As President Obama’s executive order on immigration continues to spark battles in Congress and the courts, opponents of the executive order have raised the concept of “amnesty bonuses.” Is it possible that taxpayer dollars could be given to illegal immigrants based on receiving tax credits, even on work from previous years?
The answer is yes, it is possible. However, it is nowhere near the statement made by Congressman Paul Gosar, an Arizona Republican, when he stated, “each illegal alien will get $24,000 in compensation.” Few, if any, illegal immigrants will receive that total.
The source of the “amnesty bonus” is the Earned Income Tax Credit (EITC), which is designed to help working low-income families with their taxes. The executive action allows illegal immigrants who have lived in the U.S. for five years or more, and have children who are legal residents, to stay in the U.S. for up to three years. With registration and a passing background check, they would receive Social Security numbers and be authorized to work during that period.
Given that new status, these workers could file for the EITC if they qualify and could also file amended returns for up to three years prior to claim the EITC — illegal immigrants are able to file returns using individual tax identification numbers (ITINs) from the IRS, but have not previously been eligible to claim the EITC. Since EITC is a refundable credit, anyone who qualifies will receive the designated refund amount whether or not they paid that amount in taxes, or even if they paid no taxes at all.
John Koskinen, the IRS commissioner, had previously told the Senate Finance Committee that only illegal aliens who had previously filed could receive retroactive benefits. Koskinen corrected that in later testimony to say that even those who had not previously filed could file back returns for those years, and that filers would receive the credits, assuming they could properly document and prove their income and provide other necessary information, as any taxpayer would have to do.
That implies that all of the illegal immigrants affected by the executive action could file for up to three years of EITC refunds. Therefore, in the eyes of opponents, this constitutes an amnesty bonus.
However, the “E” of the EITC is the important point. Illegal immigrants have to have earned those credits, and must be able to prove it as any taxpayer would.
First, filers must have some earned income (not through assistance programs) and that income must be below a particular limit, depending on the number of qualifying children the filer can claim. The adjusted gross income (AGI) determines where the maximum credit is received, and for each category, there is a “sweet spot” to get the maximum amount of refund possible.
With too little income, there is little credit to be received, and with too much income, the credit phases out to zero. For example, the maximum refund is $6,143 for tax year 2014 and that requires three or more qualifying children and an AGI between $13,650 and $17,850 if single or $23,300 if married filing jointly.
The EITC is inflation-adjusted and has been near $6,000 for the past three years, thus Rep. Gosar’s claim of a $24,000 bonus—three years of past returns plus tax year 2015 totaling four years of returns around $6,000, or $24,000 total.
At this point there are no estimates of the total refund to illegal immigrants, but consider the following: The executive action affects around four million illegal immigrants, and the average EITC for tax year 2013 was $2,407. While there are many assumptions required on average income and qualifying children of illegal immigrants, as well as how many have the ability to file for refunds from previous years, it does seem reasonable that the overall refunds to illegal immigrants will total in the tens of millions of dollars. However, there are two stumbling blocks in the way.
A district judge in Texas recently blocked the executive action on immigration from being enforced, because it did not follow established procedures for change and placed an undue burden on states. On the legislative side, Sen. Charles Grassley (R-Iowa) is drafting legislation barring the illegal immigrants covered under the executive action from receiving EITC benefits. Grassley’s efforts are not likely to pass, but the judicial challenge is more of a toss-up.
In short, some illegal immigrants covered under the President’s executive action will receive EITC benefits if the executive action is allowed to stand and not modified via Congressional action. The amounts will vary, and whether you consider it an amnesty bonus that rewards illegal behavior or a restoration of rightfully earned tax credits depends on your attitude toward illegal immigration (and, most likely, your political affiliation).