The One Big Beautiful Bill Act, enacted as Public Law 119-21 on July 4, 2025, introduces new section 4475,i which imposes a 1% excise tax on remittance transfers made after December 31, 2025. The provision was initially touted as one that “Makes America Win Again,” because it would affect only certain immigrants. As enacted, however, the excise tax applies equally to all individual taxpayers, whether US citizen, resident, or immigrant. It is unclear just how broadly section 4475 will be applied, but the Joint Tax Committee estimated that it will bring in nearly $10 billion of revenue over 10 years.
Key takeaways
Section 4475 either:
- Fully excludes remittance transfers sent from certain financial institutions or funded with a US debit or credit card, or
- Treats the transfer as fully taxable, with secondary liability for the transfer providers.
Definitions
Under new section 4475, an excise tax of 1% is levied on all “remittance transfers” made by a “sender” after December 31, 2025, via a “remittance transfer provider,” each of which are defined by cross reference to section 919(g) of the Electronic Funds Transfer Act.ii For this purpose:
- A “remittance transfer” is the “electronic transfer of funds” requested by a sender located in any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing to a designated recipient in a foreign country that is initiated by a “remittance transfer provider,” whether or not the sender holds an account with the remittance transfer provider and whether or not the remittance transfer is also an electronic fund transfer.iii
- An “electronic fund transfer” is any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument, or computer or magnetic tape so as to order, instruct, or authorize a financial institution to debit or credit an account.iv
- A “sender” is a consumer (further defined as a natural person under 15 USC 1693a(6)) who primarily for personal, family, or household purposes requests a remittance provider to send a remittance transfer to a designated recipient.v
- A “remittance transfer provider” is any person or financial institution that provides remittance transfers for a consumer in the normal course of its business, whether or not the consumer holds an account with such person or financial institution.vi
Operation and requirements
The section 4475 excise tax will operate via a requirement to withhold, which is imposed on the remittance transfer provider at the time of the remittance transfer. Remittance transfer providers are then required to remit the withheld excise tax to the Secretary of the Treasury on a quarterly basis, as directed by the Secretary. Failure to withhold the tax, if required, results in liability for the remittance transfer provider in the amount required to be withheld.
Unlike prior versions of the provision, there is no longer a requirement for remittance transfer providers to file and furnish information returns with respect to individuals from whom they withheld the excise tax. However, given the requirement to remit the withheld taxes, we expect that remittance transfer providers will be required to report the amounts withheld and remitted, either on a current form, such as the Form 720, Quarterly Federal Excise Tax Return, or a new form created for this purpose.
Section 4475 includes anti-conduit provisions. Specifically, section 4475(f) provides that for purposes of the anti-conduit rules, with respect to any multiple-party arrangements involving the sender, a remittance transfer is treated as a financing transaction in the sense of section 7701(l). In general, under the anti-conduit rules, any multiple-party financing transaction can be recharacterized as a transaction directly among two or more of the parties in order to prevent the avoidance of tax. Individuals who attempt to get around the excise tax by using intermediaries not subject to the provision may be subject to the anti-conduit provisions and could face penalties, such as the accuracy-related penalty under section 6662, and interest on the transaction.
Cash only—virtual currency not impacted
By its terms, section 4475 applies only to remittance transfers for which the sender provides cash, a money order, a cashier’s check, or other similar physical instrument, as determined by the Secretary of the Treasury, to the remittance transfer provider. As such, it clarifies that the excise tax is not applicable to transfers of virtual currency such as cryptocurrencies or stablecoins.
Exceptions for certain remittance transfers
Section 4475 specifically excepts from the excise tax any remittance transfer for which the funds being transferred are withdrawn from accounts held in or by certain financial institutions subject to Bank Secrecy Act reporting, and for those funded with a US issued debit card or credit card. For purposes of the exception, financial institutions are defined by cross reference to 31 USC section 5312(a)(2)(A) through (H), and include FDIC insured banks, commercial banks or trust companies, private bankers, an agency or branch of a foreign bank in the US, any credit union, a thrift institution, a broker dealer registered with the SEC, and a broker or dealer in securities or commodities. The exception would not apply to remittance transfers from which the funds being transferred are withdrawn from accounts held by money services businesses, despite the fact that they are subject to the Bank Secrecy Act.
Therefore, to the extent an electronic funds transfer is made from accounts at any of these financial institutions that is subject to the Bank Secrecy Act, or is funded with a US credit or debit card, the excise tax will not apply. Individuals should consider the extent to which they can make any remittances through these excepted financial institutions or fund the remittances using US issued credit or debit card.
Covered businesses
While section 4475 as enacted limits applicability via its exceptions, there are still a number of businesses that will be impacted. These include money transfer operators, digital payment providers, non-bank financial institutions such as foreign exchange service providers and remittance businesses, and certain retailers and businesses offering remittance services such as travel agencies, check-cashing businesses and convenience stores.
