(The Center Square) – Tennessee is facing a legal challenge to a bill that adds a $10 fee for monetary wire transfers to another country.
House Bill 2502 also adds a 2% tax to transfers over $500. The state would collect more than $91 million in revenue from the tax during the 2026-27 fiscal year and more than $183 million in subsequent years, according to the bill’s fiscal note.
The bill does not apply to bank-to-bank financial institution transactions and military transactions that use payment apps like Zelle, Hixson Republican Bo Watson said during the bill’s debate on the Senate floor.
“The largest receiver of these transmissions from the state of Tennessee are in Mexico,” Watson said. “This is intended to recoup some state revenue from those transmissions of the over $55 million per year.”
Sen. Jeff Yarbro said during the debate that the bill has a constitutional problem.
“It strikes me as a bad idea for us to go down this road,” Yarbro said. “The only other states that have done this have applied this to all transactions.”
The Financial Technology Association also believes the bill is unconstitutional. The organization is asking for an injunction to stop the law in its Davidson County Chancery Court lawsuit.
“When a state singles out international payments for special taxation, that is unconstitutional, plain and simple,” said Penny Lee, president and CEO of the Financial Technology Association. “The dormant Commerce Clause exists precisely to prevent this kind of unilateral state action.”
Some of the organization’s members are not equipped to handle the law, the organization said in its lawsuit.
“Thus, to comply with HB2502, these FTA members will have to modify existing transaction-processing systems, compliance software, and customer-facing interfaces,” the lawsuit said. “These members must spend significant and unrecoverable staff time and financial resources to make this happen. And FTA members must incur those nonrecoverable costs now to come into compliance before the end of the year, or else risk facing penalties.”
Gov. Bill Lee signed it into law in May; the bill takes effect until Jan. 1.
