The Internal Revenue Service and Treasury Department have proposed regulations that would restrict four major refundable tax credits to U.S. citizens, nationals, and qualified aliens.
The proposed rules apply to the adoption tax credit, child tax credit, American opportunity tax credit, and earned income tax credit. Under the proposal, only the refunded portion of these credits—the amount exceeding a taxpayer's income tax liability—would be subject to the citizenship requirement.
The regulations stem from a legal analysis concluding that the refunded portions of these credits constitute federal public benefits under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA).
Treasury Secretary Scott Bessent said: "These proposed regulations end the abuse, protect the integrity of the tax system, and put Americans first."
Under the proposal, taxpayers would be required to declare under penalty of perjury that they are eligible to receive the refunded portion. For joint returns, only one spouse must meet the eligibility requirement.
The regulations would apply to tax years ending on or after the date they are published as final rules. Treasury and the IRS will accept public comments on the proposal.