One Big Beautiful Bill Act FAQ Roundup
The One Big Beautiful Bill Act (H.R. 1) was passed by both chambers of Congress on July 3, 2025, and was signed into law on July 4, 2025. Last week, we published FAQs (member-only) addressing how H.R. 1 established a temporary tax deduction for passenger vehicle loan interest and new reporting requirements for businesses receiving $600 or more in interest on certain qualifying vehicle loans. This blog, in addition, provides FAQs for the remittance transfer tax, the Trump Accounts, and the excess compensation excised tax.
Remittance Transfer Tax
"Sec. 70604. Excise tax on certain remittance transfers."
How would H.R. 1 impact a credit union's remittance transfer program?
H.R. 1 creates a new section under Internal Revenue Code, section 4001, which requires the imposition of an excise tax on remittance transfers. Under H.R. 1, providers (credit unions, banks, and money services businesses, FinTech's or their agents) would be responsible for collecting the tax by withholding and remitting the tax to the U.S. Treasury Department on a quarterly basis. The final version of H.R. 1 imposes a 1% (a decrease from the original 3.5%) excise tax on all remittances. Notably, H.R. 1 only applies to remittances made by cash or other similar instrumentalities; it thereby exempts transfers made from accounts at banks, credit unions, and other financial institutions or funded by a debit or credit card issued in the United States.
Further, the legislation explicitly states that even if the sender of the remittance provider does not collect the tax, it remains obligated to send the tax proceeds to the Treasury. This language essentially creates a secondary liability provision, whereby the remittance provider would be liable for paying the tax to Treasury, even if they do not collect the excise tax from the sender.
When does it apply to remittance transfers?
The tax would apply to transfers made after December 31, 2025. No phase-in period is provided.
Explain the "anticonduit" rules in §112105(e).
H.R. 1 treats any remittance transfer as a "financing transaction" under IRC §7701(l). This allows the IRS to recharacterize multiparty arrangements (those arrangements where agents are used in the money transfer process) and still impose the 1% tax.
What would be some new compliance burdens likely to befall providers?
- Collecting and remitting tax to the IRS Audit/penalty exposure for uncollected tax
- Collecting and remitting tax to the IRS
- System changes to detect possible conduit transactions
How will credit union members likely react to remittance tax?
Higher costs historically drive remittance users underground to hawalas, cash couriers, transfer splitting, or crypto peer-to-peer rails, eroding FinCEN SAR/CTR visibility, and thereby weakening AML/CFT transparency, as well as defenses against fraudulent activity.
Does any U.S. state impose a similar tax?
No state currently levies a flat remittance excise tax. Oklahoma's sub1% surcharge (implemented in 2009) generated negligible revenue and was largely repealed once administrative costs and avoidance were evaluated.
Trump Accounts
"Sec. 70204. Trump accounts and contribution pilot program."
What are Trump Accounts and how can customers use the accounts?
H.R.1 adds a new type of account that credit unions can offer. These "Trump Accounts" are very similar to 529 college savings plans. Amounts in Trump Accounts would be required to be invested in equity investments. However, like 401k and 529 plans, funds could be used for education, homeownership, entrepreneurship, etc.
Can Credit unions offer Trump Accounts to members?
Credit unions will be able to offer these accounts to members, though they may have to work through a CUSO or third-party provider to offer the product and comply with the investment requirements.
Excess Compensation Excise Tax
"Sec. 70416. Expanding application of tax on excess compensation with tax-exempt organizations."
What were the changes made to Section 4960(c)(2) concerning the tax on excess compensation within tax-exempt organizations?
The regulation expands the definition of covered employee. The amendment to Section 4960(c)(2) reads:
"(2) Covered employee.--For purposes of this section, the term
`covered employee' means any employee of an applicable tax-exempt
organization (or any predecessor of such an organization) and any
former employee of such an organization (or predecessor) who was
such an employee during any taxable year beginning after December
31, 2016.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2025." Emphasis added.
What's the difference between how the H.R.1 applies the excise tax in comparison to the former Tax Cuts and Jobs Act (TCJA law)?
H.R.1 would apply the excise tax (paid by the credit union) to all employees making over $1 million annually (including annual compensation and deferred compensation payouts), rather than just the top 5 employees under current TCJA law.
Are all credit unions impacted?
Not all. Under section 4960, applicable tax-exempt organizations (ATEOs) must pay excise taxes on remuneration of more than $1 million and excess parachute payments made to covered employees. An ATEO includes any organization that is exempt from taxation under section 501(a). Section 501(a) exempts from taxation organizations described under sections 501(c) and (d). Federally chartered credit unions are exempt from taxation under section 501(c)(1), and state-chartered credit unions are identified in section 501(c)(14)(A). Both are ATEOs under section 4960. Under the statute's definitions, section 4960 could also apply to a credit union service organization (CUSO) as a related organization.
Based on prior IRS guidance (see below), the applicability of the excise tax to federal credit unions has hinged on the question of whether a federal instrumentality, whose enabling statute provides an exemption from all current and future federal taxes, is subject to the requirements in Section 4960. Federal credit unions are traditionally regarded as instrumentalities of the federal government and their tax status under section 501(c)(1) reflects this recognition. However, other privileges and statuses which may attach to a federal instrumentality can involve highly fact-specific analysis, which is why implementation of the excise tax prompted the IRS to issue a clarifying statement in 2021. This is unlikely to affect many credit unions, because average credit unions don't pay their executive staff over $1 million dollars in salary.
How did the TCJA's Section 4960 require credit unions to report excise tax liability to the IRS, and how does that compare to the H.R.1?
In its 2019 interim guidance, the Treasury Department and the IRS noted that the excise tax was to be reported and paid on Form 4720, Return of Certain Excise Taxes Under Chapter 41 and 42 of the Internal Revenue Code. The instructions for Form 4720 can be found here. The tax was paid and the form filed by the 15th day of the 5th month after the end of the credit union's taxable year. So, if your credit union had a taxable year that ended December 31st, the deadline to pay the tax and file Form 4720 would be May 15th.
If you have any questions about information within this blog, please contact the Advocacy or Compliance teams. If you have any suggestions for blog topics or general compliance questions, please contact Compliance Team using compliance@americascreditunions.org. For any question on how these tax laws may directly impact your credit union, please consult your local credit union counsel or experienced tax counsel.