[Title 31 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 2007 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          31


          Parts 200 to 499

                         Revised as of July 1, 2007


          Money and Finance: Treasury
          



________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of July 1, 2007
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 31:
    Subtitle B--Regulations Relating to Money and Finance 
      (Continued)
          Chapter II--Fiscal Service, Department of the 
          Treasury                                                   5
          Chapter IV--Secret Service, Department of the 
          Treasury                                                 527
  Finding Aids:
      Material Approved for Incorporation by Reference........     539
      Table of CFR Titles and Chapters........................     541
      Alphabetical List of Agencies Appearing in the CFR......     559
      List of CFR Sections Affected...........................     569

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 31 CFR 202.1 refers 
                       to title 31, part 202, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, July 1, 2007), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
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instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
volumes. For the period beginning January 1, 2001, a ``List of CFR 
Sections Affected'' is published at the end of each CFR volume.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
containing that incorporation. If, after contacting the agency, you find 
the material is not available, please notify the Director of the Federal 
Register, National Archives and Records Administration, Washington DC 
20408, or call 202-741-6010.

CFR INDEXES AND TABULAR GUIDES

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that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

[[Page vii]]


REPUBLICATION OF MATERIAL

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

July 1, 2007.

[[Page ix]]



                               THIS TITLE

    Title 31--Money and Finance: Treasury is composed of three volumes. 
The parts in these volumes are arranged in the following order: parts 0-
199, parts 200-499, and parts 500 to end. The contents of these volumes 
represent all current regulations codified under this title of the CFR 
as of July 1, 2007.

    For this volume, Robert J. Sheehan was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Ann Worley.


[[Page 1]]



                  TITLE 31--MONEY AND FINANCE: TREASURY




                  (This book contains parts 200 to 499)

  --------------------------------------------------------------------
                                                                    Part

    SUBTITLE B--Regulations Relating to Money and Finance (Continued)

chapter ii--Fiscal Service, Department of the Treasury......         202

chapter iv--Secret Service, Department of the Treasury......         401

[[Page 3]]

    Subtitle B--Regulations Relating to Money and Finance (Continued)

[[Page 5]]



         CHAPTER II--FISCAL SERVICE, DEPARTMENT OF THE TREASURY




  --------------------------------------------------------------------

               SUBCHAPTER A--FINANCIAL MANAGEMENT SERVICE
Part                                                                Page
202             Depositaries and financial agents of the 
                    Federal Government......................           9
203             Payment of Federal taxes and the Treasury 
                    Tax and Loan Program....................          11
204

[Reserved]

205             Rules and procedures for efficient Federal-
                    State funds transfers...................          23
206             Management of Federal agency receipts, 
                    disbursements, and operation of the Cash 
                    Management Improvements Fund............          39
208             Management of Federal agency disbursements..          45
210             Federal Government participation in the 
                    Automated Clearing House................          50
211             Delivery of checks and warrants to addresses 
                    outside the United States, its 
                    territories and possessions.............          60
215             Withholding of District of Columbia, State, 
                    city and county income or employment 
                    taxes by Federal agencies...............          61
223             Surety companies doing business with the 
                    United States...........................          66
224             Federal process agents of surety 
                    corporations............................          73
225             Acceptance of bonds secured by Government 
                    obligations in lieu of bonds with 
                    sureties................................          74
226             Recognition of insurance covering Treasury 
                    tax and loan depositaries...............          78
235             Issuance of settlement checks for forged 
                    checks drawn on designated depositaries.          80
240             Indorsement and payment of checks drawn on 
                    the United States Treasury..............          81
245             Claims on account of Treasury checks........          96

[[Page 6]]

248             Issue of substitutes of lost, stolen, 
                    destroyed, mutilated and defaced checks 
                    of the United States drawn on accounts 
                    maintained in depositary banks in 
                    foreign countries or United States 
                    territories or possessions..............          97
250             Payment on account of awards of the Foreign 
                    Claims Settlement Commission of the 
                    United States...........................          99
256             Obtaining payments from the judgment fund 
                    and under private relief bills..........         102
270             Availability of records.....................         107
281             Foreign exchange operations.................         108
285             Debt collection authorities under the Debt 
                    Collection Improvement Act of 1996......         110
                 SUBCHAPTER B--BUREAU OF THE PUBLIC DEBT
306             General regulations governing U.S. 
                    securities..............................         153
308             General regulations governing full-paid 
                    interim certificates....................         181
309             Issue and sale of Treasury bills............         182
312             Federal savings and loan associations and 
                    Federal credit unions as fiscal agents 
                    of the United States....................         185
315             Regulations governing U.S. Savings Bonds, 
                    Series A, B, C, D, E, F, G, H, J, and K, 
                    and U.S. Savings Notes..................         186
316             Offering of United States Savings Bonds, 
                    Series E................................         212
317             Regulations governing agencies for issue of 
                    United States Savings Bonds.............         219
321             Payments by banks and other financial 
                    institutions of United States Savings 
                    Bonds and United States Savings Notes 
                    (Freedom Shares)........................         224
323             Disclosure of records.......................         241
328             Restrictive endorsements of U.S. bearer 
                    securities..............................         243
330             Regulations governing payment under special 
                    endorsement of United States Savings 
                    Bonds and United States Savings Notes 
                    (Freedom Shares)........................         246
332             Offering of United States Savings Bonds, 
                    Series H................................         250
337             Supplemental regulations governing Federal 
                    Housing Administration debentures.......         254
339             Exchange offering of United States Savings 
                    Bonds, Series H.........................         257
340             Regulations governing the sale of Treasury 
                    bonds through competitive bidding.......         260
341             Regulations governing United States 
                    Retirement Plan Bonds...................         262
342             Offering of United States Savings Notes.....         272

[[Page 7]]

343             Regulations governing the offering of United 
                    States Mortgage Guaranty Insurance 
                    Company Tax and Loss Bonds..............         277
344             U.S. Treasury securities--State and Local 
                    Government Series.......................         280
345             Regulations governing 5 percent Treasury 
                    Certificates of Indebtedness--R.E.A. 
                    Series..................................         305
346             Regulations governing United States 
                    Individual Retirement Bonds.............         306
348             Regulations governing depositary 
                    compensation securities.................         316
351             Offering of United States Savings Bonds, 
                    Series EE...............................         317
352             Offering of United States Savings Bonds, 
                    Series HH...............................         333
353             Regulations governing United States Savings 
                    Bonds, Series EE and HH.................         338
354             Regulations governing book-entry securities 
                    of the Student Loan Marketing 
                    Association (Sallie Mae)................         365
355             Regulations governing fiscal agency checks..         370
356             Sale and issue of marketable book-entry 
                    Treasury bills, notes, and bonds 
                    (Department of the Treasury Circular, 
                    Public Debt Series No. 1-93)............         373
357              Regulations governing book-entry treasury 
                    bonds, notes and bills held in Legacy 
                    Treasury Direct.........................         407
358             Regulations governing book-entry conversion 
                    of bearer corpora and detached bearer 
                    coupons Regulations governing book-entry 
                    conversion of detached bearer coupons 
                    and bearer corpora......................         445
359             Offering of United States Savings Bonds, 
                    Series I................................         448
360             Regulations governing definitive United 
                    States Savings Bonds, Series I..........         461
361             Claims pursuant to the Government Losses in 
                    Shipment Act............................         480
362             Declaration of valuables under the 
                    Government Losses in Shipment Act.......         483
363             Regulations governing securities held in 
                    TreasuryDirect..........................         483
370             Electronic transactions and funds transfers 
                    relating to United States securities....         512
375             Marketable treasury securities redemption 
                    operations..............................         519
380             Collateral acceptability and valuation......         523
391             Waiver of interest, administrative costs, 
                    and penalties...........................         524

[[Page 9]]



                SUBCHAPTER A_FINANCIAL MANAGEMENT SERVICE


PART 202_DEPOSITARIES AND FINANCIAL AGENTS OF THE FEDERAL GOVERNMENT \1\--

Table of Contents


---------------------------------------------------------------------------

    \1\ The regulations, which previously appeared in this part, 
governing payment of checks drawn on the United States Treasury now 
appear in revised form in part 240 of this chapter (Department Circular 
21 (Second Revision)).
---------------------------------------------------------------------------

202.1 Scope of regulations.
202.2 Designations.
202.3 Authorization.
202.4 Agreement of deposit.
202.5 Previously designated depositaries.
202.6 Collateral security.
202.7 Maintenance of balances within authorizations.

    Authority: 12 U.S.C. 90, 265-266, 391, 1452(d), 1464(k), 1789a, 
2013, 2122 and 3101-3102; 31 U.S.C. 3303 and 3336.



Sec. 202.1  Scope of regulations.

    The regulations in this part govern the designation of Depositaries 
and Financial Agents of the Federal Government (hereinafter referred to 
as depositaries), and their authorization to accept deposits of public 
money and to perform other services as may be required of them. Public 
money includes, but is not limited to, revenue and funds of the United 
States, and any funds the deposit of which is subject to the control or 
regulation of the United States or any of its officers, agents, or 
employees. The designation and authorization of Treasury Tax and Loan 
depositaries for the receipt of deposits representing Federal taxes are 
governed by the regulations in part 203 of this chapter.

[62 FR 45520, Aug. 27, 1997]



Sec. 202.2  Designations.

    (a) Financial institutions of the following classes are designated 
as Depositaries and Financial Agents of the Government if they meet the 
eligibility requirements stated in paragraph (b) of this section:
    (1) Financial institutions insured by the Federal Deposit Insurance 
Corporation.
    (2) Credit unions insured by the National Credit Union 
Administration.
    (3) Banks, savings banks, savings and loan, building and loan, and 
homestead associations, credit unions created under the laws of any 
State, the deposits or accounts of which are insured by a State or 
agency thereof or by a corporation chartered by a State for the sole 
purpose of insuring deposits or accounts of such financial institutions, 
United States branches of foreign banking corporations authorized by the 
State in which they are located to transact commercial banking business, 
and Federal branches of foreign banking corporations, the establishment 
of which has been approved by the Comptroller of the Currency.
    (b) In order to be eligible for designation, a financial institution 
is required to possess, under its charter and the regulations issued by 
its chartering authority, either general or specific authority to 
perform the services outlined in Sec. 202.3(b). A financial institution 
is required also to possess the authority to pledge collateral to secure 
public funds.

[44 FR 53066, Sept. 11, 1979, as amended at 46 FR 28152, May 26, 1981; 
62 FR 45521, Aug. 27, 1997]



Sec. 202.3  Authorization.

    (a) To accept deposits covered by the appropriate Federal or State 
insurer. Every depositary is authorized to accept a deposit of public 
money in an official account, other than an account in the name of the 
United States Treasury, in which the maximum balance does not exceed the 
``Recognized Insurance Coverage.'' ``Recognized Insurance Coverage'' 
means the insurance provided by the Federal Deposit Insurance 
Corporation, the National Credit Union Administration, and by insurance 
organizations specifically qualified by the Secretary of the Treasury.
    (b) To perform other services. (1) The Secretary of the Treasury may 
authorize a depositary to perform other services including, but not 
limited to:

[[Page 10]]

    (i) The maintenance of official accounts in which balances will be 
in excess of the applicable Federal or State insurance coverage;
    (ii) The maintenance of accounts in the name of the United States 
Treasury;
    (iii) The acceptance of deposits for credit of the United States 
Treasury;
    (iv) The furnishing of bank drafts in exchange for collections.
    (2) To obtain authorization to perform services, a depositary must:
    (i) File with the Secretary of the Treasury an appropriate agreement 
and resolution of its board of directors authorizing the agreement (both 
on forms prescribed by the Financial Management Service and available 
from Federal Reserve Banks), and
    (ii) Pledge collateral security as provided for in Sec. 202.6.

[32 FR 14215, Oct. 13, 1967, as amended at 44 FR 53066, Sept. 11, 1979; 
49 FR 47001, Nov. 30, 1984; 62 FR 45521, Aug. 27, 1997]



Sec. 202.4  Agreement of deposit.

    A depositary which accepts a deposit under this part enters into an 
agreement of deposit with the Treasury Department. The terms of this 
agreement include:
    (a) All of the provisions of this part.
    (b) Any instructions issued pursuant to this part by the Treasury or 
by Federal Reserve Banks as Fiscal Agents of the United States or by any 
other Government agency.
    (c) The provisions prescribed in Executive Order 11246, entitled 
``Equal Employment Opportunity,'' as amended by Executive Orders 11375 
and 12086, and regulations issued thereunder at 41 CFR chapter 60, as 
amended.
    (d) The requirements of section 503 of the Rehabilitation Act of 
1973, as amended, and the regulations issued thereunder at 41 CFR part 
60-741, requiring Federal contractors to take affirmative action to 
employ and advance in employment qualified individuals with 
disabilities.
    (e) The requirements of section 503 of the Vietnam Era Veterans' 
Readjustment Assistance Act of 1972, as amended, 38 U.S.C. 4212, 
Executive Order 11701, and the regulations issued thereunder at 41 CFR 
parts 60-250 and 61-250, requiring Federal contractors to take 
affirmative action to employ and advance in employment qualified special 
disabled and Vietnam Era veterans.

[44 FR 53067, Sept. 11, 1979, as amended at 62 FR 45521, Aug. 27, 1997]



Sec. 202.5  Previously designated depositaries.

    A depositary previously designated will, by the acceptance or 
retention of deposits, be presumed to have assented to all the terms and 
provisions of this part and to the retention of collateral security 
theretofore pledged.

[32 FR 14215, Oct. 13, 1967]



Sec. 202.6  Collateral security.

    (a) Requirement. Prior to receiving deposits of public money, a 
depositary authorized to perform services under Sec. 202.3(b) must 
pledge collateral security in the amount required by the Secretary of 
the Treasury.
    (b) Acceptable security. Types and valuations of acceptable 
collateral security are addressed in 31 CFR part 380. For a current list 
of acceptable classes of securities and instruments described in 31 CFR 
part 380 and their valuations, see the Bureau of the Public Debt's web 
site at www.publicdebt.treas.gov.
    (c) Deposits of securities. Unless the Secretary of the Treasury 
provides otherwise, collateral security under this part must be 
deposited with the Federal Reserve Bank or Branch of the district in 
which the depositary is located (depositaries located in Puerto Rico and 
the Virgin Islands will be considered as being located in the New York 
Federal Reserve district), or with a custodian or custodians within the 
United States designated by the Federal Reserve Bank, under terms and 
conditions prescribed by the Federal Reserve Bank. Securities deposited 
with a Federal Reserve Bank must be accompanied by a letter stating 
specifically the purpose for which the securities are being deposited.
    (d) Assignment. A depository that pledges securities which are not 
negotiable without its endorsement or assignment may, in lieu of placing 
its unqualified endorsement on each security, furnish an appropriate 
resolution and irrevocable power of attorney authorizing the Federal 
Reserve Bank to

[[Page 11]]

assign the securities. The resolution and power of attorney shall 
conform to such terms and conditions as the Federal Reserve Banks shall 
prescribe.
    (e) Disposition of principal and interest payments of the pledged 
securities after a depositary is declared insolvent--(1) General. In the 
event of the depositary's insolvency or closure, or in the event of the 
appointment of a receiver, conservator, liquidator, or other similar 
officer to terminate its business, the depositary agrees that all 
principal and interest payments on any security pledged to protect 
public money due as of the date of the insolvency or closure, or 
thereafter becoming due, shall be held separate and apart from any other 
assets and shall constitute a part of the pledged security available to 
satisfy any claim of the United States, including those not arising out 
of the depositary relationship.
    (2) Payment procedures. (i) Subject to the waiver in paragraph 
(e)(2)(iii) of this section, each depositary (including, with respect to 
such depositary, an assignee for the benefit of creditors, a trustee in 
bankruptcy, or a receiver in equity) shall immediately remit each 
payment of principal and/or interest received by it with respect to 
collateral pledged pursuant to this section to the Federal Reserve Bank 
of the district, as fiscal agent of the United States, and in any event 
shall so remit no later than ten days after receipt of such a payment.
    (ii) Subject to the waiver in paragraph (e)(2)(iii) of this section, 
each obligor on a security pledged by a depositary pursuant to this 
section shall make each payment of principal and/or interest with 
respect to such security directly to the Federal Reserve Bank of the 
district, as fiscal agent of the United States.
    (iii) The requirements of paragraphs (e)(2) (i) and (ii) of this 
section are hereby waived for only so long as a pledging depositary 
remains solvent. The foregoing waiver is terminated without further 
action immediately upon the involvency of a pledging depositary or, if 
earlier, upon notice by the Treasury of such termination. For purposes 
of this paragraph, a depositary is insolvent when, voluntarily or by 
action of competent authority, it is closed because of present or 
prospective inability to meet the demands of its depositors or 
shareholders.

[32 FR 14216, Oct. 13, 1967, as amended at 36 FR 6748, Apr. 8, 1971; 36 
FR 17995, Sept. 8, 1971; 39 FR 30832, Aug. 26, 1974; 44 FR 53067, Sept. 
11, 1979; 46 FR 28152, May 26, 1981; 62 FR 45521, Aug. 27, 1997; 65 FR 
55428, Sept. 13, 2000]



Sec. 202.7  Maintenance of balances within authorizations.

    (a) Federal Government agencies shall contact the Department of the 
Treasury, Financial Management Service, before making deposits with a 
financial institution insured by a State or agency thereof or by a 
corporation chartered by a State for the sole purpose of insuring 
deposits or accounts. The contact should be directed to the Cash 
Management Policy and Planning Division, Federal Finance, Financial 
Management Service, Department of the Treasury, Washington, DC 20227.
    (b) Government agencies having control or jurisdiction over public 
money on deposit in accounts with depositaries are responsible for the 
maintenance of balances in such accounts within the limits of the 
authorizations specified by the Secretary of the Treasury.

[44 FR 53067, Sept. 11, 1979, as amended at 49 FR 47001, Nov. 30, 1984; 
62 FR 45521, Aug. 27, 1997]



PART 203_PAYMENT OF FEDERAL TAXES AND THE TREASURY TAX AND LOAN PROGRAM--Table 

of Contents




                      Subpart A_General Information

Sec.
203.1 Scope.
203.2 Definitions.
203.3 Financial institution eligibility for designation as a Treasury 
          Tax and Loan depositary.
203.4 Designation of financial institutions as Treasury Tax and Loan 
          depositaries.
203.5 Obligations of the depositary.
203.6 Compensation for services.
203.7 Termination of agreement or change of election or option.
203.8 Application of part and procedural instructions.

                Subpart B_Electronic Federal Tax Payments

203.9 Scope of the subpart.

[[Page 12]]

203.10 Enrollment.
203.11 Electronic payment methods.
203.12 Future-day reporting and payment mechanisms.
203.13 Same-day reporting and payment mechanisms.
203.14 Electronic Federal Tax Payment System interest assessments.
203.15 Prohibited debits through the Automated Clearing House.
203.16 Appeal and dispute resolution.

                     Subpart C_Federal Tax Deposits.

203.17 Scope of the subpart.
203.18 Tax deposits using Federal Tax Deposit coupons.
203.19 Note option.
203.20 Remittance option.

 Subpart D_Investment Program and Collateral Security Requirements for 
                   Treasury Tax and Loan Depositaries

203.21 Scope of the subpart.
203.22 Sources of balances.
203.23 Note balance.
203.24 Collateral security requirements.

    Authority: 12 U.S.C. 90, 265-266, 332, 391, 1452(d), 1464(k), 1767, 
1789a, 2013, 2122, and 3102; 26 U.S.C. 6302; 31 U.S.C. 321, 323 and 
3301-3304.

    Source: 63 FR 5650, Feb. 3, 1998, unless otherwise noted.



                      Subpart A_General Information



Sec. 203.1  Scope.

    The regulations in this part govern the processing of Federal tax 
payments by financial institutions and the Federal Reserve Banks (FRB) 
using electronic payment or paper methods; the designation of Treasury 
Tax and Loan (TT&L) depositaries; and the operation of the Department of 
the Treasury's (Treasury) investment program.



Sec. 203.2  Definitions.

    As used in this part:
    (a) Advice of credit means the Treasury form used in the Federal Tax 
Deposit system that is supplied to depositaries to summarize and report 
Federal tax deposits. The current form is Treasury Form 2284. Advice of 
credit information also may be delivered electronically.
    (b) Automated Clearing House (ACH) credit entry means a transaction 
originated by a financial institution in accordance with applicable ACH 
formats and applicable laws, regulations, and procedural instructions.
    (c) Automated Clearing House (ACH) debit entry means a transaction 
originated by a Treasury Financial Agent (TFA), in accordance with 
applicable ACH formats and applicable laws, regulations, and 
instructions.
    (d) Business day means any day on which the FRB of the district is 
open.
    (e) Direct Access transaction means same-day Federal tax payment 
information transmitted by a financial institution directly to the 
Electronic Tax Application at an FRB using the Fedline Taxpayer Deposit 
Application.
    (f) Direct investment means placement of Treasury funds with a 
depositary and a corresponding increase in a depositary's note balance.
    (g) Direct investment means placement of Treasury funds with a 
depositary and a corresponding increase in a depositary's main note 
balance.
    (h) Electronic Tax Application (ETA) means a sub-system of EFTPS 
that receives, processes, and transmits same-day Federal tax payment 
information for taxpayers. ETA activity is comprised of Fedwire value 
transfers, Fedwire non-value transactions, and Direct Access 
transactions.
    (i) Electronic Tax Application (ETA) reference number means the 
unique number assigned to each ETA transaction by an FRB.
    (j) Federal funds rate means the Federal funds rate published weekly 
by the Board of Governors of the Federal Reserve System.
    (k) Federal Reserve account means an account with reserve or 
clearing balances held by a financial institution at an FRB.
    (l) Federal Reserve Bank of the district means the FRB that services 
the geographical area in which the financial institution is located, or 
such other FRB that may be designated in an FRB operating circular.
    (m) Federal Tax Deposit (FTD) means a tax deposit or payment made 
using an FTD coupon.
    (n) Federal Tax Deposit coupon (FTD coupon) means a paper form 
supplied to a taxpayer by the Treasury for use in the FTD system to 
accompany deposits of Federal taxes. The current paper form is Form 
8109.

[[Page 13]]

    (o) Federal Tax Deposit system (FTD system) means the paper-based 
system through which taxpayers remit Federal tax payments by presenting 
an FTD coupon and payment to a depositary or an FRB. The depositary 
prepares an advice of credit summarizing all FTDs.
    (p) Federal taxes means those Federal taxes or other payments 
specified by the Secretary of the Treasury as eligible for payment 
through the procedures prescribed in this part.
    (q) Fedwire means the funds transfer system owned and operated by 
the FRBs.
    (r) Fedwire non-value transaction means the same-day Federal tax 
payment information transmitted by a financial institution to an FRB 
using a Fedwire type 1090 message to authorize a payment.
    (s) Fedwire value transfer means a Federal tax payment made by a 
financial institution using a Fedwire type 1000 message.
    (t) Financial institution means any bank, savings bank, savings and 
loan association, credit union, or similar institution.
    (u) Fiscal Agent means the Federal Reserve acting as agent for the 
Treasury.
    (v) Input Message Accountability Data (IMAD) means a unique number 
assigned to each Fedwire transaction by the financial institution 
sending the transaction to an FRB.
    (w) Main note balance means an open-ended interest-bearing note 
balance maintained at the FRB of the district.
    (x) Note option means that program available to a TT&L depositary 
under which Treasury invests in obligations of the depositary. The 
amount of such investments will be evidenced by interest-bearing note 
balances maintained at the FRB of the district.
    (y) Procedural instructions means the procedures contained in the 
Treasury Financial Manual, Volume IV (IV TFM), other Treasury 
instructions issued through the TFAs, and FRB operating circulars issued 
consistent with this part.
    (z) Recognized insurance coverage means the insurance provided by 
the Federal Deposit Insurance Corporation, the National Credit Union 
Administration, and by insurance organizations specifically qualified by 
the Secretary.
    (aa) Remittance option means that program available to a depositary 
that processes FTD payments, under which the amount of deposits credited 
by the depositary to the TT&L account will be withdrawn by the FRB for 
deposit to the Treasury General Account on the day that the FRB receives 
the advices of credit supporting such deposits.
    (bb) Same-day payment means the following ETA payment options:
    (1) Direct Access transaction;
    (2) Fedwire non-value transaction; and
    (3) Fedwire value transfer.
    (cc) Secretary means the Secretary of the Treasury, or the 
Secretary's delegate.
    (dd) Special direct investment means the placement of Treasury funds 
with a depositary and a corresponding increase in a depositary's main 
note balance, where the investment specifically is identified as a 
``special direct investment'' and may be secured by collateral retained 
in the possession of the depositary pursuant to the terms of Sec. 
203.24(c)(2)(i).
    (ee) Tax due date means the day on which a tax payment is due to 
Treasury, as determined by statute and Internal Revenue Service (IRS) 
regulations.
    (ff) Term investment option means the program available to financial 
institutions that offers the ability to borrow excess Treasury operating 
funds for a predetermined period of time.
    (gg) Term note balance means an interest-bearing note balance 
maintained at the FRB of the district for a predetermined period of 
time.
    (hh) Transaction trace number means an identifying number assigned 
by the taxpayer's financial institution to each ACH credit transaction.
    (ii) Treasury Financial Agent (TFA) means a financial institution 
designated as an agent of Treasury for processing EFTPS enrollments, 
receiving EFTPS tax payment information, and originating ACH debit 
entries on behalf of Treasury as authorized by the taxpayer.
    (jj) Treasury General Account (TGA) means an account maintained in 
the

[[Page 14]]

name of the United States Treasury at an FRB.
    (kk) Treasury Tax and Loan (TT&L) account means the Treasury account 
maintained by a depositary in which funds are credited by the depositary 
after receiving and collateralizing FTDs.
    (ll) Treasury Tax and Loan depositary (depositary) means a financial 
institution designated as a depositary by the FRB of the district for 
the purpose of maintaining a TT&L account and/or note balance.
    (mm) Treasury Tax and Loan (TT&L) Program means the program for 
collecting Federal taxes and investing the Government's excess operating 
funds.
    (nn) Treasury Tax and Loan (TT&L) rate of interest means the 
interest charged on the main note balance. The TT&L rate of interest is 
the rate prescribed by the Secretary taking into consideration 
prevailing market interest rates. The rate and any rate changes will be 
announced through a TT&L Special Notice to Depositaries and will be 
published in the Federal Register and on a web site maintained by 
Treasury's Financial Management Service at http://www.fms.treas.gov.

[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11575, Mar. 15, 2002]



Sec. 203.3  Financial institution eligibility for designation as a Treasury 

Tax and Loan depositary.

    (a) To be designated as a TT&L depositary, a financial institution 
shall be insured as a national banking association, state bank, savings 
bank, savings and loan, building and loan, homestead association, 
Federal home loan bank, credit union, trust company, or a U.S. branch of 
a foreign banking corporation, the establishment of which has been 
approved by the Comptroller of the Currency.
    (b) A financial institution shall possess the authority to pledge 
collateral to secure TT&L account balances and/or a note balance.
    (c) In order to be designated as a TT&L depositary for the purposes 
of processing tax deposits in the FTD system, a financial institution 
shall possess under its charter either general or specific authority 
permitting the maintenance of the TT&L account, the balance of which is 
payable on demand without previous notice of intended withdrawal. In 
addition, note option depositaries shall possess either general or 
specific authority permitting the maintenance of a note balance. In the 
case of note option depositaries maintaining main note balances, the 
authority shall permit the maintenance of a main note balance which is 
payable on demand without previous notice of intended withdrawal.

[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11576, Mar. 15, 2002]



Sec. 203.4  Designation of financial institutions as Treasury Tax and Loan 

depositaries.

    (a) Parties to the agreement. To be designated as a TT&L depositary, 
a financial institution shall enter into a depositary agreement with 
Treasury's fiscal agent, the FRB. By entering into this agreement, the 
financial institution agrees to be bound by this part, and procedural 
instructions issued pursuant to this part.
    (b)(1) Application procedures. An eligible financial institution 
seeking designation as a depositary and, thereby, the authority to 
maintain a TT&L account and/or a note balance shall file with the FRB, 
Financial Management Service Form 458, ``Financial Institution Agreement 
and Application for Designation as a TT&L Depositary,'' and Financial 
Management Service Form 459, ``Resolution Authorizing the Financial 
Institution Agreement and Application for Designation as a TT&L 
Depositary,'' certified by its board of directors. Financial Management 
Service Forms 458 and 459 are available upon request from the FRB of the 
district.
    (2) Depositaries processing tax payments in the FTD system are 
required to elect either the remittance or the note option.
    (c) Designation. Each financial institution satisfying the 
eligibility requirements and the application procedures will receive 
from the FRB notification of its specific designation as a TT&L 
depositary. A financial institution is not authorized to maintain a TT&L 
account or note balance until it has been designated as a TT&L 
depositary by the FRB.

[[Page 15]]



Sec. 203.5  Obligations of the depositary.

    A depositary shall:
    (a) Administer a note balance, if not participating in the FTD 
System.
    (b) Administer a TT&L account and, if applicable, a note balance, if 
participating in the FTD System.
    (c) Comply with the requirements of Section 202 of Executive Order 
11246, entitled ``Equal Employment Opportunity'' (3 CFR, 1964-1965 Comp. 
p. 339) as amended by Executive Orders 11375 and 12086 (3 CFR, 1966-1970 
Comp., p. 684; 3 CFR, 1978 Comp. p. 230), and the regulations issued 
thereunder at 41 CFR Chapter 60.
    (d) Comply with the requirements of Section 503 of the 
Rehabilitation Act of 1973, as amended, and the regulations issued 
thereunder at 41 CFR part 60-741, requiring Federal contractors to take 
affirmative action to employ and advance in employment qualified 
individuals with disabilities.
    (e) Comply with the requirements of Section 503 of the Vietnam Era 
Veterans' Readjustment Assistance Act of 1972, as amended, 38 U.S.C. 
4212, Executive Order 11701 (3 CFR 1971-1975 Comp. p. 752), and the 
regulations issued thereunder at 41 CFR parts 60-250 and 61-250, 
requiring Federal contractors to take affirmative action to employ and 
advance in employment qualified special disabled veterans and Vietnam-
era veterans.



Sec. 203.6  Compensation for services.

    Except as provided in the procedural instructions, Treasury will not 
compensate financial institutions for servicing and maintaining the TT&L 
account, or for processing tax payments through the EFTPS or the FTD 
system.



Sec. 203.7  Termination of agreement or change of election or option.

    (a) Termination by Treasury. The Secretary may terminate the 
agreement of a depositary at any time upon notice to that effect to that 
depositary, effective on the date set forth in the notice.
    (b) Termination or change of election or option by the depositary. A 
depositary may terminate its depositary agreement, or change its option 
or election, consistent with this part and the procedural instructions, 
by submitting notice to that effect in writing to the FRB effective at a 
prospective date set forth in the notice.



Sec. 203.8  Application of part and procedural instructions.

    The terms of this part and procedural instructions issued pursuant 
to this part shall be binding on financial institutions that process tax 
payments and/or maintain a note balance under this part. By accepting or 
originating Federal tax payments, the financial institution agrees to be 
bound by this part and by procedural instructions issued pursuant to 
this part.



                Subpart B_Electronic Federal Tax Payments



Sec. 203.9  Scope of the subpart.

    This subpart prescribes the rules by which financial institutions 
shall process Federal tax payment transactions electronically. A 
financial institution does not need to be designated as a TT&L 
depositary in order to process electronic Federal tax payments. In 
addition, a financial institution that does process electronic Federal 
tax payments under this subpart does not thereby become a Federal 
Government depositary and shall not advertise itself as one because of 
that fact.



Sec. 203.10  Enrollment.

    (a) General. Taxpayers shall complete an enrollment process with the 
TFA prior to making their first electronic Federal tax payment.
    (b) Enrollment forms. The TFA shall provide financial institutions 
and taxpayers with enrollment forms upon request. The taxpayer is 
responsible for completing the enrollment form, obtaining the 
verifications required on the form, and returning the enrollment form to 
the TFA.
    (c) Verification. If the taxpayer elects the ACH debit entry method 
of paying taxes, an authorized representative of the financial 
institution shall verify the accuracy of the financial institution 
routing number, taxpayer account number, and taxpayer account type at 
the request of the taxpayer.

[[Page 16]]



Sec. 203.11  Electronic payment methods.

    (a) General. Electronic payment methods for Federal tax payments 
available under this subpart include ACH debit entries, ACH credit 
entries, and same-day payments. Any financial institution that is 
capable of originating and/or receiving transactions for these payment 
methods, by itself or through a correspondent financial institution, may 
do so on behalf of a taxpayer.
    (b) Conditions to making an electronic payment. Nothing contained in 
this part shall affect the authority of financial institutions to enter 
into contracts with their customers regarding the terms and conditions 
for processing payments, provided that such terms and conditions are not 
inconsistent with this subpart and applicable law governing the 
particular transaction type.
    (c) Payment of interest for time value of funds held. Treasury will 
not pay interest on any payments erroneously paid to Treasury and 
subsequently refunded to the financial institution.



Sec. 203.12  Future-day reporting and payment mechanisms.

    (a) General. A financial institution may receive an ACH debit entry, 
originated by the TFA at the direction of the taxpayer; or, a financial 
institution may originate an ACH credit entry, at the direction of the 
taxpayer. Taxpayers will be credited for the actual amount received by 
Treasury.
    (b) ACH debit. A financial institution receiving an ACH debit entry 
originated by the TFA shall, as applicable:
    (1) Timely verify the account number and account type contained in 
an ACH prenotification entry;
    (2) Timely and properly return a prenotification entry that contains 
an invalid account number or account type, or otherwise is erroneous or 
unprocessable;
    (3) Timely and accurately notify the TFA of incorrect information on 
entries received, using a Notification of Change entry; and
    (4) Timely and accurately return an entry not posted, including but 
not limited to, a return or a contested dishonored return for acceptable 
return reasons, as set forth in the procedural instructions.
    (c) ACH credit. A financial institution originating an ACH credit 
entry at the direction of a taxpayer shall:
    (1) At the request of the taxpayer, originate either an ACH 
prenotification containing the taxpayer's identification number or a 
zero dollar ACH entry with the appropriate addenda record. Additional 
format information is contained in the procedural instructions;
    (2) Format the ACH credit entry in the ACH format approved by 
Treasury for Federal tax payments;
    (3) Originate an ACH credit entry by the appropriate deadline, as 
specified by the FRB or Treasury, whichever is earlier, in order to meet 
the tax due date specified by the taxpayer; and
    (4) Provide the taxpayer, upon request, a transaction trace number, 
or some other method to trace the tax payment.
    (d) ACH credit reversals. Reversals may be initiated for a duplicate 
or erroneous file or entry. No advance approval from, or notification 
to, the IRS is required when originating an ACH credit reversal. 
Documentation of reversals shall be made available as set forth in the 
procedural instructions.



Sec. 203.13  Same-day reporting and payment mechanisms.

    (a) General. A financial institution or its authorized correspondent 
may initiate same-day reporting and payment transactions on behalf of 
taxpayers. A same-day payment must be received by the FRB of the 
district by the deadline established by the Treasury in the procedural 
instructions. Taxpayers will be credited for the actual amount received 
by Treasury.
    (b) Fedwire value transfer. To initiate a Fedwire value tax payment, 
the financial institution shall be a Fedwire participant and shall 
comply with the FRB's Fedwire format for tax payments. The taxpayer's 
financial institution shall provide the taxpayer, upon request, the IMAD 
and the ETA reference numbers for a Fedwire value transfer. The 
financial institution may obtain the ETA reference number for Fedwire 
value transfers from its FRB

[[Page 17]]

by supplying the related IMAD number. Fedwire value transfers settle 
immediately to the TGA and thus are not credited to a depositary's main 
note balance.
    (c) Fedwire non-value transaction. By initiating a Fedwire non-value 
transaction, a financial institution authorizes the FRB of the district 
to debit its Federal Reserve account or, for a TT&L depositary, to debit 
the Federal Reserve account of the depositary or its designated 
correspondent financial institution, for the amount of the tax payment 
specified in the transaction. To initiate a Fedwire non-value 
transaction, the financial institution shall be a Fedwire participant 
and shall comply with the FRB's Fedwire format for tax payments. The 
taxpayer's financial institution shall provide the taxpayer, upon 
request, the IMAD and ETA reference numbers for the Fedwire non-value 
transaction. The financial institution may obtain the ETA reference 
number for Fedwire non-value transactions from its FRB by supplying the 
related IMAD number.
    (1) For a note option depositary using a Fedwire non-value 
transaction, the tax payment amount will be credited to the depositary's 
main note balance on the day of the transaction.
    (2) For a remittance option depositary using a Fedwire non-value 
transaction, the tax payment amount will be debited from the Federal 
Reserve account of the depositary or the depositary's designated 
correspondent and credited to the TGA on the day of the transaction.
    (3) For a non-TT&L depositary financial institution using a Fedwire 
non-value transaction, the tax payment amount will be debited from the 
financial institution's Federal Reserve account and credited to the TGA 
on the day of the transaction.
    (d) Direct Access transaction. By initiating a Direct Access 
transaction, a financial institution authorizes the FRB of the district 
to debit its Federal Reserve account or, for a TT&L depositary, to debit 
the Federal Reserve account of the depositary or its designated 
correspondent financial institution for the amount of the tax payment 
specified in the transaction. The taxpayer's financial institution shall 
provide the taxpayer, upon request, the ETA reference number for the 
Direct Access transaction.
    (1) For a note option depositary using a Direct Access transaction, 
the tax payment amount will be credited to the depositary's main note 
balance on the day of the transaction.
    (2) For a remittance option depositary or a non-TT&L depositary 
financial institution using a Direct Access transaction, the tax payment 
amount will be debited from the Federal Reserve account of the financial 
institution or its designated correspondent financial institution, and 
credited to the TGA on the day of the transaction.
    (e) Cancellations and reversals. In addition to cancellations due to 
insufficient funds in the financial institution's Federal Reserve 
account, the FRB may reverse a same-day transaction:
    (1) If the transaction:
    (i) Is originated by a financial institution after the deadline 
established by the Treasury in the procedural instructions;
    (ii) Has an unenrolled taxpayer identification number; or
    (iii) Does not meet the edit and format requirements set forth in 
the procedural instructions; or,
    (2) At the direction of the IRS, for the following reasons:
    (i) Incorrect taxpayer name;
    (ii) Overpayment; or
    (iii) Unidentified payment; or,
    (3) At the request of the financial institution that sent the same-
day transaction, if the request is made prior to the deadline 
established by Treasury in the procedural instructions on the day the 
payment was made.
    (f) Other than as stated in paragraph (e) of this section, Treasury 
is not obligated to reverse all or any part of a payment.

[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11576, Mar. 15, 2002]



Sec. 203.14  Electronic Federal Tax Payment System interest assessments.

    (a) Circumstances subject to interest assessments. Treasury may 
assess interest on a financial institution in instances where a taxpayer 
that failed to meet a tax due date proves to the IRS that the delivery 
of tax payment instructions to

[[Page 18]]

the financial institution was timely and that the taxpayer satisfied the 
conditions imposed by the financial institution pursuant to Sec. 
203.11(b). Treasury also may assess interest where a financial 
institution failed to respond to an ACH prenotification entry on an ACH 
debit as required in Sec. 203.12(b) or failed to originate an ACH 
prenotification or zero dollar entry on an ACH credit as described in 
Sec. 203.12(c) which then resulted in a late payment.
    (b) Calculation of interest assessment. Any interest assessed under 
this section will be at the TT&L rate. The interest will be assessed 
from the day the taxpayer specified that its payment should settle to 
the Treasury until the receipt of the payment by Treasury, subject to 
the following limitations: For ACH debit transactions, interest will be 
limited to no more than seven calendar days; for ACH credit and same-day 
transactions, interest will be limited to no more than 45 calendar days. 
The limitation of liability in this paragraph does not apply to any 
interest assessment in which there is an indication of fraud, the 
presentation of a false claim, or misrepresentation or embezzlement on 
the part of the financial institution or any employee or agent of the 
financial institution.
    (c) Authorization to assess interest. A financial institution that 
processes Federal tax payments made by electronic payment methods under 
this subpart is deemed to authorize the FRB to debit its Federal Reserve 
account or the account of its designated correspondent financial 
institution for any interest assessed under this section. Upon the 
direction of Treasury, the FRB shall debit the Federal Reserve account 
of the financial institution or the account of its designated 
correspondent financial institution for the amount of the assessed 
interest.
    (d) Circumstances not subject to the assessment of interest. (1) 
Treasury will not assess interest on a taxpayer's financial institution 
if a taxpayer fails to meet a tax due date because the taxpayer has not 
satisfied conditions imposed by the financial institution pursuant to 
Sec. 203.11(b) and the financial institution has not contributed to the 
delay. The burden is on the financial institution to establish, pursuant 
to the procedures in Sec. 203.16, that the taxpayer has not satisfied 
the conditions and that the financial institution has not contributed to 
the delay.
    (2) Treasury will not assess interest on a financial institution if 
the delay causing the interest assessment is due to the FRB or the TFA 
and the financial institution did not contribute to the delay. The 
burden is on the financial institution to establish, pursuant to the 
procedures in Sec. 203.16, that it did not cause or contribute to the 
delay.



Sec. 203.15  Prohibited debits through the Automated Clearing House.

    (a) General. The Treasury has instituted operational safeguards to 
scrutinize all entries that remove funds from the TGA. In the event 
funds are removed from the TGA without authority, this section sets 
forth the liability of financial institutions originating such entries. 
Accordingly, a financial institution shall not originate an ACH 
transaction to debit the TGA without the prior written permission of 
Treasury. Unauthorized entries under this section do not include 
reversal entries of previously initiated ACH credits authorized in Sec. 
203.12(d).
    (b) Liability. A financial institution that originates an 
unauthorized ACH entry that debits the TGA shall be liable to Treasury 
for the amount of the transaction and shall be liable for interest 
charges as specified in paragraph (d) of this section.
    (c) Authorization to recover principal and assess interest charge. 
By initiating unauthorized debits to the TGA through the ACH, a 
financial institution is deemed to authorize the FRB to debit its 
Federal Reserve account or the account of its designated correspondent 
financial institution for any principal and, if applicable, an interest 
charge assessed by Treasury under this section.
    (d) Interest charge calculation. The interest charge shall be at a 
rate equal to the Federal funds rate plus two percent. The interest 
charge shall be assessed for each calendar day from the day the TGA was 
debited to the day the TGA is recredited with the full amount of 
principal due.

[[Page 19]]



Sec. 203.16  Appeal and dispute resolution.

    (a) Contest. A financial institution may contest any interest 
assessed under Sec. 203.14, any principal or interest assessed under 
Sec. 203.15, or any late fees assessed under Sec.  203.20. The 
financial institution shall submit information supporting its position 
and the relief sought. The information must be received, in writing, by 
the Treasury officer or fiscal agent identified in the procedural 
instructions, no later than 90 calendar days after the date the FRB 
debits the reserve account of the financial institution under Sec. Sec. 
203.14, 203.15, or 203.20. The Treasury officer or fiscal agent will: 
uphold the assessment, or reverse the assessment, or modify the 
assessment, or mandate other action.
    (b) Appeal. The financial institution may appeal the decision to 
Treasury as set forth in the procedural instructions. No further 
administrative review of the Treasury's decision is available under this 
Part.
    (c) Recoveries. In the event of an over or under recovery of either 
interest, principal, or late fees, Treasury will instruct the FRB to 
credit or debit the Federal Reserve account of the financial institution 
or its designated correspondent financial institution, as appropriate.



                     Subpart C_Federal Tax Deposits



Sec. 203.17  Scope of the subpart.

    This subpart applies to all depositaries that accept FTD coupons and 
governs the acceptance and processing of those coupons.



Sec. 203.18  Tax deposits using Federal Tax Deposit coupons.

    (a) FTD coupons. A depositary that accepts FTD coupons, through any 
of its offices that accept demand and/or savings deposits, shall:
    (1) Accept from a taxpayer, cash, a postal money order drawn to the 
order of the depositary, or a check or draft drawn on and to the order 
of the depositary, covering an amount to be deposited as Federal taxes 
when accompanied by an FTD coupon on which the amount of the deposit has 
been properly entered in the space provided. A depositary may accept, at 
its discretion, a check drawn on another financial institution, but it 
does so at its option and absorbs for its own account any float and 
other costs involved.
    (2) Issue a counter receipt when requested to do so by a taxpayer 
that makes an FTD deposit over the counter.
    (3) Place a stamp impression on the face of each FTD coupon in the 
space provided. The stamp shall reflect the date on which the tax 
deposit was received and the name and location of the depositary. The 
timeliness of the tax payment will be determined by reference to the 
date stamped by the depositary on the FTD coupon.
    (4) Credit, on the date of receipt, all FTD deposits to the TT&L 
account and administer that account pursuant to the provisions of this 
part.
    (5) Forward, each day, to the IRS Center servicing the geographical 
area in which the depositary is located, the FTD coupons for all FTD 
deposits received that day. The FTD coupons shall be accompanied by an 
advice of credit reflecting the total amount of all FTD coupons.
    (6) Establish an adequate record of all FTD deposits prior to 
transmittal to the IRS Center so that the depositary will be able to 
identify deposits in the event tax deposit coupons are lost in shipment. 
For tracking purposes, a record shall be made of each FTD deposit 
showing, at a minimum, the date of deposit, the taxpayer identification 
number, and the amount of the deposit. The depositary's copy of the 
advice of credit may be used to provide the necessary information if 
individual deposits are listed separately, showing date, taxpayer 
identification number, and amount.
    (7) Deliver its advices of credit to the FRB by the cutoff hour 
designated by the FRB for receipt of advices.
    (8) Not accept compensation from taxpayers for accepting FTDs and 
handling them as required by this section.
    (b) FTD deposits with Federal Reserve Banks. An FRB shall:
    (1) Accept an FTD directly from a taxpayer when such tax deposit is:
    (i) Mailed or delivered by a taxpayer; and

[[Page 20]]

    (ii) Provided in the form of cash or a check or postal money order 
payable to the order of that FRB; and,
    (iii) Accompanied by an FTD coupon on which the amount of the tax 
deposit has been properly entered in the space provided.
    (2) Issue a counter receipt, when requested to do so by a taxpayer 
that makes an FTD over the counter; and,
    (3) Place, in the space provided on the face of each FTD coupon 
accepted directly from a taxpayer, a stamp impression reflecting the 
name of the FRB and the date on which the tax deposit will be credited 
to the TGA. Timeliness of the Federal tax payment will be determined by 
this date. However, if a deposit is mailed to an FRB, it shall be 
subject to the ``Timely mailing treated as timely filing and paying'' 
clause of the Internal Revenue Code, 26 U.S.C. 7502; and,
    (4) Credit the TGA with the amount of the tax payment;
    (i) On the date the payment is received, if payment is made in cash; 
or,
    (ii) On the date the proceeds of the tax payment are collected, if 
payment is made by postal money order or check.



Sec. 203.19  Note option.

    (a) Late delivery of advices of credit. If an advice of credit does 
not arrive at the FRB before the designated cutoff hour for receipt of 
such advices, the FRB will post the funds to the main note balance as of 
the next business day after the date on the advice of credit. This is 
the date on which funds will begin to earn interest for Treasury.
    (b) Transfer of funds from TT&L account to the main note balance. 
For a depositary selecting the note option, funds equivalent to the 
amount of deposits credited by a depositary to the TT&L account shall be 
withdrawn by the depositary and credited to the main note balance on the 
business day following the receipt of the tax payment.

[67 FR 11576, Mar. 15, 2002]



Sec. 203.20  Remittance option.

    (a) FTD late fee. If an advice of credit does not arrive at the FRB 
before the designated cutoff hour for receipt of such advices, an FTD 
late fee in the form of interest at the TT&L rate will be assessed for 
each day's delay in receipt of such advice. Upon the direction of 
Treasury, the FRB shall debit the Federal Reserve account of the 
financial institution or the account of its designated correspondent 
financial institution for the amount of the late fee.
    (b) Withdrawals. For a depositary selecting the Remittance Option, 
the amount of deposits credited by a depositary to the TT&L account will 
be withdrawn upon receipt by the FRB of the advices of credit. The FRB 
will charge the depositary's Federal Reserve account or the account of 
the depositary's designated correspondent financial institution.



 Subpart D_Investment Program and Collateral Security Requirements for 
                   Treasury Tax and Loan Depositaries



Sec. 203.21  Scope of the subpart.

    This subpart provides rules for TT&L depositaries on crediting main 
note balances under the various payment methods; debiting main note 
balances; maintaining term note balances; and pledging collateral 
security.

[67 FR 11576, Mar. 15, 2002]



Sec. 203.22  Sources of balances.

    Depositaries electing to participate in the investment program can 
receive Treasury's investments in obligations of the depositary from the 
following sources:
    (a) FTDs that have been credited to the TT&L account pursuant to 
subpart C of this part;
    (b) EFTPS ACH credit and debit transactions, Fedwire non-value 
transactions, and Direct Access transactions pursuant to subpart B of 
this part;
    (c) Direct investments and special direct investments pursuant to 
subpart D of this part; and
    (d) Other excess Treasury operating funds.

[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11576, Mar. 15, 2002]

[[Page 21]]



Sec. 203.23  Note balance.

