The Department of the Treasury and the Internal Revenue Service (IRS) are seeking public comments and requests for a public hearing on proposed regulations that would apply and clarify federal law regarding the eligibility requirements for taxpayer-funded refundable individual income tax credits.
Under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), only U.S. citizens, U.S. nationals, and qualified aliens are eligible to receive federal public benefits. The proposed regulations would apply PRWORA to the adoption tax credit, the child tax credit, the American opportunity tax credit, and the earned income tax credit.
The proposed regulations would apply to tax years ending on or after the date the regulations are published as final regulations. They state that to receive the refunded portion of an affected credit a taxpayer must declare on the tax return that the taxpayer is eligible to receive the refunded portion of the credit, and the taxpayer must be a U.S. citizen, U.S. national, or qualified alien on the date the taxpayer files the federal income tax return first claiming the affected credit. On a joint return, only one spouse must be a U.S. citizen, U.S. national, or qualified alien.
The proposal follows the Department of Justice’s Office of Legal Counsel legal analysis.