# Protecting Americans From Tax Hikes (PATH) Act: Definition

![Three wood blocks spelling tax on tax forms](https://www.investopedia.com/thmb/ABWnGP4RIUcIzeAt4eOPRjM_3GI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1124618351-364a4c5243bf4732817e85badb49e5d6.jpg)

*— Constantine Johnny / Getty Images *

## What Is the Protecting Americans From Tax Hikes (PATH) Act?

The Protecting Americans From Tax Hikes (PATH) Act of 2015 is an Obama-era law that expanded or renewed several tax credits for individuals, families, and businesses while implementing measures to prevent fraudulent claims for those credits. The act remains in force.

The act primarily affects people who are eligible to receive certain tax credits:

*   People filing for the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) must have a Social Security number or a valid Individual Taxpayer Identification Number (ITIN). If an ITIN has not been used in a tax filing during the previous three years, it is no longer valid, and a new number must be obtained.
*   Refunds that include these credits are not issued before Feb. 15 of each year. That gives the Internal Revenue Service (IRS) time to check for fraudulent claims.  
    

The PATH Act also renewed about 50 temporary tax breaks for individuals and businesses that had passed their original expiration dates. It made the Child Tax Credit (CTC) and the EITC permanent.

### Key Takeaways

*   The Protecting Americans From Tax Hikes (PATH) Act of 2015 renewed and expanded several tax credits, and established procedures to forestall attempts to defraud the government.
*   The [Child Tax Credit (CTC)](https://www.investopedia.com/terms/c/childtaxcredit.asp) and the EITC, both created as temporary tax breaks for families, were made permanent under the PATH Act.
*   The act also retroactively extended the Work Opportunity Tax Credit, a credit for employers who hire individuals from groups that have consistently faced employment barriers.
*   It also renewed some 50 tax breaks for individuals and businesses.

## Understanding the PATH Act

The PATH Act focused on several tax credits for individuals, families, and businesses. It extended some credits permanently and expanded eligibility for others.

A tax credit, in general, is more valuable to the taxpayer than a tax deduction. A tax deduction merely reduces the person’s taxable income. A [tax credit](https://www.investopedia.com/terms/t/taxcredit.asp) reduces the amount of taxes owed, dollar for dollar.

A tax credit may also be refundable or partially refundable. In that case, a low-income taxpayer might owe little or no taxes and receive a check from the IRS for some or all of the credit.

## Special Considerations

Tax credits are particularly vulnerable to fraud by taxpayers seeking to score credits that they aren’t eligible for and by con artists preying upon eligible taxpayers. This was done notably through the CTC and the EITC.

### Child Tax Credit

The CTC program, which was substantially expanded to relieve American families of some of the financial burden caused by the COVID-19 pandemic, delivered payments of up to $300 per month per child to taxpayers below certain [income](https://www.investopedia.com/terms/i/income.asp) levels through 2021.

Eligible taxpayers automatically received those payments because the [IRS](https://www.investopedia.com/terms/i/irs.asp) had the information it needed to identify them. But those whose incomes were so low that they didn’t have to file were required to sign up for the credit online.

And that fact opened up an opportunity for con artists masquerading as IRS agents. They approached people by text, email, phone, and social media, posing as government representatives to trick personal information out of the unwitting.  

The other target for fraud, of course, was the IRS itself. Tax filers could commit fraud by underreporting their income or inventing dependents to qualify for the credit.

> **Important**
>
> The CTC reverted back to pre-pandemic levels in 2022 and is adjusted slightly for inflation annually.

### Earned Income Tax Credit

A second opportunity for defrauding the IRS occurred through the [EITC](https://www.investopedia.com/terms/e/earnedincomecredit.asp). This credit, worth $632 to $7,830 a year, is available to low- and moderate-income individuals, with larger amounts credited to families with children.

An attempted fraud can occur when someone files a tax return that falsifies the person’s earned income, the number of children in the family, or both.  

> **Warning**
>
> The IRS warns that people eligible for the Child Tax Credit are being targeted by scam artists seeking to steal their money. The agency advises taxpayers not to disclose personal or financial information to anyone purporting to be from the IRS.

## Earned Income Tax Credit and Additional Child Tax Credit

There was no change in the tax filing process for these credits due to the PATH Act. In most cases, the IRS expects to send refund checks within 21 days.

However, if you file an EITC or ACTC return early in the year, the IRS will hold your refund check until Feb. 15. This provides the IRS with additional time to identify fraudulent claims and to prevent refunds from being paid to identity thieves.

