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Third Party Payment Banking Convention -- Explanation
November 21, 2012

The National Automated Clearinghouse Association (NACHA) has approved for inclusion in its guidance to financial institutions the new Third Party Payment Addenda, or TPP. This success was the result of 18 months of effort by  a group of states spearheaded by the Colorado Department of Revenue, and FTA thanks them and the other involved states for working on it.

The document is ACH Operations Bulletin #2-2012 - Third Party Tax Payments Banking Convention: Standardized Formatting for Remittance Information in Third-Party Payment Addenda Records.

The full document is posted here.

"Third party tax payment" means one where the tax agency desires that both the payer and the taxpayer on whose behalf the payment is being made are identified within the addenda record, so the newly created TPP has capabilities that make it superior to the existing TXP Banking convention in cases of wage garnishments and other electronic third party payment payment scenarios.

FTA-approved tax and amount codes (posted on this web site here) should be utilized with the TPP to help ensure maximum uniformity across the states in its implementation and simplify the task for private sector users.

The addenda will be available for use on January 1, 2013, and NACHA has recommended that parties involved in its intended use work toward implementation by June 21, 2013, as originating and receiving banks contacted by NACHA indicate that development work is estimated to take 6-12 months.

States may wish to contact their financial provider and review with them this new tax agency tool.