U.S. Treasury immigration-related financial regulations

The U.S. Treasury Department has introduced new regulatory measures targeting the financial and tax-related access of immigrant populations. Initially, Treasury Secretary Scott Bessent announced guidelines from the Office of the Comptroller of the Currency (OCC) requiring banks to increase oversight of loans and financial services provided to undocumented immigrants. These directives aim to monitor credit risks and prevent the “blatant abuse of our financial system,” specifically targeting fraud, identity theft, and payroll tax evasion.

Following these banking guidelines, the Treasury and the Internal Revenue Service (IRS) have proposed formal regulations to restrict access to the refundable portions of four major federal tax credits: the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), the American Opportunity Tax Credit (AOTC), and the adoption tax credit. By reclassifying these refundable components as “federal public benefits” under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, the administration seeks to deny cash refunds to noncitizens who do not meet the legal definition of a “qualified alien.”

This would include DACA recipients, individuals with pending asylum applications, and those with Temporary Protected Status. While these individuals could still use nonrefundable portions to reduce tax liability to zero, they would lose cash refunds that some estimates suggest could impact families by up to $6,800. The proposal includes an exception for married couples filing jointly, requiring only one spouse to be a U.S. citizen, national, or qualified alien to receive the refundable portion. A 45-day public comment period is underway, with a public hearing scheduled for October 14.