The Treasury Department and Internal Revenue Service announced proposed regulations on Wednesday that would limit access to refundable tax credits for specific immigrant populations. The action designates the refundable portions of four tax credits—the adoption tax credit, child tax credit, American Opportunity tax credit, and earned income tax credit—as federal public benefits, a classification that would make many noncitizens ineligible to claim them.
Research analysts estimate the proposal could impact several million people, including asylum applicants, individuals with Temporary Protected Status, and DACA recipients. According to data cited in the proposal, approximately 2.6 million asylum applicants existed in 2023, alongside 650,000 people with Temporary Protected Status and 600,000 DACA enrollees. However, these figures have likely declined following recent immigration enforcement actions by the current administration, including a Supreme Court decision in June permitting the removal of certain Haitian and Syrian immigrants from protected status.
Treasury Secretary Scott Bessent characterized the proposal as protecting the integrity of the tax system and prioritizing American interests. The regulations would allow affected immigrants to use only the nonrefundable portion of the credits to reduce their tax liability to zero, but would prevent them from receiving refunds. Lower-income households would face the most significant consequences, as they typically have minimal tax liability and rely on refundable credits for cash benefits.
Under the proposal, married couples filing jointly would need only one spouse to be a U.S. citizen, national, or qualified alien to receive the refunded portion. The public comment period extends for 45 days, with a scheduled public hearing on Oct. 14. If finalized this year, the regulations would apply to tax returns filed in the following year.
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