Sponsors (2)
The bill helps disaster-displaced, low-income workers and families keep or increase refundable tax credits by allowing prior-year earned income to be used for eligibility, at the cost of higher short-term federal outlays and added filing and IRS administrative complexity.
Low-income individuals and families with children who are displaced or have reduced earnings because of a Presidential major disaster can use prior-year earned income to preserve or increase eligibility for the Earned Income Tax Credit and larger refundable child tax credits in the disaster year.
Taxpayers and the IRS get a clear, administrable rule tying eligibility to Presidential major disaster declarations, simplifying determination of who may make the earned-income substitution election.
Low- and middle-income taxpayers and tax preparers will face an additional election on tax returns, increasing filing complexity and the risk of errors or incorrect claims.
Taxpayers broadly may bear higher short-term federal costs because refundable credits could be larger in disaster years, potentially increasing deficits or forcing budget trade-offs elsewhere.
The IRS must issue guidance and update processing to handle the election, creating administrative costs and possible processing delays that could slow refunds or increase agency workload.
Based on analysis of 2 sections of legislative text.
Allows taxpayers affected by a Presidential major disaster to elect to use prior-year earned income when computing Child Tax Credit and Earned Income Tax Credit.
Allows taxpayers who live or work in areas hit by a Presidential major disaster (or who were displaced by such a disaster) to choose to use their prior year’s earned income when computing the Child Tax Credit and the Earned Income Tax Credit. This election is intended to help families whose current-year earnings dropped because of the disaster qualify for larger credits or remain eligible. The change applies to taxable years beginning after December 31, 2024, and relies on existing definitions of a qualified disaster area tied to major disaster declarations under the Stafford Act.
Introduced December 11, 2025 by Amy Klobuchar · Last progress December 11, 2025