In connection with today’s immigration reform hearing by the House Ways & Means Committee, the Joint Committee on Taxation has issued Present Law and Background Relating to Tax Issues Associated with Immigration Reform (JCX-32-06):

S. 2611, The Comprehensive Immigration Reform Act of 2006 as passed by the Senate on May 25, 2006, as has four tax provisions: (1) provisions relating to payment of income tax by aliens, (2) limitations on refunds and refundable credits for aliens for taxable years prior to 2006, (3) an employer protection provision that absolves an employer of civil and criminal tax liability arising out of the employment of an alien applying for an adjustment of status, and (4) amendments to § 6103 to permit the disclosure of return information to the Department of Homeland Security relating to the electronic employee verification system created by the bill and mismatched social security numbers contained in Forms W-2 filed by employers. The bill also has indirect effects on tax compliance and Federal tax revenues.

The tax provisions of the Senate bill raise many issues, including the ability to administer the payment of income tax provisions and refund limitations by the Internal Revenue Service, the necessity of absolving noncompliant employers of employment taxes, and whether the potential benefits to Department of Homeland Security workplace enforcement outweigh the adverse effects on taxpayer compliance and privacy that would result from the disclosures of return information.