The IRS Remittance Transfer Tax: One Key Difference Community Banks Should Know

Stull explains that beginning January 1, 2026, a 1% excise tax will apply to certain remittance transfers sent from the United States to recipients in foreign countries. The applicability of the tax depends on specific transaction details, including the funding method. The sender is liable for the tax, while the remittance transfer provider is responsible for collecting it when required.

Community banks must identify potentially taxable transactions as part of their compliance obligations. Stull cautions institutions familiar with Regulation E not to make a potentially significant assumption.

Regulation E includes a volume threshold related to its remittance transfer requirements.

Generally, an institution that provided 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer in the current calendar year is not considered to be providing remittance transfers in the normal course of business for purposes of Regulation E's Subpart B.

Bank compliance professionals may already be familiar with this threshold.

Stull highlights this difference because it affects how institutions should assess their potential obligations. Community banks should not assume that conducting a small number of qualifying remittance transfers exempts them from the proposed IRS requirements. Even a single qualifying transaction could trigger compliance obligations.

Community banks that rarely handle remittance transfers may assume the new requirements will have minimal operational impact. However, as Stull's guidance shows, transaction volume alone does not determine compliance obligations. Community banks should first review the remittance services they offer and determine whether any transactions may fall under the new requirements.

This review will raise additional questions.

Can current systems identify affected transactions? Are frontline employees prepared to handle them? Which departments should be involved? Do existing policies and procedures address the new requirements? Addressing these questions requires evaluating how the requirements integrate with the bank's actual operations.

A key takeaway from Molly Stull's webinar is clear: Do not assume Regulation E's 500-transfer exemption applies to the IRS remittance transfer tax.

This is an important starting point. However, recognizing that the exemption does not apply leads to a larger question: What steps should your community bank take next?

In Alert! IRS Proposed Remittance Rule: No Exemption Like Regulation E, Stull examines the practical compliance and operational considerations that financial institutions should evaluate.