County Treasurer’s Guide to Remittance Transfer Tax Exemptions: Protecting Government Payment Operations

For County Treasurers, Finance Directors & Tax Collectors

This comprehensive guide addresses the complex intersection of remittance transfer regulations and tax payment processing (under OBBBA Section 4475) for local government offices. County treasurers and tax collectors increasingly encounter situations where taxpayers use remittance transfer services to send tax payments, triggering federal disclosure requirements under the Consumer Financial Protection Bureau’s Remittance Rule.

Key Takeaways:

The guide clarifies when tax payments qualify for exemptions from standard remittance transfer disclosures, helping county offices ensure compliance while maintaining efficient payment processing. Understanding these exemptions is critical for treasurers who accept international payments or work with third-party payment processors.

Finance directors will find practical guidance on implementing compliant payment systems that distinguish between standard tax payments and true remittance transfers. The resource explains documentation requirements, disclosure obligations, and safe harbor provisions that protect county offices from regulatory violations.

Tax collectors benefit from clear protocols for identifying qualifying tax payment transactions versus remittance transfers requiring additional consumer protections. This knowledge prevents processing delays and ensures taxpayers receive appropriate information without unnecessary regulatory burden on county operations.

Practical Application:

County financial officials can use this guide to audit current payment acceptance procedures, train staff on compliance requirements, and implement systems that correctly categorize transactions while maintaining taxpayer convenience and regulatory compliance.

 

Quick Reference: Is Your County Payment Exempt?

Most county treasurers are asking: “Do I need to withhold 1% on international payments?”

Short answer: Almost certainly NO—if you use standard government payment methods.

Use this decision tree to determine your status in 30 seconds:

Does your county make international payments?

└─ NO → No action needed. File this article for reference.

└─ YES → Continue below

How do you pay international vendors/expenses?

├─ Wire transfers from county bank account → EXEMPT ✓

├─ County credit/debit card → EXEMPT ✓

├─ ACH from county bank account → EXEMPT ✓

├─ Online platform linked to US bank → EXEMPT ✓

└─ Cash, money orders, cashier’s checks → TAXABLE (1%)

└─ If this is your method → Change it immediately

If all your international payments use the first four methods, you’re done. No tax applies, no withholding required, no forms to file.

This guide helps you document your exemption status for auditors and avoid the few scenarios where the tax might apply.

Part 1: The Banking Exemption – Why Counties Are Protected

Understanding Your Primary Protection

The remittance tax law contains two major exemptions. The first—and most important for counties—is the “financial institution account exemption.”

The Law (IRC Section 4475(d)(1)):

The excise tax does not apply to remittance transfers for which the funds being transferred are withdrawn from an account held in or by a financial institution subject to Bank Secrecy Act reporting requirements.

What This Means in Plain English:

Any international payment funded from your county’s bank account at a US bank or credit union is automatically exempt. Period.

Why Counties Qualify:

✓ County checking accounts are held at FDIC-insured banks ✓ These banks are subject to Bank Secrecy Act reporting ✓ Wire transfers from these accounts = EXEMPT ✓ ACH transfers from these accounts = EXEMPT ✓ Online bill pay from these accounts = EXEMPT

Payment Processing Insight: The exemption attaches to the funding source, not the recipient or purpose. Whether you’re paying for software licenses in India, equipment from Germany, or conference fees in France—if the payment originates from your US bank account, it’s exempt.

Which Financial Institutions Qualify?

Section 4475 specifically excepts transfers from accounts at:

1. FDIC-insured banks – Covers virtually all county depository accounts
2. Commercial banks or trust companies – Includes most county banking relationships
3. Credit unions – Some counties bank with credit unions; fully covered
4. Broker-dealers registered with SEC – If county has investment accounts
5. US agency or branch of foreign bank – Subject to Bank Secrecy Act

County Application:

If your county’s primary operating account is at a recognizable US bank (Bank of America, Wells Fargo, regional banks, community banks, credit unions), you qualify. This describes 99.9% of counties.

Important Limitation:

The exception would not apply to remittance transfers from which the funds being transferred are withdrawn from accounts held by money services businesses, despite the fact that they are subject to the Bank Secrecy Act.

Money services businesses (Western Union, MoneyGram, etc.) don’t qualify even though they’re BSA-regulated. This doesn’t affect counties because counties don’t maintain operating accounts at money services businesses.

Part 2: The Card Payment Exemption – Your Secondary Protection

US-Issued Credit and Debit Cards

Additionally, the OBBBA excludes any transfers funded by a debit or credit card issued in the United States from the tax.

County Applications That Are EXEMPT:

✓ Procurement Cards (P-Cards): Purchasing international software, subscriptions, equipment ✓ County Credit Cards: Travel expenses, emergency purchases, online vendors
✓ County-Issued Debit Cards: Department operating expenses, employee travel ✓ Ghost Cards: Virtual card numbers for online international purchases ✓ Travel Cards: Employee expenses during international travel

Key Requirement: The card must be “issued in the United States”

Practical Guidance:

Any credit or debit card issued by a US bank to your county qualifies. This includes:

• Visa cards from US banks
• Mastercard cards from US banks
• American Express cards issued in US
• Discover cards
• County-specific government purchasing cards

What About Prepaid Cards?

There’s an important distinction: prepaid card reloads and transfers made from such cards are taxable remittances.

• US-issued prepaid card used for direct purchase = EXEMPT
• Prepaid card reload sent to someone abroad = TAXABLE

For counties: Using prepaid cards to make direct vendor payments is exempt. Using prepaid cards to reload someone else’s card abroad would be taxable (but counties don’t do this).

Part 3: What IS Taxable – And Why Counties Don’t Use These Methods

The Only Methods Subject to 1% Tax

Section 4475 shall apply only to any remittance transfer for which the sender provides cash, a money order, a cashier’s check, or any other similar physical instrument.

Taxable Payment Methods:

1. Cash – Physical currency given to remittance provider
2. Money Orders – Purchased and sent internationally
3. Cashier’s Checks – Bank check purchased for international transfer
4. Similar Physical Instruments – Treasury to define, but likely includes bank drafts, certified checks

Why Counties Don’t Use These:

✓ Internal Control Requirements: Cash and money orders lack adequate audit trails ✓ Financial Policy Standards: GFOA best practices prohibit cash for vendor payments ✓ Fraud Prevention: Physical instruments are high-risk for fraud ✓ Efficiency: Wire transfers and ACH are faster and cheaper ✓ Documentation: Electronic payments provide superior records

Payment Processing Insight: If you discover your county is using cash, money orders, or cashier’s checks for ANY payments (domestic or international), the remittance tax should be the least of your concerns. These methods violate basic internal control standards and should be eliminated immediately for all payments.

Part 4: Documenting Your Exemption Status (For Your Auditors)

Creating Your Compliance File

External auditors will want to verify your county isn’t subject to remittance tax obligations. Make their job easy with proper documentation.

Simple Three-Document Compliance File:

Document 1: International Payment Methods Inventory

[COUNTY NAME] INTERNATIONAL PAYMENT METHODS INVENTORY

Prepared: [Date]

Effective Period: January 1, 2026 – December 31, 2026

 

Purpose: Document compliance with IRC §4475 Remittance Transfer Tax provisions

 

INTERNATIONAL PAYMENTS MADE BY [COUNTY NAME]:

 

1. Vendor Payments

Method: Wire transfer from county operating account

Bank: [Bank Name], FDIC-insured

Annual Volume: Approximately [X] transactions, $[Amount]

Exemption Basis: IRC §4475(d)(1) – Bank account exemption

Status: EXEMPT ✓

 

2. Software/SaaS Subscriptions

Method: County procurement card (Visa)

Issuer: [Bank Name], US-issued

Annual Volume: Approximately [X] transactions, $[Amount]

Exemption Basis: IRC §4475(d)(2) – US card exemption

Status: EXEMPT ✓

 

3. Employee Travel Expenses

Method: County-issued travel cards (Mastercard)

Issuer: [Bank Name], US-issued

Annual Volume: Approximately [X] transactions, $[Amount]

Exemption Basis: IRC §4475(d)(2) – US card exemption

Status: EXEMPT ✓

 

4. Conference/Training Fees

Method: Wire transfer or county credit card

Exemption Basis: IRC §4475(d)(1) and (d)(2)

Annual Volume: Approximately [X] transactions, $[Amount]

Status: EXEMPT ✓

 

METHODS NOT USED:

– Cash payments to remittance providers: PROHIBITED

– Money orders for international transfer: PROHIBITED

– Cashier’s checks for international transfer: PROHIBITED

 

CONCLUSION: All [County Name] international payments utilize methods that qualify for statutory exemptions under IRC §4475(d). No remittance transfer tax obligations exist.

