scott Bessent stated in a press release that the proposed rules would “protect the integrity of the tax system, and put Americans first.” Policy analysts note that lower-income households would face the greatest financial impact, as they typically have minimal tax liability and therefore receive the majority of their tax benefits as refunds.
The proposal represents part of a broader administration effort to restrict immigrant access to public benefits, following legislative changes enacted last year that narrowed eligibility for programs including Medicaid, Medicare, and nutrition assistance. The agencies have established a 45-day public comment period, with a scheduled public hearing for Oct. 14. If finalized this year, the regulations would apply to tax returns filed next year, according to the Treasury and IRS.
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