    (a) Additions. Treasury will invest funds in obligations of 
depositaries selecting the note option. Such obligations shall be in the 
form of open-ended, interest-bearing notes; and additions and reductions 
will be reflected on the books of the FRB of the district.
    (1) FTD system. A depositary processing tax deposits using the FTD 
system and electing the note option shall debit the TT&L account and 
credit its main note balance as stated in Sec. 203.19(b).
    (2) EFTPS--(i) ACH debit and ACH credit. A note option depositary 
processing EFTPS ACH debit entries and/or ACH credit entries shall 
credit its main note balance for the value of the transactions on the 
date that an exchange of funds is reflected on the books of the Federal 
Reserve Bank of the district. Financial institutions may refer to the 
procedural instructions for information on how to ascertain the amount 
of the credit to the main note balance.
    (ii) Fedwire non-value and Direct Access. A note option depositary 
processing Fedwire non-value and/or Direct Access transactions pursuant 
to subpart B of this part shall credit its main note balance and debit 
its customer's account for the value of the transactions on the date ETA 
receives and processes the transactions.
    (b) Other additions. Other funds from Treasury may be offered from 
time to time to certain note option depositaries through direct 
investments, special direct investments, or other investment programs.
    (c) Main note balance withdrawals. The amount of the main note 
balance shall be payable on demand without prior notice. Calls for 
payment on the note will be by direction of the Secretary through the 
FRBs. On behalf of Treasury, the FRB shall charge the reserve account of 
the depositary or the depositary's designated correspondent on the day 
specified in the call for payment.
    (d) Interest. A main note balance shall bear interest at the TT&L 
rate. Such interest is payable by a charge to the Federal Reserve 
account of the depositary or its designated correspondent in the manner 
prescribed in the procedural instructions.
    (e) Maximum balance--(1) Note option depositaries. A depositary 
selecting the note option shall establish a maximum for its main note 
balance by providing notice to that effect in writing to the FRB of the 
district. The maximum balance is the amount of funds for which a main 
note option depositary is willing to provide collateral in accordance 
with Sec. 203.24(c)(1). The depositary shall provide the advance notice 
required in the procedural instructions before reducing the established 
maximum balance unless it is a reduction resulting from a collateral re-
evaluation as determined by the depositary's FRB. That portion of any 
advice of credit or EFTPS tax payment, which, when posted at the FRB, 
would cause the main note balance to exceed the maximum balance amount 
specified by the depositary, will be withdrawn by the FRB that day.
    (2) Direct investment depositaries. A main note option depositary 
that participates in direct investment shall set a maximum for its main 
note balance for direct investment purposes which is higher than its 
peak balance normally generated by the depositary's advices of credit 
and EFTPS tax payment inflow. The direct investment note option 
depositary shall provide the advance notice required in the procedural 
instructions before reducing the established maximum balance.
    (3) Special direct investment depositaries. Special direct 
investments, when credited to the main note balance, shall not be 
considered in setting the amount of the maximum balance or in 
determining the amounts to be withdrawn where a depositary's maximum 
balance is exceeded.
    (f) Term investment option. Treasury may, from time to time, invest 
excess operating funds in obligations of depositaries selecting the term 
investment option. Such obligations shall be in the form of interest-
bearing notes payable upon a predetermined period of time not to exceed 
90 days. Such notes shall bear interest at a rate prescribed by the 
Secretary by auction or otherwise taking into consideration prevailing 
market interest rates.

[63 FR 5650, Feb. 3, 1998, as amended at 67 FR 11576, Mar. 15, 2002]

[[Page 22]]



Sec. 203.24  Collateral security requirements.

    Financial institutions that process EFTPS tax payments, but are not 
TT&L depositaries, have no collateral requirements under this part. 
Financial institutions that are note option depositaries or remittance 
option depositaries have collateral security requirements, as follows:
    (a) Note option--main note balance--(1) FTD deposits and EFTPS tax 
payments. A depositary shall pledge collateral security in accordance 
with the requirements of paragraphs (d)(1), (e), and (f) of this section 
in an amount that is sufficient to cover the pre-established maximum 
balance for the main note balance, and, if applicable, the closing 
balance in the TT&L account which exceeds recognized insurance coverage. 
Depositaries shall pledge collateral for the full amount of the maximum 
balance at the time the maximum balance is established. If the 
depositary maintains a TT&L account, the depositary shall pledge 
collateral security before crediting deposits to the TT&L account.
    (2) Direct investments. A note option depositary that participates 
in direct investment is not required to pledge collateral continuously 
in the amount of the pre-established maximum balance. However, each note 
option depositary participating in direct investment shall pledge, no 
later than the day the direct investment is placed, the additional 
collateral in accordance with paragraphs (d)(1), (e), and (f) of this 
section to cover the total main note balance including those funds 
received through direct investment. If a direct investment depositary 
has a history of frequent collateral deficiencies, it shall fully 
collateralize its maximum balance at all times.
    (3) Special direct investments. Before special direct investments 
are credited to a depositary's main note balance, the note option 
depositary shall pledge collateral security, in accordance with the 
requirements of paragraphs (d)(2) and (f) of this section, to cover 100 
percent of the amount of the special direct investments to be received.
    (b) Note option--term note balance. Each note option depositary 
participating in the term investment program shall pledge, prior to the 
time the term investment is placed, collateral in accordance with 
paragraphs (d)(1), (e), and (f) of this section sufficient to cover the 
total term note balance.
    (c) Remittance option. Prior to crediting FTD deposits to the TT&L 
account, a remittance option depositary shall pledge collateral security 
in accordance with the requirements of paragraph (c)(1), (d), and (e) of 
this section in an amount which is sufficient to cover the balance in 
the TT&L account at the close of business each day, less recognized 
insurance coverage.
    (d) Deposits of securities. (1) Collateral security required under 
paragraphs (a)(1), (2), (b), and (c) of this section shall be deposited 
with the FRB of the district, or, where appropriate, with a custodian or 
custodians within the United States designated by the FRB, under terms 
and conditions prescribed by the FRB.
    (2)(i) Collateral security required under paragraph (a)(3) of this 
section shall be pledged under a written security agreement on a form 
provided by the FRB of the district. The collateral security pledged to 
satisfy the requirements of paragraph (a)(3) of this section may remain 
in the pledging depositary's possession and the fact that it has been 
pledged shall be evidenced by advices of custody to be incorporated by 
reference in the written security agreement. The written security 
agreement and all advices of custody covering collateral security 
pledged under that agreement shall be provided by the depositary to the 
FRB of the district. Collateral security pledged under the agreement 
shall not be substituted for or released without the advance approval of 
the FRB of the district, and any collateral security subject to the 
security agreement shall remain so subject until an approved 
substitution is made. No substitution or release shall be approved until 
an advice of custody containing the description required by the written 
security agreement is received by the FRB of the district.
    (ii) Treasury's security interest in collateral security pledged by 
a depositary in accordance with paragraph (c)(2)(i) of this section to 
secure special direct investments is perfected without

[[Page 23]]

Treasury taking possession of the collateral security for a period not 
to exceed 21 calendar days from the day of the depositary's receipt of 
the special direct investment.
    (e) Acceptable securities. Types and valuations of acceptable 
collateral security are addressed in 31 CFR part 380. For a current list 
of acceptable classes of securities and instruments described in 31 CFR 
part 380 and their valuations, see the Bureau of the Public Debt's web 
site at www.publicdebt.treas.gov.
    (f) Assignment of securities. A TT&L depositary that pledges 
acceptable securities which are not negotiable without its endorsement 
or assignment may furnish, in lieu of placing its unqualified 
endorsement on each security, an appropriate resolution and irrevocable 
power of attorney authorizing the FRB to assign the securities. The 
resolution and power of attorney shall conform to such terms and 
conditions as the FRB shall prescribe.
    (g) Effecting payments of principal and interest on securities 
pledged as collateral--(1) General. If the depositary fails to pay, when 
due, the whole or any part of the funds received by it for credit to the 
TT&L account, and/or if applicable, its note balance; or otherwise 
violates or fails to perform any of the terms of this part, or fails to 
pay when due amounts owed to the United States or the United States 
Treasury; or if the depositary is closed for business by regulatory 
action or by proper corporate action, or in the event that a receiver, 
conservator, liquidator or any other officer is appointed; then the 
Treasury, without notice or demand, may sell, or otherwise collect the 
proceeds of all or part of the collateral, including additions and 
substitutions; and apply the proceeds, to satisfy any claims of the 
United States against the depositary. All principal and interest 
payments on any security pledged to protect the note balance (if 
applicable) and/or the TT&L account (if applicable), due as of the date 
of the insolvency or closure, or thereafter becoming due, shall be held 
separate and apart from any other assets and shall constitute a part of 
the pledged security available to satisfy any claim of the United 
States.
    (2) Payment procedures. (i) Subject to the waiver in paragraph 
(f)(2)(iii) of this section, each depositary (including, with respect to 
such depositary, an assignee for the benefit of creditors, a trustee in 
bankruptcy, or a receiver in equity) shall immediately remit each 
payment of principal and/or interest received by it with respect to 
collateral pledged pursuant to this section to the FRB of the district, 
as fiscal agent of the United States, and in any event shall so remit no 
later than 10 days after receipt of such a payment.
    (ii) Subject to the waiver in paragraph (f)(2)(iii) of this section, 
each obligor on a security pledged by a depositary pursuant to this 
section, upon notification that the Treasury is entitled to any payment 
associated with that pledged security, shall make each payment of 
principal and/or interest due with respect to such security directly to 
the FRB of the district, as fiscal agent of the United States.
    (iii) The requirements of paragraphs (f)(2)(i) and (ii) of this 
section are hereby waived for only so long as a pledging depositary 
avoids both termination from the program under Sec. 203.7; and also, 
those circumstances identified in paragraph (f)(1) which may lead to the 
collection of the proceeds of collateral or the waiver is otherwise 
terminated by Treasury.

[63 FR 5650, Feb. 3, 1998, as amended at 65 FR 55429, Sept. 13, 2000; 67 
FR 11577, Mar. 15, 2002]

                           PART 204 [RESERVED]



PART 205_RULES AND PROCEDURES FOR EFFICIENT FEDERAL-STATE FUNDS TRANSFERS--

Table of Contents




Sec.
205.1 What Federal assistance programs are covered by this part?
205.2 What definitions apply to this part?

Subpart A_Rules Applicable to Federal Assistance Programs Included in a 
                        Treasury-State Agreement

205.3 What Federal assistance programs are subject to this subpart A?
205.4 Are there any circumstances where a Federal assistance program 
          that meets the criteria of Sec. 205.3 would not be subject to 
          this subpart A?
205.5 What are the thresholds for major Federal assistance programs?
205.6 What is a Treasury-State agreement?

[[Page 24]]

205.7 Can a Treasury-State agreement be amended?
205.8 What if there is no Treasury-State agreement in effect?
205.9 What is included in a Treasury-State agreement?
205.10 How do you document funding techniques?
205.11 What requirements apply to funding techniques?
205.12 What funding techniques may be used?
205.13 How do you determine when State or Federal interest liability 
          accrues?
205.14 When does Federal interest liability accrue?
205.15 When does State interest liability accrue?
205.16 What special rules apply to Federal assistance programs and 
          projects funded by the Federal Highway Trust Fund?
205.17 Are funds transfers delayed by automated payment systems 
          restrictions based on the size and timing of the drawdown 
          request subject to this part?
205.18 Are administrative costs subject to this part?
205.19 How is interest calculated?
205.20 What is a clearance pattern?
205.21 When may clearance patterns be used?
205.22 How are accurate clearance patterns maintained?
205.23 What requirements apply to estimates?
205.24 How are accurate estimates maintained?
205.25 How does this part apply to certain Federal assistance programs 
          or funds?
205.26 What are the requirements for preparing Annual Reports?
205.27 How are Interest Calculation Costs calculated?
205.28 How are interest payments exchanged?
205.29 What are the State oversight and compliance responsibilities?
205.30 What are the Federal oversight and compliance responsibilities?
205.31 How does a State or Federal Program Agency appeal a determination 
          made by us and resolve disputes?

 Subpart B_Rules Applicable to Federal Assistance Programs Not Included 
                      in a Treasury-State Agreement

205.32 What Federal assistance programs are subject to this subpart B?
205.33 How are funds transfers processed?
205.34 What are the Federal oversight and compliance responsibilities?
205.35 What is the result of Federal Program Agency or State non-
          compliance?

Subpart C [Reserved]

    Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3332, 3335, 6501, 6503.

    Source: 67 FR 31885, May 10, 2002, unless otherwise noted.



Sec. 205.1  What Federal assistance programs are covered by this part?

    (a) This part prescribes rules for transferring funds between the 
Federal government and States for Federal assistance programs. This part 
applies to:
    (1) All States as defined in Sec. 205.2; and
    (2) All Federal program agencies, except the Tennessee Valley 
Authority (TVA) and its Federal assistance programs.
    (b) Only programs listed in the Catalog of Federal Domestic 
Assistance, as established by Chapter 61 of Title 31, United States Code 
(U.S.C) are covered by this part.
    (c) This part does not apply to:
    (1) Payments made to States acting as vendors on Federal contracts, 
which are subject to the Prompt Payment Act of 1982, as amended, 31 
U.S.C. 3901 et seq., 5 CFR part 1315, and 48 CFR part 32; or
    (2) Direct loans from the Federal government to States.



Sec. 205.2  What definitions apply to this part?

    For purposes of this part:
    Administrative costs means expenses incurred by a State associated 
with managing a Federal assistance program. This term includes indirect 
costs.
    Auditable means records must be retained to allow for calculations 
outlined in the Treasury-State agreements to be reviewed and replicated 
for compliance purposes. States must maintain these records to be 
readily available, fully documented, and verifiable.
    Authorized State official means a person with the authority under 
the laws of a State to make commitments on behalf of the State for the 
purposes of this part, or that person's official designee as certified 
in writing.
    Business day means a day when Federal Reserve Banks are open.
    Catalog of Federal Domestic Assistance (CFDA) means the government-
wide list of Federal assistance programs, projects, services, and 
activities which provide assistance or benefits to the

[[Page 25]]

American public. The listing includes financial and non-financial 
Federal assistance programs administered by agencies of the Federal 
government.
    Clearance pattern means a projection showing the daily amount 
subtracted from a State's bank account each day after the State makes a 
disbursement. For example, a State mailing out benefit checks may 
project that the percentage of checks cashed each day will be 0% for the 
first day, 10% for the second day, 80% on the third day, and 10% on the 
fourth day following issuance. Clearance patterns are used to schedule 
the transfer of funds with various funding techniques and to support 
interest calculations.
    Compensating balance means funds maintained in State bank accounts 
and/or State Treasurer bank accounts to offset the costs of bank 
services.
    Current project cost means a cost for which the State has recorded a 
liability on or after the day that the State last requested funds for 
the project.
    Day means a calendar day unless otherwise specified.
    Default procedures means efficient cash management practices that we 
prescribe for Federal funds transfers to a State if a Treasury-State 
agreement is not in place.
    Disburse means to issue a check or initiate an electronic funds 
transfer payment, or to provide access to benefits through an electronic 
benefits transfer.
    Discretionary grant project means a project for which a Federal 
Program Agency is authorized by law to exercise judgment in awarding a 
grant and in selecting a grantee, generally through a competitive 
process.
    Dollar-weighted average day of clearance means the day when, on a 
cumulative basis, 50 percent of funds have been paid out. To calculate 
the dollar-weighted average day of clearance for a clearance pattern:
    (1) For each day, multiply the percentage of dollars paid out that 
day by the number of days that have elapsed since the payments were 
issued. For example, on the first day payments were issued, multiply the 
percentage of dollars paid out on that day by zero, since zero days have 
elapsed. On the day after payments were issued, multiply the percentage 
of dollars paid out on that day by one, since one day has elapsed; and 
so forth.
    (2) Total the results from paragraph (1) of this definition. Round 
to the nearest whole number. This is the dollar-weighted average day of 
clearance.
    Draw down (verb) means a process in which a State requests and 
receives Federal funds.
    Drawdown (noun) means Federal funds requested and received by a 
State.
    Electronic Funds Transfer (EFT) means any transfer of funds, other 
than a transaction originated by cash, check, or similar paper 
instrument, that is initiated through an electronic terminal, telephone, 
computer, or magnetic tape, for the purpose of ordering, instructing, or 
authorizing a financial institution to debit or credit an account.
    Estimate means a projection of the needs of a Federal Assistance 
Program.
    Federal assistance program means a program included in the Catalog 
of Federal Domestic Assistance where funds are transferred from the 
Federal government to a State. Federal assistance programs include 
cooperative agreements, but do not include vendor payments or direct 
loans.
    Federal Program Agency means an executive agency as defined by 31 
U.S.C. 102, except the Tennessee Valley Authority (TVA), that issues and 
administers Federal assistance programs to States or cooperative 
agreements with States.
    Federal-State agreement means an agreement between a State and a 
Federal Program Agency specifying terms and conditions for carrying out 
a Federal assistance program or group of programs. This is different 
than a Treasury-State agreement.
    Financial management service (we or us) means the Bureau of the U.S. 
Department of the Treasury responsible for implementation of this part.
    Fiscal year means the twelve-month period that a State designates as 
its budget year.
    Grant means, for purposes of this part, a funds transfer by the 
Federal government associated with a Federal assistance program listed 
in the Catalog of Federal Domestic Assistance.

[[Page 26]]

    Indirect cost rate means a formula that identifies the amount of 
indirect costs based on the amount of accrued direct costs. The 
applicable indirect cost rate shall be described in the Treasury-State 
agreement.
    Indirect costs means costs a State incurs that are necessary to the 
operation and performance of its Federal assistance programs, but that 
are not readily identifiable with a particular project or Federal 
assistance program.
    Interest calculation costs means those costs a State incurs in 
performing the actual calculation of interest liabilities, including 
those costs a State incurs in developing and maintaining clearance 
patterns in support of interest calculations.
    Maintenance-of-effort means a requirement that a State spend at 
least a specified amount of State funds for Federal assistance program 
purposes.
    Major Federal assistance program means a Federal assistance program 
which receives Federal funding in excess of the dollar thresholds found 
in Table A to Sec. 205.5.
    Obligational authority means the existence of a definite commitment 
on the part of the Federal government to provide appropriated funds to a 
State to carry out specified programs, whether the commitment is 
executed before or after a State pays out funds for Federal assistance 
program purposes.
    Pay out means to debit the State's bank account.
    Pay out funds for Federal Assistance Program Purposes means, in the 
context of State payments, to debit a State account for the purpose of 
making a payment to:
    (1) A person or entity that is not considered part of the State 
pursuant to the definition of ``State'' in this section; or
    (2) A State entity that provides goods or services for the direct 
benefit or use of the payor State entity or the Federal government to 
further Federal assistance program goals.
    Rebate means funds returned to a State by third parties after a 
State has paid out those funds for Federal assistance program purposes.
    Refund means funds that a State recovers that it previously paid out 
for Federal assistance program purposes. Refunds include rebates 
received from third parties.
    Refund transaction means an entry to the record of a State bank 
account representing a single deposit of refunds. A refund transaction 
may consist of a single check or item, or a bundle of accumulated 
checks.
    Related banking costs means separately identified costs which are 
necessary and customary for maintaining an account in a financial 
institution, whether a commercial account or a State Treasurer account. 
Investment service fees and fees for credit-related services are not 
related banking costs.
    Request for funds means a State's request for funds that the State 
completes and submits in accordance with Federal Program Agency 
guidelines.
    Reverse flow program means a Federal assistance program, such as 
Supplemental Security Income (SSI), for which the Federal government 
makes payments to recipients on behalf of a State.
    Revolving loan fund means a pool of program funds managed by a 
State. States may loan funds from the pool to other entities in support 
of Federal assistance program goals. Investment income is earned on the 
funds that remain in the pool and on loans made from pool funds. A 
Federal Program Agency may require that all income derived from a 
revolving loan fund be used for Federal assistance program purposes.
    Secretary means the Secretary of the United States Department of the 
Treasury. We are the Secretary's representative in all matters 
concerning this part, unless otherwise specified.
    State means a State of the United States, the District of Columbia, 
the Commonwealth of Puerto Rico, the Commonwealth of the Northern 
Mariana Islands, American Samoa, Guam, and the Virgin Islands. It 
includes any agency, instrumentality, or fiscal agent of a State that is 
legally and fiscally dependent on the State Executive, State Treasurer, 
or State Comptroller.
    (1) A State agency or instrumentality is any organization of the 
primary government of the State financial reporting entity, as defined 
by generally accepted accounting principles.

[[Page 27]]

    (2) A fiscal agent of a State is an entity that pays, collects, or 
holds Federal funds on behalf of the State in furtherance of a Federal 
assistance program, excluding private nonprofit community organizations.
    (3) Local governments, Indian Tribal governments, institutions of 
higher education, hospitals, and nonprofit organizations are excluded 
from the definition of State.
    Treasury-State agreement means a document describing the accepted 
funding techniques and methods for calculating interest and identifying 
the Federal assistance programs governed by this subpart A.
    Trust fund for which the Secretary is the trustee means a trust fund 
administered by the Secretary.
    Vendor payment means a funds transfer by a Federal Program Agency to 
a State to compensate the State for acting as a vendor on a Federal 
contract.
    We and Us means Financial Management Service.



Subpart A_Rules Applicable to Federal Assistance Programs Included in a 
                        Treasury-State Agreement



Sec. 205.3  What Federal assistance programs are subject to this subpart A?

    (a) Generally, this subpart prescribes the rules that apply to 
Federal assistance programs which:
    (1) Are listed in the Catalog of Federal Domestic Assistance;
    (2) Meet the funding threshold for a major Federal assistance 
program; and
    (3) Are included in a Treasury-State agreement or default 
procedures.
    (b) Upon a State's request, we will make additional Federal 
assistance programs subject to subpart A by lowering the funding 
threshold in the Treasury-State agreement. All of a State's programs 
that meet this lower threshold would be subject to this subpart A.
    (c) We may make additional Federal assistance programs subject to 
subpart A if a State or Federal Program Agency fails to comply with 
subpart B of this part.



Sec. 205.4  Are there any circumstances where a Federal assistance program 

that meets the criteria of Sec. 205.3 would not be subject to this subpart A?

    (a) A Federal assistance program that meets or exceeds the threshold 
for major Federal assistance programs in a State is not subject to this 
subpart A until it is included in a Treasury-State agreement or in 
default procedures.
    (b) We and a State may agree to exclude components of a major 
Federal assistance program from interest calculations if the State 
administers the program through several State agencies and meets the 
following requirements:
    (1) The dollar amount of the exempted cash flow does not exceed 5% 
of the State's major Federal assistance program threshold and the total 
amount excluded under a single program by all State agencies 
administering the program does not exceed 10% of that Federal assistance 
program's total expenditures;
    (2) If less than the total amount of Federal assistance program 
funding is subject to interest calculation procedures, the interest 
liabilities should be pro-rated to 100% of the Federal assistance 
program funding;
    (3) A State may not use this exclusion if a Federal assistance 
program is administered by only one State agency; and
    (4) We may request Federal assistance program specific data on 
funding levels to determine exemptions.
    (c) We and a State may exclude a Federal assistance program from 
this subpart A if the Federal assistance program has been discontinued 
since the most recent Single Audit and the remaining funding is below 
the threshold, or if the Federal assistance program is funded by an 
award not limited to one fiscal year and the remaining Federal 
assistance program funding is below the State's threshold.



Sec. 205.5  What are the thresholds for major Federal assistance programs?

    (a) Table A of this section defines major Federal assistance 
programs based on the dollar amount of an individual Federal assistance 
program and

[[Page 28]]

the dollar amount of all Federal assistance being received by a State 
for all Federal assistance programs including non-cash programs. A State 
must locate the appropriate row in Column A based upon the total amount 
of Federal assistance received. In that same row, a State must apply the 
percentage from Column B to the dollar value of all its Federal 
assistance programs to determine the State's threshold for major Federal 
assistance programs. For example, if the total amount received by a 
State for all Federal assistance programs is $50 million, then that 
State's threshold for major Federal assistance programs is 6% of $50 
million or $3 million. A State which receives more than $10 billion 
under Federal assistance programs will have a minimum default threshold 
of $60 million.
    (b) To ensure adequate coverage of all State programs, a State must, 
on an annual basis, compare its program coverage using the percentage 
obtained from Table A to the program coverage which would result using a 
percentage which is half of the percentage obtained from Table A. For 
example, a State receiving $1 billion in Federal Assistance would use 
Table A to learn that its threshold level would be .60 percent of $1 
billion. A State would compare program coverage at .60 percent of $1 
billion to program coverage at .30 percent of $1 billion.
    (c) If the comparison conducted under paragraph (b) of this section 
results in a reduction of program coverage that is greater than 10%, a 
State must lower its threshold, or add programs, until the difference is 
less than or equal to 10%.
    (d) In accordance with Sec. 205.3(b), a State may lower its 
threshold to include additional programs. All of a State's programs that 
meet this lower threshold would be subject to this subpart A.
    (e) Unless specified otherwise, major Federal assistance programs 
must be determined from the most recent Single Audit data available.

                         Table A to Sec.  205.5
------------------------------------------------------------------------
                                             Column B  Major Federal
   Column A  Total amount of Federal       Assistance Program means any
 Assistance for all programs per State:  Federal assistance program that
                                               exceed these levels:
------------------------------------------------------------------------
Between zero and $100 million inclusive  6.00 percent of the total
                                          amount of Federal assistance.
Over $100 million but less than or       0.60 percent of the total
 equal to $10 billion.                    amount of Federal assistance.
Over $10 billion.......................  The greater of 0.30 percent of
                                          the total Federal assistance
                                          of $60 million.
------------------------------------------------------------------------



Sec. 205.6  What is a Treasury-State agreement?

    (a) A Treasury-State agreement documents the accepted funding 
techniques and methods for calculating interest agreed upon by us and a 
State and identifies the Federal assistance programs governed by this 
subpart A. If anything in a Treasury-State agreement is inconsistent 
with this subpart A, that part of the Treasury-State agreement will not 
have any effect and this subpart A will govern.
    (b) A Treasury-State agreement will be effective until terminated 
unless we and a State agree to a specific termination date. We or a 
State may terminate a Treasury-State agreement on 30 days written 
notice.



Sec. 205.7  Can a Treasury-State agreement be amended?

    (a) We or a State may amend a Treasury-State agreement at any time 
if both we and the State agree in writing.
    (b) The effective date of an amendment shall be the date both 
parties agree to the amendment in writing unless otherwise agreed to by 
both parties.
    (c) We and a State must amend a Treasury-State agreement as needed 
to change or clarify its language when the terms of the existing 
agreement are either no longer correct or no longer applicable. A State 
must notify us in writing within 30 days of the time the State becomes 
aware of a change, describing the Federal assistance program change. The 
notification must include a proposed amendment for our review and a 
current list of all programs included in the Treasury-State agreement. 
Amendments may address, but are not limited to:

[[Page 29]]

    (1) Additions or deletions of Federal assistance programs subject to 
this subpart A;
    (2) Changes in funding techniques; and
    (3) Changes in clearance patterns.
    (d) Additions or deletions to the list of Federal assistance 
programs subject to this subpart A take effect when a Treasury-State 
agreement is amended, unless otherwise agreed to by the parties.
    (e) Federal assistance programs that are to be added to a Treasury-
State agreement are not subject to this subpart A until the Treasury-
State agreement is amended, except when a Federal assistance program 
subject to this subpart A is being replaced by a Federal assistance 
program governed by subpart B of this part, in which case the 
replacement program is immediately subject to this subpart A.
    (f) Notwithstanding any other provision of this section, if no 
changes to the Treasury-State agreement are required, States must notify 
us annually.



Sec. 205.8  What if there is no Treasury-State agreement in effect?

    When a State does not have a Treasury-State agreement in effect, we 
will prescribe default procedures to implement this subpart A. The 
default procedures will prescribe efficient funds transfer procedures 
consistent with State and Federal law and identify the covered Federal 
assistance programs and designated funding techniques. When we and a 
State reach agreement on some but not all Federal assistance programs 
administered by the State, we and the State may enter into a Treasury-
State agreement for all programs on which we are in agreement and we may 
prescribe default procedures governing those programs on which we are 
unable to reach agreement.



Sec. 205.9  What is included in a Treasury-State agreement?

    We will prescribe a uniform format for all Treasury-State 
agreements. A Treasury-State agreement must include, but is not limited 
to, the following:
    (a) State agencies, instrumentalities, and fiscal agents that 
administer the Federal assistance programs subject to this subpart A.
    (b) Federal assistance programs subject to this subpart A, 
consistent with Sec. Sec. 205.3 and 205.4. A State must use its most 
recent Single Audit report as a basis for determining the funding 
thresholds for major Federal assistance programs, unless otherwise 
specified in the Treasury-State agreement. A State may use budget or 
appropriations data for a more recent period instead of Single Audit 
data, if specified in the Treasury-State agreement.
    (c) Funding techniques to be applied to Federal assistance programs 
subject to this subpart A.
    (d) Methods the State will use to develop and maintain clearance 
patterns and estimates, consistent with Sec. 205.11. The method must 
include, at a minimum, a clear indication of:
    (1) The data used;
    (2) The sources of the data;
    (3) The development process;
    (4) For estimates, when and how the State will update the estimate 
to reflect the most recent data available;
    (5) For estimates, when and how the State will make adjustments, if 
any, to reconcile the difference between the estimate and the State's 
actual cash needs; and
    (6) Any assumptions, standards, or conventions used in converting 
the data into the clearance pattern or estimate.
    (e) Federal Program Agency provisions requiring reconciliation of 
estimates to actual outlays may be included in a Treasury-State 
agreement. The supporting documentation must be retained by the State 
for three years.
    (f) States must include the results of the clearance pattern process 
in the Treasury-State agreement for programs where the timing of 
drawdowns is based on clearance patterns. For programs where the timing 
of drawdowns is not based on clearance patterns, the results of the 
clearance pattern process may be provided with the annual report 
required under Sec. 205.26. The supporting documentation must be 
retained by the State for three years.
    (g) Methods used by the State and Federal agencies to calculate 
interest liabilities pursuant to this subpart A.

[[Page 30]]

The method must include, but is not limited to, a clear indication of:
    (1) The data used;
    (2) The sources of the data;
    (3) The calculation process; and
    (4) Any assumptions, standards, or conventions used in converting 
the data into the interest liability amounts.
    (h) Treasury-State agreements must include language describing how a 
State and Federal Program Agency will address a State request for 
supplemental funding. This language must include, but is not limited to, 
the following provisions:
    (1) What constitutes a timely request for supplemental funds for 
Federal assistance program purposes by a State; and
    (2) What constitutes a timely transfer of supplemental funds for 
Federal assistance program purposes from a Federal Program Agency to a 
State.



Sec. 205.10  How do you document funding techniques?

    The Treasury-State agreement must include a concise description for 
each funding technique that a State will use. The description must 
include the following:
    (a) What constitutes a timely request for funds;
    (b) How the State determines the amount of funds to request;
    (c) What procedures are used to project or reconcile estimates with 
actual and immediate cash needs;
    (d) What constitutes the timely receipt of funds; and
    (e) Whether a State or Federal interest liability accrues when the 
funding technique, including any associated procedure for projection or 
reconciliation, is properly applied.



Sec. 205.11  What requirements apply to funding techniques?

    (a) A State and a Federal Program Agency must minimize the time 
elapsing between the transfer of funds from the United States Treasury 
and the State's payout of funds for Federal assistance program purposes, 
whether the transfer occurs before or after the payout of funds.
    (b) A State and a Federal Program Agency must limit the amount of 
funds transferred to the minimum required to meet a State's actual and 
immediate cash needs.
    (c) A State must not draw down funds from its account in the 
Unemployment Trust Fund (UTF) or from a Federal account in the UTF in 
advance of actual immediate cash needs for any purpose including 
maintaining a compensating balance.
    (d) A Federal Program Agency must allow a State to submit requests 
for funds daily. This requirement should not be construed as a change to 
Federal Program Agency guidelines defining a properly completed request 
for funds.
    (e) In accordance with the electronic funds transfer provisions of 
the Debt Collection Improvement Act of 1996 (31 U.S.C. 3332), a Federal 
Program Agency must use electronic funds transfer methods to transfer 
funds to States unless a waiver is available.



Sec. 205.12  What funding techniques may be used?

    (a) We and a State may negotiate the use of mutually agreed upon 
funding techniques. We may deny interest liability if a State does not 
use a mutually agreed upon funding technique. Funding techniques should 
be efficient and minimize the exchange of interest between States and 
Federal agencies.
    (b) We and a State may base our agreement on the sample funding 
techniques listed in paragraphs (b)(1) through (b)(5) of this section, 
or any other technique upon which both parties agree.
    (1) Zero balance accounting means that a Federal Program Agency 
transfers the actual amount of Federal funds to a State that are paid 
out by the State each day.
    (2) Projected clearance means that a Federal Program Agency 
transfers to a State the projected amount of funds that the State pays 
out each day. The projected amount paid out each day is determined by 
applying a clearance pattern to the total amount the State will 
disburse.
    (3) Average clearance means that a Federal Program Agency, on the 
dollar-weighted average day of clearance of a disbursement, transfers to 
a State a lump sum equal to the actual amount

[[Page 31]]

of funds that the State is paying out. The dollar-weighted average day 
of clearance is the day when, on a cumulative basis, 50 percent of the 
funds have been paid out. The dollar-weighted average day of clearance 
is calculated from a clearance pattern, consistent with Sec. 205.20.
    (4) Cash advance (pre-issuance or post-issuance) funding means that 
a Federal Program Agency transfers the actual amount of Federal funds to 
a State that will be paid out by the State, in a lump sum, not more than 
three business days prior to the day the State issues checks or 
initiates EFT payments.
    (5) Reimbursable funding means that a Federal Program Agency 
transfers Federal funds to a State after that State has already paid out 
the funds for Federal assistance program purposes.



Sec. 205.13  How do you determine when State or Federal interest liability 

accrues?

    (a) State or Federal interest liability may or may not accrue when 
mutually agreed to funding techniques are applied, depending on the 
terms of the Treasury-State agreement.
    (b) We and a State may agree in a Treasury-State agreement that no 
State or Federal interest liability will accrue for indirect costs or 
indirect allocated costs based on an indirect cost rate. This indirect 
cost must be consistent with OMB Circular A-87 (For availability, see 5 
CFR 1310.3.) and be in accordance with this subpart A. The indirect cost 
rate may be a Statewide indirect cost rate or a public assistance cost 
rate, where appropriate.



Sec. 205.14  When does Federal interest liability accrue?

    (a) Federal interest liabilities may accrue in accordance with the 
following provisions:
    (1) The Federal Program Agency incurs interest liability if a State 
pays out its own funds for Federal assistance program purposes with 
valid obligational authority under Federal law, Federal regulation, or 
Federal-State agreement. A Federal interest liability will accrue from 
the day a State pays out its own funds for Federal assistance program 
purposes to the day Federal funds are credited to a State bank account.
    (2) If a State pays out its own funds for Federal assistance program 
purposes without obligational authority, the Federal Program Agency will 
incur an interest liability if obligational authority subsequently is 
established. However, if the lack of obligational authority is the 
result of the failure of the State to comply with a Federal Program 
Agency requirement established by statute, regulation, or agreement, 
interest liability may be denied. A Federal interest liability will 
accrue from the day a State pays out its own funds for Federal 
assistance program purposes to the day Federal funds are credited to a 
State bank account.
    (3) If a State pays out its own funds prior to the day a Federal 
Program Agency officially notifies the State in writing that a 
discretionary grant project is approved, the Federal Program Agency does 
not incur an interest liability, notwithstanding any other provision of 
this section.
    (4) If a State pays out its own funds prior to the availability of 
Federal funds authorized or appropriated for a future Federal fiscal 
year, the Federal Program Agency does not incur an interest liability, 
notwithstanding any other provision of this section.
    (5) If a State fails to request funds timely as set forth in Sec. 
205.29, or otherwise fails to apply a funding technique properly, we may 
deny any resulting Federal interest liability, notwithstanding any other 
provision of this section.
    (b) Federal Program Agency programs that have specific payment dates 
set by the Federal Program Agency that create interest liabilities are 
subject to this part.
    (c) States must adhere to Federal Program Agency disbursement 
schedules when requesting funds. Notwithstanding any other provision of 
this section, we may deny a State's claim for Federal interest liability 
for the period prior to a late drawdown request. States must time their 
funds drawdown so that it does not create Federal interest liability. 
The drawdown request

[[Page 32]]

must allow the Federal Program Agency sufficient time to meet its 
disbursement schedule. If the Federal Program Agency does not make a 
timely payout in accordance with the terms of the Treasury-State 
agreement, a State may submit a claim for interest liability.



Sec. 205.15  When does State interest liability accrue?

    (a) General rule. State interest liability may accrue if Federal 
funds are received by a State prior to the day the State pays out the 
funds for Federal assistance program purposes. State interest liability 
accrues from the day Federal funds are credited to a State account to 
the day the State pays out the Federal funds for Federal assistance 
program purposes.
    (b) Refunds. (1) A State incurs interest liability on refunds of 
Federal funds from the day the refund is credited to a State account to 
the day the refund is either paid out for Federal assistance program 
purposes or credited to the Federal government.
    (2) We and a State may agree, in a Treasury-State agreement, that a 
State does not incur an interest liability on refunds in refund 
transactions under $50,000.
    (c) Exception to the general rule. A State does not incur an 
interest liability to the Federal government if a Federal statute 
requires the State to retain or use for Federal assistance program 
purposes the interest earned on Federal funds, notwithstanding any other 
provision in this section.
    (d) Mandatory matching of Federal funds. In programs utilizing 
mandatory matching of Federal funds with State funds, a State must not 
arbitrarily assign its earliest costs to the Federal government. A State 
incurs interest liabilities if it draws Federal funds in advance and/or 
in excess of the required proportion of agreed upon levels of State 
contributions in programs utilizing mandatory matching of Federal funds 
with State funds.



Sec. 205.16  What special rules apply to Federal assistance programs and 

projects funded by the Federal Highway Trust Fund?

    The following applies to Federal assistance programs and projects 
funded out of the Federal Highway Trust Fund, notwithstanding any other 
provision of this part:
    (a) A State must request funds at least weekly for current project 
costs, or Federal interest liability will not accrue prior to the day a 
State submits a request for funds.
    (b) If a State pays out its own funds in the absence of a project 
agreement or in excess of the Federal obligation in a project agreement, 
the Federal Program Agency will not incur an interest liability.



Sec. 205.17  Are funds transfers delayed by automated payment systems 

restrictions based on the size and timing of the drawdown request subject to 

this part?

    Funds transfers delayed due to payment processes that automatically 
reject drawdown requests that fall outside a pre-determined set of 
parameters are subject to this part.



Sec. 205.18  Are administrative costs subject to this part?

    (a) A State and FMS may agree, in a Treasury-State agreement, to the 
following funding conventions for indirect costs and administrative 
costs:
    (1) The State will draw down a prorated amount of administrative 
costs on the date of the State payday. For example, the State would draw 
one-third of its quarterly administrative costs if payroll is monthly, 
or one-sixth of its quarterly administrative costs if payroll is semi-
monthly.
    (2) If an indirect cost rate is applied to a program, the State will 
include a proportionate share of the indirect cost allowance on each 
drawdown by applying the indirect cost rate to the appropriate direct 
costs on each drawdown.
    (3) If costs must be allocated to various programs pursuant to a 
labor distribution or other system under an approved cost allocation 
plan, the State will draw down funds to meet cash outlay requirements 
based on the most recent, certified cost allocations, with

[[Page 33]]

subsequent adjustments made pursuant to the actual allocation of costs.
    (b) Notwithstanding any other provision of this part, no interest 
liabilities will be incurred or calculated for indirect costs and 
administrative costs, provided the funding conventions described in 
paragraph (a) of this section are properly applied.



Sec. 205.19  How is interest calculated?

    (a) A State must calculate Federal interest liabilities and State 
interest liabilities for each Federal assistance program subject to this 
subpart A.
    (b) The interest rate for all interest liabilities for each Federal 
assistance program subject to this subpart A is the annualized rate 
equal to the average equivalent yields of 13-week Treasury Bills 
auctioned during a State's fiscal year. We provide this rate to each 
State.
    (c) A State must calculate and report interest liabilities on the 
basis of its fiscal year. A State must ensure that its interest 
calculations are auditable and retain a record of the calculations.
    (d) As set forth in Sec. 205.9, a Treasury-State agreement must 
include the method a State uses to calculate and document interest 
liabilities.
    (e) A State may use actual data, a clearance pattern, or statistical 
sampling to calculate interest. A clearance pattern used to calculate 
interest must meet the standards of Sec. 205.20. If a State uses 
statistical sampling to calculate interest, the State must sample 
transactions separately for each Federal assistance program subject to 
this subpart A. Each sample must be representative of the pool of 
transactions and be of sufficient size to accurately represent the flow 
of Federal funds under the Federal assistance program, including 
seasonal or other periodic variations.
    (f) For the first year in which a Federal assistance program is 
covered in a Treasury-State agreement, funds transfers that occur prior 
to the first day of the State's fiscal year must not be included in 
interest calculations and are not subject to the interest liability 
provisions of this part.



Sec. 205.20  What is a clearance pattern?

    States use clearance patterns to project when funds are paid out, 
given a known dollar amount and a known date of disbursement. A State 
must ensure that clearance patterns meet the following standards:
    (a) A clearance pattern must be auditable.
    (b) A clearance pattern must accurately represent the flow of 
Federal funds under the Federal assistance programs to which it is 
applied.
    (c) A clearance pattern must include seasonal or other periodic 
variations in clearance activity.
    (d) A clearance pattern must be based on at least three consecutive 
months of disbursement data, unless additional data is required to 
accurately represent the flow of Federal funds.
    (e) If a State uses statistical sampling to develop a clearance 
pattern, the sample size must be sufficient to ensure a 96 percent 
confidence interval no more than plus or minus 0.25 weighted days above 
or below the estimated mean.
    (f) A clearance pattern must extend, at a minimum, until 99 percent 
of the dollars in a disbursement have been paid out for Federal 
assistance program purposes.
    (g) We and a State may agree to other procedures, such as estimates 
to project when funds are paid out when the dollar amount and/or the 
timing of disbursements are not known.



Sec. 205.21  When may clearance patterns be used?

    (a) A State may develop a clearance pattern for:
    (1) An individual Federal assistance program;
    (2) A logical group of Federal assistance programs that have the 
same disbursement method and type of payee;
    (3) A bank account;
    (4) A specific type of payment, such as payroll or vendor payments; 
or
    (5) Anything that is agreed upon by us and a State. If a clearance 
pattern is used for multiple Federal assistance programs, a State must 
apply the clearance pattern separately to each Federal assistance 
program when scheduling funds transfers or calculating interest.

[[Page 34]]

    (b) As set forth in Sec. 205.9, a Treasury-State agreement must 
include the method a State uses to develop and maintain clearance 
patterns.



Sec. 205.22  How are accurate clearance patterns maintained?

    (a) If a State has knowledge, at any time, that a clearance pattern 
no longer reflects a Federal assistance program's actual clearance 
activity, or if a Federal assistance program undergoes operational 
changes that may affect clearance activity, the State must notify us, 
develop a new clearance pattern, and certify that the new pattern 
corresponds to the Federal assistance program's clearance activity. 
Clearance patterns will remain in effect until a new clearance pattern 
is certified.
    (b) An authorized State official must certify that a clearance 
pattern corresponds to the clearance activity of the Federal assistance 
program to which it is applied. An authorized State official must re-
certify the accuracy of a clearance pattern at least every five years. 
If a State develops a clearance pattern for a bank account or a specific 
type of payment, or on another basis, as set forth in Sec. 205.21, we 
may prescribe other requirements for re-certifying the accuracy of the 
clearance pattern. A State can begin to use a new clearance pattern on 
the date the new clearance pattern is certified.



Sec. 205.23  What requirements apply to estimates?

    The following requirements apply when we and a State negotiate a 
mutually agreed upon funds transfer procedure based on an estimate of 
the State's immediate cash needs:
    (a) The State must ensure that the estimate reasonably represents 
the flow of Federal funds under the Federal assistance program or 
program component to which the estimate applies. The estimate must take 
into account seasonal or other periodic variations in activity 
throughout the period for which the Federal funds are available.
    (b) As set forth in Sec. Sec. 205.9 and 205.10, a Treasury-State 
agreement must include the method a State uses to develop, maintain, and 
document the estimate.



Sec. 205.24  How are accurate estimates maintained?

    (a) If a State has knowledge that an estimate does not reasonably 
correspond to the State's cash needs for a Federal assistance program or 
program component, or if a Federal assistance program undergoes 
operational changes that may affect cash needs, the State must 
immediately notify us in writing. We and the State will amend the 
funding technique provisions in the Treasury-State agreement or take 
other mutually agreed upon corrective action.
    (b) When estimates are properly updated and applied, a State or 
Federal interest liability may or may not accrue, depending on the terms 
of the Treasury-State agreement.
    (c) We may require a State to justify in writing that it is not 
feasible to use a more efficient basis for determining the amount of 
funds to be transferred under the Federal assistance program or program 
component to which an estimate is applied. We may prescribe requirements 
for certifying the reasonableness of an estimate.



Sec. 205.25  How does this part apply to certain Federal assistance programs 

or funds?

    (a) Special rules apply to certain Federal assistance programs or 
funds described in this section. To the extent the provisions of this 
section are inconsistent with other provisions of this part, this 
section applies.
    (b) A State's interest liability on funds withdrawn from its account 
in the UTF equals the actual interest earned on such funds less the 
related banking costs. Actual interest earned does not include non-cash 
bank earnings. If funds withdrawn from the State account in the UTF are 
commingled with other funds, a proportionate share of interest earnings 
and banking costs must be allocated to the funds withdrawn from the 
State account. Interest liabilities on funds withdrawn from a Federal 
account in the UTF, except the Federal Unemployment Account, are 
calculated in accordance with Sec. 205.19.
    (c) Supplemental Security Income. (1) Except as provided in 42 
U.S.C. 1382e(d), the Federal government incurs an interest liability 
from the day State

[[Page 35]]

funds are credited to the Federal government's account to the day a 
Federal Program Agency pays out the State funds for Federal assistance 
program purposes. A State incurs an interest liability from the day a 
Federal Program Agency pays out Federal funds for Federal assistance 
program purposes to the day State funds are credited to the Federal 
government's account.
    (2) Interest liability must be calculated on the difference between 
a State's monthly Supplemental Security Income payment and the State's 
actual liability for the month.
    (3) The Federal government will not incur interest liabilities on 
refunds of State funds under the Supplemental Security Income Program.
    (4) Administrative fees charged by the Social Security 
Administration to States under the Supplemental Security Income program 
are not subject to this part.
    (5) Supplemental State payments made in conjunction with 
Supplemental Security Income are not subject to this part.
    (d) Funds collected under the Child Support Enforcement Program. (1) 
Funds collected by States from absent parents pursuant to Title IV-D of 
the Social Security Act are not subject to this part.
    (2) Interest earned by States on undistributed collections must be 
treated as Federal assistance program income under 45 CFR 304.50(b) and 
is not subject to this part.
    (3) Late payment fees collected by States from absent parents are 
not subject to interest liabilities under this part and are not subject 
to this part. However, such fees must be treated as Federal assistance 
program income in accordance with 45 CFR 302.75(b)(6).
    (e) A State that earns interest on Special Supplemental Food Program 
for Women, Infants, and Children rebates is not subject to interest 
liability if the funds earned are used for Federal assistance program 
purposes.
    (f) Revolving Loan Funds. (1) This part applies to any transfer of 
funds from the Federal Program Agency to the State for the Revolving 
Loan Fund.
    (2) This part does not apply to interest a State earns on Revolving 
Loan Funds when Federal Program Agency regulations require that all 
interest earned on invested funds be used for Federal assistance program 
purposes.



Sec. 205.26  What are the requirements for preparing Annual Reports?

    (a) A State must submit to us an Annual Report accounting for State 
and Federal interest liabilities of the State's most recently completed 
fiscal year. Adjustments to the Annual Report must be limited to the two 
State fiscal years prior to the State fiscal year covered by the report. 
The authorized State official must certify the accuracy of a State's 
Annual Report. A signed original of the Annual Report must be received 
by December 31 of the year in which the State's fiscal year ends. We 
will provide copies of Annual Reports to Federal agencies. We will 
prescribe the format of the Annual Report, and may prescribe that the 
Annual Report be submitted by electronic means.
    (b) A State must submit a description and supporting documentation 
for liability claims greater than $5,000. This information must include 
the following:
    (1) The amount of funds requested;
    (2) The date the funds were requested;
    (3) The date the funds were paid out for Federal assistance program 
purposes;
    (4) The date the funds were received by the State; and
    (5) The date of award.
    (c) A State claiming reimbursement of Interest Calculation Costs 
must submit its claim with its Annual Report in accordance with Sec. 
205.27. An authorized State official must certify the accuracy of a 
State's claim for Interest Calculation Costs.



Sec. 205.27  How are Interest Calculation Costs calculated?

    (a) We will compensate a State annually for the costs of calculating 
interest, including the cost of developing and maintaining clearance 
patterns in support of interest calculations, pursuant to this subpart 
A, subject to the conditions and limitations of this section.
    (b) We may deny an interest calculation cost claim if a State does 
not:

[[Page 36]]

    (1) Have a Treasury-State agreement with us, as set forth in 
Sec. Sec. 205.6 through 205.9;
    (2) Submit timely a Treasury-State agreement, as set forth in 
Sec. Sec. 205.6 through 205.9;
    (3) Submit timely an updated list of Federal assistance programs 
subject to this subpart A, as set forth in Sec. Sec. 205.6 through 
205.9;
    (4) Submit timely a claim for Interest Calculation Costs with its 
Annual Report, as set forth in Sec. 205.26; or
    (5) Submit timely its Annual Report, as set forth in Sec. 205.26.
    (c) A State must maintain documentation to substantiate its claim 
for Interest Calculation Costs. We may require a State to provide 
documentation to support its interest calculation cost claims. We will 
review all interest calculation cost claims for reasonableness. If we 
determine that a cost claim is unreasonable, we will not reimburse a 
State for that cost, notwithstanding any other provision of this 
section.
    (d) Eligibility and treatment of Interest Calculation Costs. (1) 
Interest Calculation Costs do not include expenses for normal disbursing 
services, such as processing checks or maintaining records for 
accounting and reconciliation of cash accounts, or expenses for 
upgrading or modernizing accounting systems.
    (2) Interest Calculation Costs in excess of $50,000 in any year are 
not eligible for reimbursement, unless a State can justify to us that 
the State is unable to develop and maintain clearance patterns in 
support of interest calculations, or perform the actual calculation of 
interest, without incurring such costs. Supporting documentation must 
accompany State requests for reimbursement in excess of $50,000.
    (3) Interest Calculation Costs that a State incurs in fiscal years 
prior to its most recently completed Annual Report are not eligible for 
reimbursement.
    (4) A State must not include Interest Calculation Costs in its 
Statewide cost allocation plan, as defined and provided for in OMB 
Circular A-87. All costs incurred by a State to implement this subpart 
A, other than Interest Calculation Costs, are subject to the procedures 
and principles of OMB Circular A-87.
    (e) The payments from the Federal government to individual States to 
offset Interest Calculation Costs incurred are funded from the aggregate 
interest payments States make to the Federal government. The following 
limitations apply:
    (1) We will not reduce or adjust interest liabilities for Federal 
assistance programs funded out of trust funds for which the Secretary is 
trustee. These programs include, but are not limited to, Unemployment 
Insurance Trust Fund (CFDA 17.225); Highway & Planning Trust Fund (CFDA 
20.205); Airport Improvement Trust Fund (CFDA 20.106); Federal Transit 
Capital Improvement Trust Fund (CFDA 20.500); Federal Transit Capital & 
Operating Assistance Trust Fund (CFDA 20.507); and Social Security--
Disability Insurance Trust Fund (CFDA 96.001); and
    (2) The aggregate payments from the Federal government to States to 
offset Interest Calculation Costs will not be greater than the aggregate 
interest payments States make to the Federal government.



