In just under two weeks, the House of Representatives introduced, modified and passed the One Big, Beautiful Bill of 2025 (the “House Tax Bill”). This Memorandum addresses a new proposed tax on certain persons sending money outside the United States (the “Remittance Proposal”). For a broader summary of the initial version of the House Tax Bill, please see our Memorandum. Among other potential changes under the House Tax Bill, the Remittance Proposal would impose a new 3.5% excise tax on certain outbound money transfers.
The Remittance Proposal
The Remittance Proposal, if enacted, would generally require certain senders to pay an excise tax equal to 3.5% on electronic transfers of funds to recipients outside of the United States. In the initial version, the excise tax was 5%, but this was reduced via a procedural amendment to 3.5%.
For purposes of the Remittance Proposal, the terms “sender,” “remittance transfer,” “remittance transfer provider” and “designated recipient” are defined by the Electronic Fund Transfer Act. By cross-referencing these defined terms, the Remittance Proposal would apply to money transfers sent to persons located outside the United States and sent through any person or financial institution that provides remittance transfers for consumers in the normal course of its business.
Remittance transfer providers would be required to collect this amount and deposit it with the Internal Revenue Service (“IRS”) on a quarterly basis. Remittance transfer providers would have secondary liability for the failure to collect this amount.
Verified U.S. citizens and nationals who send remittances via qualified remittance transfer providers would not be subject to this tax. For this purpose, a “qualified remittance transfer provider” means a remittance transfer provider that enters into a written agreement with the IRS, under which the provider agrees to verify the status of senders as U.S. citizens or nationals.
A sender who is subject to this tax and who has a social security number (and if married, whose spouse has a social security number) would be entitled to a refundable tax credit. In other words, the excise tax can offset a U.S. taxpayer’s other federal income tax liability or be refunded if the taxpayer does not have any net U.S. federal income tax liability that year.
Legal Tokens
Since its initial proposal, the Remittance Proposal has come under scrutiny by financial services firms. This pushback is likely reason for the reduction from 5% to 3.5%.
Since this tax applies to payments sent via a remittance transfer provider, it appears true peer-to-peer transactions are not subject to this tax. The term remittance transfer provider is broad and include both financial institutions and non-financial institutions. This generally picks up money transmitters, banks and other intermediaries, including digital assets intermediaries, all of which could be impacted if the Senate also passes Remittance Proposal.
Seward & Kissel LLP actively monitors tax changes and their impact on the financial services industry.
