WRCR Act of 2025

Bill Number

H.R. 2338

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-03-25: Referred to the House Committee on Ways and Means.

Last Updated

2026-03-25T08:05:43Z

AI-Generated Summary

Purpose

The Worker Relief and Credit Reform Act of 2025 (H.R. 2338) aims to broaden access to the Earned Income Tax Credit (EITC), a refundable tax credit designed to support low- and moderate-income workers and families. It expands eligibility to include more groups, such as students and caregivers, simplifies rules, increases credit amounts for certain households, and introduces advance monthly payments to provide ongoing financial relief.

Key Provisions

• Eligibility for Students: Allows "qualifying students" (eligible students receiving Federal Pell Grants or meeting income thresholds below 300% of the federal poverty line) to claim the EITC, even if they lack earned income from traditional work. Qualifying students must not be claimed as dependents by others.
• Lowered Age Requirements: Reduces the minimum age for EITC eligibility from 25 to 18 for individuals without qualifying dependents.
• Treatment of Caregiving and Education as Earned Income: Treats qualifying students and individuals with qualifying dependents as having "earned income" up to $4,000 ($8,000 for joint filers) for EITC purposes, even if they are primarily engaged in caregiving or learning rather than paid work.
• Expanded Qualifying Dependents: Broadens the definition to include:
• Children under age 12 (instead of 19).
• Spouses or qualifying relatives who are physically or mentally incapable of self-care.
• Qualifying relatives aged 65 or older.
• Excludes government benefits (e.g., Social Security, disability aid) from income calculations for these dependents.
• Adjusted Credit Percentages and Amounts:
• Sets a flat 100% credit rate on the first $4,000 of earned income ($8,000 for joint filers).
• Establishes a 20% phaseout rate starting at $30,000 income ($50,000 for joint filers).
• Includes inflation adjustments starting in 2026, rounded to the nearest $50.
• Increased Credit for Unmarried Parents: Provides an additional credit for unmarried individuals with 2 or more qualifying children, using modified rates from 2018 law (12.5% for 2 children, 18.75% for 3+), with a 5% phaseout.
• Advance Payment Program: Requires the IRS to create a program within 2 years for optional monthly advance payments of up to 75% of estimated EITC. Payments can be via prepaid debit card, with elections changeable anytime. Excess payments are recaptured as additional tax, and non-repayment bars future advances for 2 years. Includes an online portal for elections and updates, plus one-on-one consultations.
• Outreach Pilot Program: Mandates IRS efforts within 1 year, including educational letters to potential qualifiers, workshops at district offices, and quarterly reminders about payment estimates and repayment risks. The program runs for 10 years, with a midterm report to Congress on effectiveness.

Significant Changes to Existing Law

• Amends Section 32 of the Internal Revenue Code (IRC) to redefine eligibility, dependents, and income calculations, replacing variable percentages with fixed rates and introducing new categories like qualifying students and elderly relatives.
• Removes prior inflation adjustments for certain thresholds and adds new ones tied to 2024 cost-of-living data.
• Adds Section 7531 to IRC Chapter 77 for advance payments, including recapture rules and coordination to reduce final-year credits by advance amounts.
• Repeals outdated subsections (e.g., prior inflation rules) and updates conforming language throughout Section 32.

Potential Impacts

• On Citizens: Could benefit millions of low-income workers, students, caregivers, and families by increasing EITC refunds (potentially up to thousands more per household) and providing steady monthly cash flow via advances, reducing reliance on payday loans or debt. However, risks overpayments leading to tax liabilities for some.
• On Government Agencies: The IRS and Treasury Department face increased administrative burdens for program setup, consultations, portals, outreach, and handling recaptures/verifications, potentially raising costs. May boost tax filing rates among low-income groups due to education efforts.
• On International Relations: No direct impact, as the bill focuses on domestic tax policy.

Main Stakeholders Affected

• Low- and Moderate-Income Taxpayers: Primary beneficiaries, especially working students, single parents with multiple children, caregivers for disabled or elderly relatives, and young adults aged 18-24.
• Families with Dependents: Gains from expanded definitions and higher credits for larger households.
• Internal Revenue Service (IRS) and Treasury Department: Responsible for implementation, outreach, and enforcement, including new programs and reporting.
• Educational Institutions and Aid Recipients: Indirectly affected through easier EITC access for Pell Grant students.
• Tax Preparation Services: May see higher demand for assistance with eligibility and advance elections.

Notable Legal, Constitutional, or Political Implications

• Legal: Enhances refundable credits under IRC Section 32, potentially increasing federal revenue loss (estimated billions annually) but aligning with anti-poverty goals. Recapture provisions ensure fiscal accountability, though they may complicate tax compliance for low-income filers. Requires IRS rulemaking for definitions like "household income" (tied to Affordable Care Act standards).
• Constitutional: No apparent challenges; supports equal protection by aiding vulnerable groups without discriminating by race, gender, or other protected classes.
• Political: Promotes progressive tax relief for working poor and education, likely appealing to advocates for income inequality reduction. Could spark debates on program costs, administrative feasibility, and work incentives, with the 10-year outreach pilot allowing evaluation before permanence. Effective for tax years after December 31, 2024, if enacted.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Moore, Gwen [D-WI-4]

Cosponsors (13)

Rep. Chu, Judy [D-CA-28], Rep. Davis, Danny K. [D-IL-7], Rep. Gomez, Jimmy [D-CA-34], Rep. Pingree, Chellie [D-ME-1], Del. Norton, Eleanor Holmes [D-DC-At Large], Rep. Tlaib, Rashida [D-MI-12], Rep. Scanlon, Mary Gay [D-PA-5], Rep. Khanna, Ro [D-CA-17], Rep. Jayapal, Pramila [D-WA-7], Rep. Pocan, Mark [D-WI-2], Rep. Omar, Ilhan [D-MN-5], Rep. Magaziner, Seth [D-RI-2], Rep. Sykes, Emilia Strong [D-OH-13]

Recent Actions

• 2025-03-25: Referred to the House Committee on Ways and Means.
• 2025-03-25: Introduced in House
• 2025-03-25: Introduced in House

Bill Versions

• Worker Relief and Credit Reform Act of 2025 — issued 2025-03-25 — PDF (20 pages)