The Senate Finance Committee’s version of the tax reconciliation bill, released on June 16, 2025 (the Bill), would impose a 3.5% excise tax on a “remittance transfer” after December 31, 2025. The Bill relaxes some aspects of the House-passed provision by excluding transfers from accounts at banks and other financial institution as well as eliminating the tax when debit and credit cards issued in the United States are used for the transfers (see Tax Alerts 2025-1108 and 2025-1116 for details on the House-passed version).

The Bill would add three sections to the Code:

• IRC Section 4475, which would impose the excise tax, with certain exceptions and operating rules
• IRC Section 36C, which would allow individuals paying the excise tax to claim an income tax credit, subject to certain conditions
• IRC Section 6050BB, which would require remittance transfer providers (RTPs) to file certain information returns

The Bill would impose penalties for late or inaccurate information returns and payee statements under IRC Sections 6721 and 6722, the same provisions that apply to Forms 1099 and 1042-S.

Under these provisions, an RTP would generally be required to collect and deposit quarterly with the IRS an excise tax equal to 3.5% on a remittance transfer made by a consumer to a designated recipient, unless an exception applied. RTPs failing to collect the tax would be liable for its payment.

Remittance transfer

“Remittance transfer” is defined by cross-reference to the Electronic Funds Transfer Act (EFTA), which applies to banks, money transmitters and others in the business of making electronic funds transfers. The purpose of the remittance transfer provisions in EFTA is to require the RTP to disclose the fees, exchange rate, net amount to be received by the recipient and certain other information.

EY observes: Because RTPs must already comply with EFTA, they may have business processes in place that identify remittance transfers.

A remittance transfer occurs when an RTP transfers funds from a “consumer” (defined under the EFTA as a “natural person”) to a “designated recipient,” whether or not the consumer holds an account with the RTP. A typical use case is individuals from a foreign country who send money to their home country through a money transmitter. A remittance transfer does not include a transfer of $15 or less.

A “designated recipient” is any person located in a foreign country and identified by the sender as the authorized recipient of a remittance transfer to be made by an RTP and may be an entity as well as an individual. The foreign location of the recipient is a requirement, so US-to-US transfers would not result in tax.

EY observes: There appears to be nothing eliminating the tax when the designated recipient is the same person as the sender. That would mean, for example, a transfer of money by a nonresident alien (NRA) to the NRA’s home-country bank account would be subject to the excise tax. In addition, the anti-conduit rules of IRC Section 7701(l) apply to prevent individuals who must pay the tax from using intermediaries to avoid the tax.

Exceptions

No tax would apply if:

• The transfer was made from an account held in or by a financial institution, as defined under the Bank Secrecy Act (e.g., banks, credit unions, brokers and dealers)

or

• The transfer involves a debit card or a credit card issued in the United States

EY observes: The exception departs significantly from the House-passed version, which was limited to a “qualified” RTP that entered into a written agreement with Treasury and verified the status of senders as US citizens or “nationals.”

Remittance transfers still in scope under the Bill include sending cash, a money order, a cashier’s check or a similar instrument via:

• Money transmitter
• Financial institution if the transfer is not via an account withdrawal

EY Observes: Online bill payments and other electronic transfers that are scheduled by the sender in advance, including preauthorized remittance transfers, other than through an account at a financial institution, would also still be in scope under the Bill.

EY observes: Without an RTP, no tax would apply, so an individual’s transfer of stablecoin or other digital assets from one wallet or address to another wallet or address would not be subject to the excise tax, provided the individual makes the transfer without the assistance of an RTP. (It is also not clear that digital assets constitute “funds” under EFTA.)

If tax were imposed because the transfer is conducted through a money-transmitter, new IRC Section 36C would allow a sender that is a work-eligible individual with a social security number (SSN) to claim an income tax credit, similar to the way backup withholding works. However, several conditions would apply:

• The individual would have to have an SSN, not an individual taxpayer identification number (ITIN) or employer identification number (EIN), and list the SSN on a tax return for the applicable tax year.
• The individual would have to certify an “intent” to claim the credit.
• The individual would have to establish that the tax was deducted from the remittance transfer.
• The individual would have to provide certain information, such as name, address and other information that would be included on the information return described next.

EY observes: The Senate Finance Committee version of the tax credit would allow non-citizens who have SSNs to obtain the tax credit, and also would dispense with the requirement that a married individual provide his or her spouse’s SSN.

Information reporting

The RTP would be required to file information returns on the remittance transfers under the new IRC Section 6050BB. Two categories of reporting would be required:

1. Persons who certify that they will claim the credit and provide the required information to the RTP: This information would be reported separately by the RTP and a copy of the information return would be furnished to those persons to substantiate their claim of a credit equal to the excise tax on Form 1040.
2. The excise tax was imposed and the sender did not certify its intent to claim the credit: The RTP would file an aggregate information return to report the tax paid and remitted on all applicable transactions.

EY observes: RTPs will need to develop new processes and systems to identify remittance transfers and carry out these reporting requirements. In addition, the IRS will need to create a new Form 1099 or other information return, as well as the systems required to accept the information returns. RTPs could have difficulty creating these new processes and systems in the absence of timely guidance from Treasury and the IRS.