Par. 6. Add a new subpart G to read as follows:
(a) In general. Section 4475(a) of the Internal Revenue Code (Code) imposes a 1 percent tax on taxable remittance transfers (remittance transfer tax). Paragraph (b) of this section provides definitions that apply for purposes of section 4475 and this section. Paragraph (c) of this section provides rules regarding when the remittance transfer tax attaches to taxable remittance transfers described in paragraph (d) of this section. Paragraph (e) of this section provides examples that illustrate the application of section 4475 and this section.
(b) Definitions. The following definitions apply for purposes of section 4475 and this section.
(1) Cash. The term cash means United States dollars or any foreign currency in physical form that is issued by a government or a central bank.
(2) Consumer. The term consumer means a natural person.
(3) Designated recipient. The term designated recipient means any person specified by the sender as the authorized recipient of a remittance transfer to be received at a location in a foreign country. A remittance transfer is received at a location in a foreign country if funds are to be received at a location physically outside of any State.
(4) Remittance transfer— (i) In general. The term remittance transfer means the electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider. The term applies regardless of whether the sender holds an account with the remittance transfer provider.
(ii) Exclusions. The term remittance transfer does not include—
(A) Small value transactions. Transfer amounts, as described in 12 CFR 1005.31(b)(1)(i) revised as of January 1, 2026, of $15.00 or less.
(B) Securities and commodities transfers. Any transfer that is excluded from the definition of electronic fund transfer under 12 CFR 1005.3(c)(4) revised as of January 1, 2026.
(5) Remittance transfer provider —(i) In general. The term remittance transfer provider means any person that provides remittance transfers for a consumer in the normal course of its business, regardless of whether the consumer holds an account with such person. A person is not a remittance transfer provider merely because it performs activities as an agent on behalf of a remittance transfer provider. For example, a grocery store would not be a remittance transfer provider merely because it acts as an agent of a remittance transfer provider to offer consumers remittance transfer services.
(ii) Non-applicability of normal-course-of-business safe harbor. For purposes of section 4475 and this section, the safe harbor provided in 12 CFR 1005.30(f)(2), which provides a threshold number of remittance transfers below which a person is deemed not to be providing remittance transfers for a consumer in the normal course of its business, does not apply.
(6) Sender. The term sender means a consumer in a State who primarily for personal, family, or household purposes requests a remittance transfer provider to send a remittance transfer to a designated recipient.
(7) State. The term State means any State or territory of the United States, or the District of Columbia.
(c) Attachment of tax —(1) In general. The remittance transfer tax attaches at the time a remittance transfer described in paragraph (d) of this section is made. A remittance transfer is made at the earlier of the time the remittance transfer is initiated by the remittance transfer provider or the time the sender pays the remittance transfer provider (or its agent). For example, if a sender pays for a remittance transfer on December 31, 2026, the remittance transfer provider initiates the transfer on the same day, and the funds are disbursed to the designated recipient on January 2, 2027, such remittance transfer occurred on December 31, 2026, and is reportable for the fourth calendar quarter of 2026 and not in the first calendar quarter of 2027. See part 40 of this chapter for rules relating to returns, payments, deposits, and other procedural rules applicable to this section.
(2) Canceled or expired remittance transfers. The remittance transfer tax attaches when the remittance transfer is made regardless of whether the remittance transfer is ever paid out to the designated recipient (for example, if the transfer was canceled or expired). In a case in which the transfer is canceled or expires and the amount of the remittance transfer is returned to the sender, the sender may be eligible to file a claim for refund of the remittance transfer tax with the Internal Revenue Service. See sections 6401 and 6402 of the Code.
(d) Taxable remittance transfers— (1) In general. The remittance transfer tax applies only to remittance transfers for which the sender provides cash, a money order, a cashier's check, or a traveler's check to the remittance transfer provider. Subject to the anti-avoidance rule in paragraph (d)(4) of this section, this is the exclusive list of instruments that, when provided to a remittance transfer provider, trigger the remittance transfer tax. Settlement of the issuer's payment obligation to the remittance transfer provider under a money order, cashier's check, or traveler's check does not constitute withdrawal for purposes of section 4475(d)(1) and, consequently, the source of any funds transferred is not relevant if such instruments have been provided to a remittance transfer provider.
(2) Personal or business check cashed by remittance transfer provider. If a remittance transfer provider (or its agent) cashes a personal or business check payable to the sender and some or all of the cash from the check cashing is used to fund a remittance transfer, such transaction is treated as a remittance transfer for which the sender provides cash to the remittance transfer provider, regardless of whether the sender ever has actual possession of any resulting cash.
(3) Amount subject to taxation. The remittance transfer tax is imposed on the total amount that will be transferred to the designated recipient, including any amount provided by the sender, the remittance transfer provider, or any other person (for example, promotional bonuses or discounts), regardless of how such amounts are characterized for purposes of the remittance transfer. Fees, taxes, and other amounts that will not be transferred to the designated recipient with respect to any remittance transfer, including the amount of the remittance transfer tax imposed, are excluded from the total amount on which the remittance transfer tax is imposed.