Sec. 205.28  How are interest payments exchanged?

    (a) We offset the adjusted total State interest liability and the 
adjusted total Federal interest liability for each State to determine 
the net interest payable to or from each specific State. The payment of 
net interest and any Interest Calculation Costs, as set forth in Sec. 
205.27, for the most recently completed fiscal year must occur no later 
than March 31. We will notify a State of the final net interest 
liability. A State must submit a claim to receive payment.
    (b) A State may appeal a decision by us on interest liabilities and 
interest calculation cost claims in accordance with Sec. 205.31.
    (c) If a State appeals the amount of interest payable in accordance 
with the provisions of Sec. 205.31, payment must occur by March 31 for 
any portions not subject to the appeal.
    (d) The Federal government will not be liable for interest on any 
payment of interest to a State.

[[Page 37]]



Sec. 205.29  What are the State oversight and compliance responsibilities?

    (a) A State must designate an official representative with the 
statutory or administrative authority to coordinate all interaction with 
the Federal government concerning this subpart A, and must notify us in 
writing of the representative's name and title. A State must notify us 
immediately of any change in the official representative.
    (b) A State must maintain records supporting interest calculations, 
clearance patterns, Interest Calculation Costs, and other functions 
directly pertinent to the implementation and administration of this 
subpart A for audit purposes. A State must retain the records for each 
fiscal year for three years from the date the State submits its Annual 
Report, or until any pending dispute or action involving the records and 
documents is completed, whichever is later. We, the Comptroller General, 
and the Inspector General or other representative of a Federal Program 
Agency must have the right of access to, and may require submission of, 
all records for the purpose of verifying interest calculations, 
clearance patterns, interest calculation cost claims, and the State's 
accounting for Federal funds.
    (c) A State's implementation of this subpart A is subject to audit 
in accordance with 31 U.S.C. Chapter 75, ``Requirements for Single 
Audits.''
    (d) If a State repeatedly or deliberately fails to request funds in 
accordance with the procedures established for its funding techniques, 
as set forth in Sec. 205.11, Sec.  205.12, or a Treasury-State 
agreement, we may deny the State payment or credit for the resulting 
Federal interest liability, notwithstanding any other provision of this 
part.
    (e) If a State materially fails to comply with this subpart A, we 
may, in addition to the action described in paragraph (d) of this 
section, take one or more of the following actions, as appropriate under 
the circumstances:
    (1) Deny the reimbursement of all or a part of the State's interest 
calculation cost claim;
    (2) Send notification of the non-compliance to the affected Federal 
Program Agency for appropriate action, including, where appropriate, a 
determination regarding the impact of non-compliance on program funding;
    (3) Request a Federal Program Agency or the General Accounting 
Office to conduct an audit of the State to determine interest owed to 
the Federal government, and to implement procedures to recover such 
interest;
    (4) Initiate a debt collection process to recover claims owed to the 
United States; or
    (5) Take other remedies legally available.



Sec. 205.30  What are the Federal oversight and compliance responsibilities?

    (a) A Federal Program Agency must designate an official 
representative to coordinate all interaction with us and the States 
concerning this subpart A, and must notify us in writing of the 
representative's name and title. A Federal Program Agency must notify us 
immediately of any change in the official representative.
    (b) A Federal Program Agency's implementation of this subpart A is 
subject to review pursuant to procedural instructions that we issue.
    (c) We will consult with Federal agencies as necessary and 
appropriate before entering into or amending a Treasury-State agreement.
    (d) We will distribute Annual Reports to Federal agencies, as set 
forth in Sec. 205.26. Upon our request, a Federal Program Agency must 
review a State's Annual Report for reasonableness and must report its 
findings to us within 30 days.
    (e) A Federal Program Agency must notify us in writing if the 
program agency has knowledge, at any time, that:
    (1) A State's clearance pattern does not correspond to a Federal 
assistance program's clearance activity; or
    (2) Corrective action needs to be taken by a State, us, or another 
Federal Program Agency, with respect to the implementation of this 
subpart. We will notify the State or Federal Program Agency as 
appropriate in writing with a description of the Federal Program 
Agency's assertion.

[[Page 38]]

    (f) A Federal Program Agency must notify us in writing of new 
Federal assistance programs listed in the Catalog of Federal Domestic 
Assistance.
    (g) If a Federal Program Agency causes an interest liability by 
failing to comply with this subpart A, we may collect a charge from the 
Federal Program Agency. A Federal interest liability resulting from 
circumstances beyond the control of a Federal Program Agency does not 
constitute noncompliance. We will determine the charge using the 
following procedures:
    (1) We will issue a Notice of Assessment to the Federal Program 
Agency, indicating the nature of the noncompliance, the amount of the 
charge, the manner in which it was calculated, and the right to file an 
appeal.
    (2) To the maximum extent practicable, a Federal Program Agency must 
pay a charge for noncompliance out of appropriations available for the 
Federal Program Agency's operations and not from the Federal Program 
Agency's program funds.
    (3) If a Federal Program Agency does not pay a charge for 
noncompliance within 45 days after receiving a Notice of Assessment, we 
will debit the appropriate Federal Program Agency account.
    (4) In the event a Federal Program Agency appeals a charge imposed 
under the Notice of Assessment, we will defer the charge until we decide 
the appeal. If we deny the appeal, the effective date of the charge may 
be retroactive to the date indicated in the Notice of Assessment.



Sec. 205.31  How does a State or Federal Program Agency appeal a 

determination made by us and resolve disputes?

    (a) This section documents the procedures for:
    (1) A State to appeal the net interest charge that we have assessed;
    (2) A State to appeal a determination we have made regarding the 
State's claim for Interest Calculation Costs in accordance with Sec. 
205.27;
    (3) A Federal Program Agency to appeal a charge for noncompliance 
that we have assessed in accordance with Sec. 205.30; or
    (4) A State or a Federal Program Agency to resolve other disputes 
with us or between or among each other concerning the implementation of 
this subpart A.
    (b) A State or Federal Program Agency must submit a written petition 
(Petition) to the Assistant Commissioner, Federal Finance, Financial 
Management Service, (Assistant Commissioner), within 90 days of the date 
of the notice of assessment or the event that initiated the appeal or 
dispute. The Petition must include a concise factual statement, not to 
exceed 15 pages, with supporting documentation in the appendices, of the 
conditions forming the basis of the Petition and the action requested of 
the Assistant Commissioner. In the case of a dispute, the party 
submitting the petition to us must concurrently provide a copy of the 
petition to the other concerned parties. The other concerned parties may 
submit to the Assistant Commissioner a rebuttal within 90 days of the 
date of the petition. The rebuttal must include a concise factual 
statement, not to exceed 15 pages, with supporting documentation in the 
appendices.
    (c) The Assistant Commissioner will review the Petition, any 
rebuttal, and all supporting documentation. As part of the review 
process, the Assistant Commissioner may request to meet with any or all 
parties and may request additional information.
    (d) The Assistant Commissioner will issue a written decision within 
the later of 120 days of the date of the Petition or the rebuttal, in 
case of a dispute, or 120 days from receipt of any additional 
information. The Assistant Commissioner's decision will be the final 
program agency action on our part for purposes of judicial review 
procedures under the Administrative Procedures Act, 5 U.S.C. 701-706 
(APA), unless either the State or Federal Program Agency invokes the 
provisions of the Administrative Dispute Resolution Act of 1990 (ADRA), 
5 U.S.C. 581-593.
    (e) Either a State or Federal Program Agency may seek to invoke the 
provisions of the ADRA within 45 days after the date of the Assistant 
Commissioner's written decision.

[[Page 39]]

    (1) The party invoking the ADRA must notify the Assistant 
Commissioner and any other concerned parties in writing. If all parties, 
including the Assistant Commissioner, agree in writing, a neutral party 
appointed under the provisions of the ADRA may assist in resolving the 
dispute through the use of alternate means of dispute resolution as 
defined in the ADRA.
    (2) If the party invoking the ADRA is unable to reach a satisfactory 
resolution, the Assistant Commissioner's decision will be the final 
agency action on our part for purposes of the judicial review procedures 
under the APA.
    (f) Any amount due as a result of an appeal or dispute must be paid 
within 30 days of the date of the decision of the Assistant Commissioner 
or the date of the resolution under the ADRA. If a State fails to pay, 
the State will be subject to collection techniques under 31 U.S.C. 3701 
et seq., including accrual of interest on outstanding balances and 
administrative offset.



 Subpart B_Rules Applicable to Federal Assistance Programs Not Included 
                      in a Treasury-State Agreement



Sec. 205.32  What Federal assistance programs are subject to this subpart B?

    This subpart B applies to all Federal assistance programs listed in 
the Catalog of Federal Domestic Assistance that are not subject to 
subpart A of this part.



Sec. 205.33  How are funds transfers processed?

    (a) A State must minimize the time between the drawdown of Federal 
funds from the Federal government and their disbursement for Federal 
program purposes. A Federal Program Agency must limit a funds transfer 
to a State to the minimum amounts needed by the State and must time the 
disbursement to be in accord with the actual, immediate cash 
requirements of the State in carrying out a Federal assistance program 
or project. The timing and amount of funds transfers must be as close as 
is administratively feasible to a State's actual cash outlay for direct 
program costs and the proportionate share of any allowable indirect 
costs. States should exercise sound cash management in funds transfers 
to subgrantees in accordance with OMB Circular A-102 (For availability, 
see 5 CFR 1310.3.).
    (b) Neither a State nor the Federal government will incur an 
interest liability under this part on the transfer of funds for a 
Federal assistance program subject to this subpart B.



Sec. 205.34  What are the Federal oversight and compliance responsibilities?

    (a) A Federal Program Agency must review the practices of States as 
necessary to ensure compliance with this subpart B.
    (b) A Federal Program Agency must notify us if a State demonstrates 
an unwillingness or inability to comply with this subpart B.
    (c) A Federal Program Agency must formulate procedural instructions 
specifying the methods for carrying out the responsibilities of this 
section.



Sec. 205.35  What is the result of Federal Program Agency or State non-

compliance?

    We may require a State and a Federal Program Agency to make the 
affected Federal assistance programs subject to subpart A of this part, 
consistent with Federal assistance program purposes and regulations, 
notwithstanding any other provision of this part, if:
    (a) A State demonstrates an unwillingness or inability to comply 
with this subpart B; or
    (b) A Federal Program Agency demonstrates an unwillingness or 
inability to make Federal funds available to a State as needed to carry 
out a Federal assistance program.

Subpart C [Reserved]



PART 206_MANAGEMENT OF FEDERAL AGENCY RECEIPTS, DISBURSEMENTS, AND OPERATION 

OF THE CASH MANAGEMENT IMPROVEMENTS FUND--Table of Contents




Sec.
206.1 Scope and application.
206.2 Definitions.
206.3 Billing policy and procedures.
206.4 Collection and payment mechanisms.

[[Page 40]]

206.5 Collection and deposit procedure exceptions.
206.6 Cash management planning and review.
206.7 Compliance.
206.8 Appeals.
206.9 Charges.
206.10 Operation of and payments from the Cash Management Improvements 
          Fund.

    Authority: 5 U.S.C. 301; 31 U.S.C. 321, 3301, 3302, 3321, 3327, 
3328, 3332, 3335, 3720, and 6503.

    Source: 59 FR 4538, Jan. 31, 1994, unless otherwise noted.



Sec. 206.1  Scope and application.

    (a) This subpart applies to all Government departments and agencies 
in the executive branch (except the Tennessee Valley Authority) and all 
monies collected and disbursed by these departments and agencies. This 
subpart does not apply to interagency transfers of funds, except that 
agencies are to use the Treasury's On-Line Payment and Collection (OPAC) 
system for interagency payments between executive agencies, when cost-
effective.
    (b) Policies and guidelines are prescribed for promoting efficient, 
effective cash management through improved billing, collection, deposit, 
and payment of funds. These objectives seek to improve funds 
availability and the efficiency and effectiveness with which funds are 
transferred.
    (c) Authority to implement this regulation has been delegated within 
the Department of the Treasury (hereinafter, ``Treasury'') to the 
Commissioner (hereinafter, ``the Commissioner'') of the Financial 
Management Service (hereinafter, ``the Service).'' The Service maintains 
the final authority as granted under the Deficit Reduction Act of 1984 
to specify use of a particular method or mechanism of collection and 
deposit and to recover costs that result from noncompliance. Authority 
is also granted to the Service, under the Cash Management Improvement 
Act of 1990, as amended by the Cash Management Improvement Act 
Amendments of 1992, to provide for the timely disbursement of funds. An 
agency will require the collection or disbursement of funds by the 
agency via EFT as a provision of new contractual agreements or renewal 
of existing contracts that impact agency collection or payment 
mechanisms.



Sec. 206.2  Definitions.

    For the purpose of this part, the following definitions apply:
    Agency means any department, instrumentality, office, commission, 
board, service, Government corporation, or other establishment in the 
executive branch, except the Tennessee Valley Authority.
    Billing means any of a variety of means by which the Government 
places a demand for payment against an entity that is indebted to the 
Government. The term encompasses invoices, notices, initial demand 
letters, and other forms of notification.
    Cash management means practices and techniques designed to 
accelerate and control collections, ensure prompt deposit of receipts, 
improve control over disbursement methods, and eliminate idle cash 
balances. ``Cash Management Review Process'' means periodic examinations 
of collection and disbursement cash flows to ensure that the most 
effective mechanisms are used to process the funds.
    Collection means the transfer of monies from a source outside the 
Federal Government to an agency or to a financial institution acting as 
an agent of the Government.
    Collection mechanism means any one of a number of tools or systems 
by which monies are transferred to the Government from a source outside 
the Government.
    Cutoff time means a time predesignated by a financial institution 
beyond which transactions presented or actions requested will be 
considered the next banking day's business.
    Day means a calendar day unless otherwise specified.
    Deposit means as a noun, money that is being or has been presented 
for credit to the Treasury. Deposits can be made by an agency or 
directly by the remitter. All such transfers are effected through a 
Federal Reserve Bank or other financial institution. As a verb, deposit 
means the act of presenting monies for credit to the Treasury by an 
official of an agency.
    Depositary means a bank or other financial institution that has been 
authorized by the Treasury to receive monies for credit to the Treasury.

[[Page 41]]

    Disburse means the initiation of an Electronic Funds Transfer (EFT) 
transaction or other methods of drawing funds from accounts maintained 
by the Government.
    Electronic funds transfer (EFT) means any transfer of funds, other 
than a transaction originated by cash, check or similar paper 
instrument, that is initiated through an electronic terminal, telephone, 
computer, or magnetic tape, for the purpose of ordering, instructing, or 
authorizing a financial institution to debit or credit an account. The 
term includes, but is not limited to, Fed Wire transfers, Automated 
Clearing House (ACH) transfers, transfers made at automatic teller 
machines (ATM) and Point-of-Sale (POS) terminals (to include use of the 
Government small purchase card), and other means of credit card 
transactions.
    Fund means the Cash Management Improvements Fund.
    Monies (or ``receipts'') means EFT transactions, currency, 
negotiable instruments, and/or demand deposits owed to or collected by 
an agency.
    Next-day deposit means a deposit made before the cutoff time on the 
day following the day on which the funds were received by an agency. For 
example, if an agency receives funds for deposit at 3 p.m. on Monday and 
transmits the deposits to the depositary by 2 p.m. on Tuesday (the 
depositary's next cutoff time), then next-day deposit requirements are 
met.
    Payment means a sum of money transferred to a recipient in 
satisfaction of an obligation. A payment includes any Federal Government 
benefit or nonbenefit payment.
    (1) A benefit payment is a disbursement for a Federal Government 
entitlement program or annuity. Benefit payments may be one-time or 
recurring payments including, but not limited to, payments for Social 
Security, Supplemental Security Income, Black Lung, Civil Service 
Retirement, Railroad Retirement Board Retirement/Annuity, Department of 
Veterans Affairs Compensation/Pension, Central Intelligence Agency 
Annuity, Military Retirement Annuity, Coast Guard Retirement, and 
Worker's Compensation.
    (2) A nonbenefit payment is a Federal Government disbursement other 
than a benefit payment. Nonbenefit payments may be one-time or recurring 
payments including, but not limited to, payments for vendors, Internal 
Revenue Service tax refunds, Federal salaries and allotments therefrom, 
grants, travel disbursements and reimbursements, loans, principal and/or 
interest related to U.S. savings bonds, notes, and other savings-type 
securities, and payments of service fees to organizations qualified to 
issue and/or redeem savings bonds.
    Point-of-sale (POS) terminal means an automated credit card or debit 
card transaction device.
    Presumed EFT means that agencies will presume that new payment 
recipients will elect EFT as the means of payment delivery. Enrollment 
forms for use in establishing routine payments will be designed with 
this approach in mind, to obtain the required written consent of the 
recipient.
    Recipient means a person, corporation, or other public or private 
entity receiving benefit or nonbenefit payments from the Government.
    Same-day deposit means a deposit made before the cutoff time on the 
day on which the funds were received by an agency. For example, if an 
agency receives funds for deposit at 10 a.m. on Monday and transmits the 
deposits by 2 p.m. on Monday (the depositary's cutoff time), then a 
same-day deposit has been achieved.
    Service means the Financial Management Service, Department of the 
Treasury.
    Treasury Financial Manual (TFM) means the manual issued by the 
Service containing procedures to be observed by all Government 
departments and agencies in relation to central accounting, financial 
reporting, and other Governmentwide fiscal responsibilities of the 
Department of the Treasury. Volume I, Chapter 6-8000 (I TFM 6-8000) 
contains agency cash management procedures to be followed pertaining to 
these regulations.

Copies of the TFM are available free to Government agencies. Others who 
are interested in ordering a copy may call (202) 208-1819 or write the 
Directives

[[Page 42]]

Management Branch, Financial Management Service, Department of the 
Treasury, Liberty Center (UCP-741), Washington, DC 20227 for further 
information.



Sec. 206.3  Billing policy and procedures.

    The billing process is considered an integral part of an effective 
cash management collection program. In those situations where bills are 
required and the failure to bill would affect the cash flow, bills will 
be prepared and transmitted within 5 business days after goods have been 
shipped or released, services have been rendered, or payment is 
otherwise due. An agency may prepare and transmit bills later than the 
5-day timeframe if it can demonstrate that it is cost-effective to do 
so. In addition, the bill must include the terms and dates of payments, 
and late payment provisions, if applicable. Terms and dates of payments 
will be consistent with industry practices. I TFM 6-8000 describes 
detailed billing policies, procedures, and industry standards for 
agencies.



Sec. 206.4  Collection and payment mechanisms.

    (a) All funds are to be collected and disbursed by EFT when cost-
effective, practicable, and consistent with current statutory authority.
    (b) Collections and payments will be made by EFT when cost- 
effective, practicable, and consistent with current statutory authority. 
When consistent with these criteria, specific cash flows will utilize 
EFT as follows:
    (1) Fees/fines. EFT will be adopted as the presumed method of 
collecting fees and fines, especially when these collection cash flows 
are recurring or of large dollar amounts.
    (2) Tax collections. EFT will be adopted as the primary method for 
collecting taxes. EFT mechanisms may include ACH credit or debit cards.
    (3) Salary payment. Presumed EFT will be adopted as the method for 
paying employees, and entrance enrollment forms for establishing regular 
payments will be designed to use this approach.
    (4) Vendor and miscellaneous payments. Each department and agency 
will exercise its authority under the Federal Acquisition Regulation to 
require that all contractors are paid by EFT, unless a determination is 
made that it is not in the best interest of the Federal Government to do 
so. EFT will be adopted as the standard method of payment for all 
Federal program payments originated by agencies or their agents.
    (5) Benefit payments. EFT will be presented to new beneficiaries as 
the presumed method for receiving benefits. EFT payment methods, such as 
Electronic Benefit Transfer, will be adopted and implemented to make EFT 
accessible to all benefit recipients.
    (c)(1) Selection of the best collection and payment mechanism is a 
joint responsibility of an agency and the Service. An agency has 
responsibility for conducting cash management reviews; gathering volume 
and dollar data relative to the operation of the systems; and funding 
any implementation and operational costs above those normally funded by 
Treasury. The Service is the required approval authority when an agency 
desires to convert from one collection mechanism to another. The 
Service's written approval is required prior to an agency entering into 
new contractual agreements or renewing existing contracts for agency 
collections or payments systems. Agencies will follow guidelines for the 
cost-effective usage of collection and payment mechanisms, published in 
the TFM, Volume I, Part 6-8000, in their selection and recommendation to 
the Service of an appropriate funds transfer mechanism. The agency will 
provide the Service with a recommended mechanism for any new or modified 
cash flows. The Service will review the recommendations, approve a 
mechanism, and assist with implementation.
    (2) If an agency proposes a collection or payment mechanism other 
than EFT, it may be required to provide a cost-benefit analysis to 
justify its use. Cost/benefit analyses must include, at a minimum, known 
or estimated agency personnel costs, costs of procurement, recurring 
operational costs, equipment and system implementation and maintenance 
costs, costs to payment recipients, and costs to remitters. Agencies 
should consult with Treasury to determine the need to include interest 
costs associated with

[[Page 43]]

float in their computations of benefits and costs.
    (d) An agency will require the collection of funds by the agency to 
be made via EFT and the disbursement of funds by the agency to be made 
via EFT as a provision of new contractual agreements or renewal of 
existing contracts that impact agency collection or payment mechanisms, 
when cost-effective, practicable, and consistent with current statutory 
authority.



Sec. 206.5  Collection and deposit procedure exceptions.

    (a) The following collection and deposit timeframe requirements are 
to be followed in exception cases where EFT mechanisms are not utilized:
    (1) An agency will achieve same-day deposit of monies. Where same 
day deposit is not cost-effective or is impracticable, next day deposit 
of monies must be achieved except in those cases covered by I TFM 6-
8000.
    (2) Deposits will be made at a time of the day prior to the 
depositary's specified cutoff time, but as late as possible in order to 
maximize daily deposit amounts.
    (3) When cost-beneficial to the Government, an agency may make 
multiple deposits.
    (b) Any additional exceptions to the above policies are listed in I 
TFM 6-8000.



Sec. 206.6  Cash management planning and review.

    (a) An agency shall periodically perform cash management reviews to 
identify areas needing improvement.
    (b) As part of its cash management review process, an agency is 
expected to document cash flows in order to provide an overview of its 
cash management activities and to identify areas that will yield savings 
after cash management initiatives are implemented. The Service will 
evaluate an agency's EFT policy and application, to include mitigating 
circumstances that may prevent the use of EFT, as part of the cash 
management reviews.
    (c) An agency's cash management reviews will provide the basis for 
identification of improvements and preparation of cash flow reports for 
submission to the Service as prescribed by I TFM 6-8000. That Chapter 
provides requirements for an agency in performing periodic cash 
management reviews, identifying improvements, and preparing cash flow 
reports. In addition, the Chapter describes the timing and content of 
periodic reports that must be submitted by an agency to the Service on 
progress made in implementing cash management initiatives and associated 
savings.
    (d) The Service will periodically review an agency's cash management 
program to ensure that adequate progress is being made to improve 
overall cash management at an agency. As part of its oversight 
authority, the Service may visit an agency and review all or specific 
cash management activities of an agency. An agency will be notified in 
advance of the Service's review and will be required to provide the 
Service with documentation of the agency cash management review within 
the timeframes required by I TFM 6-8000.



Sec. 206.7  Compliance.

    (a) The Service will monitor agency cash management performance. 
Part of the monitoring process will include establishing implementation 
end dates for conversion to, or expansion of, EFT mechanisms, as well as 
the identification of mitigating circumstances that may prevent the use 
of EFT.
    (b) In cases where an agency fails to meet a scheduled date within 
its control, or where an agency converts to a less cost-effective 
transfer mechanism without prior, written Service approval as determined 
in accordance with Sec. 206.4(c), the Service will send a formal Notice 
of Deficiency to an agency's designated cash management official. A 
separate Notice will be sent for each initiative.
    (1) Collections cash flows. For collections cash flows, the Notice 
of Deficiency will include the nature of the deficiency, the amount of 
the proposed charge, the method of calculation, the right to file an 
appeal, and the date the charge will be imposed in the absence of an 
appeal. The amount of the charge will be equal to the cost of such 
noncompliance to the Treasury's General Fund.
    (2) Payments cash flows. [Reserved]

[[Page 44]]



Sec. 206.8  Appeals.

    (a) An agency that chooses to file an appeal must submit the appeal 
in writing to the Commissioner within 45 days of the date of the Notice 
of Deficiency. In the event of an appeal, the charge imposed under 
Notice of Deficiency will be deferred pending the results of the appeal. 
If an appeal is not submitted (i.e., received by the Commissioner) 
within 45 days, the amount indicated in the Notice of Deficiency will be 
charged per Sec. 206.9(a).
    (b) The appeal will contain the elements and follow the submission 
procedures specified in I TFM 6-8000. The appeal will include the 
background leading to the Notice of Deficiency, the basis of the appeal, 
and the action requested by an agency. An agency should state its 
disagreements with the Notice of Deficiency which may include cost-
benefit factors, the amount of the charge, and other items.
    (c) An agency must state what action it requests in its appeal. An 
agency may request that the Notice of Deficiency be completely 
overturned for cost-benefit or other considerations. Alternatively, an 
agency may request a reduced charge, deferral of the charge, an 
alternative solution to cash management improvement, or a combination of 
these actions.
    (d) Appeals Board. The Commissioner will refer the appeal to an 
Appeals Board. The Appeals Board will consist of three members--two 
permanent members and one temporary member. The permanent members will 
be the Deputy Chief Financial Officer, Department of the Treasury, and 
the Assistant Commissioner, Federal Finance, of the Service. The 
temporary board member will be a cash management official from an agency 
other than the agency appealing the Notice of Deficiency. The Board will 
be convened on an as-needed basis. The order of agency assignment to the 
Board will be published by Treasury in Volume I, Chapter 6-8000 of the 
TFM. The Deputy Chief Financial Officer, Department of the Treasury, the 
Assistant Commissioner, Federal Finance, and the designated agency cash 
management official may delegate their responsibility to a staff 
subordinate having sufficient experience in cash management matters. The 
Assistant Commissioner's designee may be from any area other than that 
which issued the Notice of Deficiency.
    (e) Appeal review process. The Appeals Board will review the Notice 
of Deficiency, any additional information submitted by the Service, and 
the written appeal from an agency. Based on this review, the Board may 
decide additional investigation is required. The Board may request an 
agency and/or the Service to meet with the Board as part of the review 
process.
    (f) Appeal finding. A written majority decision will be rendered by 
the Appeals Board within 30 days of receipt of the appeal. The Board may 
extend this period for an additional period, not to exceed 30 days, if 
required. The Appeals Board will notify the Commissioner and the agency 
of the decision. The decision of the Board whether to uphold the Notice 
of Deficiency, to overturn the Notice of Deficiency, or to mandate some 
other action will be stated in the finding. Other action mandated may 
include a reduced charge, a deferral of the charge, an alternate 
solution to cash management improvement, or a combination of these 
actions. The basis of the decision, the amount of the charge, and the 
effective date of the charge will be stated in the finding. The 
effective date of the charge may be retroactive to the date indicated in 
the Notice of Deficiency.
    (g) Any terms related to charge deferral shall be stated; the 
Service and an agency will be required to submit evidence of compliance 
to such terms at a future specified date. At this future time, the 
Appeals Board will review the evidence of compliance. Based on this 
evidence, the Board will decide whether to impose a charge.



Sec. 206.9  Charges.

    (a) Within 30 days of the effective date of the charge or the 
appeals decision, an agency must submit appropriate accounting 
information to the Service's Assistant Commissioner, Federal Finance. 
The charge will be calculated following procedures outlined in I TFM 6-
8000, and will be assessed for each month that noncompliance continues.

[[Page 45]]

    (b) Collection noncompliance. In the case of cash management 
collection noncompliance, an agency will absorb the charge from amounts 
appropriated or otherwise made available to carry out the program to 
which the collections relate. Charges collected from an executive agency 
in the case of cash management collection noncompliance will be 
deposited in the Cash Management Improvements Fund as outlined in Sec. 
206.10.
    (c) Payment noncompliance. [Reserved]
    (d) If an agency does not voluntarily pay the charge assessed under 
Sec. 206.9(a), the Service will debit the appropriate account 
automatically. By failing to pay voluntarily the charges as required by 
the Deficit Reduction Act of 1984, an agency will be deemed to authorize 
the automatic debit to its account.
    (e) The Commissioner will formally terminate the charge when the 
Commissioner has determined that an agency has complied. In addition, on 
an annual basis, the Commissioner will review an agency's performance 
and calculation of the charge, and will notify an agency in writing of 
any changes to the amount being charged.



Sec. 206.10  Operation of and payments from the Cash Management Improvements 

Fund.

    (a) The Cash Management Improvements Fund (Fund) will be operated as 
a revolving fund by the Service. Charges assessed under Sec. 206.9(a) 
for cash management collection noncompliance will be deposited into the 
Fund according to the Deficit Reduction Act of 1984. The Service will 
also disburse any payments from the Fund based on projects selected by a 
project selection and approval committee.
    (b) Committee composition. The committee will consist of three 
members--two permanent members and one temporary member. The permanent 
members will be the Commissioner and the Assistant Commissioner, Federal 
Finance, of the Service. The temporary committee member will be a cash 
management official from an agency other than an agency being considered 
for funds. The order of agency assignment to the Committee will be 
published in a TFM Bulletin, when funds are first deposited to the Fund. 
Decisions of the project selection and approval committee cannot be 
appealed. Agencies will be notified of any available amounts in the Fund 
and requirements to apply for such monies through a TFM bulletin.
    (c) As provided by 31 U.S.C. 3720, sums in the Fund will be 
available without fiscal year limitation for the payment of expenses 
incurred in developing improved methods of collection and deposit and 
the expenses incurred in carrying out collections and deposits using 
such methods, including the costs of personal services and the costs of 
the lease or purchase of equipment and operating facilities.
    (d) In addition to all reports required by law and regulation, for 
each fiscal year during which there is a balance in Fund, the Service 
will prepare and publish, by the 60th day following the close of the 
fiscal year, a full report on payments, receipts, disbursements, 
balances of the Fund, and full disclosure on projects financed by the 
Fund.



PART 208_MANAGEMENT OF FEDERAL AGENCY DISBURSEMENTS--Table of Contents




Sec.
208.1 Scope and application.
208.2 Definitions.
208.3 Payment by electronic funds transfer.
208.4 Waivers.
208.5 Availability of the ETA\SM\.
208.6 General account requirements.
208.7 Agency responsibilities.
208.8 Recipient responsibilities.
208.9 Compliance.
208.10 Reservation of rights.
208.11 Accounts for disaster victims.

Appendix A to Part 208--Model Disclosure for Use Until ETA\SM\ Becomes 
          Available
Appendix B to Part 208--Model Disclosure for Use After ETA\SM\ Becomes 
          Available

    Authority: 5 U.S.C. 301; 12 U.S.C. 90, 265, 266, 1767, 1789a; 31 
U.S.C. 321, 3122, 3301, 3302, 3303, 3321, 3325, 3327, 3328, 3332, 3335, 
3336, 6503; Pub. L. 104-208, 110 Stat. 3009.

    Source: 63 FR 51502, Sept. 25, 1998, unless otherwise noted.



Sec. 208.1  Scope and application.

    This part applies to all Federal payments made by an agency and, 
except as specified in Sec. 208.4, requires such payments to be made by 
electronic

[[Page 46]]

funds transfer. This part does not apply to payments under the Internal 
Revenue Code of 1986 (26 U.S.C.).



Sec. 208.2  Definitions.

    (a) Agency means any department, agency, or instrumentality of the 
United States Government, or a corporation owned or controlled by the 
Government of the United States.
    (b) Authorized payment agent means any individual or entity that is 
appointed or otherwise selected as a representative payee or fiduciary, 
under regulations of the Social Security Administration, the Department 
of Veterans Affairs, the Railroad Retirement Board, or other agency 
making Federal payments, to act on behalf of an individual entitled to a 
Federal payment.
    (c) Disbursement means, in the context of electronic benefits 
transfer, the performance of the following duties by a Financial Agent 
acting as agent of the United States:
    (1) The establishment of an account for the recipient that meets the 
requirements of the Federal Deposit Insurance Corporation or the 
National Credit Union Administration Board for deposit or share 
insurance;
    (2) The maintenance of such an account;
    (3) The receipt of Federal payments through the Automated Clearing 
House system or other electronic means and crediting of Federal payments 
to the account; and (4) The provision of access to funds in the account 
on the terms specified by Treasury.
    (d) Electronic benefits transfer (EBT) means the provision of 
Federal benefit, wage, salary, and retirement payments electronically, 
through disbursement by a financial institution acting as a Financial 
Agent. For purposes of this part, EBT includes disbursement through an 
ETA\SM\ and through a Federal/State EBT program.
    (e) Electronic funds transfer means any transfer of funds, other 
than a transaction originated by cash, check, or similar paper 
instrument, that is initiated through an electronic terminal, telephone, 
computer, or magnetic tape, for the purpose of ordering, instructing, or 
authorizing a financial institution to debit or credit an account. The 
term includes, but is not limited to, Automated Clearing House 
transfers, Fedwire transfers, and transfers made at automated teller 
machines and point-of-sale terminals. For purposes of this part only, 
the term electronic funds transfer includes a credit card transaction.
    (f) ETA\SM\ means the Treasury-designated electronic transfer 
account made available by a Federally-insured financial institution 
acting as a Financial Agent in accordance with Sec. 208.5 of this part.
    (g) Federal payment means any payment made by an agency.
    (1) The term includes, but is not limited to:
    (i) Federal wage, salary, and retirement payments;
    (ii) Vendor and expense reimbursement payments;
    (iii) Benefit payments; and
    (iv) Miscellaneous payments including, but not limited to: 
interagency payments; grants; loans; fees; principal, interest, and 
other payments related to U.S. marketable and nonmarketable securities; 
overpayment reimbursements; and payments under Federal insurance or 
guarantee programs for loans.
    (2) For purposes of this part only, the term ``Federal payment'' 
does not apply to payments under the Internal Revenue Code of 1986 (26 
U.S.C.).
    (h) Federal/State EBT program means any program that provides access 
to Federal benefit, wage, salary, and retirement payments and to State-
administered benefits through a single delivery system and in which 
Treasury designates a Financial Agent to disburse the Federal payments.
    (i) Federally-insured financial institution means any financial 
institution, the deposits of which are insured by the Federal Deposit 
Insurance Corporation under 12 U.S.C. Chapter 16 or, in the case of a 
credit union, the member accounts of which are insured by the National 
Credit Union Share Insurance Fund under 12 U.S.C. Chapter 14, Subchapter 
II.
    (j) Financial Agent means a financial institution that has been 
designated by Treasury as a Financial Agent for the provision of EBT 
services under any provision of Federal law, including 12 U.S.C. 90, 
265, 266, 1767, and 1789a, and 31

[[Page 47]]

U.S.C. 3122 and 3303, as amended by the Omnibus Consolidated 
Appropriations Act, 1997, Section 664, Public Law 104-208.
    (k) Financial institution means:
    (1) Any insured bank as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make 
application to become an insured bank under section 5 of such Act (12 
U.S.C. 1815);
    (2) Any mutual savings bank as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to 
make application to become an insured bank under section 5 of such Act 
(12 U.S.C. 1815);
    (3) Any savings bank as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make 
application to become an insured bank under section 5 of such Act (12 
U.S.C. 1815);
    (4) Any insured credit union as defined in section 101 of the 
Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is 
eligible to make application to become an insured credit union under 
section 201 of such Act (12 U.S.C. 1781);
    (5) Any savings association as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository 
institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is 
eligible to apply to become an insured depository institution under the 
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
    (6) Any agency or branch of a foreign bank as defined in section 
1(b) of the International Banking Act, as amended (12 U.S.C. 3101).
    (l) Individual means a natural person.
    (m) Recipient means an individual, corporation, or other public or 
private entity that is authorized to receive a Federal payment from an 
agency.
    (n) Secretary means Secretary of the Treasury.
    (o) Treasury means the United States Department of the Treasury.



Sec. 208.3  Payment by electronic funds transfer.

    Subject to Sec. 208.4, and notwithstanding any other provision of 
law, effective January 2, 1999, all Federal payments made by an agency 
shall be made by electronic funds transfer.



Sec. 208.4  Waivers.

    Payment by electronic funds transfer is not required in the 
following cases:
    (a) Where an individual determines, in his or her sole discretion, 
that payment by electronic funds transfer would impose a hardship due to 
a physical or mental disability or a geographic, language, or literacy 
barrier, or would impose a financial hardship. In addition, the 
requirement to receive payment by electronic funds transfer is 
automatically waived for all individuals who do not have an account with 
a financial institution and who are eligible to open an ETA\SM\ under 
Sec. 208.5, until such date as the Secretary determines that the 
ETA\SM\ is available;
    (b) Where the political, financial, or communications infrastructure 
in a foreign country does not support payment by electronic funds 
transfer;
    (c) Where the payment is to a recipient within an area designated by 
the President or an authorized agency administrator as a disaster area. 
This waiver is limited to payments made within 120 days after the 
disaster is declared;
    (d) Where either:
    (1) A military operation is designated by the Secretary of Defense 
in which uniformed services undertake military actions against an enemy, 
or
    (2) A call or order to, or retention on, active duty of members of 
the uniformed services is made during a war or national emergency 
declared by the President or Congress;
    (e) Where a threat may be posed to national security, the life or 
physical safety of any individual may be endangered, or a law 
enforcement action may be compromised;
    (f) Where the agency does not expect to make more than one payment 
to the same recipient within a one-year period, i.e., the payment is 
non-recurring, and the cost of making the payment via electronic funds 
transfer exceeds the cost of making the payment by check; and
    (g) Where an agency's need for goods and services is of such unusual 
and compelling urgency that the Government would be seriously injured 
unless

[[Page 48]]

payment is made by a method other than electronic funds transfer; or, 
where there is only one source for goods or services and the Government 
would be seriously injured unless payment is made by a method other than 
electronic funds transfer.



Sec. 208.5  Availability of the ETA \SM\.

    An individual who receives a Federal benefit, wage, salary, or 
retirement payment shall be eligible to open an ETA \SM\ at any 
Federally-insured financial institution that offers ETAs \SM\. Any 
Federally-insured financial institution shall be eligible, but not 
required, to offer ETAs \SM\ as Treasury's Financial Agent. A Federally-
insured financial institution that elects to offer ETAs \SM\ shall, upon 
entering into an ETA \SM\ Financial Agency Agreement with the Treasury, 
be designated as Treasury's Financial Agent for the offering of the 
account pursuant to Public Law 104-208. Treasury shall make publicly 
available required attributes for ETAs \SM\ and any ETA \SM\ offered by 
a Federally-insured financial institution shall comply with such 
requirements. The offering of an ETA \SM\ shall constitute the provision 
of EBT services within the meaning of Public Law 104-208.



Sec. 208.6  General account requirements.

    (a) All Federal payments made by electronic funds transfer, 
including those made through an ETA \SM\, shall be deposited into an 
account at a financial institution. For all payments other than vendor 
payments, the account at the financial institution shall be in the name 
of the recipient, except as provided in paragraph (b) of this section.
    (b)(1) Where an authorized payment agent has been selected, the 
Federal payment shall be deposited into an account titled in accordance 
with the regulations governing the authorized payment agent.
    (2) Where a Federal payment is to be deposited into an investment 
account established through a securities broker or dealer registered 
with the Securities and Exchange Commission under the Securities 
Exchange Act of 1934, or an investment account established through an 
investment company registered under the Investment Company Act of 1940 
or its transfer agent, such payment may be deposited into an account 
designated by such broker or dealer, investment company, or transfer 
agent.



Sec. 208.7  Agency responsibilities.

    (a) An agency shall disclose to each individual who is eligible to 
receive a Federal benefit, wage, salary, or retirement payment and who 
is not already receiving payment by electronic funds transfer the 
individual's rights and obligations under Sec. Sec. 208.3, 208.4(a) and 
208.5 of this part, unless payment by electronic funds transfer is not 
required pursuant to any provision of subsections (b) through (g) of 
Sec. 208.4.
    (1) Prior to the date the ETA \SM\ becomes available, the disclosure 
shall be in a form substantially similar to the model disclosure set 
forth in appendix A of this part.
    (2) On and after the date the ETA \SM\ becomes available, the 
disclosure shall be in a form substantially similar to the model 
disclosure set forth in appendix B of this part.
    (b) An agency shall put into place procedures that allow recipients 
to indicate that the recipient elects to have payment deposited by 
electronic funds transfer to an account held by the recipient at a 
financial institution. In addition, an agency may put into place 
procedures to request that individuals who are invoking a hardship 
waiver under Sec. 208.4(a) indicate, in writing or orally, that a 
hardship waiver has been invoked. However, an agency may not delay or 
withhold payment if a recipient does not respond to such a request.



Sec. 208.8  Recipient responsibilities.

    Each recipient who is required to receive payment by electronic 
funds transfer and who has an account with a financial institution must, 
within the time frame specified by the agency making the payment, 
designate a financial institution through which the payment may be made 
and provide the agency with the information requested by the agency in 
order to effect payment by electronic funds transfer.

[[Page 49]]



Sec. 208.9  Compliance.

    (a) Treasury will monitor agencies' compliance with this part. 
Treasury may require agencies to provide information about their 
progress in converting payments to electronic funds transfer.
    (b) If an agency fails to make payment by electronic funds transfer, 
as prescribed under this part, Treasury may assess a charge to the 
agency pursuant to 31 U.S.C. 3335.



Sec. 208.10  Reservation of rights.

    The Secretary reserves the right, in the Secretary's discretion, to 
waive any provision(s) of this regulation in any case or class of cases.



Sec. 208.11  Accounts for disaster victims.

    Treasury may establish and administer accounts at any financial 
institution designated as a financial agent for disaster victims in 
order to allow for the delivery by electronic funds transfer of one or 
more Federal payments. Such accounts may be established upon terms and 
conditions that the Secretary considers appropriate or necessary in 
light of the circumstances. Treasury may deliver payments to these 
accounts notwithstanding any other payment instructions from the 
recipient and without regard to the requirements of Sec. Sec. 208.4, 
208.6, and 208.7 of this part and 31 CFR 210.5. For purposes of this 
section, ``disaster victim'' means an individual or entity located 
within an emergency area, or an individual or entity that has relocated 
or been displaced from an emergency area as a result of a major disaster 
or emergency. ``Emergency area'' means a geographical area in which 
there exists an emergency or disaster declared by the President pursuant 
to the National Emergencies Act (50 U.S.C. 1601 et seq.) or the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 
et seq.). The maintenance of accounts and the provision of account-
related services under this section shall constitute reasonable duties 
of a financial agent of the United States.

[71 FR 44585, Aug. 7, 2006]

Appendix A to Part 208--Model Disclosure for Use Until ETA \SM\ Becomes 
                                Available

    The Debt Collection Improvement Act of 1996 requires that most 
Federal payments be made by electronic funds transfer after January 2, 
1999.
    If you are currently receiving your Federal payment by check or you 
have just become eligible to begin receiving a Federal payment, you have 
several choices:
    (1) Receive your payment by Direct Deposit through the financial 
institution of your choice.
    The Government makes payments electronically through a program 
called Direct Deposit. Direct Deposit is a safe, convenient, and 
reliable way to receive your Federal payment through a financial 
institution. (A financial institution can be a bank, credit union, 
savings bank, or thrift.) Many financial institutions offer basic, low-
cost accounts in addition to full-service checking or savings accounts.
    (2) Do nothing now and wait for a basic, low-cost account, called an 
ETA \SM\, to become available.
    If you do not have an account with a financial institution, you do 
not need to do anything now. In the future a low-cost account, called an 
ETA \SM\, will be available at many financial institutions. Like Direct 
Deposit, the ETA \SM\ (which stands for electronic transfer account) is 
a safe, convenient, and reliable way to receive your Federal payment 
through a financial institution. You are eligible to open this account, 
at a low monthly fee, if you receive a Federal benefit, wage, salary, or 
retirement payment. [Agency name] will contact you and let you know when 
the ETA \SM\ is available and which financial institutions in your area 
offer the account.
    (3) Continue to receive a check.
    If receiving your payment electronically would cause you a hardship 
because you have a physical or mental disability, or because of a 
geographic, language, or literacy barrier, you may receive your payment 
by check. In addition, if receiving your payment electronically would 
cause you a financial hardship because it would cost you more than 
receiving your payment by check, you may receive your payment by check.
    Please call [agency name] at [agency customer service number] if you 
would like more information on Direct Deposit, the ETA \SM\, or hardship 
waivers.

Appendix B to Part 208--Model Disclosure for Use After ETA \SM\ Becomes 
                                Available

    The Debt Collection Improvement Act of 1996 requires that most 
Federal payments be

[[Page 50]]

made by electronic funds transfer after January 2, 1999.
    If you are currently receiving your Federal payment by check or you 
have just become eligible to begin receiving a Federal payment, you have 
several choices:
    (1) Receive your payment by Direct Deposit through the financial 
institution of your choice.
    The Government makes payments electronically through a program 
called Direct Deposit. Direct Deposit is a safe, convenient, and 
reliable way to receive your Federal payment through a financial 
institution. (A financial institution can be a bank, credit union, 
savings bank, or thrift.) Many financial institutions offer basic, low-
cost accounts in addition to full-service checking or savings accounts.
    (2) Receive your payment through a basic, low-cost account called an 
ETA \SM\.
    If you receive a Federal benefit, wage, salary, or retirement 
payment, you are eligible to open an ETA \SM\. This account is available 
for a low monthly fee at many financial institutions. Like Direct 
Deposit, the ETA \SM\ (which stands for electronic transfer account) is 
a safe, convenient, and reliable way to receive your Federal payment 
through a financial institution. Please call the customer service number 
listed below to find out which financial institutions in your area offer 
the ETA \SM\.
    (3) Continue to receive a check.
    If receiving your payment electronically would cause you a hardship 
because you have a physical or mental disability, or because of a 
geographic, language, or literacy barrier, you may receive your payment 
by check. In addition, if receiving your payment electronically would 
cause you a financial hardship because it would cost you more than 
receiving your payment by check, you may receive your payment by check.
    Please call [agency name] at [agency customer service number] if you 
would like more information on Direct Deposit, the ETA \SM\, or hardship 
waivers.



PART 210_FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED CLEARING HOUSE--

Table of Contents




Sec.
210.1 Scope; relation to other regulations.
210.2 Definitions.
210.3 Governing law.

                            Subpart A_General

210.4 Authorizations and revocations of authorizations.
210.5 Account requirements for Federal payments.
210.6 Agencies.
210.7 Federal Reserve Banks.
210.8 Financial institutions.

                Subpart B_Reclamation of Benefit Payments

210.9 Parties to the reclamation.
210.10 RDFI liability.
210.11 Limited liability.
210.12 RDFI's rights of recovery.
210.13 Notice to account owners.
210.14 Erroneous death information.

Appendix A to Part 210--Standard Disclosure for Point-of-Purchase 
          Conversion--Posted Notice
Appendix B to Part 210--Standard Disclosure for Point-of-Purchase 
          Conversion--Brochure or Pamphlet
Appendix C to Part 210--Standard Disclosure for Lockbox Conversion--
          Notice

    Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321, 3301, 3302, 
3321, 3332, 3335, and 3720.

    Source: 64 FR 17487, Apr. 9, 1999, unless otherwise noted.



Sec. 210.1  Scope; relation to other regulations.

    This part governs all entries and entry data originated or received 
by an agency through the Automated Clearing House (ACH) network, except 
as provided in paragraphs (a) and (b) of this section. This part also 
governs reclamations of benefit payments.
    (a) Federal tax payments received by the Federal Government through 
the ACH system that are governed by part 203 of this title shall not be 
subject to any provision of this part that is inconsistent with part 
203.
    (b) ACH credit or debit entries for the purchase of, or payment of 
principal and interest on, United States securities that are governed by 
part 370 of this title shall not be subject to any provision of this 
part that is inconsistent with part 370.



Sec. 210.2  Definitions.

    For purposes of this part, the following definitions apply. Any term 
that is not defined in this part shall have the meaning set forth in the 
ACH Rules.
    (a) ACH Rules means the Operating Rules and the Operating Guidelines 
published by NACHA--The Electronic Payments Association (NACHA), a 
national association of regional member clearing house associations, ACH 
Operators and participating financial institutions located in the United 
States.