Businesses will want to ensure they understand whether they are affected by the provision or excepted as soon as possible, taking into account any guidance issued by Treasury and the IRS. Impacted businesses should prepare to implement the withholding requirements beginning January 1, 2026, as well as the related quarterly remittance requirements in order to ensure compliance with the requirements of section 4475 and avoid any secondary liability for the tax.
All individuals transferring funds are potentially impacted—no exceptions for US citizens or residents
Prior versions of section 4475 (e.g., section 112105 of the House Bill) had included exceptions for US citizens and nationals, whether via a tax credit, or via an exemption from withholding. Because the provision was initially touted as a way of addressing immigration, it was therefore expected that it would not apply to US citizens or nationals. For example, the Ways and Means Committee described the remittance transfer excise tax as one of the provisions that “Makes America Great Again” by “applying new fees on remittance payments from illegal immigrants to outside the U.S.”
Similarly, in H. Rept. 119-106 at 1779, House Republicans indicated that the remittance excise tax provision was based on the Committee’s belief “that the ability of non-citizens and non-nationals of the United States to send payments to individuals in other countries through the system of remittance transfers may encourage illegal immigration and lead to the overreliance of some jurisdictions on the receipt of such remittance flows.”
However, as enacted, section 4475 provides no exceptions for any individuals and impacts US citizens, residents, and immigrants alike, to the extent they make a remittance transfer that is covered. This means that the provision, despite having been reduced from an initial 5% tax to a now 1% tax, will bring in higher revenue than it otherwise would have given its broader applicability, a surprising turn in light of the rationale offered for its promulgation.
Admittedly, the provision will likely have the most impact on individuals who do not have the ability to obtain US bank accounts or other excepted accounts or to obtain US issued credit or debit cards with which to fund a remittance transfer. However, the provision could also impact US citizens or residents who send cash from accounts not otherwise excepted via remittance transfer providers to their own or their family’s foreign accounts. This could pull in, for example, parents who send funds to their children who are abroad, such as those studying abroad or traveling during a “gap” year, and US individuals who receive checks or other cash who want to deposit the funds into foreign accounts. Similarly, mobile workers and students who are in the US legally but who may not have excepted accounts or US issued debit or credit cards would be subject to the excise tax if they send money abroad, whether to their own accounts or to their family. And, perhaps as intended, the excise tax will be imposed on working-class immigrant households who send a portion of their earnings to support their family abroad.
Of note, individuals legally in the US who are otherwise covered by a tax treaty will remain subject to the excise tax given US tax treaties generally cover only income taxes and limited excise taxes (e.g., related to insurance).
Open questions and considerations
- Withholding, remitting and reporting: In light of the requirements to withhold and remit the excise tax on a quarterly basis, guidance will be needed to direct businesses as to how to withhold, how and when to remit the taxes, and whether any reporting will be required and, if so, where. Businesses will need time to process the guidance and implement the requisite withholding and reporting procedures.
- Amounts withheld in error: While there are no exceptions for individuals, section 4475 does provide exceptions for certain remittance transfers, such as those withdrawn from accounts subject to Bank Secrecy Act reporting and those funded with US-issued debit or credit cards. However, as enacted, section 4475 does not provide any mechanism for an individual to recover the excise tax in the case that it is withheld in error, and there is a risk that a remittance transfer provider may withhold the excise tax in error, particularly given concerns around secondary liability. Further, the fact that there is no longer any individual reporting via information returns as to what was withheld and from whom makes this prospect even riskier for individuals. For example, a money transfer operator may incorrectly withhold on a transaction funded with a US-issued debit card. In this case, there does not appear to be a mechanism for the individual to recover the incorrectly withheld tax, other than by somehow attempting to recover it from the remittance transfer provider directly. It would be helpful if the Secretary issued guidance to address these situations so that individuals have a process for requesting erroneously withheld amounts back, whether from the remittance transfer provider or from the IRS (e.g., via their individual return).
Conclusion
New section 4475 imposes a new excise tax on cross-border transfers initiated in the US and sent abroad via remittance transfer providers, regardless of whether the sender or the recipient is US or foreign. While the provision is expected to yield approximately $10 billion over 10 years, it creates withholding and remittance requirements for businesses, and financial burdens on working-class households and others who send money to their families abroad or to their foreign accounts, even if the senders are US citizens or residents.
Impacted businesses will need to prepare for the new withholding and remittance requirements, which have to be implemented timely enough to be tested and deployed by January 1, 2026. Individuals will want to plan for this new excise tax and determine whether they can find other means to transfer money abroad.
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i All references are to the Internal Revenue Code unless otherwise indicated.
ii 15 USC sec. 1693o-1(g). The laws applicable to remittance transfers are generally found in Titles 12 and 15 of the United States Code (USC) and the regulations thereunder.
iii See 15 U.S.C. sec. 1693o-1(g)(2)(A).
iv See 15 U.S.C. sec. 1693a(7).
v See 12 CFR sec. 1005.30(g).
vi See 15 U.S.C. sec. 1693o-1(g)(3).
