Tax Proposal Would Limit Unauthorized Immigrants’ Access to Child Tax Credit

Yesterday, House Ways and Means Chairman David Camp (R-MI) released a proposal that aims to overhaul and simplify the tax code. One of the proposal’s provisions would limit unauthorized immigrants’ eligibility for the Additional Child Tax Credit (ACTC).

People with federal tax requirements who do not qualify for a Social Security Number (SSN) file using an Individual Taxpayer Identification Number (ITIN). Individuals who fall into this group include nonresident aliens who are required to file a U.S. tax return, as well as unauthorized immigrants who pay their taxes. Citing research from the Social Security Administration and others, the Congressional Budget Office estimates that “between 50 and 75 percent of unauthorized immigrants pay federal, state, and local taxes.”

Arguments over proposals to reform or cut access to the CTC/ACTC usually focus on the identification requirements of the filing individuals. Under current law, the credit is available to individuals who have a “qualifying child.” This places the burden of identification for the purposes of determining citizenship or residency fully on the child—the individual the tax credit ultimately aims to benefit. The IRS defines a “qualifying child” as one who meets the following criteria:

• Citizenship: The child must be a U.S. citizen, a U.S. national, or a U.S. resident alien.
• Relationship: The child is the applicant’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them.
• Age: The child is under the age of 17.
• Support: The child did not provide over half of his or her own support for the year.
• Residence: The child lived with the applicant for more than half of the filing period.
• Dependent:  The child is claimed as a dependent on the filing individual’s return and does not file a joint return for the year.

The Camp proposal would base ACTC eligibility on the parent’s status rather than the child and limit eligibility to individuals who file with an SSN. Joint returns would meet the requirement if either spouse has an SSN. The proposal would also grant the Internal Revenue Service (IRS) the “math error authority” to deny claims for individuals who do not meet identification requirements, which it currently lacks. Effectively, this would allow the IRS to deny ACTC benefits to households headed by unauthorized immigrant parents, regardless of the child’s citizenship status. In 2009, the Pew Research Center estimated that of the 5.5 million children who reside in households headed by unauthorized immigrants, nearly three quarters are U.S.-born citizens.

Supporters of similar proposals have argued that unauthorized immigrants should not be eligible for benefits in the U.S., contending that these individuals pay less in taxes than they receive in rebates. The Treasury Inspector General for Tax Administration found that individuals not authorized to work in the U.S. received $4.2 billion worth of ACTC benefits in 2010. Supporters of the status quo point out that the credit is designed to help children, and that a large majority of unauthorized immigrants’ children are U.S. citizens. They contend that eliminating these benefits would harm millions U.S. citizen children and their families.