The U.S. Treasury Department and Internal Revenue Service are proposing new regulations that would restrict eligibility for four refundable federal tax credits to U.S. citizens, U.S. nationals and qualified aliens.
Treasury Secretary Scott Bessent announced the proposal Wednesday, saying the changes are intended to strengthen enforcement of existing eligibility requirements and prevent federal tax benefits from being paid to individuals who do not qualify.
The proposal would affect the adoption credit, child tax credit, American Opportunity Tax Credit and earned income tax credit. According to the information provided, Treasury estimates that approximately one million people currently receiving the credits would become ineligible under the proposed rules, potentially reducing federal spending by about $3 billion.
Bessent said the administration intends to ensure that taxpayer-funded benefits are directed toward individuals who meet federal eligibility requirements. IRS Chief Executive Frank Bisignano similarly argued that refundable credits were created to provide financial assistance to eligible families and workers and that stronger verification would help protect the tax system.
A key feature of the proposal involves the nature of refundable tax credits. Unlike nonrefundable credits, refundable credits can result in a payment to a taxpayer when the credit exceeds the amount of federal income tax owed. That means eligible taxpayers with little or no tax liability can still receive money from the government.
Under the proposed regulations, taxpayers would be required to certify under penalty of perjury that they meet the applicable eligibility requirements when filing their returns. They would need to establish that they are a citizen, national or qualified alien on the date the return is filed.
For joint tax returns, the proposal would allow eligibility to be satisfied if at least one spouse meets the required status.
The administration has framed the proposal as an enforcement measure rather than the creation of entirely new benefits restrictions. Treasury officials argue that federal law already establishes eligibility requirements and that the new rules would provide a clearer mechanism for ensuring those requirements are followed.
The proposal is expected to generate political debate over immigration policy, taxation and access to federal benefits. Supporters are likely to view the changes as an effort to protect taxpayer funds, while critics may question how the rules would affect mixed-status families and low-income households.
The proposal now moves through the federal regulatory process, meaning the final rules could be modified before implementation.
If adopted, the regulations would represent a significant change in how eligibility for several major refundable tax credits is verified and enforced.
