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The House-passed One Big Beautiful Bill, endorsed by Americans for Tax Reform, delivers on President Trump’s promise of across the board, pro-growth tax relief for American households and businesses.
Having passed the House, the GOP-controlled Senate now has the opportunity to improve upon the current bill. The Senate can do so by making the pro-growth expensing provisions permanent and addressing some of the revenue-generating provisions used to “pay for” tax cuts in the bill.
One revenue-generating tax provision in the bill is the creation of a 3.5 percent excise tax on remittance transactions.
A remittance transaction is a non-commercial payment from a sender located in the U.S. to a recipient located abroad. An example be a worker inside the U.S. sending money to family or friends abroad. Remittance taxes are typically intended by lawmakers as a deterrent to stop illegal immigrants from sending money earned in the U.S. back to their country of origin.
Americans for Tax Reform has previously detailed the flaws with remittance taxes proposals introduced in Congress.
Exemptions from tax for U.S. citizens and or nationals
The bill provides two means for an exemption from the excise tax for remittance transfers sent by citizens and nationals of the United States:
- The sender can verify their status as a citizen or national of the United States through a “qualified remittance transfer provider” previously approved by the Treasury Secretary and who agrees to to verify the status of a sender as a citizen or national of the United States.
- A citizen or national of the United States may be relieved of the excise tax is via a tax credit. In order to claim the tax credit, a taxpayer must include their social security number on their tax return for the relevant taxable year and must demonstrate, to the satisfaction of the Secretary, that:
- (1) he or she is a citizen or national of the United States; and
- (2) the excise tax was paid by him or her and is with respect to a remittance transfer for which he or she provided certification and certain information to the remittance transfer provider.
This means that in order for U.S. citizens to avoid paying the tax, they’ll be required to trust sensitive information, such as their social security number, with the financial institution they’re using to conduct a remittance transfer. That, or maintain their receipts from the remittance transfer until tax time when they’ll have to submit their social security number and further proof of citizenship with the IRS.
Increased Paperwork Burden on Americans
While this excise tax is intended to crack down on illegal immigrants sending money abroad, it increases the regulatory compliance burden of U.S. citizens and businesses.
As the Tax Foundation notes in its analysis released on June 6, 2025:
“The tax will impose extra ID-verification and reporting hurdles on American citizens and financial institutions, not just the intended tax base of remittance senders without citizenship. The process for recouping erroneously collected tax will be cumbersome.”
Tax Foundation goes on to detail the increased compliance burden for American businesses:
“Another potential problem would be for businesses with international operations or supply chains. For instance, a small business in the Detroit-Windsor, Ontario area may have hundreds of transactions with Canadian and US customers, suppliers, and employees. Many of those business transactions will need to prove they are non-remittance in nature. And a larger business with thousands or tens of thousands of employees both in the US and elsewhere may do thousands of international transactions a day, most for reasons other than immigration or remittance. Creating a detailed accounting of these transactions, all to prove they do not incur tax, is a waste of everyone’s time.”
High tax avoidance likely misses intended targets
Remittance transactions tend to miss the intended target of payments from illegal immigrants because they have a high number of alternative measures available to send money abroad to avoid paying the remittance tax.
The remittance tax itself triggers consumers to seek alternative ways of sending money abroad at relatively low levels of taxation. This is already proven by the Manager’s Amendment in the House that lowered the excise tax from the original 5 percent tax at introduction to 3.5 percent. JCT estimates that a lower 3.5 percent excise tax generates roughly $3.8 billion more in tax revenue than a higher 5 percent excise tax – the likely reason House Republicans amended the bill to include a lower rate.
Numerous alternatives to remittance transactions include sending cash by mail, the sending of goods instead of money, cryptocurrency transactions or having U.S. citizens send money on behalf of a non-citizen.
The easy degree of tax avoidance to remittance transactions means that the compliance cost will fall on U.S. citizens complying with the law and seeking reimbursement taxes they paid but do not owe.
