Federal Remittance Transfer Tax: What County Treasurers Need to Know

For County Treasurers, Finance Directors & Tax Collectors | Updated  January 2026 | 3 Minute Read

Executive Summary

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, imposed a 1% excise tax on certain cross-border money transfers effective January 1, 2026. For most county governments, no action is required—standard government payment practices are already exempt from this tax.

The Law at a Glance

What it is: A 1% federal excise tax on certain outbound international money transfers (IRC Section 4475). Effective date: January 1, 2026 Who collects it: Remittance transfer providers (Western Union, MoneyGram, etc.)—not county governments. What’s taxable: Only transfers funded by cash, money orders, cashier’s checks, or similar physical instruments. What’s exempt: Transfers from U.S. bank accounts or funded by U.S.-issued credit/debit cards.

Quick Assessment: Is Your County Affected?

Does your county make international payments?

• NO → No action needed.
• YES → How do you pay?
  • Wire transfer from county bank account → EXEMPT
  • ACH from county bank account → EXEMPT
  • County credit/debit card → EXEMPT
  • Cash, money orders, or cashier’s checks → TAXABLE (change method immediately)

If you use standard banking methods, you have no obligations under this law.

Why Standard Government Practices Are Exempt

Bank Account Exemption (IRC §4475(d)(1)): The tax doesn’t apply when funds are withdrawn from an account at a financial institution subject to Bank Secrecy Act reporting. This includes virtually all FDIC-insured banks and credit unions where counties hold accounts. U.S. Card Exemption (IRC §4475(d)(2)): The tax doesn’t apply to transfers funded by U.S.-issued debit or credit cards—including county procurement cards and travel cards.

Documentation for Auditors

Maintain a simple compliance file:

1. Payment Methods Summary: List international payment categories, methods used, and exemption basis. Confirm prohibited methods (cash/money orders/cashier’s checks) are not used.
2. Policy Memo: Brief confirmation from County Treasurer that all international payments use exempt methods.
3. Bank Letter: Request confirmation from your bank that they’re subject to Bank Secrecy Act reporting.

This policy memo is designed to be utilized by County Treasurers and Finance Directors to document their compliance with the One Big Beautiful Bill Act (OBBBA). It serves as a formal internal record for auditors and department heads to ensure no accidental tax liabilities are incurred.

OFFICE OF THE COUNTY TREASURER

POLICY MEMORANDUM

TO: All Department Heads, Finance Staff, and Accounts Payable Personnel FROM: [Name], County Treasurer DATE: January 22, 2026 SUBJECT: Compliance Policy for Federal Remittance Transfer Tax (IRC Section 4475)

1. Executive Summary

The One Big Beautiful Bill Act (OBBBA), effective January 1, 2026, imposes a 1% federal excise tax on certain outbound international money transfers. Based on current county operations and federal exemptions, this county is currently exempt from this tax because it utilizes standard banking channels. However, to maintain this exempt status and satisfy future audits, all departments must strictly adhere to the payment methods outlined in this memo.

2. Legal Context

The new tax (Internal Revenue Code Section 4475) targets transfers where the sender provides cash, money orders, or cashier’s checks to a remittance provider. It specifically exempts:

• Bank Account Transfers: Transfers where funds are withdrawn from an account at a financial institution subject to Bank Secrecy Act reporting (e.g., FDIC-insured banks).

• Card-Funded Transfers: Transfers funded via U.S.-issued debit or credit cards.

• Commercial Purpose: Payments for business or operational purposes rather than personal, family, or household use.

3. Mandatory Payment Procedures

To ensure zero tax liability, all international payments (including vendor payments, software licenses, or specialized equipment) must be made through one of the following Approved Methods:

1. Wire Transfer or ACH directly from the County’s primary bank account.

2. County Procurement Card (P-Card) or authorized corporate credit card.

Prohibited Methods: Under no circumstances shall any department or employee use cash, money orders, or cashier’s checks for international remittances. These methods not only trigger the 1% excise tax but also represent a failure of internal financial controls.

4. Documentation for Auditors

Departments are required to maintain a compliance folder for each fiscal year containing:

• Payment Type Logs: Verification that 100% of international payments were made via wire/ACH or card.

• Bank Certification: A statement from the county’s banking partner confirming they are a financial institution subject to Bank Secrecy Act reporting under 31 USC §5312.

