The ability of unauthorized aliens to claim federal refundable tax credits has received considerable scrutiny. In a July 2011 study, the Treasury Inspector General for Tax Administration (TIGTA) reported that individuals who were not authorized to work in the United States received $4.2 billion by claiming the refundable portion of the child tax credit—the additional child tax credit (ACTC). The ACTC is available to working families with children under age 17. This issue is complicated by the differences in legal classifications of foreign nationals/aliens (e.g., "employment-authorized alien," "legal permanent resident," "resident alien," and "qualified alien") across the federal immigration, tax, and welfare laws. The TIGTA audit was based upon analysis of tax returns filed by persons with Individual Taxpayer Identification Numbers (ITINs). The Internal Revenue Service (IRS) issues ITINs to individuals who are required to have a taxpayer identification number for tax purposes but are not eligible to obtain a Social Security number (SSN) because they are not authorized to work in the United States. The number of tax forms filed with ITINs has increased from 1.55 million in 2005 to 3.02 million in 2010. It is unclear how many of these individuals who filed with ITINs were unauthorized aliens or part of mixed-status families that included U.S. citizens or legally present aliens as well as unauthorized aliens. This report opens with an explanation of refundable tax credits and follows with an overview of unauthorized resident aliens. The report proceeds to analyze the federal tax status of unauthorized aliens and their eligibility for refundable tax credits, including a legal analysis of whether refundable tax credits are "federal public benefits" under Section 401 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). The report concludes with a discussion of selected policy options. Tax credits allow taxpayers to reduce their tax liability dollar-for-dollar up to the value of the credit. Credits are either nonrefundable or refundable. By definition, the value of nonrefundable tax credits cannot exceed a taxpayer's income tax liability. In contrast, refundable tax credits can be larger than a taxpayer's income tax liability, with the taxpayer receiving the difference (or part of the difference in the case of partially refundable tax credits) as a cash payment from the IRS. As a result of this distinction, refundable tax credits can be claimed by taxpayers with little or no income tax liability, which includes many low-income tax filers. The existing refundable tax credits include the earned income tax credit (EITC); the additional child tax credit (ACTC), which is the refundable portion of the child tax credit; the American opportunity tax credit, which is a partially refundable credit for tuition and related expenses; the health coverage tax credit, which provides a credit for health insurance costs of qualifying individuals who receive trade adjustment assistance (TAA) or pension benefits under a plan taken over by the Pension Benefit Guaranty Corporation (PBGC); the credit for tax withheld on wages; the credit for tax withheld at source for nonresident aliens and foreign corporations; the credit for fuel excise taxes paid on fuel used for nontaxable uses; and the credit for overpayment of tax. Additionally, a premium assistance credit, provided under the Patient Protection and Affordable Care Act ( P.L. 111-148 ), will go into effect in 2014. There are also several refundable credits that have recently expired. These are the first-time homebuyer credit, the "recovery rebate" credit in the Economic Stimulus Act of 2008 (2008 stimulus credit), the Making Work Pay credit available in 2009 and 2010, and the adoption expenses credit, which was refundable for 2010 and 2011. Selected credits are summarized in Appendix A . The credits listed in the last four bulleted points above are essentially methods by which taxpayers receive refunds for overpayment of taxes. The other refundable credits can be broadly categorized into those whose value depends on the taxpayer's earnings and those whose value is based on the taxpayer's expenditures for a particular action or good, such as higher education or homeownership. Currently, the two largest refundable tax credits—the EITC and ACTC—fall into the former category and comprise an estimated 95% of the total amount of refundable credits claimed in 2009. These credits effectively subsidize low-wage work, providing additional money for each dollar of wages. In addition, both credits help mitigate the federal taxes that low-income workers pay. In many cases, these workers may not have sufficient income to incur an income tax liability, but they do pay payroll taxes (i.e., the taxes on wages that fund Social Security benefits under the Old-Age, Survivors, and Disability Insurance (OASDI) program and the Medicare hospital insurance (HI) program). For extremely low-wage workers, these credits may result in a net increase in income. For example, in 2011 (when the two-percentage