One Big Beautiful Bill Act(Section 4475) - Simplified

The One Big Beautiful Bill Act (OBBBA), officially H.R. 1 and enacted as Public Law 119-21 on July 4, 2025, is a sweeping legislative overhaul encompassing budgets, tax reforms, and incentives. 

New Subchapter C – IRC §4475

Inserted into Chapter 36, Subchapter C, Section 4475 introduces a 1% excise tax on specified remittance transfers made from the U.S.

Key Points:

• Rate: 1% of the transfer amount.

• Effective Date: Applies to remittances after December 31, 2025, with tax collection starting January 1, 2026.

• Tax applies only when the sender uses cash, money orders, cashier’s checks, or similar physical instruments.

• Exempts transfers funded by withdrawals from certain financial institutions under Bank Secrecy Act or paid via U.S.-issued debit/credit cards

• The sender pays the tax at the transfer time.

• Remittance transfer providers (e.g., Western Union, banks) must withhold and remit the tax quarterly to the IRS.

• Transfer Providers face secondary liability if the sender fails to pay.

Remittance Transfer - Electronic fund transfer from a sender to a designated recipient, initiated by a provider; small-value transfers excluded.

Sender - A U.S. consumer making the transfer request, for personal/family/household use.

Remittance Transfer Provider - The intermediary (person or institution) that sends the transfer in the normal course of business; includes safe-harbor-conforming entities.

For detailed information on who is required to pay the remittance excise tax and who may qualify for exemptions, you can refer to the official summary provided by Democrats Abroad

• House version (May 22, 2025): Proposed a 3.5% excise tax with exemption via “qualified remittance transfer providers” for U.S. citizens.

• Senate consolidation: Reduced to 1%, exempted certain non-cash funding methods, and removed credit/reporting elements.

• Final law (July 4, 2025): Enacted as Section 4475 with current exclusions and 1% rate 

• Estimated to raise $9–10 billion over 10 years.

• Shifted from higher original rates—5% flagged by critics, then 3.5% (House), to 1% in the final version.

• Critics, particularly from India, Mexico, Philippines, noted possible reduction in formal remittances and rise in informal channels.

• Treasury/IRS guidance expected before the end of 2025 to clarify definitions, collection procedures, and exemptions.

• Providers need to update systems for withholding, reporting, and IRS remittance.

• Senders must anticipate a 1% line on cash-based transfers post-Jan 1, 2026. Non-cash transfers remain exempt.

Conclusion

The One Big Beautiful Bill Act established a 1% excise tax under Section 4475 on cash-based remittance transfers from the U.S., effective January 1, 2026, with exclusions for card-funded and institutional transfers. 

Providers must withhold, remit quarterly, and may be held liable if they fail. While it is projected to generate around $10 billion over a decade, detailed IRS guidance will determine its practical impact. Anticipated final rules will arrive by year-end.