March 12, 2015

Crapo, Risch Back Bill To Prohibit Retroactive Tax Benefit Payments Under the President's Executive Action on Immigration

Senators say tax code should not reward those who enter the country illegally

Washington, D.C. -Idaho Senators Mike Crapo and Jim Risch today joined Senator Chuck Grassley (R-Iowa) to introduce legislation to prohibit recipients of deferred action under the President's recent executive immigration orders from claiming retroactive tax benefits through the Earned Income Tax Credit (EITC) based on wages earned while working in the U.S. illegally.  As many as five million individuals may be covered by the President's plan, allowing them to obtain work permits and Social Security numbers.  Because of this, the Commissioner of the Internal Revenue Service recently confirmed to members of Congress that the President's executive amnesty would allow illegal immigrants to amend up to three years of previous tax forms to claim the EITC-which could amount to billions of dollars in additional payments they were previously ineligible for. 

"Unfairly rewarding individuals who entered the country illegally with retroactive tax benefits undermines our immigration system and discourages those who seek to come to America from doing so through the proper legal channels," said Crapo. "This legislation will prohibit the Administration from manipulating the Earned Income Tax Credit as a way to further advance its unilateral immigration policy agenda."

"This bill will benefit the millions of hardworking Americans who pay their fair share of taxes, which contribute to our roads, schools, and the safety of this country," said Risch.  "Providing tax credits to people who are living in our country and enjoying those benefits without paying taxes isn't right or fair. We cannot reward people who come to our country by breaking the law."

The bill fixes the ability of people under the 2014 executive actions, and any similar actions going forward, from being able to claim the tax credit based on work performed illegally in the United States.  In future years, those who are granted deferred action and are authorized to work will be able to access the credit based on future authorized work.  This bill is intended to close a loophole created by a 2000 Internal Revenue Service (IRS) interpretation that has the effect of allowing those receiving deferred action to qualify for a credit they were previously denied or otherwise ineligible for at the time.  It is consistent with policy put in place in 1996 intended to deny the credit to those not authorized to work in the United States. 

This legislation would accomplish this by denying the credit to those receiving deferred action unless they were eligible to claim the credit for the year in question and were authorized to engage in employment in the United States for the entire taxable year.  This requirement would apply to the year in which they are granted deferred action and for all previous returns.  To help the IRS administer the requirement, the Department of Homeland Security is required to share necessary information with the Social Security Administration so that it will be able to establish Social Security Number identifiers that would alert the IRS to those who have received deferred action.

The non-partisan Joint Committee on Taxation has estimated that this proposal will save $2.1 billion over ten years in payments that otherwise would have gone out.  The actual amount of Earned Income Tax Credit payments going to those receiving deferred action could be much greater than $2.1 billion over 10 years, however.  The score is based on the premise that it will take a year for the IRS to update its systems to account for this change.