 

Prepared by: _________________________ Date: _________

[County Treasurer/Finance Director]

 

Reviewed by: _________________________ Date: _________

[County Auditor/Controller]

Document 2: Policy Confirmation Memo

MEMORANDUM

 

TO: County Auditor

FROM: County Treasurer

DATE: [Date]

RE: Remittance Transfer Tax Compliance Verification

 

This memo confirms that [County Name] has reviewed payment processing procedures in light of the One Big Beautiful Bill Act’s remittance transfer tax provisions (IRC §4475), effective January 1, 2026.

 

FINDINGS:

 

1. All international payments are processed through banking channels that qualify for statutory exemptions.

 

2. County policy prohibits the use of cash, money orders, or cashier’s checks for vendor payments (domestic or international).

 

3. No county department has authority to act as a “remittance transfer provider” for public or employee personal transfers.

 

4. Payment processing systems are configured to route international payments exclusively through exempt channels (wire transfer or card payments).

 

COMPLIANCE STATUS: [County Name] has no remittance transfer tax withholding, collection, or remittance obligations under current operations.

 

NO ACTION REQUIRED for calendar year 2026 unless payment methods change.

 

This determination will be reviewed annually as part of the budget preparation process.

 

Attachments:

– International Payment Methods Inventory

– Banking Relationship Confirmation Letters

Document 3: Banking Confirmation Letter (Request from your bank)

[Request this letter from your primary banking partner]

 

[Bank Letterhead]

 

TO: [County Name]

DATE: [Date]

RE: Bank Secrecy Act Compliance Status

 

This letter confirms that [Bank Name] is a [FDIC-insured depository institution / federally-insured credit union] subject to the recordkeeping and reporting requirements of the Bank Secrecy Act (31 U.S.C. §§ 5311 et seq.).

 

Pursuant to the remittance transfer tax exemption provisions in Internal Revenue Code Section 4475(d)(1), funds transferred from accounts held by [County Name] at [Bank Name] to international recipients qualify for exemption from the remittance transfer excise tax, regardless of the purpose or recipient of such transfers.

 

This confirmation is provided for [County Name]’s tax compliance documentation purposes.

 

Sincerely,

 

[Bank Relationship Manager] [Title] [Bank Name]

Part 5: Vendor Setup Process to Maintain Exemption Status

Configuring Your AP System for Compliance

Modern accounts payable systems can prevent non-exempt payment methods through proper configuration.

Vendor Master File Requirements for International Vendors:

Mandatory Fields:

1. Country Code – Flags vendor as international
2. Payment Method – Must be “Wire Transfer” or “ACH” for international vendors
3. Bank Account Information – Full wire instructions including SWIFT/BIC
4. Intermediary Bank Details – If required for payment routing
5. Payment Currency – USD or foreign currency

System Configuration:

Set up automated validations:

IF Vendor.Country ≠ “USA”

THEN Vendor.PaymentMethod MUST BE IN (“Wire Transfer”, “ACH”, “Credit Card”)

ELSE Flag for Treasurer Review

Block These Combinations:

• International vendor + Payment method = “Check” → REJECT
• International vendor + Payment method = “Cash” → REJECT
• International vendor + Payment method = “Money Order” → REJECT

New International Vendor Checklist

When Purchasing/Procurement brings you a new international vendor:

✓ Step 1: Obtain complete wire transfer instructions

• Beneficiary bank name and address
• Bank account number (or IBAN for European vendors)
• SWIFT/BIC code
• Intermediary/correspondent bank info (if needed)
• Reference information required

✓ Step 2: Verify payment method in vendor setup

• Default payment method set to “Wire Transfer”
• Alternative payment method set to “Credit Card” (if applicable)
• Check payment option disabled for this vendor

✓ Step 3: Test first payment

• Process small test payment before large invoice
• Confirm successful receipt
• Document routing for future payments

✓ Step 4: Document exemption basis

• Note in vendor file: “International payments via wire transfer – IRC §4475(d)(1) exempt”
• Attach bank confirmation of successful routing

✓ Step 5: Train AP staff

• AP processors understand international vendors require wire/card only
• Escalation process if vendor requests alternative method

Handling Vendor Payment Method Requests

Scenario: International vendor requests payment via cashier’s check instead of wire transfer.

Your Response:

“[County Name] processes all international payments via wire transfer or credit card to comply with federal tax regulations and internal control requirements. We are unable to issue cashier’s checks for international payments.

Please provide your banking information for direct wire transfer:

• Beneficiary bank name and address
• Account number or IBAN
• SWIFT/BIC code
• Any intermediary bank information

Wire transfers typically arrive within 1-2 business days and provide both parties with superior tracking and documentation.”

Why This Protects Your County:

1. Maintains exemption status (no 1% tax)
2. Better internal controls
3. Faster payment delivery
4. Superior audit trail
5. Lower fraud risk
6. Meets GFOA best practices

Part 6: Special Situations and Edge Cases

Situation 1: Sister City or International Partnership Payments

Question: “Our county has a sister city relationship in Mexico and sends $10,000 annually to support municipal projects. Does the remittance tax apply?”

Analysis:

Tax status depends entirely on payment method, NOT on purpose or recipient:

• Wire transfer from county account to sister city’s bank → EXEMPT
• County credit card payment to purchase supplies for sister city → EXEMPT
• Cashier’s check sent via courier to sister city treasurer → POTENTIALLY TAXABLE

Recommended Structure:

Establish bank-to-bank wire transfer relationship:

1. Obtain sister city’s municipal bank account information
2. Process as standard international wire transfer
3. Document as inter-governmental transfer (for your records)
4. Payment remains exempt under banking exemption

Alternative Structure:

If direct transfers are difficult, route through established NGO with US bank account:

1. Wire funds to US-based nonprofit fiscal sponsor
2. Nonprofit transfers to sister city (nonprofit’s responsibility)
3. Your payment remains exempt (sent to US account)

Situation 2: Foreign National Employee Payroll

Question: “We employ several foreign national engineers on H-1B visas. They want to send money home. Are we responsible for the remittance tax?”

Answer: NO – Employee personal banking is separate from county operations.

County Responsibility:

• Pay employees via direct deposit to their US bank accounts (or payroll cards)
• Pay via wire transfer if employee has no US account (still exempt – from county account)
• Process normal payroll withholding (income tax, FICA, etc.)

Employee’s Subsequent Actions:

• What employees do with funds after receiving payroll is their personal decision
• If they transfer from their own US bank account → EXEMPT (bank exemption applies to them too)
• If they use cash/money order services → They pay 1% tax (their responsibility, not county’s)

County Has No Withholding Obligation for employees’ personal banking decisions after receiving payroll.

Situation 3: International Conference Registration

Question: “County manager is attending a conference in London. The £2,000 registration fee must be paid to a UK organization. How do we pay without triggering the tax?”

Options (All Exempt):

Option A: County credit card payment

• Most conference organizers accept credit cards
• Use county P-card or manager’s county travel card
• EXEMPT under US-issued card exemption
• Often fastest and easiest method

Option B: Wire transfer from county account

• Obtain conference organizer’s bank details
• Process as standard international wire
• EXEMPT under bank account exemption
• May have higher bank fees than card

Option C: Online payment platform

• Many conferences use Eventbrite, RegFox, etc.
• If platform debits county bank account → EXEMPT
• If platform requires card → EXEMPT

Option D (DON’T USE): Purchasing money order or cashier’s check

• Would be TAXABLE
• Poor internal controls
• Slow and inefficient

Best Practice: Default to county credit card for conference fees under $5,000; use wire transfer for larger amounts.

Situation 4: Emergency Humanitarian Assistance

Question: “During a natural disaster, our county emergency management wants to provide cash assistance to evacuees, some of whom need to send money to family abroad. Does this involve us in remittance tax?”

Analysis:

If the county directly facilitates cash remittances (acting as intermediary with Western Union, etc.), tax and compliance implications are complex.

