ANALYSIS: The One Big Beautiful Bill Act (H.R. 1), which was signed into law last month, included several provisions of interest to credit unions. We have already told you about the new requirement to report to the IRS $600 or more in interest received from a borrower on a qualifying vehicle loan.
Today, we want to provide some details on two other sections of H.R. 1: A new excise tax on remittance transfers and the introduction of so-called “Trump Accounts.”
Excise tax on remittance transfers
Starting Jan. 1, 2026, consumers who send money outside of the U.S. – whether they are U.S. citizens, green card holders, and non-citizens – will face a new 1% tax on many of those transfers.
What “remittance transfers” are covered?
H.R. 1 uses the term “remittance transfer” to describe the transfers subject to the tax. The new law’s definition of that term may capture many cross-border transfers that credit unions might not normally think of as “remittances,” but there are some broad exemptions, as well.
The new law borrows the Electronic Fund Transfer Act’s (EFTA’s) definition of “remittance transfer.” This includes:
- Transfers conducted through a money transmitter or financial institution;
- Wire transfers conducted by a financial institution;
- Addition of funds to a prepaid card by a participant in a prepaid card program, even if the sender can withdraw funds added;
- International Automated Clearing House (“ACH”) transactions; and
- Online bill payments and other electronic transfers scheduled in advance.
Notably, the tax only applies to remittances made by cash or other similar instrumentalities; it exempts transfers that are 1) made from accounts at banks, credit unions, and other financial institutions, or 2) funded by a debit or credit card issued in the U.S.
Other definitions
Under the EFTA, a “remittance transfer” is defined as “the electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider.”
A “sender” is an individual “consumer in a state who, primarily for personal, family, or household purposes, requests a remittance transfer provider to send a remittance transfer to a designated recipient.”
This definition of “sender” limits the scope of the term “remittance transfer” in certain key ways:
- Transfers made for business or commercial purposes are not subject to the tax – only transfers by individuals making transfers “primarily for personal, family, or household purposes.”
- The tax applies only to a consumer “in a state.” Reg. E (which implements the EFTA) explains that “in a state” means within the U.S., a U.S. territory, or on a U.S. military base.
A “designated recipient” is “any person specified by the sender as the authorized recipient of a remittance transfer to be received at a location in a foreign country.” Thus, transfers to be received by someone in the U.S. are exempt.
The “remittance transfer provider” means “any person that provides remittance transfers for a consumer in the normal course of its business, regardless of whether the consumer holds an account with such person.”
Credit union tax liability
Banks, credit unions, and money transfer services will have to collect this tax and remit it to the IRS as part of any qualifying transaction. Even if the remittance provider does not collect the tax, it remains obligated to send the tax proceeds to the IRS. In other words, the credit union will be liable for paying the tax, even if it does not collect the tax from the sender.
“Trump Accounts”
H.R. 1 added a new type of account – often called “Trump Accounts” or baby bonus accounts – that credit unions can consider offering.
Account basics
Starting Jan. 1, 2026, these accounts can be opened for the benefit of qualifying children, who must be minors when the account is opened and U.S. citizens. The child’s parents (or parent filing income tax return where the child is claimed as a dependent) must have a U.S. Social Security number.
For children born during the years 2025 through 2028, the federal government will make an initial contribution of $1,000 to each child’s account.
The account is essentially a custodial trust account while the beneficiary is a minor, with no distributions allowed until the beneficiary turns 18. Once the beneficiary turns 18, the account operates much like an IRA. For example, early withdrawals (i.e., those taken before age 59.5) may incur a 10% penalty, in addition to the applicable income taxes. Also, like IRAs, certain early withdrawals, such as for a first-time home purchase, qualified educational expense, disability, certain medical expenses, etc., are not subject to any early withdrawal penalty. However, withdrawals are subject to income tax.
Contributions
Annual contributions are capped at $5,000 (which will be adjusted for inflation), but the initial government contribution and certain exempt contributions from charitable organizations do not count towards the annual limit.
Qualified contributions are not included in the beneficiary’s gross income.
Employers can contribute up to $2,500 (adjusted annually with inflation) to an account for the benefit of their employee or a dependent of their employee, though it is unclear for now whether this is a one-time or annual contribution exclusion.
Investment requirements & credit union considerations
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 investment requirements. As America’s Credit Unions has explained:
Credit unions can offer IRAs and act as the trustee or custodian for such accounts or choose to offer these products through their Credit Union Service Organizations (“CUSOs”) or third-party providers. It is important to note that the H.R. 1 requires that a Trump Account be invested in “eligible investments.” An eligible investment means any mutual fund or exchange traded fund which:
- Tracks the returns of a qualified index;
- Does not use leverage;
- Does not have annual fees and expenses of more than 0.1 percent of the investment in the fund; and
- Meets other criteria as the Secretary of the Treasury determines appropriate.
To facilitate the provision of the Trump Accounts, credit unions will have to work with either a CUSO or a third-party provider. Credit unions will also need to ensure that their disclosures reflect that this is an investment account, not a share certificate account, that could decrease in value depending on the performance of the investments.
The U.S. Treasury will need to implement regulations regarding these accounts. Credit union trade groups have already called on officials to include credit union representatives in any working groups, advisory committees, or pilot programs related to the rollout of these accounts.