point payroll tax reduction was in effect), taxpayers were directly subject to a payroll tax rate of 5.65%. If a taxpayer had $20,000 of earnings and one child, the taxpayer would owe $1,130 of payroll taxes and $410 of federal income taxes, for a total federal tax liability of $1,540, as illustrated in Figure 1 . This same taxpayer would be eligible for a $1,000 refund from the ACTC and a $2,565 refund from the EITC. Hence, in this example, the taxpayer would receive $2,025 as a refund. Figure 1 also highlights that while taxpayers begin paying payroll taxes on the first dollar they earn, the total amount of refundable credits they receive is greater than their total federal tax liability (net the non-refundable portion of the child tax credit) until taxpayers earn approximately $26,000. Hence, in this example, taxpayers making under approximately $26,000 actually see a net increase in their income as a result of these credits. For reference, in 2011 the poverty level for an adult under 65 with one child was $15,504. The migration and family patterns of unauthorized aliens residing in the United States are central to the question of their ability to claim refundable tax credits. Through the Immigration and Nationality Act (INA), foreign nationals enter the United States in two main categories: as legal permanent residents (LPRs) and temporary nonimmigrants. Unauthorized resident aliens are foreign nationals who overstay their nonimmigrant visas, foreign nationals who enter the country surreptitiously, or foreign nationals who are admitted on the basis of fraudulent documents. In all three instances, these unauthorized aliens are in violation of the INA and subject to removal. The actual number of unauthorized aliens in the United States is not known, as locating and enumerating people who are residing in the United States without permission poses many methodological problems. Estimates derived from the March Supplement of the U.S. Census Bureau's Current Population Survey (CPS) indicate that the unauthorized resident alien population was 11.2 million in 2010. The Pew Hispanic Center reported that 35% of unauthorized adults have resided in the United States for 15 years or more and that 28% have resided for 10 to 14 years. The report also found that the proportion of unauthorized aliens who have been in the country at least 15 years has more than doubled since 2000. Pew researchers have also found that unauthorized aliens tend to be younger than the U.S. population overall and more likely to be in the child-bearing and child-rearing years. As a consequence, nearly half—an estimated 46%—of unauthorized adults are parents of minor children. A significant portion of the households headed by unauthorized aliens may have U.S. citizen children, as well as spouses who may be legal permanent residents (LPRs). Researchers at the Pew Hispanic Center estimated that at least 9 million people were in "mixed-status" families that included at least one unauthorized adult alien and at least one U.S.-born child in 2010. Along with the approximately 1 million unauthorized aliens who are minor children, Pew researchers estimated that 4.5 million minor children were born in the United States to a family in which at least one parent was an unauthorized alien. As Figure 2 shows, the number of U.S.-citizen children with at least one unauthorized parent has more than doubled since 2000. The implications of these demographics for the refundable tax credits heighten the complexity of the debate to restrict such tax credits to those persons legally authorized to work in the United States. In a widely cited 2002 study of federal benefits that may have gone to households headed by unauthorized aliens, Steven Camarota concluded, "[M]any of the costs associated with illegals are due to their American-born children, who are awarded U.S. citizenship at birth ... greater efforts at barring illegals from federal programs will not reduce costs because their citizen children can continue to access them." Whether an unauthorized alien who is head of household is permitted to be the payee of a federal benefit for U.S. citizen children varies across programs. Another group of foreign nationals that adds a level of complexity are the "quasi-legal" migrants. More precisely, not all unauthorized aliens lack legal documents giving them permission to work in the United States, which leads many observers to characterize these documented aliens as "quasi-legal" migrants. There are certain circumstances in which the Department of Homeland Security issues temporary employment authorization documents (EADs) to aliens who are not otherwise considered authorized to reside in the United States. Foreign nationals with EADs, in turn, may legally obtain Social Security cards. These "quasi-legal" unauthorized aliens fall in several categories: The government has given them temporary humanitarian relief from removal, such as Temporary Protected Status (TPS). They have sought asylum in the United States and their cases have been pending for at least 180 days.