The Treasury Department and Internal Revenue Service introduced proposed regulations on Wednesday that would limit access to refundable tax credits for specific categories of immigrants. The measure targets the refundable portions of four tax credits: the adoption tax credit, child tax credit, American Opportunity tax credit, and earned income tax credit, by classifying them as federal public benefits.
The proposed rules would impact numerous immigrant groups with valid work authorization, including asylum applicants, individuals with Temporary Protected Status, and DACA recipients. Tax experts estimate that several million people could potentially be affected by the restrictions. According to recent data, approximately 2.6 million asylum applicants existed in a given recent year, alongside roughly 650,000 people with Temporary Protected Status and 600,000 DACA recipients. These populations have likely declined since those figures were recorded due to recent immigration enforcement actions.
Treasury Secretary Scott Bessent stated that the proposed rules are intended to protect the integrity of the tax system and prioritize American citizens. The restrictions would have the most significant impact on lower-income households, as these households typically have minimal tax liability and receive most of their tax benefit as a refund rather than as a reduction in taxes owed. Lower earners in particular would lose the opportunity to receive refunds from these credits.
The proposal represents part of a broader policy shift to limit immigrants’ access to public benefits. Recent legislation has already narrowed eligibility for various assistance programs including Medicaid, Medicare, and nutrition assistance programs. Under the new tax proposal, immigrants could still claim the nonrefundable portion of credits, meaning they could reduce their annual tax liability to zero but would not receive refunds. For joint filers, only one spouse would need to be a U.S. citizen or qualified alien to access the refundable portion.
The agencies are accepting public comments for 45 days, with a scheduled public hearing set for Oct. 14. If finalized this year, the regulations would apply to tax returns filed in the following year.
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