A group of Republican senators have introduced legislation to disallow the Earned Income Tax Credit for prior tax years to any immigrants who would benefit from President Obama’s executive action on immigration reform.

Senators Chuck Grassley of Iowa, Mike Enzi of Wyoming, Mike Crapo of Idaho, Jim Inhofe of Oklahoma, David Perdue of Georgia, Tim Scott of South Carolina, Pat Roberts of Kansas, Johnny Isakson of Georgia, Jim Risch of Idaho, John Boozman of Arkansas and John Cornyn of Texas introduced the legislation Tuesday to disallow the EITC for those made newly eligible for past benefits under Obama’s executive action. Grassley announced his intention last week to introduce such a bill (see Senator Plans Legislation Denying EITC Claims for Prior Tax Years to Immigrants).

“This tax credit is meant to help the working poor get into the workforce,” Grassley said in a statement. “It isn’t meant to benefit individuals who aren’t authorized to work in the United States. Congress implemented that policy in 1996. The legislation introduced today upholds the principle that many of us in Congress support. The tax code shouldn’t reward those who broke our immigration laws.”

The bill would deny the EITC to individuals granted deferred action under the 2014 executive actions, and any similar actions going forward, for any period in which they performed work illegally in the United States.  The bill is intended to close a loophole created by a 2000 IRS interpretation that has the effect of allowing those receiving deferred action to qualify for a credit they were previously denied or otherwise ineligible for at the time. The senators contend it is consistent with a policy dating back to 1996 intended to deny the credit to those not authorized to work in the United States. 

The legislation would accomplish this by denying the EITC to those receiving deferred action unless they were eligible to claim the credit for the year in question and were authorized to engage in employment in the United States for the entire taxable year. The rule would apply to the year in which they are granted deferred action and for all previous returns. To help the IRS administer this rule, information sharing requirements between the Department of Homeland Security, the Social Security Administration and the IRS would be established under the bill. 

Congress’s nonpartisan Joint Committee on Taxation has estimated that the proposal would save $2.1 billion over 10 years in payments that otherwise would have gone out for 800,000 tax returns. The actual amount of EITC payments going to those receiving deferred action could be much greater than $1.7 billion over 10 years, however, according to the senators. The score is based on the premise that it will take a year for the IRS to update its systems to account for this change.

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