Recommended Approaches (Avoid County as Remittance Provider):

Approach A: Prepaid Debit Cards

• Issue US-issued prepaid debit cards to evacuees
• Evacuees can then make their own transfers from card (exempt if they use card directly)
• County issues card, evacuee controls subsequent use
• County is NOT acting as remittance transfer provider

Approach B: Partner with Banks

• Coordinate with local banks offering free/reduced-cost wire transfers for disaster victims
• County provides vouchers, bank processes transfers
• Bank handles compliance, not county

Approach C: Cash Assistance with No County Involvement in Transfers

• Provide direct cash assistance for immediate needs
• Refer evacuees to banks or credit unions for international transfers
• County’s role ends when assistance is provided

What to Avoid:

• County staff physically going to Western Union on evacuees’ behalf
• County collecting cash and arranging remittances
• County acting as intermediary in transfer process

Situation 5: International Equipment Purchase

Question: “We’re buying a specialized fire truck from a Canadian manufacturer for $500,000. How should we structure payment?”

Recommended Structure:

Option A: Wire Transfer (Most Common)

• Obtain manufacturer’s Canadian bank wire instructions
• Process from county account
• EXEMPT under bank account exemption
• Total cost: $500,000 + bank wire fee (~$25-50)
• Best audit trail

Option B: Letter of Credit (For Very Large Purchases)

• Establish L/C through county’s bank
• Provides payment security for both parties
• Funded from county account → EXEMPT
• Higher bank fees but added protection

What NOT to Do:

• Don’t purchase cashier’s check for $500,000 (would be taxable, poor controls, high risk)
• Don’t wire funds to US intermediary who uses money order (creates unnecessary complexity)

Payment Terms in Contract:

Include specific payment method language: “Payment shall be made via wire transfer from County’s US bank account to Seller’s designated bank account. County shall not be responsible for any intermediary bank fees; Seller shall receive full invoice amount. All payments in USD unless otherwise agreed.”

Part 7: Internal Controls and Audit Considerations

Questions Your Auditor Will Ask

Be prepared to answer these during your annual audit:

1. “Does the county make international payments?”

Response: “Yes, approximately [X] international payments annually, totaling $[Amount]. Primary categories are [software subscriptions, equipment purchases, conference fees, etc.].”

2. “How are international payments processed?”

Response: “All international payments are processed via wire transfer from county operating accounts or county-issued credit/debit cards. We do not use cash, money orders, or cashier’s checks for any payments.”

3. “Has the county withheld or remitted any remittance transfer taxes?”

Response: “No. All county international payments qualify for exemptions under IRC §4475(d) based on funding source (bank accounts or US-issued cards). No tax withholding or remittance obligations exist.”

4. “How does the county ensure ongoing compliance?”

Response: “Our accounts payable system is configured to restrict international vendor payment methods to wire transfer or card only. Annual review is conducted by the Treasurer’s office. Documentation is maintained in our compliance files.”

5. “Are there any county programs that facilitate remittances for individuals?”

Response: “No. The county does not operate money transfer services or act as a remittance transfer provider for employees or the public.”

Internal Control Recommendations

Segregation of Duties:

✓ Vendor Setup: Purchasing/Procurement enters vendor information ✓ Payment Method Validation: Treasurer’s office reviews international vendors ✓ Payment Processing: AP staff process payments per established methods ✓ Review: Finance Director or Treasurer reviews international wire transfers before release

System Controls:

✓ Automated Flags: System flags all payments to non-US vendors ✓ Method Restrictions: System prevents check/cash options for international vendors ✓ Approval Workflows: International wires require additional approval level ✓ Exception Reports: Monthly report of all international payments for review

Documentation Standards:

✓ Vendor Files: Include wire instructions, first payment confirmation, exemption notation ✓ Payment Records: Retain wire transfer confirmations, bank statements showing debit ✓ Annual Compliance File: Update inventory and policy confirmation annually ✓ Audit Trail: Maintain complete record from invoice through payment confirmation

Payment Processing Insight: Modern treasury management systems can generate automated compliance reports showing all international payments, payment methods used, and exemption basis. Monthly review of these reports (5-10 minutes) provides ongoing assurance of compliance and early detection of any problematic payment methods.

Part 8: Working with Your Payment Processing Partners

Questions for Your Banking Relationship Manager

Schedule a brief call with your bank’s government banking specialist to confirm exemption status and streamline international payment processing:

1. “Our county makes [X] international wire transfers per year. Can you confirm our transfers qualify for the remittance transfer tax exemption?”

Expected answer: “Yes, all wire transfers initiated from your county accounts qualify for exemption under IRC §4475(d)(1) because we are an FDIC-insured bank subject to Bank Secrecy Act reporting.”

Request: Written confirmation letter for audit file (see template in Part 4).

2. “What information do we need to collect from international vendors to process exempt wire transfers?”

Expected answer: Bank will provide standard wire instruction template covering beneficiary bank details, SWIFT codes, intermediary banks, etc.

3. “Are there any payment methods we should avoid to maintain exemption status?”

Expected answer: “Avoid cashier’s checks, money orders, or cash for international transfers. Wire transfers and ACH from your account are always exempt.”

4. “Do you offer any streamlined processes for recurring international payments?”

Many banks offer:

• Template saving for frequently used international vendors
• Batch wire processing for multiple international payments
• Integration with AP systems for automated wire initiation
• Dedicated government banking portals with international payment tools

5. “What are your wire transfer fees for international payments?”

Typical range: $15-50 per outbound wire. Some banks offer:

• Volume discounting for government clients
• Monthly wire bundles
• Free wires for large depositors
• Lower fees for online-initiated wires vs. phone/in-person

Questions for Your Payment Card Provider

If your county uses procurement cards or other cards for international purchases:

1. “Can you confirm our county-issued cards are ‘issued in the United States’ for purposes of the remittance transfer tax exemption?”

Expected answer: “Yes, all cards issued by [Card Provider/Bank Name] to your county are issued in the United States and qualify for exemption under IRC §4475(d)(2).”

2. “Do foreign transaction fees apply to our cards?”

• Many government card programs waive foreign transaction fees
• If fees apply (typically 3%), build into purchasing decisions
• Still usually cheaper and more compliant than alternative methods

3. “Are there any international merchant categories where card payments might not work?”

• Most professional services accept cards
• Some government-to-government payments may require wire transfers
• Bank can advise on specific situations

4. “Can we set spending controls or limits for international transactions?”

Most card programs allow:

• Dollar limits per transaction
• Monthly international spend limits
• Merchant category restrictions
• Real-time alerts for international transactions

Optimizing Your International Payment Processes

Payment Processing Insight: Counties making frequent international payments (10+ per month) should consider:

1. Integrated AP Automation

• Software that auto-populates wire templates from vendor files
• Electronic approvals for international payments
• Automatic generation of wire instructions for bank
• Typical ROI: 2-4 hours saved per week + reduced errors

2. Treasury Management System Integration

• Direct integration between county ERP and bank’s wire system
• Initiate wires without re-keying information
• Real-time payment status tracking
• Enhanced security through bank-grade encryption

3. Payment Analytics

• Dashboard showing international payment volumes and costs
• Identify opportunities to negotiate better wire rates
• Track compliance with payment method policies
• Support budget forecasting for international expenses

4. Vendor Payment Portals

• Some counties offer vendor self-service portals
• Vendors enter/update their own wire instructions
• Reduces AP workload and data entry errors
• Improves vendor payment experience

Implementation Timeline:

Most improvements can be implemented within one fiscal year:

• Q1: Assess current processes and costs
• Q2: Evaluate technology solutions and bank services
• Q3: Implement selected improvements
• Q4: Train staff and measure results

Typical Cost Savings:

Counties implementing these improvements report:

• 30-50% reduction in time spent on international payments
• 20-40% reduction in wire transfer costs (through negotiation/optimization)
• 80-90% reduction in payment errors requiring investigation
• 100% compliance with remittance tax exemption requirements

Frequently Asked Questions – County Treasury Focus

Q: Our county treasurer is changing banks. Do we need to reverify exemption status with the new bank?

A: Yes, but it’s simple. Request a Bank Secrecy Act compliance confirmation letter from your new bank (see template in Part 4). As long as your new bank is an FDIC-insured institution or federally-insured credit union (which virtually all are), your exemption status continues unchanged. Include the new bank letter in your annual compliance file update.

Q: We discovered one department paid an international vendor with a cashier’s check last year. What should we do?

A: First, determine if this occurred before or after January 1, 2026 (when tax took effect). If before Jan 1, 2026: No tax applied, but update policies to prevent future occurrences. If after Jan 1, 2026: The tax would have applied, but the cashier’s check issuer (bank) should have collected it—verify with the department. Going forward, require all international payments through wire transfer or card only.

Q: Can we use PayPal, Venmo, or similar services for international payments?

