Sec. 112205. Earned income tax credit reforms
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Chapter 77 is amended by adding at the end the following new section: To avoid duplicative and other erroneous claims under section 32 with respect to a child of the taxpayer, for taxable years beginning after December 31, 2027, the Secretary shall establish a program under which, on the taxpayer’s application with respect to the child, the Secretary shall issue an EITC certificate for purposes of section 32 establishing such child’s status as a qualifying child only of the taxpayer for a taxable year.
The Secretary shall not issue to a taxpayer an EITC certificate with respect to a child for a taxable year unless the taxpayer applies under the program with respect to the child and provides such information and supporting documentation as the Secretary shall by regulation prescribe as necessary to establish such child as a qualifying child only of the taxpayer for the taxable year. Such application shall be made, and such information and supporting documentation shall be provided— in such manner as may be provided by the Secretary for purposes of this section (including establishing an on-line portal), and not later than the due date for the return of tax for the taxable year or (if later) when the return is filed.
In the case of more than 1 taxpayer making an application with respect to a child under the program for a taxable year beginning during a calendar year, the Secretary shall not issue an EITC certificate to any such taxpayer with respect to such child for such a taxable year unless the Secretary can establish such child, based on information and supporting documentation provided under paragraph (1), as the qualifying child only of one such taxpayer for such a taxable year. For taxable years beginning after December 31, 2027— In the case of a taxpayer who takes into account as a qualifying child under section 32 a child for whom an EITC certificate has not been issued for the taxable year to the taxpayer— the Secretary shall not credit the portion of any overpayment for such taxable year that is attributable to the taxpayer taking into account such child as a qualifying child, unless the taxpayer obtains, not later than the due date for the return for the taxable year, an EITC certificate with respect to such child for such taxable year, and if the taxpayer fails to so obtain an EITC certificate, such failure shall be treated— as an omission of information required by section 32 with respect to such child, and as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).
In the case of a taxpayer who for a taxable year takes into account as a qualifying child under section 32 a child for whom an EITC certificate is terminated for such taxable year, such termination shall be treated in the same manner as a failure to obtain an EITC certificate under paragraph (1)(B). 2028 If for any taxable year beginning after December 31, 2023, and before January 1, 2027, more than 1 taxpayer makes a claim for credit under section 32 taking into account the same child as a qualifying child, then the Secretary shall send notice to each such taxpayer (by certified or registered mail to the last known address of the taxpayer) detailing the resultant treatment of such taxpayers under paragraph
(2)with respect to such child for any subsequent taxable years beginning before 2028. 2028 In the case of a child with respect to whom paragraph
(1)applied by reason of claims for credit for a taxable year, for any subsequent taxable years beginning before January 1, 2028— subject to subparagraph (B), the Secretary shall not credit the portion of any overpayment for the taxable year that is attributable to a taxpayer taking into account such child as a qualifying child under section 32 until the 15th day of October following the end of the taxable year, and if more than one taxpayer makes a claim for such credit for the taxable year taking into account such child as a qualifying child, so taking such child into account shall be treated— as an omission of information required by section 32 with respect to such child, and as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1). For purposes of this section, the term qualifying child has the meaning given such term under section 32(c)(3). Treatment under subsection
(c)or (d)(2)(B) as having omitted information required by section 32 may be rebutted by providing such information and supporting documentation as satisfactorily demonstrates the child is a qualifying child of the taxpayer for the taxable year. A taxpayer shall not be permitted to apply for an EITC certificate under the program for any taxable year in the disallowance period. For purposes of paragraph (1), the disallowance period is— the period of 10 taxable years after the most recent taxable year for which there was a penalty imposed under 6720D on the taxpayer (but only if such penalty has been imposed on such taxpayer more than once, at least one instance of which was due to fraud under section 6720D(b)), the period of 2 taxable years after the most recent taxable year for which there was a penalty imposed under 6720D on the taxpayer (but only if such penalty has been imposed on such taxpayer more than once due to reckless or intentional disregard of rules and regulations (but not imposed due to fraud)), and