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The Importance of Notice and Hearing Rights for the Advanced Child Tax Credit



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Today we welcome first-time guest blogger Jennifer Burdick. Jen is an attorney with Community Legal Services of Philadelphia focusing on SSI benefits. In this post, she explains the notice and appeal rights that typically apply in public benefit programs, and why they are crucial to her clients’ accessing the benefits that they qualify for. She then addresses the promise and shortfalls of the American Rescue Plan’s child tax credit expansion. Christine

Notice and Hearing Rights in Public Benefits: an Example

Jacob is a five-year-old child who receives SSI, a modest Social Security income support for children with disabilities. His mother receives a notice that Jacob is no longer eligible for SSI because a data match shows that his mother has too much money in the bank. In fact, the Social Security Administration (SSA) is mistaken — that’s not her bank account.

The notice of the termination, which SSA must send mom prior to stopping Jacob’s benefits, provides instructions for how she can appeal by seeking reconsideration. 20 C.F.R. § 416.1336. She is given 60 days, plus five for mailing, to appeal the decision. Id. All she has to do to appeal is send in the provided form (or any writing) disagreeing with the termination. She does not have to write much – one or two sentences is sufficient, and she does not need to use any magic words like “appeal,” or even sign the form. POMS SI 04020.020. If she appeals within ten days, plus five for mailing, Jacob’s benefits will remain on during the appeal, until there is a reconsideration decision. 20 C.F.R. § 416.1336(b).

Once Jacob’s mother requests reconsideration, an SSA claims representative who was not involved in the initial termination decision must review the case and issue a new written determination. 20 C.F.R. §§ 416.1413 & 416.1422. As part of that review, Jacob’s mother can select if she wants SSA to do a case review, or if she wants to attend an informal conference; in certain circumstances a formal conference is also available. 20 C.F.R. § 416.1413a. In a case review, SSA will allow Jacob’s mother to review SSA’s evidence, and present additional oral or written evidence, but typically these cases are decided by re-reviewing the case file. 20 C.F.R. § 1413(a). At an informal conference, Jacob’s mother will attend, can testify, and can additionally present witnesses. Id.  SSA regulations indicate the reconsideration proceeding should be scheduled within fifteen days of her request at her local office, either by phone or in person based on Jacob’s mom’s preference. 20 C.F.R. § 416.1413c. Jacob’s mother can bring an attorney or representative to the meeting. A summary of the informal or formal conference will be included in the record. 20 C.F.R. § 416.1413.

If, after the reconsideration proceeding, the SSA claims representative reaffirms the termination of benefits, Jacob’s mother once again has 60 days, plus five days for mailing, to appeal the decision with the opportunity for benefit continuation pending appeal. This time, the Social Security Act entitles her a hearing before a qualified administrative law judge within 90 days. She’s entitled to bring an attorney or other representative to the hearing.

Importantly, throughout this process SSA shares with Jacob’s mother the duty to develop the record in her case. 42 U.S.C. § 423(d)(5)(B). So as long as Jacob’s mother tells SSA about evidence that might support her claim for benefits, SSA has to help her get it if she cannot. Regulations governing SSA proceedings provide they are inquisitorial rather than adversarial. Carr v. Saul, 19-1442, 593 U.S. (2021). The shared duty to develop the evidence and the inquisitorial nature of the proceedings is critical because many claimants appear without the assistance of counsel, although legal services programs do represent claimants as resources allow. Following the hearing, she receives a written decision with further appeal rights if she loses.

Fortunately, though, she doesn’t need to appeal: the judge agrees that she does not have too much money in the bank, and Jacob’s disability income remains intact.

Implications for the Advanced Child Tax Credit

Among Social Security applicants and recipients, Jacob and his mother’s experiences are utterly commonplace, enshrined in decades of constitutional and statutory law that guarantee basic due process rights. Yet with the tax system, which is increasingly administering the American safety net, there is no similar inquisitorial process.  Instead, people with similar issues related to their tax payments and refund face adversarial process. But Congress can fix this. In the coming weeks, it should draft legislation providing notice and hearing rights to taxpayers seeking the refundable advanced Child Tax Credit (AdvCTC), as expanded in the American Rescue Plan (ARP).

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The expansion of the Child Tax Credit (CTC), coupled with making it fully refundable and available monthly to sync its availability to need, has the potential to revolutionize the social safety net. If this advanced tax credit is successfully distributed to those eligible, including Jacob and his mother, it will be literally life changing. Millions of families will rely on this benefit to help them pay for life’s necessities. My clients, low-income families where either a caregiver or child has a severe disability qualifying them for SSI, are excited because monthly payments bring the promise of helping them cover recurring expenses including the rent and utility expenses. One of my clients, Mr. McGruder hopes it will allow him to get his grandsons a cable subscription.

The problem is that ARP does not provides for necessary procedural protections in the event someone seeking to claim the advanced CTC credit is denied, or has their advanced payment reduced or ceased. The only legally required notice provided to families under the ARP is one letter, to be provided in January 2022 (after the receipt of any AdvCTC payments), which will list the total amount of advanced CTC the taxpayer received in 2021. IRC Sec. 7527A(b)(3). To be fair, IRS has elected to provide additional notice to families, sending letters to 36 million families who may qualify for AdvCTC payments, and announcing their intention to send a second personalized letter listing an estimate of their monthly payment. However, there is no provision in ARP, and the IRS has not committed, to send written notices at other key moments:

  1. if a family seeks advanced payments and is determined eligible for less than the full amount;
  2. if a family is determined completely ineligible; or
  3. if IRS will use their unilateral power to reduce or stop AdvCTC that the family has been receiving.

