Washington: The US Treasury Department said Thursday it plans to reclassify certain refundable tax credits as “federal public benefits,” a move that would bar some immigrant taxpayers from receiving them even if they file and pay taxes and otherwise qualify.

Tax experts say the change will most affect DACA recipients, immigrants with Temporary Protected Status, foreign workers, student visa holders and some families with US-citizen children, depending on the final rule.

The Treasury announcement reflects the Trump administration's “whole of government” approach to immigration enforcement, seeking actions across multiple departments beyond Homeland Security.

The department plans new rules affecting the refundable portions of the Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Tax Credit and Saver's Match Credit. These would be redefined as “federal public benefits” under the 1996 Personal Responsibility and Work Opportunity Reconciliation Act, making many immigrants with work authorisation ineligible.

According to the Tax Policy Center, undocumented immigrants who pay taxes often do not receive the same benefits as US citizens; they paid nearly USD 100 billion in federal, state and local taxes in 2022. They also contribute billions to Social Security and Medicare but cannot access those benefits.

Critics called the move an attempt to target immigrants. Daniel Costa of the Economic Policy Institute said it is “terrible and unfair” to deny credits to people who pay taxes and qualify. He warned that determining immigration status for tax purposes would expand the administration's deportation efforts.

The regulation is expected to apply from tax year 2026. Treasury Secretary Scott Bessent said the change enforces the law and prevents “illegal aliens” from claiming benefits intended for citizens. Treasury sought a Justice Department reinterpretation of the law to support the rulemaking.

Carl Davis of the Institute on Taxation and Economic Policy said those most affected will be immigrants authorised to work and paying taxes, not undocumented workers, who already do not qualify for refundable credits. He said the administration appears intent on making life harder for taxpaying immigrants.

NYU Tax Law Center's Brandon DeBot said the reinterpretation overrides clear tax code provisions and such changes require congressional action. Davis added that Congress likely would not support the move, prompting unilateral action by the administration. He noted broad public sympathy for DACA recipients, saying the policy would not have majority support in Congress.