Two federal agencies have proposed making taxpayers sign a new perjury declaration before they can collect the refundable portion of four common tax credits, tying eligibility for that money to citizenship or immigration status for what would be the first time inside the individual tax code. The rule is not in effect, and no return filed today is affected by it, but its reach — covering credits millions of working families claim every year — makes it worth understanding exactly what it would and would not change if it is finalized.
What the proposal would add to a return
The proposal would require a taxpayer to declare, under penalty of perjury, that they are eligible to receive the refunded portion of an affected credit before that money could be paid out. The declaration would live on the tax return itself rather than a separate form, and it would apply only to the piece of a credit that exceeds what a taxpayer already owes in income tax — the part that comes back as an actual refund rather than simply zeroing out a bill.
That distinction between a credit that offsets tax owed and one that pays out beyond it is the hinge the whole proposal turns on. A nonrefundable credit can only bring a tax bill down to zero; a refundable credit, once it exceeds that liability, generates an actual payment to the filer. The four credits named in this proposal are refundable in whole or in part specifically so that lower-income working families who owe little or no income tax can still receive the benefit in cash. The perjury declaration would attach only to that cash-generating piece, leaving the offset portion of each credit untouched by the new eligibility test.
Treasury and the IRS issued the proposed regulations on August 19. Treasury Secretary Scott Bessent framed the proposal as closing what the department calls abuse of taxpayer-funded benefits, while IRS Chief Executive Officer Frank Bisignano cast it as protecting “the integrity of every taxpayer dollar.” Those are the officials’ own characterizations of intent; what the text of the proposal would actually change is a citizenship and immigration-status test tied to four specific credits.
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The four credits the rule would touch
The proposed regulations would apply to the adoption tax credit, the child tax credit, the American opportunity tax credit, and the earned income tax credit — four of the most widely claimed credits in the individual tax code. Under the proposal, a taxpayer would need to be a U.S. citizen, U.S. national, or “qualified alien” on the date they file the return first claiming the affected credit in order to receive the refunded portion. Qualified aliens, as the proposal defines the term, would include lawful permanent residents, asylees, refugees, and several other categories already recognized elsewhere in federal benefits law.
The eligibility test would apply only to the refunded portion, the amount that exceeds a filer’s tax liability for the year. A taxpayer who would not qualify under the new test could still claim whatever part of an affected credit offsets their actual tax bill; they would simply not receive the excess as a check or direct deposit.
Where the legal theory comes from
The proposal rests on the 1996 Personal Responsibility and Work Opportunity Reconciliation Act, a welfare-reform law that already restricts most federal public benefits to citizens, nationals, and qualified aliens. Treasury and the IRS say the Department of Justice’s Office of Legal Counsel concluded that the refunded portion of these four credits qualifies as a federal public benefit under that 1996 law — a legal reclassification that, if it survives the rulemaking process, would extend a decades-old eligibility framework built for programs like food assistance into a corner of the individual income tax system it has not previously reached.
What a joint return would look like under the proposal
For married couples filing jointly, the proposal would set a lower bar than it would for individual filers: only one spouse would need to be a U.S. citizen, U.S. national, or qualified alien for the couple to receive the refunded portion of an affected credit. That detail matters for mixed-status households, where one spouse holds citizenship or a qualifying immigration status and the other does not — under the proposed text, the household’s eligibility would turn on the qualifying spouse alone, not the return as a whole.
Why nothing changes on a return filed today
Nothing in this proposal is currently in force. Treasury and the IRS have said they will seek public comments and requests for a public hearing on the regulations before any final rule is adopted, and the proposed text itself states the rule would apply only to tax years ending on or after the date final regulations are published — a date that has not arrived. A taxpayer claiming the child tax credit, the EITC, or either of the other two affected credits this filing season follows the same eligibility rules that applied before August 19.
Under the standard federal rulemaking process this proposal is following, the comment period would give individuals, tax preparers, and advocacy groups a formal channel to flag problems before any text becomes binding — including practical questions like how the IRS would verify a declaration made under penalty of perjury without slowing down refunds for eligible filers. Treasury and the IRS would then need to review that input, and potentially hold the public hearing referenced in the release, before deciding whether to adopt the rule as proposed, revise it, or withdraw it. Whether, when, and in what final form this proposal takes effect depends on a process that, as of this writing, is still in its comment stage.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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