[[Page 51]]

    (b) Actual or constructive knowledge, when used in reference to an 
RDFI's knowledge of the death or legal incapacity of a recipient or 
death of a beneficiary, means that the RDFI received information, by 
whatever means, of the death or incapacity and has had a reasonable 
opportunity to act on such information or that the RDFI would have 
learned of the death or incapacity if it had followed commercially 
reasonable business practices.
    (c) Agency means any department, agency, or instrumentality of the 
United States Government, or a corporation owned or controlled by the 
Government of the United States. The term agency does not include a 
Federal Reserve Bank.
    (d) Applicable ACH Rules means the ACH Rules with an effective date 
on or before March 18, 2005, as published in Parts II, III, and IV of 
the ``2005 ACH Rules: A Complete Guide to Rules & Regulations Governing 
the ACH Network'':
    (1) ACH Rule 1.1 (limiting the applicability of the ACH Rules to 
members of an ACH association);
    (2) ACH Rule 1.2.2 (governing claims for compensation);
    (3) ACH Rule 1.2.4; 2.2.1.12; Appendix Eight and Appendix Eleven 
(governing the enforcement of the ACH Rules, including self-audit 
requirements);
    (4) ACH Rules 2.2.1.10; 2.6; and 4.8 (governing the reclamation of 
benefit payments);
    (5) ACH Rule 9.3 and Appendix Two (requiring that a credit entry be 
originated no more than two banking days before the settlement date of 
the entry--see definition of ``Effective Entry Date'' in Appendix Two);
    (6) ACH Rule 2.10.2.3 (requiring that originating depository 
financial institutions (ODFIs) establish exposure limits for Originators 
of Internet-initiated debit entries); and
    (7) ACH Rule 2.11.3 (requiring reporting regarding unauthorized 
Telephone-initiated entries).
    (e) Authorized payment agent means any individual or entity that is 
appointed or otherwise selected as a representative payee or fiduciary, 
under regulations of the Social Security Administration, the Department 
of Veterans Affairs, the Railroad Retirement Board, or other agency 
making Federal payments, to act on behalf of an individual entitled to a 
Federal payment.
    (f) Automated Clearing House or ACH means a funds transfer system 
governed by the ACH Rules which provides for the interbank clearing of 
electronic entries for participating financial institutions.
    (g) Beneficiary means a natural person other than a recipient who is 
entitled to receive the benefit of all or part of a benefit payment.
    (h) Benefit payment is a payment for a Federal entitlement program 
or for an annuity, including, but not limited to, payments for Social 
Security, Supplemental Security Income, Black Lung, Civil Service 
Retirement, Railroad Retirement annuity and Railroad Unemployment and 
Sickness benefits, Department of Veterans Affairs Compensation and 
Pension, and Worker's Compensation.
    (i) Federal payment means any payment made by an agency. The term 
includes, but is not limited to:
    (1) Federal wage, salary, and retirement payments;
    (2) Vendor and expense reimbursement payments;
    (3) Benefit payments; and
    (4) Miscellaneous payments including, but not limited to, 
interagency payments; grants; loans; fees; principal, interest, and 
other payments related to United States marketable and nonmarketable 
securities; overpayment reimbursements; and payments under Federal 
insurance or guarantee programs for loans.
    (j)(1) Financial institution means:
    (i) Any insured bank as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to apply to 
become an insured bank under section 5 of such Act (12 U.S.C. 1815);
    (ii) Any mutual savings bank as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to 
apply to become an insured bank under section 5 of such Act (12 U.S.C. 
1815);
    (iii) Any savings bank as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to 
apply to become an

[[Page 52]]

insured bank under section 5 of such Act (12 U.S.C. 1815);
    (iv) Any insured credit union as defined in section 101 of the 
Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is 
eligible to apply to become an insured credit union pursuant to section 
201 of such Act (12 U.S.C. 1781);
    (v) Any savings association as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository 
institution as defined in such Act (12 U.S.C. 1811 et seq.) or is 
eligible to apply to become an insured depository institution under the 
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
    (vi) Any agency or branch of a foreign bank as defined in section 
1(b) of the International Banking Act, as amended (12 U.S.C. 3101).
    (2) In this part, a financial institution may be referred to as an 
Originating Depository Financial Institution (ODFI) if it transmits 
entries to its ACH Operator for transmittal to a Receiving Depository 
Financial Institution (RDFI), or it may be referred to as an RDFI if it 
receives entries from its ACH Operator for debit or credit to the 
accounts of its customers.
    (k) Government entry means an ACH credit or debit entry or entry 
data originated or received by an agency.
    (l) Green Book means the manual issued by the Service which provides 
financial institutions with procedures and guidelines for processing 
Government entries.
    (m) Notice of reclamation means notice sent by electronic, paper, or 
other means by the Federal Government to an RDFI which identifies the 
benefit payments that should have been returned by the RDFI because of 
the death or legal incapacity of a recipient or death of a beneficiary.
    (n) Outstanding total means the sum of all benefit payments received 
by an RDFI from an agency after the death or legal incapacity of a 
recipient or the death of a beneficiary, minus any amount returned to, 
or recovered by, the Federal Government.
    (o) Recipient means a natural person, corporation, or other public 
or private entity that is authorized to receive a Federal payment from 
an agency.
    (p) Service means the Financial Management Service, Department of 
the Treasury.
    (q) Treasury means the United States Department of the Treasury.
    (r) Treasury Financial Manual means the manual issued by the Service 
containing procedures to be observed by all agencies and Federal Reserve 
Banks with respect to central accounting, financial reporting, and other 
Federal Government-wide fiscal responsibilities of the Treasury.

[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000; 66 
FR 10580, Feb. 16, 2001; 67 FR 17902, Apr. 11, 2002; 68 FR 33829, June 
5, 2003; 70 FR 67366, Nov. 7, 2005]



Sec. 210.3  Governing law.

    (a) Federal law. The rights and obligations of the United States and 
the Federal Reserve Banks with respect to all Government entries, and 
the rights of any person or recipient against the United States and the 
Federal Reserve Banks in connection with any Government entry, are 
governed by this part, which has the force and effect of Federal law.
    (b) Incorporation by reference--applicable ACH Rules.
    (1) This part incorporates by reference the applicable ACH Rules, 
including rule changes with an effective date on or before March 18, 
2005, as published in Parts II, III, and IV of the ``2005 ACH Rules: A 
Complete Guide to Rules & Regulations Governing the ACH Network.'' The 
Director of the Federal Register approves this incorporation by 
reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies 
of the ``2005 ACH Rules'' are available from NACHA--The Electronic 
Payments Association, 13665 Dulles Technology Drive, Suite 300, Herndon, 
Virginia 20171. Copies also are available for public inspection at the 
Office of the Federal Register, 800 North Capitol Street, NW., Suite 
700, Washington, DC 20002; and the Financial Management Service, 401 
14th Street, SW., Room 401, Washington, DC 20227.
    (2) Any amendment to the applicable ACH Rules that takes effect 
after March 18, 2005, shall not apply to Government entries unless the 
Service expressly accepts such amendment by publishing notice of 
acceptance of the

[[Page 53]]

amendment to this part in the Federal Register. An amendment to the ACH 
Rules that is accepted by the Service shall apply to Government entries 
on the effective date of the rulemaking specified by the Service in the 
Federal Register notice expressly accepting such amendment.
    (c) Application of this part. Any person or entity that originates 
or receives a Government entry agrees to be bound by this part and to 
comply with all instructions and procedures issued by the Service under 
this part, including the Treasury Financial Manual and the Green Book. 
The Treasury Financial Manual is available for downloading at the 
Service's web site at http://www.fms.treas.gov/ or by calling (202) 874-
9940 or writing the Directives Management Branch, Financial Management 
Service, Department of the Treasury, 3700 East West Highway, Room 500C, 
Hyattsville, MD 20782. The Green Book is available for downloading at 
the Service's web site at http://www.fms.treas.gov/fmsnews.html or by 
calling (202) 874-6540 or writing the Product Promotion Division, 
Financial Management Service, Department of the Treasury, 401 14th 
Street, SW., Room 309, Washington, DC 20227.

[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000; 66 
FR 10580, Feb. 16, 2001; 67 FR 17903, Apr. 11, 2002; 68 FR 33830, June 
5, 2003; 69 FR 18803, Apr. 9, 2004; 70 FR 67367, Nov. 7, 2005]



                            Subpart A_General



Sec. 210.4  Authorizations and revocations of authorizations.

    (a) Requirements for authorization. Each debit and credit entry 
subject to this part shall be authorized in accordance with the 
applicable ACH Rules and the following additional requirements:
    (1) The agency or the RDFI that accepts the recipient's 
authorization shall verify the identity of the recipient and, in the 
case of a written authorization requiring the recipient's signature, the 
validity of the recipient's signature.
    (2) Unless authorized in writing, or similarly authenticated, by an 
agency, no person or entity shall initiate or transmit a debit entry to 
that agency, other than a reversal of a credit entry previously sent to 
the agency.
    (b) Terms of authorizations. By executing an authorization for an 
agency to initiate entries, a recipient agrees:
    (1) To the provisions of this part;
    (2) To provide accurate information;
    (3) To verify the recipient's identity to the satisfaction of the 
RDFI or agency, whichever has accepted the authorization;
    (4) That any new authorization inconsistent with a previous 
authorization shall supersede the previous authorization; and
    (5) That the Federal Government may reverse any duplicate or 
erroneous entry or file as provided in Sec. 210.6(f) of this part.
    (c) Termination and revocation of authorizations. An authorization 
shall remain valid until it is terminated or revoked by:
    (1) With respect to a recipient of benefit payments, a change in the 
recipient's ownership of the deposit account as reflected in the deposit 
account records, including the removal of the name of the recipient, the 
addition of a power of attorney, or any action which alters the interest 
of the recipient;
    (2) The death or legal incapacity of a recipient of benefit payments 
or the death of a beneficiary;
    (3) The closing of the recipient's account at the RDFI by the 
recipient or by the RDFI. With respect to a recipient of benefit 
payments, if an RDFI closes an account to which benefit payments 
currently are being sent, it shall provide 30 calendar days written 
notice to the recipient prior to closing the account, except in cases of 
fraud; or
    (4) The RDFI's insolvency, closure by any state or Federal 
regulatory authority or by corporate action, or the appointment of a 
receiver, conservator, or liquidator for the RDFI. In any such event, 
the authorization shall remain valid if a successor is named. The 
Federal Government may temporarily transfer authorizations to a 
consenting RDFI. The transfer is valid until either a new authorization 
is executed by the recipient, or 120 calendar days have elapsed since 
the insolvency, closure, or appointment, whichever occurs first.

[[Page 54]]



Sec. 210.5  Account requirements for Federal payments.

    (a) Notwithstanding ACH Rules 2.1.2, 4.1.3, and Appendix Two, 
section 2.2 (listing general ledger and loan accounts as permissible 
transaction codes), an ACH credit entry representing a Federal payment 
other than a vendor payment shall be deposited into a deposit account at 
a financial institution. For all payments other than vendor payments, 
the account at the financial institution shall be in the name of the 
recipient, except as provided in paragraph (b) of this section.
    (b)(1) Where an authorized payment agent has been selected, the 
Federal payment shall be deposited into an account titled in accordance 
with the regulations governing the authorized payment agent.
    (2) Where a Federal payment is to be deposited into an investment 
account established through a securities broker or dealer registered 
with the Securities and Exchange Commission under the Securities 
Exchange Act of 1934, or an investment account established through an 
investment company registered under the Investment Company Act of 1940 
or its transfer agent, such payment may be deposited into an account 
designated by such broker or dealer, investment company, or transfer 
agent.
    (3) The Secretary of the Treasury may waive the requirements of 
paragraph (a) of this section in any case or class of cases.

[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000]



Sec. 210.6  Agencies.

    Notwithstanding ACH Rules 2.2.3, 2.4.5, 2.5.2, 4.2, and 8.7.2, 
agencies shall be subject to the obligations and liabilities set forth 
in this section in connection with Government entries.
    (a) Receiving entries. An agency may receive ACH debit or credit 
entries only with the prior written authorization of the Service.
    (b) Liability to a recipient. An agency will be liable to the 
recipient for any loss sustained by the recipient as a result of the 
agency's failure to originate a credit or debit entry in accordance with 
this part. The agency's liability shall be limited to the amount of the 
entry(ies).
    (c) Liability to an originator. An agency will be liable to an 
originator or an ODFI for any loss sustained by the originator or ODFI 
as a result of the agency's failure to credit an ACH entry to the 
agency's account in accordance with this part. The agency's liability 
shall be limited to the amount of the entry(ies).
    (d) Liability to an RDFI or ACH association. Except as otherwise 
provided in this part, an agency will be liable to an RDFI for losses 
sustained in processing duplicate or erroneous credit and debit entries 
originated by the agency. An agency's liability shall be limited to the 
amount of the entry(ies), and shall be reduced by the amount of the loss 
resulting from the failure of the RDFI to exercise due diligence and 
follow standard commercial practices in processing the entry(ies). This 
section does not apply to credits received by an RDFI after the death or 
legal incapacity of a recipient of benefit payments or the death of a 
beneficiary as governed by Subpart B of this part. An agency shall not 
be liable to any ACH association.
    (e) Acquittance of the agency. The final crediting of the amount of 
an entry to a recipient's account shall constitute full acquittance of 
the Federal Government.
    (f) Reversals. An agency may reverse any duplicate or erroneous 
entry, and the Federal Government may reverse any duplicate or erroneous 
file. In initiating a reversal, an agency shall certify to the Service 
that the reversal complies with applicable law related to the recovery 
of the underlying payment. An agency that reverses an entry shall 
indemnify the RDFI as provided in the applicable ACH Rules, but the 
agency's liability shall be limited to the amount of the entry. If the 
Federal Government reverses a file, the Federal Government shall 
indemnify the RDFI as provided in the applicable ACH Rules, but the 
extent of such liability shall be limited to the amount of the

[[Page 55]]

entries comprising the duplicate or erroneous file. Reversals under this 
section shall comply with the time limitations set forth in the 
applicable ACH Rules.
    (g) Point-of-purchase debit entries. An agency may convert to an ACH 
debit entry a check drawn on a consumer or business account and 
presented at a point-of-purchase. Agencies shall use the Point-of-
Purchase (POP) Standard Entry Class (SEC) code for entries to consumer 
accounts and the Cash Concentration or Disbursement (CCD) SEC code for 
entries to business accounts. The requirements of ACH Rules 2.1.2 and 
3.5 shall be met for such an entry if the Receiver presents the check at 
a location where the agency has posted a conspicuous notice at the 
point-of-purchase containing the disclosure set forth at appendix A to 
this part and makes available to the Receiver, in a form that the 
Receiver can retain, the disclosure set forth at appendix B to this 
part. For purposes of ACH Rules 3.12 and 4.1.1, authorization shall 
consist of a copy of the notice and a copy of the Receiver's source 
document.
    (h) Accounts receivable check conversion--(1) Conversion of consumer 
checks.--An agency may originate an Accounts Receivable (ARC) entry 
using a check drawn on a consumer account that is received via the mail 
or at a dropbox, or that is delivered in person in circumstances in 
which the agency cannot contemporaneously image and return the check. 
The notice and authorization requirements of ACH Rules 2.1.4 and 3.7.1 
shall be met for an ARC entry only if an agency has provided the 
Receiver with the disclosure set forth at appendix C to this part.
    (2) Conversion of business checks. An agency may originate an ACH 
debit using a business check that is received via the mail or at a 
dropbox, or that is delivered in person in circumstances in which the 
agency cannot contemporaneously image and return the check. The agency 
shall use the CCD SEC code for such entries, which shall be deemed to 
meet the requirements of ACH Rule 2.1.2 if the agency has provided the 
disclosure set forth at appendix C to this part. For purposes of ACH 
Rules 3.12 and 4.1.1, authorization shall
    (i) Returned item service fee. An agency may originate an ACH debit 
entry to collect a one-time service fee in connection with an ACH debit 
entry originated pursuant to paragraph (g) or (h) of this section that 
is returned due to insufficient funds. An entry originated pursuant to 
this paragraph shall meet the requirements of ACH Rules 2.1.2 and 3.5 if 
the agency has complied with the disclosure requirements of paragraph 
(g) or (h), as appropriate. For purposes of ACH Rule 3.12 and 4.1.1, 
authorization shall consist of a copy of the notice provided under 
paragraph (g) or (h), as applicable, and a copy of the Receiver's source 
document.

[64 FR 17487, Apr. 9, 1999, as amended at 67 FR 17903, Apr. 11, 2002; 69 
FR 13189, Mar. 19, 2004; 70 FR 67367, Nov. 7, 2005]



Sec. 210.7  Federal Reserve Banks.

    (a) Fiscal Agents. Each Federal Reserve Bank serves as Fiscal Agent 
of the Treasury in carrying out its duties as the Federal Government's 
ACH Operator under this part. As Fiscal Agent, each Federal Reserve Bank 
shall be responsible only to the Treasury and not to any other party for 
any loss resulting from the Federal Reserve Bank's action, 
notwithstanding Section 11.5 and Article 8 of the ACH Rules. Each 
Federal Reserve Bank may issue operating circulars not inconsistent with 
this part which shall be binding on financial institutions.
    (b) Routing numbers. All routing numbers issued by a Federal Reserve 
Bank to an agency require the prior approval of the Service.



Sec. 210.8  Financial institutions.

    (a) Status as a Treasury depositary. The origination or receipt of 
an entry subject to this part does not render a financial institution a 
Treasury depositary. A financial institution shall not advertise itself 
as a Treasury depositary on such basis.
    (b) Liability. Notwithstanding ACH Rules 2.2.3, 2.4.5, 2.5.2, 4.2, 
and 8.7.2, if the Federal Government sustains a loss as a result of a 
financial institution's failure to handle an entry in accordance with 
this part, the financial institution shall be liable to the Federal 
Government for the loss, up to the

[[Page 56]]

amount of the entry, except as otherwise provided in this section. A 
financial institution shall not be liable to any third party for any 
loss or damage resulting directly or indirectly from an agency's error 
or omission in originating an entry. Nothing in this section shall 
affect any obligation or liability of a financial institution under 
Regulation E, 12 CFR part 205, or the Electronic Funds Transfer Act, 12 
U.S.C. 1693 et seq.
    (1) An ODFI that transmits a debit entry to an agency without the 
prior written or similarly authenticated authorization of the agency, 
shall be liable to the Federal Government for the amount of the 
transaction, plus interest. The Service may collect such funds using 
procedures established in the applicable ACH Rules or by instructing a 
Federal Reserve Bank to debit the ODFI's account at the Federal Reserve 
Bank or the account of its designated correspondent. The interest charge 
shall be at a rate equal to the Federal funds rate plus two percent, and 
shall be assessed for each calendar day, from the day the Treasury 
General Account (TGA) was debited to the day the TGA is recredited with 
the full amount due.
    (2) An RDFI that accepts an authorization in violation of Sec. 
210.4(a) shall be liable to the Federal Government for all credits or 
debits made in reliance on the authorization. An RDFI that transmits to 
an agency an authorization containing an incorrect account number shall 
be liable to the Federal Government for any resulting loss, up to the 
amount of the payment(s) made on the basis of the incorrect number. If 
an agency determines, after appropriate investigation, that a loss has 
occurred because an RDFI transmitted an authorization or notification of 
change containing an incorrect account number, the agency may instruct 
the Service to direct a Federal Reserve Bank to debit the RDFI's account 
for the amount of the payment(s) made on the basis of the incorrect 
number. The agency shall notify the RDFI of the results of its 
investigation and provide the RDFI with a reasonable opportunity to 
respond before initiating such a debit.
    (c) Acquittance of the financial institution. The final crediting of 
the correct amount of an entry received and processed by the Federal 
Reserve Bank and posted to the TGA shall constitute full acquittance of 
the ODFI and the originator for the amount of the entry. Full 
acquittance shall not occur if the entries do not balance, are 
incomplete, are incorrect, or are incapable of being processed. In the 
case of funds collected by an agency through origination of a debit 
entry, full acquittance shall not occur until the underlying payment 
becomes final.
    (d) Notice of misdirected payment. If an RDFI becomes aware that an 
agency has originated an ACH credit entry to an account that is not 
owned by the payee whose name appears in the ACH payment information, 
the RDFI shall promptly notify the agency. An RDFI that originates a 
Notification of Change (NOC) entry with the correct account and/or 
Routing and Transit Number information, or returns the original ACH 
credit entry to the agency with an appropriate return reason code, shall 
be deemed to have satisfied this requirement.

[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004; 70 
FR 67367, Nov. 7, 2005]



                Subpart B_Reclamation of Benefit Payments



Sec. 210.9  Parties to the reclamation.

    (a) Agreement of RDFI. An RDFI's acceptance of a benefit payment 
pursuant to this part shall constitute its agreement to this subpart. By 
accepting a benefit payment subject to this part, the RDFI authorizes 
the debiting of the Federal Reserve Bank account utilized by the RDFI in 
accordance with the provisions of Sec. 210.10(e).
    (b) The Federal Government. In processing reclamations pursuant to 
this subpart, the Service shall act pursuant to the direction of the 
agency that certified the benefit payment(s) being reclaimed.



Sec. 210.10  RDFI liability.

    (a) Full liability. An RDFI shall be liable to the Federal 
Government for the total amount of all benefit payments received after 
the death or legal incapacity of a recipient or the death of a

[[Page 57]]

beneficiary unless the RDFI has the right to limit its liability under 
Sec. 210.11 of this part. An RDFI shall return any benefit payments 
received after the RDFI becomes aware of the death or legal incapacity 
of a recipient or the death of a beneficiary, regardless of the manner 
in which the RDFI discovers such information. If the RDFI learns of the 
death or legal incapacity of a recipient or death of a beneficiary from 
a source other than notice from the agency issuing payments to the 
recipient, the RDFI shall immediately notify the agency of the death or 
incapacity. The proper use of the R15 or R14 return reason code shall be 
deemed to constitute such notice.
    (b) Notice of reclamation. Upon receipt of a notice of reclamation, 
an RDFI shall provide the information required by the notice of 
reclamation and return the amount specified in the notice of reclamation 
in a timely manner.
    (c) Exception to liability rule. An RDFI shall not be liable for 
post-death benefit payments sent to a recipient acting as a 
representative payee or fiduciary on behalf of a beneficiary, if the 
beneficiary was deceased at the time the authorization was executed and 
the RDFI did not have actual or constructive knowledge of the death of 
the beneficiary.
    (d) Time limits. An agency that initiates a request for a 
reclamation must do so within 120 calendar days after the date that the 
agency first has actual or constructive knowledge of the death or legal 
incapacity of a recipient or the death of a beneficiary. An agency may 
not reclaim any post-death or post-incapacity payment made more than six 
years prior to the date of the notice of reclamation; provided, however, 
that if the account balance at the time the RDFI receives the notice of 
reclamation exceeds the total amount of post-death or post-incapacity 
payments made by the agency during such six-year period, this limitation 
shall not apply and the RDFI shall be liable for the total amount of all 
post-death or post-incapacity payments made, up to the amount in the 
account at the time the RDFI receives the notice of reclamation and has 
had a reasonable opportunity to act on the notice (not to exceed one 
business day).
    (e) Debit of RDFI's account. If an RDFI does not return the full 
amount of the outstanding total or any other amount for which the RDFI 
is liable under this subpart in a timely manner, the Federal Government 
will collect the amount outstanding by instructing the appropriate 
Federal Reserve Bank to debit the account utilized by the RDFI. The 
Federal Reserve Bank will provide advice of the debit to the RDFI.

[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004]



Sec. 210.11  Limited liability.

    (a) Right to limit its liability. If an RDFI does not have actual or 
constructive knowledge of the death or legal incapacity of a recipient 
or the death of a beneficiary at the time it receives one or more 
benefit payments on behalf of the recipient, the RDFI's liability to the 
agency for those payments shall be limited to:
    (1) An amount equal to: (i) The amount in the account at the time 
the RDFI receives the notice of reclamation and has had a reasonable 
opportunity (not to exceed one business day) to act on the notice, plus 
any additional benefit payments made to the account by the agency before 
the RDFI responds in full to the notice of reclamation, or
    (ii) The outstanding total, whichever is less; plus
    (2) If the agency is unable to collect the entire outstanding total, 
an additional amount equal to:
    (i) The benefit payments received by the RDFI from the agency within 
45 days after the death or legal incapacity of the recipient or death of 
the beneficiary, or
    (ii) The balance of the outstanding total, whichever is less.
    (b) Qualification for limited liability. In order to limit its 
liability as provided in this section, an RDFI shall:
    (1) Certify that at the time the benefit payments were credited to 
or withdrawn from the account, the RDFI had no actual or constructive 
knowledge of the death or legal incapacity of the recipient or death of 
the beneficiary;
    (2) Certify the date the RDFI first had actual or constructive 
knowledge of the death or legal incapacity of the

[[Page 58]]

recipient or death of the beneficiary, regardless of how and where such 
information was obtained;
    (3)(i) In cases involving the reclamation of Social Security Federal 
Old-Age, Survivors, and Disability Insurance benefit payments, or 
benefit payments certified by the Railroad Retirement Board or the 
Department of Veterans' Affairs, provide the name and last known address 
of the following person(s):
    (A) The recipient and any co-owner(s) of the recipient's account;
    (B) All other person(s) authorized to withdraw funds from the 
recipient's account; and
    (C) All person(s) who withdrew funds from the recipient's account 
after the death or legal incapacity of the recipient or death of the 
beneficiary.
    (ii) If persons are not identified for any of these subcategories, 
the RDFI must certify that no such information is available and why no 
such information is available; and
    (4) Fully and accurately complete all certifications on the notice 
of reclamation and comply with the requirements of this part.
    (c) Payment of limited liability amount. If the RDFI qualifies for 
limited liability under this subpart, it shall immediately return to the 
Federal Government the amount specified in Sec. 210.11(a)(1). The 
agency will then attempt to collect the amount of the outstanding total 
not returned by the RDFI. If the agency is unable to collect that 
amount, the Federal Government will instruct the appropriate Federal 
Reserve Bank to debit the account utilized by the RDFI at that Federal 
Reserve Bank for the amount specified in Sec. 210.11(a)(2).
    (d) Violation of subpart B. An RDFI that fails to comply with any 
provision of this subpart in a timely and accurate manner, including but 
not limited to the certification requirements at Sec. 210.11(b) and the 
notice requirements at Sec. 210.13, shall be liable to the Federal 
Government for any loss resulting from its act or omission. Any such 
liability shall be in addition to the amount(s) for which the RDFI is 
liable under Sec. 210.10 or Sec.  210.11, as applicable.

[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004]



Sec. 210.12  RDFI's rights of recovery.

    (a) Matters between the RDFI and its customer. This subpart does not 
authorize or direct an RDFI to debit or otherwise affect the account of 
a recipient. Nothing in this subpart shall be construed to affect the 
right an RDFI has under state law or the RDFI's contract with a 
recipient to recover any amount from the recipient's account.
    (b) Liability unaffected. The liability of the RDFI under this 
subpart is not affected by actions taken by the RDFI to recover any 
portion of the outstanding total from any party.



Sec. 210.13  Notice to account owners.

    Provision of notice by RDFI. Upon receipt by an RDFI of a notice of 
reclamation, the RDFI immediately shall mail to the last known address 
of the account owner(s) or otherwise provide to the account owner(s) a 
copy of any notice required by the Service to be provided to account 
owners as specified in the Green Book. Proof that this notice was sent 
may be required by the Service.



Sec. 210.14  Erroneous death information.

    (a) Notification of error to the agency. If, after the RDFI responds 
fully to the notice of reclamation, the RDFI learns that the recipient 
or beneficiary is not dead or legally incapacitated or that the date of 
death is incorrect, the RDFI shall inform the agency that certified the 
underlying payment(s) and directed the Service to reclaim the funds in 
dispute.
    (b) Resolution of dispute. The agency that certified the underlying 
payment(s) and directed the Service to reclaim the funds will attempt to 
resolve the dispute with the RDFI in a timely manner. If the agency 
determines that the reclamation was improper, in whole or in part, the 
agency shall notify the RDFI and shall return the amount of the 
improperly reclaimed funds to the RDFI. Upon certification by the agency 
of an improper reclamation, the Service may instruct the appropriate 
Federal Reserve Bank to credit the account utilized by the RDFI at the 
Federal Reserve Bank in the

[[Page 59]]

amount of the improperly reclaimed funds.

[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004]

   Appendix A to Part 210--Standard Disclosure for Point-of-Purchase 
                        Conversion--Posted Notice

                  Notice to Customers Presenting Checks

    Conversion of Checks--If you are presenting a check to the cashier, 
your check will be converted into an electronic fund transfer. When you 
hand your completed, signed check to the cashier, your check will be 
copied. The account information from your check will be used to make an 
electronic fund transfer from your account in the amount of the check. 
The cashier will void the check and return it to you.
    Insufficient Funds--The electronic fund transfer from your account 
will usually occur within 24 hours, which is faster than a check is 
normally processed. Do not present a check to the cashier unless there 
are sufficient funds available in your checking account. If the 
electronic fund transfer cannot be completed because of insufficient 
funds, we may try to make the transfer up to two more times [and we will 
charge you a one-time fee of $----------, which we will also collect by 
electronic fund transfer].
    Authorization--By reading this notice and handing your check to the 
cashier, you authorize the conversion of your check into an electronic 
fund transfer. If the electronic fund transfer cannot be processed for 
technical reasons, you authorize us to process the copy of your original 
check.
    More Information--A pamphlet with more information about this 
process, including information about your rights under Federal law, is 
available from the cashier. [You may also call ------ or visit our 
Internet site at ------ for detailed information.]

    Note: This notice must be conspicuous. This means that the notice 
should be printed on a sign that is prominently posted at the location 
where checks are presented to a cashier, in such a way that it is 
clearly visible from several feet away to customers waiting to present 
checks.

[67 FR 17903, Apr. 11, 2002]

   Appendix B to Part 210--Standard Disclosure for Point-of-Purchase 
                    Conversion--Brochure or Pamphlet

    What is point-of-purchase check conversion? Point-of-purchase check 
conversion is the process of converting checks that customers present to 
cashiers into electronic fund transfers. ``Electronic fund transfer'' is 
the term used to refer to the process in which we electronically 
instruct your financial institution to transfer funds from your account 
to our account, rather than processing your check. When you hand a check 
to the cashier, your check is copied and the account information from 
your check is used to make an electronic fund transfer from your 
account. The cashier voids your check and returns it to you. By 
presenting your check at a location where a sign notifies you that your 
check will be converted, you authorize the conversion of your check into 
an electronic fund transfer in this manner.
    How quickly will funds be transferred from my account? The 
electronic fund transfer from your account will usually occur within 24 
hours, which is faster than a check is normally processed. Therefore, 
you should be sure that there are sufficient funds available in your 
checking account when you present your check. If the electronic fund 
transfer cannot be completed because there are insufficient funds in 
your account, we may try to make the transfer up to two more times [and 
we will impose a one-time fee of $------ against your account, which we 
will also collect by electronic fund transfer].
    Will the electronic fund transfer appear on my account statement? 
The electronic fund transfer from your account will be on the account 
statement that you receive from your financial institution. However, the 
transfer may be in a different place on your statement than the place 
where your checks normally appear. For example, it may appear under 
``other withdrawals'' or ``other transactions.'' The electronic fund 
transfer should be identified on your statement as ``[insert].''
    What if there is a problem with the electronic fund transfer? You 
should contact your financial institution immediately if you believe 
that the electronic fund transfer reported on your account statement was 
not properly authorized or is otherwise incorrect. Consumers have 
protections under a Federal law called the Electronic Fund Transfer Act 
for an unauthorized or incorrect electronic fund transfer.
    What if the electronic fund transfer cannot be processed? In rare 
instances, an electronic fund transfer cannot be processed for reasons 
other than insufficient funds. In these cases, we will process the copy 
of your original check. Different rights apply to the processing of the 
copy of the check than apply to an electronic fund transfer.
    [More detailed information about this process is available on our 
Internet site at ------ or by calling ------.]

    Note: This disclosure must be conspicuous. This means that it should 
be printed in reasonably large typeface. If this disclosure is combined 
with other information, it should

[[Page 60]]

be set off by contrasting color, by surrounding it with a box, or by 
using other means to ensure that it is prominently featured.

[67 FR 17903, Apr. 11, 2002]

  Appendix C to Part 210--Standard Disclosure for Accounts Receivable 
                           Conversion--Notice

               Notice to Customers Making Payment by Check

    If you send us a check, it will be converted into an electronic 
funds transfer (EFT). This means we will copy your check and use the 
account information on it to electronically debit your account for the 
amount of the check. The debit from your account will usually occur 
within 24 hours, and will be shown on your regular account statement.
    You will not receive your original check back. We will destroy your 
original check, but we will keep the copy of it. If the EFT cannot be 
processed for technical reasons, you authorize us to process the copy in 
place of your original check. If the EFT cannot be completed because of 
insufficient funds, we may try to make the transfer up to 2 times [and 
we will charge you a one-time fee of $--, which we will also collect by 
EFT].
    Note: This disclosure must be conspicuous. This means that it should 
be printed in reasonably large typeface. If this disclosure is combined 
with other information, it should be set off by contrasting color, by 
surrounding it with a box, or by using other means to ensure that it is 
prominently featured.

[69 FR 13189, Mar. 19, 2004]



PART 211_DELIVERY OF CHECKS AND WARRANTS TO ADDRESSES OUTSIDE THE UNITED 

STATES, ITS TERRITORIES AND POSSESSIONS--Table of Contents




Sec.
211.1 Withholding delivery of checks.
211.2 Claims for the release of withheld checks or for the proceeds 
          thereof.
211.3 Exceptions.
211.4 Implementing instructions.

    Authority: 5 U.S.C. 301; 31 U.S.C. 321 and 3329.



Sec. 211.1  Withholding delivery of checks.

    (a) It is hereby determined that postal, transportation or banking 
facilities in general or local conditions in the Republic of Cuba and 
the Democratic People's Republic of Korea (North Korea) are such that 
there is not a reasonable assurance that a payee in those areas will 
actually receive checks or warrants drawn against funds of the United 
States, or agencies or instrumentalities thereof, and be able to 
negotiate the same for full value.
    (b) A check or warrant intended for delivery in any of the areas 
named in paragraph (a) of this section shall be withheld unless the 
check or warrant is specifically released by the Secretary of the 
Treasury.
    (c) Before a check or warrant drawn against funds blocked pursuant 
to the provisions of Executive Order No. 8389 (3 CFR, 1943 Cum. Supp.), 
as amended, and which remain blocked under the proviso clause of General 
License No. 101 of the Foreign Funds Control Regulations (31 CFR 
520.101) may be released, it will be necessary for a license authorizing 
the release to be issued by the Department of the Treasury, Office of 
Foreign Assets Control, pursuant to E.O. 8389, as amended. In this 
regard, attention is also directed to the following regulations issued 
by the Secretary of the Treasury:
    (1) The Foreign Assets Control Regulations issued on December 17, 
1950 (31 CFR part 500), pursuant to Executive Order 9193 (3 CFR, 1943 
Cum. Supp.), which prohibit transactions involving payments to nationals 
of the Democratic People's Republic of Korea (North Korea), the 
Socialist Republic of Vietnam, and Democratic Kampuchea, except to the 
extent that any such payments have been authorized by appropriate 
license,
    (2) The Cuban Assets Control Regulations issued on July 8, 1963 (31 
CFR part 515), pursuant to the same authority, which prohibit similar 
transactions with nationals of Cuba unless licensed, and
    (3) The Iranian Assets Control Regulations issued on November 14, 
1979 (31 CFR part 535), as amended on April 17, 1980, pursuant to 
Executive Orders 12170 and 12211, which prohibit transactions in 
property of the Iranian Government or its instrumentalities and 
transfers of funds to persons in Iran, except as authorized by 
appropriate license.
    (d) Powers of attorney for the receipt or collection of checks or 
warrants or for the proceeds of checks or warrants included within the 
determination of

[[Page 61]]

the Secretary of the Treasury set forth in paragraph (a) of this section 
will not be recognized.

[41 FR 15847, Apr. 15, 1976, as amended at 44 FR 51568, Sept. 4, 1979; 
45 FR 47678, July 16, 1980; 61 FR 41739, Aug. 12, 1996; 66 FR 63623, 
Dec. 10, 2001]



Sec. 211.2  Claims for the release of withheld checks or for the proceeds 

thereof.

    Claims for the release of checks or warrants withheld from delivery 
or for the proceeds thereof, shall be filed with the administrative 
agency which would have originally authorized such issuance, e.g., 
claims arising out of checks or warrants representing payments under 
laws administered by the Department of Veterans Affairs shall be filed 
with the Secretary of Veterans Affairs, Department of Veterans Affairs, 
Washington, DC 20420.

[61 FR 41739, Aug. 12, 1996]



Sec. 211.3  Exceptions.

    The regulations of this part do not apply to payments to foreign 
governments, nor to checks or warrants issued in payment of salaries or 
wages, or for goods or services purchased by the Government of the 
United States in foreign countries, unless such payments are subject to 
the Foreign Funds Control Regulations (31 CFR part 520), the Foreign 
Assets Control Regulations (31 CFR part 500), the Cuban Assets Control 
Regulations (31 CFR part 515), or the Iranian Assets Control Regulations 
(31 CFR part 535).

[45 FR 47678, July 16, 1980]



Sec. 211.4  Implementing instructions.

    Implementing instructions will be issued in Part IV, ``Disbursing,'' 
of the Treasury Fiscal Requirements Manual for Guidance of Departments 
and Agencies.

[41 FR 15847, Apr. 15, 1976]



PART 215_WITHHOLDING OF DISTRICT OF COLUMBIA, STATE, CITY AND COUNTY INCOME OR 

EMPLOYMENT TAXES BY FEDERAL AGENCIES--Table of Contents




                      Subpart A_General Information

Sec.
215.1 Scope of part.
215.2 Definitions.

                          Subpart B_Procedures

215.3 Procedures for entering into a Withholding Agreement.
215.4 Relationship of Withholding Agreement to prior agreements.

                     Subpart C_Withholding Agreement

215.5 In general.
215.6 Parties.
215.7 Compliance by agencies.
215.8 Withholding certificates.
215.9 Change of legal residence by members of the Armed Forces.
215.10 Agency withholding procedures.
215.11 Miscellaneous provisions.
215.12 Supersession, amendment and termination provisions.

    Authority: 5 U.S.C. 5516, 5517, 5520; E.O. 11997, 42 FR 31759.

    Source: 42 FR 33731, July 1, 1977, unless otherwise noted.



                      Subpart A_General Information



Sec. 215.1  Scope of part.

    This part relates to agreements between the Secretary of the 
Treasury and States (including the District of Columbia), cities or 
counties for withholding of State, city or county income or employment 
taxes from the compensation of civilian Federal employees, and for the 
withholding of State income taxes from the compensation of members of 
the Armed Forces. Subpart A contains general information and 
definitions. Subpart B prescribes the procedures to be followed in 
entering into an agreement for the withholding of State, city or county 
income or employment taxes. Subpart C is the Withholding Agreement which 
the Secretary will enter into with any State, city or county which 
qualifies to have the tax withheld.

[71 FR 2150, Jan. 13, 2006]

[[Page 62]]



Sec. 215.2  Definitions.

    As used in this part:
    (a) Agency means each of the executive agencies and military 
departments (as defined in 5 U.S.C. 105 and 102, respectively) and the 
United States Postal Service; and in addition, for city or county 
withholding purposes only, all elements of the judicial branch.
    (b) City means any unit of general local government.
    (1) Which:
    (A) Is classified as a municipality by the United States Bureau of 
the Census, or
    (B) Is a town or township which, in the determination of the 
Secretary of the Treasury,
    (i) Possesses powers and performs functions comparable to those 
associated with municipalities,
    (ii) Is closely settled, and
    (iii) Contains within its boundaries no incorporated places as 
defined by the United States Bureau of the Census; and
    (2) Within the political boundaries of which five hundred or more 
persons are regularly employed by all agencies of the Federal 
Government.
    (c) City income or employment taxes means any form of tax for which, 
under a city ordinance:
    (1) Collection is provided by imposing on employers generally the 
duty of withholding sums from the pay of employees and making returns of 
the sums to a designated city officer, department, or instrumentality; 
and
    (2) The duty to withhold generally is imposed on the payment of 
compensation earned within the jurisdiction of the city in the case of 
employees whose regular place of employment is within such jurisdiction. 
Whether the tax is described as an income, wage, payroll, earnings, 
occupational license, or otherwise, is immaterial.
    (d) Compensation as applied to employees of an agency and members of 
the Armed Forces means wages as defined in 26 U.S.C. 3401(a) and 
regulations issued thereunder.
    (e) County means any unit of local general Government which is 
classified as a county by the Bureau of the Census and within the 
political boundaries of which 500 or more persons are regularly employed 
by all agencies of the Federal Government.
    (f) County income or employment taxes means any form of tax for 
which, under a county ordinance:
    (1) Collection is provided by imposing on employers generally the 
duty of withholding sums from the pay of employees and making returns of 
the sums to a designated county officer, department, or instrumentality; 
and
    (2) The duty to withhold generally is imposed on the payment of 
compensation earned within the jurisdiction of the country in the case 
of employees whose regular place of employment is within such 
jurisdiction. Whether the tax is described as an income, wage, payroll, 
earnings, occupational license, or otherwise, is immaterial.
    (g) District of Columbia income tax means the income tax imposed 
under 47 District of Columbia Code, chapter 15, subchapter II.
    (h)(1) Employees for the purpose of State income tax withholding, 
means all employees of an agency, other than members of the armed 
forces. For city and county income or employment tax withholding, it 
means:
    (i) Employees of an agency;
    (ii) Members of the National Guard, participating in exercises or 
performing duty under 32 U.S.C. 502; or
    (iii) Members of the Ready Reserve, participating in scheduled 
drills or training periods, or serving on active duty for training under 
10 U.S.C. 270(a).


The term does not include retired personnel, pensioners, annuitants, or 
similar beneficiaries of the Federal Government, who are not performing 
active civilian service or persons receiving remuneration for services 
on a contract-fee basis.
    (2) Employees for purposes of District of Columbia income tax 
withholding, means employees as defined in 47 District of Columbia Code 
1551c(z).
    (i) Members of the Armed Forces means (1) individuals in active duty 
status (as defined in 10 U.S.C. 101(d)(1)) in regular and reserve 
components of the Army, Navy, Air Force, Marine Corps, and Coast Guard, 
and (2) members of the National Guard while participating in exercises 
or performing duty under 32 U.S.C. 502 and members of the Ready

[[Page 63]]

Reserve while participating in scheduled drills or training periods or 
serving on active duty for training under 10 U.S.C. 10147.
    (j) Ordinance means an ordinance, order, resolution, or similar 
instrument which is duly adopted and approved by a city or county in 
accordance with the constitution and statutes of the state in which it 
is located and which has the force of law within such city or county.
    (k) Regular place of Federal employment means the official duty 
station, or other place, where an employee actually and normally (i.e., 
other than in a travel or temporary duty status) performs services, 
irrespective of residence.
    (l) Secretary means Secretary of the Treasury or his designee.
    (m) State means a State, territory, possession, or commonwealth of 
the United States, or the District of Columbia.
    (n) State income tax means any form of tax for which, under a State 
status:
    (1) Collection is provided, either by imposing on employers 
generally the duty of withholding sums from the compensation of 
employees and making returns of such sums to the State or by granting to 
employers generally the authority to withhold sums from the compensation 
of employees, if any employee voluntarily elects to have such sums 
withheld; and
    (2) The duty to withhold generally is imposed, or the authority to 
withhold generally is granted, with respect to the compensation of 
employees who are residents of such State.

[42 FR 33731, July 1, 1977, as amended at 55 FR 3590, Feb. 2, 1990; 55 
FR 7494, Mar. 2, 1990; 71 FR 2150, Jan. 13, 2006]



                          Subpart B_Procedures



Sec. 215.3  Procedures for entering into a Withholding Agreement.

    (a) Subpart C of this part is the Withholding Agreement which the 
Secretary will enter into with a State, city or county. A State, city or 
county which does not have an existing withholding agreement with the 
Secretary and wishes to enter into such an agreement shall indicate in a 
letter its consent to be bound by the provisions of Subpart C. The 
letter shall be sent to the Secretary by addressing the request to: 
Assistant Commissioner, Federal Finance, Financial Management Service, 
Department of the Treasury, 401 14th Street, SW., Washington, DC 20227. 
The letter shall be signed by an officer authorized to bind 
contractually the State, city or county. Copies of all applicable State 
laws, city or county ordinances and implementing regulations, 
instructions, and forms shall be enclosed. The letter shall also 
indicate the title and address of the official whom Federal agencies may 
contact to obtain forms and other information necessary to implement 
withholding.
    (b) Within 120 days of the receipt of the letter from the State, 
city or county official, the Secretary will, by letter, notify the 
State, city or county:
    (1) That a Withholding Agreement has been entered into as of the 
date of the Secretary's letter, or
    (2) That a Withholding Agreement cannot be entered into with the 
State, city or county and the reason for that determination.
    (c) The withholding of the State, city or county income or 
employment tax shall commence within 90 days after the effective date of 
the agreement.

[71 FR 2150, Jan. 13, 2006]



Sec. 215.4  Relationship of Withholding Agreement to prior agreements.

    Jurisdictions which requested from Treasury an agreement other than 
the Withholding Agreement set forth in Subpart C (formerly known as the 
Standard Agreement) within 90 days after July 1, 1977, which request 
Treasury subsequently approved, will continue to be governed by such 
agreement. For all other jurisdictions, the Withholding Agreement set 
forth in Subpart C replaced all prior agreements between the Secretary 
and a taxing jurisdiction for the withholding of income or employment 
taxes from the compensation of Federal employees, and any jurisdiction 
which was a party to a prior agreement is presumed to have consented to 
be bound by the Withholding Agreement set forth in Subpart C.

[71 FR 2150, Jan. 13, 2006]

[[Page 64]]



                     Subpart C_Withholding Agreement



Sec. 215.5  In general.

    This subpart is the text of the Withholding Agreement between the 
Secretary and the State, city or county. The terms used in this 
agreement are defined in Sec. 215.2 of this part.

[42 FR 33731, July 1, 1977. Redesignated and amended at 71 FR 2150, Jan. 
13, 2006]



Sec. 215.6  Parties.

    The parties to this agreement are the Secretary and the State, city 
or county which has entered into this agreement pursuant to 5 U.S.C. 
5516, 5517, or 5520 and Executive Order 11997 (June 22, 1977).

[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]



Sec. 215.7  Compliance by agencies.

    (a) In the case of an agreement with a State, the head of each 
agency is required to withhold State income taxes from the compensation 
of:
    (1) Employees of such agency who are subject to such taxes and whose 
regular place of Federal employment is within the State, and
    (2) Members of the Armed Forces who are subject to such taxes and 
who are legal residents of the State.

The foregoing is also applicable with respect to a State whose statutes 
permit but do not require withholding by employers, provided the 
employee voluntarily elects to have such tax withheld.
    (b) In the case of an agreement with a city or county, the head of 
each agency is required to withhold city or county income or employment 
taxes from the compensation of any employee of the agency who is subject 
to the tax, and
    (1) Whose regular place of Federal employment is within the city or 
county, or
    (2) Is a resident of the city or county.
    (c) In withholding taxes, the head of each agency, except as 
otherwise provided in this agreement, shall comply with the withholding 
provisions of the State, city or county income or employment tax 
statute, regulations, procedural instructions and reciprocal agreements 
related thereto.

(Pub. L. 95-365, 92 Stat. 599 (5 U.S.C. 5520))

[42 FR 33731, July 1, 1977, as amended at 44 FR 4670, Jan. 23, 1979. 
Redesignated at 71 FR 2150, Jan. 13, 2006]



Sec. 215.8  Withholding certificates.

    Each agency may require employees or members of the Armed Forces 
under its jurisdiction to complete a withholding certificate in order to 
calculate the amount to be withheld. The agency shall use the 
withholding certificate which the State, city or county has prescribed. 
Where the State, city or county has not prescribed a certificate, the 
agency may use a certificate approved by the Department of the Treasury. 
The agency may rely on the information in the certificate. Copies of 
completed certificates shall be provided to the taxing authority by 
agencies upon request.

[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]



Sec. 215.9  Change of legal residence by members of the Armed Forces.

    (a) In determining the legal residence of a member of the Armed 
Forces for tax withholding purposes, the head of an agency at all times 
may rely on the agency's current records, which may include a 
certificate of legal residence. The form of the certificate of legal 
residence shall be approved by the Department of the Treasury. A change 
of legal residence of a member of the Armed Forces shall become 
effective for tax withholding purposes only after a member of the Armed 
Forces completes a certificate indicating a new legal residence and 
delivers it to the agency.
    (b) Heads of agencies shall notify the State of prior legal 
residence of the member of the Armed Forces involved on a monthly basis 
concerning the change of the member's legal residence. The notification 
shall include the name, social security number, current mailing address 
and the new legal residence of such member of the Armed Forces. The 
effective date of the

[[Page 65]]

change in legal residence shall also be included in the notification.

[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]



Sec. 215.10  Agency withholding procedures.

    (a) State income tax shall be withheld only on the entire 
compensation of Federal employees and members of the Armed Forces. 
Nonresident employees, who under the State income tax law are required 
to allocate at least three-fourths of their compensation to the State, 
shall be subject to withholding on their entire compensation. 
Nonresident employees, who under the State income tax law are required 
to allocate less than three-fourths of their compensation to the State, 
may elect to:
    (1) Have State income tax withheld on their entire compensation, or
    (2) Have no income tax withheld on their compensation.
    (b) In calculating the amount to be withheld from an employee's or a 
member's compensation, each agency shall use the method prescribed by 
the State income tax statute or city or county ordinance or a method 
which produces approximately the tax required to be withheld:
    (1) By the State income tax statute from the compensation of each 
employee or member of the Armed Forces subject to such income tax, or
    (2) By the city or county ordinance from the compensation of each 
employee subject to such income or employment tax.
    (c) Where it is the practice of a Federal agency under Federal tax 
withholding procedure to make returns and payment of the tax on an 
estimated basis, subject to later adjustment based on audited figures, 
this practice may be applied with respect to the State, city of county 
income or employment tax where the agency has made appropriate 
arrangements with the State, city or county income tax authorities.
    (d) Copies of Federal Form W-2, ``Wage and Tax Statement'', may be 
used for reporting withheld taxes to the State, city or county.
    (e) Withholding shall not be required on wages earned but unpaid at 
the date of an employee's or member's death.
    (f) Withholding of District of Columbia income tax shall not apply 
to pay of employees who are not residents of the District of Columbia as 
defined in 47 District of Columbia Code, chapter 15, subchapter II.

[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]



Sec. 215.11  Miscellaneous provisions.

