Child Tax Credit Bill Has One Fatal Flaw, Nonprofit Says

A recent legislative proposal introduced by a cohort of Senate Democrats to permanently restore the now lapsed expanded child tax credit provisions originally enacted as COVID-19 relief leaves out U.S. citizens living overseas, an advocacy organization argued.

The Working Families Tax Relief Act (S 1992) was introduced by 40 Democratic senators in June, with Ohio’s Sherrod Brown as the primary sponsor. The bill effectively reverts the child tax credit back to its tax year 2021 expanded version and mirrors provisions of the American Rescue Plan Act (ARPA; PL 117-2), which made the CTC fully refundable and worth $3,000 for children aged 6-17, or $3,600 for children aged 5 or younger. Another change the proposed bill incorporates from ARPA is delivering the CTC on a monthly basis rather than an annual lump sum.

However, the lawmakers behind the Working Families Tax Relief Act also included an original oversight from ARPA, according to American Citizens Abroad (ACA), a nonprofit that self-identifies as a “non-partisan advocacy organization that represents the legislative and regulatory concerns of US citizens living and working overseas to the US Government.”

In a submitted statement for a Senate Finance Tax Subcommittee hearing conducted July 13 to assess the CTC 25 years after its creation, the ACA wrote that the bill and ARPA both deny the full refundability and advance payment benefits to CTC recipients living abroad.

“This is disappointing and upsetting for non-resident parents who already bear an inordinately costly and complex U.S. tax filing burden,” the organization’s statement read. “We ask that the Senate Finance Committee reconsider the U.S. residence requirement included in the bill’s eligibility criteria for full CTC refundability. It is not clear to us why, from an equity or a tax administration point of view, the choice was made to include it in S. 1992.”

ACA recommended that the online IRS CTC portal allow beneficiaries living abroad to register with their international addresses, phone numbers, and bank accounts for the sake of observing “equal protection provisions in making and implementing law.” In their view, global inflation has made now a “time of considerable financial distress for middle-income U.S. families regardless” of where they live.

At July’s committee hearing, ranking member John Thune, Republican of South Dakota, took issue with the expanded CTC, calling it, essentially, universal basic income for those with children. “It extended the credit to children who are almost adults,” Thune said in his opening statement. “It adopted a completely new approach by mandating taxpayers who did not opt-out to receive half their credit in advance, significantly straining the IRS’s resources and leading to refund delays, surprise tax bills, and lengthy call wait times for two consecutive tax filing seasons, among a host of other administrative challenges.”

Michael Bennet, Colorado Democrat and Chair of the Subcommittee on Tax, spoke glowingly on the “success” of the program throughout its history and pushed back against the notion that the credit disincentivizes parents from seeking or retaining employment. “We are living in a world now where we are the richest country in the world and have one of the highest rates of childhood poverty in the industrialized world,” said Bennet. “We don’t have to accept that.”