A: It depends on how the service is funded. If PayPal/Venmo withdraws funds from your county’s linked US bank account, the payment is EXEMPT (bank account exemption). If you load these services using cash or money orders, it could be TAXABLE. Best practice: Link these services directly to county bank accounts and never fund with cash. However, most counties avoid these consumer services in favor of business banking channels with better controls.

Q: What if an international vendor absolutely refuses to accept wire transfers and demands a cashier’s check?

A: You have three options: (1) Negotiate with the vendor—explain US government payment requirements; (2) Find an alternative vendor who accepts standard payment methods; (3) If you must use cashier’s check, accept that 1% tax applies and factor into total cost. Option 3 should be rare; most legitimate international businesses accept wire transfers. If a vendor is unwilling to provide banking information for wire transfer, that itself is a red flag warranting procurement review.

Q: Does the remittance tax apply to payments to US territories (Puerto Rico, US Virgin Islands, Guam)?

A: No. Payments to US territories are domestic transfers, not international remittances. The tax applies only to transfers to foreign countries. Treat payments to US territories the same as payments to US states—no special considerations needed.

Q: Our county has a Canadian border crossing and occasionally reimburses employees for small cash purchases in Canada. Does this involve remittance tax?

A: No. Employee reimbursements for business expenses are not remittances. When you reimburse an employee (via direct deposit, check, or county card reload), you’re paying the employee, not making an international transfer. The employee’s original cash purchase in Canada was their personal transaction. Your reimbursement is a domestic payment to a US-based employee.

Q: We’re considering a contract with an international software company. Should payment terms be included in the RFP to ensure exemption compliance?

A: Yes! Include standard payment terms in your RFP/bid documents: “Payment will be made via wire transfer from County bank account or via County credit card. Vendor must be able to accept payment via one of these methods. County does not issue international payments via cash, money order, or cashier’s check.” This screens out vendors with incompatible payment requirements before contract award.

Q: What if our bank charges $50 per international wire but a money order costs $5. Can we save money using money orders?

A: No. The 1% tax plus poor internal controls make money orders more expensive:

• $10,000 wire: $50 bank fee = Total cost $10,050
• $10,000 money order: $5 money order fee + $100 remittance tax (1%) = Total cost $10,105
• Plus: Money orders lack proper audit trail and create control weaknesses

Wire transfers are actually cheaper AND compliant. Additionally, you can often negotiate government pricing for frequent wires—ask your bank about volume discounts.

Q: How do we report remittance tax payments if we somehow end up owing the tax?

A: The tax is reported on IRS Form 720 (Quarterly Federal Excise Tax Return) and paid quarterly. However, given that counties use bank accounts and cards for international payments, you should never reach this point. If you discover a situation where tax was owed, consult your county attorney and tax advisor—this likely indicates an internal control breakdown that needs immediate attention beyond just tax payment.

Q: Are there any reporting requirements even if all our payments are exempt?

A: No. The exemptions are self-executing based on payment method. You don’t file anything with the IRS to claim exemption status. Your only obligation is to maintain proper documentation in case of audit. The compliance file described in Part 4 is for your internal records and audit support—not for IRS filing.

Q: Our county is considering creating a “rainy day fund” invested with an international broker. Would transfers to fund this account be taxable?

A: No, if the international broker has a US branch or correspondent account at a US bank subject to Bank Secrecy Act reporting. Most reputable international investment firms have US banking relationships specifically to facilitate US client transfers. Verify the funding mechanism before establishing the account—if you can wire from your US bank account to the broker’s US bank account, it’s exempt.

Q: Does the remittance tax apply to international grant payments from county to foreign nonprofits?

A: The tax statute doesn’t distinguish grant payments from other payments—only the payment method matters. If you wire grant funds from your county account to the nonprofit’s bank, it’s EXEMPT (bank account exemption). The charitable or governmental purpose doesn’t affect tax status, though it may be relevant for other aspects of the transaction (grant accounting, reporting requirements, etc.).

Conclusion: Simple Compliance for County Treasurers

The remittance transfer tax, while seemingly complex in the federal statute, has minimal impact on properly-structured county treasury operations. By maintaining standard government payment practices—wire transfers from bank accounts and use of county-issued payment cards—counties automatically qualify for exemptions without additional compliance burden.

Key Takeaways:

1. Standard practices protect you: If you’re following GFOA best practices for payment processing, you’re already compliant.
2. Documentation is straightforward: A simple annual compliance file (Part 4 templates) provides audit support.
3. System configuration prevents problems: Modern AP systems can prevent non-exempt payment methods automatically.
4. Bank relationships are your foundation: Your existing banking relationships provide exemption status—no special accounts or services needed.
5. Edge cases are rare: Most gray-area scenarios can be resolved by defaulting to wire transfer or card payments.

Part 9: Technology Integration for Remittance Tax Compliance and Beyond

The Evolution of Government Payment Processing

County treasurers are increasingly adopting advanced payment technologies not just for compliance, but for comprehensive financial management transformation. The remittance tax compliance requirement provides an opportune moment to evaluate and upgrade payment infrastructure.

Dashboard Capabilities for County Treasurers:

1. International Payment Compliance Dashboard

Real-time display showing:

• Total international payments (current month, YTD)
• Breakdown by payment method (wire transfer vs. card)
• Exemption status verification (100% exempt = green indicator)
• Payment method policy violations (flagged in red if any)
• Average time to process international payments
• Cost per international payment (bank fees, staff time)

Value Proposition:

• Monthly treasurer review in 5 minutes vs. 2+ hours of manual analysis
• Immediate visibility to any compliance issues
• Supports board presentations on payment efficiency
• Early warning system for process breakdowns

2. Vendor Risk and Performance Analytics

Monitor international vendor relationships:

• Payment frequency and amounts by vendor
• On-time payment performance
• Payment method used for each vendor
• Time from invoice to payment
• Vendor payment disputes or issues

Strategic Uses:

• Identify vendors for contract renegotiation
• Support vendor performance reviews
• Optimize payment timing for cash flow
• Document vendor payment patterns for audit

3. Cash Flow Forecasting with International Components

Predictive analytics incorporating:

• Scheduled international wire transfers
• Historical payment patterns
• Currency fluctuation impacts (if paying in foreign currency)
• Bank fee projections
• Seasonal variations in international spending

Treasury Management Benefits:

• Optimize bank account balances
• Reduce unnecessary idle cash
• Plan for large international payments
• Support investment decisions

4. Cybersecurity and Fraud Prevention Monitoring

Real-time alerts for:

• Changes to vendor banking information
• Payment requests outside normal patterns
• International payments to new/unknown entities
• Unusual payment amounts or frequencies
• Failed payment attempts or rejections

Fraud Protection:

• Business Email Compromise (BEC) detection
• Vendor impersonation prevention
• Wire transfer fraud early warning
• Anomaly detection using AI/ML algorithms

Predictive Analytics for Compliance and Audit-Readiness

Advanced systems use machine learning to enhance compliance and predict audit needs.

Predictive Capabilities:

1. Compliance Risk Scoring

• Analyzes payment patterns to identify compliance risks
• Scores vendors based on payment method compliance history
• Predicts likelihood of payment processing errors
• Recommends preventive actions before issues occur

Example Application:

System Analysis:

“Vendor ABC Corp (UK) has received 15 payments in past 12 months.

– 14 payments via wire transfer (exempt)

– 1 payment via check (potentially non-compliant)

 

Risk Assessment: MEDIUM

Recommendation: Review check payment from June 2026. If international check,

determine if remittance tax applied. Update vendor master to WIRE ONLY.”

2. Audit Readiness Automation

• Pre-builds audit documentation packages
• Identifies missing documentation before auditor requests
• Generates compliance reports on demand
• Simulates audit queries to test data completeness

Annual Audit Preparation:

• System generates “International Payments Compliance Report”
• Includes all payments, methods used, exemption basis
• Attaches supporting documentation
• Flags any anomalies for treasurer review
• Typical preparation time: 15-30 minutes vs. several days manual compilation

3. Policy Compliance Monitoring

• Tracks adherence to county payment policies
• Identifies departments/staff with compliance issues
• Measures policy effectiveness
• Suggests policy updates based on operational data

Management Value:

• Data-driven policy decisions
• Targeted staff training based on actual issues
• Continuous improvement metrics
• Board reporting on internal control effectiveness

Government Treasury Trends: Data-Driven Decision-Making

County treasurers are increasingly adopting private-sector analytical approaches to public finance management.

