Update – February 16, 2018 ; New Bill in Oklahoma and Nebraska – Contributed by the MSBA

Georgia & Iowa move to leverage a tax on remittances – Financial Institutions are reacting

In a previous blog (in Spanish), posted in the midst of the many reporter calls, especially from Latinamerica (driven by the anxiety over the migration policies of the new US Trump administration), I mentioned the US legislators drive to tax remittances in the US. The State of Oklahoma is taxing remittances for some years now ($5 up to $500 and 1% after that). Several other States such as Georgia and Iowa are moving on this direction and the industry is watching. In the federal level there are also some initiatives being proposed. in an effort to fund the border wall.

Check the update from February 16, 2018 below.

OKLAHOMA

In Oklahoma, remittances are taxed  $5.00 for the first $500.00  and 1% thereafter, a tax that is deductible when making income tax returns (a tax credit for residents). This means that illegals, who do not file a tax return, do not have the possibility to recover the paid tax. The notice that is posted for remittance user reads:

TAX CREDIT NOTICE TO OKLAHOMA TAXPAYERS
Pursuant to HB 2250, as of July 1, 2009, a drug enforcement and money laundering fee will be attached to each wire transaction in the State of Oklahoma. This fee is $5.00 for the first $500.00 and 1% thereafter. If you file an Oklahoma Tax Return, you may be eligible for a tax credit equal to the amount of the fee remitted. To qualify for the tax credit you must maintain your receipt with the transaction number for the purpose of filing your Oklahoma income tax return.

In 2016, pursuant to the Annual Report of the Oklahoma Tax Commission (Fiscal Year Ended June 30, 2016), the Wire Transmitter Fee collected was US$12,696,879.25 (http://bit.ly/2mpRr51). The previous year the total was US$ 11,322,558.81.
The Center for Immigration Studies (CIS) states that only 4% has been claimed as tax credits (http://bit.ly/2jA3p7K). I can’t find other sources that confirm this percentage and the CIS, a Washington, D.C. conservative non-profit research organization who is in the “fake news sites” lists has been designated as an anti-immigrant hate group by the Southern Poverty Law Center (http://bit.ly/2lqseHY).
And this is the basic problem with these remittance tax ideas: they are pushed and defended by most of those who voted for Trump and some of his more anti-immigrant advisers. They repeatedly state that sending remittances to Mexico robs the country of 25 billion a year,
The CIS states: “Can you think of a more attractive tax source for politicians? The vast majority of people paying the taxes are both illegal aliens (who cannot vote) and are tax evaders! – This should be a dream for politicians — 96 percent of this funding source is being collected from people who are tax cheats and who cannot vote.“(http://bit.ly/2jA3p7K).

Kathy Tomasofsky (MSBA) 2/16/08: There are 3 additional bills being considered there this session. The Bill SB 1434 is proposing to increase the remittance tax from 5.00 per transaction under $500, to 7.50, and to increase the percentage fee over $500 from 1% of the dollar amount to 1.5%.

NEBRASKA:

Kathy Tomasofsky (MSBA) 2/16/08: : The State currently has legislation ( LB1016) that proposes taxes that will affect remittances as well as other peer- to peer payment transactions. There is a hearing scheduled for the last week of February. The MSBA will probably submit a comment letter for he record to explain the unintended consequences of taxing remittances.

Note: For more information contact Kathy B. Tomasofsky at the MSBA

GEORGIA & IOWA

The US Money Service Business Association (MSBA) has been closely following the legislation in all states with an emphasis on remittance tax bills and has sent letters to Georgia – and will send a similar letter to Iowa, identifying the shortcoming of the bills and the unintended consequences of these bills.

• Georgia House Bill 66 (HB66 http://bit.ly/2mR43PO) – Bill Title: Banking and finance; money transmission transactions by financial institutions; provide certain fees, was introduced 2017-01-24 by six Republican representatives (Rep. Jeff Jones [R], Rep. Alan Powell [R], Rep. Jesse Petrea [R], Rep. Robert Gasaway [R], Rep. David Clark [R] and Rep. Matt Dollar [R]). The bill would mandate a $10 fee for certain wire transfers and allow those paying the fee to recoup the fee when filing their next annual tax return. The Georgia Bankers Association (GBA) has serious concerns with the bill and has called for Rep. Jones to listen to the financial services industry (http://bit.ly/2m6fCTo).

