A highly specialized bit of advice can be gleaned from a criminal case now in the federal courts in Pennsylvania: If you want to become a naturalized citizen, don’t rent your kids out for tax purposes.
Lucas Hernandez-Torres, a 47-year-old green card holder, learned this lesson the hard way when he was charged with defrauding the United States with "unlawful procurement of naturalization".
What he had done, before filing a fraudulent naturalization application, was to get caught while manipulating his tax filings illegally — in both traditional and unusual ways.
Using a standard technique all too often employed by low-income Americans, he inflated his earnings in order to secure greater benefits from (apparently) the earned income tax credit (EITC) program. In a certain range of incomes, the increase in income increases the EITC tax refund for persons whose incomes are such that they pay no federal income tax, but they do get cash refunds.
Torres, who may not make much money, but apparently is a tax whiz and the father of lots of children, also took the unusual step of allowing other taxpayers to claim credits for "certain of his dependent children, the claiming of which would incur no financial benefit," to quote the criminal information in the case. (The PACER file is 3:15-cr-00032-RDM.)
The phrase "the claiming of which would incur no financial benefit" puzzled me at first until I remembered that the formula for the EITC calls for more money if there are three kids rather than two, but no more benefits for four kids than for three.
So Torres must have four or more eligible children. How he balanced the utility of the fourth, fifth, and perhaps other children in the additional child tax credit program, which can be for as much as $1,000 each, as opposed to renting the same child to another taxpayer is a tax consultant’s puzzle that may never be solved. We know he got thousands of dollars in cash for the rentals.
If we want data on the exact tax fraud techniques used by Torres and his co-conspirators, we are out of luck. As happens so often in criminal cases, the charging document in this case is designed to describe the alleged crime in sufficient detail to jail the bad guy, but often leaves out other data that would help the observer understand the case. In this instance, for example, the number of children, and their nationality, is not mentioned, nor are the specifics of the tax fraud.
Let’s step back a bit and look at this case in both the immigration policy and government finance contexts.
Immigration. If some worry, as I do, about too many low-income families arriving with too many children, the Torres case is a good example of what our immigration process should not produce.
In this case, not only is there a worker, and I guess a spouse, and at least four children, their income level is low enough so that the tax system, working legally, gives the family a subsidy through EITC.
If that were not bad enough, Torres illegally, overstated his income to make that subsidy larger.
And then, in yet another fraud, he helped other low-income families inflate their refunds by lending them his "excess" children for EITC purposes.
Even setting aside the criminal behavior, the immigration system should discourage admitting people with profiles like that of the Torres family.
Finances. Though I applaud the proceeding against Torres, I have to note the extreme amount of governmental resources required in this, and presumably other similar cases. The tax frauds took place regarding the 2010-2014 filings; the case is now three and a half years old; some 57 documents were filed in the case; and much time was spent on it by two sets of lawyers, both federally funded, the prosecution and the defense. All this was over the loss of some $50,000 in tax revenues.
The same amount of federal time spent on a fraudulent real estate transaction based, for instance, in Manhattan, might have dealt with 1,000 times as much money.
Locale. Throughout this process Torres lived in Hazleton, Pa., population 24,659. That is the hometown of once-Mayor Lou Barletta, who famously tried to use a local ordinance to thin the town’s illegal alien population, rode that controversy to a GOP seat in the U.S. House of Representatives, and is now the Republican candidate for U.S. Senate, running against incumbent Sen. Bob Casey (D).
Torres is just the kind of alien that Barletta was trying to chase out of town.