Eric Ruark's picture


  by  Eric Ruark

The tax bill passed by Congress this week contains a provision that will disallow a tax credit some illegal aliens have been receiving. However, the final language on this was not as strong as what was originally introduced in the House. Under the new tax law, which goes into effect for next year, a child (under the age of 17) must have a valid Social Security number for the tax filer to claim the Additional Child Tax Credit for that child. This means that illegal aliens who file tax returns using an ITIN (Individual Taxpayer Identification Number) will still be able to qualify for the tax credit if they are able to claim a child who is a U.S. citizen or a legal resident. Originally, the House version required the tax filer to have a valid Social Security number, as well.

Jan Ting and David North have written on this for the Center for Immigration Studies, both pointing out that the awarding of tax credits to illegal aliens was a decision previously made by the IRS, arguably in violation of existing law, and that Congress could and should make it clear that only legal residents are eligible for tax credits.

Here is Ting:

I have explained in depth why the Personal Responsibility and Work Opportunity Act of 1996 makes illegal aliens "not eligible for any Federal public benefit." However, under the IRS's misguided interpretation, a tax filer only needs to show a valid "taxpayer identification number" to receive these credits. Unlike a Social Security number, illegal aliens can receive these numbers.

While the IRS has the authority, if not the mandate, to deny these credits to illegal aliens, Congress should resolve any ambiguity. The Tax Cuts and Jobs Act initially did just that. When House Ways and Means Committee Chairman Kevin Brady introduced the bill, Section 1103, "Refundable Credit Program Integrity", provided that the refundable credits were not available unless the "taxpayer includes the taxpayer's Social Security number on the return of tax for such taxable year." This would ensure that illegal aliens could not receive the credit.

That language was changed during the committee markup to its present form, and so Congress effectively voted to confer benefits on individuals living and working in the United States illegally. In this case, a refundable credit that may result in cash being paid out even to those who have no tax liability.

North also found that the tax bill allows illegal aliens to claim two other tax credits. The first is a nonrefundable credit, which is one deducted from what a taxpayer would otherwise owe in taxes, as compared to a refund paid out by the Treasury. Only those who have a tax liability can qualify for nonrefundable credits.

While the tax bill denied the $1,100 ACTC for children without valid Social Security numbers, it does allow a tax credit of $500. North found this in a footnote in the Conference Agreement language:

Additionally, a qualifying child who is ineligible to receive the child tax credit because that child did not have a Social Security number as the child's taxpayer identification number may nonetheless qualify for the nonrefundable $500 credit.

Further, there is a partial non-refundable and partial refundable tax credit up to $2,500 for “college-level educational expenses” that does not require an individual to have a valid Social Security to claim it.

The tax bill will likely save taxpayers some money that is now being funneled by the IRS to those illegally in the United States, $3.9 billion by North’s estimation. It doesn’t, however, attempt to stop this practice altogether. This is regrettable, especially when Congress could have easily done so.

North sums up the situation succinctly:

The illegal families lose a tax break (that they should never have had in the first place) while two more prosperous sets of illegal aliens (those that do pay taxes and those in college) get to retain benefits they do not deserve….What is needed, of course, is a law or an IRS ruling that says if a filer's SSN does not match with a legally obtained one, there will be no refunds. None.

Maybe next year

ERIC RUARK is the Director of Research for NumbersUSA

Updated: Thu, Mar 22nd 2018 @ 12:16pm EDT

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