Not legal advice. Not tax advice. If you need someone to sign their name to something, call your attorney or tax advisor. This blog is here to help translate regulatory Latin into English, not to get between you and the people you pay to keep you out of trouble.

When Congress passed the One, Big, Beautiful Bill Act (OBBBA) last July, it included a new 1% excise tax on certain remittance transfers sent from the United States to foreign destinations. The tax technically took effect January 1, 2026. On April 13, 2026, the IRS and Treasury published proposed regulations to fill in the blanks on how it actually works.

Here is the headline for credit unions: you are mostly spectators to this one. And that is not a bad place to be.

Quick Refresher: What Is the Tax, and Who Pays It?

Section 4475 imposes a 1% excise tax on the amount of a taxable remittance transfer. The sender pays it. The remittance transfer provider collects and remits it quarterly.

A remittance transfer is the electronic transfer of funds from a consumer in the U.S. to a designated recipient in a foreign country, using a remittance transfer provider in the normal course of business. Same definition as Regulation E, which should sound familiar.

What makes a remittance transfer taxable? Two things have to line up:

• The transfer goes to a foreign location (domestic transfers do not trigger this tax), and
• The sender funds it with cash, a money order, a cashier’s check, or a traveler’s check.

That’s it. Miss either prong and there is no tax. Which brings us to the good news.

The Statutory Carve-Out That Matters for You

Section 4475(d)(1) exempts from the tax any remittance transfer for which the funds are withdrawn from an account held in or by, among other things, a credit union that is subject to BSA requirements. Translation: if your member’s money comes out of a share account at your credit union, the tax does not apply.

Section 4475(d)(2) separately exempts transfers funded with a U.S.-issued debit card or credit card. So in practice, the tax hits cash, money orders, cashier’s checks, and traveler’s checks: instruments that tend to show up at money services businesses (MSBs).

The IRS and Treasury said the quiet part out loud in the preamble: they expect banks and credit unions will “not be materially affected” by the tax because credit union -facilitated remittances are primarily funded by non-cash instruments.

The Question We’ve Heard and How Our Answer Changes With This Proposal: Is There a Waiting Period?

Here is the scenario. A member walks into the branch, deposits $500 in cash into their share account, and ten minutes later initiates a remittance transfer from that same account. Is that transfer exempt under §4475(d)(1), or does it look enough like tax avoidance to raise a flag?

The conservative advice we have been giving has been to let the cash sit in the account for a few days before using it to fund a remittance, just to avoid any appearance of gaming the system. The proposed regulations do not require that, and here is why.

The preamble and footnotes state that settlement of an instrument against an account “does not constitute a ‘withdrawal’ from an account at a financial institution for purposes of section 4475(d)(1)… Thus, the source of any funds used to purchase such instruments is immaterial.” That language is aimed at money orders and cashier’s checks, not cash deposits specifically, but the reasoning travels: once funds are in an account, they are account funds. No holding period. No look-through. Nothing in the proposed reg imposes or implies a waiting period.

So the short answer is: there is no statutory or regulatory waiting period, and the proposed reg supports treating funds as exempt account funds once they hit the account.

But (and it is a useful but) the proposed regulations include an anti-avoidance rule at §49.4475-1(d)(4) that lets Treasury disregard or recharacterize transactions whose “principal purpose“ is avoiding the tax. The two examples Treasury gives involve a consumer handing over cash in exchange for a general-use prepaid card and immediately using the card to fund a remittance or handing the card to a relative who does. In other words, they are targeting instruments used as pass-throughs.

A genuine cash deposit into a real, ongoing share account, processed through the credit union’s normal BSA and CIP procedures, is a different animal.

Practical takeaway: If the proposed regulations is finalized as is, you can stop telling members to wait three days. What you should keep doing is making sure cash deposits go through your normal front line procedures (CIP verification, CTR thresholds, SAR monitoring, the usual). Where the member is actually your member, and the account is actually their account, the exemption applies.

A Few Compliance Housekeeping Notes

Even though your credit union is not the one collecting and remitting the tax, a few operational points deserve attention:

• Cashier’s checks and money orders issued by your credit union. If a member takes a cashier’s check drawn on your credit union and hands it to Western Union, that transfer is taxable to the sender. The settlement of the check between you and the MSB is not treated as a withdrawal from the member’s account for §4475(d)(1) purposes. The tax attaches because the MSB received a cashier’s check regardless of where the funds backing it came from. This mostly matters for member education. You are not the collector, but your members may be surprised to learn that “I used a cashier’s check from my credit union” does not save them the 1%.
• Check cashing at MSBs. If a member cashes a payroll or personal check at an MSB and immediately uses the proceeds to fund a remittance, the proposed regs treat that as a cash-funded remittance and therefore taxable. Again, not your compliance burden, but useful to know when members ask.
• International wires from member accounts. The exemption applies regardless of whether the wire goes through your credit union directly or through a correspondent. As long as the funds come out of the member’s account at a BSA-covered financial institution, §4475(d)(1) applies.
• The Reg E safe harbor does not travel. Regulation E’s 500-transfer-or-fewer safe harbor for low-volume providers does NOT apply for purposes of this tax. Treasury was explicit on this point. If your credit union does fewer than 500 remittance transfers a year, you are still a “remittance transfer provider” for §4475 purposes. In practice, it does not matter much because the transfers you facilitate are from member accounts, which are exempt anyway but it is a useful footnote for anyone on your team who was counting on the safe harbor.
• Form 720 and semimonthly deposits. For the handful of transfers where your credit union might actually be collecting the tax (cash-funded remittances from non-members, for example, if your CU offers that service), you would be filing Form 720 quarterly and making semimonthly deposits. Notice 2025-55 provides failure-to-deposit relief for the first three calendar quarters of 2026, so there is a soft-landing period built in.

Comment Period and What to Push For

Written comments on the proposed regulations are due June 12, 2026. If there is one thing worth asking Treasury to address more explicitly, it is the cash-deposit-then-remit fact pattern. The proposed reg supports the conclusion that it is exempt, but the support is by analogy rather than by direct example.

The New York Credit Union Association is reviewing the proposal so you can send comments and feedback to be considered for a comment letter.

The Bottom Line

The new 1% remittance excise tax is a rare regulatory development that genuinely benefits credit unions without requiring you to do much of anything. The statute carves you out. The proposed regulations confirm the carve-out. The anti-avoidance rule targets synthetic workarounds, not genuine member relationships.

Your job is less about compliance and more about communication. Let your members and your communities know that sending money home from a share account is cheaper than sending it from the storefront down the block. That is not new. The tax just made it a little more true.

And, one more time, because we like our licensed colleagues: this blog is not legal or tax advice. Consult your attorney and your tax advisor on the specifics of your operation.

And, one more one more time: this is just a proposal. Things can change.

Until Next Time

From the big picture to the fine print, we’ve got you covered. Thanks for reading, and CU in the next post.