The Treasury Department and the IRS have proposed new rules to block illegal aliens from claiming refundable tax credits, tighten the definition of federal public benefits, and reinforce enforcement of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
On August 19, 2026, Treasury and the IRS rolled out a proposal aimed squarely at closing gaps that could let ineligible people receive refundable tax credits. The agencies emphasize eligibility at the moment a credit is claimed and the requirement that claimants legally declare their right to the credit. Officials say the change is meant to reduce abuse and make sure taxpayer dollars go where the law intended.
Specifically, the agencies want clearer language to ensure that “federal public benefits” are limited to citizens, nationals or “qualified aliens.” The proposal frames the edits as strengthening “enforcement” of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). That law has been central to conservative efforts to prevent public benefits from becoming an incentive for illegal immigration.
“Under President Trump, the days of illegal aliens collecting taxpayer-funded benefits are over. The federal law is clear, and Treasury is enforcing it,” Treasury Secretary Scott Bessent said in a statement on Wednesday. “American taxpayers should not be forced to foot the bill for benefits going to those who are barred by law from receiving them. These proposed regulations end the abuse, protect the integrity of the tax system, and put Americans first.”
IRS Chief Executive Officer Frank Bisignano issued a closely aligned message and tied the changes to the original purpose of refundable credits. “refundable tax credits, like the Earned Income Tax Credit (EITC), were enacted to help low-to-middle income American families and workers receive critical financial support.” “Today’s proposed regulations ensure that federally funded benefits are reserved for eligible taxpayers and protect the integrity of every taxpayer dollar,” he added.
The proposed regulation text would require that an individual qualify for a credit on the date they try to claim it and be able to legally declare that they can obtain the credit. The Treasury language also clarifies that, when filing a joint return, one spouse must meet the eligibility standard for the credit. Those are small but important technical fixes that the agencies say will reduce fraudulent claims and administrative confusion.
This rulemaking comes as part of two broader efforts inside the Trump administration: a sharper crackdown on public benefits fraud and continued enforcement actions against illegal entrants. Administrations of both parties have wrestled with how to balance assistance programs with immigration policy, but the current effort tilts toward strict eligibility checks. Officials say these steps are about fairness to American taxpayers and restoring the law’s intended limits.
The president signed an Executive Order in February 2025 doubling down on the PRWORA. “Title IV of the PRWORA states that it is national policy that ‘aliens within the Nation’s borders not depend on public resources to meet their needs,’ and that ‘[i]t is a compelling government interest to remove the incentive for illegal immigration provided by the availability of public benefits,'” the order states. “But in the decades since the passage of the PRWORA, numerous administrations have acted to undermine the principles and limitations directed by the Congress through that law.”
Debate will follow in the public comment period, where stakeholders from tax advocacy groups to states will press their positions. Expect legal teams to scrutinize whether the proposed text properly ties benefit access to immigration status and whether the paperwork and verification burden is reasonable. The agencies say the goal is narrow: enforce existing law, protect taxpayers, and close opportunities for misuse without changing longstanding core benefits policy.