    Nothing in this agreement shall be deemed:
    (a) To require collection by agencies of the United States of 
delinquent tax liabilities of Federal employees or members of the Armed 
Forces, or
    (b) To consent to the application of any provision of law of the 
State, city or county which has the effect of:
    (1) Imposing more burdensome requirements upon the United States 
than it imposes on other employers, or
    (2) Subjecting the United States or any of its officers or employees 
to any penalty or liability, or
    (c) To consent to procedures for withholding, filing of returns, and 
payment of the withheld taxes to a State, city or county that do not 
conform to the usual fiscal practices of agencies, or
    (d) To permit withholding of a city or county tax from the pay of a 
Federal employee who is not a resident of, or whose regular place of 
Federal employment is not within, the State in which the city or county 
is located, unless the employee consents to the withholding, or
    (e) To permit the withholding of city or county income or employment 
taxes from the pay of members of the Armed Forces of the United States, 
or
    (f) To allow agencies to accept compensation from a State, city or 
county for services performed in withholding of State or city or county 
income or employment taxes.

(Pub. L. 95-365, 92 Stat. 599 (5 U.S.C. 5520))

[42 FR 33731, July 1, 1977, as amended at 44 FR 4670, Jan. 23, 1979. 
Redesignated at 71 FR 2150, Jan. 13, 2006]

[[Page 66]]



Sec. 215.12  Supersession, amendment and termination provisions.

    (a) This agreement supersedes any prior agreement between the 
Secretary of the Treasury and a State or city pursuant to 5 U.S.C. 5516, 
5517, or 5520.
    (b) This agreement shall be subject to any amendment of 5 U.S.C. 
5516, 5517, 5520 or Executive Order 11997, and any rules and regulations 
issued prusuant to them and amendments thereto.
    (c) This agreement may be terminated as to a specific State or city 
or county which is a party to this agreement by providing written notice 
to that effect to the Secretary at least 90 days prior to the proposed 
termination.

[42 FR 33731, July 1, 1977. Redesignated at 71 FR 2150, Jan. 13, 2006]



PART 223_SURETY COMPANIES DOING BUSINESS WITH THE UNITED STATES--Table of 

Contents




Sec.
223.1 Certificate of authority.
223.2 Application for certificate of authority.
223.3 Issuance of certificates of authority.
223.4 Deposits.
223.5 Business.
223.6 Requirements applicable to surety companies.
223.7 Investment of capital and assets.
223.8 Financial reports.
223.9 Valuation of assets and liabilities.
223.10 Limitation of risk.
223.11 Limitation of risk: Protective methods.
223.12 Recognition as reinsurer.
223.13 Full penalty of the obligation regarded as the liability; 
          exceptions.
223.14 Schedules of single risks.
223.15 Paid up capital and surplus for Treasury rating purposes; how 
          determined.
223.16 List of certificate holding companies.
223.17 Revocation.
223.18 Performance of agency obligations.
223.19 Informal hearing on agency complaints.
223.20 Final decisions.
223.21 Reinstatement.
223.22 Fees for services of the Treasury Department.

    Authority: 80 Stat. 379; 5 U.S.C. 301; 6 U.S.C. 8.



Sec. 223.1  Certificate of authority.

    The regulations in this part will govern the issuance by the 
Secretary of the Treasury of certificates of authority to bonding 
companies to do business with the United States as sureties on, or 
reinsurers of, recognizances, stipulations, bonds, and undertakings, 
hereinafter sometimes called obligations, under the provisions of the 
Act of July 30, 1947 (61 Stat. 646, as amended; 6 U.S.C. 6-13), and the 
acceptance of such obligations from such companies so long as they 
continue to hold said certificates of authority.

[28 FR 1039, Feb. 2, 1963, as amended at 40 FR 6499, Feb. 12, 1975; 40 
FR 8335, Feb. 27, 1975]



Sec. 223.2  Application for certificate of authority.

    Every company wishing to apply for a certificate of authority shall 
address the Assistant Commissioner, Comptroller, Financial Management 
Service, U.S. Department of Treasury, Washington, DC 20226, who will 
notify the company of the data which the Secretary of the Treasury 
determines from time to time to be necessary to make application. In 
accord with 6 U.S.C. 8 the data will include a copy of the applicant's 
charter or articles of incorporation and a statement, signed and sworn 
to by its president and secretary, showing its assets and liabilities. A 
fee shall be transmitted with the application in accordance with the 
provisions of Sec. 223.22(a)(i).

[34 FR 20188, Dec. 24, 1969, as amended at 37 FR 1232, Jan. 27, 1972; 40 
FR 6499, Feb. 12, 1975; 43 FR 12678, Mar. 27, 1978; 49 FR 47002, Nov. 
30, 1984]



Sec. 223.3  Issuance of certificates of authority.

    (a) If, from the evidence submitted in the manner and form herein 
required, subject to the guidelines referred to in Sec. 223.9 the 
Secretary of the Treasury shall be satisfied that such company has 
authority under its charter or articles of incorporation to do the 
business provided for by the Act referred to in Sec. 223.1, and if the 
Secretary of the Treasury shall be satisfied from such company's 
financial statement and from any further evidence or information he may 
require, and from such examination of the company, at its own expense, 
as he may cause to be made, that such company has a capital fully paid 
up in cash of not less than $250,000,

[[Page 67]]

is solvent and financially and otherwise qualified to do the business 
provided for in said Act, and is able to keep and perform its contracts, 
he will, subject to the further conditions herein contained, issue a 
certificate of authority to such company, under the seal of the Treasury 
Department, to qualify as surety on obligations permitted or required by 
the laws of the United States to be given with one or more sureties, for 
a term expiring on the last day of June next following. The certificate 
of authority shall be renewed annually on the first day of July, so long 
as the company remains qualified under the law and the regulations in 
this part, and transmits to the Assistant Commissioner, Comptroller by 
March 1 each year the fee in accordance with the provisions of Sec. 
223.22(a)(3).
    (b) If a company meets the requirements for a certificate of 
authority as an acceptable surety on Federal bonds in all respects 
except that it is a United States branch of a company not incorporated 
under the laws of the United States or of any State, or it is limited by 
its articles of incorporation or corporate charter to reinsure business 
only, it may be issued a certificate of authority as a reinsuring 
company on Federal bonds. The fees for initial application and renewal 
of a certificate as a reinsuring company shall be the same as the fees 
for a certificate of authority as an acceptable surety on Federal bonds.

[33 FR 8390, June 6, 1968, as amended at 34 FR 20188, Dec. 24, 1969; 37 
FR 1232, Jan. 27, 1972; 40 FR 6499 Feb. 12, 1975; 40 FR 8335, Feb. 27, 
1975; 42 FR 8637, Feb. 11, 1977; 43 FR 12678, Mar. 27, 1978; 43 FR 
39089, Sept. 1, 1978; 49 FR 47002, Nov. 30, 1984]



Sec. 223.4  Deposits.

    No such company will be granted authority to do business under the 
provisions of the act referred to in Sec. 223.1 unless it shall have 
and maintain on deposit with the Insurance Commissioner. or other proper 
financial officer, of the State in which it is incorporated, or of any 
other State of the United States, for the protection of claimants, 
including all its policyholders in the United States, legal investments 
having a current market value of not less than $100,000.

[36 FR 9630, May 27, 1971]



Sec. 223.5  Business.

    (a) The company must engage in the business of suretyship whether or 
not also making contracts in other classes of insurance, but shall not 
be engaged in any type or class of business not authorized by its 
charter or the laws of the State in which the company is incorporated. 
It must be the intention of the company to engage actively in the 
execution of surety bonds in favor of the United States.
    (b) No bond is acceptable if it has been executed (signed and/or 
otherwise validated) by a company or its agent in a State where it has 
not obtained that State's license to do surety business. Although a 
company must be licensed in the State or other area in which it executes 
a bond, it need not be licensed in the State or other area in which the 
principal resides or where the contract is to be performed. The term 
other area includes the Canal Zone, District of Columbia, Guam, Puerto 
Rico, and the Virgin Islands.

[40 FR 6499, Feb. 12, 1975]



Sec. 223.6  Requirements applicable to surety companies.

    Every company now or hereafter authorized to do business under the 
act of Congress referred to in Sec. 223.1 shall be subject to the 
regulations contained in this part.

[38 FR 22779, Aug. 24, 1973]



Sec. 223.7  Investment of capital and assets.

    The cash capital and other funds of every such company must be 
safely invested in accordance with the laws of the State in which it is 
incorporated and will be valued on the basis set forth in Sec. 223.9. 
The Secretary of the Treasury will periodically issue instructions for 
the guidance of companies with respect to investments and other matters. 
These guidelines may be updated from time to time to meet changing 
conditions in the industry.

[42 FR 8637, Feb. 11, 1977]

[[Page 68]]



Sec. 223.8  Financial reports.

    (a) Every such company will be required to file with the Assistant 
Commissioner, Comptroller on or before the last day of January of each 
year, a statement of its financial condition made up as of the close of 
the preceding calendar year upon the annual statement blank adopted by 
the National Association of Insurance Commissioners, signed and sworn to 
by its president and secretary.

On or before the last days of April, July and October of each year, 
every such company shall file a financial statement with the Assistant 
Commissioner, Comptroller as of the last day of the preceding month. A 
form is prescribed by the Treasury for this purpose. The quarterly 
statement form of the National Association of Insurance Commissioners 
when modified to conform to the Treasury's requirements, may be 
substituted for the Treasury's form. The quarterly statement will be 
signed and sworn to by the company's president and secretary or their 
authorized designees.
    (b) Every such company shall furnish such other exhibits or 
information, and in such manner as the Secretary of the Treasury may at 
any time require.

[10 FR 2348, Mar. 1, 1945, as amended at 42 FR 8637, Feb. 11, 1977; 49 
FR 47002, Nov. 30, 1984]



Sec. 223.9  Valuation of assets and liabilities.

    In determining the financial condition of every such company, its 
assets and liabilities will be computed in accordance with the 
guidelines contained in the Treasury's current Annual Letter to 
Executive Heads of Surety Companies. However, the Secretary of the 
Treasury may value the assets and liabilities of such companies in his 
discretion. Credit will be allowed for reinsurance in all classes of 
risks if the reinsuring company holds a certificate of authority from 
the Secretary of the Treasury, or has been recognized as an admitted 
reinsurer in accord with Sec. 223.12.

[42 FR 8637, Feb. 11, 1977]



Sec. 223.10  Limitation of risk.

    Except as provided in Sec. 223.11, no company holding a certificate 
of authority shall underwrite any risk on any bond or policy on behalf 
of any individual, firm, association, or corporation, whether or not the 
United States is interested as a party thereto, the amount of which is 
greater than 10 percent of the paid-up capital and surplus of such 
company, as determined by the Secretary of the Treasury. That figure is 
hereinafter referred to as the underwriting limitation.

[34 FR 20188, Dec. 24, 1969]



Sec. 223.11  Limitation of risk: Protective methods.

    The limitation of risk prescribed in Sec. 223.10 may be complied 
with by the following methods:
    (a) Coinsurance. Two or more companies may underwrite a risk on any 
bond or policy, the amount of which does not exceed their aggregate 
underwriting limitations. Each company shall limit its liability upon 
the face of the bond or policy, to a definite specified amount which 
shall be within its underwriting limitation.
    (b) Reinsurance. (1) In respect to bonds running to the United 
States, liability in excess of the underwriting limitation shall be 
reinsured within 45 days from the date of execution and delivery of the 
bond with one or more companies holding a certificate of authority from 
the Secretary of the Treasury. Such reinsurance shall not be in excess 
of the underwriting limitation of the reinsuring company. Where 
reinsurance is contemplated, Federal agencies may accept a bond from the 
direct writing company in satisfaction of the total bond requirement 
even though it may exceed the direct writing company's underwriting 
limitation. Within the 45 day period, the direct writing company shall 
furnish to the Federal agency any necessary reinsurance agreements. 
However, a Federal agency may, at its discretion, require that 
reinsurance be obtained within a lesser period than 45 days, and may 
require completely executed reinsurance agreements in hand before making 
a final determination that any bond is acceptable. Reinsurance may 
protect bonds required to be furnished to the United States by the 
Miller Act (40 U.S.C. 270a through 270d) covering contracts for the 
construction, alteration,

[[Page 69]]

or repair of any public building or public work of the United States, as 
well as other types of Federal bonds. Use of reinsurance or coinsurance 
to protect such bonds is at the discretion of the direct writing 
company. Reinsurance shall be executed on reinsurance agreement forms 
(Standard Form 273 for Miller Act Performance bonds (formerly form No. 
TFS 6317), Standard Form 274 for Miller Act Payment bonds (formerly form 
No. TFS 6318), and Standard Form 275 for other types of Federal bonds 
(formerly form No. TFS 6319)). Federal bond-approving officers may 
obtain the forms by submitting a requisition in FEDSTRIP/MILSTRIP format 
to the General Services Administration regional office providing support 
to the requesting Government organization. In addition, the forms are 
available to authorized sureties and reinsurers from the Superintendent 
of Documents, Government Printing Office, Stop: SSMC, Washington, DC 
20402.
    (2) In respect to risks covered by bonds or policies not running to 
the United States, liability in excess of the underwriting limitation 
shall be reinsured within 45 days from the date of execution and 
delivery of the bond or policy with:
    (i) One or more companies holding a certificate of authority from 
the Secretary of the Treasury as an acceptable surety on Federal bonds 
or one or more companies holding a certificate of authority as an 
acceptable reinsuring company on such bonds, or
    (ii) One or more companies recognized as an admitted reinsurer in 
accord with Sec. 223.12, or
    (iii) A pool, association, etc., to the extent that it is composed 
of such companies, or
    (iv) An instrumentality or agency of the United States which is 
permitted by Federal law or regulation to execute reinsurance contracts.
    (3) No certificate-holding company may cede to a reinsuring company 
recognized under Sec. 223.12 any risk in excess of 10 percent of the 
latter company's paid-up capital and surplus.
    (c) Other methods. In respect to all risks other than Miller Act 
performance and payment bonds running to the United States, which must 
be coinsured or reinsured in accord with paragraph (a) or (b)(1) of this 
section respectively, the excess liability may otherwise be protected:
    (1) By the deposit with the company in pledge, or by conveyance to 
it in trust for its protection, of assets admitted by the Treasury the 
current market value of which is at least equal to the liability in 
excess of its underwriting limitation, or
    (2) If such obligation was incurred on behalf of or on account of a 
fiduciary holding property in a trust capacity, by a joint control 
agreement which provides that the whole or a sufficient portion of the 
property so held may not be disposed of or pledged in any way without 
the consent of the insuring company.

[34 FR 20188, Dec. 24, 1969, as amended at 40 FR 6499, Feb. 12, 1975; 41 
FR 10605, Mar. 12, 1976; 42 FR 8637, Feb. 11, 1977; 43 FR 39089, Sept. 
1, 1978]



Sec. 223.12  Recognition as reinsurer.

    (a) Application by U.S. company. Any company organized under the 
laws of the United States or of any State thereof, wishing to apply for 
recognition as an admitted reinsurer (except on excess risks running to 
the United States) of surety companies doing business with the United 
States, shall file the following data with the Assistant Comptroller for 
Auditing and shall transmit therewith the fee in accordance with the 
provisions of Sec. 223.22(a)(2):
    (1) A certified copy of its charter or articles of incorporation, 
and
    (2) A certified copy of a license from any State in which it has 
been authorized to do business, and
    (3) A copy of the latest available report of its examination by a 
State Insurance Department, and
    (4) A statement of its financial condition, as of the close of the 
preceding calendar year, on the annual statement form of the National 
Association of Insurance Commissioners, signed and sworn to by two 
qualified officers of the company, showing that it has a capital stock 
paid up in cash of not less than $250,000, in the case of a stock 
insurance company, or has net assets of not less than $500,000 over and 
above all

[[Page 70]]

liabilities, in the case of a mutual insurance company, and
    (5) Such other evidence as the Secretary of the Treasury may 
determine necessary to establish that it is solvent and able to keep and 
perform its contracts.
    (b) Application by a U.S. branch. A U.S. branch of an alien company 
applying for such recognition shall file the following data with the 
Assistant Commissioner, Comptroller and shall transmit therewith the fee 
in accordance with the provisions of Sec. 223.22(a)(2):
    (1) The submissions listed in paragraphs (a) (1) through (5) of this 
section, except that the financial statement of such branch shall show 
that it has net assets of not less than $250,000 over and above all 
liabilities, and
    (2) Evidence satisfactory to the Secretary of the Treasury to 
establish that it has on deposit in the United States not less than 
$250,000 available to its policyholders and creditors in the United 
States.
    (c) Financial reports. Each company recognized as an admitted 
reinsurer shall file with the Assistant Commissioner, Comptroller on or 
before the first day of March of each year its financial statement and 
such additional evidence as the Secretary of the Treasury determines 
necessary to establish that the requirements of this section are being 
met. A fee shall be transmitted with the foregoing data, in accordance 
with the provisions of Sec. 223.22(a)(4).

[34 FR 20189, Dec. 24, 1969, as amended at 37 FR 1232, Jan. 27, 1972; 40 
FR 6499, Feb. 12, 1975; 43 FR 12678, Mar. 27, 1978; 49 FR 47002, Nov. 
30, 1984]



Sec. 223.13  Full penalty of the obligation regarded as the liability; 

exceptions.

    In determining the limitation prescribed in this part, the full 
penalty of the obligation will be regarded as the liability, and no 
offset will be allowed on account of any estimate of risk which is less 
than such full penalty, except in the following cases:
    (a) Appeal bonds; in which case the liability will be regarded as 
the amount of the judgment appealed from, plus 10 percent of said amount 
to cover interest and costs.
    (b) Bonds of executors, administrators, trustees, guardians, and 
other fiduciaries, where the penalty of the bond or other obligation is 
fixed in excess of the estimated value of the estate; in which cases the 
estimated value of the estate, upon which the penalty of the bond was 
fixed, will be regarded as the liability.
    (c) Credit will also be allowed for indemnifying agreements executed 
by sole heirs or beneficiaries of an estate releasing the surety from 
liability.
    (d) Contract bonds given in excess of the amount of the contract; in 
which cases the amount of the contract will be regarded as the 
liability.
    (e) Bonds for banks or trust companies as principals, conditioned to 
repay moneys on deposit, whereby any law or decree of a court, the 
amount to be deposited shall be less than the penalty of the bond; in 
which cases the maximum amount on deposit at any one time will be 
regarded as the liability.

[Dept. Circ. 297, July 5, 1922]



Sec. 223.14  Schedules of single risks.

    During the months of January, April, July, and October of each year 
every company will be required to report to the Secretary of the 
Treasury every obligation which it has assumed during the 3 months 
immediately preceding, the penal sum of which is greater than 10 percent 
of its paid up capital and surplus, together with a full statement of 
the facts which tend to bring it within the provisions of this part, on 
a form suitable for the purpose.

[Dept. Circ. 297, July 5, 1922]



Sec. 223.15  Paid up capital and surplus for Treasury rating purposes; how 

determined.

    The amount of paid up capital and surplus of any such company shall 
be determined on an insurance accounting basis under the regulations in 
this part, from the company's financial statements and other 
information, or by such examination of the company at its own expense as 
the Secretary of the Treasury may deem necessary or proper.

[42 FR 8637, Feb. 11, 1977]

[[Page 71]]



Sec. 223.16  List of certificate holding companies.

    A list of qualified companies is published annually as of July 1 in 
Department Circular No. 570, Companies Holding Certificates of Authority 
as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring 
Companies, with information as to underwriting limitations, areas in 
which licensed to transact surety business and other details. If the 
Secretary of the Treasury shall take any exceptions to the annual 
financial statement submitted by a company, he shall, before issuing 
Department Circular 570, give a company due notice of such exceptions. 
Copies of the Circular are available from the Assistant Commissioner, 
Comptroller upon request. Selection of a particular qualified company 
from among all companies holding certificates of authority is 
discretionary with the principal required to furnish bond.

[34 FR 20189, Dec. 24, 1969, as amended at 40 FR 6499, Feb. 12, 1975; 42 
FR 8637, Feb. 11, 1977; 49 FR 47002, Nov. 30, 1984]



Sec. 223.17  Revocation.

    Whenever it appears that a company is not complying with the 
requirements of 6 U.S.C. 6-13 and of the regulations in this part, the 
Secretary of the Treasury will:
    (a) In all cases notify the company of the facts or conduct which 
indicate such failure, and provide opportunity to the company to 
respond, and
    (b) In those cases where the public interest in the constant 
financial stability of such a company allows, also provide opportunity 
to the company to demonstrate or achieve compliance with those 
requirements. The Secretary shall revoke a company's certificate of 
authority with advice to it if:
    (1) The company does not respond satisfactorily to his notification 
of noncompliance, or
    (2) The company, provided an opportunity to demonstrate or achieve 
compliance, fails to do so.

[34 FR 20189, Dec. 24, 1969. Redesignated at 38 FR 22779, Aug. 24, 1973, 
as amended at 42 FR 8637, Feb. 11, 1977]



Sec. 223.18  Performance of agency obligations.

    (a) Every company shall promptly honor its bonds naming the United 
States or one of its agencies or instrumentalities as obligee. If an 
agency's demand upon a company on behalf of the agency or laborers, 
materialmen, or suppliers (on payment bonds), for payment of a claim 
against it is not settled to the agency's satisfaction, and the agency's 
review of the situation thereafter establishes that the default is clear 
and the company's refusal to pay is not based on adequate grounds, the 
agency may make a report to the Secretary of the Treasury, including a 
copy of the subject bond, the basis for the claim against the company, a 
chronological resume of efforts to obtain payment, a statement of all 
reasons offered for non-payment, and a statement of the agency's views 
on the matter.
    (b) On receipt of such report from the Federal agency the Secretary 
will, if the circumstances warrant, notify the company concerned that 
the agency report may demonstrate that the company is not keeping and 
performing its contracts and that, in the absence of satisfactory 
explanation, the company's default may preclude the renewal of the 
company's certificate of authority, or warrant prompt revocation of the 
existing certificate. This notice will provide opportunity to the 
company to demonstrate its qualification for a continuance of the 
certificate of authority.

[34 FR 20189, Dec. 24, 1969. Redesignated at 38 FR 22779, Aug. 24, 1973, 
as amended at 42 FR 8638, Feb. 11, 1977]



Sec. 223.19  Informal hearing on agency complaints.

    (a) Request for informal hearing. If a company determines that the 
opportunity to make known its views, as provided for under Sec. 
223.18(b), is inadequate, it may, within 20 business days of the date of 
the notice required by Sec. 223.18(b), request, in writing, that the 
Secretary of the Treasury convene an informal hearing.
    (b) Purpose. As soon as possible after a written request for an 
informal hearing is received, the Secretary of the Treasury shall 
convene an informal

[[Page 72]]

hearing, at such time and place as he deems appropriate, for the purpose 
of determining whether revocation of the company's certificate of 
authority is justified.
    (c) Notice. The company shall be advised, in writing, of the time 
and place of the informal hearing and shall be directed to bring all 
documents, records and other information as it may find necessary and 
relevant to substantiate its refusal to settle the claims made against 
it by the Federal agency making the report under Sec. 223.18(a).
    (d) Conduct of hearings. The hearing shall be conducted by a hearing 
officer appointed by the Secretary. The company may be represented by 
counsel and shall have a fair opportunity to present any relevant 
material and to examine the agency's evidence. Formal rules of evidence 
will not apply at the informal hearing.
    (e) Report. Within 30 days after the informal hearing, the hearing 
officer shall make a written report to the Secretary setting forth his 
findings, the basis for his findings, and his recommendations. A copy of 
the report shall be sent to the company.

[38 FR 22779, Aug. 24, 1973]



Sec. 223.20  Final decisions.

    If, after review of the case file, it is the judgment of the 
Secretary that the complaint was unfounded, the Secretary shall dismiss 
the complaint by the Federal agency concerned and shall so notify the 
company. If, however, it is the judgment of the Secretary that the 
company has not fulfilled its obligations to the complainant agency, he 
shall notify the company of the facts or conduct which indicate such 
failure and allow the company 20 business days from the date of such 
notification to demonstrate or achieve compliance. If no showing of 
compliance is made within the period allowed, the Secretary shall either 
preclude renewal of a company's certificate of authority or revoke it 
without further notice.

[38 FR 22779, Aug. 24, 1973, as amended at 42 FR 8638, Feb. 11, 1977]



Sec. 223.21  Reinstatement.

    If, after one year from the date of the expiration or the revocation 
of the certificate of authority, under Sec. 223.20 a company can show 
that the basis for the non-renewal or revocation has been eliminated and 
that it can comply with the requirements of 6 U.S.C. 6-13 and the 
regulations in this part, a new certificate of authority shall be issued 
without prejudice.

[38 FR 22779, Aug. 24, 1973, as amended at 42 FR 8638, Feb. 11, 1977]



Sec. 223.22  Fees for services of the Treasury Department.

    (a) Fees shall be imposed and collected, for the services listed in 
paragraphs (a) (1) through (4) of this section which are performed by 
the Treasury Department, regardless of whether the action requested is 
granted or denied. The payee of the check or other instrument shall be 
the Financial Management Service, Treasury Department. The amount of the 
fee will be based on which of the following categories of service is 
requested:
    (1) Examination of a company's application for a certificate of 
authority as an acceptable surety on Federal bonds or for a certificate 
of authority as an acceptable reinsuring company on such bonds (see 
Sec. 223.2);
    (2) Examination of a company's application for recognition as an 
admitted reinsurer (except on excess risks running to the United States) 
of surety companies doing business with the United States (see Sec. 
223.12(a) and (b));
    (3) Determination of a company's continuing qualifications for 
annual renewal of its certificate of authority (see Sec. 223.3); or
    (4) Determination of a company's continuing qualifications for 
annual renewal of its authority as an admitted reinsurer (see Sec. 
223.12(c)).
    (b) In a given year a uniform fee will be collected from every 
company requesting a particular category of service, e.g., determination 
of a company's continuing qualifications for annual renewal of its 
certificate of authority. However, the Treasury Department reserves the 
right to redetermine the amounts of fees annually. Fees are determined 
in accordance with Office of Management and Budget Circular A-25, as 
amended.

[[Page 73]]

    (c) Specific fee information may be obtained from the Assistant 
Commissioner, Comptroller at the address shown in Sec. 223.2. In 
addition, a notice of the amount of a fee referred to in Sec. 223.22(a) 
(1) through (4) will be published in the Federal Register as each change 
in such fee is made.

[43 FR 12678, Mar. 27, 1978, as amended at 49 FR 47001 and 47002, Nov. 
30, 1984]



PART 224_FEDERAL PROCESS AGENTS OF SURETY CORPORATIONS--Table of Contents




Sec.
224.1 What does this part cover?
224.2 Definitions.
224.3 When may a surety corporation provide a bond without appointing a 
          process agent?
224.4 When must a surety corporation appoint a process agent?
224.5 Who may a surety corporation appoint to be a process agent?
224.6 Where can I find a sample power of attorney form?
224.7 Where can I find a list of United States district court offices?
224.8 When must a surety corporation appoint a new process agent?

    Authority: 31 U.S.C. 9306 and 9307.

    Source: 71 FR 60848, Oct. 7 2006, unless otherwise noted.



Sec. 224.1  What does this part cover?

    This part provides guidance on when a surety corporation must 
appoint a service of process agent and how the surety corporation 
complies with this requirement.



Sec. 224.2  Definitions.

    For purposes of this regulation:
    (a) Principal means the person or entity required to provide a 
surety bond.
    (b) Process agent means a resident agent for service of process.
    (c) State means a State, the District of Columbia, or a territory or 
possession of the United States.



Sec. 224.3  When may a surety corporation provide a bond without appointing a 

process agent?

    A surety corporation may provide a bond without appointing a process 
agent when the State where the bond is filed, the State where the 
principal resides, and the State where the surety corporation is 
incorporated are the same.



Sec. 224.4  When must a surety corporation appoint a process agent?

    A surety corporation must appoint a process agent when either the 
State where the bond is filed or the State where the principal resides 
is different from the State where the surety corporation is 
incorporated. In such a case, the surety corporation must appoint a 
process agent in each such State that is different from the State where 
the surety is incorporated.



Sec. 224.5  Who may a surety corporation appoint to be a process agent?

    A surety corporation may appoint either of the following as process 
agent--(a) An official of the State who is authorized or appointed under 
the law of that jurisdiction to receive service of process on the surety 
corporation; or
    (b) An individual who resides in the jurisdiction of the district 
court for the district in which a surety bond is filed and who is 
appointed by the surety corporation by means of a power of attorney. A 
certified copy of the power of attorney must be filed with the clerk of 
the district court for the district in which a surety bond is to be 
provided. In addition, the surety corporation must provide the clerk of 
the United States District Court at the main office in each judicial 
district with the required number of authenticated copies of the power 
of attorney for each divisional office of the court within that judicial 
district.



Sec. 224.6  Where can I find a sample power of attorney form?

    The Surety Bond Branch provides a sample form on its Web page 
located at: http://www.fms.treas.gov/c570. While use of the sample form 
is not required, any power of attorney provided should be substantially 
the same as the sample form.



Sec. 224.7  Where can I find a list of United States district court offices?

    A list of the divisional offices of the court in each judicial 
district may be obtained from the Federal Judiciary, U.S. Courts Web 
page at http://www.uscourts.gov, or by mail by writing

[[Page 74]]

to: Office of Public Affairs, Administrative Office of the U.S. Courts, 
Washington, DC 20544.



Sec. 224.8  When must a surety corporation appoint a new process agent?

    The surety corporation must immediately appoint a new process agent 
whenever the authority of a process agent is terminated by reason of 
revocation, disability, removal from the district, or any other cause.



PART 225_ACCEPTANCE OF BONDS SECURED BY GOVERNMENT OBLIGATIONS IN LIEU OF 

BONDS WITH SURETIES--Table of Contents




Sec.
225.1 Scope.
225.2 Definitions.
225.3 Pledge of Government obligations in lieu of a bond with surety or 
          sureties.
225.4 Pledge of book-entry Government obligations.
225.5 Pledge of definitive Government obligations.
225.6 Payment of interest.
225.7 Custodian duties and responsibilities.
225.8 Bond official duties and responsibilities.
225.9 Return of Government obligations to obligor.
225.10 Other agency practices and authorities.
225.11 Courts.

    Authority: 12 U.S.C. 391; 31 U.S.C. 321, 9301 and 9303.

    Source: 64 FR 4763, Jan. 29, 1999, unless otherwise noted.



Sec. 225.1  Scope.

    The regulation in this part applies to Government agencies accepting 
bonds secured by Government obligations in lieu of bonds with sureties. 
The Financial Management Service (FMS) is the representative of the 
Secretary of the Treasury (Secretary) in all matters concerning this 
part unless otherwise specified. The Commissioner of the FMS may issue 
procedural instructions implementing this regulation.



Sec. 225.2  Definitions.

    For purposes of this part:
    Agency means a department, agency, or instrumentality of the United 
States Government.
    Authenticate instructions means to verify that the instructions 
received are from a bond official.
    Bearer means that ownership of a Government obligation is not 
recorded. Title to such an obligation passes by delivery without 
endorsement and without notice. A bearer obligation is payable on its 
face to the holder at either maturity or call.
    Bond means an executed written instrument, which guarantees the 
fulfillment of an obligation to the United States and sets forth the 
terms, conditions, and stipulations of the obligation.
    Bond official means an agency official having authority under 
Federal law or regulation to approve a bond with surety or sureties and 
to approve a bond secured by Government obligations.
    Book-entry means that the issuance and maintenance of a Government 
obligation is represented by an accounting entry or electronic record 
and not by a certificate.
    Custodian means a Federal Reserve Bank or an entity within the 
United States designated by such Federal Reserve Bank under terms and 
conditions prescribed by such Federal Reserve Bank, a depositary 
specifically designated by the Secretary of the Treasury for purposes of 
this part, or such other entities as the Secretary of the Treasury may 
designate for purposes of this part.
    Definitive means that a Government obligation is issued in engraved 
or printed form.
    Depositary includes, but is not limited to:
    (1) Any insured bank as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make 
application to become an insured bank under section 5 of such Act (12 
U.S.C. 1815);
    (2) Any mutual savings bank as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to 
make application to become an insured bank under section 5 of such Act 
(12 U.S.C. 1815);
    (3) Any savings bank as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make 
application

[[Page 75]]

to become an insured bank under section 5 of such Act (12 U.S.C. 1815);
    (4) Any insured credit union as defined in section 101 of the 
Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is 
eligible to make application to become an insured credit union under 
section 201 of such Act (12 U.S.C. 1781);
    (5) Any savings association as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository 
institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is 
eligible to apply to become an insured depository institution under the 
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
    (6) Any agency or branch of a foreign bank as defined in section 
1(b) of the International Banking Act, as amended (12 U.S.C. 3101).
    Federal Reserve means a Federal Reserve Bank and its branches.
    Government obligation means a public debt obligation of the United 
States Government and an obligation whose principal and interest is 
unconditionally guaranteed by the United States Government.
    Obligor includes, but is not limited to, an individual, a trust, an 
estate, a partnership, a corporation, and a sole proprietor.
    Officer authorized to certify assignment means the individual 
identified as a certifying individual at part 306, subpart F of this 
title.
    Person means an individual, a trust, an estate, a partnership, and a 
corporation.
    Pledge means a transfer of security interest in a Government 
obligation to a bond official's agency as collateral in lieu of a bond 
with a surety or sureties.
    Procedural instructions means the Treasury Financial Manual, as 
amended, published by the Financial Management Service.
    Registered means that ownership of a definitive Government 
obligation is listed in the issuer's records, and that the obligation is 
payable at maturity or call to the person in whose name the obligation 
is inscribed or to that person's assignee.
    Secretary means the Secretary of the Treasury.



Sec. 225.3  Pledge of Government obligations in lieu of a bond with surety or 

sureties.

    (a) General. An obligor required by Federal law or regulation to 
furnish a bond with surety or sureties may give in lieu thereof to a 
bond official any security acceptable under 31 U.S.C. 9301, as amended. 
The Secretary will designate classes of Government obligations 
acceptable under this part.
    (b) Bond. The bond, at a minimum, shall irrevocably authorize the 
bond official to collect, sell, assign, or transfer such Government 
obligations and any interest retained therefrom in the event of the 
obligor's default in performing any of the terms, conditions, or 
stipulations of such bond. Unless otherwise provided by law, the bond 
shall authorize the bond official to apply the proceeds from the sale, 
assignment, or transfer of such Government obligations, in whole or in 
part, to satisfy any costs incurred by the United States related to the 
default, and to apply any excess proceeds to satisfy any other claim of 
the United States against the obligor. The bond shall not include any 
obligations on custodians which are inconsistent with, or in addition 
to, the obligations in this part. The bond will provide that the bond 
official may retain any interest accruing upon any Government 
obligations, or direct that such interest be retained by the custodian.
    (c) Amount of Government obligations. The obligor shall pledge to 
the bond official Government obligations valued as required by 31 U.S.C. 
9303, as amended.
    (d) Avoiding frequent substitutions. To avoid the frequent 
substitution of Government obligations, the bond official may reject 
Government obligations which mature, or are redeemable, within one year 
from the date they are pledged to the bond official.
    (e) Acceptable Government obligations. Types and valuations of 
acceptable collateral security are addressed in 31 CFR part 380. For a 
current list of acceptable classes of securities and instruments 
described in 31 CFR part 380 and their valuations, see the Bureau of

[[Page 76]]

the Public Debt's web site at www.publicdebt.treas.gov.

[64 FR 4763, Jan. 29, 1999, as amended at 65 FR 55430, Sept. 13, 2000]



Sec. 225.4  Pledge of book-entry Government obligations.

    (a) General. Except as otherwise provided by the Secretary in 
procedural instructions, an obligor, or a depositary acting as agent or 
sub-agent for the obligor, or the bond official, shall arrange a pledge 
pursuant to the prior agreement and approval of the bond official, of 
book-entry Government obligations. The Government obligations must be 
transferred to an account for the benefit of the bond official. The 
custodian holding the Government obligations is not required to 
establish that the agreement and approval of the bond official has been 
obtained prior to such a transfer.
    (b) Receipt. Upon the transfer of Government obligations to an 
account for the benefit of the bond official, the custodian will 
promptly issue a receipt or an activity statement, or both, to the bond 
official and to the obligor or a depositary acting as agent or sub-agent 
for the obligor.
    (c) Effect of the transfer. Book-entry Government obligations 
credited to an account for the benefit of the bond official shall have 
the effect as provided in part 357 of this title, or in other applicable 
regulations.



Sec. 225.5  Pledge of definitive Government obligations.

    (a) Type and assignment. Definitive Government obligations may be in 
bearer or registered form, and shall be owned by the obligor.
    (1) Bearer Government obligations. The obligor shall pledge bearer 
Government obligations to the bond official with all unmatured interest 
coupons attached.
    (2) Registered Government obligations; assignment. The obligor shall 
pledge registered Government obligations in the obligor's name to the 
bond official by assignment in accordance with subpart F of part 306 of 
this title and other codified procedures for issuers that apply to 
assignment of the registered Government obligations, except that, when 
so authorized under such procedures, all assignments shall be made in 
blank.
    (b) Delivery to bond official; receipt. All deliveries of definitive 
Government obligations from the obligor to the bond official under this 
part shall be made at the risk and expense of the obligor. Upon receipt 
of definitive Government obligations, the bond official will issue the 
obligor a receipt.
    (c) Risk of loss; safekeeping. All definitive Government obligations 
held by the bond official will be held at the risk of the bond official. 
The bond official will keep safe all definitive Government obligations 
and may place them with a custodian.
    (d) Delivery to custodian; receipt. If the bond official is in 
receipt of definitive Government obligations, and then places those 
obligations with a custodian, the expense and risk of loss in delivery 
will rest with the bond official. Upon the placement of definitive 
Government obligations with a custodian, the custodian will issue the 
bond official a receipt. All definitive Government obligations held by 
the custodian will be held at the risk of the custodian.
    (e) Conversion to book-entry. (1) Treasury bonds, notes, 
certificates of indebtedness, or bills deposited with a Federal Reserve 
Bank under this part may be converted into book-entry Treasury 
obligations in accordance with part 306 of this title, and the pertinent 
provisions of that part shall apply to such Treasury obligations.
    (2) When converting definitive Government obligations to book-entry 
form, a Federal Reserve Bank will act pursuant to, and in accordance 
with, book-entry procedures for issuers that apply to the definitive 
Government obligations pledged to the bond official's agency, including 
those set forth in part 306 of this title.



Sec. 225.6  Payment of interest.

    (a) General. Except as otherwise provided in this section and Sec. 
225.7(b), interest accruing upon Government obligations pledged to a 
bond official's agency in accordance with this part will be remitted to 
the obligor or a depositary acting as agent or sub-agent for the 
obligor.

[[Page 77]]

    (b) Default. If the bond official determines that the obligor has 
defaulted, the bond official will retain any interest accruing upon 
Government obligations pledged to the bond official's agency or direct 
the custodian, in accordance with this part, to retain such interest. 
Unless otherwise provided by law, such interest will be available to 
satisfy any costs incurred by the United States related to the default, 
and any excess proceeds will be available to satisfy any other claim of 
the United States against the obligor.



Sec. 225.7  Custodian duties and responsibilities.

    (a) General. A custodian shall authenticate instructions received 
from a bond official and shall act in accordance with such authenticated 
instructions. The custodian assumes no liability and is without 
liability of any kind for acting in accordance with such authenticated 
instructions, except for the custodian's failure to exercise ordinary 
care. By providing a bond secured by Government obligations in lieu of a 
bond with surety or sureties, an obligor agrees not to hold either the 
custodian or the Secretary liable or responsible for the actions or 
inactions of a bond official or for carrying out a bond official's 
authenticated instructions.
    (b) Interest. Absent authenticated instructions from the bond 
official to retain interest, interest received by the custodian on 
Government obligations pledged to the bond official's agency in 
accordance with this part will be remitted in the regular course of 
business to the obligor or to a depositary acting as agent or sub-agent 
for the obligor.
    (c) Principal. Absent authenticated instructions from the bond 
official to retain the proceeds of matured Government obligations, a 
custodian will release to the obligor proceeds from matured Government 
obligations only if the obligor has deposited Government obligations 
acceptable under 31 U.S.C. 9301, as amended, in substitution for those 
which have matured.
    (d) Liquidation of Government obligations. A custodian will collect, 
sell, assign, or transfer Government obligations, including any interest 
therefrom, only in accordance with a bond official's authenticated 
instructions.
    (e) Application of proceeds of liquidated Government obligations. A 
custodian will apply the proceeds from the collection, sale, assignment, 
or transfer of Government obligations only in accordance with a bond 
official's authenticated instructions.



Sec. 225.8  Bond official duties and responsibilities.

    The bond official's duties and responsibilities are as follows:
    (a) Approving the bond secured by Government obligations after 
determining its sufficiency;
    (b) Verifying ownership of any registered definitive Government 
obligations given, and ensuring that those Government obligations are 
properly assigned;
    (c) Approving establishment of a book-entry account for the benefit 
of the bond official;
    (d) Providing the custodian, when appropriate, with clear and 
concise instructions;
    (e) Taking all reasonable and appropriate steps to ensure that all 
procedures or transactions conform with the provisions of this part; and
    (f) Notifying the Secretary of the Treasury, or his designee, upon 
an obligor's default, and, unless otherwise provided by law, applying 
any part of the proceeds in excess of the amount required to assure 
payment of any costs incurred by the United States related to the 
default to satisfy any claim of the United States against the obligor.



Sec. 225.9  Return of Government obligations to obligor.

    (a) General. Except as provided in paragraph (b) of this section or 
as otherwise provided in this part, the bond official will return the 
Government obligations, and any interest retained therefrom, to the 
obligor, without written application from the obligor, when the bond 
official determines that the Government obligations are no longer 
required under the terms of the bond.

[[Page 78]]

    (b) Miller Act payment bonds. The bond official will not return 
Government obligations to an obligor who has furnished to the bond 
official a payment bond if:
    (1) A person, who supplied the obligor with labor or materials and 
whom the obligor has not paid, files with the United States Government 
the application and affidavit provided for in the Miller Act (Act), as 
amended (40 U.S.C. 270a-270d), and the time provided in the Act for the 
person to commence suit against the obligor on the payment bond has not 
expired; or
    (2) A person commences a suit against the obligor within the time 
provided for in the Act, in which case the bond official will hold the 
Government obligations subject to the order of the court having 
jurisdiction of the suit; or
    (3) The bond official has actual knowledge of a claim against the 
obligor on the basis of the payment bond, in which case the bond 
official may return the Government obligations to the obligor when the 
bond official deems it appropriate.
    (c) Claim of the United States unaffected. Nothing in this section 
shall affect or impair the priority of any claim of the United States 
against Government obligations, or any right or remedy granted by the 
Miller Act or by this part to the United States in the event of an 
obligor's default on any term, condition, or stipulation of a bond.
    (d) Return of definitive Government obligations; risk of loss. 
Definitive Government obligations to be returned to the obligor will be 
forwarded at the obligor's risk and expense, either by the bond 
official, or by a custodian upon receipt of a bond official's 
authenticated instructions.



Sec. 225.10  Other agency practices and authorities.

    (a) Agency practices. Nothing in this part shall be construed as 
modifying the existing practices or duties of agencies in handling 
bonds, except to the extent made necessary under the terms of this part 
by reason of the acceptance of bonds secured by Government obligations.
    (b) Agency authorities. Nothing contained in this part shall affect 
the authority of agencies to receive Government obligations for security 
in cases authorized by other provisions of law.



Sec. 225.11  Courts.

    Nothing contained in this part shall affect the authority of a court 
over a Government obligation given as security in a civil action.



PART 226_RECOGNITION OF INSURANCE COVERING TREASURY TAX AND LOAN 

DEPOSITARIES--Table of Contents




Sec.
226.1 Scope.
226.2 General.
226.3 Application--termination.
226.4 Adequacy of security--how computed.
226.5 Examinations.
226.6 Financial reports.
226.7 Effective date.

    Authority: Secs. 2 and 3, Pub. L. 95-147. 91 Stat. 1227 (31 U.S.C. 
1038).

    Source: 43 FR 18972, May 2, 1978, unless otherwise noted.



Sec. 226.1  Scope.

    The regulations in this part apply to insurance covering public 
money of the United States held by banks, savings banks, savings and 
loan associations, building and loan associations, homestead 
associations, or credit unions designated as Treasury tax and loan 
depositaries under 31 CFR part 203. Approval of the adequacy of the 
insurance coverage provided to Treasury tax and loan funds shall be 
governed by the regulations contained herein, which will be supplemented 
by guidelines issued by the Treasury and updated from time to time to 
meet changing conditions in the industry.



Sec. 226.2  General.

    (a) Deposit or account insurance provided by the Federal Deposit 
Insurance Corporation, the Federal Savings and Loan Insurance 
Corporation, and the National Credit Union Share Insurance Fund, is 
hereby recognized. Deposits or accounts which are insured by a State or 
agency thereof, or by a corporation chartered by a State for the sole 
purpose of insuring deposits or accounts of financial institutions 
eligible to be

[[Page 79]]

Treasury tax and loan depositaries (hereinafter referred to as Insurance 
Arrangement), shall be approved as provided herein. Such approval 
constitutes recognition for the purpose of reducing the amount of 
collateral required of a tax and loan depositary by the amount of 
recognized insurance coverage pursuant to 31 CFR 203.15.
    (b) Generally, these regulations and their associated guidelines 
require that an organization providing insurance maintain a corpus of 
sufficient value and liquidity, and/or that it have sufficient State 
borrowing authority, in relation to its liabilities and total insured 
savings (or deposits) to provide adequate security to the Government's 
deposits and that adequate monitoring of the financial condition of the 
insured institutions is conducted.



Sec. 226.3  Application--termination.

    (a) Every Insurance Organization applying for recognition as a 
qualified insurer of financial institutions designated as Treasury tax 
and loan depositaries shall address a written request to the Assistant 
Commissioner, Comptroller, Financial Management Service, Department of 
the Treasury, Washington, DC 20226, who will notify the applicant of the 
data which is necessary to make application. If the Secretary of the 
Treasury is satisfied that:
    (1) One or more institutions insured by the applicant otherwise meet 
the Secretary's requirements for designation as a Treasury tax and loan 
depositary or Federal tax depositary,
    (2) The insurance provided by the applicant covers public money of 
the United States, and
    (3) The insurance coverage provided affords adequate security to the 
Government's deposits, the Secretary shall recognize the applicant as a 
qualified insurer of financial institutions designated as Treasury tax 
and loan depositaries.
    (b) If and when the Secretary of the Treasury determines that a 
qualified insurance organization's financial condition is such that it 
no longer provides adequate security or that it is not complying with 
the regulations of this part, the Secretary will notify the Insurance 
Organization of the facts or conduct which cause him to make such 
determination, and in those cases where the safety of the Government's 
funds allows, provide the Insurance Organization with an opportunity to 
correct the deficiency. When any deficiency has not been corrected to 
his satisfaction or, where the safety of Government funds makes 
immediate revocation imperative, the Secretary will revoke the 
recognition previously granted.

    Note: For a delegation of authority to perform the functions 
described in Sec. Sec. 226.3 and 226.4, see 44 FR 19406 of the Federal 
Register of April 3, 1979.

[43 FR 18972, May 2, 1978, as amended at 44 FR 19406, Apr. 3, 1979; 49 
FR 47002, Nov. 30, 1984]



Sec. 226.4  Adequacy of security--how computed.

    (a) In qualifying Insurance Organizations, the Treasury will use a 
ratio (equity (net worth) of the insurance organization divided by 
insured accounts or deposits) to determine if the security is adequate. 
The ratio will be computed as determined by the Treasury, and is 
required to equal 0.0045 or greater for an Insurance Organization to be 
recognized (i.e., net worth is required to equal 0.45 of 1 percent of 
insured accounts or deposits).
    (b) If, in the judgment of the Secretary of the Treasury, any of the 
Insurance Organization's assets which cannot be liquidated promptly or 
are subject to restriction, encumbrance, or discredit, all or part of 
the value of such assets may be deducted from equity in making the 
computation. The Secretary of the Treasury may value the assets and 
liabilities in his discretion.
    (c) An Insurance Organization's unqualified borrowing authority from 
its sponsoring State will be added to its equity in making the 
computation because such authority is equivalent to additional 
capitalization. An Insurance Organization's commercial borrowing 
authority and its reinsurance will be disregarded in making the 
computation, because these are not adequate substitutes for 
undercapitalization.

    Note: For a delegation of authority to perform the functions 
described in Sec. Sec. 226.3 and

[[Page 80]]

226.4, see 44 FR 19406 of the Federal Register of April 3, 1979.

[43 FR 18972, May 2, 1978, as amended at 44 FR 19406, Apr. 3, 1979]



Sec. 226.5  Examinations.

    (a) Examinations by State regulatory authorities or audits by CPA 
firms of Insurance Organizations shall be performed in accordance with, 
and at intervals prescribed by, State regulatory procedures. Copies of 
the reports shall be submitted to the Treasury.
    (b) Examinations by State regulatory authorities or audits by CPA 
firms of insured financial institutions shall be performed in accordance 
with, and at intervals prescribed by, State regulatory procedures. In 
addition, an adequate monitoring system shall be employed to detect 
those institutions with financial problems.



Sec. 226.6  Financial reports.

    Financial reports of Insurance Organizations shall be submitted to 
the Treasury at the same intervals they are submitted to State 
regulatory authorities. However, they need not be submitted more 
frequently than quarterly but, as a minimum, shall be submitted 
annually. The Treasury may prescribe the format of such reports.



Sec. 226.7  Effective date.

    The provisions of this part become effective November 2, 1978.

[43 FR 47506, Oct. 16, 1978]



PART 235_ISSUANCE OF SETTLEMENT CHECKS FOR FORGED CHECKS DRAWN ON DESIGNATED 

DEPOSITARIES--Table of Contents




Sec.
235.1 Scope of regulations.
235.2 Definition.
235.3 Settlement of claims.
235.4 Check Forgery Insurance Fund.
235.5 Reclamation amounts.
235.6 Implementing instructions.

    Authority: 31 U.S.C. 3343.

    Source: 40 FR 6785, Feb. 14, 1975, unless otherwise noted.



Sec. 235.1  Scope of regulations.