• This Policy Memo: To be presented during annual financial audits as evidence of proactive regulatory monitoring.

5. Inbound Payments & Employee Reimbursements

• Inbound Funds: Fees or taxes paid into the county by foreign entities are not taxable under this law.

• Employee Reimbursements: Reimbursements to U.S.-based employees for international business expenses are considered domestic transactions and are exempt.

6. Conclusion

While the IRS has provided limited penalty relief for the first three quarters of 2026, this applies primarily to the providers of the service, not the senders. Strict adherence to this policy will ensure the county remains in full compliance without the need for additional tax filings or federal withholding.

Questions regarding specific vendor setups should be directed to the [County Treasurer’s Office / Finance Department].

Common Questions

Employee reimbursements: Reimbursing employees for international expenses is a domestic payment to a U.S. employee—not a remittance. Inbound payments: Money coming INTO the U.S. (foreign nationals paying county fees) is not taxable. U.S. territories: Payments to Puerto Rico, Guam, USVI are domestic, not international. Employee personal transfers: What employees do with their paychecks is their responsibility.

If You Find Non-Compliant Payments

If any department uses cash, money orders, or cashier’s checks for international payments:

1. Stop immediately—these methods have poor internal controls regardless of tax implications
2. Transition to wire transfer or card
3. Update vendor files with wire instructions
4. Train staff on approved methods

International Vendor Setup

Require from all international vendors:

• Bank name and address
• Account number or IBAN
• SWIFT/BIC code
• Intermediary bank info (if needed)

Configure your AP system to default international vendors to wire transfer and block check/cash options.

Regulatory Monitoring

The IRS continues to issue implementation guidance. The Treasury Department has provided penalty relief for the first three quarters of 2026 while providers adapt. Monitor IRS.gov and GFOA communications for updates.

Q: What is the One Big Beautiful Bill Act (OBBBA) 1% remittance tax?

A: The OBBBA, signed July 4, 2025, introduces a 1% excise tax on certain cross-border remittance transfers. Effective January 1, 2026, this tax primarily targets international transfers funded by physical instruments like cash, money orders, or cashier’s checks. Most digital and bank-integrated government payment methods remain exempt under Section 4475.

Q: Are county government payments exempt from the OBBBA remittance tax?

A: Yes, most standard county government payments are exempt. The tax applies only to “remittance transfers” sent via physical instruments. Payments made through bank account withdrawals, ACH, or U.S.-issued debit and credit cards are specifically excluded from the 1% excise tax, ensuring typical property tax and fee collections are unaffected.

Q: Does the 1% excise tax apply to property taxes paid by international residents?

A: Generally, no. As long as the international resident pays their county property taxes via a U.S. bank account, credit card, or debit card, the transaction is exempt. The tax only triggers if the payment is classified as a “remittance transfer” funded by cash or a physical money order sent to a foreign jurisdiction.

Q: What are the compliance requirements for County Treasurers under OBBBA?

A: For the vast majority of County Treasurers, there are no new reporting or collection requirements. Because standard government payment processing is digital and integrated with U.S. financial institutions, these transactions do not fall under the definition of taxable “remittance transfers” requiring IRS Form 720 filing.

Q: When does the OBBBA remittance tax go into effect?

A: The 1% excise tax on remittance transfers becomes effective on January 1, 2026. While the law was signed in 2025, the IRS has provided a grace period for penalty relief during the first three quarters of 2026 to allow providers to update their compliance and reporting systems.

Resources

• IRS: One Big Beautiful Bill provisions (irs.gov)
• IRS Penalty Relief Notice for Remittance Transfer Providers
• Government Finance Officers Association (gfoa.org)
• National Association of Counties (naco.org)
• Your county’s legal counsel and banking partners

Disclaimer: This article provides general information about IRC Section 4475 and does not constitute legal, tax, or professional advice. The remittance transfer tax is new legislation (effective January 1, 2026) and IRS implementation guidance continues to evolve. Counties should consult qualified legal counsel, tax advisors, or certified public accountants for guidance specific to their operations. This article is not official IRS guidance—for authoritative information, refer to IRS.gov. Information is accurate as of the publication date but may not reflect subsequent regulatory developments. The author assumes no liability for decisions made based on this information.