26 USC 7530: Application of earned income tax credit to possessions of the United States
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26 USC 7530: Application of earned income tax credit to possessions of the United States Text contains those laws in effect on November 22, 2024
From Title 26-INTERNAL REVENUE CODESubtitle F-Procedure and AdministrationCHAPTER 77-MISCELLANEOUS PROVISIONS
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§7530. Application of earned income tax credit to possessions of the United States

(a) Puerto Rico

(1) In general

With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to Puerto Rico equal to-

(A) the specified matching amount for such calendar year, plus

(B) in the case of calendar years 2021 through 2025, the lesser of-

(i) the expenditures made by Puerto Rico during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to the earned income tax credit, or

(ii) $1,000,000.

(2) Requirement to reform earned income tax credit

The Secretary shall not make any payments under paragraph (1) with respect to any calendar year unless Puerto Rico has in effect an earned income tax credit for taxable years beginning in or with such calendar year which (relative to the earned income tax credit which was in effect for taxable years beginning in or with calendar year 2019) increases the percentage of earned income which is allowed as a credit for each group of individuals with respect to which such percentage is separately stated or determined in a manner designed to substantially increase workforce participation.

(3) Specified matching amount

For purposes of this subsection-

(A) In general

The term "specified matching amount" means, with respect to any calendar year, the lesser of-

(i) the excess (if any) of-

(I) the cost to Puerto Rico of the earned income tax credit for taxable years beginning in or with such calendar year, over

(II) the base amount for such calendar year, or


(ii) the product of 3, multiplied by the base amount for such calendar year.

(B) Base amount

(i) Base amount for 2021

In the case of calendar year 2021, the term "base amount" means the greater of-

(I) the cost to Puerto Rico of the earned income tax credit for taxable years beginning in or with calendar year 2019 (rounded to the nearest multiple of $1,000,000), or

(II) $200,000,000.

(ii) Inflation adjustment

In the case of any calendar year after 2021, the term "base amount" means the dollar amount determined under clause (i) increased by an amount equal to-

(I) such dollar amount, multiplied by-

(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting "calendar year 2020" for "calendar year 2016" in subparagraph (A)(ii) thereof.


 Any amount determined under this clause shall be rounded to the nearest multiple of $1,000,000.

(4) Rules related to payments

(A) Timing of payments

The Secretary shall make payments under paragraph (1) for any calendar year-

(i) after receipt of such information as the Secretary may require to determine such payments, and

(ii) except as provided in clause (i), within a reasonable period of time before the due date for individual income tax returns (as determined under the laws of Puerto Rico) for taxable years which began on the first day of such calendar year.

(B) Information

The Secretary may require the reporting of such information as the Secretary may require to carry out this subsection.

(C) Determination of cost of earned income tax credit

For purposes of this subsection, the cost to Puerto Rico of the earned income tax credit shall be determined by the Secretary on the basis of the laws of Puerto Rico and shall include reductions in revenues received by Puerto Rico by reason of such credit and refunds attributable to such credit, but shall not include any administrative costs with respect to such credit.

(b) Possessions with mirror code tax systems

(1) In general

With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands equal to-

(A) the cost to such possession of the earned income tax credit for taxable years beginning in or with such calendar year, plus

(B) in the case of calendar years 2021 through 2025, the lesser of-

(i) the expenditures made by such possession during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to such earned income tax credit, or

(ii) $50,000.

(2) Application of certain rules

Rules similar to the rules of subparagraphs (A), (B), and (C) of subsection (a)(4) shall apply for purposes of this subsection.

(c) American Samoa

(1) In general

With respect to calendar year 2021 and each calendar year thereafter, the Secretary shall, except as otherwise provided in this subsection, make payments to American Samoa equal to-

(A) the lesser of-

(i) the cost to American Samoa of the earned income tax credit for taxable years beginning in or with such calendar year, or

(ii) $16,000,000, plus


(B) in the case of calendar years 2021 through 2025, the lesser of-

(i) the expenditures made by American Samoa during such calendar year for education efforts with respect to individual taxpayers and tax return preparers relating to such earned income tax credit, or

(ii) $50,000.

(2) Requirement to enact and maintain an earned income tax credit

The Secretary shall not make any payments under paragraph (1) with respect to any calendar year unless American Samoa has in effect an earned income tax credit for taxable years beginning in or with such calendar year which allows a refundable tax credit to individuals on the basis of the taxpayer's earned income which is designed to substantially increase workforce participation.

(3) Inflation adjustment

In the case of any calendar year after 2021, the $16,000,000 amount in paragraph (1)(A)(ii) shall be increased by an amount equal to-

(A) such dollar amount, multiplied by-

(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting "calendar year 2020" for "calendar year 2016" in subparagraph (A)(ii) thereof.


Any increase determined under this clause shall be rounded to the nearest multiple of $100,000.

(4) Application of certain rules

Rules similar to the rules of subparagraphs (A), (B), and (C) of subsection (a)(4) shall apply for purposes of this subsection.

(d) Treatment of payments

For purposes of section 1324 of title 31, United States Code, the payments under this section shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.

(Added Pub. L. 117–2, title IX, §9625(a), Mar. 11, 2021, 135 Stat. 155 .)