Since you asked: Should incarcerated people be receiving stimulus payments?

Some correctional authorities - responding to bad guidance from the IRS - are intercepting and returning stimulus checks for incarcerated people. We explain why people in prison and jail are eligible for, and should be receiving, emergency aid.

by Stephen Raher

On March 27, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, more commonly known as the "CARES Act." One of the better-known aspects of the 883-page bill is the Treasury's disbursement of one-time economic stimulus payments, which were designed with broad eligibility requirements to get financial relief into people's pockets as quickly as possible.

The IRS is claiming that incarcerated people do not "qualify" for stimulus payments and the agency is attempting to "claw back" badly needed funds from vulnerable people who may need it most. But this policy is contradicted by the unambiguous language of the CARES Act itself.

Does incarceration make people ineligible for stimulus payments?

In short: According to the CARES Act, no. The provision regarding the stimulus payments is fairly straightforward: the government is directed to distribute $1,200 to every "eligible individual."¹ An eligible individual is defined as "any individual" other than a nonresident immigrant, someone who is claimed as a dependent on another person's tax return, a probate estate, or a trust.² Other parts of the law reduce the size of payments to high-earning taxpayers³ and require eligible individuals to have tax ID numbers.⁴ These basic eligibility requirements appear in the law itself, and are repeated on the IRS's webpage regarding stimulus payments. There is no language in the statute that directly or indirectly suggests that incarceration status affects eligibility.

Why have I heard that payments to incarcerated people should be returned?

On May 6, 2020, the IRS updated the frequently asked questions ("FAQs") on its webpage to say that incarcerated people do not qualify for stimulus payments and should return any payments that they receive. The IRS cites no authority for this, and the only law mentioned in the FAQ is the statute that prohibits incarcerated people from receiving Social Security payments. But this is irrelevant since the stimulus payments are refundable tax credits⁵ having nothing to do with Social Security. Despite the fact that this new advice comes from an IRS FAQ page, and not from the CARES Act itself, it has been cited widely in publications like Forbes, leading to a lot of confusion.

How is it possible that the IRS website would give advice that's not consistent with the law?

There is a well-defined process for the IRS to issue rules and regulations that supplement tax laws passed by Congress. The purported ban on stimulus payments to incarcerated people was not a result of this rulemaking process. Instead, it appears that IRS made up this "rule" out of whole cloth and announced it by posting it on a webpage.

It's impossible to say why the IRS took this unusual approach, but here's one theory: someone in the Treasury Department may have decided that giving money to incarcerated people is bad policy. Of course, the IRS is severely under-resourced, as a result of decades of attacks by grandstanding members of Congress, so the agency doesn't have the time or staff to go after individual incarcerated people to claw back stimulus payments. And the IRS would likely lose in court if such an action were challenged in litigation.

But, by placing an FAQ on the agency's website saying that incarcerated people cannot receive the payments, some prison systems will probably do the IRS's dirty work by using the FAQ as a justification to intercept payments or bring disciplinary action against people who take the steps to claim the money to which they are legally entitled. In fact, we've heard that at least one state prison system is already doing this.

It is entirely reasonable to give emergency financial aid to incarcerated people

Even though this issue is fundamentally about the rule of law (more about that in a minute), as a practical matter some people can't fathom giving money to incarcerated people or others who are "dependent" on the government.

But there are good reasons why people in jail or prison need emergency aid in these unprecedented times. First, many incarcerated people will be released soon (especially people in jail, where stays tend to be for short periods of time). Navigating the financial hurdles of post-incarceration life is difficult even in normal times. But to state the obvious, we are not in normal times: given the record-high unemployment rates, the well-documented challenges of finding work as a formerly incarcerated person are only going to get more formidable. It makes perfect sense for the government to provide monetary aid so that recently released people can obtain housing, clothing, and food. The CARES Act stimulus payments, while modest, can provide literally lifesaving assistance for people being released from incarceration.

It also makes sense to give money to people who won't necessarily be released from custody soon. Prisons and jails have shifted more and more costs onto incarcerated people — costs for things like hygiene supplies, medical copayments, and communication with loved ones. Since incarcerated people have little ability to earn money, they tend to rely on money transfers from friends and family to pay for basic necessities. But as family members on the outside (who are often low-income to begin with) lose their jobs in the pandemic-induced economic collapse, families will be increasingly less able to send money to loved ones inside. Providing stimulus funds to incarcerated people helps protect the health and well-being of those behind bars and provides relief to their loved ones at home.

The implications of the IRS's policy for our government and the rule of law

Beyond the immediate implications for incarcerated people and their families, the IRS's errant attempt to prevent incarcerated people from receiving stimulus payments is troublesome because it upends our system of government, specifically the separation of powers. Executive-branch agencies (like the IRS) are charged with implementing the laws passed by Congress, not changing the law. But that seems to be exactly what's happening here: Congress said to give everyone money, but then the Treasury Department thought that incarcerated people should have been excluded. As every first-year law student learns, it is settled law that unambiguous statutes are to be applied as written, even if that could lead to arguably unintended consequences.⁶

Furthermore, interfering with the administration of the federal tax system (which would presumably include interfering with someone's ability to claim a valid tax refund) is a federal crime.⁷ But we live in a time when the national government operates under a philosophy that only some people (namely, people without the right connections) are obliged to obey the law. The IRS's sudden about-face on stimulus payments provides a troubling illustration of this mindset: a government agency has ignored the clear-cut language of the governing law in an effort to impose additional punishment on people who are serving time for violating other laws.

Footnotes:

1. 26 U.S.C. § 6428(a) and (f).

2. 26 U.S.C. § 6428(d).

3. 26 U.S.C. § 6428(c).

4. 26 U.S.C. § 6428(g)

5. Even though the stimulus payments are tax credits, the CARES Act is very clear that people may claim the payments even if they have no taxable income. See Revenue Procedure 2020-28.

6. See Magwood v. Patterson, 561 U.S. 320, 334 (2010) ("[Courts] cannot replace the actual text [of a statute] with speculation as to Congress' intent."); Henson v. Santander Consumer USA, 137 S.Ct. 1718, 1725 (2017) ("[I]t is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done had it faced a question that, on everyone's account, it never faced.").

7. 26 U.S.C. § 7212(a).