• Iowa House Bill 494 (HB494 http://bit.ly/2m6k3h7 Full Text: http://bit.ly/2m6k3h7) Introduced 2017-03-02 by the Judiciary Committee. This is “A bill for an act relating to financial crime enforcement by assessing a drug paraphernalia surcharge, creating a money transfer service fee and related fund and income tax credit, and including retroactive applicability provisions. (Formerly HSB 150.)“. The Iowa Bankers Association will certainly state their position very soon and it seems that Western UnionThe Western Union Company is a US financial services company with headquarters in Englewood, Colorado with offices and agents all over the world offering services such as money transfers (P2P, P2B and B2B, money orders, and other business & commercial services. With close to 12,000 employees, more than 500,000 agent locations in over 200 countries and territories, Western Union is... want more?, Facebook, Google, and American Express have engaged local lobbyists to try and stop the bill. Working together to stop these bill is vital to the industry as they can set a precedent if passed , and encourage other states to look to legislate tax bills as well.

Note: For more information contact Kathy B. Tomasofsky at the MSBA

Federal Bill – Mike Rogers (R-Alabama) Remittance Tax

US Rep. Mike Rogers, Republican Representative from Alabama has been proposing a federal remittance tax to fund the US-Mexico Wall. Although it is not anticipated that this bill will move on, in a biweekly newsletter Rogers wrote that the bill would require workers in the country illegally to pay a fee on their remittances to fund the wall and that this was a time-sensitive issue that should start as soon as possible (http://bit.ly/2lKIEac).
It is important to know that Mike Rodgers is the same politician who is sponsoring a bill to take U.S. out of United Nations (http://bit.ly/2lKxbr0). The bill, known as the American Sovereignty Restoration Act of 2017 was referred to the House Committee on foreign affairs earlier this month.
Roger says: “The U.N. has attempted a number of actions which aimed to encroach on the rights granted to U.S. citizens under our Constitution. Most recently, the U.N. Security Council sided with Palestine and passed a resolution condemning Israel’s settlements in Jerusalem. Attacks against one of the United States’ greatest allies are just the most recent chapter in the U.N.’s dangerous agenda. I believe our involvement in the U.N. is a waste of taxpayer dollars.“

Some thoughts

Dan Primack, a Biz editor @Axios, states in his blog that a “Mexican remittance tax could lead to Bitcoin boom”. He states that a remittance bill “could unintentionally spark mass adoption of Bitcoin and other cryptocurrencies, which could be used by immigrants to circumvent such rules“. He states, as many VC enthusiasts feel, that companies handling VCs “are highly unlikely to be covered under such a bill“(http://bit.ly/2lKAcaU).
I am not going to get on the regulatory debate over who will be covered or not, because this is not the point I want to make. I have seen how Bitcoin can be used effectively as a remittance tool and Luis Buenaventura, writer and entrepreneur (and RemTECH Award Co-Chair) makes a great read in his “Reinventing Remittances with Bitcoin” Book (http://bit.ly/luisbook) that I advise everyone to read it.
My point is that there are many informal ways – and I don’t mean illegal, of sending x-border transfers that anything that creates a barrier, whether regulatory, accessibility, tax-based, undoubtedly creates funds to move through different channels, some of them less transparent and less safe than others. The money transfer industry has worked so hard to work closely with regulators and law enforcement in a quest for transparency and accountability that is quite disheartening to see the spread of DeriskingThe closing (or not opening) of bank accounts by financial institutions as a way to avoid the risk associated with providing banking services to a law-abiding sector of the economy. Derisking has been used as an excuse to stifle competition and for political and/or economic reasons.... want more? by US Banking Institutions or US politicians desires to use remittances and anti-migration rhetoric for votes and state funding.