Groups ask IRS to stop plan to deny tax credits to immigrants with citizen children

• Key insight: Here's why advocacy groups are fighting a proposed IRS rule targeting refundable tax credits.
• What's at stake: Whether millions of immigrant families and U.S. citizen children lose access to tax credits.
• Expert quote: "turning tax forms into ICE checkpoints does nothing..." — Maddie Geschu, PIF
  

Nearly 200 organizations are urging the Internal Revenue Service to scrap a plan to deny refundable federal tax credits such as the Earned Income Tax Credit, Adoption Tax Credit, American Opportunity Tax Credit and Child Tax Credit to lawful immigrants and their children who are U.S. citizens.

In a comment letter submitted Monday to the Treasury Department, a group of advocacy organizations asked the IRS to withdraw a regulatory proposal, claiming it would increase child poverty among children living in immigrant families. The Trump administration has proposed to deny the tax credits to lawfully present immigrants and U.S. citizens — who are mostly children — in immigrant families. 

The comment letter was submitted by the Protecting Immigrant Families coalition, UnidosUS and the Children Thrive Action Network and cosigned by 189 organizations, including the American Academy of Pediatrics, First Focus on Children, and Share Our Strength.

"Families all over the country are struggling to stay afloat in a Trump economy defined by rising prices and falling hopes, and the administration's response is to make it harder for hardworking families to feed their kids," said PIF policy and advocacy director Maddie Geschu in a statement Tuesday. "And turning tax forms into ICE checkpoints does nothing but deter immigrant families from filing tax returns. This is not what the American people want, and it's long past time to rein in the Trump administration's reckless, relentless attacks on immigrant families."

The groups noted that the EITC and CTC are two of the most effective federal child poverty mitigation initiatives, together lifting 3.7 million children out of poverty in 2024.

The Treasury Department proposed to reinterpret the tax credits as "federal public benefits" under the 1996 Personal Responsibility and Work Opportunity Reconciliation Act. 

"If finalized as proposed, this rule would significantly restrict eligibility for the refunded portions of the Adoption Tax Credit (ATC), American Opportunity Tax Credit (AOTC), Child Tax Credit (CTC), and Earned Income Tax Credit (EITC)," said the letter. "Since 1996, PRWORA has restricted eligibility for many federal public benefit programs, like Temporary Assistance for Needy Families (TANF) and Medicaid, to only a subset of lawfully present immigrants, termed 'qualified immigrants,' which include naturalized U.S. citizens, lawful permanent residents, refugees, and asylees. Under current law, undocumented immigrants are already ineligible for most of these tax credits. This proposed rule would newly deny refundable tax credits to lawfully present immigrants including: Deferred Action for Childhood Arrivals (DACA) recipients; immigrants with special 'U' visas; people with Temporary Protected Status (TPS) who've fled war, natural disaster, or other emergencies; and other lawfully present immigrants who don't meet the narrow definition of 'qualified immigrant.' Moreover, many people who would remain eligible for the credits would likely not apply due to the difficulty in understanding this distinction, and the fear of making a mistake."

The groups pointed out that tax credits are fundamentally different from "federal public benefits" as outlined by Congress in the PRWORA. In contrast, refundable tax credits are incentive-based provisions of the Internal Revenue Code that reward earned income and are concentrated among employed families with children. 

"Categorizing refundable tax credits under PRWORA's 'federal public benefit' definition would represent an unprecedented departure from longstanding Department interpretation and would contradict Congressional intent," said the groups.

They noted that approximately 4 million children are already denied the CTC by immigrant eligibility restrictions in last year's One Big Beautiful Bill Act and Social Security Number requirements enacted in 2017. "This proposed regulation combined with the recent restrictions in  OBBBA add irreparable harm to U.S. citizen children," they wrote.

Along with the limitations on immigrant taxpayers included in the OBBBA, the IRS also recently added a question to a draft of next year's Form 1040 asking about taxpayers' citizenship status. The IRS's Criminal Investigation was also drawn into helping the Department of Homeland Security's Immigration and Customs Enforcement unit last year in enforcement efforts last year.

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