Current Trends in Government Treasury Management:

1. Centralized Treasury Operations

• Consolidating payment processing across departments
• Unified visibility to all county cash flows
• Standardized payment methods and controls
• Shared services model for AP processing

Remittance Tax Benefit: Single point of control ensures consistent application of compliant payment methods across all departments.

2. API-Enabled Banking Integration

• Real-time bank account data in treasury systems
• Automated reconciliation of wire transfers
• Instant payment status updates
• Direct bank communication without manual intervention

Efficiency Gains:

• Wire transfer status updates without calling bank
• Automated confirmation of international payment receipt
• Same-day exception resolution
• Reduced bank statement reconciliation time by 60-80%

3. Cloud-Based Treasury Management

• Secure access from anywhere for authorized staff
• Automatic software updates without IT intervention
• Scalability without hardware investments
• Disaster recovery and business continuity built-in

Operational Advantages:

• Treasurer can approve international wires remotely
• Department heads can view payment status real-time
• Auditors can access records electronically
• Supports hybrid work environments

4. Advanced Analytics and AI

• Predictive cash flow modeling
• Anomaly detection for fraud prevention
• Natural language processing for invoice data extraction
• Automated categorization and coding

Future-Forward Capabilities:

• AI suggests optimal payment timing
• ML identifies duplicate invoices automatically
• Chatbots answer vendor payment status inquiries
• Predictive maintenance for payment systems

Cybersecurity Enhancements in Payment Processing

As payment systems become more sophisticated, security measures must evolve proportionally.

Critical Security Considerations for International Payments:

1. Multi-Factor Authentication (MFA)

• Required for all international wire transfers
• Biometric authentication options (fingerprint, facial recognition)
• Token-based authentication for high-value payments
• Device authorization controls

Best Practice: Require MFA for any user initiating or approving international payments, regardless of amount.

2. Dual Authorization for International Wires

• Separate user initiates payment
• Different user approves and releases
• Both actions logged with timestamp and IP address
• Neither user can complete transaction alone

Implementation:

International Wire Transfer Workflow:

1. AP Clerk enters payment details → Saved as “Pending”
2. Supervisor reviews and approves → Status “Approved”
3. Treasurer or designee releases → Status “Released to Bank”
4. Bank processes → Status “Completed”

Each step requires separate login and MFA.

3. Vendor Verification Protocols

• Out-of-band confirmation for banking changes
• Phone verification using independently obtained numbers
• Email confirmation using alternate email addresses
• Verification of changes before first payment

BEC Fraud Prevention: Business Email Compromise scams often target international wire transfers. Counties have lost millions to fraudulent vendor banking changes. Strict verification prevents this.

4. Encryption and Data Protection

• End-to-end encryption for wire transfer data
• Encrypted storage of vendor banking information
• Secure transmission to banking partners
• Audit logging of all access to sensitive data

Compliance Connection: Strong encryption protects the same data needed for remittance tax exemption documentation (vendor banking info, wire transfer records).

5. Network Segmentation

• Separate network zones for financial systems
• Restricted access to payment processing applications
• Firewall rules limiting external connections
• Intrusion detection specific to treasury operations

6. Continuous Monitoring and Threat Intelligence

• Real-time monitoring of wire transfer activity
• Alerts for unusual payment patterns
• Threat intelligence feeds for government sector
• Regular vulnerability assessments

Payment Processing Insight: Counties implementing advanced cybersecurity measures report 90%+ reduction in successful fraud attempts and faster detection of the remaining 10%. Insurance carriers often offer premium reductions for documented security controls, offsetting implementation costs.

Selecting Technology Solutions

Evaluation Criteria for County Treasurers:

When evaluating AP automation or treasury management systems, consider:

1. Compliance Features

• Built-in remittance tax exemption validation
• Configurable payment method rules by vendor location
• Automated compliance reporting
• Audit trail capabilities

2. Integration Capabilities

• Compatibility with existing ERP (Tyler, Oracle, SAP, etc.)
• Direct bank connectivity (API-based preferred)
• Document management system integration
• Budget/forecasting tool connections

3. User Experience

• Intuitive interface requiring minimal training
• Mobile access for approvals
• Self-service vendor portals
• Customizable dashboards

4. Security and Compliance

• SOC 2 Type II certification
• Government-specific security features
• Role-based access controls
• MFA and encryption standards

5. Vendor Support and Viability

• Experience with government clients
• Implementation success rate
• Customer support responsiveness
• Product roadmap and innovation

6. Cost and ROI

• Total cost of ownership (licensing, implementation, training)
• Quantifiable efficiency gains
• Error reduction value
• Staff time savings

Typical ROI Timeline:

For mid-size counties (100-500 employees):

• Implementation: 3-6 months
• Break-even: 18-24 months
• Annual savings: $50,000-150,000 (staff time + error reduction)
• Intangible benefits: Better controls, audit readiness, fraud prevention

Part 10: Legislative Monitoring and Ongoing Compliance

Staying Current with Remittance Tax Regulations

The remittance transfer tax is new legislation (effective January 1, 2026) and implementation guidance will evolve over time. County treasurers should establish processes for monitoring regulatory developments.

Why Legislative Monitoring Matters:

1. IRS Implementation Guidance: Treasury Department and IRS will issue regulations, notices, and guidance clarifying ambiguous provisions
2. Enforcement Priorities: IRS examination focus areas may shift based on compliance trends
3. Legislative Amendments: Congress may modify provisions based on implementation experience
4. Court Interpretations: Judicial decisions may clarify statutory language
5. State Implications: Some states may enact parallel or supplemental provisions

Setting Up Your Monitoring System

Recommended Alert Sources:

1. IRS Official Channels

Subscribe to IRS updates:

• IRS Tax Professionals Page: www.irs.gov/tax-professionals
• IRS e-News for Tax Professionals: Email subscription for updates
• Federal Register Alerts: www.federalregister.gov (search “remittance transfer tax”)
• IRS Notice and Announcement Listings: Published on IRS.gov quarterly

Set up alerts for:

• Form 720 updates (quarterly excise tax return)
• New Revenue Rulings addressing remittance transfers
• IRS Notices providing transition relief or guidance
• Proposed and final Treasury Regulations under IRC §4475

2. Government Finance Organizations

Join and monitor:

Government Finance Officers Association (GFOA)

• Website: www.gfoa.org
• Member alerts on federal tax changes affecting local governments
• Best practice updates
• Webinars on compliance topics
• Online discussion forums

National Association of Counties (NACo)

• Website: www.naco.org
• Federal legislation tracking
• Model policies and procedures
• County peer networking

International City/County Management Association (ICMA)

• Website: icma.org
• Management briefings on federal requirements
• Professional development resources

3. Banking and Payment Industry Sources

Your banking partners monitor regulatory changes affecting their services:

• Federal Reserve Bank Bulletins: Updates on payment system regulations
• Bank Relationship Manager Updates: Your bank likely sends government client alerts
• Payment Association News: NACHA (ACH), The Clearing House (wires)

Action Item: Request your bank add your treasury email to their government banking regulatory update distribution list.

4. Professional Associations

Association of Government Accountants (AGA)

• Website: www.agacgp.org
• CGFM certification updates
• Government financial management publications

National Association of State Treasurers (NAST)

• Website: www.nast.org
• Intergovernmental payment issues
• Treasury management best practices

Association for Financial Professionals (AFP)

• Website: www.afponline.org
• Treasury management certifications
• Payment system updates

5. Legal and Tax Research Services

If your county subscribes:

• Bloomberg Tax: Daily updates on tax law changes
• Thomson Reuters Checkpoint: Comprehensive tax research
• CCH/Wolters Kluwer: Tax and accounting guidance
• Lexis/Westlaw: Legal research with tax modules

Alternative: Many county associations negotiate group subscriptions at reduced rates for members.