The EITC applies to low- and medium-income individuals and families with or without children. The credits depend on the number of children. The full ACTC amount applies to all families that make less than $200,000 ($400,000 filing jointly) and decreases as income increases over that level.

If the EITC or ACTC doesn’t apply to you, or if you file taxes after Feb. 15, the PATH Act does not affect the timing of your refund.

> **Important**
>
> The EITC has a cap of $632 for childless households for tax year 2024 and $649 for 2025. 

## New and Extended Tax Provisions in the PATH Act

The PATH Act renewed many expired tax laws and introduced a few new laws affecting individuals and businesses. Many [tax deductions](https://www.investopedia.com/terms/t/tax-deduction.asp) set to expire, such as tuition deductions, certain charitable contributions, and residential [energy credits](https://www.investopedia.com/terms/e/energy-tax-credit.asp), were extended with retroactive credit.

Below are a few PATH Act changes and extensions for individuals and businesses.

### Extension of the Work Opportunity Tax Credit

Employers may be eligible for a [Work Opportunity Tax Credit (WOTC)](https://www.investopedia.com/work-opportunity-tax-credit-definition-5080842) if they hire individuals from specified groups that historically have faced barriers to employment.

The PATH Act retroactively extended WOTC eligibility to workers hired on or after Jan. 1, 2015. The WOTC includes nine categories of workers and an additional category for [long-term unemployment](https://www.investopedia.com/terms/u/unemployment.asp) recipients hired on or after Jan. 1, 2016.

### Wrongful Incarceration Exclusion

The PATH Act allows exonerated people to omit any monetary awards related to wrongful incarceration from their reported earned income.

It also provides wrongfully incarcerated individuals with a window to file refund claims related to restitution or monetary awards (including civil damages) received and reported in a prior [tax year](https://www.investopedia.com/terms/t/taxyear.asp). The term “PATH Act Refund” is sometimes applied to this provision.

### Renewal of Individual Taxpayer Identification Number (ITIN)

The ITIN is used primarily by taxpayers who cannot obtain a [Social Security number (SSN)](https://www.investopedia.com/terms/s/ssn.asp). Most are foreign citizens who earn income in the United States or from U.S. sources.

The PATH Act required these taxpayers to get a new ITIN number if they have one but have not used it on a tax return in the previous three years.

An ITIN number can be obtained by mailing Form W-7 to the IRS or visiting an IRS office or IRS-authorized agent.

Using an expired ITIN could result in a refund delay or ineligibility for tax credits.

## Tax Policy Today

As a topic of debate and discussion, the PATH Act has long been supplanted by newer legislation, some of which deals with the tax credits renewed back in 2015. The fate of the Child Tax Credit is particularly at issue.

The American Rescue Plan, passed in 2020 to relieve taxpayers harmed economically by the COVID-19 pandemic, extended the CTC to many more American families and increased the size of the payments. That provision expired at the end of 2021.

The CTC was set to be expanded by the Build Back Better bill, which was proposed by President Joe Biden in 2021. The House of Representatives passed the measure, but it stalled in the Senate.

The expanded credit, however, didn’t appear in the Inflation Reduction Act of 2022 at the federal level, which replaced the BBB bill and was signed into law on Aug. 16, 2022.

## Who Qualifies for the EITC?

Taxpayers must meet a number of criteria in order to [qualify for the EITC](https://www.investopedia.com/terms/e/earnedincomecredit.asp). For the 2024 tax year, those with no children filing as single, head of household, or married filing separately face an income limit of $18,591. For those married filing jointly, the income limit is $25,511. For the 2025 tax year, those limits rose to $19,104 and $26,214, respectively. These income limits increase incrementally depending on the number of qualifying children. In addition, taxpayers must meet other criteria, such as limits on investment income.  

## What Is the Difference Between the ACTC and the CTC?

The ACTC is simply the refundable portion of the CTC. It refers to the amount that can be claimed by families who owe the IRS less money than their qualified CTC amount.  

## Is the PATH Act a Good Thing?

The PATH Act had several provisions that addressed issues for lower-income taxpayers and created steps to protect taxpayers from fraudulent activity. Other provisions addressed separate tax issues that have generally been accepted as positive changes.  

## The Bottom Line

The PATH Act of 2015 is an Obama-era law that expanded and renewed several tax credits for individuals, families, and businesses. At the same time, it implemented safeguards to prevent fraudulent claims for those credits.

This was a vulnerability that emerged as scammers targeted families to obtain their potential credits, and individuals ineligible for them attempted to attain them. The act remains in place today.

