Can a Government Shutdown affect child tax credits payments?

In September, when the federal government was barreling towards a shutdown the White House advised that federal agencies begin to plan for a lapse in funding. For many, this involved updating their lapse in allocations “contingency plans,” which outline which functions will continue to be carried out during a government shutdown.

While the September shutdown was averted, lawmakers only passed a spending bill through 3 December, meaning that once again agencies are preparing for possible closure.

Senate Minority Leader Mitch McConnell has said that the public should not worry about a government shutdown and that he is confident he and Senate Majority Leader Chuck Schumer will reach a deal. However, some Republicans have said publically this week that they want to drive the government into a shutdown to avoid the implementation of vaccine mandates.

As of Thursday afternoon on 2 December, it seems that the House of Representatives has reached a deal to avert a shutdown, but whether it will be able to garner the support of sixty Senators remains an open question.

What does the plan say about the payment of child tax credit?

Based on the guidance published by the IRS in their contingency plan, it does not seem likely that the December Child Tax Credit payment will be impacted.

There are specific programs and tax credits that Congress provides funding for through the fiscal year, ending on 30 September 2022. Other programs, like Social Security, are paid out of an “indefinite appropriation, and therefore [the IRS] may continue making these payments during a shutdown.”

Similarly, the funds needed to distribute the Child Tax Credit were appropriated under the American Rescue Plan and do not run out after this fiscal year. Rather, the funding for this benefit was allocated across fiscal years since the payments were two be made in two different years. The IRS states that a certain subset of its workforce will be kept on to ensure that the distribution of payments is not interrupted.

Will the Child Tax Credit be extended?

Initially, Democrats had proposed a five-year extension to the structure of the credit. However, more conservative members of the Democratic caucus had objected. In the Build Back Better bill passed by the house, a one-year extension was included. However, with strong opposition in the Senate, the fate of the bill stands on shaky ground.

There is evidence that the payments have helped to reduce hardship among families with children. For example, in her Senate testimony on Monday 29 November, Treasury Secretary Janet Yellen told committee members that a profound decrease in food insecurity had been tracked. Sec. Yellen referred to this outcome as "a profound economic and moral victory for the country."