As a result, if a taxpayer is denied access to complete AdvCTC payments, or the Secretary uses the modification powers outlined in the ARP to modify or stop the advanced payment (IRC Sec. 7527A(b)(3)), a taxpayer may experience unexpected interruptions in those payments without any sort of advanced warning that the payment isn’t coming, or any information about an opportunity to appeal. In that event, the taxpayer won’t be able to easily contact IRS customer service, as IRS staff are already struggling to answer the current call volume and IRS directs that people not call in with CTC questions.

Can you imagine anything more frustrating? Imagine if Jacob’s mother, based on the promise of the AdvCTC’s additional $250 a month, secures a larger apartment so she and Jacob can have separate bedrooms, affording him the personal space that is recommended by this therapist. After relying on these payments to offset the additional rent, without receiving any notice, the payment does not come in September due to an internal IRS decision. She will no doubt try to call the IRS, but even the IRS website instructs people not to call for assistance.  If she does call and connect to a human, there is a decent chance she will be connected to a contractor who is unable to give her specific information about her tax case.  She will reach out to me, a legal aid lawyer, who will have to inform her that there is no clear avenue for appeal. Hopefully this will not result in their eviction and all the adverse consequences that follow.

There should be legislation, not litigation, creating detailed notice and hearings rights. In the public benefits context, the Fifth Amendment to the U.S. Constitution’s promise that “[n]o person shall be deprived of life, liberty, or property without due process of law” has been interpreted to convey both applicants and recipients a property interest in government benefits, including cash payments like the AdvCTC. U.S. Const. amend V. Because of this property interest, applicants and recipients are entitled to notice and an opportunity to appeal a denial, reduction, or termination of benefits, in many cases before the reduction or termination takes place. U.S. Const. amend V.; Goldberg v. Kelly, 397 U.S. 254 (1970).

Many poverty advocates, public benefits lawyers, and policy analysts have been surprised to learn that the Supreme Court does not necessarily believe that Fifth Amendment’s promise of pre-deprivation due process applies with the same force to tax refunds and credits. See Leslie Book, The IRS’s EITC Compliance Regime: Taxpayers Caught in the Net, 81 Or. L. Rev. 351, n.9 (2002), (reviewing relevant due process and tax cases, and finding that “the Supreme Court has long held that the collection of tax is so essential to the nation’s lifeline that IRS adjudicative actions should remain largely untouched by procedural protections inherent in the Fifth Amendment Due Process Clause”); Nina Olson, Erwin N. Griswald Lecture Before the American College of Tax Counsel: Taking the Bull by its Horns: Some Thoughts on Constitutional Due Process in Tax Collection, Tax Lawyer Vol 63, No. 3, 2010, at  n. 24.

Although there is some legal basis to support a finding that there is a protectable property interest that would confer due process rights on tax benefits that target alleviating poverty like the AdvCTC, the jurisprudence in this area is murky. Compare, e.g., In re Hardy, 787 F.3d 1189, 1190-91 (8th Cir. 2015) (holding child tax credit qualified as a “public assistance benefit”); Flanery v. Mathison, 289 B.R. 624, 628 (W.D. Ky. 2003) (recognizing trend that refundable tax credits fall within the classification of public assistance designed to combat poverty and are not merely tax refunds); In re Vazquez, 516 B.R. 523, 526 (Bankr. N.D. Ill. 2014) (holding child tax credits can be claimed as exempt public assistance benefits); with, Phillips v. Comm’r, 283 U.S. 589, 596-97 (1931).

Because of the complex legal ground in this area, it would be helpful if Congress would legislate a notice and hearing process. This process must include the following elements:

  1. Plain language notice of approval, denial, termination, or reduction of advance CTC payments, with the reason for the approval, denial, termination, or reduction of the payment;
  2. A clear deadline to protest (or appeal) an adverse action (denial, reduction, or termination), with an additional explanation that if the taxpayer disagrees they can still file a tax return claiming the CTC, which would then be subject to deficiency procedures;
  3. With each notice of payment denial, reduction or termination, a plain language worksheet and sample affidavits to allow claimants to easily file a written protest, with no requirements that people use *magic words* to appeal;
  4. An appeals conference (in person, or over the phone) with an impartial officer must be scheduled promptly after receipt of a protest;
  5. A plain language notice to appellants with the conference information, including its time and date, information about what to have on hand, what to expect, and how to reschedule;
  6. The ability to attend the conference virtually or by phone, plus an in-person option if public health measures allow;
  7. Information to appellants detailing their right to an authorized representative of their choice (including an LITC representative) via phone or video conferencing;
  8. Written procedures for conduct of the conference, including use of interpreters and assistive technology;
  9. Appeals to issue a decision within 30 days of the conference, as well as notification making it clear that the denial does not mean the underlying CTC is decided, and does not prevent the taxpayer from seeking it through a subsequent tax return.

The creation of an accessible appeal conference is critical. Some of the disputes about the ability to claim the AdvCTC will revolve around which caregiver a child lives with, and from whom the child gets more support. These may seem like a straightforward questions, but many families are complex. Real disputes may exist: for example, do you know where a child’s official residence is if she has a bedroom at her mother’s house, but usually sleeps at her grandmother’s house because her mother works overnight shifts? These sorts of questions will not likely be resolvable with dueling pieces of paper, but will require testimony and possibly witnesses. Absent the creation of notice and hearing rights, many children who most need the support the AdvCTC promises may be unable to benefit.



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