Monitoring Schedule and Responsibilities

Suggested Approach:

Monthly Review (30 minutes)

• County Treasurer or designee
• Check IRS.gov for new notices/guidance
• Review GFOA and NACo email alerts
• Check Federal Register for proposed regulations
• Document “no changes” or note any developments

Quarterly Review (1-2 hours)

• Finance Director and County Treasurer
• Review Form 720 instructions for updates
• Check for new IRS publications or FAQs
• Review bank communications for payment system changes
• Update internal compliance documentation if needed

Annual Review (Half day)

• Finance leadership team
• Comprehensive review of all remittance tax developments
• Update compliance policies and procedures
• Brief county commissioners on any material changes
• Update staff training materials
• Review and update compliance file for auditors

Legislative Alert Response Protocol:

When significant guidance or changes are announced:

Step 1: Initial Assessment (Same day)

• Treasurer reviews alert/guidance
• Determines if county operations are affected
• Classifies as: No impact / Minor impact / Significant impact

Step 2: Detailed Analysis (Within 1 week)

• Finance team analyzes specific implications
• Consults with county attorney if legal interpretation needed
• Contacts bank/payment processor for their assessment
• Determines if operational changes required

Step 3: Action Plan (Within 2 weeks)

• Document required changes to policies/procedures
• Identify system configuration updates needed
• Plan staff communication and training
• Establish implementation timeline

Step 4: Implementation (As required)

• Make necessary operational adjustments
• Update internal documentation
• Train affected staff
• Monitor effectiveness

Step 5: Documentation (Within 30 days)

• Update the compliance file with new guidance
• Document the county response and implementation
• Prepare summary for next board meeting (if material)

Potential Areas for Future Guidance

Based on common implementation questions, expect IRS guidance on:

1. Definition Clarifications

• What constitutes “other similar physical instruments” beyond cash, money orders, and cashier’s checks?
• How do digital payment innovations (stablecoins, CBDCs) apply?
• Treatment of mobile payment apps (Venmo, Cash App, etc.)
• Blockchain-based payment systems

2. Exemption Scope

• Clarification of “withdrawn from an account” for various payment structures
• Treatment of payment intermediaries and aggregators
• Status of FinTech companies operating through bank partnerships
• International correspondent banking arrangements

3. Collection and Remittance

• Form 720 filing instructions and line items
• Electronic filing requirements and formats
• Payment timing and estimated tax requirements
• Penalty relief for good-faith compliance errors

4. Compliance and Enforcement

• Examination priorities and audit procedures
• Safe harbor provisions for exempt transfers
• Documentation standards for exemption claims
• Statute of limitations and recordkeeping requirements

5. Coordination with Other Laws

• Interaction with state money transmitter laws
• Bank Secrecy Act reporting coordination
• OFAC sanctions and remittance tax
• Tax treaty implications for government transfers

Congressional Activity to Monitor

Potential Legislative Amendments:

While the remittance transfer tax is now law, Congress may consider changes:

Possible Amendments:

• Expanding exemptions (e.g., explicit government payment exemption)
• Raising de minimis thresholds (exempt small transfers)
• Modifying tax rates or structures
• Adding reporting requirements or credits
• Clarifying the application to specific industries or situations

How to Track:

1. Congress.gov: Search “remittance transfer” or “Section 4475”
2. Committee Websites:
   • House Ways and Means Committee
   • Senate Finance Committee
3. Congressional Budget Office: Cost estimates for proposed amendments
4. Government Affairs Offices: Your state’s county association lobbyists

Action Item: If proposed amendments would significantly affect counties, coordinate advocacy through:

• National Association of Counties
• State association of counties
• Direct communication with your Congressional delegation

Payment Processing Insight: Technology vendors serving government clients monitor legislative developments to ensure their systems remain compliant. When selecting or renewing payment platform contracts, confirm vendor commitment to regulatory updates without additional licensing fees.

Part 11: Expanded FAQs – Gray Areas and Edge Scenarios

Digital Payment Innovations and Platform Changes

Q: Our county is considering using digital wallets (Apple Pay, Google Pay) for emergency employee expenses. Would payments from these wallets to international vendors be exempt?

A: It depends on how the digital wallet is funded:

Exempt Scenarios:

• Digital wallet linked to county bank account (funds withdrawn from account) → EXEMPT under bank account exemption
• Digital wallet linked to county-issued credit/debit card → EXEMPT under US card exemption
• Employee uses their personal digital wallet for business expense, the county reimburses the employee in USD → County reimbursement is a domestic payment, not international transfer

Potentially Taxable:

• Digital wallet funded by cash or money order, then used for international transfer → TAXABLE
• County loads prepaid card for employee, employee reloads international person’s digital wallet → Complex, possibly taxable

Best Practice: If using digital wallets for county business, link exclusively to county bank accounts or US-issued cards. Document the funding source in your compliance file. For employee expense reimbursements, reimburse employees in USD to their US accounts—their personal use of digital wallets is separate from county operations.

Q: We’re hearing about Central Bank Digital Currencies (CBDCs). If the US launches a digital dollar, how would it affect remittance tax?

A: The IRS has not issued guidance on CBDCs and remittance tax. However, logical framework:

If US CBDC is held in accounts at Federal Reserve or federally-regulated institutions:

• Likely exempt under bank account exemption (similar treatment to current USD)
• Transfers from CBDC accounts would parallel wire transfers

If US CBDC operates outside traditional banking:

• May require specific regulatory guidance
• Could be treated similar to prepaid cards or payment apps

Current Recommendation: Continue using established banking channels until official guidance on CBDCs is published. If US launches CBDC, expect IRS to provide clear guidance on remittance tax treatment before widespread adoption.

Q: Our county uses bill.com for vendor payments. Are payments through this platform exempt?

A: Yes, IF bill.com withdraws funds from your county’s linked US bank account. Bill.com and similar platforms (AvidXchange, Tipalti, MineralTree) typically:

1. County links platform to county bank account
2. Platform initiates ACH debit from county account
3. Platform transfers funds to vendor (including international vendors)

Exemption Analysis:

• Funds come from county’s US bank account → Bank account exemption applies
• County is not providing “cash, money order, or cashier’s check”
• Platform is acting as county’s agent, using county’s exempt funding source

Documentation: Confirm with your platform provider:

• “How are international payments funded?” (Answer should be: ACH from our bank account)
• “Do you collect remittance transfer taxes?” (Answer should be: No, payments are exempt under bank account exemption)
• Request written confirmation for your compliance file

Q: What about cryptocurrency payments to international vendors? Our IT department wants to pay for blockchain services.

A: This is a gray area with no clear IRS guidance yet. Conservative approach:

Current Recommendation: Avoid for Government Operations

Reasons:

1. Uncertain tax treatment: IRS hasn’t clarified whether crypto transfers are “remittance transfers” under the statute
2. Accounting challenges: GASB standards for crypto are still evolving
3. Volatility concerns: Exchange rate risk for county funds
4. Internal control issues: Crypto transactions harder to reverse or verify than traditional payments
5. Political/policy risk: Public perception of government crypto use

Alternative: Require international vendors accept traditional payment methods (wire transfer or card). If vendor insists on crypto:

• Pay vendor in USD via wire transfer to their business bank account

Q: We’re switching from one online payment platform to another. Do we need to reverify exemption status?

A: Yes. When changing payment platforms, verify the new platform’s funding mechanisms:

Due Diligence Questions for New Platform:

1. “How are international payments funded in your system?”
   • Acceptable: “ACH from your bank account” or “Credit card charges”
   • Problematic: “Platform wallet that you load with money orders”
2. “Are you registered as a remittance transfer provider under EFTA?”
   • This helps understand their compliance posture
3. “Do you withhold or collect remittance transfer taxes?”
   • Should be “No” if they’re using exempt funding methods
4. “Can you provide documentation that payments qualify for IRC §4475 exemptions?”
   • Reputable platforms serving government clients should be able to provide this

Implementation Steps:

• Test payment process before going live
• Verify first international payment processes correctly
• Update your compliance documentation with new platform details
• Train AP staff on any process changes

Q: Our county wants to offer residents the ability to pay fees/fines online. If a foreign national pays us from abroad, do we have remittance tax obligations?

A: No. Inbound payments (money coming INTO the US) are not subject to the remittance transfer tax.

The tax applies to transfers FROM the US TO foreign countries. If someone abroad pays your county:

• They’re sending money TO the US (inbound)
• No US remittance tax applies
• This is true regardless of payer’s citizenship or location

Your only consideration: Choose a payment processor that can accept international cards/payments efficiently. But remittance tax compliance is not a factor for inbound payments.

Staff Training and Departmental Coordination

Q: Which staff members need training on remittance tax compliance?

