The refund a proposal would tie to immigration status

On October 9, 2026 the Internal Revenue Service published a one-page document in the Federal Register that contains no numbers at all. It cancels a public hearing that had been set for October 14, and it gives the least dramatic reason available: nobody asked to speak. Not one person or organization filed a request to testify or an outline of topics by the October 5 deadline, so the hearing was taken off the calendar.

The proposal that quiet document hangs off is the one worth reading. On August 20, 2026 the Treasury Department and the IRS proposed regulations that would classify the refunded portion of four individual tax credits as a “Federal public benefit” under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 — the welfare-reform law known as PRWORA. The effect would be that people who are not “qualified aliens” under that statute could not receive the refunded part of those credits.

The proposal is real, published and openable. It is also not a rule, and there is no date on which anything in it happens by itself.

The short version

Status	A notice of proposed rulemaking (REG-119882-25, RIN 1545-BS06). No final rule exists.
What changes today	Nothing. The proposal says it would apply to tax years ending on or after the date a final rule is published.
The credits covered	The earned income credit (26 U.S.C. 32), the child tax credit (§24), the American opportunity tax credit (§25A) and the adoption tax credit (§23)
What is covered within each credit	Only the refunded portion — the part paid out because the credit is larger than the tax owed
The test	The filer, or on a joint return at least one spouse, must be a U.S. citizen, U.S. national or qualified alien
Certification	A declaration under penalty of perjury — the notice points to a Schedule 3-A, or another form the Treasury Secretary designates, filed with the Form 1040
Comments	Closed October 5, 2026
Hearing	Was set for October 14, 2026; canceled October 9 for lack of any request to testify

Why the word “refunded” is doing the work

A refundable tax credit can do two different things. It can reduce the tax you owe, and — if it is bigger than that tax — it can produce a payment to you. The proposal reaches only the second job.

The notice explains that it uses the term “refunded portion” rather than “refundable portion” for exactly that reason: what is being classified is the money actually paid out. The proposed regulation defines it as the part of the credit that exceeds the tax imposed, and where a taxpayer claims more than one of the covered credits, the portions are added together first and the total is measured against the tax.

Two consequences follow, and both are worth holding onto. First, the proposal is not a ban on claiming these credits — it is a limit on receiving the part that comes back as money. Second, in the notice’s own discussion, if a filer fails the status test, the amount treated as an overpayment and available for credit, offset or refund is reduced by the disallowed benefit rather than the whole claim being voided. The credit that offsets tax is a reduction in what you owe; it is the payment, not the offset, that the proposal classifies as the benefit.

The four credits, and the two that are deliberately not on the list

The list is short and specific: the earned income credit, the child tax credit, the American opportunity tax credit and the adoption tax credit. Those four are named in the summary, and the proposed regulations amend the rules under exactly four Code sections — 23, 24, 25A and 32.

What is missing is more interesting than what is present. The premium tax credit — the Affordable Care Act subsidy — is not covered. The notice says so directly, and gives its reasoning: the Affordable Care Act and the 2025 tax law known as the One Big Beautiful Bill Act (Public Law 119-21) specifically address immigration status for that credit, and Congress “specifically addressed immigration status as it relates to the computation of and eligibility for the PTC”, so those provisions “supersede and override PRWORA”. The statute does that work instead. Subsection 36B(e) already limits the credit by immigration status, and the 2025 law extended that limit: for tax years beginning after December 31, 2026, the premiums taken into account must also be reduced for people who are lawfully present in the United States but are not “eligible aliens”. The enrollment rules themselves — who may buy coverage through the marketplace and with a subsidy — are set out on HealthCare.gov rather than in this rulemaking.

The second omission is the Saver’s Match under §6433, the retirement-savings match that begins for tax years after December 31, 2026. The notice recounts that the Department of Justice’s Office of Legal Counsel was asked about it and concluded in a November 19, 2025 memorandum that its refunded portion is a Federal public benefit — the same conclusion the 2020 opinion reached for the first three credits. It is simply not part of this rulemaking.

The text does not close that door for good: its provisions apply to the covered credits “or another individual refundable income tax credit for which the refunded portion is specified by the Secretary in regulations as subject to PRWORA”. In other words, the mechanism for adding credits later is written into the rule. Anyone tracking this should watch the premium tax credit and the Saver’s Match for that reason — not because they are covered, but because the text anticipates that they could be.

Who it would actually reach

Treasury’s own numbers are the place to start, because the department is unusually candid about what it does not know.

For tax year 2026 it estimates that about 49 million individual returns will claim at least one of the four credits, and that about 24 million of them will produce an affected refunded portion. It then says plainly that it has no direct data on qualified-alien status, so it cannot say how many of those taxpayers are affected; a rough estimate built from Social Security Administration data shared for tax administration, USCIS statistics and Department of Homeland Security population estimates suggests 200,000 to 700,000 taxpayers would likely be ineligible for tax year 2026. The notice states that as 0.8 to 2.8 percent. The percentages do not divide out of the counts — 700,000 of 24 million is about 2.9 percent — so treat the counts as the figures to use.

The reason the pool is small is partly statutory and worth knowing: the notice notes that under the Code, taxpayers are generally required to have a valid Social Security number to be eligible for these credits at all.

“Qualified alien” is a fixed list in the statute, not a general description of lawful presence. 8 U.S.C. 1641 defines it to include lawful permanent residents, people granted asylum, refugees, people paroled into the United States for at least a year, people whose removal is being withheld, conditional entrants admitted before April 1, 1980, Cuban and Haitian entrants, and people lawfully resident under a Compact of Free Association — plus certain battered spouses and children, whom subsection (c) treats as qualified aliens. It is not the same category as “lawfully present”, and it is narrower than “not undocumented”: a person working here on a temporary visa, holding a Social Security number and claiming the refundable child tax credit for a U.S.-citizen child sits outside that list on the face of the definitions. Whether that is who Treasury intends to reach is a question the notice does not answer directly; what the notice says is that the rule implements PRWORA as written.

