Today, the House is taking up the payroll tax cut bill, H.R. 3630, which contains a provision that would close fix a significant loophole in our nation’s tax laws. The measure is partly a result of a report issued this summer by the Inspector General for the Treasury Department revealing that the federal government doled out roughly $4.2 billion in refundable tax credits to illegal aliens in 2010. (See TIGTA Report 2011-41-061, July 7, 2011; see also FAIR Legislative Update, Sept. 6, 2011)

The payments came in the form of the Additional Child Tax Credit (ACTC), a refundable credit that allows individuals to reduce their federal income tax by up to $1,000 for each child under the age of 17 who meet certain criteria. (FAIR Legislative Update, Sept. 6, 2011) Illegal aliens are eligible for this credit because one is not required to have a valid Social Security Number (SSN) to qualify for it.

In his report, the Treasury Inspector General recommended that the IRS take several corrective measures, including:

  • require individuals filing without SSNs and claiming the ACTC to provide specific verifiable documentation to support that their dependents meet the qualifications for the credit, including residency;
  • verify ACTC claims on returns with questionable wages and withholdings; and
  • alert taxpayers when it becomes aware that their identity has potentially been stolen.

Now Congress has acted to help stop the giveaway of taxpayer dollars to illegal aliens. Section 5201 of H.R. 3630 closes the loophole in current law by barring individuals without a valid SSN from being eligible to receive the credit. This section is based on legislation, H.R. 1956, introduced by the House Social Security Subcommittee Chairman, Sam Johnson (R-TX). (See Ways and Means one-pager) It is also similar to legislation authored by Rep. Jack Kingston (R-GA) and Senator David Vitter (R-LA). (See H.R. 3444 and S. 577)

One way to help stop illegal immigration is preventing illegal aliens from gaming the system. This provision is an important step in that direction.