The U.S. Department of the Treasury soon will issue regulations regarding the treatment of certain refundable individual income tax credits under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA).
The act reformed the welfare system to require work in exchange for time-limited assistance. The Treasury will issue a notice of proposed rulemaking to clarify that the refunded portions of certain individual income tax credits are federal public benefits. The tax credits include the Earned Income Tax Credit, the Additional Child Tax Credit, the American Opportunity Tax Credit, and the Saver’s Match Credit.
Non-American citizens would no longer be able to receive any benefits.
“Treasury’s Office of Tax Policy and the Internal Revenue Service have worked tirelessly to advance this initiative and ensure its successful implementation,” Secretary of the Treasury Scott Bessent said. “Their diligence and professionalism reflect this administration’s determination to uphold the integrity of our tax system. We will continue to ensure that taxpayer resources are directed only to those who are entitled under the law.”
The Treasury plans to issue the notice of proposed rulemaking in the near future and expects the final regulations to apply beginning in tax year 2026.