    This part governs the issuance of settlement checks for checks drawn 
on designated depositaries of the United States by accountable officers 
of the United States, that have been negotiated and paid on a forged or 
unauthorized indorsement.

[40 FR 6785, Feb. 14, 1975, as amended at 54 FR 35642, Aug. 29, 1989]



Sec. 235.2  Definition.

    Accountable Officers of the United States, as used in these 
regulations, means disbursing officers authorized by the Secretary of 
the Treasury to maintain official accounts of the United States in 
depositary banks located in the United States, its territories, and 
foreign countries, and to draw checks thereon in dollars or in foreign 
currencies.



Sec. 235.3  Settlement of claims.

    Upon receipt of a claim by a payee or special indorsee on a check 
determined to have been paid on a forged indorsement under conditions 
satisfying the provisions set forth in 31 U.S.C. 3343, accountable 
officers of the United States, with respect to a check drawn on 
designated depositaries of the United States, in dollars or in foreign 
currency, shall cause to be issued a settlement check in the appropriate 
currency to the payee or special indorsee.

[40 FR 6785, Feb. 14, 1975, as amended at 49 FR 47001, 47002, Nov. 30, 
1984; 54 FR 35642, Aug. 29, 1989]



Sec. 235.4  Check Forgery Insurance Fund.

    The Check Forgery Insurance Fund, established pursuant to 31 U.S.C. 
3343, shall be available for use by the Commissioner, Financial 
Management Service, and accountable officers of the United States for 
the purpose of providing funding for settlements made to a payee or 
special indorsee pursuant to these regulations.

[40 FR 6785, Feb. 14, 1975, as amended at 49 FR 47001, 47002, Nov. 30, 
1984]



Sec. 235.5  Reclamation amounts.

    Amounts received by way of reclamation on forged checks shall be 
deposited to the credit of the Check Forgery Insurance Fund or to the 
appropriate foreign currency fund or other account charged for the 
settlement payment.

[[Page 81]]



Sec. 235.6  Implementing instructions.

    Procedural instructions implementing these regulations will be 
issued by the Commissioner of the Financial Management Service in volume 
I, part 4 of the Treasury Financial Manual.

[54 FR 35642, Aug. 29, 1989]



PART 240_INDORSEMENT AND PAYMENT OF CHECKS DRAWN ON THE UNITED STATES 

TREASURY--Table of Contents




                           General Provisions

Sec.
240.1 Scope of regulations.
240.2 Definitions.
240.3 Electronic checks and substitute checks.
240.4 Presentment guarantees.
240.5 Limitations on payment; cancellation and distribution of proceeds 
          of checks.
240.6 Provisional credit; first examination; declination; final payment.
240.7 Declination protest.
240.8 Reclamation of amounts of paid checks.
240.9 Reclamation procedures; reclamation protests.
240.10 Offset.
240.11 Treasury Check Offset.
240.12 Processing of checks.

                          Indorsement of Checks

240.13 Indorsement by payees.
240.14 Checks issued to incompetent payees.
240.15 Checks issued to deceased payees.
240.16 Checks issued to minor payees.
240.17 Powers of attorney.
240.18 Lack of authority to shift liability.
240.19 Reservation of rights.

Appendix A to Part 240--Optional Forms for Powers of Attorney and Their 
          Application

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 321, 3327, 3328, 
3331, 3334, 3343, 3711, 3712, 3716, 3717; 332 U.S. 234 (1947); 318 U.S. 
363 (1943).

    Source: 69 FR 61568, Oct. 19, 2004, unless otherwise noted.

                           General Provisions



Sec. 240.1  Scope of regulations.

    (a) The regulations in this part prescribe the requirements for 
indorsement and the conditions for payment of checks drawn on the United 
States Treasury. These regulations also establish procedures for 
collection of amounts due the United States Treasury based on claims 
arising from the breach of presentment guarantees by presenting banks 
and other indorsers of Treasury checks when checks bearing material 
defects or alterations or forged disbursing officer (drawer) signatures 
are presented for payment and are paid.
    (b) Standards contained in this regulation supersede existing 
Federal common law to the extent that they are inconsistent with Federal 
common law rules relating to counterfeit checks. Under the provisions of 
this regulation, the risk of loss on certain counterfeit checks is 
placed on presenting banks and other indorsers unless Treasury fails to 
timely reclaim on a check payment in accordance with 31 U.S.C. 3712(a) 
and Sec. 240.8 of this regulation. Treasury will reclaim on counterfeit 
checks that are deemed paid under Sec. 240.6(d) of this regulation when 
a presenting bank or other indorser fails to make all reasonable efforts 
to ensure that a check is an authentic Treasury check.
    (c) Nothing in this regulation supercedes the rights or obligations 
of Treasury or any other person that are set forth in Regulation CC, 12 
CFR part 229, with respect to substitute checks, as defined therein.



Sec. 240.2  Definitions.

    (a) Administrative offset or offset, for purposes of this section, 
has the same meaning as defined in 31 U.S.C. 3701(a)(1) and 31 CFR part 
285.
    (b) Agency means any agency, department, instrumentality, office, 
commission, board, service, or other establishment of the United States 
authorized to issue Treasury checks or for which checks drawn on the 
United States Treasury are issued.
    (c) Certifying agency means an agency authorizing the issuance of a 
payment by a disbursing official in accordance with 31 U.S.C. 3325.
    (d) Check or checks means an original check or checks; an electronic 
check or checks; or a substitute check or checks.
    (e) Check payment means the amount paid to a presenting bank by a 
Federal Reserve Bank.

[[Page 82]]

    (f) Counterfeit check means a document that purports to be an 
authentic check drawn on the United States Treasury, but in fact is not 
an authentic check.
    (g) Days means calendar days. For purposes of computation, the last 
day of the period will be included unless it is a Saturday, Sunday, or 
Federal holiday; the first day is not included. For example, if a 
reclamation was issued on July 1, the 90 day protest period under Sec. 
240.9(b) would begin on July 2. If the 90th day fell on a Saturday, 
Sunday or Federal holiday, the protest would be accepted if received on 
the next business day.
    (h) Declination means the process by which Treasury refuses to make 
final payment on a check, i.e., declines payment, by instructing a 
Federal Reserve Bank to reverse its provisional credit to a presenting 
bank.
    (i) Declination date means the date on which the declination is 
issued by Treasury.
    (j) Disbursing official means an official, including an official of 
the Department of the Treasury, the Department of Defense, any 
Government corporation (as defined in 31 U.S.C. 9101), or any official 
of the United States designated by the Secretary of the Treasury, 
authorized to disburse public money pursuant to 31 U.S.C. 3321 or 
another law.
    (k) Drawer's signature means the signature of a disbursing official 
placed on the front of a Treasury check as the drawer of the check.
    (l) Electronic check means an electronic image of a check drawn on 
the United States Treasury, together with information describing that 
check, that meets the technical requirements for sending electronic 
items to a Federal Reserve Bank as set forth in the Federal Reserve 
Banks' operating circulars.
    (m) Federal Reserve Bank means a Federal Reserve Bank (FRB) or a 
branch of a Federal Reserve Bank.
    (n) Federal Reserve Processing Center means a Federal Reserve Bank 
center that images Treasury checks for archiving check information and 
transmitting such information to Treasury.
    (o) Financial institution means:
    (1) Any insured bank as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make 
application to become an insured bank under section 5 of such Act (12 
U.S.C. 1815);
    (2) Any mutual savings bank as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to 
make application to become an insured bank under section 5 of such Act 
(12 U.S.C. 1815);
    (3) Any savings bank as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make 
application to become an insured bank under section 5 of such Act (12 
U.S.C. 1815);
    (4) Any insured credit union as defined in section 101 of the 
Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is 
eligible to make application to become an insured credit union under 
section 201 of such Act (12 U.S.C. 1781);
    (5) Any savings association as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813) which is an insured depositary 
institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is 
eligible to apply to become an insured depositary institution under the 
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
    (6) Any financial institution outside of the United States if it has 
been designated by the Secretary of the Treasury as a depositary of 
public money and has been permitted to charge checks to the General 
Account of the United States Treasury.
    (p) First examination means Treasury's initial review of a check 
that has been presented for payment. The initial review procedures, 
which establish the authenticity and integrity of a check presented to 
Treasury for payment, may include reconciliation; retrieval and 
inspection of the check or the best available image thereof; and other 
procedures Treasury deems appropriate to specific circumstances.
    (q) Forged or unauthorized drawer's signature means a drawer's 
signature that has been placed on the front of a Treasury check by a 
person other than:
    (1) A disbursing official; or

[[Page 83]]

    (2) A person authorized to sign on behalf of a disbursing official.
    (r) Forged or unauthorized indorsement means:
    (1) An indorsement of the payee's name by another person who is not 
authorized to sign for the payee; or
    (2) An indorsement of the payee's name made by another person who 
has been authorized by the payee, but who has not indorsed the check in 
accordance with Sec. 240.4 and Sec. Sec.  240.13 through 240.17; or
    (3) An indorsement added by a financial institution where the 
financial institution had no authority to supply the indorsement; or
    (4) A check bearing an altered payee name that is indorsed using the 
payee name as altered.
    (s) Guarantor means a financial institution that presents a check 
for payment and any prior indorser(s) of a check.
    (t) Material defect or alteration means:
    (1) The counterfeiting of a check; or
    (2) Any physical change on a check, including, but not limited to, a 
change in the amount, date, payee name, or other identifying information 
printed on the front or back of the check (but not including a forged or 
unauthorized drawer's signature); or
    (3) Any forged or unauthorized indorsement appearing on the back of 
the check.
    (u) Minor means the term minor as defined under applicable State 
law.
    (v) Monthly statement means a statement prepared by Treasury which 
includes the following information regarding each outstanding 
reclamation:
    (1) The reclamation date;
    (2) The reclamation number;
    (3) Check identifying information; and
    (4) The balance due, including interest, penalties, and 
administrative costs.
    (w) Original check means the first paper check drawn on the United 
States Treasury with respect to a particular payment transaction.
    (x) Payee means the person that the certifying agency designated to 
receive payment pursuant to 31 U.S.C. 3528.
    (y) Person means an individual, institution, including a financial 
institution, or any other type of entity; the singular includes the 
plural.
    (z) Presenting bank means:
    (1) A financial institution which, either directly or through a 
correspondent banking relationship, presents checks to and receives 
provisional credit from a Federal Reserve Bank; or
    (2) A depositary which is authorized to charge checks directly to 
Treasury's General Account and present them to Treasury for payment 
through a designated Federal Reserve Bank.
    (aa) Provisional credit means the initial credit provided to a 
presenting bank by a Federal Reserve Bank. Provisional credit may be 
reversed by Treasury until the completion of first examination or final 
payment is deemed made pursuant to Sec. 240.6(d).
    (bb) Reasonable efforts means, at a minimum, verifying the existence 
of the Treasury watermark on an original check. Based upon the facts at 
hand, including whether a check is an original check, a substitute check 
or an electronic check, reasonable efforts may require the verification 
of other security features.
    (cc) Reclamation means a demand for the amount of a check for which 
Treasury has requested an immediate refund.
    (dd) Reclamation date means the date on which a reclamation is 
issued by Treasury. Normally, demands are sent to presenting banks or 
other indorsers within two business days of the reclamation date.
    (ee) Reclamation debt means the amount owed as a result of 
Treasury's demand for refund of a check payment, and includes interest, 
penalties and administrative costs assessed in accordance with Sec. 
240.8.
    (ff) Reclamation debtor means a presenting bank or other indorser of 
a check from whom Treasury has demanded a refund in accordance with 
Sec. Sec. 240.8 and 240.9. The reclamation debtor does not include a 
presenting bank or other indorser who may be liable for a reclamation 
debt, but from which Treasury has not demanded a refund.
    (gg) Recurring benefit payment includes but is not limited to a 
payment of money for any Federal Government entitlement program or 
annuity.

[[Page 84]]

    (hh) Substitute check means a paper reproduction of a check drawn on 
the United States Treasury that meets the definitional requirements set 
forth at 12 CFR 229.2(aaa).
    (ii) Treasury means the United States Department of the Treasury, or 
when authorized, an agent designated by the Secretary of the Treasury or 
his delegee.
    (jj) Treasury Check Offset means the collection of an amount owed by 
a presenting bank in accordance with 31 U.S.C. 3712(e).
    (kk) Truncate means to remove a paper check from the forward 
collection or return process and send to a recipient, in lieu of such 
paper check, a substitute check or an electronic check.
    (ll) U.S. securities means securities of the United States and 
securities of Federal agencies and Government corporations for which 
Treasury acts as the transfer agent.
    (mm) Writing includes electronic communications when specifically 
authorized by Treasury in implementing instructions.



Sec. 240.3  Electronic checks and substitute checks.

    (a) Legal equivalence of electronic checks. An electronic check for 
which a presenting bank has provided the guarantees described in Sec. 
240.4 is the legal equivalent of an original or substitute check for 
purposes of this part if the electronic check accurately represents all 
of the information on the front and back of the check that the 
presenting bank truncated. If a financial institution presents an 
electronic check for payment and the check is subject to return, 
Treasury may effect the return using an electronic check, but this part 
does not create any right for the presenting bank to return the check to 
the payee or any other person using an electronic check.
    (b) Safekeeping of original checks. Any financial institution that 
creates a substitute check or electronic check shall prevent 
unauthorized access to the original or substitute check that was 
truncated by storing the check, until it is destroyed, in a manner 
consistent with federal banking agency guidelines for safeguarding 
customer information.



Sec. 240.4  Presentment guarantees.

    The guarantors of a check presented to the Treasury for payment are 
deemed to guarantee to the Treasury all of the following:
    (a) Indorsements. That all prior indorsements are genuine, whether 
or not an express guarantee is placed on the check. When the first 
indorsement has been made by one other than the payee personally, the 
presenting bank and the indorsers are deemed to guarantee to the 
Treasury, in addition to other guarantees, that the person who so 
indorsed had unqualified capacity and authority to indorse the check on 
behalf of the payee.
    (b) Alterations. That the check has not been materially altered.
    (c) Drawer's signature. That the guarantors have no knowledge that 
the signature of the drawer is forged or unauthorized.
    (d) Authenticity. That the guarantors have made all reasonable 
efforts to ensure that a check is an authentic Treasury check, not a 
counterfeit check.
    (e) Electronic check. If the check is an electronic check, that--
    (1) The check accurately represents all of the information on the 
front and back of the original or substitute check that was truncated 
and meets the technical requirements for sending electronic items to a 
Federal Reserve Bank as set forth in the Federal Reserve Banks' 
operating circulars;
    (2) Treasury will not receive presentment of, or otherwise be 
charged for, the electronic check, the original check, or a substitute 
check (or a paper or electronic reproduction of any of the foregoing) 
such that Treasury will be asked to make payment based on a check it 
already has paid; and
    (3) Treasury's receipt of the electronic check instead of the 
original or substitute check will not result in the loss of Treasury's 
ability to determine whether the check contains a material defect or 
alteration.
    (f) Substitute check. If the check is a substitute check, that the 
guarantors make the warranties set forth at 12

[[Page 85]]

CFR 229.52(a)(1) and (2) and the indemnity set forth at 12 CFR 229.53.



Sec. 240.5  Limitations on payment; cancellation and distribution of proceeds 

of checks.

    (a) Limitations on payment. (1) Treasury shall not be required to 
pay any check that is not negotiated to a financial institution within 
12 months after the date on which the check was issued.
    (2) All checks shall bear a legend, stating ``Void After One Year.'' 
The legend is notice to payees and indorsers of a general limitation on 
the payment of checks. The legend, or the inadvertent lack thereof, does 
not limit, or otherwise affect, the rights of Treasury under the law.
    (b) Cancellation and distribution of proceeds of checks. (1) Any 
check that has not been paid and remains outstanding for more than 12 
months after the issue date will be canceled by Treasury.
    (2) The proceeds from checks canceled pursuant to paragraph (b)(1) 
of this section will be returned to the payment certifying or 
authorizing agency for ultimate credit to the appropriation or fund 
account initially charged for the payment.
    (3) On a monthly basis, Treasury will provide to each agency that 
authorizes the issuance of checks a list of those checks issued for such 
agency which were canceled during the preceding month pursuant to 
paragraph (b)(1) of this section.



Sec. 240.6  Provisional credit; first examination; declination; final 

payment.

    (a) Any credit issued by a Federal Reserve Bank to a financial 
institution shall be a provisional credit until Treasury completes first 
examination of the check, or as provided in paragraph (d) of this 
section.
    (b) Treasury shall have the right as a drawee to complete first 
examination of checks presented for payment, to reconcile checks, and, 
when appropriate, to make a declination on any check.
    (c) Treasury will decline payment on a check when first examination 
by Treasury establishes that:
    (1) The check has a material defect or alteration;
    (2) The check bears a forged or unauthorized drawer's signature;
    (3) Treasury has already received presentment of, and made payment 
on, a substitute check, electronic check or original check relating to 
the check being presented, such that Treasury is being requested to make 
payment on a check it has already paid;
    (4) In the case of an electronic check, Treasury cannot determine 
whether the check contains a material defect or alteration without 
examining the original check or a better quality image of the check and 
Treasury is on notice of a question of law or fact about whether the 
check is properly payable; or
    (5) In the case of a substitute check, Treasury has a warranty or 
indemnity claim arising under 12 CFR 229.52 or 229.53.
    (d) Treasury shall have a reasonable amount of time to complete 
first examination. However, except as provided in paragraph (e) of this 
section, if Treasury has not declined payment on a check within 60 days 
after the check is presented to a Federal Reserve Processing Center for 
payment, Treasury will be deemed to have made final payment on the 
check.
    (e) Notwithstanding the provisions of paragraph (d) of this section, 
in accordance with 31 U.S.C. 3328(a)(2), if, upon presentment for 
payment, Treasury is on notice of a question of law or fact about 
whether a check is properly payable, Treasury may defer final payment 
until the question is settled.
    (f) If a Federal Reserve Bank debits a financial institution's 
reserve account as a result of an erroneous declination, Treasury will 
promptly refund the amount of the payment.



Sec. 240.7  Declination protest.

    (a) Who may protest. Only a presenting bank may protest the 
declination of a check that it has presented to a Federal Reserve Bank 
for payment.
    (b) Basis for protest. Where Treasury, in accordance with Sec. 
240.6, has made a declination of a check presented for payment and a 
Federal Reserve Bank has reversed its provisional credit to the 
presenting bank, the presenting bank may file a protest challenging the

[[Page 86]]

factual basis for such declination. Protests may be filed challenging 
the following determinations:
    (1) Counterfeit checks. The presenting bank may offer evidence that 
the check is not a counterfeit.
    (2) Altered checks. The presenting bank may offer evidence that the 
check is not altered.
    (3) Checks bearing forged or unauthorized drawer's signatures. The 
presenting bank may offer evidence that the drawer's signature was 
authentic or was authorized.
    (4) Checks bearing a forged or unauthorized indorsement. The 
presenting bank may offer evidence that an indorsement on the back of 
the check was not forged or was otherwise authorized in accordance with 
the requirements of Sec. Sec. 240.13 through 240.17.
    (5) Prior presentment. The presenting bank may offer evidence that 
the check or a paper or electronic representation thereof has not 
already been presented to, and paid by, Treasury.
    (6) Adequacy of substitute check or electronic check. The presenting 
bank may offer an original check or a copy of the check that is 
sufficient to support a determination that the check does not contain a 
material defect or alteration.
    (c) Procedures for filing a protest. A declination protest must be 
in writing, and must be sent to: Department of the Treasury, Financial 
Management Service, Branch Manager, Financial Processing Division, Check 
Reconciliation Branch, Room 700-A, 3700 East-West Highway, Hyattsville, 
MD 20782, or to such other address as Treasury may publish in the 
Treasury Financial Manual, which can be found at http://
www.fms.treas.gov. Treasury will not consider any protest unless it is 
received within 90 days from the declination date.
    (d) Review of a declination protest. The Director, Financial 
Processing Division, or an authorized designee, will make every effort 
to decide any protest properly submitted under this section within 60 
days, and will notify the presenting bank of Treasury's decision. In 
those cases where it is not possible to render a decision within 60 
days, the Director, Financial Processing Division, or an authorized 
designee, will notify the presenting bank of the delay. Neither the 
Director, Financial Processing Division, nor an authorized designee, 
will have any involvement in the decision to deny payment of a check 
under Sec. 240.6 of this part.
    (1) If, based on the evidence provided, the Director of the 
Financial Processing Division, or an authorized designee, finds that the 
presenting bank has met, by a preponderance of the evidence, the 
criteria in paragraph (b) of this section, Treasury will reverse its 
decision to decline payment on the check by directing a Federal Reserve 
Bank to provide credit in the amount of the check to the presenting 
bank.
    (2) If, based on the evidence provided, the Director of the 
Financial Processing Division, or an authorized designee, finds that the 
presenting bank has failed to meet, by a preponderance of the evidence, 
the criteria in paragraph (b) of this section, the declination will not 
be reversed.



Sec. 240.8  Reclamation of amounts of paid checks.

    (a) If, after making final payment in accordance with Sec. 240.6, 
Treasury determines that any guarantor has breached a presentment 
guarantee listed in Sec. 240.4, the guarantor shall be liable to 
Treasury for the full amount of the check payment. Treasury may reclaim 
the amount of the check payment from any such guarantor prior to:
    (1) The end of the 1-year period beginning on the date that a check 
is processed for payment by a Federal Reserve Processing Center; or
    (2) The expiration of the 180-day period beginning on the close of 
the period described in paragraph (a)(1) of this section if a timely 
claim under 31 U.S.C. 3702 is presented to the certifying agency.
    (b) Treasury will not reclaim on a check that bears a forged or 
unauthorized drawer's signature unless it has evidence that the 
reclamation debtor had knowledge of the forged or unauthorized drawer's 
signature.
    (c) Treasury will not reclaim on a counterfeit check unless the 
reclamation debtor has failed to make all reasonable efforts to ensure 
that a check

[[Page 87]]

is an authentic check and not a counterfeit check. Guidance on the key 
security features found on U.S. Treasury checks is available on the FMS 
website at: http://www.fms.treas.gov/checkclaims/check--security--
new.pdf. Institutions may contact the FMS Questioned Documents Branch at 
(202) 874-7640 for additional information about these security features 
or to request training.
    (d) Reclamation debts are due to be paid upon receipt of the 
reclamation by the reclamation debtor. Interest, penalties, and 
administrative costs associated with unpaid balances will accrue as 
follows:
    (1) Interest. Treasury will assess interest on the unpaid principal 
of the reclamation debt beginning on the 61st day following the 
reclamation date, and will calculate interest based on the rate 
published annually by Treasury in accordance with 31 U.S.C. 3717. 
Interest will continue to accrue until the full amount of the 
reclamation is paid or Treasury determines that payment is not required.
    (2) Penalties. Treasury will assess a penalty beginning on the 91st 
day following the reclamation date. The penalty will be assessed in 
accordance with 31 U.S.C. 3717 on the unpaid principal of the 
reclamation debt, and will continue to accrue until the full amount of 
the reclamation debt is paid or Treasury determines that payment is not 
required.
    (3) Administrative costs. Treasury will assess administrative costs 
associated with the unpaid reclamation debt beginning on the 61st day 
following the reclamation date. Administrative costs will continue to 
accrue until the full amount of the reclamation debt is paid or Treasury 
determines that payment is not required.
    (e) If Treasury is unable to fully collect a reclamation debt from a 
reclamation debtor, after pursuing all appropriate means of collection 
(including, but not limited to, administrative offset in accordance with 
Sec. 240.10 and Treasury Check Offset in accordance with Sec.  240.11), 
Treasury will discharge the unpaid reclamation debt. See 31 CFR 903.5 
(Discharge of indebtedness; reporting requirements). Treasury or the 
certifying agency will report the amount of the unpaid reclamation debt 
to the Internal Revenue Service in accordance with the requirements of 
26 U.S.C. 6050P and 26 CFR 1.6050P-1.



Sec. 240.9  Reclamation procedures; reclamation protests.

    (a) Reclamation procedures. (1) Treasury will send a ``REQUEST FOR 
REFUND (CHECK RECLAMATION)'' to the reclamation debtor in accordance 
with Sec. 240.8(a). This request will advise the reclamation debtor of 
the amount demanded and the reason for the demand. Treasury will make 
follow-up demands by sending at least three monthly statements to the 
reclamation debtor. Monthly statements will identify any unpaid 
reclamation debts (as defined at Sec. 240.2) and will contain or be 
accompanied by notice to the reclamation debtor that:
    (i) If the reclamation debt is not paid within 120 days of the 
reclamation date, Treasury intends to collect the debt through 
administrative offset in accordance with Sec. 240.10;
    (ii) If the administrative offset is unsuccessful, Treasury intends 
to collect the debt through Treasury Check Offset in accordance with 
Sec. 240.11;
    (iii) The reclamation debtor has an opportunity to inspect and copy 
Treasury's records with respect to the reclamation debt;
    (iv) The reclamation debtor may, by filing a protest in accordance 
with Sec. 240.9(b), request Treasury to review its decision that the 
reclamation debtor is liable for the reclamation debt; and
    (v) The reclamation debtor has an opportunity to enter into a 
written agreement with Treasury for the repayment of the reclamation 
debt. A request for a repayment agreement must be accompanied by 
documentary proof that satisfies Treasury that the reclamation debtor is 
unable to repay the entire amount owed when due.
    (2) Requests by a reclamation debtor for an appointment to inspect 
and copy Treasury's records with respect to a reclamation debt and 
requests to enter into repayment agreements must be sent in writing to: 
Department of the Treasury, Financial Management Service, Financial 
Processing Division, Reclamation Branch, Room 700D, PO Box 1849, 
Hyattsville, MD 20788, or to

[[Page 88]]

such other address as Treasury may publish in the Treasury Financial 
Manual, which can be found at http://www.fms.treas.gov.
    (3) If a reclamation debt remains unpaid for 90 days after the 
reclamation date and if there is no unresolved protest associated with 
the reclamation debt, the monthly statement will be annotated with a 
notice that the reclamation debtor has until the next billing date to 
make payment on the reclamation debt or Treasury will proceed to collect 
the reclamation debt through offset in accordance with Sec. 240.10 and 
Treasury Check Offset in accordance with Sec. 240.11.
    (4) If Treasury determines that a reclamation has been made in 
error, Treasury will abandon the reclamation. If Treasury already has 
collected the amount of the reclamation from the reclamation debtor, 
Treasury will promptly refund to the reclamation debtor the amount of 
its payment. Treasury may refund the amount either by applying the 
amount to another reclamation debt owed by the reclamation debtor in 
accordance with this Part or other applicable law, or by returning the 
amount to the reclamation debtor.
    (b) Reclamation protests--(1) Who may protest. Only a reclamation 
debtor may protest a reclamation.
    (2) Basis for protest. Where Treasury, in accordance with Sec. 
240.8 and paragraph (a) of this section, reclaims the amount of a check 
payment, the reclamation debtor may file a protest challenging such 
reclamation. Protests may be filed challenging the following 
determinations:
    (i) Counterfeit checks. The reclamation debtor may offer evidence 
that it made all reasonable efforts to ensure that a check is authentic. 
The reclamation debtor must include evidence that the check was examined 
for a watermark as required under Sec. Sec. 240.2(bb) and 240.4. 
Depending on the circumstances, FMS may require evidence that the 
reclamation debtor also examined the check for evidence of additional 
security features as described in guidance provided by Treasury or on 
Treasury's behalf.
    (ii) Altered checks. The reclamation debtor may offer evidence that 
the check is not altered.
    (iii) Checks bearing forged or unauthorized drawer's signatures. The 
reclamation debtor may offer evidence that the reclamation debtor did 
not have knowledge of the forged or unauthorized drawer's signature.
    (iv) Checks bearing a forged or unauthorized indorsement. The 
reclamation debtor may offer evidence that the indorsement was not 
forged or was otherwise authorized in accordance with the requirements 
of Sec. Sec. 240.13 through 240.17.
    (v) Prior presentment. The presenting bank may offer evidence that 
the check or a paper or electronic representation thereof has not 
already been presented to, and paid by, Treasury.
    (vi) Adequacy of substitute check or electronic check. The 
presenting bank may offer an original check or a copy of the check that 
is sufficient to support a determination that the check does not contain 
a material defect or alteration.
    (3) Procedures for filing a protest. A reclamation protest must be 
in writing, and must be sent to: Department of the Treasury, Financial 
Management Service, Financial Processing Division, Reclamation Branch, 
Room 700D, P.O. Box 1849, Hyattsville, MD 20788, or to such other 
address as Treasury may publish in the Treasury Financial Manual, which 
can be found at http://www.fms.treas.gov.
    (i) The reclamation protest must include supporting documentation 
(including, but not limited to, affidavits, account agreements, and 
signature cards) for the purpose of establishing that the reclamation 
debtor is not liable for the reclamation debt.
    (ii) Treasury will not consider reclamation protests received more 
than 90 days after the reclamation date.
    (iii) Treasury may, at its discretion, consider information received 
from a guarantor other than the reclamation debtor. However, in so 
doing, Treasury does not waive any of its rights under this part, nor 
does Treasury grant rights to any guarantor that are not otherwise 
provided in this part.

[[Page 89]]

    (4) Review of a reclamation protest. The Director, Financial 
Processing Division, or an authorized designee, will make every effort 
to decide any protest properly submitted under this section within 60 
days, and will notify the reclamation debtor of Treasury's decision. In 
those cases where it is not possible to render a decision within 60 
days, the Director, Financial Processing Division, or an authorized 
designee, will notify the reclamation debtor of the delay. Neither the 
Director, Financial Processing Division, nor an authorized designee, 
will have any involvement in the process of making determinations under 
Sec. 240.8(a) of this part or sending a ``REQUEST FOR REFUND (CHECK 
RECLAMATION)'' under Sec. 240.9(a) of this part.
    (i) Treasury will refrain from the collection activities identified 
in Sec. Sec. 240.10 and 240.11 while a timely protest is being 
considered. However, interest, penalties, and administrative costs will 
continue to accrue and will be added to the reclamation debt until a 
final determination on the protest has been made.
    (ii) If, based on the evidence provided, the Director of the 
Financial Processing Division, or an authorized designee, finds that the 
reclamation debtor has met, by a preponderance of the evidence, the 
criteria in paragraph (b)(2) of this section, Treasury will notify the 
reclamation debtor, in writing, of his or her decision to terminate 
collection and will refund any amounts previously collected for the 
reclamation debt. Treasury may refund the amount either by applying the 
amount to another reclamation debt owed by the reclamation debtor in 
accordance with this Part or other applicable law, or by returning the 
amount to the reclamation debtor.
    (iii) If the Director, Financial Processing Division, or an 
authorized designee, finds, by a preponderance of the evidence, that the 
reclamation debtor is liable for the reclamation debt, Treasury will 
notify the reclamation debtor, in writing, of his or her decision. If 
the reclamation debtor has not paid the reclamation in full, the 
reclamation debtor must pay any outstanding amounts in full within 30 
days from the date of Treasury's decision. If the reclamation debtor 
fails to pay the reclamation debt in full within that time frame, 
Treasury will proceed to collect the reclamation debt through offset in 
accordance with Sec. Sec. 240.10 and 240.11.
    (5) Effect of protest decision. The notice provided to the 
reclamation debtor under paragraph (b)(4)(iii) of this section shall 
serve as the final agency determination under the Administrative 
Procedure Act (5 U.S.C. 701, et seq.). No civil suit may be filed until 
the reclamation debtor has filed a protest under this section, and 
Treasury has provided notice of its final determination.



Sec. 240.10  Offset.

    (a) If a reclamation debt remains unpaid for 120 days after the 
reclamation date, Treasury will refer the reclamation debt, if eligible, 
to Treasury's centralized offset program (see 31 CFR part 285) or 
another Federal agency for offset in accordance with 31 U.S.C. 3716. 
Prior to making a referral for offset, Treasury, in accordance with 
Sec. 240.9(a)(3), will send at least one monthly statement to the 
reclamation debtor informing the reclamation debtor that Treasury 
intends to collect the reclamation debt by administrative offset and 
Treasury Check Offset.
    (b) If a reclamation debtor wishes to make payment on a reclamation 
debt referred for offset, the reclamation debtor should contact Treasury 
at the address listed in Sec. 240.9(b) to resolve the debt and avoid 
offset.
    (c) If Treasury is unable to collect a reclamation debt by use of 
the offset described in paragraph (a) of this section, Treasury shall 
take such action against the reclamation debtor as may be necessary to 
protect the interests of the United States, including, but not limited 
to, Treasury Check Offset in accordance with Sec. 240.11, or referral 
to the Department of Justice.
    (d) If Treasury effects offset under this section and it is later 
determined that the reclamation debtor already had paid the amount of 
the reclamation debt, or that a reclamation debtor which had timely 
filed a protest was not liable for the amount of the reclamation, 
Treasury will promptly refund to the reclamation debtor the

[[Page 90]]

amount of its payment. Treasury may refund the amount either by applying 
the amount to another reclamation debt owed by the reclamation debtor in 
accordance with this Part or other applicable law, or by returning the 
amount to the reclamation debtor.



Sec. 240.11  Treasury Check Offset.

    (a) If Treasury is unable to effect collection pursuant to 
Sec. Sec. 240.8, 240.9, or 240.10, of this part, Treasury will collect 
the amount of the reclamation debt through Treasury Check Offset. 
Treasury Check Offset occurs when, at the direction of the Treasury, a 
Federal Reserve Bank withholds, that is, offsets, credit from a 
presenting bank. The amount of credit offset is applied to the 
reclamation debt owed by the presenting bank. By presenting Treasury 
checks for payment, the presenting bank is deemed to authorize Treasury 
Check Offset.
    (b) If Treasury effects offset under this section and it is later 
determined that the presenting bank paid the reclamation debt in full, 
or that a presenting bank was not liable for the amount of the 
reclamation debt, Treasury will promptly refund to the presenting bank 
the amount of its overpayment. Treasury may refund the amount either by 
applying the amount to another reclamation debt in accordance with this 
part or other applicable law, or by returning the amount to the 
presenting bank.
    (c) Treasury Check Offset is used for the purpose of collecting debt 
owed by a presenting bank to the Federal Government. As a consequence, 
presenting banks shall not be able to use the fact that Treasury checks 
have not been paid as the basis for a claim against Treasury, a Federal 
Reserve Bank, or other persons or entities, including payees or other 
indorsers of checks, for the amount of the credit offset pursuant to 31 
U.S.C. 3712(e) and this section.
    (d) This section does not apply to a claim based upon a reclamation 
that has been outstanding for more than 10 years from the date of 
delinquency.



Sec. 240.12  Processing of checks.

    (a) Federal Reserve Banks. (1) Federal Reserve Banks must cash 
checks for Government disbursing officials when such checks are drawn by 
the disbursing officials to their own order, except that payment of such 
checks must be refused if:
    (i) A check bears a material defect or alteration;
    (ii) A check was issued more than one year prior to the date of 
presentment; or
    (iii) The Federal Reserve Bank has been notified by Treasury, in 
accordance with Sec. 240.15(c), that a check was issued to a deceased 
payee.
    (2) Federal Reserve Banks are not required to cash checks presented 
directly to them by the general public.
    (3) As a depositary of public funds, each Federal Reserve Bank 
shall:
    (i) Receive checks from its member banks, nonmember clearing banks, 
or other depositors, when indorsed by such banks or depositors who 
guarantee all prior indorsements thereon;
    (ii) Give immediate provisional credit therefore in accordance with 
their current Time Schedules and charge the amount of the checks cashed 
or otherwise received to the General Account of the United States 
Treasury, subject to first examination and payment by Treasury;
    (iii) Forward payment records and requested checks to Treasury; and
    (iv) Release the original checks and substitute checks to a 
designated Regional Records Services Facility upon notification from 
Treasury.
    (4) If a check is to be declined under Sec. 240.6, Treasury will 
provide the Federal Reserve Bank with notice of declination upon the 
completion of first examination. Federal Reserve Banks must give 
immediate credit therefor to Treasury's General Account, thereby 
reversing the previous charge to the General Account for such check.
    (5) Treasury authorizes each Federal Reserve Bank to release a copy 
of the check to the presenting bank when payment is declined.
    (b) Treasury General Account (TGA) designated depositaries outside 
the United States. (1) Financial institutions outside the United States 
designated by Treasury as depositaries of public money in accordance 
with 31 U.S.C. 3303 and permitted to charge checks to the General 
Account of the United States Treasury in accordance with

[[Page 91]]

Treasury implementing instructions shall be governed by the operating 
instructions contained in the letter of authorization to them from 
Treasury and are, as presenting banks, subject to the provisions of 
Sec. Sec. 240.4, 240.8, and 240.9.
    (2) If a check is to be declined under Sec. 240.6, Treasury will 
provide the presenting bank with notice of declination upon the 
completion of first examination and will provide the presenting bank 
with a copy or image of the check. Such presenting bank must give 
immediate credit therefore to the General Account of the United States 
Treasury, thereby reversing the previous charge to the Account for such 
check. Treasury authorizes the designated Federal Reserve Bank to return 
to such presenting bank the original check when payment is declined in 
accordance with Sec. 240.5(a) or Sec.  240.15(c).
    (3) To ensure complete recovery of the amount due, reclamation 
refunds require payment in United States dollars with checks drawn on or 
payable through United States financial institutions located in the 
United States. Reclamation refunds initiated by financial institutions 
outside of the United States must be sent through their headquarters or 
U.S. correspondent financial institution only. The payments should be 
accompanied by documentation identifying the check that was the subject 
of the reclamation (such as a copy of the reclamation notice or the 
current monthly statement). Reclamation refunds shall not be deposited 
to Treasury's General Account.
    (4) Additional information relating to designated depositaries 
outside the United States may be found in Volume VI, Chapter 2000, of 
the Treasury Financial Manual, which can be found at http://
www.fms.treas.gov.

                          Indorsement of Checks



Sec. 240.13  Indorsement by payees.

    (a) General requirements. Checks shall be indorsed by the named 
payee or by another on behalf of such named payee as set forth in this 
part.
    (b) Acceptable indorsements. (1) A check is properly indorsed when:
    (i) The check is indorsed by the payee in a form recognized by 
general principles of law and commercial usage for negotiation, transfer 
or collection of negotiable instruments.
    (ii) The check is indorsed by another on behalf of the named payee, 
and sufficiently indicates that the indorser has indorsed the check on 
behalf of the payee pursuant to authority expressly conferred by or 
under law or other regulation. An example would be: ``John Jones by Mary 
Jones.'' This example states the minimum indication acceptable. However, 
Sec. Sec. 240.14, 240.15, and 240.17(f) specify the addition of an 
indication in specified situations of the actual capacity in which the 
person other than the named payee is indorsing.
    (iii) Absent a signature, the check is indorsed ``for collection'' 
or ``for deposit only to the credit of the within named payee or 
payees.'' The presenting bank shall be deemed to guarantee good title to 
checks without signatures to all subsequent indorsers and to Treasury.
    (iv) The check is indorsed by a financial institution under the 
payee's authorization.
    (2) Indorsement of checks by a duly authorized fiduciary or 
representative. The individual or institution accepting a check from a 
person other than the named payee is responsible for determining whether 
such person is authorized and has the capacity to indorse and negotiate 
the check. Evidence of the basis for such a determination may be 
required by Treasury in the event of a dispute.
    (3) Indorsement of checks by a financial institution under the 
payee's authorization. When a check is credited by a financial 
institution to the payee's account under the payee's authorization, the 
financial institution may use an indorsement substantially as follows: 
``Credit to the account of the within-named payee in accordance with the 
payee's instructions. XYZ [Name of financial institution].'' A financial 
institution using this form of indorsement will be deemed to guarantee 
to all subsequent indorsers and to the Treasury that it is acting as an 
attorney-in-fact for the payee, under the payee's authorization, and 
that this authority is currently in force and has neither

[[Page 92]]

lapsed nor been revoked either in fact or by the death or incapacity of 
the payee.
    (4) Indorsement of checks drawn in favor of financial institutions. 
All checks drawn in favor of a financial institution, for credit to the 
account of a person designating payment so to be made, must be indorsed 
in the name of the financial institution as payee in the usual manner. 
However, no check drawn in favor of a financial institution for credit 
to the account of a payee may be negotiated by the financial institution 
after the death of the payee.
    (c) Unacceptable indorsements. (1) A check is not properly indorsed 
when the check is signed or otherwise is indorsed by a person without 
the payee's consent or authorization.
    (2) Failure to include the signature of the person signing the check 
as required by paragraph (b)(1)(ii) of this section will create a 
rebuttable presumption that the indorsement is a forgery and is 
unacceptable.
    (3) Failure to include sufficient indication of the indorser's 
authority to act on behalf of the payee as required by paragraph 
(b)(1)(ii) of this section will create a rebuttable presumption that the 
indorsing person is not authorized to indorse a check for the payee.



Sec. 240.14  Checks issued to incompetent payees.

    (a) Handling of checks when a guardian or other fiduciary has been 
appointed. (1) A guardian appointed in accordance with applicable State 
law, or a fiduciary appointed in accordance with other applicable law, 
may indorse checks issued for the following classes of payments the 
right to which under law does not terminate with the death of the payee: 
payments for the redemption of currencies or for principal and/or 
interest on U.S. securities; payments for tax refunds; and payments for 
goods and services.
    (i) A guardian or other fiduciary indorsing any such check on behalf 
of an incompetent payee, must include, as part of the indorsement, an 
indication of the capacity in which the guardian or fiduciary is 
indorsing. An example would be: ``John Jones by Mary Jones, guardian of 
John Jones.''
    (ii) When a check indorsed in this fashion is presented for payment 
by a financial institution, it will be paid by Treasury without 
submission of documentary proof of the authority of the guardian or 
other fiduciary, with the understanding that evidence of such claimed 
authority to indorse may be required by Treasury in the event of a 
dispute.
    (2) A guardian or other fiduciary may not indorse a check issued for 
any class of payment other than one specified in paragraph (a)(1) of 
this section. When a check other than one specified in paragraph (a)(1) 
of this section is received by a guardian or other fiduciary, the check 
must be returned to the certifying agency with information as to the 
incompetence of the payee and documentary evidence showing the 
appointment of the guardian or other fiduciary in order that a 
replacement check, and future checks, may be drawn in favor of the 
guardian or other fiduciary.
    (b) Handling of checks when a guardian or other fiduciary has not 
been appointed. If a guardian or other fiduciary has not been appointed, 
all checks issued to an incompetent payee must be returned to the 
certifying agency for determination as to whether, under applicable law, 
payment is due and to whom it may be made.
    (c) Handling of certain checks by an attorney-in-fact. 
Notwithstanding paragraph (a)(2) of this section, if a check was issued 
for a class of payments the right to which under law terminates upon the 
death of the beneficiary, such as a recurring benefit payment or 
annuity, the check may be negotiated under a durable special power of 
attorney or springing durable special power of attorney subject to the 
restrictions enumerated in Sec. 240.17. After the end of the six-month 
period provided in Sec. Sec. 240.17(d) and (e), such checks must be 
handled in accordance with paragraph (a)(2) of this section.



Sec. 240.15  Checks issued to deceased payees.

    (a) Handling of checks when an executor or administrator has been 
appointed. (1) An executor or administrator of an

[[Page 93]]

estate that has been appointed in accordance with applicable State law 
may indorse checks issued for the following classes of payments the 
right to which under law does not terminate with the death of the payee: 
payments for the redemption of currencies or for principal and/or 
interest on U.S. securities; payments for tax refunds; and payments for 
goods and services.
    (i) An executor or administrator indorsing any such check must 
include, as part of the indorsement, an indication of the capacity in 
which the executor or administrator is indorsing. An example would be: 
``John Jones by Mary Jones, executor of the estate of John Jones.''
    (ii) When a check indorsed in this fashion is presented for payment 
by a financial institution, it will be paid by Treasury without the 
submission of documentary proof of the authority of the executor or 
administrator, with the understanding that evidence of such claimed 
authority to indorse may be required by Treasury in the event of a 
dispute.
    (2) An executor or administrator of an estate may not indorse a 
check issued for any class of payment other than one specified in 
paragraph (a)(1) of this section. Other checks, such as recurring 
benefit payments and annuity payments, may not be negotiated after the 
death of the payee. Such checks must be returned to the certifying 
agency for determination as to whether, under applicable law, payment is 
due and to whom it may be made.
    (b) Handling of checks when an executor or administrator has not 
been appointed. If an executor or administrator has not been appointed, 
all checks issued to a deceased payee must be returned to the certifying 
agency for determination as to whether, under applicable law, payment is 
due and to whom it may be made.
    (c) Handling of checks when a certifying agency learns, after the 
issuance of a recurring benefit payment check, that the payee died prior 
to the date of issuance. (1) A recurring benefit payment check, issued 
after a payee's death, is not payable. As a consequence, when a 
certifying agency learns that a payee has died, the certifying agency 
must give immediate notice to Treasury, as prescribed at Volume I, Part 
4, Chapter 7000 of the Treasury Financial Manual, which can be found at 
http://www.fms.treas.gov. Upon receipt of such notice from a certifying 
agency, Treasury will instruct the Federal Reserve Bank to refuse 
payment of the check upon presentment. Upon receipt of such instruction 
from Treasury, the Federal Reserve Bank will make every appropriate 
effort to intercept the check. If the check is successfully intercepted, 
the Federal Reserve Bank will refuse payment, and will return the check 
unpaid to the presenting bank with an annotation that the payee is 
deceased. If a financial institution learns that a date of death 
triggering action under this section is erroneous, the financial 
institution must advise the payee to contact the payment certifying 
agency.
    (2) Nothing in this section shall limit the right of Treasury to 
institute reclamation proceedings under the provisions of Sec. Sec. 
240.8 and 240.9 with respect to a check issued to a deceased payee that 
has been negotiated and paid over a forged or unauthorized indorsement.



Sec. 240.16  Checks issued to minor payees.

    (a) Checks in payment of principal and/or interest on U.S. 
securities that are issued to minors may be indorsed by:
    (1) Either parent with whom the minor resides; or
    (2) If the minor does not reside with either parent, by the person 
who furnishes the minor's chief support.
    (b) The parent or other person indorsing on behalf of the minor must 
present with the check the indorser's signed statement giving the 
minor's age, and stating that the payee either resides with the parent 
or receives his or her chief support from the person indorsing on the 
minor's behalf and that the proceeds of the check will be used for the 
minor's benefit.



Sec. 240.17  Powers of attorney.

    (a) Specific powers of attorney. Any check may be negotiated under a 
specific power of attorney executed in accordance with applicable State 
or Federal law after the issuance of the check

[[Page 94]]

and describing the check in full (check serial and symbol numbers, date 
of issue, amount, and name of payee).
    (b) General powers of attorney. Checks may be negotiated under a 
general power of attorney executed, in accordance with applicable State 
or Federal law, in favor of a person for the following classes of 
payments:
    (1) Payments for the redemption of currencies or for principal and/
or interest on U.S. securities;
    (2) Payments for tax refunds, but subject to the limitations 
concerning the mailing of Internal Revenue refund checks contained in 26 
CFR 601.506(c); and
    (3) Payments for goods and services.
    (c) Special powers of attorney. Checks issued for classes of 
payments other than those specified in paragraph (b) of this section, 
such as a recurring benefit payment, may be negotiated under a special 
power of attorney executed in accordance with applicable State or 
Federal law, which describes the purpose for which the checks are 
issued, names a person as attorney-in-fact, and recites that the special 
power of attorney is not given to carry into effect an assignment of the 
right to receive such payment, either to the attorney-in-fact or to any 
other person.
    (d) Durable special powers of attorney. A durable special power of 
attorney is a special power of attorney that continues despite the 
principal's later incompetency, and is created by the principal's use of 
words explicitly stating such intent. Classes of checks other than those 
specified in paragraph (b) of this section may be negotiated under a 
durable special power of attorney executed in accordance with applicable 
State or Federal law, which describes the purpose for which the checks 
are issued, names a person as attorney-in-fact, and recites that the 
special power of attorney is not given to carry into effect an 
assignment of the right to receive such payment, either to the attorney-
in-fact or to any other person. For the purpose of negotiating Treasury 
checks, durable special powers of attorney are effective only during the 
six-month period following a determination that the named payee is 
incompetent.
    (e) Springing durable special powers of attorney. A springing 
durable special power of attorney is similar to a durable power of 
attorney except that its terms do not become effective until the 
principal's subsequent incompetence. As with a durable special power of 
attorney, a springing durable special power of attorney is created by 
the principal's use of language explicitly stating that its terms become 
effective at such time as the principal is determined to be incompetent. 
Classes of checks other than those specified in paragraph (b) of this 
section may be negotiated under a springing durable special power of 
attorney executed in accordance with applicable State or Federal law, 
which describes the purpose for which the checks are issued, names a 
person as attorney-in-fact, and recites that the springing durable 
special power of attorney is not given to carry into effect an 
assignment of the right to receive payment, either to the attorney-in-
fact or to any other person. For the purpose of negotiating Treasury 
checks, springing durable special powers of attorney are effective only 
during the six-month period following a determination that the named 
payee is incompetent.
    (f) Proof of authority. Checks indorsed by an attorney-in-fact must 
include, as part of the indorsement, an indication of the capacity in 
which the attorney-in-fact is indorsing. An example would be: ``John 
Jones by Paul Smith, attorney-in-fact for John Jones.'' Such checks when 
presented for payment by a financial institution, will be paid by 
Treasury without the submission of documentary proof of the claimed 
authority, with the understanding that evidence of such claimed 
authority to indorse may be required by Treasury in the event of a 
dispute.
    (g) Revocation of powers of attorney. Notwithstanding any other law, 
for purposes of negotiating Treasury checks, all powers of attorney are 
deemed revoked by the death of the principal and may also be deemed 
revoked by notice from the principal to the parties known, or reasonably 
expected, to be acting on the power of attorney.
    (h) Optional use forms. Optional use power of attorney forms are 
listed in

[[Page 95]]

the appendix to this part. These forms are available on the FMS website 
at: http://www.fms.treas.gov/ checkclaims/ regulations.html.



Sec. 240.18  Lack of authority to shift liability.

