At a Glance
The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces several tax and regulatory changes directly affecting credit unions. Key measures include a 1% excise tax on cash-based international remittances, an expansion of the 21% executive-compensation excise tax to all employees earning over $1 million, and enhanced W-2 reporting for fringe benefits and loan-interest subsidies. Importantly, the Act reaffirms credit unions’ federal tax-exempt status and establishes a new “Trump Account” savings vehicle for children born between 2025–2028. While these provisions create new compliance obligations—particularly around system enhancements and quarterly filings—they also open doors for fresh product offerings and deeper member engagement.
Contents
- Remittance Excise Tax
- Executive Compensation Excise Tax
- Tax-Exempt Status Maintained
- “Trump Accounts” – New Savings Vehicle
- Administrative & Payroll Reporting Updates
- Key Takeaways
Remittance Excise Tax
Effective for transfers made on or after January 1, 2026, the Act imposes a 1% excise tax on remittances sent via cash, money orders, cashier’s checks, or other physical instruments. Transfers funded through U.S. bank accounts—or by U.S.-issued debit or credit cards—remain exempt. Credit unions offering remittance services must withhold the tax at the point of transfer, file and pay quarterly deposits to the U.S. Treasury, and face secondary liability if taxes aren’t collected. To comply, credit unions should:
- Systemize sender verification: Flag transactions funded by cash-equivalent instruments and confirm sender citizenship or residency where required.
- Enhance remittance platforms: Build or update software to calculate, collect, and report the 1% tax.
- Educate members: Clearly disclose tax liabilities on member remittance statements and provide guidance on eligible exemptions.
Though this adds administrative complexity—especially for branches serving immigrant communities—it aligns credit unions with federal border-funding objectives and helps safeguard the overall remittance ecosystem against underground channels.
Executive Compensation Excise Tax
Under prior law, only the top five highest-paid employees of a tax-exempt organization triggered the 21% excise tax on annual compensation above $1 million or on excess parachute payments. The Act broadens this scope to any employee (or former employee) whose total remuneration—including salary, bonuses, deferred awards, and severance—exceeds $1 million in a calendar year, provided their employer’s taxable year begins after December 31, 2025. Key action items for credit unions:
- Revise payroll systems: Track aggregate compensation for all staff and identify those crossing the $1 million threshold.
- Coordinate with benefits administrators: Ensure deferred compensation and parachute-payment calculations are captured accurately.
- Update tax filings: Continue reporting excise tax liability on IRS Form 4720 by the 15th day of the fifth month following the end of the credit union’s taxable year.
For most credit unions—which typically do not pay executives above $1 million—impact may be limited. However, larger institutions and CUSOs should review compensation structures now to mitigate potential liabilities.
Tax-Exempt Status Maintained
A major advocacy victory for the industry, the Act leaves intact the federal income-tax exemption for credit unions under IRC § 501(c)(1) and (c)(14)(A). Following a united “Don’t Tax My Credit Union” campaign that generated over 860,000 grassroots messages to Congress, credit unions secured continued parity with other member-owned, not-for-profit institutions. By preserving this exemption, credit unions can keep channeling earnings into lower loan rates, higher deposit yields, community outreach, and financial-education programs rather than tax obligations.
“Trump Accounts” – New Savings Vehicle
The Act establishes a new tax-advantaged trust account—commonly dubbed a “Trump Account”—for U.S. children born between 2025 and 2028. Each eligible newborn receives a $1,000 seed deposit at birth, with parents and other family members able to contribute additional after-tax dollars. These accounts also allow employer contributions, which are non-taxable to the employee. Funds must be invested in equities but may be withdrawn tax-free for qualified expenses, including higher education, first-time home purchase, and certain entrepreneurial endeavors. Credit unions can leverage this by:
- Partnering with CUSOs or fintechs: To design compliant investment platforms that meet equity-only mandates.
- Integrating into youth programs: Promoting financial literacy alongside account opening to foster long-term member loyalty.
- Marketing to new-parent demographics: Positioning credit unions as the go-to institution for family-focused savings solutions.
Administrative & Payroll Reporting Updates
Beyond the two headline excise taxes, the Act also tightens reporting and tax treatment of certain fringe benefits and loan subsidies:
- Expanded W-2 disclosures: Member-serving organizations must now report tip income, overtime pay, and employer-subsidized auto-loan interest.
- Fringe-benefit excise tax: Some previously excluded benefits, transit passes, parking assistance, and other qualified transportation may now be taxable under unrelated business income tax rules.
- CFPB modernization mandates: The Consumer Financial Protection Bureau is directed to update technology systems and expedite rulemaking, potentially affecting exam schedules and regulatory comment periods.
Credit unions should monitor guidance from the NCUA, IRS, and CFPB, and begin auditing internal processes to capture these additional data points for timely tax and regulatory submissions.
Key Takeaways
- Heightened compliance load: Remittance-tax withholding, expanded executive compensation tracking, and enhanced W-2 reporting demand system upgrades.
- New growth avenues: “Trump Accounts” and education-focused savings initiatives can deepen member relationships.
- Reassured structure: Federal tax-exempt status remains secure, allowing reinvestment in member services.
- Regulatory vigilance: CFPB and IRS updates will shape future examination cycles and reporting deadlines.
By proactively upgrading technology, refining reporting workflows, and aligning product offerings with these changes, credit unions can transform compliance requirements into fresh opportunities for member engagement and long-term growth.
Camden Jalbert joined ARB in 2020 as a college intern and became a Senior Accountant in 2023. He specializes in auditing and financial compliance, with a focus on financial institutions, commercial business, auto dealerships, and nonprofit organizations. Camden is a member of the Maine Society of CPA’s Difference Makers Committee.
