# SSR 78-18: SSR 78-18: Rescinded 1981

> Federal · Rulings · Rescinded

URL: https://www.frixlaw.com/law-library/statutes/SSA_SSR_SSI_SSR_78_18

## Section

- **Citation:** SSR 78-18
- **Heading:** SSR 78-18: Rescinded 1981
- **Jurisdiction:** Federal
- **Kind:** Rulings
- **Status:** Rescinded
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Social Security Rulings / SSI / Income / SSR 78-18

## Text

SSR 78-18

PURPOSE:

To establish policy on treatment of earned income tax credits (or
refunds) provided under Section 43 of the Internal Revenue Code (IRC) of
1954, as amended, when considering eligibility for, and the amount of,
benefits under the supplemental security income (SSI) program.

CITATIONS (AUTHORITY):

Sections 204(a) and 209(b) of Public Law 94-12; Section 2, paragraphs
(c), (d), (f), and (g), of Public Law 94-164; Sections 401(c) and 402 of
Public Law 94-455; Section 401 of Public Law 92-603; Section 212(c)(2) of
Public Law 93-66; Regulations No. 16, Sections 416.1112, 416.1201,
416.2025, and 416.2050; and Congressional Record for December 17, 1975, at
page S 22468.

PERTINENT HISTORY:

Section 204(a) of Public Law 94-12 (Tax Reduction Act of 1975)
established a new Section 43 of the Internal Revenue Code of 1954 to
provide a tax credit of 10 percent of such earned income, including
self-employment income, as does not exceed $4,000 (or a maximum credit of
$400) for the taxable year. The amount of the credit is phased down to
zero as earned income (or adjusted gross income, if greater) increases
from $4,000 to $8,000. Tax credits under Section 43 of the IRC were
originally available only for one year; however, this period has been
twice extended so that the credits are now available for taxable years
beginning after December 31, 1974, and ending before January 1, 1979. Any
cost incurred in refunding the tax credits is met from general funds of
the U.S. Treasury.

Public Law 94-12 was silent with respect to the treatment of these earned
income credits by public assistance programs. However, Section 2(d) of
Public Law 94-164, as amended by Section 402 of Public Law 94-455,
provides that, for taxable years ending after December 31, 1975:
January 1, 1979. Any
cost incurred in refunding the tax credits is met from general funds of
the U.S. Treasury.

Public Law 94-12 was silent with respect to the treatment of these earned
income credits by public assistance programs. However, Section 2(d) of
Public Law 94-164, as amended by Section 402 of Public Law 94-455,
provides that, for taxable years ending after December 31, 1975:

"Any refund of Federal income taxes made to any individual by reason of
section 43 of the Internal Revenue Code of 1954 (relating to earned income
credit) shall not be taken into account as income or receipts for purposes
of determining the eligibility, for the month in which such refund is made
or any month thereafter of such individual or any other individual for benefits or assistance, or the amount or extent of benefits or
assistance , under any Federal program or under any State or local
program financed in whole or in part with Federal funds, but only if
such individual . . . is a recipient of benefits or assistance under
such a program for the month before the month in which such refund is
made." (Emphasis added.)

Inasmuch as Section 416.1112 of Regulations No. 16 already provides for
the exclusion of income tax refunds from income for SSI purposes, the tax
credits are excludable from the income of any individual already on the
rolls; they would have no effect on such a recipient's Federal SSI
payments. In addition, because the definition of income is the same for a
deemor as for an eligible individual, the tax credits are also excluded
from the income of an individual whose income would be deemed to a
recipient or claimant; i.e., an essential person, an ineligible spouse, or
(if the claimant or recipient is a child) a parent or spouse of parent.
such a recipient's Federal SSI
payments. In addition, because the definition of income is the same for a
deemor as for an eligible individual, the tax credits are also excluded
from the income of an individual whose income would be deemed to a
recipient or claimant; i.e., an essential person, an ineligible spouse, or
(if the claimant or recipient is a child) a parent or spouse of parent.

Section 2(d) of Public Law 94-164 provides for exclusion of the earned
income tax credit in determining eligibility or the amount or extent of
benefits or assistance "under any Federal program or under any State or
local program financed in whole or in part with Federal funds," but only
if the individual is a recipient of such assistance for the month prior to
the month in which the refund is made. Thus, with respect to an individual
initially applying for Federal SSI benefits, an earned income tax credit
received in the month of application would clearly not be excluded from
income in determining eligibility and payment amount. Even if an
individual's actual income tax is less than the amount refunded under
Section 43, the exclusion can apply since some taxes (e.g., FICA) would
have been paid irrespective of any liability for a personal income tax,
and Congress has clearly labeled the credit allowed as a "refund of
Federal income taxes." Some questions do arise, however, with respect to
treatment of these credits in relation to individuals who receive various
types of State supplementary payments, but do not receive a Federal SSI
payment, for the month prior to receipt of the refund.
tive of any liability for a personal income tax,
and Congress has clearly labeled the credit allowed as a "refund of
Federal income taxes." Some questions do arise, however, with respect to
treatment of these credits in relation to individuals who receive various
types of State supplementary payments, but do not receive a Federal SSI
payment, for the month prior to receipt of the refund.

