IRS Proposes Regulations Implementing 1% Remittance Excise Tax

April 14, 2026

Un-Banked Tax 101: The IRS Proposes Regulations Implementing the 1% Remittance Excise Tax

Mark Leeds, Brian Montgomery, Craig Saperstein Pillsbury Winthrop Shaw Pittman LLP + Follow Contact LinkedIn Facebook X Send Embed

President Trump has famously said that “‘tariffs’ is the most beautiful word to me in the dictionary.” [1] As financial service firms know, the Administration’s tariff policy has not been limited to non-U.S. goods and services. The President’s signature legislation, the One Big Beautiful Bill Act (PL 119-21), enacted a one percent (1%) excise tax on certain remittance transfers initiated with cash and money orders, beginning in 2026. [2] And while remittance senders bear the tax in the first instance, U.S. remittance transfer providers are required to collect the tax, remit it to the Internal Revenue Service (IRS) and bear the tax if it’s not properly collected. The IRS, recognizing the importance of the excise tax to the Administration’s immigration enforcement initiatives, [3] has just proposed regulations for remittance service providers to use to comply with the new rules.

The proposed regulations are effective for calendar quarters beginning after the proposed regulations are published as final regulations. Remittance transfer providers can rely on the new rules earlier, provided that they do so in a consistent manner.

Overview of the Remittance Tax Statute
The remittance tax uses several key phrases in implementing the excise tax:

• Remittance Transfer
• Remittance Transfer Provider
• Cash, Money Order, Cashier’s Check and Similar Physical Instrument
• Noncash Remittance Transfers While the statute addresses certain of these terms, its brevity leaves open a significant number of questions, certain of which are addressed by the proposed regulations. We explore the new rules below.

Taxable Remittance Transfers
Code § 4475(c)(1) uses the definition in section 919(g) of the Electronic Funds Transfer Act (EFTA) to define a remittance transfer as an electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider. The definition applies regardless of whether the sender holds an account with the remittance transfer provider. The proposed regulations pick up this definition. [4] The excise tax rules also include exceptions for remittances of $15 or less and remittances to fund the purchase of securities and commodities. The tax attaches at the time that the remittance transfer is initiated or the sender pays the remittance transfer provider. [5] Remittance transfer providers may not initiate excise tax refund claims for any taxable remittances that are refunded by the service provider.

The proposed regulations limit the definition of taxable remittances to transactions in which the sender is a natural person [6] who requests a remittance transfer for personal, family or household purposes. [7] A designated recipient is proposed to be defined as an authorized recipient at a location in a foreign country. [8] The preamble to the proposed regulations makes clear that “foreign country,” for this purpose, does not include Puerto Rico. Most remittance transfer providers already separate consumer businesses from commercial businesses for EFTA purposes. The preamble states that this business line division can be used for purposes of complying with the new excise tax provisions, as well.

The proposed regulations also address the amount of the taxable remittance. The proposed regulations include bonuses paid by remittance transfer providers in the taxable base. The taxable base is reduced by service fees, state taxes (currently, only Oklahoma imposes a tax on remittances), and goods and services not transferred to the recipient. [9]

Remittance Transfer Providers
Code § 4475(c)(1) uses the definition in section 919(g) of the Electronic Funds Transfer Act (EFTA) to define a remittance transfer provider as any person that provides remittance transfers for a consumer in the normal course of its business. The preamble to the proposed regulations makes clear that agents of remittance transfer providers are not required to collect the excise tax. The preamble and proposed regulations state, as an example, that a grocery store that acts as an agent to a remittance transfer provider is not required to collect the tax. In our experience, however, contracts between the customer interfacing agents and the remittance transfer providers require the agents to collect all fees, including applicable taxes, that are imposed on the remittance. Accordingly, in practice, agents may end up assuming derivative liability for collecting the tax and transferring the amount collected to the remittance transfer provider. The IRS specifically refused to adopt the EFTA exception for remittance transfer providers who provide 500 or fewer remittances.

