Resolution needed on H.R. 1 vehicle interest, remittance ambiguities
Resolving ambiguities in the implementation of several tax provisions in H.R. 1 (the One Big Beautiful Bill) will help credit unions execute on the consumer benefits in the law, America’s Credit Unions wrote to Treasury Secretary Scott Bessent, in his capacity as Acting Commissioner of the IRS, Thursday.
The letter reflects concerns leagues and credit unions have shared directly with America’s Credit Unions, and was written in collaboration with leagues to ensure all issues were addressed.
Specifically, H.R. 1 creates a temporary federal income tax deduction for interest on certain passenger vehicle loans for tax years 2025–2028 and imposes a new excise tax on certain cross-border remittance transfers, exempting transfers from deposit accounts. Both create new compliance and reporting obligations for credit unions and other financial institutions.
The issuance of Internal Revenue Service (IRS) guidance providing a one-year transition relief for the vehicle loan interest reporting requirement is positive, but additional questions remain from credit unions, including guidance on:
- Who is responsible for determining whether a vehicle loan qualifies as a “specified passenger vehicle loan” eligible for the interest deduction;
- The scope of loans that must be reported on IRS information returns and borrower statements;
- Refinances that include more than the remaining purchase balance, such as GAP coverage, extended warranties, fees, or cash-out; and
- Whether lenders may satisfy reporting obligations by reporting gross interest, that patronage dividends may continue to be treated as profit distributions rather than loan-level interest adjustments, and that any netting for deduction purposes be addressed on the taxpayer’s return rather than through additional reporting requirements for credit unions.
Confirmation of the timing of new loans versus existing loans, model year versus manufacturing year, refinances, and the calendar year used in reporting outstanding principal is also needed to help credit unions configure their systems and ensure consistent reporting.
Regarding the remittance tax section of H.R. 1, credit unions welcome the account-based exemption, but need practical guidance, particularly in situations when a member deposits cash and then uses the same account to send a remittance.
America’s Credit Unions favors “the plain-language view that any transfer paid from the sender’s account at the institution is exempt from the excise tax, regardless of how recently the funds were deposited,” and asks Treasury and the IRS to confirm this.