Pursuant to Section 416.2025 of Regulations No. 16, Federal countable
income rules are used when a State optional supplement program is
administered by the Federal Government. Thus, whatever decision is made
with respect to a Section 43 earned income credit for purposes of a
Federal SSI payment would be equally valid for a federally administered
optional supplement, and receipt of such a supplement for the month prior
to receipt of a Section 43 credit, even if no Federal payment were
involved, would permit the exclusion of a Section 43 credit from income.
The effects of such a credit on a program of optional supplementation
which is administered by a State would appear to be a matter for
consideration solely by the State. It is not taken into consideration for
purposes of a Federal determination of eligibility.

The more difficult questions arise with respect to mandatory minimum
supplementary payments since, even where such payments are federally
administered, Section 416.2050 of the regulations requires the application
of State countable income rules
to be a matter for
consideration solely by the State. It is not taken into consideration for
purposes of a Federal determination of eligibility.

The more difficult questions arise with respect to mandatory minimum
supplementary payments since, even where such payments are federally
administered, Section 416.2050 of the regulations requires the application
of State countable income rules. The issues here are whether such
benefits, when paid by the Secretary on behalf of a State are financed at
least in part by Federal funds and whether State administration of
mandatory supplements constitutes a "Federal program." Where a State's
liability for payment of the benefits is limited by Section 401 of Public
Law 92-603 (the "hold-harmless" provision which is made applicable to the
mandatory supplement pursuant to Section 212(c)(2) of Public Law 93-66),
such benefits may be considered to be financed in part by Federal funds.
Where this "hold harmless" limitation does not apply, it can still be
argued that Federal administration of a State's mandatory supplementation
program constitutes a "Federal program." Moreover, even a
State-administered mandatory supplement may be considered a "Federal
program" since the supplements are mandated by a Federal statute, the
rules for such a program are prescribed by the Federal Government, and
failure to comply with Federal requirements can result in loss of Federal
Medicaid funds. This interpretation has the advantage of providing similar
treatment of SSI recipients regardless of whether mandatory
supplementation is administered federally or by a State.

POLICY DIRECTIVE STATEMENT:
y a Federal statute, the
rules for such a program are prescribed by the Federal Government, and
failure to comply with Federal requirements can result in loss of Federal
Medicaid funds. This interpretation has the advantage of providing similar
treatment of SSI recipients regardless of whether mandatory
supplementation is administered federally or by a State.

POLICY DIRECTIVE STATEMENT:

An earned income tax credit under the provisions of Section 43 of the
Internal Revenue Code of 1954, as amended, is excluded from the income of
any SSI claimant or recipient for a taxable year which begins after
December 31, 1974, and ends before January 1, 1976. For taxable years
ending after December 31, 1975, an earned income tax credit under Section
43 of the Internal Revenue code is excluded from income only if, for the
month prior to the month in which he or she receives the credit, the
individual receives a Federal SSI benefit, a federally administered State
supplementary payment (either mandatory or optional) or a
State-administered mandatory supplement. Receipt of a State-administered
optional supplementary payment is not material to the excludability of an
earned income credit. Section 43 earned income credits are excluded at all
times from income to be deemed to any SSI claimant or recipient. However,
under existing rules, an earned income credit is countable as a resource
to the extent that it is retained until the first day of the quarter
following the quarter of its receipt.

To be eligible for an earned income tax credit (refund), an individual
must have earned income not in excess of $8,000 for a taxable year
beginning after December 31, 1974, and ending before January 1, 1979. He
or she must also maintain a household in the United States for
himself/herself and at least one dependent child as defined for Federal
income tax purposes. Whether or not any income tax is payable, such an
individual must file an income tax return in order to obtain the credit.
in excess of $8,000 for a taxable year
beginning after December 31, 1974, and ending before January 1, 1979. He
or she must also maintain a household in the United States for
himself/herself and at least one dependent child as defined for Federal
income tax purposes. Whether or not any income tax is payable, such an
individual must file an income tax return in order to obtain the credit.

DOCUMENTATION:

Under all circumstances, verification is required to prove that a
reported receipt of cash was an earned income credit. For earned income
tax credits received by an SSI claimant for a taxable year ending after
December 31, 1975, the individual's allegation of a receipt of a Federal
SSI benefit, federally administered State supplementary payment, or
State-administered mandatory supplement for the preceding month must be
verified.

FURTHER INFORMATION:

If the SSI recipient who receives an earned income tax credit is blind
and has had social security taxes (i.e., FICA and/or self-employment)
excluded from SSI countable income as a work expense, the person continues
to qualify for the mandatory payroll tax withholding exclusions as work
expenses even though he or she may receive a full tax credit.

In August of 1976, only 2.9 percent of all SSI recipients had earned
income. Of these, the number who also maintain households for dependent
children (as defined for Federal income tax purposes) is minimal.
Therefore, the tax credit provisions of Section 43 of the Internal Revenue
Code should not have significant impact on the SSI population.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/SSA_SSR_SSI_SSR_78_18. Check the current official text before relying on it. Not legal advice.