Messer Proposal to End
Tax Credits for Illegal Immigrants Included in Tax Cut Package
WASHINGTON (Friday, Nov. 3, 2017) — U.S.
Rep. Luke Messer’s (IN-06) proposal to eliminate tax credits for illegal
immigrants is included in the broader tax cut plan, which was unveiled this
week.
“It's well past time to address both our
broken tax code and an immigration system that rewards people who come here
illegally,” Messer said.
“Our tax cut plan accomplishes both. I’m excited that part of my proposal to
end tax credits for illegal immigrants is included in the plan, so that we can
expand the Child Tax Credit for law-abiding, American families.”
Currently, illegal immigrants can claim
the Child Tax Credit without a Social Security Number by using an Individual
Taxpayer Identification Number (ITIN), which is issued to individuals
regardless of immigration status. This loophole is costing American taxpayers
up to $7.1 billion, according to a report from the Treasury Inspector General.
A WTHR news investigation in Indiana found that illegal immigrants
were claiming the credit for children and other relatives who didn’t even live
in the United States.
Messer filed
legislation in
January to target this fraud and also urged President
Trump to take
Executive Action to close this loophole and protect U.S. taxpayers. The
President subsequently included this proposal in his budget request to Congress.
Part of Messer’s provision included in
the tax cut plan ensures that only taxpayers with a Social Security Number that
is valid for work can claim the Child Tax Credit.
Child Tax Credits for Illegal Immigrants,
by Peter A. Schulkin on November 8, 2010
Summary: The
Treasury Department reports that illegal immigrants filing tax returns using
the Individual Tax Identification Number are receiving more than $1.5 billion
each year from the federal government through the Child Tax Credit and the
Additional Child Tax Credit.
Many illegal immigrants are
regularly accessing welfare benefits in the United States in different ways.1 They may do so through those state and local
governments that do not verify citizenship or that accept false proof of
citizenship. In many cases, they access welfare benefits through their citizen
children born in the United States. Additionally, and this is the focus of this
report, there are ways illegal immigrants can obtain a form of federal welfare
that is available to income tax filers. Since a significant percentage of
illegal immigrants have low incomes, work “off the books,” or work with false
names and Social Security numbers, it is likely that many report little or no
income when applying for federal, state, or local benefits.
An illegal immigrant cannot qualify
for a legitimate Social Security number to use to file income tax returns or
for any other purposes. Thus, a major facilitator for illegal immigrant access
to income tax-based welfare benefits is the nine-digit Individual Tax
Identification Number (ITIN) established by the IRS in 1996. It was initially
established for people like foreign investors, who are required to file U.S.
income tax forms but cannot legally obtain a Social Security number. However,
the IRS has allowed illegal immigrants to apply for and use the ITIN for filing
income taxes returns related to income earned in the United States.
Consequently, the ITIN quickly became a vehicle for illegal immigrants to
obtain refunds of part or all of income taxes withheld (if any) from their pay
and for obtaining refundable tax credits above and beyond any withholding. All
but a small minority of people using ITINs today are illegal immigrants.
Since Congress did not explicitly
limit the Child Tax Credit (CTC) and the Additional Child Tax Credit (ACTC) to
holders of Social Security numbers, the IRS has allowed ITIN filers to obtain
billions of dollars of refund checks related to these tax credits. If the CTC
results in negative total tax due, it may be converted into an ACTC, which is
the vehicle that the ITIN filer (or Social Security number filer) may use to
collect the negative tax in the form of a check from the IRS. By IRS rules, the
ACTC is a refundable credit available to individuals with no tax liability.
A Treasury Inspector General for Tax
Administration report dated March 31, 2009, “Actions Are Needed to Ensure
Proper Use of Individual Taxpayer Identification Numbers and to Verify or Limit
Refundable Credit Claims,” indicates that, for the 2007 tax year, Child Tax
Credits (774,000 filings for $0.62 billion) and Additional Child Tax Credits
(1,220,000 filings for $1.78 billion), together totaling $2.4 billion, were
given to ITIN filers.3 By definition, none of the 1,220,000 filers who
received the ACTC refunds had any tax liability, and as a group they received
IRS checks totaling at least $1.78 billion. The report goes on to say: “While
the law also prohibits aliens residing without authorization from receiving
most Federal public benefits, IRS management’s view is that the law does not
provide sufficient legal authority for the IRS to disallow the ACTC to ITIN
filers. Nonetheless, as it now stands, the payment of Federal funds through
this tax benefit appears to provide an additional incentive for aliens to enter,
reside, and work in the United States without authorization, which contradicts
Federal law and policy to remove such incentives.”
A Treasury Inspector General for Tax
Administration report dated December 8, 2009, “Individual Taxpayer
Identification Numbers are Being Issued Without Sufficient Supporting
Identification,” indicates that total refunds due for new ITINs issued in the
January 1, 2008, through November 21, 2008, period were projected to amount to
$1.929 billion based on a statistical sampling.5 Without the CTC and ACTC, these ITIN filers were
projected to have collected in the aggregate only $0.412 billion of refunds
instead of the $1.929 billion, a difference of $1.517 billion.6 The December 8 report goes on to note that, based on a
statistical sampling, 87 percent of ITIN applications submitted by Certified
Acceptance Agents contained errors, primarily in supporting ID documents being
missing or illegible and that “In addition, more than 55,000 ITINs were used
multiple times on approximately 102,000 tax returns, with refunds totaling more
than $202 million.”7
Any illegal immigrants who in some
way obtained Social Security numbers that they could use to file tax returns
and obtain refunds (by, for instance, having been legal temporary workers who
didn’t depart when they were supposed to) are not included in the above numbers
for ITINs. Moreover, such illegal immigrants may have also accessed the Earned
Income Credit or the Making Work Pay Credit.
Peter A. Schulkin received his PhD
in economics from Harvard and is former Director of Research for the National
Association of Real Estate Investor Trusts and former Senior Vice President of
a real estate arm of Wells Fargo & Co. He has taught at several
universities, including UCLA.
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