any disallowance period with respect to the taxpayer under section 32(k)(1). The Secretary shall prescribe such rules as may be necessary or appropriate to carry out the program and purposes of this section, including— a process for establishing alternating taxable year treatment of a child as a qualifying child under a custodial arrangement, notwithstanding subsection (d)(2), a process for— establishing the status of a child as a qualifying child of the taxpayer under section 32 for taxable years to which such subsection applies, and allowing credit or refunds attributable to such status, a simplified process for re-certifying a child as a qualifying child only of the taxpayer for a taxable year, and a process for terminating EITC certificates in the case of competing claims with respect to a child or in cases in which issuance of the certificate is determined by the Secretary to be erroneous. . Section 32 amended by adding at the end the following new subsection: For rules relating to EITC certificates with respect to qualifying children and duplicate claims for the credit allowed under this section, see section 7531. . The table of sections for chapter 77 is amended by adding at the end the following new item: Sec. 7531. Earned income tax credit certification program. . Part I of subchapter B of chapter 68 is amended by adding at the end the following new section: EITC certificate program If— any person makes a material misstatement or inaccurate representation in an application under section 7531 for an EITC certificate, and such misstatement or representation was due to reckless or intentional disregard of rules and regulations (but not due to fraud), such person shall pay a penalty of $100 for each EITC certificate with respect to which such misstatement or representation was made. If a misstatement or representation described in subsection (a)(1) is due to fraud on the part of the person making such misstatement or representation, in addition to any criminal penalty, such person shall pay a penalty of $500 for each EITC certificate with respect to which such a misstatement or representation was made. . The table of sections for part I of subchapter B of chapter 68 is amended by adding at the end the following new item: Sec. 6720D. Penalties with respect to EITC certificate program. . The amendments made by this subsection shall apply to taxable years beginning after December 31, 2024. Out of any money in the Treasury not otherwise appropriated, there is hereby appropriated $10,000,000 for the fiscal year ending on September 30, 2026, for necessary expenses of the Department of the Treasury, to establish, within 90 days following the date of the enactment of this Act, a task force to provide to the Secretary of the Treasury a report on the following with respect to the administration of the earned income tax credit: Recommendations for improvement of the integrity of such administration. The potential use of third-party payroll and consumption datasets to verify income. The integration of automated databases to allow horizontal verification to reduce improper payments, fraud, and abuse. Section 32, as amended by the preceding provisions of this Act, is amended by adding at the end the following new subsection: In the case of a specified Purple Heart recipient, the credit otherwise determined under subsection
(a)for the taxable year shall be increased (whether or not such specified Purple Heart recipient is an eligible individual) by the sum of the SSDI benefit substitution amounts with respect to qualified benefit termination months during such taxable year. For purposes of this subsection, the term specified Purple Heart recipient means any individual— who received the Purple Heart, who received disability insurance benefit payments under section 223(a) of the Social Security Act, and with respect to whom such disability insurance benefit payments ceased to be payable by reason of section 223(e)(1) of such Act. For purposes of this subsection— The term qualified benefit termination month means, with respect to any specified Purple Heart recipient, each month during the 12-month period beginning with the first month with respect to which disability insurance benefit payments described in paragraph (2)(B) ceased to be payable as described in paragraph (2)(C). Such term shall not include any month if the specified Purple Heart recipient receives any benefit payment under section 223(a) of the Social Security Act with respect to such month. For purposes of this subsection, the term SSDI benefit substitution amount means, with respect to any specified Purple Heart recipient for any qualified benefit termination month, an amount equal to the disability insurance benefit payment received by such recipient under section 223(a) of the Social Security Act for the month immediately preceding the 12-month period described in paragraph (3)(A). Subsections (a)(2), (d), (e), (f), and
(i)shall not apply with respect to the increase under paragraph (1). . The amendment made by this subsection shall apply to taxable years ending after the date of the enactment of this Act. Section 32(m) is amended by striking issued to an individual and all that follows and inserting (as defined section 24(h)(7)) . The amendment made by this section shall apply to taxable years beginning after December 31, 2024.