Title 26 — Internal Revenue CodeRelease 119-73not60

§7530 Application of Earned Income Tax Credit to Possessions of the United States

Title 26 › Subtitle Subtitle F— Procedure and Administration › Chapter 77— MISCELLANEOUS PROVISIONS › § 7530

Last updated Apr 5, 2026|Official source

Summary

The Treasury must pay U.S. possessions money to help cover earned income tax credits starting in calendar year 2021 and after. For Puerto Rico, the payment equals a “matching” amount plus, through 2025, up to $1,000,000 more for education about the credit. The matching amount is the smaller of (a) how much more Puerto Rico spends on the credit that year than a set “base amount,” or (b) three times that base amount. For 2021 the base amount is the larger of Puerto Rico’s 2019 credit cost (rounded to the nearest $1,000,000) or $200,000,000. After 2021 the base amount is increased by a cost-of-living adjustment using the same method as section 1(f)(3) but substituting “calendar year 2020” for “calendar year 2016.” Treasury pays after it gets required information and generally before the local tax return due date. The credit’s cost is measured under Puerto Rico law and counts lost revenue and refunds, not administrative costs. Treasury may require reporting. The Virgin Islands, Guam, and the Northern Mariana Islands get payments equal to their credit cost plus, through 2025, up to $50,000 for education. American Samoa gets the smaller of its credit cost or $16,000,000 (this $16,000,000 is increased after 2021 by the same cost-of-living method) plus, through 2025, up to $50,000 for education. American Samoa must have a refundable earned income credit based on earned income designed to boost work. Timing and reporting rules like Puerto Rico’s apply. For federal payment rules, these amounts are treated the same as certain tax refunds.

Full Legal Text

Title 26, §7530

Internal Revenue Code — Source: USLM XML via OLRC

(a)(1)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)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)For purposes of this subsection—

(A)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)(i)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)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.

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

(C)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)(1)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)Rules similar to the rules of subparagraphs (A), (B), and (C) of subsection (a)(4) shall apply for purposes of this subsection.

(c)(1)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)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)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.

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

(d)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.

Reference

Citations & Metadata

Citation

26 U.S.C. § 7530

Title 26 — Internal Revenue Code

Last Updated

Apr 5, 2026

Release point: 119-73not60