U.S. Sen. Chuck Grassley (R-IA) filed an amendment Tuesday to the budget legislation under consideration by the full Senate that would disallow the Earned Income Tax Credit for those made newly eligible for past benefits under the President’s executive actions on immigration. The amendment tracks Grassley’s legislation introduced earlier this month with several fellow senators.
“Like much of the budget, this provision wouldn’t be binding, but it expresses priorities for the committees that set the policy based on the budget document,” Grassley said. “The Earned Income Tax Credit is meant to help the working poor get into the workforce. It isn’t meant to benefit individuals who aren’t authorized to work in the United States. Congress implemented that policy in 1996. The legislation upholds the principle that many of us in Congress support. The tax code shouldn’t reward those who broke our immigration laws.”
The Grassley bill denies the Earned Income Tax Credit to individuals granted deferred action under the 2014 executive actions, and any similar actions going forward, for any period in which they performed work illegally in the United States. This bill is intended to close a loophole created by a 2000 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.
The 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 rule would apply to the year in which they are granted deferred action and for all previous returns. To help the IRS administer this rule, information sharing requirements between the Department of Homeland Security, the Social Security Administration and the IRS are established.
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. The number of tax returns affected is 800,000 over the covered time period.