H.R. 3715 — New IDEA Act

This section disallows deductions under IRC §162(a) for any wages paid to or on behalf of an unauthorized alien (as defined in INA §274A(h)(3)), effective for taxable years beginning after December 31, 2024. (Wages are defined broadly to include all remuneration for employment, including the cash value of non-cash benefits.) The section provides a safe harbor from disallowance for employers participating in E-Verify (i.e., the DHS electronic employment eligibility verification system) who obtain program confirmation of the employee's identity and work authorization. (Thus, compliant E-Verify users may continue deducting such wages.) It also places the burden of proof on the Treasury Secretary to show wages were paid to unauthorized aliens and prohibits audits of taxpayers solely based on such deductions. Additionally, the section (1) extends the limitations period under IRC §6501 to six years for assessing taxes related to improper deductions claimed under this provision; (2) authorizes use of Form I-9 documentation (i.e., employment eligibility verification forms) for enforcement of the new tax rule; and (3) requires the Social Security Commissioner, DHS Secretary, and Treasury Secretary to share information—such as no-match letters and earnings suspense file data—to identify unauthorized aliens and support enforcement. Finally, the section authorizes Treasury disclosure of employer and employee taxpayer identity information to SSA and DHS for enforcement and updates related recordkeeping requirements. These provisions generally take effect on enactment, except as noted above.

This section makes the E-Verify program permanent by striking its sunset provision (previously in section 401(b) of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996) and expands voluntary employer participation nationwide to include verification of all current employees (in addition to new hires, recruitment, and referrals). (As background, E-Verify is an internet-based system operated by the Department of Homeland Security that allows enrolled employers to confirm newly hired employees' identity and work authorization by checking Department of Homeland Security and Social Security Administration databases.) It further (1) establishes a rebuttable presumption that participating employers who receive employment eligibility confirmation for their employees have not violated INA §274A(a)(2) (8 U.S.C. §1324a(a)(2)) regarding continuing employment of unauthorized aliens; (2) permits elections to apply to all hiring/recruitment/referrals and/or all current employees, including on a state- or location-specific basis; (3) authorizes employers to make job offers conditional on final E-Verify confirmation; and (4) modifies program procedures to cover continued employment verification and adjust inquiry timing requirements for previously hired individuals.