Cash Initiation Requirement
Code § 4475(c) limits the excise tax imposition to remittances initiated by “cash, a money order, a cashier’s check, or any other similar physical instrument.” The proposed regulations contain a definition of cash that would exclude cryptocurrencies and other digital assets but would include currencies issued by foreign governments. [10] The proposed regulations would treat remittances initiated with traveler’s checks as taxable remittances. [11]

The Noncash Remittance Exception
Code § 4475(d) excludes remittances initiated with funds withdrawn from accounts held at financial institutions and through debit cards and “credit cards issued in the United States” from the excise tax. The proposed regulations make clear that settlement of a payment obligation under a money order, cashier’s check or traveler’s check is not a bank account withdrawal. Concomitantly, if the remittance transfer provider cashes a business or personal check made payable to the sender and the funds are used to initiate the remittance, the remittance is taxable. If, however, the sender writes a check to initiate the remittance, the proposed regulations state that no tax is due. The proposed regulations also exempt remittances initiated through credit cards “regardless of the country in which debit card or credit card was issued.” Remittances initiated with “general-use prepaid cards” are also exempt from the excise tax.

Anti-Avoidance Rules
Congress was concerned that taxpayers would seek to avoid the 1% excise tax through conduit transactions. In order to prevent such evasion, Code § 4475(f) incorporates the anti-conduit rules of Code § 7701(I) into the application of the remittance tax rules. The proposed regulations implement this rule by providing that “all facts and circumstances” will be taken into account in determining whether a transaction or series of transactions have been undertaken to avoid the excise tax. In one example, the IRS states that purchase of a general-use prepaid card sold by the remittance transfer provider to a sender who then (or through a relative) “immediately initiates a remittance transfer” with such card will be treated as a taxable remittance transfer. [12] Similarly, the preamble states that remittance transfer providers that accept store gift cards, gift certificates, or loyalty cards for remittances could be treated as having paid cash for such cards and then having accepted the cash for the remittance.

Takeaways
The preamble to the proposed regulations estimates that the size of affected transactions ranges from $290 to $740 and that taxable transactions mostly will be undertaken by unbanked immigrants. The proposed regulations whittle down the universe of possibly affected transactions by excluding international credit cards and exempting check and general-use prepaid card purchases of remittance transfers (except where such prepaid cards are purchased explicitly to avoid taxation). And most importantly, while directly silent, digital asset transactions should be exempt from tax.

[1] https://economictimes.indiatimes.com/news/international/global-trends/most-beautiful-trump-says-tariff-is-his-fifth-most-favourite-word-what-are-the-four-others/articleshow/120314018.cms

[2] Section 4475 of the Internal Revenue Code of 1986, as amended.

[3] As Mark Krikorian of the Center for Immigration Studies has observed, “One of the main reasons people come here is to work and send money home. If that’s much more difficult to do, it becomes less appealing to come here.” Hussein and Janetsky, Funds from migrants sent back home help fuel some towns’ economies. A GOP plan targets that (Associated Press May 14, 2025).

[4] Prop. Treas. Reg. § 49.4475-1(b)(4)(i).

[5] Prop. Treas. Reg. § 49.4475-1(c)(1). It’s irrelevant as to whether the recipient actually receives the remittance.

[6] Prop. Treas. Reg. § 49.4475-1(b)(2).

[7] Prop. Treas. Reg. § 49.4475-1(b)(6).

[8] Prop. Treas. Reg. § 49.4475-1(b)(3).

[9] Prop. Treas. Reg. § 49.4475-1(d)(3).

[10] Prop. Treas. Reg. § 49.4475-1(b)(1).

[11] Prop. Treas. Reg. § 49.4475-1(d)(1).

[12] Prop. Treas. Reg. § 49.4475-1(c)(4).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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