The Senate Finance Committee has responded to the “Big Beautiful Bill”. It has made changes to the “remittance tax” as originally proposed.
Here is how I interpret the Senate proposed rules for the remittance tax found on page 388 of the Senate Bill:
https://www.finance.senate.gov/imo/media/doc/finance_committee_legislative_text_title_vii.pdf
1. General rule of 3.5% tax on remittance transfers for all people all day, every day.
2. Transfers which are funded by WITHDRAWALS from bank/brokerage accounts listed in 5312(a) of the Bank Secrecy Act are excluded (this solves the problem of most people). It means that this applies to Western Union (and others), etc (who may not continue in this business).
3. If cash, check, etc. is PROVIDED for the transfer then the 3.5% tax applies even if it is a commercial bank listed in 5312(a) that is facilitating the remittance.
4. Those who do/did pay the 3.5% remittance tax, who have a Social Security Number, can get some kind of tax credit. (This appears to be an attempt to make it more expensive for “some” undocumented people to send funds home.)
5. The Senate proposal describes the credit as refundable (“REFUNDABLE INCOME TAX CREDIT ALLOWED TO INDIVIDUALS WITH WORK-ELIGIBLE SOCIAL SECURITY”) . Yet, the actual proposed legislation describes it as ONLY a credit against tax – ‘‘SEC. 36C. CREDIT FOR EXCISE TAX ON REMITTANCE TRANSFERS BY INDIVIDUALS WITH WORK ELIGIBLE SOCIAL SECURITY NUMBERS.” So, it is NOT clear that this is to be a “refundable tax credit”. In addition, the language of the proposed legislation is ambiguous.
6. The ambiguity described in “5” above is illuminated and reinforced by the actual proposed language which reads:
‘‘(a) IN GENERAL.—In the case of any individual, there shall be allowed as a credit against the tax imposed by this subtitle for any taxable year an amount equal to the aggregate amount of taxes paid by such individual under section 4475 during such taxable year.”
A plain reading suggests:
– it is NOT clear whether the credit is refundable
– it is NOT clear whether the credit is available if no tax is actually owed
(This can (I think) be interpreted to mean that if no tax is actually imposed that the credit is not available.)
All of this can be fixed. But, I don’t think that the proposed legislative language is clear.
John Richardson – Follow me on X.com @Expatriationlaw