Treasury Plan to Deny Tax Credits Sparks Immigrant Backlash/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Treasury Department is proposing a rule change to redefine certain tax credits as public benefits, restricting immigrant eligibility. Critics say the move targets working, tax-paying immigrants — including DACA recipients — and bypasses congressional authority. The rule would take effect in 2026.
Tax Credit Eligibility Rule + Quick Looks
- Treasury plans to restrict key tax credits from some immigrants starting in 2026.
- The proposal reclassifies refundable credits as “federal public benefits.”
- DACA recipients and immigrants with Temporary Protected Status may be excluded.
- Critics argue the rule unfairly penalizes tax-paying immigrants.
- Legal experts warn it could bypass congressional authority.
- The change aligns with Trump’s broader immigration enforcement agenda.
- Nearly $100 billion in taxes were paid by undocumented immigrants in 2022.
- Immigration advocates and tax policy leaders voice strong opposition.
Treasury Plan to Deny Tax Credits Sparks Immigrant Backlash
Deep Look
In a major shift set to impact millions of immigrant taxpayers, the U.S. Treasury Department announced Thursday that it plans to reclassify several popular tax credits as “federal public benefits,” a legal change that would disqualify many immigrants from accessing these credits — even if they are legally working and paying taxes.
The new proposal, which is expected to take effect in the 2026 tax year, would apply to the Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), the American Opportunity Tax Credit, and the Saver’s Match Credit. Under current rules, these refundable credits provide crucial financial relief for low- and middle-income households, including many immigrant families.
The administration plans to redefine these credits under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which limits access to federal public benefits for noncitizens. The reinterpretation could exclude a broad swath of immigrants, including DACA recipients, those with Temporary Protected Status (TPS), foreign students, guest workers, and families where one or more children are U.S. citizens.
Legal and tax experts argue that the policy change disproportionately affects immigrants who are playing by the rules. These are individuals who file taxes with valid identification numbers, often have work authorization, and yet may be cut off from benefits they’ve earned.
Carl Davis, research director at the Institute on Taxation and Economic Policy, emphasized that “the folks who are really going to be impacted are people who are really trying to do the right thing, the people authorized to work and paying their taxes.” Davis noted that people without work authorization already don’t qualify for these benefits under current tax law.
The move is seen by critics as another step in President Donald Trump’s “whole of government” immigration enforcement strategy. Since returning to office, Trump has empowered agencies across the federal system — including the Treasury Department — to support a broad agenda aimed at curbing immigration and tightening restrictions on benefits access.
According to the Institute on Taxation and Economic Policy, undocumented immigrants paid nearly $100 billion in federal, state, and local taxes in 2022. Despite these contributions, they are ineligible for Social Security and Medicare benefits, and under the new rule, they may be further excluded from tax credits many rely on for basic financial support.
“It’s a terrible and unfair idea to deny tax credits to people who have paid taxes and are eligible for them because of their immigration status,” said Daniel Costa, director of Immigration Law and Policy Research at the Economic Policy Institute. Costa added that the rule could serve as a “backdoor” expansion of the administration’s immigration enforcement and deportation efforts.
In defense of the rule change, Treasury Secretary Scott Bessent issued a statement declaring the administration’s intent to “enforce the law and prevent illegal aliens from claiming tax benefits intended for American citizens.” He confirmed that Treasury sought a reinterpretation of existing laws from the Justice Department in order to support the regulatory changes.
The NYU Tax Law Center criticized the move as an overreach. Policy Director Brandon DeBot stated that denying tax credits to immigrant families would require explicit action by Congress, not a unilateral administrative rule.
“The Treasury’s reinterpretation of the law overrides such clear provisions of the tax code,” DeBot argued.
The rule is expected to face legal challenges and political resistance. Advocates note that the policy change could jeopardize access to tax benefits for immigrants who have lived and worked in the U.S. for years and have U.S. citizen children.
Critics also point to the political context. Immigration remains a divisive issue, and many believe the Trump administration is deliberately targeting vulnerable populations without congressional support.
“The American people are broadly sympathetic to the Dreamers and DACA recipients,” said Davis. “Targeting them in this roundabout way — that’s not a policy change that would’ve had majority support in Congress.”
The Treasury’s announcement comes at a time when debates over immigration policy, tax equity, and the role of federal agencies continue to escalate. With the final rule expected to be implemented in time for the 2026 tax season, lawmakers, legal advocates, and immigrant communities are already mobilizing in opposition.
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