(4) Transactions for tax-avoidance purposes. If a sender and remittance transfer provider (or its agent) or third party engage in a transaction (or series of transactions) with a principal purpose of avoiding the remittance transfer tax, the Secretary may disregard or recharacterize the transaction (or series of transactions) in accordance with its substance. The determination of whether a sender and remittance transfer provider (or its agent) or third party have engaged in a transaction (or series of transactions) with a principal purpose of avoiding the tax is based on all facts and circumstances, including a remittance transfer provider's or third party's pattern of conduct, the timing of the transactions involved, the amount of the transactions involved, and the relationship between any parties involved. For example, if a sender provides $500.00 in cash to a remittance transfer provider (or its agent) in exchange for a general-use prepaid card loaded with $500.00 and then immediately initiates a remittance transfer in the amount of $500.00 paid for with the general-use prepaid card, the series of transactions (the purported purchase of a general-use prepaid card immediately followed by a remittance transfer) may be recharacterized as a remittance transfer in which the sender provided cash to the remittance transfer provider. As a result, the remittance transfer tax attaches to the remittance transfer and, if not collected from the sender at the time of attachment, becomes a liability of the remittance transfer provider. The same result would arise if, under the same sequence of events, the consumer immediately provides the general-use prepaid card to a relative who initiates the remittance transfer with the remittance transfer provider.
(e) Examples— (1) In general. The following examples illustrate the application of section 4475 and this section. For purposes of these examples, Sender is a sender as defined in paragraph (b)(6) of this section, Designated Recipient is a designated recipient as defined in paragraph (b)(3) of this section, and Remittance Transfer Provider is a remittance transfer provider as defined in paragraph (b)(5) of this section. Retailer is a retailer that accepts payments for remittance transfers from consumers and remits such payments to Remittance Transfer Provider (as an agent of Remittance Transfer Provider).
(2) Example 1: Fees, taxes, and bonuses —(i) Facts. Sender engages Remittance Transfer Provider through Retailer in State A to transfer $1,000.00 to Designated Recipient. Sender pays cash to Retailer for the remittance transfer. Remittance Transfer Provider charges a service fee of $20.00 for the remittance transfer and, as part of a marketing promotion, transmits an additional $5.00 “bonus” to Designated Recipient. State A imposes a $12.00 tax on the transaction.
(ii) Analysis. Because Sender, Designated Recipient, and Remittance Transfer Provider are a sender, designated recipient, and remittance transfer provider, respectively, as those terms are defined in paragraph (b) of this section, and because Sender requested an electronic transfer of funds to Designated Recipient, the transfer qualifies as a remittance transfer under the definitions provided in paragraph (b) of this section. Moreover, because Sender has provided Retailer (as an agent of Remittance Transfer Provider) an instrument described in paragraph (d)(1) of this section (cash), the remittance transfer is, upon payment by Sender, subject to the remittance transfer tax. The total amount transferred to Designated Recipient is $1,005.00, which includes the amount provided by Sender to be sent to Designated Recipient ($1,000.00) and the “bonus” transmitted to Designated Recipient by Remittance Transfer Provider ($5.00) but excludes Remittance Transfer Provider's service fee ($20.00) and the State A tax ($12.00), neither of which are sent to Designated Recipient. The remittance transfer tax imposed is one percent of $1,005.00, or $10.05.
(3) Example 2: Remittance transfer paid for with a personal check— (i) Facts. The facts are the same as those provided in paragraph (e)(2)(i) of this section (Facts of Example 1 ), except that Sender provides Retailer (as an agent of Remittance Transfer Provider) with a personal check payable to Remittance Transfer Provider.
(ii) Analysis. For the reasons provided in paragraph (e)(2)(ii) of this section (Analysis of Example 1 ), the transfer qualifies as a remittance transfer under the definitions provided in paragraph (b) of this section. Sender has not, however, provided Retailer (as an agent of Remittance Transfer Provider) any instrument described in paragraph (d)(1) of this section. As a result, the remittance transfer will not, upon payment by Sender, be subject to taxation under section 4475(a). The result would be the same if Sender had instead provided, for example, a debit card, general-use prepaid card, credit card, or store gift card.
(4) Example 3: Remittance transfer paid for using check-cashing service— (i) Facts. The facts are the same as those provided in paragraph (e)(2)(i) of this section (Facts of Example 1 ), except that Remittance Transfer Provider offers customers a check cashing service for a fee of $4.00 and Sender provides Retailer (as an agent of Remittance Transfer Provider) a $1,000.00 paycheck payable to Sender and requests a transfer in the amount of $800.00. Retailer (as an agent of Remittance Transfer Provider) charges Sender the Remittance Transfer Provider's $20.00 service fee and the State A's $12.00 tax, but does not charge Sender the $4.00 check-cashing fee.
(ii) Analysis. For the reasons provided in paragraph (e)(2)(ii) of this section (Analysis of Example 1 ), the transfer qualifies as a remittance transfer under the definitions provided in paragraph (b) of this section. Under paragraph (d)(2) of this section, the transaction is treated as a remittance transfer for which the sender provided cash. This is true despite the fact that Retailer (as an agent of Remittance Transfer Provider) did not charge Sender the $4.00 check- cashing fee. As a result, the remittance transfer is, upon payment by Sender, subject to taxation under section 4475(a). The remittance transfer tax imposed is one percent of $805.00, or $8.05.
(f) Applicability date. This section applies to remittance transfers made in calendar quarters beginning on or after [date of publication of final regulations in the Federal Register ].