Tennessee remittance tax adds to Trump's immigration crackdown

• Key insights: Tennessee's new tax on remittances for money transmitters goes into effect Jan. 1, 2027, with a notable exception for banks. 
• What's at stake: The levy comes amid continued pressure from the Trump Administration, which has been leaning on states to enforce its restrictive immigration policies and mass deportations. 
• Forward look: Lawmakers say the tax is an effort to capture nearly $55 million in annual revenue from remittances. Critics say it will have negative repercussions on more than just immigrants. 

Sending money abroad from Tennessee is getting more expensive. 

The state's new remittance tax goes into effect Jan. 1, 2027, and covers international transactions that originated in Tennessee. The tax imposes a $10 fee on transactions under $500, with an additional 2% fee for ones that exceed $500. 

Lawmakers say the tax is an effort to capture nearly $55 million in annual revenue from the 16.4 million remittances sent from the state. Tennessee had one of the lowest tax collection rates per capita in the country in 2023, second to Mississippi, according to data from the Tax Foundation.  

But the law's passage also comes amid continued pressure from the Trump Administration as it looks to muscle states into enforcing its restrictive immigration policies. 

"These cross-border payments, not surprisingly, are often used by migrant workers in the U.S. to share their earnings with family or friends," Eamonn Moran, a partner at Holland & Knight, told American Banker. "Immigration has become a charged political topic with the administration seeking to curb the number of people coming to the U.S. You can't think about this without thinking about the overarching issue." 

The Trump administration has put immigrants in the U.S. under fire with an onslaught of prohibitive policies and mass deportation. President Donald Trump has directed banks and bank regulators to scrutinize the activity of undocumented immigrants, enacted sweeping changes to the process by which immigrants secure a Green Card and assailed the validity of birthright citizenship. 

Critics of the bill say that its negative repercussions will ripple out beyond the state's immigrant population to businesses, military families, religious organizations, and non-profits. 

"Tennesseans shouldn't face new taxes when sending money to friends, family, business partners, or suppliers abroad, or when making charitable donations," Penny Lee, president and CEO of the Financial Technology Association, said in a statement. "This law raises taxes on Tennessee consumers, businesses, and non-profits, and contradicts recently passed federal law while also running afoul of the Foreign Commerce Clause in the U.S. Constitution." 

Critics also say that the law unfairly discriminates against money transmitters because banks and other regulated financial institutions are exempt from the tax. 

Remittance companies should expect to incur an increased compliance cost to collect the tax, Moran said. 

Tennessee is not the first state to have a remittance tax. Oklahoma also has had a similar law on the books since 2009, which charges a $5 fee on transactions under $500 and additional 1% on transactions exceeding that amount. 

There is also a 1.5% excise tax imposed on remittances sent from the U.S. that was included in last year's One Big Beautiful Bill. And Representative Chip Roy (R-TX) last month floated legislation that would increase the nationwide remittance tax to 25%. 

"The United States economy has dealt with the inextricably linked harmful effects of unchecked legal and illegal immigration and the drain of American dollars leaving the economy through remittances for decades," Rep. Roy said in a statement.