IRS proposes status declaration for refundable portions of four credits

Treasury and the IRS have proposed requiring certain taxpayers to declare their immigration status before receiving the refunded portion of four refundable tax credits. The proposal is not final, and its publication does not by itself change current filing rules.

The IRS announced the proposal on August 19, 2026, and the proposed regulation was published in the Federal Register on August 20. Written comments and requests to speak at a hearing are due October 5. A hearing is scheduled for October 14, subject to the notice’s participation requirements.

If finalized, a taxpayer seeking the affected refunded amount generally would have to declare under penalty of perjury that the taxpayer is a U.S. citizen, U.S. national or qualified alien.

Which credits are covered

The proposal covers the adoption tax credit, child tax credit, American Opportunity Tax Credit and Earned Income Tax Credit.

It would apply the immigration-status restrictions in the 1996 Personal Responsibility and Work Opportunity Reconciliation Act, or PRWORA, to the refunded portion of those credits. The proposed rule would not necessarily eliminate an entire credit or the part that simply reduces federal income-tax liability.

What “refunded portion” means

The affected amount is generally the portion of the specified refundable credits that exceeds the taxpayer’s federal income-tax liability after the offsets described in the proposed regulation. It is separate from an ordinary refund of wage withholding or estimated tax payments.

For example, if a taxpayer qualifies for $1,000 in affected refundable credits and has $600 in remaining federal income-tax liability after the specified offsets, the $600 could first reduce the tax liability. The $400 excess would be the portion subject to the proposed PRWORA restriction. The nonrefundable portion that otherwise offsets federal income-tax liability would remain available if the taxpayer otherwise qualifies.

Who could be affected

PRWORA recognizes several categories of qualified aliens, including lawful permanent residents, refugees, asylees and certain other groups. The proposal therefore would not bar all immigrants from receiving the affected amounts, and individual eligibility would depend on the person’s status and the tax-credit rules.

The Associated Press reported that tax-policy experts expect the proposal could affect some DACA recipients, people with Temporary Protected Status, foreign workers and student-visa holders. Some families with U.S.-citizen children could also face questions, depending on which taxpayer claims the credit and how the status rules apply. Filing a return, paying taxes or having work authorization alone would not guarantee eligibility for the refunded portion under the proposal.

How the status test would work

The proposed attestation would be made on the federal income-tax return, amended return or schedule required by the IRS. On a joint return, the proposal generally would require only one spouse to be a U.S. citizen, U.S. national or qualified alien for the couple to receive the refunded portion.

Status would be determined when the taxpayer files the return that first claims the affected credit for that tax year. That could be an original, amended or late return. A later change in immigration status generally would not cure an earlier claim made when the taxpayer did not meet the proposed requirement. But if an amended return is the first return to claim the credit, the taxpayer’s status on that filing date would control.

What happens next

Written comments and requests to speak at the public hearing must be received by October 5, 2026. The hearing is scheduled for October 14, but the notice says it will be canceled if no timely requests to speak and topic outlines are received.

Requests to attend the hearing must be submitted by 5 p.m. Eastern time on October 9, 2026. If the regulations are finalized, they would apply only to tax years ending on or after the date the final regulations are published.

For now, taxpayers do not need to change their filing plans solely because the proposal was announced. Anyone whose eligibility may depend on an individual immigration or tax-status question should consult a qualified tax professional or accredited legal-services provider rather than relying on a general news article.

Sources

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