Washington, D.C. –The U.S. Department of the Treasury announced it will begin formal rulemaking to clarify how refundable individual income tax credits are treated under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). In a forthcoming notice of proposed rulemaking, Treasury will state that the refundable portions of several credits—including the Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Tax Credit, and the Saver’s Match Credit—qualify as “federal public benefits” under PRWORA.
Under that designation, individuals who are not U.S. citizens or qualified non-citizens would be ineligible to receive the refundable benefits. According to the announcement, the rule is intended to align Treasury and Internal Revenue Service administration with PRWORA’s eligibility restrictions.
“Treasury’s Office of Tax Policy and the Internal Revenue Service have worked tirelessly to advance this initiative and ensure its successful implementation,” Treasury Secretary Scott Bessent said, adding that the action aims to ensure taxpayer funds are directed only to individuals eligible under federal law.
The Department of Justice’s Office of Legal Counsel recently issued an opinion supporting this interpretation. Treasury stated that its proposed regulations will incorporate DOJ’s legal analysis, with final rules expected to apply beginning in tax year 2026.
The department characterized the move as part of the administration’s broader effort to enforce immigration and eligibility requirements attached to federal benefit programs.
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