Implications of the Remittance Tax in the GOP Reconciliation Bill

Congress recently passed its reconciliation bill, colloquially referred to as the One Big Beautiful Bill Act (OBBBA), with the President signing it into law on July 4, 2025. The bill contains a new excise tax on international remittance transfers. While this provision went through multiple variations, the version that ultimately was included in the bill ended up being less draconian than feared. However, the new tax may still cause some wrinkles for taxpayers.

Why Introduce a Remittance Excise Tax?

The remittance tax is expected to generate a substantial amount of revenue for the federal government due to the large amount of money sent overseas from the US yearly. For example, in 2023, over $23 billion was sent from the United States to India alone. Original estimates for a 3.5% excise tax put the revenue generation at just under $26 billion over ten years. The 1% tax, while greatly reduced, is still estimated to generate just under $10 billion in revenue over ten years.

Who Does it Impact?

Potentially, everyone. Any individual who is transferring funds out of the United States could be subject to the excise tax, including citizens, green card holders, visa holders, and non-resident aliens.

When Does it Apply?

In addition to reducing the excise tax amount, the final version of the bill also changed which transfers will be subject to the tax. Early versions would have applied the tax to all transfers made, including any electronic transfer. The final version includes language limiting the applicability of the excise tax to transfers of cash, money orders, cashiers’ checks, and “similar physical instruments,” instead of all transfers. (Note: this means that cryptocurrency and stablecoin transfers are not considered remittance transfers subject to the tax.)

Is There Any Relief?

While the earlier variations contained relief for U.S. citizens, the final version only contains limited relief if the remittance tax applies. The remittance tax will not apply to any transfer where the funds are withdrawn from an account held at a financial institution that is subject to reporting under the Bank Secrecy Act (BSA). In general, traditional banks, credit unions, and investment firms are all subject to BSA, as well as some money transfer companies (i.e., Western Union) and other businesses that handle large financial transactions. (Note: while companies like Western Union are subject to the BSA, they typically do not hold funds that can be withdrawn, making most transfers through these companies subject to the excise tax.) Additionally, the OBBBA excludes any transfers funded by a debit or credit card issued in the United States from the tax, but prepaid card reloads and transfers made from such cards are taxable remittances.

An early version of the provision would have provided relief to United States citizens and Nationals in the form of a refundable credit for any tax paid. However, the final version did not include any provisions for refundability or credit for U.S. citizens, nationals, or any other category of transferor, if the remittance tax is imposed. The bill either excludes certain transfers from withholding entirely due to their funding source or the transfer is fully taxable. The provision also imposes a secondary liability on the institution servicing the fund transfer. If appropriate withholding is not done upon transfer, the service provider is then liable for the tax.

Potential Issues Facing Taxpayers

The excise tax has many drawbacks, including concerns about the interaction between the excise tax and treaties (as treaties only apply to income or estate tax), the effect on students and highly talented individuals under specialized visas, and the impact on immigration. The remittance tax is also likely to be an economic deterrent for entities, both for foreign business expansion into the United States and for United States residents who operate businesses overseas.

Lingering Questions

The remittance tax will be effective for transfers made after December 31, 2025, and there are still many unanswered questions about the application of the tax. The emphasis in the legislation on physical funds may mean that some digital payments will not be subject to the tax. For instance, while money orders made via companies such as Western Union seem almost certain to be subject to the tax, it is unclear if that will be true if the funds are sent via a mobile application. The enforcement and remittance of the withholding is also yet to be clarified, leaving the service providers with more questions than answers.  

Concerned about the impact of this tax on yourself or your business? Reach out to your EisnerAmper tax advisor to discuss the effect and potential planning or amelioration.