A: Training should be tiered based on job responsibilities:

Tier 1 – Comprehensive Training (2-3 hours)

• County Treasurer
• Finance Director
• Accounts Payable Manager
• Assistant Finance Director
• Treasury staff who process wire transfers

Topics:

• Full remittance tax law overview
• Exemption provisions in detail
• County payment methods and why they’re exempt
• Documentation requirements
• Red flags and when to escalate
• Legislative monitoring process

Tier 2 – Operational Training (1 hour)

• AP Clerks who process payments
• Purchasing staff who set up vendors
• Department fiscal staff with payment authority
• Internal auditors

Topics:

• Prohibited payment methods (cash, money order, cashier’s check) for international payments
• How to identify international vendors
• Required vendor information for international payments
• Who to contact with questions
• Basic exemption concepts

Tier 3 – Awareness Training (15-30 minutes)

• Department heads
• Program managers with budget authority
• Staff who travel internationally
• Elected officials

Topics:

• County doesn’t use cash/money orders for ANY payments
• International payments processed through Treasury
• Reimbursements for employee expenses not affected
• No personal liability if following county procedures

Training Delivery Methods:

• Live sessions: For Tier 1 and initial rollout
• Recorded webinars: For ongoing staff onboarding
• Quick reference guides: One-page summaries for all staff
• Email updates: When regulations/guidance changes
• Annual refresher: Brief update at start of each fiscal year

Q: How should we handle training when staff turnover is high in AP department?

A: Implement structured onboarding with built-in compliance training:

New AP Staff Onboarding Checklist:

Week 1:

• Review county payment policies (including international payment procedures)
• Shadow experienced AP clerk on international wire transfer
• Review remittance tax exemption documentation file
• Complete online training module (if available)

Week 2-4:

• Process first international payment under supervision
• Demonstrate understanding of exemption requirements
• Quiz on prohibited payment methods
• Sign acknowledgment of training completion

Ongoing:

• Quarterly review of international payment procedures
• Annual refresher on compliance requirements
• Immediate notification of any regulation changes

Payment Processing Insight: Modern AP systems can include embedded training tools—contextual help that appears when processing international payments, required reading before first international wire, pop-up reminders about prohibited methods. These built-in features reduce training burden and ensure consistent compliance even with staff turnover.

Q: What if a department processes international payments without going through Treasury? How do we prevent this?

A: Implement system controls and policy enforcement:

Prevention Strategies:

1. System Configuration
   • Only Treasury has access to initiate international wires
   • County credit cards issued/controlled by Treasury
   • Department procurement cards have appropriate limits and controls
   • System alerts when international vendor added to vendor master
2. Policy Clarity
   • Written policy: “All international payments must be processed through County Treasurer’s Office”
   • Clear definition of “international payment” (vendor outside US)
   • Consequences for policy violations outlined
   • Exception process for emergency situations (still requires Treasurer approval)
3. Training
   • All department fiscal staff are trained on policy
   • Annual acknowledgment required
   • Include in new employee orientation
4. Monitoring
   • Monthly report of all vendor additions by department
   • Quarterly review of payment methods used
   • Flag any anomalies for investigation

If Policy Violation Discovered:

1. Immediately determine payment details (method used, amount, recipient)
2. Assess whether remittance tax applied (was exempt method used?)
3. Document findings and remediation
4. Retrain responsible staff
5. Strengthen controls to prevent recurrence
6. If taxable method was used, consult a tax advisor on corrective action

Q: We have multiple satellite offices/facilities. How do we ensure consistent compliance across locations?

A: Centralized payment processing with local accountability:

Organizational Structure:

• Centralized Treasury: All payment execution (wires, card payments) happens at main office
• Distributed AP Data Entry: Satellite offices can enter invoices into system
• Workflow Routing: Payments automatically route to Treasury for execution
• Local Budget Monitoring: Satellite managers track their budgets but don’t execute payments

Communication Protocols:

• Monthly calls: Treasury and satellite fiscal staff discuss upcoming international payments
• Shared calendar: Planned international payments visible to all locations
• Standard templates: Satellite offices use Treasury-provided forms for international vendor setup
• Quick reference guides: Posted at each location with “Do/Don’t” reminders

Technology Solutions:

• Cloud-based systems: All locations access the same platform
• Role-based security: Satellite staff can enter invoices, and Treasury releases payments
• Mobile approval: Satellite managers approve via smartphone, Treasury executes
• Centralized reporting: Treasury monitors all locations’ international payments

Q: What happens if an employee makes an unauthorized international payment on their county card?

A: Depends on circumstances:

Scenario A: Legitimate business expense using county card

• Employee traveled internationally, used county card for authorized expenses
• Payment method (US-issued card) is EXEMPT
• No compliance issue—normal expense reimbursement process applies

Scenario B: Personal use of county card (policy violation)

• Employee used county card for personal international purchase
• This is personnel/ethics issue, not primarily a remittance tax issue
• Card issuer (bank) would handle tax if any (county not involved in employee’s personal transaction)
• Address through county’s card misuse policies

Scenario C: Business expense using prohibited method

• Employee paid international vendor with personal cash, seeks reimbursement
• County reimburses employee in USD—this is domestic payment (exempt)
• Employee’s original payment method doesn’t affect county’s reimbursement
• May counsel employee on preferred payment methods for future

Key Principle: When the county reimburses employees for business expenses, the reimbursement itself is a domestic payment to a US-based employee, not an international transfer. The employee’s original payment method doesn’t create county remittance tax obligations.

Q: How do we train elected officials who might travel internationally and incur expenses?

A: Focused, respectful training recognizing their unique role:

Training Approach:

Format: One-on-one briefing or small group session (not mixed with general staff)

Duration: 30 minutes

Key Messages:

1. County has your back: “We’ve structured our payment processes to ensure full compliance with federal tax law. If you use county-approved methods, you don’t need to worry about this regulation.”
2. What you need to do: “When traveling internationally or incurring international expenses:
   • Use your county-issued credit card whenever possible
   • Keep receipts as always
   • Submit expense reports through normal process
   • We handle the rest”
3. What we handle: “Treasury ensures all payments use tax-exempt methods. You don’t need to become a tax expert—just follow our standard expense procedures.”
4. Questions welcome: “If you have any unusual situations or questions, contact [Treasurer] directly. We’re here to make compliance easy for you.”

Materials to Provide:

• One-page summary in non-technical language
• Wallet card with “When in doubt, call Treasury” contact info
• Pre-programmed Treasury contact in county-issued phone

Follow-up:

• Email reminder before any planned international travel
• Proactive check-in after international travel: “Need any help with expenses?”

Policy Updates and Best Practices

Q: Should we update our county’s financial policies to explicitly address remittance tax compliance?

A: Yes. Policy updates provide clarity and establish accountability. Consider adding a new section or updating your existing payment processing policies.

Recommended Policy Language:

SECTION XX: INTERNATIONAL PAYMENTS AND REMITTANCE TAX COMPLIANCE

Purpose: To ensure compliance with Internal Revenue Code Section 4475 (Remittance Transfer Tax) and maintain appropriate controls over international payments.

Scope: Applies to all county departments, elected offices, and affiliated entities making payments to vendors, contractors, or service providers located outside the United States.

 

Policy Provisions:

1. Authorized Payment Methods: All international payments shall be made exclusively through:

• Wire transfers from county bank accounts
• Automated Clearing House (ACH) transfers from county bank accounts
• County-issued credit or debit cards issued by US financial institutions
• Electronic payment platforms that withdraw funds from county bank accounts

 

2. Prohibited Payment Methods: The following methods shall NOT be used for international payments:

• Cash payments to remittance transfer providers
• Money orders sent to international recipients
• Cashier’s checks for international transfers
• Any other physical payment instruments sent outside the United States

 

3. Centralized Processing: All international payments must be processed through the County Treasurer’s Office. Department-initiated international payments without Treasury approval are prohibited.

 

4. Vendor Setup Requirements: Purchasing/Procurement shall obtain complete banking information from international vendors prior to vendor setup, including:

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

 

5. Documentation: Treasury shall maintain documentation demonstrating compliance with exemption provisions, including:

•    Annual inventory of international payment methods
•    Banking relationship confirmations
•    Vendor payment method records
•    Compliance review memoranda

 

6. Training: All staff involved in payment processing, vendor setup, or budget management shall receive training on international payment procedures upon hire and annually thereafter.

 

7. Monitoring: Treasury shall conduct quarterly reviews of international payments to ensure policy compliance and exemption status maintenance.

 

8. Policy Review: This policy shall be reviewed annually and updated as necessary to reflect changes in federal law or regulations.

 

Effective Date: [Date]

Review Date: [Annual review date]

Approved by: [County Board]

Implemented by: [County Treasurer]

Q: How often should we review and update our remittance tax compliance procedures?

