The Treasury Department and Internal Revenue Service unveiled proposed regulations on Wednesday designed to limit access to refundable tax credits for specific immigrant populations. The proposal would classify 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, thereby restricting eligibility among noncitizens.
Immigrant groups affected by the proposed rules include individuals with pending asylum applications, those holding Temporary Protected Status, and DACA recipients, among others. Tax experts estimate that several million people could potentially be disqualified from these benefits. Research data indicates that as of 2023, approximately 2.6 million asylum applicants were in the U.S. system, alongside 650,000 individuals with Temporary Protected Status and 600,000 DACA enrollees, though these figures have likely decreased following recent policy changes.
The proposal would allow affected immigrants to claim only the nonrefundable portion of these credits, meaning the benefits could reduce their annual tax liability to zero but would not generate refunds. This limitation would disproportionately affect lower-income households, which typically rely on refundable portions of these credits since they generally have minimal tax liability. For married couples filing jointly, only one spouse would need to be a U.S. citizen, national, or qualified alien to receive the refunded portion.
Treasury Secretary Scott Bessent stated that the proposed rules “protect the integrity of the tax system, and put Americans first.” The regulations represent part of a broader administration effort to restrict immigrant access to public benefits, following legislation passed last year that narrowed eligibility for programs including Medicaid and the Supplemental Nutrition Assistance Program.
The proposal is open for public comment for 45 days, with a public hearing scheduled for October 14. If finalized this year, the regulations would apply to tax returns filed in 2027 for the 2026 tax year.
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