HHS/ASPE. U. S. Department of Health and Human Services.

Extending the EITC to Noncustodial Parents:
Potential Impacts and Design Considerations

May 23, 2009

Submitted to:
Office of the Assistant Secretary for Planning and Evaluation (ASPE)
U.S. Department of Health and Human Services

Submitted by:
The Urban Institute

Authors:
Laura Wheaton and Elaine Sorensen

This report is available on the Internet at:
http://aspe.hhs.gov/hsp/09/NCP-EITC/index.shtml

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ABSTRACT

Under current federal income tax rules, low-income noncustodial parents are ineligible for the EITC benefits available to low-income families with children, even when they support their children through full payment of child support. While the EITC and child support have successfully removed many low-income working families from poverty, the combined effect of taxes and child support payments can impoverish noncustodial parents working at or near the minimum wage. Noncustodial parent (NCP) EITC policies work to reduce this disparity. This report provides background and rationale for an NCP EITC. It examines three policy scenarios for a national NCP EITC, which are based on the NCP credits adopted by New York and Washington, D.C., and proposed in S. 1626. Estimates are provided for the number of noncustodial parents who would be eligible for an NCP EITC and for the size of the benefit and overall cost. Lastly the report identifies key design and implementation issues to be considered when enacting an NCP EITC.

The research presented here was funded by the Office of the Assistant Secretary for Planning and Evaluation (ASPE), Department of Health and Human Services (HHS) under contract HHSP23320074300EC. The Urban-Brookings Tax Policy Center provided additional support.  Project Officers:  Linda Mellgren and Jennifer Burnszynski.

The opinions expressed in this paper are those of the authors and do not necessarily represent positions of the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation.

Material contained in this publication is in the public domain and may be reproduced, fully or partially, without permission of the Federal Government. The courtesy of attribution is requested. The recommended citation follows:

Wheaton, Laura and Elaine Sorensen (2009) Extending the EITC to Noncustodial Parents:  Potential Impacts and Design Considerations. Washington, DC:  U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation.

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CONTENTS

Executive Summary

  1. Introduction
  2. Background
  3. Noncustodial Parent EITC Policies
  4. Noncustodial Parents: Earnings, Payment of Child Support, and EITC Eligibility
  5. Estimated Impact of Different NCP EITCs
  6. NCP EITC Design and Implementation Considerations
    1. Eligibility of Non-IV-D Noncustodial Parents
    2. Definition of “Full Payment”
    3. Interaction with the Child-Based EITC
    4. NCP EITC and Tax Intercepts
    5. Other Tax Implications
    6. Encouraging Participation
  7. Conclusions
  8. References

How to Obtain a Printed Copy

To obtain a printed copy of this report, send the title and your mailing information to:

Human Services Policy, Room 404E
Assistant Secretary for Planning and Evaluation
U.S. Department of Health and Human Services
200 Independence Av, SW
Washington, DC 20201

Fax:  (202) 690-6562
Email:  pic@hhs.gov

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Last upated:  05/26/09