ITIN: Mortgage Meltdown, Fraudulent Child Tax Credit Facilitator, Rears Ugly Head

By Joe Guzzardi
May 14, 2014

If only the California Legislature spent as much time working on creating jobs, improving education or providing better health care as it does on catering to illegal immigrants, the state might one day return to its former grandeur. But, sadly, Sacramento has again chosen to introduce more legislation that will accommodate the current alien population and serve as a beacon to those waiting to come illegally. 

Assemblyman Luis Alejo, fresh from his successful legislation that will grant driver’s licenses to illegal immigrants in 2015, has come up with a new scheme. Alejo’s Assembly Bill 2014 would require the Franchise Tax Board to advertise that illegal immigrants can obtain an Individual Taxpayer Identification Number (ITIN). Focus on “advertise,” which I’ll return to in a few paragraphs.

Alejo’s bill would allow illegal immigrants to work legally, pay taxes, exempt them from deportation and, according to him, contribute to California’s economy.

But having an ITIN doesn’t mean that taxes will be paid. And it won’t erase any employment-related felonies they may have or might be committed in the process of alien employment like falsifying their I-9 forms, lying to employers about their immigration status or stealing identities.

Moreover, aliens are already quasi-officially non-deportable because of President Obama’s refusal to enforce immigration law. Senator Jeff Sessions, a Judiciary Committee member, recently completed an analysis of 2013 Immigration and Customs Enforcement data and found that 99.92 percent of illegal aliens and visa overstayers not convicted of a serious crime have been allowed to stay in the U.S., an administrative amnesty. And Governor Jerry Brown’s Trust Act reaffirms the White House’s non-deportation guidelines. Obama and Brown have unconstitutionally declared that all but the most heinous convicted criminal aliens won’t be sent home.

As currently defined by the Internal Revenue Service, an ITIN doesn’t grant legal work authorization, a provision that Alejo’s bill would allow, at least within California. The idea that Alejo’s legislation would encourage the Franchise Tax Board to “advertise” ITIN’s ready availability to aliens should sent chills up the backs of every American. The ITIN has been at the center of two financial scandals including the mortgage meltdown that nearly destroyed the global economy.

Beginning around 2004, ITINs were the main vehicle behind giving home mortgages to otherwise unqualified illegal immigrants. In their eagerness to cash in on what the financial industry called an emerging market, participating lenders tossed aside traditional creditworthiness standards, valid employment record requirements, and thorough background checks. Banks were delighted to rely on the flimsy ITIN. When thousands of borrowers couldn’t make payments on their too-good-to-be-true subprime, short-term balloon loans, the bottom fell out and Wall Street went into a tailspin.

Then, in 2013, the Treasury Inspector General for Tax Administration revealed that by filing tax returns using their ITINs, aliens receive more than $1.5 billion annually through Child Tax Credits.

The IRS, by authorizing ITIN distribution to aliens, aids and abets illegal immigrants. Section 8 USC 1324(a) states that any person who knowingly aids, abets, harbors or encourages aliens is guilty of a felony that carries a fine and/or imprisonment.  

Instead of promoting the ITIN, the IRS should limit them to citizens and legal immigrants. The revenue benefits that may accrue to the Treasury from ITIN holders who file returns don’t outweigh the risks associated with issuing them to illegal immigrants who might abuse the system.

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Joe Guzzardi is a Californians for Population Stabilization Senior Writing Fellow whose columns have been syndicated since 1987. Contact him at [email protected]