H.R. 5595: Requiring Excise for Migrant Income Transfers Act” or the “REMIT Act.

The bill known as the “Requiring Excise for Migrant Income Transfers Act” or the “REMIT Act” proposes modifications to the existing tax framework concerning remittance transfers, which are funds sent back home by migrants to their families or communities. Here’s a breakdown of the key provisions of this bill:

Modification of Tax on Remittance Transfers

• Increased Tax Rate: The bill amends the current tax rate on remittance transfers from 1% to 15% under Section 4475(a) of the Internal Revenue Code.
• Exceptions for Certain Transfers: An exception to this increased tax rate applies for remittance transfers made by citizens or nationals of the United States if sent via a qualified remittance transfer provider. A “qualified remittance transfer provider” is defined as one that has a written agreement with the Secretary of the Treasury to verify the status of senders as U.S. citizens or nationals. Additionally, a “verified United States sender” refers to any sender who is confirmed as a citizen or national under these qualifications.

Refundable Tax Credit for U.S. Citizens

• Tax Credit Availability: The bill establishes a new refundable income tax credit (referred to as Section 36C) for U.S. citizens and nationals, allowing them to reclaim the amount of excise tax they pay on remittance transfers, effectively offsetting the costs imposed by the new tax rate.
• Requirements for Claiming Credit: To qualify for this credit, taxpayers must include their Social Security number on their tax return, and if married, their spouse’s Social Security number as well. Furthermore, they must provide documentation to demonstrate that the tax was paid on remittance transfers to which the credit applies.

Reporting Requirements for Remittance Transfer Providers

• New Reporting Obligations: The bill introduces new reporting requirements for remittance transfer providers under Section 6050BB. Providers must file returns that include information such as the number and value of remittance transfers and details pertaining to U.S. citizens claiming the tax credit.
• Statements to Senders: Providers are also required to furnish senders with written statements detailing necessary information from the returns they file.

Penalties and Compliance

• Penalties for Non-compliance: The bill increases penalties for failure to comply with the reporting requirements laid out in the new Section 6050BB.

Effective Date

• Implementation Timeline: The amendments to the tax code are intended to take effect as if included in a prior law and the tax credits are applicable to taxable years ending after December 31, 2025.

Relevant Companies

• WMGI (Smith & Nephew plc): Companies involved in financial services and money transfer systems may be affected by changes in compliance and potentially increased transaction costs due to the new tax rate on remittances.
• PAYC (Paycor HCM Inc): As a payroll and HR service company, Paycor may need to adapt its processes for reporting and compliance in light of the new remittance requirements.