One Big Beautiful Bill Act imposes 1% excise tax on cross-border remittances

Executive summary

The One Big, Beautiful Bill Act of 2025, signed into law on July 4, 2025, introduces a 1% excise tax on remittance transfers from senders in the U.S. to recipients in foreign countries. Effective for transfers made on Jan. 1, 2026, and thereafter, the new tax must be collected by remittance transfer providers and remitted quarterly to the IRS.

Certain transfers are exempt from the excise tax, including those funded through withdrawals from accounts held in or by certain financial institutions or made using debit or credit cards issued in the U.S. The legislation also includes anti-conduit provisions under section 7701(l) to prevent circumvention of the excise tax through the use of indirect payment routes.

New excise tax on foreign remittances

New section 4475 imposes a 1% excise tax on the amount of each remittance transfer from a sender in the U.S. to a person located in a foreign country, through a remittance transfer provider. The tax applies to remittance transfers made after Dec. 31, 2025, and represents a significant policy development aimed at improving tax compliance and oversight in the remittance sector, while balancing concerns about consumer access and financial inclusion. The tax has broad implications for individuals and businesses involved in international money transfers and applies to remittance transfers funded by cash, money orders, cashier’s checks or other similar physical instruments.

Although the tax is imposed on the sender, it must be collected and remitted quarterly by the remittance transfer provider. If the tax is not paid by the sender at the time the transfer is made, then the tax is to be paid by the remittance transfer provider. This is known as secondary liability.

Section 4475 defines several terms through reference to the Electronic Fund Transfer Act of 1978, which was enacted to protect consumers engaging in electronic fund transfers, establishing their rights and the responsibilities of financial institutions. Under new section 4475, a remittance transfer means an electronic transfer of funds by a sender in the U.S. to a recipient located in a foreign country. Likewise, a remittance transfer provider is defined as 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.

Excise tax limited to cash and similar instruments

The tax applies only to a remittance transfer for which a sender provides cash, a money order, a cashier’s check or any other similar physical instrument to the remittance transfer provider. The tax does not apply to any remittance transfer for which the funds being transferred are withdrawn from an account held in or by a financial institution subject to certain Bank Secrecy Act requirements. In addition, the tax does not apply to remittance transfers funded by a debit or credit card that was issued in the U.S. To address potential avoidance, anti-conduit rules under section 7701(l) apply, allowing for the recharacterization of multiple-party financing transactions as a transaction directly between two or more parties.