> **Article Sources**
>
> 1.  Internal Revenue Service. “[Who Qualifies for the Earned Income Tax Credit (EITC)](https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/who-qualifies-for-the-earned-income-tax-credit-eitc)?”
>     
> 2.  Internal Revenue Service. “[2021 Child Tax Credit and Advance Child Tax Credit Payments—Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit](https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-b-eligibility-for-advance-child-tax-credit-payments-and-the-2021-child-tax-credit),” select “Q B4. Do I, or my children, need to have Social Security numbers to qualify for the Child Tax Credit? (updated January 11, 2022).”
>     
> 3.  U.S. Senate Committee on Finance. “[Section-by-Section Summary of the Proposed ‘Protecting Americans from Tax Hikes Act of 2015’](https://www.finance.senate.gov/download/summary-of-the-protecting-americans-from-tax-hikes-path-act-of-2015),” Pages 8–9.
>     
> 4.  Internal Revenue Service. “[When To Expect Your Refund If You Claimed the Earned Income Tax Credit or Additional Child Tax Credit](https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/when-to-expect-your-refund-if-you-claimed-the-earned-income-tax-credit-or-additional-child-tax-credit).”
>     
> 5.  U.S. Senate Committee on Finance. “[Section-by-Section Summary of the Proposed ‘Protecting Americans from Tax Hikes Act of 2015’](https://www.finance.senate.gov/download/summary-of-the-protecting-americans-from-tax-hikes-path-act-of-2015).”
>     
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>     
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>     
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>     
> 10.  Internal Revenue Service. “[Don’t Fall for Tax Scams About the Child Tax Credit—YouTube Video Text Script](https://www.irs.gov/newsroom/dont-fall-for-tax-scams-about-the-child-tax-credit-youtube-video-text-script).”
>      
> 11.  Internal Revenue Service. “[Earned Income and Earned Income Tax Credit (EITC) Tables](https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-and-earned-income-tax-credit-eitc-tables).”
>      
> 12.  Internal Revenue Service. “[Refunds](https://www.irs.gov/refunds).”
>      
> 13.  Internal Revenue Service. “[Earned Income and Earned Income Tax Credit (EITC) Tables](https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-and-earned-income-tax-credit-eitc-tables),” select “Tax Year 2024.”
>      
> 14.  Internal Revenue Service. “[What You Need to Know About CTC, ACTC and ODC](https://www.eitc.irs.gov/other-refundable-credits-toolkit/what-you-need-to-know-about-ctc-and-actc/what-you-need-to-know).”
>      
> 15.  Internal Revenue Service. “[Rev. Proc. 2024-40](https://www.irs.gov/pub/irs-drop/rp-24-40.pdf),” Page 9.
>      
> 16.  Virginia Employment Commission. “[Work Opportunity Tax Credit](https://www.vec.virginia.gov/employers/incentives/work-opportunity-tax-credit).”
>      
> 17.  U.S. Senate Committee on Finance. “[Section-by-Section Summary of the Proposed ‘Protecting Americans from Tax Hikes Act of 2015’](https://www.finance.senate.gov/download/summary-of-the-protecting-americans-from-tax-hikes-path-act-of-2015),” Page 4.
>      
> 18.  Internal Revenue Service. “[Wrongful Incarceration FAQs](https://www.irs.gov/individuals/wrongful-incarceration-faqs).”
>      
> 19.  Internal Revenue Service. “[Individual Taxpayer Identification Number (ITIN)](https://www.irs.gov/individuals/individual-taxpayer-identification-number).”
>      
> 20.  Internal Revenue Service. “[How To Apply for an ITIN?](https://www.irs.gov/individuals/how-do-i-apply-for-an-itin)”
>      
> 21.  Internal Revenue Service. “[IRS Updates Tax Year 2021 / Filing Season 2022 Child Tax Credit Frequently Asked Questions, Information to Help Taxpayers Prepare Their 2021 Returns](https://www.irs.gov/pub/taxpros/fs-2022-28.pdf),” Pages 1–2.
>      
> 22.  Congressional Research Service. “[The Child Tax Credit in the House-Passed Build Back Better Act: Summary Table](https://crsreports.congress.gov/product/pdf/IN/IN11786),” Page 1.
>      
> 23.  NPR. “[Democrats Are Forced to Regroup as Biden’s Signature Spending Bill Stalls](https://www.npr.org/2021/12/16/1064927774/democrats-forced-to-regroup-as-bidens-signature-spending-bill-stalls).”
>      
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