How the test is applied: filing date, and joint returns

Two rules in the proposal change who passes, and neither is the one people expect.

The measuring moment is the date you file, not the end of the tax year. The notice states that, for receiving the refunded portion, a taxpayer’s status “is determined on the date the taxpayer files the taxpayer’s return for the taxable year that first claims the credit” — including an amended return. The proposed regulations carry worked examples on precisely this point: a timely April filing, an early February filing, and a late return filed in November. Filing earlier or later can therefore change the answer, which is not how most people think about a tax year.

On a joint return, one spouse is enough. The earned income credit, the American opportunity tax credit and the adoption tax credit generally require married couples to file jointly; the child tax credit does not, though spouses may elect to. Where a joint return claims a refunded portion, the proposal would require that one of the two filers be a U.S. citizen, U.S. national or qualified alien for the couple to receive it. The notice says the rule applies where the joint filers meet the credit’s own requirements and the credit exceeds their tax liability.

What the certification would look like

The proposal would not ask everyone who claims these credits to prove status. It asks a taxpayer to identify the refunded portion first, and only someone whose claim has one would make the declaration — a design the notice says was chosen over the alternative of requiring every claimant to certify, which it judged the heavier burden.

The declaration would be made under penalty of perjury, on the return, an amended return, or a schedule, and the notice says it intends to update forms and instructions. It names a Schedule 3-A, or a successor form designated by the Treasury Secretary, filed with the Form 1040, and says no separate document attesting eligibility would be required. It also notes, for anyone weighing the consequences of guessing, that 18 U.S.C. 1001 makes it a felony to knowingly and willfully make a materially false statement in a matter within the jurisdiction of a branch of the federal government.

None of that is on a form you file today. It is a description of how the mechanism would work if a final rule adopted it.

The dates that matter, and one that does not exist

• August 20, 2026 — the proposed regulations are published at 91 Fed. Reg. 53812–53827.
• October 5, 2026 — written or electronic comments were due. That deadline has passed.
• October 14, 2026 — a public hearing was scheduled. It was canceled on October 9, 2026 because no requests to testify were received.
• No effective date — because there is no final rule. The proposal states that it would apply “for taxable years ending on or after the date these regulations are published as final regulations in the Federal Register.”

Read that last line carefully, because it is the most practically useful sentence in the document and it works differently from the way tax measures usually work. Applicability runs off the end of a tax year. An individual’s tax year ends on December 31. So a final rule published after December 31, 2026 would, on its own terms, first reach the tax year ending December 31, 2027 — the return filed in 2028. A final rule published during 2026 would reach the year ending December 31, 2026. That is a reading of the proposed applicability sentence, not a promise about the final rule, which can set its own date; but it is the reading the text supports.

With the hearing canceled, the written comments filed by October 5 are the record the agency will work from.

What to do, and what not to pay for

Nothing changes for a return you file today or for the return you will file for 2026. No amount is withheld and no form carries a new question. One deadline for a reader has passed — the comment window closed on October 5 — but that was never a route to changing your own eligibility: comments shape a final rule, and the final rule shapes everyone.

Nothing you can buy protects a credit from a proposal. This is the point at which a rulemaking like this becomes a sales environment, and the durable rules are the familiar ones:

• No one can charge you to protect a benefit that does not exist yet. A proposed rule has no operative effect. Any service offering to “lock in” your credit, file something to preserve it, or advance a fee against it is describing money the government has not created and may never create.
• The IRS does not call, text or email to demand immediate payment, and does not ask for gift cards, wire transfers or cryptocurrency. It also does not ask for your Login.gov password. Our network’s scam checklist, Is That Really America.gov? A Scam-Spotting Checklist, walks through how to verify a contact before you act on it.
• Watch the word “notario”. In many Spanish-speaking countries a notario público is a lawyer; in the United States it is not, and a document prepared by someone who is not qualified to prepare it costs money and cannot be undone. Before you pay anyone to handle a tax or status document, check the credentials the IRS recognises for representing taxpayers — its own page on enrolled agents is a starting point — and remember that the IRS does not require you to use a paid preparer at all.
• Start at irs.gov, not at a search result. Forms, instructions and the current rules are free there. No private site is the official channel.

If your household mixes statuses, get the facts rather than act. The useful preparation is not a filing — it is knowing exactly which credit each person claims, how much of it is refunded rather than offset, and what the filing-date rule in this proposal would mean for you if it were finalized. That is a conversation with someone qualified to have it, and it can wait for a final rule.

One note on jurisdiction

This is federal tax and federal immigration law, and it applies the same way in all fifty states. Unlike the employment, housing and contract questions covered elsewhere on Counsel, none of this turns on where you live.

Two qualifications. State tax credits are separate programs with their own rules, and this proposal does not amend them — though a state credit that is calculated by reference to a federal credit could be affected if the federal amount changes, which is a question for your state’s revenue department rather than this document. And the determination of status in an individual case is the government’s to make, not a website’s — including this one.

The premium tax credit side of the same subject, which this proposal does not touch, is covered on our insurance site in the 2027 subsidy cliff and the Marketplace cancellations. The other immigration proposal we have written about — the $70,000 OPT fee — is in Immigration.

A wider list of the official pages worth bookmarking for federal programs lives at omc.center/resources.