    (a) This part neither authorizes nor directs a financial institution 
to debit the account of any person or to deposit any funds from any 
account into a suspense account or escrow account or the equivalent. 
Nothing in this part shall be construed to affect a financial 
institution's contract with its depositor(s) under authority of state 
law.
    (b) A financial institution's liability under this part is not 
affected by any action taken by it to recover from any person the amount 
of the financial institution's liability to the Treasury.



Sec. 240.19  Reservation of rights.

    The Secretary of the Treasury reserves the right, in the Secretary's 
discretion, to waive any provision(s) of this regulation not otherwise 
required by law.

Appendix A to Part 240--Optional Forms for Powers of Attorney and Their 
                               Application

    FMS Form 231--General Power of Attorney (Individual). This general 
power of attorney form may be executed by an individual, unincorporated 
partnership, or sole owner, for checks drawn on the United States 
Treasury, in payment: (1) For redemption of currencies or for principal 
or interest on U.S. securities; (2) for tax refunds; and (3) for goods 
and services.
    FMS Form 232--Specific Power of Attorney (Individual). This specific 
power of attorney form may be executed by an individual, unincorporated 
partnership, or sole owner to authorize the indorsement of any class of 
check drawn on the United States Treasury. To be valid, the form must be 
executed after the issuance of the check and must describe the check in 
full, including the check serial and symbol numbers, date of issue, 
amount, and name of the payee.
    FMS Form 233--Special Power of Attorney (Individual). This special 
power of attorney form may be executed by an individual, unincorporated 
partnership, or sole owner, to authorize the indorsement of payments 
other than those listed under FMS Form 231, such as recurring benefit 
payments. It may name any person (as the term person is defined in 31 
CFR part 240) as attorney-in-fact, but must describe the purpose for 
which the checks are issued and recite that it is not given to carry 
into effect an assignment of the right to receive payment, either to the 
attorney-in-fact or to any other person. A special power of attorney is 
not effective for purposes of negotiating checks issued after the payee 
is determined to be incompetent, unless the payee has indicated that the 
special power of attorney is to: (1) Remain effective following a 
determination that the principal is incompetent (a durable special power 
of attorney); or (2) become effective following a determination that the 
principal is incompetent (a springing durable special power of 
attorney). In no instance may a special power of attorney be used as the 
basis for negotiation of a check drawn on the United States Treasury 
more than six months after a determination that the principal is 
incompetent.
    FMS Form 234--Specific Power of Attorney (Corporation). This general 
power of attorney form may be executed by a corporation to authorize the 
indorsement by an attorney-in-fact for the classes of payments listed 
under FMS Form 231. When authority is given to an officer of the 
corporation to execute a power of attorney authorizing a third person to 
indorse and collect checks drawn on the United States Treasury in the 
name of the corporation, the power of attorney on FMS Form 234 should be 
accompanied by FMS Form 235 (Resolution by Corporation Conferring 
Authority Upon an Officer to Execute a Power of Attorney for the 
Collection of Checks Drawn on the Treasurer of the United States), 
executed by the officer authorized herein to execute such a power.
    FMS Form 236--Specific Power of Attorney (Corporation). This 
specific power of attorney form may be executed by a corporation to 
authorize the indorsement by an attorney-in-fact of any class of check 
drawn on the United States Treasury. To be valid, the form must be 
executed after the issuance of the check and must describe the check in 
full, including the check serial and symbol numbers, date of issue, 
amount, and name of the payee. When authority is given to an officer of 
the corporation to execute a power of attorney authorizing a third 
person to indorse and collect checks drawn on the United States Treasury 
in the name of the corporation, the power of attorney on FMS Form 236 
should be accompanied by FMS Form 235 (Resolution by Corporation 
Conferring Authority Upon an Officer to Execute a Power of Attorney for 
the Collection of Checks Drawn on the Treasurer of the United States), 
executed by the officer authorized herein to execute such a power.

[[Page 96]]



PART 245_CLAIMS ON ACCOUNT OF TREASURY CHECKS--Table of Contents




Sec.
245.1 Introductory.
245.2 Definitions.
245.3 Time limit for check claims.
245.4 Advice of nonreceipt or loss.
245.5 Recertification of payment.
245.6 Claim by an indorser.
245.7 Check status inquiry.
245.8 Receipt or recovery of original check.
245.9 Procedural instructions.
245.10 Performance of functions of the Commissioner.

    Authority: R.S. 3646, as amended; 31 U.S.C. 3328; 31 U.S.C. 3331.

    Source: 54 FR 35647, Aug. 29, 1989, unless otherwise noted.



Sec. 245.1  Introductory.

    This part governs the issuance of replacement checks for checks 
drawn on the United States Treasury, when
    (a) The original check has been lost, stolen, destroyed or mutilated 
or defaced to such an extent that it is rendered non-negotiable;
    (b) The original check has been negotiated and paid on a forged or 
unauthorized indorsement, and
    (c) The original check has been cancelled pursuant to Sec. 204.4 of 
this chapter.



Sec. 245.2  Definitions.

    For purposes of this part:
    (a) Agency means each authority of the United States for which the 
Treasury of the United States issues checks or for which checks drawn on 
the Treasury of the United States are issued.
    (b) Check means a check drawn on the United States Treasury.
    (c) Certifying Agency means an agency for whom a Treasury disbursing 
officer or a non-Treasury disbursing officer makes payment in accordance 
with 31 U.S.C. 3325. The responsibilities of a certifying official are 
set forth at 31 U.S.C. 3528.
    (d) Commissioner means the Commissioner of the Financial Management 
Service, Department of the Treasury, 401 14th Street, SW., Washington, 
DC 20227.
    (e) Person means an individual, a partnership, a corporation, a 
labor organization, a government or a subdivision or instrumentality 
thereof, and any other entity to which a check may be issued.
    (f) Replacement check means a check issued pursuant to the 
recertification of payment by a certifying official.
    (g) Secretary means the Secretary of the Treasury.



Sec. 245.3  Time limit for check claims.

    (a) Any claim on account of a Treasury check must be presented to 
the agency that authorized the issuance of such check within one year 
after the date of issuance of the check or within one year after October 
1, 1989, whichever is later.
    (b) Any claim by an indorser under Sec. 245.6 will be considered 
timely if presented to the Commissioner within one year after the date 
of issuance of the check or within one year after October 1, 1989, 
whichever is later.
    (c) Nothing in this subsection affects the underlying obligation of 
the United States, or any agency thereof, for which a Treasury check was 
issued.



Sec. 245.4  Advice of nonreceipt or loss.

    (a) In the event of the nonreceipt, loss or destruction of a check 
drawn on the United States Treasury, or the mutilation or defacement of 
such a check to an exent which renders it nonnegotiable, the claimant 
should immediately notify the agency that authorized the issuance of 
such check, describing the check, stating the purpose for which it was 
issued and giving, if possible, its date, amount, Treasury symbol and 
number.
    (b) In cases involving mutiliated or defaced checks, the claimant 
should enclose the mutilated or defaced check with his communication to 
the agency.



Sec. 245.5  Recertification of payment.

    Upon receipt of a claim concerning the nonreceipt, loss, 
destruction, mutilation or defacement of a check, or the cancellation of 
a check pursuant to Sec. 240.4 of this chapter, the certifying agency 
may certify a new payment.



Sec. 245.6  Claim by an indorser.

    When one or more Treasury checks are lost, stolen or destroyed in a 
single incident while in the possession of a person to whom the checks 
have been

[[Page 97]]

negotiated by the payee, and if the checks have not been paid, the 
Commissioner may issue a replacement check to the person to whom the 
checks had been negotiated.



Sec. 245.7  Check status inquiry.

    The Commissioner will provide the status and a copy of the check if 
available, upon request, to the agency which authorized the issuance of 
the check.



Sec. 245.8  Receipt or recovery of original check.

    (a) If the original check is received or recovered by the claimant 
after he has requested the agency to issue a replacement check, but 
before a replacement check has been received, he should immediately 
advise the agency and hold such check until receipt of instructions with 
respect to the negotiability of such check.
    (b) If the original check is received or recovered by the claimant 
after a replacement check has been received by him, the original shall 
not be cashed, but shall be forwarded immediately to the agency that 
authorized the issuance of such check. Under no circumstances should 
both the original and replacement checks be cashed.



Sec. 245.9  Procedural instructions.

    The Commissioner of the Financial Management Service may issue 
procedural instructions, implementing these regulations, in Volume I, 
Part 4 of the Treasury Financial Manual.



Sec. 245.10  Performance of functions of the Commissioner.

    The Commissioner of the Financial Management Services may authorize 
any officer of the Treasury Department to perform any of his functions 
under this part and to redelegate such authority within such limits as 
the Commissioner may prescribe.

(Approved by the Office of Management and Budget under control number 
1510-0058)



PART 248_ISSUE OF SUBSTITUTES OF LOST, STOLEN, DESTROYED, MUTILATED AND 

DEFACED CHECKS OF THE UNITED STATES DRAWN ON ACCOUNTS MAINTAINED IN DEPOSITARY 

BANKS IN FOREIGN COUNTRIES OR UNITED STATES TERRITORIES OR POSSESSIONS--Table 

of Contents




Sec.
248.1 Introductory.

                         Delegation of Authority

248.2 Delegation of authority to issue substitute checks.

                     Action To Be Taken By Claimants

248.3 Advice of nonreceipt or loss.
248.4 Undertaking of indemnity.
248.5 Exception to requirement of undertaking of indemnity Form 2244.
248.6 Recovery of original check.
248.7 Claims requiring settlement action.
248.8 Inquiries.
248.9 Amendments and waivers.

    Authority: 31 U.S.C. 3331.

    Source: 25 FR 10869, Nov. 16, 1960, unless otherwise noted. 
Redesignated at 39 FR 20969, June 17, 1974.



Sec. 248.1  Introductory.

    This part governs the issuance of substitutes for checks of the 
United States drawn on United States dollar or foreign currency 
accounts, maintained with designated depositaries in foreign countries 
or territories or possessions of the United States. Checks of the United 
States drawn on such depositaries are hereafter referred to as 
``depositary checks.''

[54 FR 35647, Aug. 29, 1989]

                         Delegation of Authority



Sec. 248.2  Delegation of authority to issue substitute checks.

    Pursuant to authority contained in section 3646 of the Revised 
Statutes, as amended, and subject to such procedural requirements as may 
be prescribed by the Treasury Department, there is hereby delegated to 
heads of departments and agencies whose disbursing officers issue 
depositary checks, authority to authorize officers

[[Page 98]]

or employees of their respective departments or agencies to issue 
substitutes of such checks, prior to the close of the fiscal year next 
following the fiscal year in which the checks are issued, and to receive 
and approve undertakings to indemnify the United States in such cases. 
The Commissioner of the Financial Management Service, Treasury 
Department, is hereby delegated authority to issue substitutes of 
depositary checks drawn by the Director, Operations Group, Treasury 
Department, or by officers disbursing under delegation from the 
Director, Operations Group, and to receive and approve undertakings of 
indemnity in such cases. The authority delegated to the Commissioner of 
the Financial Management Service may be redelegated by him to such 
disbursing officers.

[39 FR 20969, June 17, 1974, as amended at 49 FR 47001, 47002, Nov. 30, 
1984]

                     Action To Be Taken by Claimants



Sec. 248.3  Advice of nonreceipt or loss.

    The payee or owner of a depositary check which is not received, or 
which has been lost, stolen, destroyed or mutilated or defaced to such 
an extent that it is rendered non-negotiable, should immediately notify 
the disbursing officer who issued such check or the administrative 
agency exercising jurisdiction over such disbursing officer, over his 
signature and current address, giving information as to the 
circumstances of the loss, theft or destruction of the check and whether 
it was endorsed, and also requesting that payment of the check be 
stopped. A claimant who is one other than the payee of the check, should 
present a statement in support of his ownership of the check. If the 
check has been mutilated or defaced, it should be forwarded to the 
issuing disbursing officer with request for the issuance of a 
substitute.



Sec. 248.4  Undertaking of indemnity.

    (a) If the check is found to be outstanding and unpaid and it 
appears that the proceeds are due the claimant, the disbursing officer 
will request the claimant to execute an undertaking of indemnity, Form 
2244, in a penal sum equal to the amount of the check (or checks).
    (b) Except in the circumstances set forth below, a corporate surety 
authorized by the Secretary of the Treasury to act as an acceptable 
surety on bonds in favor of the United States or two responsible 
individual sureties will be required on the undertaking of indemnity. It 
will be the responsibility of the claimant in a foreign country to 
secure a certification as to the financial sufficiency of the individual 
sureties executed by one of the persons listed in, and in the manner 
prescribed by, the instruction appearing under the Certificate as to 
Sureties on the face of Form 2244.
    (c) Where the amount of the original check (or checks) is $200 or 
less, or the equivalent in foreign currency, one financially responsible 
individual surety may be accepted.
    (d) Unless it is determined that the requirement of sureties is 
essential in the public interest, sureties will not be required under 
the following circumstances:
    (1) If the officer authorized to issue a substitute check is 
satisfied that the loss, theft, destruction, mutilation or defacement of 
the original check occurred without fault of the owner or holder and 
while the check was in the custody or control of the United States or of 
a person duly authorized as an agent of the United States when 
performing services in connection with an official function of the 
United States;
    (2) If substantially the entire check is presented and surrendered 
by the owner or holder and the disbursing officer is satisfied as to the 
identity of the check presented and that any missing portions are not 
sufficient to form the basis of a valid claim against the United States;
    (3) If the owner or holder is the United States or an officer or 
employee thereof in his official capacity, a State, the District of 
Columbia, a territory or possession of the United States, a municipal 
corporation or political subdivision of any of the foregoing, a 
corporation the entire capital of which is owned by the United States, a 
foreign government or agency thereof, a foreign central bank, or a 
Federal Reserve Bank.

[[Page 99]]



Sec. 248.5  Exception to requirement of undertaking of indemnity Form 2244.

    Notwithstanding the provisions of Sec. 248.4, if in any case 
involving a financially responsible claimant it is impracticable to 
obtain the execution of Standard Form 2244, with or without sureties, 
the officer or employee responsible for handling the claim, in his 
discretion, may accept an undertaking of indemnity in the form of a 
written statement or letter, substantially as follows:

In consideration of the issuance of a substitute check in lieu of_______
                                                     (Check description)

and the payment of the substitute check, the undersigned undertakes and 
agrees to save harmless and indemnify the United States of America, its 
officers and agents, of and from any and all liability, loss, expense, 
claim, and demand whatsoever, arising in any manner by reason of or on 
account of said original check (or checks) or the stoppage or payment 
thereof, or the issue or payment of the substitute check (or checks), to 
replace the same.


The undertaking of indemnity should be appropriately witnessed, and if 
it is executed on behalf of a corporation or other business 
organization, the individual executing the same should furnish proof of 
this authority to so act. In appropriate cases, a foreign language 
translation of the foregoing letter of indemnity may be accepted.

[25 FR 10869, Nov. 16, 1960. Redesignated at 39 FR 20969, June 17, 1974, 
as amended at 54 FR 35648, Aug. 29, 1989]



Sec. 248.6  Recovery of original check.

    (a) If the claimant recovers an original check after he has 
furnished advice of non-receipt but before receipt of a substitute 
check, he should immediately notify the disbursing officer or agency 
concerned and hold the check until receipt of advice from the disbursing 
officer or agency concerned regarding the negotiability of such original 
check.
    (b) In the event the substitute check has been received prior to the 
recovery of the original check, the original check should be returned 
immediately to the disbursing officer.
    (c) Under no circumstances should the claimant attempt to cash both 
the original and substitute check.



Sec. 248.7  Claims requiring settlement action.

    There are certain types of claims on which the disbursing officer 
will not be authorized to take final action. These include:
    (a) Claims on original checks which have been outstanding more than 
one full fiscal year following the fiscal year in which the checks were 
issued, and
    (b) Claims involving doubtful questions of law and fact.

In such cases the disbursing officer will obtain information and 
supporting papers, including an undertaking of indemnity, from the 
claimant and transmit such data to the Claims Division, General 
Accounting Office, for settlement action.



Sec. 248.8  Inquiries.

    Claimants should direct any inquiries regarding the application of 
these regulations to the department or agency or disbursing officer 
concerned.



Sec. 248.9  Amendments and waivers.

    The Treasury Department may waive, withdraw or amend at any time or 
from time to time any or all of the foregoing regulations.



PART 250_PAYMENT ON ACCOUNT OF AWARDS OF THE FOREIGN CLAIMS SETTLEMENT 

COMMISSION OF THE UNITED STATES--Table of Contents




Sec.
250.1 Scope of regulations.
250.2 Forms.
250.3 Voucher applications.
250.4 Payment on awards.
250.5 Manner of payment.
250.6 Powers of attorney.
250.7 Additional evidence.

    Authority: Sec. 7, 64 Stat. 16, sec. 310, 69 Stat. 573, sec. 413, 72 
Stat. 530, sec. 213, 76 Stat. 1111; 22 U.S.C. 1626, 1641i, 1642l, 50 
U.S.C. App. 2017l.



Sec. 250.1  Scope of regulations.

    The regulations in this part govern payment by the Department of the 
Treasury on awards made and certified

[[Page 100]]

to the Secretary of the Treasury by the Foreign Claims Settlement 
Commission under the International Claims Settlement Act of 1949, as 
amended (22 U.S.C. 1621 et seq.), and Title II of the War Claims Act of 
1948 (50 U.S.C. App. 2017 et seq.).

[34 FR 1897, Feb. 8, 1969]



Sec. 250.2  Forms.

    The forms referred to in Sec. Sec. 250.3 and 250.4 shall be used in 
connection with the payment of awards hereunder. Voucher applications 
for all payments will be mailed to awardees by the Financial Management 
Service, Treasury Department, Hyattsville, MD 20782, without request 
therefor by awardees.

[31 FR 9418, July 9, 1966, as amended at 49 FR 47001, Nov. 30, 1984; 58 
FR 4578, Jan. 15, 1993]



Sec. 250.3  Voucher applications.

    (a) Execution of voucher by person named. No payment of any part of 
the amount due on account of an award will be made unless a voucher 
application therefor properly executed (preferably in ink or indelible 
pencil) is received by the Treasury Department. A voucher application 
for each payment on account of an award must be signed by each person 
whose name appears on such voucher application as payee exactly as his 
name appears thereon, with the following two exceptions:
    (1) If only the name of the payee, and not his identity, has 
changed, the payee shall sign the voucher application with his changed 
name and return it to the Financial Management Service, Treasury 
Department, Hyattsville, MD 20782; the voucher application shall be 
accompanied by an explanatory affidavit and appropriate supporting 
documents, e.g., a copy of a marriage certificate or court order of 
change of name.
    (2) If the identity of the payee has changed, paragraph (b) of this 
section shall apply. A signature by mark (X) must be witnessed by two 
persons; the signature and address of each must appear on the voucher 
application. In the case of a corporation the voucher application must 
be signed by an appropriate officer thereof having authority to do so, 
whose authority to sign on behalf of the corporation must be duly 
certified to thereon over the seal of the corporation.
    (b) Execution of voucher by other person. If the person named in the 
voucher application as payee is no longer the proper person to receive 
the payment by reason of assignment, incompetency or death, or of 
termination of a partnership or corporation named, the voucher shall be 
executed by the person entitled to payment as provided in Sec. 250.4 
and returned to the Credit Accounting Branch with the relevant 
information and the appropriate supporting documents required by that 
section.

[31 FR 9418, July 9, 1966, as amended at 49 FR 47001, Nov. 30, 1984; 58 
FR 4578, Jan. 15, 1993]



Sec. 250.4  Payment on awards.

    Payment will be made only to the person or persons on behalf of whom 
the award is made, except in the following circumstances:
    (a) If such person is incompetent, payment will be made to his 
guardian, committee, or other equivalent legal representative. The law 
of the residence of the incompetent will determine whether the legal 
representative must be court appointed. If court appointment is 
required, the legal representative shall submit a certificate of the 
clerk of the appointing court, under its seal, dated within 6 months of 
the date of the voucher application for payment, showing that his 
appointment is in full force and effect. If court appointment is not 
required, the legal representative shall submit a notarized statement 
showing:
    (1) His relationship to the incompetent;
    (2) The name and address of the person having care and custody of 
the incompetent;
    (3) That any money received will be applied to the use and benefit 
of the incompetent, and
    (4) That there was no appointment of a guardian or committee.
    (b) If such person is deceased, payment will be made to his legal 
representative.
    (1) If any payment to be made is not over $1,000 and there is no 
qualified executor or administrator, the legal representative will be 
the person found by the Comptroller General to be entitled

[[Page 101]]

thereto, without the necessity of compliance with the requirements of 
law with respect to the administration of estates, upon execution and 
submission of Standard Form No. 1055 to the Financial Management Service 
for transmittal to the Comptroller General. That form is available from 
the Credit Accounting Branch.
    (2) In all other cases, the term legal representative shall include 
court-appointed or statutory administrators or executors, and successors 
in interest of the decedent, e.g., his legatees or heirs as determined 
by an appropriate court or by the law of his residence. If 
administration of the decedent's estate is closed, the legal 
representative shall submit a copy of the appropriate court's final 
order of distribution or other pertinent order, identifying the 
distributees and their addresses. If administration continues and the 
legal representative is court-appointed, he shall submit a certificate 
of the clerk of the appointing court, under its seal, dated within 6 
months of the date of the voucher application for payment, showing that 
such appointment is in full force and effect. If the legal 
representative is not court-appointed, he shall submit evidence 
sufficient to prove his interest and authority to apply for payment. If 
that evidence is a copy of the decedent's will, it shall show on its 
face or by attachments thereto that it has been offered for probate, and 
that the appropriate court has affixed its seal and attached its 
certification of authenticity that the will is in fact the decedent's 
last will and testament.
    (c)-(d) [Reserved]
    (e) In the case of a partnership or corporation, the existence of 
which has been terminated, if a receiver or trustee has been duly 
appointed by a court of competent jurisdiction in the United States and 
has not been discharged prior to the date of payment, payment will be 
made to such receiver or trustee in accordance with the order of the 
court. In the event a receiver or trustee duly appointed by a court of 
competent jurisdiction in the United States makes an assignment of the 
claim or any part thereof with respect to which an award is made, or 
makes an assignment of such award or any part thereof, payment will be 
made to the assignee as his interest may appear. In the latter 
circumstance, certified copies of the court orders showing the authority 
of the receiver or trustee to make the assignment shall be submitted 
with the assignment. No particular form of assignment is prescribed, but 
the original assignment must be submitted to, and will be retained by 
the Treasury Department.
    (f) In the case of a partnership or corporation, the existence of 
which has been terminated, if no receiver or trustee has been duly 
appointed by a court of competent jurisdiction in the United States, or 
if such a receiver or trustee has been discharged prior to the date of 
payment without having made an assignment, payment may be made to the 
person or persons found by the Comptroller General of the United States 
to be entitled thereto. In this circumstance, the person or persons 
claiming payment shall submit to the Financial Management Service, 
Treasury Department, Hyattsville, MD 20782, such documentary evidence as 
is appropriate to show his or their right to the payment.
    (g) In the case of an assignment of an award or any part thereof 
which is made in writing and duly acknowledged and filed after such 
award is certified to the Secretary of the Treasury, payment may in the 
discretion of the Secretary of the Treasury be made to the assignee as 
his interest may appear. No particular form of assignment is prescribed, 
but the original assignment must be submitted to, and will be retained 
by the Treasury Department.

[31 FR 9418, July 9, 1966, as amended at 34 FR 1897, Feb. 8, 1969; 49 FR 
47001, Nov. 30, 1984; 58 FR 4578, Jan. 15, 1993]



Sec. 250.5  Manner of payment.

    Payment will be made by check drawn on the United States Treasury. 
Checks will be mailed to the payee at the address indicated on the 
voucher application, unless subsequent to the issue of the voucher 
application the Treasury Department receives a written request from the 
payee to deliver the check to him at some other address. Where the award 
has been entered in favor of more than one person,

[[Page 102]]

only one check will be drawn in making payment unless the payees specify 
the share of each and request separate checks.

[31 FR 9418, July 9, 1966]



Sec. 250.6  Powers of attorney.

    No power of attorney to sign a voucher application will be 
recognized but a power of attorney executed subsequent to the 
certification of an award to the Secretary of the Treasury to receive, 
endorse and collect a check given in payment on an award may be 
recognized. An appropriate form for such a power of attorney may be 
obtained from the Financial Management Service, Treasury Department, 
Hyattsville, MD 20782.

[31 FR 9418, July 9, 1966, as amended at 49 FR 47001, Nov. 30, 1984; 58 
FR 4578, Jan. 15, 1993]



Sec. 250.7  Additional evidence.

    The Secretary of the Treasury or the Comptroller General of the 
United States may in any case require such additional information and 
evidence as may be deemed necessary.

[31 FR 9418, July 9, 1966]



PART 256_OBTAINING PAYMENTS FROM THE JUDGMENT FUND AND UNDER PRIVATE RELIEF 

BILLS--Table of Contents




                      Subpart A_General Information

Sec.
256.0 What does this part cover?
256.1 What is Treasury's role in paying awards and settlements from the 
          Judgment Fund?
256.2 Where can I find more information about, and forms for, Judgment 
          Fund payments?

                      Subpart B_Requesting Payments

256.10 Who may request payment from the Judgment Fund?
256.11 How do agencies request payments?
256.12 What supporting documentation must agencies submit to FMS when 
          requesting a payment from the Judgment Fund?
256.13 Are agencies required to supply a taxpayer identification number 
          (TIN) when submitting a request for payment?
256.14 What happens if I submit an incomplete request for payment?

                        Subpart C_Debt Collection

256.20 How does an agency indicate that a debt is to be offset from a 
          Judgment Fund payment?
256.21 Are Judgment Fund payments offset to collect administrative 
          debts?
256.22 How does FMS set off an award under 31 U.S.C. 3728?

                 Subpart D_Interest and Litigation Costs

256.30 When does the Judgment Fund pay interest?
256.31 How does FMS compute interest on payments?
256.32 What documentation must be submitted to the Judgment Fund Branch 
          to preserve the right to seek interest under 31 U.S.C. 1304(b) 
          in a case where the government has taken an appeal?
256.33 For what period of time is interest computed under 31 U.S.C. 
          1304(b)?
256.34 Does the Judgment Fund pay all litigation costs?

              Subpart E_Reimbursements to the Judgment Fund

256.40 When must an agency reimburse the Judgment Fund?
256.41 When is reimbursement due for CDA and No FEAR payments?

                     Subpart F_Additional Provisions

256.50 How does FMS process back pay awards?
256.51 Does FMS report Judgment Fund payments to the IRS as income to 
          the payee on IRS Form 1099?
256.52 How does FMS issue a payment?
256.53 How does the submitting agency know when payment is made?
256.54 What happens if FMS denies a request for payment?

                     Subpart G_Private Relief Bills

256.60 How do I get paid for a Private Relief Bill?

    Authority: 31 U.S.C. 1304, 3728; 41 U.S.C. 612; 5 U.S.C. 2301 note.

    Source: 71 FR 60849, Oct. 17, 2006, unless otherwise noted.



                      Subpart A_General Information



Sec. 256.0  What does this part cover?

    This part applies to payments made by the U.S. Department of the 
Treasury (Treasury) pursuant to the Judgment Fund statute, 31 U.S.C. 
1304.

[[Page 103]]



Sec. 256.1  What is Treasury's role in paying awards and settlements from the 

Judgment Fund?

    (a) The Judgment Fund is a permanent, indefinite appropriation which 
is available to pay many judicially and administratively ordered 
monetary awards against the United States. In addition, amounts owed 
under compromise agreements negotiated by the U.S. Department of Justice 
in settlement of claims arising under actual or imminent litigation are 
normally paid from the Judgment Fund, if a judgment on the merits would 
be payable from the Judgment Fund. Treasury's Financial Management 
Service (FMS) certifies payments from the Judgment Fund when the 
following four tests have been met: (1) Awards or settlements are final; 
(2) Awards or settlements are monetary; (3) One of the authorities 
specified in 31 U.S.C. 1304(a)(3) provides for payment of the award or 
settlement; and (4) Payment may not legally be made from any other 
source of funds.
    (b) Additionally, FMS requires that requests for payment identify 
the statute that forms the basis of the underlying claim. The award or 
settlement must comply with the statutory and regulatory requirements 
that authorize the award or settlement. For example, interest is payable 
on Judgment Fund awards only if there is an express statutory provision, 
contractual agreement or constitutional waiver of sovereign immunity 
authorizing the assessment of interest against the United States. Also, 
a tort under the Federal Tort Claims Act (FTCA) is payable from the 
Judgment Fund only when the award amount exceeds $2,500 (for 
administrative awards) and is in compliance with the regulatory 
requirements at 28 CFR part 14.



Sec. 256.2  Where can I find more information about, and forms for, Judgment 

Fund payments?

    Detailed information related to Judgment Fund payments, including 
copies of all forms, can be found in the Treasury Financial Manual 
(TFM), Volume I, Part 6, Chapter 3100. The TFM is available on the 
Judgment Fund Web site at http://www.fms.treas.gov/judgefund. Contact 
information for the Judgment Fund Branch is also available on the Web 
site.



                      Subpart B_Requesting Payments



Sec. 256.10  Who may request payment from the Judgment Fund?

    (a) Court judgments and settlements of litigation. The Department of 
Justice must normally submit the request for payment from the Judgment 
Fund. Agencies that have independent litigating authority may submit a 
request for payment themselves if the Department of Justice is not 
responsible for the case.
    (b) Administrative awards. The program agency that is authorized to 
approve the award must submit the request for payment.



Sec. 256.11  How do agencies request payments?

    Agencies must submit requests for payments from the Judgment Fund on 
FMS's Judgment Fund payment request forms or by using other approved 
methods as provided for on the Judgment Fund Web site at http://
www.fms.treas.gov/judgefund. FMS provides forms and detailed information 
about Judgment Fund payments in the TFM, Volume I, Part 6, Chapter 3100. 
The TFM is also available on the Judgment Fund Web site. The submitting 
agency must complete and sign all required Judgment Fund forms and must 
attach all required supporting documents.



Sec. 256.12  What supporting documentation must agencies submit to FMS when 

requesting a payment from the Judgment Fund?

    (a) All payments. The submitting agency must submit a copy of the 
judgment or settlement agreement, as applicable, in addition to the 
request for payment from the Judgment Fund. The request for payment must 
be on the appropriate Judgment Fund payment request forms.
    (b) Awards to minors. For awards to claimants that are minors, the 
submitting agency must include in its submission to FMS documentation 
establishing that the payee, if different from the claimant, is legally 
authorized to

[[Page 104]]

act on behalf of the claimant. Documentation of court approvals 
(Federal, State, or foreign) that are legally required for payment must 
be submitted along with the request for payment from the Judgment Fund. 
State law typically specifies when money awards to minors require the 
appointment of a guardian. Agencies must list the appropriate 
controlling state law citation on the payment request forms.
    (c) Awards of costs. For awards of costs, the submitting agency must 
include a copy of the ``bill of costs'' or the Court's order awarding 
costs. Only those items expressly enumerated under the cost statute, 28 
U.S.C. 1920, or other governing statute specific to the award, are 
payable from the Judgment Fund.
    (d) Payments to multiple claimants/payees in a single award. For 
awards where multiple payees are to receive separate payments, the 
submitting agency must complete separate Judgment Fund Vouchers for 
Payment for each payee. When there are multiple claimants in an 
administrative tort matter, each claimant's award must independently 
exceed the mandatory $2,500 threshold in order for payment to be made 
from the Judgment Fund. A claimant's threshold can be satisfied by 
combining amounts awarded for personal and property damage under the 
FTCA.
    (e) Awards of back pay. For awards of back pay where the judgment 
does not specifically state the principal amounts to be paid and 
withholdings to be made, the submitting agency must include a 
spreadsheet indicating precisely which amounts are allocable to net pay, 
deductions, and interest.



Sec. 256.13  Are agencies required to supply a taxpayer identification number 

(TIN) when submitting a request for payment?

    Yes, agencies must include a valid TIN on all requests for payments, 
unless the situation meets one of the exceptions listed in the FMS TIN 
Policy, which may be found on the FMS Web site at: http://
www.fms.treas.gov/tinpolicy/regulations.html. For an individual, the TIN 
is the Social Security Number. For a business, the TIN is the Employer 
Identification Number issued by IRS. The TIN provided must be for the 
party entitled to the payment, whether or not that party is the payee. 
Failure to include a required TIN results in an incomplete request for 
payment.



Sec. 256.14  What happens if I submit an incomplete request for payment?

    FMS may return, without action, any request for payment that is 
incomplete. If a request for payment is returned for lack of necessary 
information, the submitting agency may resubmit the request for payment 
once all the required information is available.



                        Subpart C_Debt Collection



Sec. 256.20  How does an agency indicate that a debt is to be offset from a 

Judgment Fund payment?

    The submitting agency must identify on the appropriate Judgment Fund 
form any known debt owed to the United States that FMS is expected to 
collect by setoff against the award. Such a debt will be offset pursuant 
to the provisions of 31 U.S.C. 3728.



Sec. 256.21  Are Judgment Fund payments offset to collect administrative 

debts?

    Yes, separate and apart from its role as administrator of the 
Judgment Fund, FMS, in its capacity as disbursing official for the 
executive branch, offsets Judgment Fund payments to collect delinquent, 
nontax Federal debts through the Treasury Offset Program (TOP). This 
rule applies only to the setoff of Judgment Fund payments prior to 
payment certification, pursuant to 31 U.S.C. 3728, and not to disbursing 
official offsets pursuant to other authorities. (See 31 CFR 285.5 for 
requirements for disbursing official offset of past-due delinquent, 
nontax debts pursuant to the authority set forth in 31 U.S.C. 3716.)



Sec. 256.22  How does FMS set off an award under 31 U.S.C. 3728?

    The setoff statute establishes a two-step process to collect debts 
that are owed to the United States. If an agency notifies FMS of a debt 
for which a court has issued a judgment against a debtor in favor of the 
United States, or for which the IRS has issued a tax levy

[[Page 105]]

pursuant to 26 U.S.C. 6331, then FMS will automatically set off the debt 
from the payment. If the debt owed to the United States has not been 
judicially determined, then FMS must notify the claimant of the debt and 
request the debtor's consent to a setoff. If the debtor consents, then 
FMS will set off the debt. If the debtor does not consent, then FMS will 
withhold from payment an amount equal to the debt. FMS also may withhold 
an amount sufficient to pay the cost of litigating the debt to judgment. 
FMS then will consult with the underlying agency and the Department of 
Justice regarding the necessity for a civil action to reduce the debt to 
judgment. If litigation proceeds and is successful, FMS will set off the 
debt. If the suit is unsuccessful, FMS will pay the withheld amount with 
interest accruing from the date when payment would have been made.



                 Subpart D_Interest and Litigation Costs



Sec. 256.30  When does the Judgment Fund pay interest?

    Interest is paid when it is ordered in the judgment pursuant to a 
statutory, contractual or constitutional waiver of sovereign immunity. 
Such waivers may include interest as set forth under 41 U.S.C. 611 
(Contract Disputes Act), 5 U.S.C. 5596 (Back Pay Act), or Title VII, 42 
U.S.C. 2000e-16 (Civil Rights Act of 1991). In addition, post-judgment 
interest is paid on awards eligible for interest under 31 U.S.C. 1304(b) 
(unsuccessful appeal by the Government).



Sec. 256.31  How does FMS compute interest on payments?

    FMS computes interest according to the terms of the statute that 
waives sovereign immunity for interest to be awarded against the Federal 
government. The statute that allows interest must be cited on the 
appropriate Judgment Fund form.



Sec. 256.32  What documentation must be submitted to the Judgment Fund Branch to preserve the right to seek interest under 31 U.S.C. 1304(b) in a case where 
          the government has taken an appeal?

    31 U.S.C. 1304(b) specifies that a ``transcript of the judgment'' 
must be filed with the Secretary of the Treasury. This means that a copy 
of the judgment must be filed with the Judgment Fund Branch for interest 
to accrue on a judgment of a federal district court, the Court of 
Appeals for the Federal Circuit, or the United States Court of Federal 
Claims. By practice, the successful plaintiff files a copy of the 
judgment. Whoever submits the judgment should include a cover letter 
explaining that it is being submitted to preserve interest rights under 
31 U.S.C. 1304. A copy of the judgment and cover letter must be sent to 
the Financial Management Service, Judgment Fund Branch, at the address 
indicated on the Judgment Fund Web site at http://www.fms.treas.gov/
judgefund.



Sec. 256.33  For what period of time is interest computed under 31 U.S.C. 

1304(b)?

    Interest is computed from the date that FMS receives the copy of the 
judgment until the date preceding the appellate court's affirmative 
ruling. If the United States files a Notice of Appeal which it later 
withdraws, interest is paid on the award through the date before the 
withdrawal of the Notice of Appeal.



Sec. 256.34  Does the Judgment Fund pay all litigation costs?

    FMS certifies for payment only those costs that are enumerated in 
the cost statute, 28 U.S.C. 1920, or as set forth under a statute that 
specifically governs payment of the award.



              Subpart E_Reimbursements to the Judgment Fund



Sec. 256.40  When must an agency reimburse the Judgment Fund?

    Agencies are required to reimburse the Judgment Fund for payments 
made pursuant to the Contract Disputes Act (CDA), 41 U.S.C. 612, and 
payments made pursuant to the Notification and

[[Page 106]]

Federal Employees Antidiscrimination and Retaliation Act of 2002 (No 
FEAR), 5 U.S.C. 2301 note. The TFM, available on the Judgment Fund Web 
site at http://www.fms.treas.gov/judgefund, contains more information 
about how FMS bills agencies and collects such reimbursements.



Sec. 256.41  When is reimbursement due for CDA and No FEAR payments?

    Reimbursement for a CDA or No FEAR payment should be made promptly 
upon notification from FMS of the amount due. If the agency is unable to 
timely reimburse FMS, the agency must contact FMS to establish a 
reimbursement plan. Under Office of Personnel Management (OPM) 
regulations, No FEAR reimbursements or payment reimbursement plans must 
be made within 45 days of the request for reimbursement. See 5 CFR part 
724. Agencies that do not meet this requirement will be listed on FMS's 
public Web site.



                     Subpart F_Additional Provisions



Sec. 256.50  How does FMS process back pay awards?

    The submitting agency may request one of two methods to process back 
pay awards.
    (a) One method has three parts. The first part is a payment of net 
back pay (and interest if authorized), which is sent to the plaintiff or 
to the plaintiff's attorney, as directed by the submitting agency. The 
second part is a payment to the agency of deductions from the net back 
pay. The third part is a payment of attorney fees, which is sent 
directly to the attorney.
    (b) Under the second method, FMS pays the entire back pay award to 
the agency out of whose actions the claim arose. The agency then issues 
amounts representing back pay (and interest if authorized) to the 
plaintiff and retains amounts representing deductions. FMS pays the 
attorney fees directly to the attorney.

[71 FR 60849, Oct. 17, 2006; 71 FR 62050, Oct. 20, 2006]



Sec. 256.51  Does FMS report Judgment Fund payments to the IRS as income to 

the payee on IRS Form 1099?

    No, FMS does not report Judgment Fund payments as potential taxable 
income to the IRS. FMS does not have sufficient information about the 
payment to determine if a Form 1099 must be issued or to prepare such a 
form when required. To the extent any Form 1099 needs to be issued, it 
is the responsibility of the agency submitting the payment request to do 
so.



Sec. 256.52  How does FMS issue a payment?

    Pursuant to 31 CFR part 208, Judgment Fund payments are to be made 
by electronic funds transfer (EFT). FMS will issue an electronic payment 
to the payee's account as specified on the appropriate Judgment Fund 
form. If a submitting agency determines that a waiver (in accordance 
with 31 CFR part 208) to the requirement for payment by EFT is 
appropriate, FMS will issue a payment by check. The Voucher for Payment 
must direct payment to the payee designated in the judgment or 
settlement agreement.



Sec. 256.53  How does the submitting agency know when payment is made?

    FMS will e-mail the agency contact when payment is disbursed, if the 
agency contact has provided an email address on the appropriate Judgment 
Fund form. Also, FMS maintains an on-line payment status system that the 
submitting agency can access to determine the status of a payment. The 
payment reporting system can be accessed from the Judgment Fund Web site 
at http://www.fms.treas.gov/judgefund.



Sec. 256.54  What happens if FMS denies a request for payment?

    FMS must deny any request for payment that fails to satisfy the 
requirements of 31 U.S.C. 1304. The submitting agency may request 
reconsideration of a payment denial. The submitting agency must provide 
an explanation of how the request for payment meets the four tests 
contained in section 256.1 of

[[Page 107]]

this part. If applicable, requests for reconsideration must contain a 
reference to the agency's program authority and include specific funding 
provisions that pertain to the program activity that resulted in the 
claim. If, upon reconsideration, FMS determines that payment from the 
Judgment Fund is appropriate, and the agency has already made payment to 
the plaintiff or claimant, FMS will reimburse the agency from the 
Judgment Fund.



                     Subpart G_Private Relief Bills



Sec. 256.60  How do I get paid for a Private Relief Bill?

    You may apply for payment by sending a request letter along with 
supporting documentation, to include a copy of the private relief act 
and proof of your identity, to the address specified on the FMS Web site 
at http://www.fms.treas.gov/privaterelief.



PART 270_AVAILABILITY OF RECORDS--Table of Contents




Sec.
270.1 Rules governing availability of information.
270.2 Materials available for inspection and copying.
270.3 Requests for identifiable records.
270.4 Fees for services.

    Authority: 5 U.S.C. 552.

    Source: 58 FR 25943, Apr. 29, 1993, unless otherwise noted.



Sec. 270.1  Rules governing availability of information.

    The records of the Financial Management Service required by 5 U.S.C. 
552 to be made available to the public shall be made available in 
accordance with the definitions, procedures and other provisions of the 
regulations on the Disclosure of Records of the Office of the Secretary 
and of other bureaus and offices of the Department issued under 5 U.S.C. 
552 and published as part 1 of title 31 of the Code of Federal 
Regulations, except as provided in these regulations.



Sec. 270.2  Materials available for inspection and copying.

    (a) Materials available. The materials in the Financial Management 
Service which are required by 5 U.S.C. 552(a)(2) to be made available 
for public inspection and copying are the following:
    (1) Final opinions, as well as orders, made in the adjudication of 
cases. These will include final dispositions of claims on Government 
checks which are of a precedential nature. Generally, however, the 
Financial Management Service does not issue orders in the adjudication 
of cases.
    (2) Statements of policy and interpretations which have been adopted 
by the Service and are not published in the Federal Register.
    (3) Administrative staff manuals and instructions to staff that 
affect a member of the public. These materials include sections of the 
Treasury Financial Manual and such Department Circulars applicable to 
Financial Management Service operations, that have been determined by 
the agency to affect a member of the public, and have not been 
incorporated into that manual or published as parts of title 31 of the 
Code of Federal Regulations.
    (4) Current indices for the foregoing materials.
    (b) Location. The materials listed in paragraph (a) of this section 
issued on or after the effective date of these regulations are available 
for inspection and copying during office hours in the public reading 
room of the Treasury Department, 15th Street and Pennsylvania Avenue, 
NW., Washington, DC 20220. Materials issued prior thereto are available 
in the public reading room to the extent feasible. If not so available, 
they may be requested as identifiable records.



Sec. 270.3  Requests for identifiable records.

    (a) Procedure. A written request for an identifiable record shall be 
addressed to: Freedom of Information Disclosure Officer, Financial 
Management Service, 401 14th Street, SW., Washington, DC 20227.
    (b) Determination of request. Determination as to the disclosure of 
a record request shall be made, subject to appeal to the Commissioner of 
the Financial Management Service, by the head of the division in which 
the record belongs and by the Disclosure Officer of

[[Page 108]]

the agency. The decision of the Commissioner shall constitute final 
agency action, unless the Commissioner refers the appeal to the Fiscal 
Assistant Secretary, in which case the decision of the Fiscal Assistant 
Secretary shall constitute final agency action.



Sec. 270.4  Fees for services.

    Fees for services performed by the Financial Management Service will 
be imposed and collected as set forth in part 1 of title 31 of the Code 
of Federal Regulations.



PART 281_FOREIGN EXCHANGE OPERATIONS--Table of Contents




Sec.
281.1 Authority.
281.2 [Reserved]
281.3 Collections.
281.4 Guaranty funds.
281.5 Depositaries.
281.6 Withdrawals from Treasury accounts.
281.7 Limitations.
281.8 Reporting and accounting.
281.9 General provisions.

    Authority: Sec. 114, 64 Stat. 836, sec. 613, 75 Stat. 443; 31 U.S.C. 
66b, 22 U.S.C. 2363, E.O. 10488, 18 FR 5699, 3 CFR, 1949-1953 Comp., p. 
972, E.O. 10900, 26 FR 143, 3 CFR, 1959-1963 Comp., p. 429.

    Source: 26 FR 10054, Oct. 26, 1961, unless otherwise noted.



Sec. 281.1  Authority.

    By virtue of the authority vested in the Secretary of the Treasury 
by section 114 of the Budget and Accounting Procedures Act of 1950, 64 
Stat. 836, 31 U.S.C. 66b; section 613 of the Act of September 4, 1961, 
75 Stat. 443; Executive Order No. 10488, 18 FR 5699, 3 CFR 1949-1953 
Comp.; and Executive Order No. 10900, 26 FR 143, the following 
regulations are prescribed for administration of the purchase custody, 
deposit, transfer, sale and reporting of foreign exchange (including 
credits and currencies) by executive departments and agencies 
(hereinafter referred to as agencies).



Sec. 281.2  [Reserved]



Sec. 281.3  Collections.

    Foreign exchange collected by agencies shall be delivered promptly 
into the custody of accountable officers for credit to accounts of the 
Secretary of the Treasury (hereinafter referred to as the Secretary) 
unless otherwise directed by the Secretary. The term ``collections,'' 
for the purpose of these regulations in this part, does not include 
foreign exchange acquired by the United States by purchase with dollars. 
The accountable officer shall maintain records, showing the collections, 
by source, and indicating the miscellaneous receipt accounts or other 
accounts in the Treasury to be credited with dollar proceeds from sale 
of the foreign exchange, and such further classifications as may be 
needed to indicate exchange which can be used only for restricted 
purposes. Accountable officers shall be advised by the collecting 
agencies of the source of collections and any restrictions on the use of 
the foreign exchange in order that the foregoing records may be 
maintained.



Sec. 281.4  Guaranty funds.

    The regulations in this part are applicable to all foreign exchange 
acquired by the United States under guaranty provisions of section 1011 
of the United States Information and Educational Exchange Act of 1948, 
as amended (22 U.S.C. 1442), except that receipts of such foreign 
exchange shall be deposited in the foreign exchange accounts of the 
United States Treasury referred to in Sec. 281.5(c).



Sec. 281.5  Depositaries.

    (a) Except as provided in paragraph (b) of this section, foreign 
exchange which is held by accountable officers for account of the 
Secretary and foreign exchange acquired by accountable officers by 
purchase or otherwise, which is not immediately disbursed but is held by 
such officers for their own account or for the account of any agency, 
shall be maintained only in depositaries designated by the Secretary. 
Unless otherwise directed by the Secretary, accountable officers are not 
required to have separate depositary accounts for foreign exchange held 
for the Secretary's account.
    (b) Accountable officers may carry foreign exchange as cash outside 
depositaries only pursuant to authority granted in accordance with 
Treasury

[[Page 109]]

Department Circular No. 1030 dated July 24, 1959, as amended.
    (c) Deposits in and withdrawals from foreign exchange accounts 
maintained with depositaries in the name of the United States Treasury 
will be made only as directed by the Secretary.



Sec. 281.6  Withdrawals from Treasury accounts.

    Foreign exchange shall be withdrawn from accounts of the Secretary 
on the books of accountable officers or from the foreign exchange 
accounts carried with depositaries in the name of the United States 
Treasury, only for the purpose of sale for dollars or transfer to 
agencies for authorized purposes, without reimbursement to the Treasury, 
as provided by or pursuant to law. Such transfers, as well as transfers 
between foreign exchange accounts of the Secretary and between foreign 
exchange accounts in the name of the United States Treasury, shall be 
made only by direction of the Secretary. An agency requiring foreign 
exchange from the Treasury Department shall make request of the 
Secretary, indicating the amount of exchange required, in units of 
foreign currency, and the name and location of the accountable officer 
to receive the exchange. To the extent practicable and desirable, 
standing authorizations will be given for withdrawals from accounts of 
the Secretary. The following conditions apply to the sale of foreign 
exchange and to the requisition of foreign exchange without dollar 
payment:
    (a) Sales. With respect to the sale of foreign exchange held in 
accounts of the Secretary, the payment in dollars shall be calculated at 
the rate of exchange that would otherwise be available to the United 
States for the acquisition of the foreign exchange for its official 
disbursements unless otherwise determined by the Treasury Department in 
consultation with the agencies concerned. When the rate that would 
otherwise be available to the United States is not readily 
ascertainable, the Treasury Department shall be consulted. The dollar 
proceeds realized from the sale of exchange shall be credited to the 
appropriate receipt, appropriation or refund account on the books of the 
Treasury. The dollar payment for foreign exchange purchased shall not be 
charged as an appropriation expenditure until the foreign exchange is 
disbursed.
    (b) Transfers without reimbursement. When foreign exchange is to be 
obtained from the Treasury Department without payment of dollars, the 
agency concerned shall furnish written certification that the exchange 
may be used without reimbursement to the Treasury, citing the relevant 
legal authority. In cases where international agreements or Bureau of 
the Budget allocations specify the programs for which foreign exchange 
may be used, the Secretary may transfer exchange to agencies without 
requiring a certification.

[26 FR 10054, Oct. 26, 1961, as amended at 29 FR 11497, Aug. 11, 1964]



Sec. 281.7  Limitations.

