Q Will the new 1% remittance transfer tax added by The One Big Beautiful Bill Act (OBBA) affect my bank?
A This largely depends on whether the bank accepts remittances paid for in cash or by negotiable instruments. Under the One Big Beautiful Bill Act (OBBBA), effective January 1, 2026, a 1% excise tax will be imposed on certain cross-border remittance transfers. This tax applies only when the customer funds the transfer using cash, money orders, cashier’s checks, or similar physical instruments.
Transfers funded by debit or credit cards issued in the U.S., and withdrawals from accounts at federally regulated financial institutions (e.g., FDIC-insured banks, credit unions) are not subject to this tax.
If a sender initiates a remittance transfer using cash, the bank must:
- Disclose this tax on the prepayment disclosure when one is required by §1005.31,
- Collect the tax from the sender at the time of the transaction, and
- Remit the tax to the IRS.
These requirements apply to all customers and non-customers.
Important reminder: If the bank fails to collect the tax, it becomes secondarily liable for the payment.
What is unclear until the IRS issues regulations:
- Does this law incorporate the de minimus $15 requirement found in the definition of “Remittance transfer” at §1005.30(e)(2)(i) of Regulation E?
- Does this law incorporate the 500 de minimis requirements under the definition of “normal course of business” in §1005.30(f)(2)(i) of Regulation E?
- When the cash is deposited into an account (even a general ledger account) as part of the bank’s internal procedure, is the transaction exempt from the tax requirements?
Banks may need to consult legal or tax counsel on these issues until regulatory guidance is provided.
For more information, contact ABA’s Leslie Callaway.
Please note that this section is not a substitute for professional legal advice.