A: Implement a structured review schedule:

Annual Comprehensive Review (Every January)

• Review all international payment activity from prior year
• Update compliance documentation for auditors
• Assess whether any payment methods have changed
• Review any new IRS guidance issued in past year
• Update training materials if needed
• Brief county board on compliance status
• Conduct staff refresher training

Quarterly Monitoring (Each quarter-end)

• Generate international payment report
• Verify all payments used exempt methods
• Flag any anomalies for investigation
• Check for new IRS publications
• Update legislative monitoring log

Immediate Review Triggers

• New IRS guidance on remittance tax
• County changes banking relationships
• County adopts new payment platform/technology
• Internal audit findings related to payments
• External audit recommendations
• Staff turnover in key positions
• Vendor payment method change requests

Policy Update Cycle:

• Review policy annually
• Update if regulations change
• Obtain board approval for material changes
• Communicate changes to all affected staff

Q: What key performance indicators (KPIs) should we track for remittance tax compliance?

A: Establish measurable compliance metrics:

Primary Compliance KPIs:

1. Exemption Rate:
   • Target: 100% of international payments using exempt methods
   • Calculation: (Exempt payments / Total international payments) × 100%
   • Review frequency: Monthly
2. Policy Violation Rate:
   • Target: Zero violations
   • Calculation: (Non-compliant payments / Total international payments) × 100%
   • Review frequency: Monthly
3. Documentation Completeness:
   • Target: 100% of international vendors have complete wire instructions on file
   • Calculation: (Vendors with complete info / Total international vendors) × 100%
   • Review frequency: Quarterly
4. Training Completion:
   • Target: 100% of required staff trained within 30 days of hire or annually
   • Calculation: (Trained staff / Required staff) × 100%
   • Review frequency: Quarterly

Secondary Efficiency KPIs:

1. Average Time to Process International Payment:
   • Benchmark: 2-3 business days from invoice approval to wire release
   • Track trends over time to identify process improvements
2. International Payment Error Rate:
   • Target: <1% of payments require correction
   • Includes rejected wires, incorrect amounts, and wrong recipients
3. Cost Per International Payment:
   • Track bank fees + staff time
   • Identify opportunities for volume discounts or process optimization
4. First-Time Success Rate:
   • Target: >95% of international payments process successfully on first attempt
   • Failed payments waste time and may indicate vendor setup issues

Dashboard Reporting:

Create a simple monthly dashboard for the treasurer’s review:

[County Name] International Payment Compliance Dashboard

Month: [Month/Year]

 

COMPLIANCE METRICS:

✓ International Payments Processed: [X]

✓ Exempt Payment Methods Used: [X] (100%)

✓ Non-Compliant Payments: [0] (0%)

✓ Vendor Documentation Complete: [X/X] (100%)

 

EFFICIENCY METRICS:

• Average Processing Time: [X] days
• Payment Error Rate: [X%]
• Cost Per Payment: $[X]
• First-Time Success Rate: [X%]

 

TRAINING STATUS:

• Staff Trained YTD: [X/X] (100%)
• Staff Requiring Training: [0]

 

REGULATORY MONITORING:

• IRS Guidance Reviewed: [Date]
• Policy Last Updated: [Date]
• Next Compliance Review: [Date]

 

STATUS: ✓ COMPLIANT – No action required

Conclusion: Simple Compliance Through Sound Practices

The remittance transfer tax, while seemingly complex in the federal statute, has minimal impact on properly-structured county treasury operations. By maintaining standard government payment practices—wire transfers from bank accounts and use of county-issued payment cards—counties automatically qualify for exemptions without additional compliance burden.

Key Takeaways for County Treasurers:

1. Standard practices protect you: If you’re following GFOA best practices for payment processing, you’re already compliant.
2. Documentation is straightforward: A simple annual compliance file (Part 4 templates) provides audit support.
3. System configuration prevents problems: Modern AP systems can prevent non-exempt payment methods automatically.
4. Bank relationships are your foundation: Your existing banking relationships provide exemption status—no special accounts or services needed.
5. Edge cases are rare: Most gray-area scenarios can be resolved by defaulting to wire transfer or card payments.
6. Technology enhances compliance: Advanced AP automation, real-time dashboards, and predictive analytics make compliance easier while improving overall treasury operations.
7. Stay informed: Simple monitoring processes ensure you’re aware of regulatory developments without consuming excessive staff time.
8. Training scales: Tier training based on job roles—comprehensive for treasury staff, awareness for general employees.

Final Recommendations:

Immediate Actions (Before January 1, 2026):

• Complete international payment methods inventory
• Document exemption basis for all payment methods
• Request Bank Secrecy Act confirmation letter from your bank
• Create a compliance file using templates in Part 4
• Brief the county board on compliance status

Ongoing Actions (2026 and beyond):

• Conduct quarterly reviews of international payments
• Monitor IRS and GFOA for regulatory updates
• Update training materials when regulations change
• Maintain annual compliance documentation for auditors
• Review and update policies annually

Strategic Considerations:

• Evaluate AP automation platforms if processing is manual
• Consider treasury management system upgrades for enhanced visibility
• Implement cybersecurity enhancements for international wire transfers
• Build data analytics capabilities for compliance and efficiency
• Participate in government finance peer networks for best practice sharing

The remittance transfer tax should be viewed not as a burden but as an opportunity to verify that your county’s payment processing infrastructure meets modern standards for efficiency, security, and compliance. Counties that use this moment to evaluate and enhance their payment systems will benefit far beyond this single compliance requirement.

Payment Processing Insight: The counties that navigate OBBBA’s various provisions most successfully—from remittance tax to SNAP cost sharing to budget impacts—are those that invest in modern financial infrastructure, maintain rigorous documentation practices, and foster a culture of continuous improvement. The remittance transfer tax, requiring minimal operational changes for most counties, provides a low-stakes opportunity to demonstrate these capabilities before more complex requirements arrive.

Additional Resources

Federal Government Sources:

• Internal Revenue Service – Excise Tax Information
• IRS Form 720 Instructions (Quarterly Federal Excise Tax Return)
• Federal Register – Treasury/IRS Regulations
• Consumer Financial Protection Bureau – Remittance Transfer Rule
• Financial Crimes Enforcement Network (FinCEN) – Bank Secrecy Act

Government Finance Professional Organizations:

• Government Finance Officers Association (GFOA) – Best practices, training, peer networking
• National Association of Counties (NACo) – Federal legislation tracking, county resources
• Association of Government Accountants (AGA) – Professional development, certification
• International City/County Management Association (ICMA) – Management guidance
• National Association of State Treasurers (NAST) – Treasury management resources

Banking and Payment System Resources:

• NACHA (National Automated Clearing House Association) – ACH payment standards
• The Clearing House – Wire transfer information
• SWIFT (Society for Worldwide Interbank Financial Telecommunication) – International wire standards

Technology and Security:

• MS-ISAC (Multi-State Information Sharing and Analysis Center) – Cybersecurity for government
• CISA (Cybersecurity and Infrastructure Security Agency) – Federal cybersecurity guidance
• Payment Card Industry Data Security Standard (PCI DSS) – Card payment security

County-Specific Guidance:

• Contact your state association of counties for state-specific implementation guidance
• Join GFOA email discussion groups for peer support
• Consult with your county’s existing banking partners – most offer government client support
• Engage your payment processing vendors for compliance support

Professional Assistance: For counties needing additional support:

• County association technical assistance programs
• Government financial management consultants specializing in treasury operations
• Law firms with public finance practices (for policy/legal questions)
• CPA firms with government audit expertise (for documentation/audit preparation)
• Payment processing solution providers (for technology implementation)

Disclaimer: This article provides general information about the One Big Beautiful Bill Act’s remittance transfer tax provisions and does not constitute legal, accounting, or professional tax advice. County treasurers and finance directors should consult with legal counsel, certified public accountants, tax advisors, and other qualified professionals for guidance specific to their jurisdiction’s circumstances and operations.

The remittance transfer tax law (IRC Section 4475) was recently enacted, and implementation guidance from the Internal Revenue Service and Treasury Department continues to evolve. Counties should monitor official IRS publications, notices, and regulations for the most current guidance. Information in this article is accurate as of the publication date but may not reflect subsequent regulatory developments or clarifications.

The examples, templates, and scenarios presented are illustrative and may not address all situations a county might encounter. Counties are encouraged to document their specific circumstances, maintain comprehensive compliance files, and seek professional advice when uncertainty exists. Federal and state laws vary, and this article focuses on federal remittance tax requirements without addressing potential state-specific considerations. The authors and publisher assume no liability for decisions made based on information in this article. Counties implementing any of the technology solutions, policy changes, or procedures discussed should conduct appropriate due diligence, obtain necessary approvals, and ensure compatibility with existing systems and local requirements.

Published October 2025  For County Treasurers and Finance Directors. This article focuses on remittance transfer tax exemptions and compliance for county operations.