    The following limitations apply to the purchase and holding of 
foreign exchange:
    (a) Unless otherwise authorized by the Secretary, no agency or 
accountable officer shall purchase, or direct the purchase of, foreign 
exchange from any source outside the Government of the United States, 
except when exchange for the purpose intended is not available for 
purchase from within the Government.
    (b) All foreign exchange acquired by agencies by transfer from the 
Treasury Department, without payment of dollars, for the purpose of 
making authorized expenditures, shall be placed with accountable 
officers for account of the agencies concerned.
    (c) Unless otherwise authorized by the Secretary, no accountable 
officer shall purchase foreign exchange which, together with the balance 
on hand at the time of purchase, would exceed estimated requirements for 
a thirty-day period.
    (d) To the maximum extent possible, foreign exchange accounts which 
are earmarked for specific programs shall be maintained on an unfunded 
basis. Each agency responsible for administering international 
agreements pertaining to the use of foreign exchange held in funded 
accounts shall review the agreement and other considerations relevant to 
each such account at

[[Page 110]]

least annually to determine if the account can be placed on an unfunded 
basis, and shall initiate appropriate action to accomplish the objective 
of minimizing the number of funded program accounts and the amounts 
therein. The resulting determinations and the status of actions 
undertaken shall be furnished in writing to the Treasury Department 
within 60 days from the date of this regulation and each time thereafter 
that there is a change of status of a particular account, or as 
requested by the Treasury Department. Exchange which becomes eligible 
for removal from a funded status either as a result of the foregoing 
determinations, or because of the expiration of the period of 
availability for restricted use under the terms of international 
agreements, or for other reasons, shall be released promptly by the 
program agency for transfer to a nonrestricted Treasury sales account.

[26 FR 10054, Oct. 26, 1961, as amended at 29 FR 11497, Aug. 11, 1964]



Sec. 281.8  Reporting and accounting.

    The Treasury Department will maintain a system of central accounting 
and reporting for the purpose of providing information on foreign 
exchange operations to the President, the Congress, and the public. The 
Treasury Department will also prescribe rules to enhance consistency in 
reporting of foreign exchange operations by all agencies. Agencies shall 
furnish such reports and information as may be required for the 
administration of the provisions of this circular.



Sec. 281.9  General provisions.

    (a) Nothing contained in this part shall be construed as having the 
effect of superseding or amending the provisions of any regulations 
issued or approved by the Secretary pursuant to the Act of December 23, 
1944, as amended (67 Stat. 61).
    (b) The Secretary may waive, withdraw, or amend at any time or from 
time to time any or all of the provisions of the regulations of this 
part.
    (c) Implementing regulations within the framework of this circular 
will be issued by the Fiscal Assistant Secretary of the Treasury. All 
communications pertaining to the administration of the provisions of 
this part shall be directed to the Fiscal Assistant Secretary.



PART 285_DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION IMPROVEMENT ACT 

OF 1996--Table of Contents




                  Subpart A_Disbursing Official Offset

Sec.
285.1 Collection of past-due support by administrative offset.
285.2 Offset of tax refund payments to collect past-due, legally 
          enforceable nontax debt.
285.3 Offset of tax refund payments to collect past-due support.
285.4 Offset of Federal benefit payments to collect past-due, legally 
          enforceable nontax debt.
285.5 Centralized offset of Federal payments to collect nontax debts 
          owed to the United States.
285.6 Administrative offset under reciprocal agreements with states.
285.7 Salary offset.
285.8 Offset of tax refund payments to collect state income tax 
          obligations.

                 Subpart B_Authorities Other Than Offset

285.11 Administrative wage garnishment.
285.12 Transfer of debts to Treasury for collection.
285.13 Barring delinquent debtors from obtaining Federal loans or loan 
          insurance or guarantees.

    Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 3711, 
3716, 3719, 3720A, 3720B, 3720D; 42 U.S.C. 664; E.O. 13019, 61 FR 51763, 
3 CFR, 1996 Comp., p. 216.

    Source: 62 FR 34179, June 25, 1997, unless otherwise noted.



                  Subpart A_Disbursing Official Offset



Sec. 285.1  Collection of past-due support by administrative offset.

    (a) Definitions. For purposes of this section:
    Administrative offset means withholding funds payable by the United 
States (including funds payable by the United States on behalf of a 
State government) to, or held by the United States for, a person to 
satisfy a debt.
    Debt as used in this section is synonymous with the term past-due 
support.

[[Page 111]]

    Disbursing official includes an official who has authority to 
disburse public money pursuant to 31 U.S.C. 3321 or another Federal law.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury. FMS is the designee of the Secretary of the 
Treasury for all matters concerning this section, unless otherwise 
specified.
    HHS means the Department of Health and Human Services, Office of 
Child Support Enforcement.
    Past-due support means the amount of support determined under a 
court order, or an order of an administrative procedure established 
under State law, for support and maintenance of a child, or of a child 
and the parent with whom the child is living, which has not been paid. 
The term child as used in this definition is not limited to minor 
children.
    Past-due support being enforced by the State means there has been an 
assignment of the support rights to the State, or the State making the 
request for offset is providing services to individuals pursuant to 42 
U.S.C. 654(5) (section 454(5) of the Social Security Act), or the State 
is enforcing support pursuant to a cooperative agreement with or by an 
Indian tribal government.
    State means the several States of the United States. The term State 
also includes the District of Columbia, American Samoa, Guam, the United 
States Virgin Islands, the Commonwealth of the Northern Mariana Islands, 
and the Commonwealth of Puerto Rico.
    Secretary means the Secretary of the Treasury.
    (b) General rule. FMS may enter into a reciprocal agreement with a 
State for the collection of past-due support being enforced by the State 
by administrative offset from certain Federal payments. Upon 
notification of past-due support either directly from a State which has 
entered into such an agreement or from HHS, disbursing officials of FMS 
or any other disbursing official of the United States shall offset 
Federal payments which are subject to offset under this section, to 
collect past-due support. The amount offset, minus the offset fee, shall 
be forwarded to the State to be distributed in accordance with 
applicable laws and procedures.
    (c) Agreements. FMS may enter into reciprocal agreements with States 
for disbursing officials of FMS and any other Federal disbursing 
official to offset certain Federal payments to collect past-due support 
being enforced by the State. The agreement shall contain any 
requirements which FMS considers appropriate to facilitate the offset 
and prevent duplicative efforts and shall require States to prescribe 
procedures governing the collection of past-due support by Federal 
administrative offset. For purposes of this section, reciprocal means of 
mutual benefit. An agreement between FMS and a State to collect past-due 
support by offsetting Federal payments will be considered of mutual 
benefit and it is not required that States conduct administrative 
offsets to collect debts owed to the Federal Government. States which 
have entered into an agreement with FMS pursuant to this section may 
thereafter request, in the manner prescribed herein, that an offset be 
performed. Such requests shall be made by the appropriate State 
disbursing official which, for purposes of this section, means an 
appropriate official of the State agency which administers or supervises 
the administration of the State plan under Title IV-D of the Social 
Security Act.
    (d) Notification to FMS of past-due support. (1) States notifying 
FMS of past-due support must do so in the manner and format prescribed 
by FMS. States notifying HHS of past-due support must do so in the 
manner and format prescribed by HHS. HHS shall notify FMS of all past-
due support referred to HHS by States for collection by administrative 
offset provided that the requirements of paragraphs (d)(3) and (h) of 
this section have been met.
    (2) When a State has knowledge that past-due support is being 
enforced by more than one State, the State notifying FMS or HHS of the 
past-due support must inform any other State involved in enforcing the 
past-due support when it refers the debt for offset and when it receives 
the offset amount.
    (3) The notification of past-due support must be accompanied by a 
certification that the debt is past-due, legally

[[Page 112]]

enforceable, and that the State has complied with all the requirements 
as set forth in paragraph (h) of this section and with any requirements 
imposed by State law or procedure. For debts so certified, the Secretary 
may waive sections 552a (o) and (p) of Title 5, United States Code, 
where applicable, in accordance with the Secretary's authority under 31 
U.S.C. 3716(f).
    (4) FMS may reject a notification of past-due support which does not 
comply with the requirements of this section. The State will be notified 
of the rejection along with the reason for the rejection.
    (e) Minimum amount of past-due support. FMS will reject a 
notification of past-due support where the past-due support owed is less 
than $25.00. This amount may be adjusted from time to time by FMS to 
ensure that the cost of collection does not exceed the debt.
    (f) Limitations. Debts properly submitted to FMS for administrative 
offset will remain subject to collection by administrative offset until 
withdrawn by the State provided the debt remains past-due and legally 
enforceable.
    (g) Notification of changes in status of debt. The State notifying 
FMS or HHS of past-due support shall, in the manner and in the time 
frames provided by FMS or HHS, notify FMS or HHS of deletions or 
decreases in the amount of a debt referred for collection by 
administrative offset. The State may notify FMS or HHS of any increases 
in the amount of a debt referred for collection by administrative offset 
provided the State has complied with the requirements of paragraph (h) 
of this section with regard to those amounts.
    (h) Advance notification of intent to collect by administrative 
offset. (1) The State, or FMS or HHS on behalf of the State, if the 
State requests and FMS or HHS agrees, shall send a written notification, 
at least 30 days in advance of referral of the debt for offset, to the 
individual owing past-due support, informing the individual that the 
State intends to refer the debt for collection by administrative offset 
against Federal payments. The notice must also inform the individual of:
    (i) The nature and amount of the debt; and
    (ii) The right to an administrative review by the State referring 
the debt or, upon the request of the individual, by the State with the 
order upon which the referral was based, of the determination of the 
State with respect to the debt and of the procedures and time frames 
established by the State for such reviews.
    (2) Prior to referring a debt to FMS for collection by 
administrative offset, States must provide individuals with a reasonable 
opportunity to exercise the rights enumerated in paragraph (h)(1) of 
this section in accordance with procedures prescribed by the State.
    (i) Payments subject to offset. Federal payments subject to offset 
under this section include all Federal payments except:
    (1) Payments due to an individual under
    (i) Title IV of the Higher Education Act of 1965;
    (ii) The Social Security Act;
    (iii) Part B of the Black Lung Benefits Act;
    (iv) Any law administered by the Railroad Retirement Board;
    (2) Payments which the Secretary determines are exempt from offset 
in accordance with paragraph (k) of this section;
    (3) Payments from which collection of past-due support by 
administrative offset is expressly prohibited by law;
    (4) Payments made under the Internal Revenue Code of 1986 (except 
that tax refund payments are subject to offset under separate 
authority); and
    (5) Payments made under the tariff laws of the United States.
    (j) Special provisions applicable to Federal salary payments. (1) 
Unless a lower maximum offset limitation is provided by applicable State 
law, the maximum part of a Federal salary payment per pay period subject 
to offset to collect past-due support shall not exceed those amounts set 
forth at section 1673(b)(2) (A) and (B) of Title 15, United States Code, 
as follows:
    (i) Fifty (50%) percent of the debtor's aggregate disposable 
earnings for any pay period, where the debtor asserts by affidavit, or 
by other acceptable evidence, that he/she is supporting a spouse and/or 
dependent child, other than the former spouse and/or child for

[[Page 113]]

whom support is being collected, except that an additional five (5%) 
percent will apply if it appears that such earnings are to enforce past-
due support for a period which is twelve (12) weeks or more prior to the 
pay period to which the offset applies. A debtor shall be considered to 
be supporting a spouse and/or dependent child only if the debtor 
provides over half of the spouse's and/or dependent child's support.
    (ii) Sixty (60%) percent of the debtor's aggregate disposable 
earnings for any pay period where the debtor fails to assert by 
affidavit or establish by other acceptable evidence that he/she is 
supporting a spouse and/or dependent child, other than a former spouse 
and/or child for whom support is being collected, except that an 
additional five (5%) percent will apply if it appears that such earnings 
are to enforce past-due support for a period which is twelve (12) weeks 
or more prior to the pay period to which the offset applies.
    (2) The maximum allowable offset amount shall be reduced by the 
amount of any deductions in pay resulting from a garnishment order for 
support. Nothing in this rule is intended to alter rules applicable to 
processing garnishment orders for child support and/or alimony.
    (3) Federal salary payments subject to offset for the collection of 
past-due support include current basic pay, special pay, incentive pay, 
retainer pay, overtime, or in the case of an employee not entitled to 
basic pay, other authorized pay. Aggregate disposable earnings for 
purposes of determining the maximum amounts which may be offset under 
paragraph (j)(1) of this section is Federal salary pay remaining after 
the deduction of:
    (i) Any amount required by law to be withheld;
    (ii) Amounts properly withheld for Federal, State or local income 
tax purposes;
    (iii) Amounts deducted as health insurance premiums;
    (iv) Amounts deducted as normal retirement contributions, not 
including amounts deducted for supplementary coverage; and
    (v) Amounts deducted as normal life insurance premiums not including 
amounts deducted for supplementary coverage.
    (4) At least 30 days in advance of offset, the disbursing official 
shall send written notice to the debtor of the maximum offset 
limitations described in paragraph (j)(1) of this section. The notice 
shall include a request that the debtor submit supporting affidavits or 
other documentation necessary to determine the applicable offset 
percentage limitation. The notice shall also inform the debtor of the 
percentage that will be deducted if he/she fails to submit the requested 
documentation.
    (5) At the time the past-due support debt is submitted for offset, 
the State shall advise FMS or HHS if the maximum amount of a Federal 
salary payment that may be offset is less than the amount described 
under this paragraph.
    (k) Payments exempt from administrative offset to collect past-due 
support being enforced by a State. The Secretary will exempt from 
administrative offset under this part payments made under means-tested 
programs when requested by the head of the Federal agency which 
administers the program. For purposes of this section, means-tested 
programs are programs for which eligibility is based on a determination 
that income and/or assets of the beneficiary are inadequate to provide 
the beneficiary with an adequate standard of living without program 
assistance. The Secretary may exempt from administrative offset under 
this section any other class or type of payment upon the written request 
of the head of the agency which authorizes the payments. In determining 
whether or not to grant such exemptions, the Secretary shall give due 
consideration to whether administrative offset would tend to interfere 
substantially with or defeat the purposes of the payment agency's 
program.
    (l) Fees. A fee which FMS has determined to be sufficient to 
reimburse FMS for the full cost of the offset procedure, shall be 
deducted from each offset amount. FMS will notify the States, annually 
and in advance, of the amount of the fee to be charged for each offset.
    (m) Offsetting payments--(1) Conducting the offset. Disbursing 
officials of

[[Page 114]]

the Department of the Treasury, the Department of Defense, the United 
States Postal Service, or any other Government corporation, any 
disbursing official of the United States designated by the Secretary, or 
any disbursing official of an executive department or agency that 
disburses Federal payments shall offset payments subject to offset under 
this section to satisfy, in whole or part, a debt owed by the payee. 
Disbursing officials shall compare payment certification records with 
records of debts submitted to FMS for collection by administrative 
offset. A match will occur when the taxpayer identifying number and name 
control of a payment record are the same as the taxpayer identifying 
number and name control of a debt record. The taxpayer identifying 
number for an individual is the individual's social security number. 
When a match occurs and all other requirements for offset have been met, 
the disbursing official shall offset the payment to satisfy, in whole or 
part, the debt. Any amounts not offset shall be paid to the payee. The 
amount that can be offset from a single payment is the lesser of the 
amount of the debt (including interest, penalties, and administrative 
costs); the amount of the payment; or the amount of the payment 
available for offset if a statute or regulation prohibits offset of the 
entire amount. Debts remain subject to collection by offset until paid 
in full.
    (2) Disposition of amounts collected. FMS will transmit amounts 
collected for debts, less fees charged under paragraph (l) of this 
section, to HHS or to the appropriate State. If FMS learns that an 
erroneous offset payment has been made to HHS or any State, FMS will 
notify HHS or the appropriate State that an erroneous offset payment has 
been made. FMS may deduct the amount of the erroneous offset payment 
from amounts payable to HHS or the State, as the case may be. 
Alternatively, upon FMS' request, the State shall return promptly to the 
affected payee or FMS an amount equal to the amount of the erroneous 
payment (unless the State previously has paid such amounts, or any 
portion of such amounts, to the affected payee). HHS and States shall 
notify FMS any time HHS or a State returns an erroneous offset payment 
to an affected payee. FMS and HHS, or the appropriate State, will adjust 
their debtor records accordingly.
    (n) Administrative offset priorities. When a payee/debtor owes more 
than one debt which has been referred to FMS for collection by 
administrative offset, any offset by a disbursing official will be 
applied first to past-due support assigned to a State and will be 
applied to any other past-due support after any other reductions allowed 
by law.
    (o) Notification of offset. (1) Disbursing officials of FMS or any 
other disbursing official which conducts an offset will notify the payee 
in writing of the occurrence of the offset to satisfy past-due support. 
The notice shall inform the payee of the type and amount of the payment 
that was offset; the identity of the State which requested the offset; 
and a contact point within the State that will handle concerns regarding 
the offset. Disbursing officials shall not be liable for failure to 
provide this notice.
    (2) Disbursing officials of FMS or any other disbursing official 
which conducts an offset under this section will share with HHS, upon 
request by the Secretary of HHS, information contained in payment 
certification records of persons who are delinquent in child support 
obligations that would assist in the collection of such debts. When no 
offset is conducted, disbursing officials of FMS or any other disbursing 
official, will provide such information to HHS to the extent such 
information is available from offset activities conducted by FMS and 
other disbursing officials.
    (p) Liability of disbursing officials and payment agencies. Neither 
the disbursing official nor the agency authorizing the payment shall be 
liable for the amount of the administrative offset on the basis that the 
underlying obligation, represented by the payment before the 
administrative offset was taken, was not satisfied. Disbursing officials 
will notify the agency authorizing the payment that the offset has

[[Page 115]]

occurred so that the agency authorizing the payment may direct any 
inquiries concerning the offset to the appropriate State.

[62 FR 36210, July 7, 1997, as amended at 63 FR 46145, Aug. 28, 1998]



Sec. 285.2  Offset of tax refund payments to collect past-due, legally 

enforceable nontax debt.

    (a) Definitions. For purposes of this section:
    Creditor agency means a Federal agency owed a claim that seeks to 
collect that claim through tax refund offset.
    Debt or claim refers to an amount of money, funds, or property which 
has been determined by an agency official to be due the United States 
from any person, organization, or entity, except another Federal agency. 
For the purposes of this section, the terms ``claim'' and ``debt'' are 
synonymous and interchangeable and includes debt administered by a third 
party acting as an agent for the Federal Government.
    Debtor means a person who owes a debt or claim. The term ``person'' 
includes any individual, organization or entity, except another Federal 
agency.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    IRS means the Internal Revenue Service, a bureau of the Department 
of the Treasury.
    Tax refund offset means withholding or reducing a tax refund payment 
by an amount necessary to satisfy a debt owed by the payee(s) of a tax 
refund payment.
    Tax refund payment means any overpayment of Federal taxes to be 
refunded to the person making the overpayment after the IRS makes the 
appropriate credits as provided in 26 U.S.C. 6402(a) and 26 CFR 6402-
3(a)(6)(i) for any liabilities for any tax on the part of the person who 
made the overpayment.
    (b) General rule. (1) A Federal agency (as defined in 26 U.S.C. 
6402(g)) that is owed by a person a past-due, legally enforceable nontax 
debt shall notify FMS of the amount of such debt for collection by tax 
refund offset. However, any agency subject to section 9 of the Act of 
May 18, 1933 (16 U.S.C. 831h) owed such a debt may, but is not required 
to, notify FMS of the amount of such debt for collection by tax refund 
offset.
    (2) FMS will compare tax refund payment records, as certified by the 
IRS, with records of debts submitted to FMS. A match will occur when the 
taxpayer identifying number (as that term is used in 26 U.S.C. 6109) and 
name (or derivation of the name, known as a ``name control'') of a 
payment certification record are the same as the taxpayer identifying 
number and name control of a debtor record. When a match occurs and all 
other requirements for tax refund offset have been met, FMS will reduce 
the amount of any tax refund payment payable to a debtor by the amount 
of any past-due, legally enforceable debt owed by the debtor. Any 
amounts not offset will be paid to the payee(s) listed in the payment 
certification record.
    (3) This section does not apply to any debt or claim arising under 
the Internal Revenue Code.
    (4)(i) This section applies to Federal Old Age, Survivors and 
Disability Insurance (OASDI) overpayments provided the requirements of 
31 U.S.C. 3720A(f)(1) and (2) are met with respect to such overpayments.
    (ii) For purposes of this section, OASDI overpayment means any 
overpayment of benefits made to an individual under title II of the 
Social Security Act (42 U.S.C. 401 et seq.).
    (5) A creditor agency is not precluded from using debt collection 
procedures, such as wage garnishment, to collect debts that have been 
submitted to FMS for purposes of offset under this part. Such debt 
collection procedures may be used separately or in conjunction with 
offset collection procedures.
    (c) Regulations. Prior to submitting debts to FMS for collection by 
tax refund offset, Federal agencies shall promulgate temporary or final 
regulations under 31 U.S.C. 3716 and 31 U.S.C. 3720A, governing the 
agencies' authority to collect debts by administrative offset, in 
general, and offset of tax refund payments, in particular.
    (d) Agency certification and referral of debt--(1) Past-due, legally 
enforceable debt eligible for tax refund offset. For purposes of this 
section, when a Federal agency refers a past-due, legally enforceable 
debt to FMS for tax refund

[[Page 116]]

offset, the agency will certify to FMS that:
    (i) The debt is past-due and legally enforceable in the amount 
submitted to FMS and that the agency will ensure that collections are 
properly credited to the debt;
    (ii) Except in the case of a judgment debt or as otherwise allowed 
by law, the debt is referred for offset within ten years after the 
agency's right of action accrues;
    (iii) The creditor agency has made reasonable efforts to obtain 
payment of the debt in that the agency has:
    (A) Submitted the debt to FMS for collection by administrative 
offset and complied with the provisions of 31 U.S.C. 3716(a) and related 
regulations, to the extent that collection of the debt by administrative 
offset is not prohibited by statute;
    (B) Notified, or has made a reasonable attempt to notify, the debtor 
that the debt is past-due, and unless repaid within 60 days after the 
date of the notice, will be referred to FMS for tax refund offset;
    (C) Given the debtor at least 60 days to present evidence that all 
or part of the debt is not past-due or legally enforceable, considered 
any evidence presented by the debtor, and determined that the debt is 
past-due and legally enforceable; and
    (D) Provided the debtor with an opportunity to make a written 
agreement to repay the amount of the debt;
    (iv) The debt is at least $25; and
    (v) In the case of an OASDI overpayment--
    (A) The individual is not currently entitled to monthly insurance 
benefits under title II of the Social Security Act (42 U.S.C. 401 et 
seq.);
    (B) The notice describes conditions under which the Commissioner of 
Social Security is required to waive recovery of the overpayment, as 
provided under 42 U.S.C. 404(b); and
    (C) If the debtor files a request for a waiver under 42 U.S.C. 
404(b) within the 60-day notice period, the agency has considered the 
debtor's request.
    (2) Pre-offset notice and consideration of evidence for past-due, 
legally enforceable debt. (i) For purposes of paragraph (d)(1)(iii)(B) 
of this section, a creditor agency has made a reasonable attempt to 
notify the debtor if the agency uses the current address information 
contained in the agency's records related to the debt. Agencies may, but 
are not required to, obtain address information from the IRS pursuant to 
26 U.S.C. 6103(m)(2), (4), or (5).
    (ii) For purposes of paragraph (d)(1)(iii)(C) of this section, if 
the evidence presented by the debtor is considered by an agent of the 
creditor agency, or other entities or persons acting on the agency's 
behalf, the debtor must be accorded at least 30 days from the date the 
agent or other entity or person determines that all or part of the debt 
is past-due and legally enforceable to request review by an officer or 
employee of the agency of any unresolved dispute. The agency must then 
notify the debtor of its decision.
    (3) Referral of past-due, legally enforceable debt. A Federal agency 
will submit past-due, legally enforceable debt information for tax 
refund offset to FMS in the time and manner prescribed by FMS. For each 
debt, the creditor agency will include the following information:
    (i) The name and taxpayer identifying number (as defined in 26 
U.S.C. 6109) of the debtor who is responsible for the debt;
    (ii) The amount of such past-due and legally enforceable debt;
    (iii) The date on which the debt became past-due;
    (iv) The designation of the Federal agency or subagency referring 
the debt; and
    (v) In the case of an OASDI overpayment, a certification by the 
Commissioner of Social Security designating whether the amount payable 
to the agency is to be deposited in either the Federal Old-Age and 
Survivors Insurance Trust Fund or the Federal Disability Insurance Trust 
Fund, but not both.
    (4) Correcting and updating referral. If, after referring a past-
due, legally enforceable debt to FMS as provided in paragraph (d)(3) of 
this section, a creditor agency determines that an error has been made 
with respect to the information transmitted to FMS, or if an agency 
receives a payment or credits a payment to the account of a debtor 
referred to FMS for offset, or if the debt

[[Page 117]]

amount is otherwise incorrect, the agency shall promptly notify FMS and 
make the appropriate correction of the agency's records. Creditor 
agencies will provide certification as required under paragraph (d)(1) 
of this section for any increases to amounts owed.
    (5) FMS may reject a certification which does not comply with the 
requirements of paragraph (d)(1) of this section. Upon notification of 
the rejection and the reason for the rejection, a creditor agency may 
resubmit the debt with a corrected certification.
    (e) Priorities for offset. (1) A tax refund payment shall be reduced 
first by the amount of any past-due support assigned to a State under 
section 402(a)(26) or section 471(a)(17) of the Social Security Act (42 
U.S.C. 602(a)(26) or 42 U.S.C. 671(a)(17)) which is to be offset under 
26 U.S.C. 6402(c), 42 U.S.C. 664 and the regulations thereunder; second, 
by the amount of any past-due, legally enforceable debt owed to a 
Federal agency which is to be offset under 26 U.S.C. 6402(d), 31 U.S.C. 
3720A and this section; and third, by the amount of any qualifying past-
due support not assigned to a State which is to be offset under 26 
U.S.C. 6402(c), 42 U.S.C. 664 and the regulations thereunder.
    (2) If a debtor owes more than one past-due, legally enforceable 
debt to a Federal agency or agencies, the tax refund payment shall be 
credited against the debts in the order in which the debts accrued. A 
debt shall be considered to have accrued at the time at which the agency 
determines that the debt became past due.
    (3) Reduction of the tax refund payment pursuant to 26 U.S.C. 
6402(a), (c), and (d) shall occur prior to crediting the overpayment to 
any future liability for an internal revenue tax. Any amount remaining 
after tax refund offset under 26 U.S.C. 6402 (a), (c), and (d) shall be 
refunded to the taxpayer, or applied to estimated tax, if elected by the 
taxpayer pursuant to IRS regulations.
    (f) Post-offset notice to the debtor, the creditor agency, and the 
IRS. (1)(i) FMS will notify the payee(s) to whom the tax refund payment 
is due, in writing of:
    (A) The amount and date of the offset to satisfy a past-due, legally 
enforceable nontax debt;
    (B) The creditor agency to which this amount has been paid or 
credited; and
    (C) A contact point within the creditor agency that will handle 
concerns or questions regarding the offset.
    (ii) The notice in paragraph (f)(1)(i) of this section will also 
advise any non-debtor spouse who may have filed a joint tax return with 
the debtor of the steps which a non-debtor spouse may take in order to 
secure his or her proper share of the tax refund. See paragraph (g) of 
this section.
    (2) FMS will advise each creditor agency of the names, mailing 
addresses, and identifying numbers of the debtors from whom amounts of 
past-due, legally enforceable debt were collected and of the amounts 
collected from each debtor for that agency. FMS will not advise the 
creditor agency of the source of payment from which such amounts were 
collected. If a payment from which an amount of past-due, legally 
enforceable debt is to be withheld is payable to two individual payees, 
FMS will notify the creditor agency and furnish the name and address of 
each payee to whom the payment was payable.
    (3) At least weekly, FMS will notify the IRS of the names and 
taxpayer identifying numbers of the debtors from whom amounts of past-
due, legally enforceable debt were collected and the amounts collected 
from each debtor.
    (g) Offset made with regard to a tax refund payment based upon joint 
return. If the person filing a joint return with a debtor owing the 
past-due, legally enforceable debt takes appropriate action to secure 
his or her proper share of a tax refund from which an offset was made, 
the IRS will pay the person his or her share of the refund and request 
that FMS deduct that amount from amounts payable to the creditor agency. 
FMS and the creditor agency will adjust their debtor records 
accordingly.
    (h) Disposition of amounts collected. FMS will transmit amounts 
collected for past-due, legally enforceable debts, less fees charged 
under paragraph (i) of this section, to the creditor agency's

[[Page 118]]

account. If an erroneous payment is made to any agency, FMS will notify 
the creditor agency that an erroneous payment has been made. The agency 
shall pay promptly to FMS an amount equal to the amount of the erroneous 
payment (without regard to whether any other amounts payable to such 
agency have been paid).
    (i) Fees. The creditor agency will reimburse FMS and the IRS for the 
full cost of administering the tax refund offset program. FMS will 
deduct the fees from amounts collected prior to disposition and transmit 
a portion of the fees deducted to reimburse the IRS for its share of the 
cost of administering the tax refund offset program. To the extent 
allowed by law, creditor agencies may add the offset fees to the debt.
    (j) Review of tax refund offsets. Any reduction of a taxpayer's 
refund made pursuant to 26 U.S.C. 6402(d) shall not be subject to review 
by any court of the United States or by the Secretary of the Treasury, 
FMS or IRS in an administrative proceeding. No action brought against 
the United States to recover the amount of this reduction shall be 
considered to be a suit for refund of tax. Any legal, equitable, or 
administrative action by any person seeking to recover the amount of the 
reduction of the overpayment must be taken against the Federal creditor 
agency to which the amount of the reduction was paid. Any action which 
is otherwise available with respect to recoveries of overpayments of 
benefits under 42 U.S.C. 404 must be taken against the Commissioner of 
Social Security.
    (k) Access to and use of confidential tax information. Access to and 
use of confidential tax information in connection with the tax refund 
offset program are restricted by 26 U.S.C. 6103. Generally, agencies 
will not receive confidential tax information from FMS. To the extent 
such information is received, agencies are subject to the safeguard, 
recordkeeping, and reporting requirements of 26 U.S.C. 6103(p)(4) and 
the regulations thereunder. The agency shall inform its officers and 
employees who access or use confidential tax information of the 
restrictions and penalties under the Internal Revenue Code for misuse of 
confidential tax information.
    (l) Effective date. This section applies to tax refund payments 
payable under 26 U.S.C. 6402 after January 1, 1998.



Sec. 285.3  Offset of tax refund payments to collect past-due support.

    (a) Definitions. For purposes of this section:
    Debt as used in this section is synonymous with the term past-due 
support unless otherwise indicated.
    Debtor as used in this section means a person who owes past-due 
support.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    HHS means the Department of Health and Human Services, Office of 
Child Support Enforcement.
    IRS means the Internal Revenue Service, a bureau of the Department 
of the Treasury.
    Past-due support means the amount of support, determined under a 
court order, or an order of an administrative process established under 
State law, for support and maintenance of a child, or of a child and the 
parent with whom the child is living, which has not been paid, as 
defined in 42 U.S.C. 664(c).
    Qualified child means a child:
    (i) Who is a minor, or
    (ii) Who, while a minor, was determined to be disabled under 
subchapters II or XVI, Chapter 7, Title 42, United States Code, and for 
whom an order of support is in force.
    State means the several States of the United States. The term 
``State'' also includes the District of Columbia, American Samoa, Guam, 
the United States Virgin Islands, the Commonwealth of the Northern 
Mariana Islands, and the Commonwealth of Puerto Rico.
    Tax refund offset means withholding or reducing a tax refund payment 
by an amount necessary to satisfy a debt owed by the payee(s) of a tax 
refund payment.
    Tax refund payment means any overpayment of Federal taxes to be 
refunded to the person making the overpayment after the IRS makes the 
appropriate credits as provided in 26 U.S.C. 6402(a) and 26 CFR 6402-
3(a)(6)(i) for any liabilities for any Federal tax

[[Page 119]]

on the part of the person who made the overpayment.
    (b) General rule. (1) Past-due support will be collected by tax 
refund offset upon notification to FMS in accordance with 26 U.S.C. 
6402(c), 42 U.S.C. 664 and this section. Collection by offset under 26 
U.S.C. 6402(c) is a collection procedure separate from the collection 
procedures provided by 26 U.S.C. 6305 and 26 CFR 301.6305-1, relating to 
the assessment and collection of certain child and spousal support 
liabilities. Tax refund offset may be used separately or in conjunction 
with the collection procedures provided in 26 U.S.C. 6305, as well as 
other collection procedures.
    (2) FMS will compare tax refund payment records, as certified by the 
IRS, with records of debts submitted to FMS. A match will occur when the 
taxpayer identifying number (as that term is used in 26 U.S.C. 6109) and 
name of a payment certification record are the same as the taxpayer 
identifying number and name of a delinquent debtor record. When a match 
occurs and all other requirements for tax refund offset have been met, 
FMS will reduce the amount of any tax refund payment payable to a debtor 
by the amount of any past-due support debt owed by the debtor. Any 
amounts not offset will be paid to the payee(s) listed in the payment 
certification record.
    (c) Notification of past-due support--(1) Past-due support eligible 
for tax refund offset. Past-due support qualifies for tax refund offset 
if:
    (i)(A) There has been an assignment of the support obligation to a 
State and the amount of past-due support is not less than $25.00, or 
such higher amount as HHS rules may allow, whichever is greater; or
    (B) A State agency is providing support collection services under 42 
U.S.C. 654(4), the amount of past-due support is not less than $500.00, 
and the past-due support is owed to or on behalf of a qualified child 
(or a qualified child and the parent with whom the child is living if 
the same support order includes support for the child and the parent); 
and
    (ii) A notification of liability for past-due support has been 
received by FMS as prescribed by paragraphs (c)(2) or (c)(3) of this 
section.
    (2) Notification of liability for past-due support and transmission 
of information to FMS by HHS. States notifying HHS of past-due support 
shall do so in the manner and format prescribed by HHS. The notification 
of liability shall be accompanied by a certification that the State has 
complied with the requirements contained in paragraph (c)(4) of this 
section and with any requirements applicable to the offset of Federal 
tax refunds to collect past-due support imposed by State law or 
procedures. HHS shall consolidate and transmit to FMS the information 
contained in the notifications of liability for past-due support 
submitted by the States provided that the State has certified that the 
requirements of paragraph (c)(4) of this section have been met.
    (3) Notification of liability for past-due support transmitted 
directly to FMS by States. States must notify HHS of past-due support in 
accordance with the provisions of paragraph (c)(2) of this section 
unless HHS rules authorize notification to FMS directly. If authorized 
by HHS rules, States may notify FMS directly of past-due support. States 
notifying FMS directly of past-due support shall do so in the manner and 
format prescribed by FMS. The notification of liability shall be 
accompanied by a certification that the State has complied with the 
requirements contained in paragraph (c)(4) of this section and with any 
requirements applicable to the offset of Federal tax refunds to collect 
past-due support imposed by State law or procedures. FMS may reject a 
notification of past-due support which does not comply with the 
requirements of this section. Upon notification of the rejection and the 
reason for rejection, the State may resubmit a corrected notification.
    (4) Advance notification to debtor of intent to collect by tax 
refund offset. The State, or HHS if the State requests and HHS agrees, 
is required to provide a written notification to the debtor, pursuant to 
the provisions of 42 U.S.C. 664(a)(3) and 45 CFR 303.72(e), informing 
the debtor that the State intends to refer the debt for collection by 
tax refund offset. The notice also shall:

[[Page 120]]

    (i) Instruct the debtor of the steps which may be taken to contest 
the State's determination that past-due support is owed or the amount of 
the past-due support;
    (ii) Advise any non-debtor who may file a joint tax return with the 
debtor of the steps which a non-debtor spouse may take in order to 
secure his or her proper share of the tax refund; and
    (iii) In cases when a debt is being enforced by more than one State, 
advise the debtor of his or her opportunities to request a review with 
the State enforcing collection or the State issuing the support order as 
prescribed by the provisions of 45 CFR 303.72(g).
    (5) Correcting and updating notification. The State shall, in the 
manner and in the time frames provided by FMS or HHS, notify FMS or HHS 
of any deletion or net decrease in the amount of past-due support 
referred to FMS, or HHS as the case may be, for collection by tax refund 
offset. The State may notify FMS or HHS of any increases in the amount 
of the debt referred to FMS for collection by tax refund offset provided 
that the State has complied with the requirements of paragraph (c)(4) of 
this section with regard to those debts.
    (6) Collection of past-due support enforced by multiple States. When 
a State has knowledge that the debt is being enforced by more than one 
State, the State notifying FMS, or HHS as the case may be, of the debt 
shall inform any such other State involved in enforcing the debt when it 
receives the offset amount.
    (d) Priorities for offset. (1) As provided in 26 U.S.C. 6402 as 
amended, a tax refund payment shall be reduced in the following order of 
priority:
    (i) First by the amount of any past-due support assigned to a State 
(welfare cases) which is to be offset under 26 U.S.C. 6402(c), 42 U.S.C. 
664 and this section;
    (ii) Second, by the amount of any past-due, legally enforceable debt 
owed to a Federal agency which is to be offset under 26 U.S.C. 6402(d), 
31 U.S.C. 3720A and Sec. 285.2 of this part;
    (iii) Third, by the amount of any qualifying past-due support not 
assigned to a State (non-welfare cases) which is to be offset under 26 
U.S.C. 6402(c), 42 U.S.C. 664 and this section; and
    (iv) Fourth, by the amount of any past-due, legally enforceable 
State income tax obligation which is to be offset under 26 U.S.C. 
6402(e).
    (2) Reduction of the tax refund payment pursuant to 26 U.S.C. 
6402(a), (c), (d), and (e) shall occur prior to crediting the 
overpayment to any future liability for an internal revenue tax. Any 
amount remaining after tax refund offset under 26 U.S.C. 6402(a), (c), 
(d), and (e) shall be refunded to the taxpayer, or applied to estimated 
tax, if elected by the taxpayer pursuant to IRS regulations.
    (e) Post-offset notice. (1)(i) FMS shall notify the debtor in 
writing of:
    (A) The amount and date of the offset to satisfy past-due support;
    (B) The State to which this amount has been paid or credited; and
    (C) A contact point within the State that will handle concerns or 
questions regarding the offset.
    (ii) The notice in paragraph (e)(1)(i) of this section also will 
advise any non-debtor who may have filed a joint tax return with the 
debtor of the steps which a non-debtor spouse may take in order to 
secure his or her proper share of the tax refund. See paragraph (f) of 
this section.
    (2) FMS will advise HHS of the names, mailing addresses, and 
identifying numbers of the debtors from whom amounts of past-due support 
were collected, of the amounts collected from each debtor through tax 
refund offset, the names of any non-debtor spouses who may have filed a 
joint return with the debtor, and of the State on whose behalf each 
collection was made. Alternatively, FMS will provide such information to 
each State that refers debts directly to FMS. FMS will inform HHS and 
each State that the payment source is a tax refund payment.
    (3) At least weekly, FMS will notify the IRS of the names and 
taxpayer identifying numbers of the debtors from whom amounts owed for 
past-due support were collected from tax refund offsets and the amounts 
collected from each debtor.
    (4) At such time and in such manner as FMS and HHS agree, but no 
less

[[Page 121]]

than annually, FMS will advise HHS of the States which have furnished 
notices of past-due support, the number of cases in each State with 
respect to which such notices have been furnished, the amount of past-
due support sought to be collected by each State, and the amount of such 
tax refund offset collections actually made in the case of each State. 
As FMS and HHS may agree, FMS may provide additional offset-related 
information about States which have furnished notices of past-due 
support.
    (f) Offset made with regard to a tax refund payment based upon joint 
return. If the person filing a joint return with a debtor owing the 
past-due support takes appropriate action to secure his or her proper 
share of a tax refund from which an offset was made, the IRS will pay 
the person his or her share of the refund and request that FMS deduct 
that amount from amounts payable to HHS or the State, as the case may 
be. FMS and HHS, or the appropriate State, will adjust their debtor 
records accordingly.
    (g) Disposition of amounts collected. FMS will transmit amounts 
collected for debts, less fees charged under paragraph (h) of this 
section, to HHS or to the appropriate State. If FMS learns that an 
erroneous offset payment is made to HHS or any State, FMS will notify 
HHS or the appropriate State that an erroneous offset payment has been 
made. FMS may deduct the amount of the erroneous offset payment from 
amounts payable to HHS or the State, as the case may be. Alternatively, 
upon FMS' request, the State shall return promptly to the affected 
taxpayer or FMS an amount equal to the amount of the erroneous payment 
(unless the State previously has paid such amounts, or any portion of 
such amounts, to the affected taxpayer). HHS and States shall notify FMS 
any time HHS or a State returns an erroneous offset payment to an 
affected taxpayer. FMS and HHS, or the appropriate State, will adjust 
their debtor records accordingly.
    (h) Fees. The State will pay a fee to FMS for the full cost of 
administering the tax refund offset program. The fee (not to exceed $25 
per case submitted) will be established annually in such amount as FMS 
and HHS agree to be sufficient to reimburse FMS for the full cost of the 
offset procedure. FMS will deduct the fees from amounts collected prior 
to disposition and transmit a portion of the fees deducted to reimburse 
the IRS for its share of the cost of administering the tax refund offset 
program. Fees will be charged only for actual tax refund offsets 
completed.
    (i) Review of tax refund offsets. In accordance with 26 U.S.C. 
6402(f), any reduction of a taxpayer's refund made pursuant to 26 U.S.C. 
6402(c), (d), or (e) shall not be subject to review by any court of the 
United States or by the Secretary of the Treasury, FMS or IRS in an 
administrative proceeding. No action brought against the United States 
to recover the amount of this reduction shall be considered to be a suit 
for refund of tax.
    (j) Access to and use of confidential tax information. Access to and 
use of confidential tax information in connection with the tax refund 
offset program is permitted to the extent necessary in establishing 
appropriate agency records, locating any person with respect to whom a 
reduction under 26 U.S.C. 6402(c) is sought for purposes of collecting 
the debt, and in the defense of any litigation or administrative 
procedure ensuing from a reduction made under section 6402(c).
    (k) Effective date. This section applies to tax refund payments 
payable under 26 U.S.C. 6402 after January 1, 1999.

[63 FR 72094, Dec. 30, 1998]



Sec. 285.4  Offset of Federal benefit payments to collect past-due, legally 

enforceable nontax debt.

    (a) Scope. (1) This section sets forth special rules applicable to 
the offset of Federal benefit payments payable to an individual under 
the Social Security Act (other than Supplemental Security Income (SSI) 
payments), part B of the Black Lung Benefits Act, or any law 
administered by the Railroad Retirement Board (other than payments that 
such Board determines to be tier 2 benefits) to collect delinquent 
nontax debt owed to the United States.
    (2) As used in this section, benefit payments ``due to'' an 
individual,

[[Page 122]]

``payable to'' an individual, and/or benefit payments ``received by'' an 
individual, refer to those benefit payments expected to be paid to an 
individual before any amounts are offset to satisfy the payee's 
delinquent debt owed to the United States. Nothing in these phrases, 
similar phrases, or this section is intended to imply or confer any new 
or additional rights or benefits on an individual with respect to his or 
her entitlement to benefit payments. The Financial Management Service 
(FMS), the Social Security Administration, the Railroad Retirement 
Board, and other payment agencies are not liable for the amount offset 
from an individual's benefit payment on the basis that the underlying 
obligation, represented by the payment before the offset was taken, was 
not satisfied. See 31 U.S.C. 3716(c)(2)(A).
    (b) Definitions. As used in this section:
    Administrative offset or offset means withholding funds payable by 
the United States (including funds payable by the United States on 
behalf of a State government) to, or held by the United States for, a 
person to satisfy a debt.
    Agency or Federal agency means a department, agency, court, court 
administrative office, or instrumentality in the executive, judicial, or 
legislative branch of the Federal Government, including government 
corporations.
    Covered benefit payment means a Federal benefit payment payable to 
an individual under the Social Security Act (other than SSI payments), 
part B of the Black Lung Benefits Act, or any law administered by the 
Railroad Retirement Board (other than payments that such Board 
determines to be tier 2 benefits). The amount of the covered benefit 
payment payable to a debtor for purposes of this section will be the 
amount after reduction or deduction required under the laws authorizing 
the program. Reductions to recover benefit overpayments are excluded 
from the covered benefit payment when calculating amounts available for 
offset.
    Creditor agency means a Federal agency owed a debt that seeks to 
collect that debt through administrative offset.
    Debt or claim means an amount of money, funds, or property which has 
been determined by an agency official to be due the United States from 
any person, organization, or entity except another Federal agency. Debt 
or claim does not include a debt or claim arising under the Internal 
Revenue Code of 1986 or the tariff laws of the United States.
    Debtor means a person who owes a debt. The term ``person'' includes 
any individual, organization or entity, except another Federal agency.
    Disbursing official means an official who has authority to disburse 
public money pursuant to 31 U.S.C. 3321 or another law, including an 
official of the Department of the Treasury, the Department of Defense, 
the United States Postal Service, or any other government corporation, 
or any official of the United States designated by the Secretary of the 
Treasury to disburse public money.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Monthly covered benefit payment means a covered benefit payment 
payable to a payee on a recurring basis at monthly intervals that is not 
expressly limited in duration, at the time the first payment is made, to 
a period of less than 12 months.
    Payee means a person who is due a payment from a disbursing 
official. For purposes of this section, a ``payee'' is a person who is 
entitled to the benefit of all or part of a payment from a disbursing 
official.
    Taxpayer identifying number means the identifying number described 
under section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 
6109). For an individual, the taxpayer identifying number generally is 
the individual's social security number.
    (c) Administrative offset, generally. Disbursing officials shall 
offset payments to satisfy, in whole or in part, debts owed by the 
payee. Disbursing officials shall compare payment records with records 
of debts submitted to FMS for collection by administrative offset. A 
match will occur when the taxpayer identifying number and name of the 
payee (as defined in paragraph (b) of this section) on a payment record 
are

[[Page 123]]

the same as the taxpayer identifying number and name of the debtor on a 
debt record. When a match occurs and all other requirements for offset 
have been met, the disbursing official shall offset the payment to 
satisfy, in whole or in part, the debt. Any amounts not offset shall be 
paid to the payee. Covered benefit payments, i.e., payments made to 
individuals under the Social Security Act (other than Supplemental 
Security Income (SSI) payments), part B of the Black Lung Benefits Act, 
or any law administered by the Railroad Retirement Board (RRB) (other 
than tier 2 benefit payments) are among the types of payments which may 
be offset to collect debts owed to the United States. Offset of covered 
benefit payments are subject to the limitations contained in this 
section. Offsets of covered benefit payments will occur only if the name 
and taxpayer identifying number of the person who is entitled to the 
benefit of all or a part of the payment matches the name and taxpayer 
identifying number of the debtor.
    (d) Submission of debts to FMS for collection by administrative 
offset. Creditor agencies must notify FMS of all past-due, legally 
enforceable debt delinquent for more than 180 days for purposes of 
collection by administrative offset. Creditor agencies may notify FMS of 
all debt delinquent for less than 180 days for purposes of collection by 
administrative offset. Prior to such notification, creditor agencies 
must certify to FMS that the debt is past-due, legally enforceable, and 
that the creditor agency has provided the debtor with notice and an 
opportunity for a review in accordance with the provisions of 31 U.S.C. 
3716(a) and other applicable law.
    (e) Offset amount. (1) The amount offset from a monthly covered 
benefit payment shall be the lesser of:
    (i) The amount of the debt, including any interest, penalties and 
administrative costs;
    (ii) An amount equal to 15% of the monthly covered benefit payment; 
or
    (iii) The amount, if any, by which the monthly covered benefit 
payment exceeds $750.
    (2) A debtor shall not receive a refund of any amounts offset if the 
debtor's monthly covered benefit payments are reduced, suspended, 
terminated, or otherwise not received for a period of 12 months.
    (3) Examples. (i) A debtor receives monthly Social Security benefits 
of $850. The amount offset is the lesser of $127.50 (15% of $850) or 
$100 (the amount by which $850 exceeds $750). In this example, the 
amount offset is $100 (assuming the debt is $100 or more).
    (ii) A debtor receives monthly Social Security benefits of $1250. 
The amount offset is the lesser of $187.50 (15% of $1250) or $500 (the 
amount by which $1250 exceeds $750). In this example, the amount offset 
is $187.50 (assuming the debt is $187.50 or more).
    (iii) A debtor receives monthly Social Security payments of $650. No 
amount will be offset because $650 is less than $750.
    (f) Notification of offset. (1) Before offsetting a covered benefit 
payment, the disbursing official will notify the payee in writing of the 
date offset will commence. The notice shall inform the payee of the type 
of payment that will be offset; the identity of the creditor agency 
which requested the offset; and a contact point within the creditor 
agency that will handle concerns regarding the offset.
    (2) The disbursing official conducting the offset will notify the 
payee in writing of the occurrence of the offset to satisfy, in whole or 
in part, a delinquent debt owed to the United States. The notice shall 
inform the payee of the type and amount of the payment that was offset; 
the identity of the creditor agency which requested the offset; and a 
contact point within the creditor agency that will handle concerns 
regarding the offset.
    (3) Non-receipt by the debtor of the notices described in paragraphs 
(f)(1) and (f)(2) of this section shall not impair the legality of the 
administrative offset.
    (g) Fees. A fee which FMS has determined to be sufficient to cover 
the full cost of the offset procedure, shall be deducted from each 
offset amount. Creditor agencies may add this fee to the debt if not 
otherwise prohibited by law.
    (h) Disposition of amounts collected. The disbursing official 
conducting the

[[Page 124]]

offset will transmit amounts collected for debts, less fees charged 
under paragraph (g) of this section, to the appropriate creditor agency. 
If an erroneous offset payment is made to a creditor agency, the 
disbursing official will notify the creditor agency that an erroneous 
offset payment has been made. The disbursing official may deduct the 
amount of the erroneous offset payment from future amounts payable to 
the creditor agency. Alternatively, upon the disbursing official's 
request, the creditor agency shall return promptly to the disbursing 
official or the affected payee an amount equal to the amount of the 
erroneous payment. The disbursing official and the creditor agency shall 
adjust the debtor records appropriately.

[63 FR 44988, Aug. 21, 1998]



Sec. 285.5  Centralized offset of Federal payments to collect nontax debts 

owed to the United States.

    (a) Scope. (1) This section governs the centralized offset of 
Federal payments to collect delinquent, nontax debts owed to Federal 
agencies in accordance with 31 U.S.C. 3716, 3720A and 26 U.S.C. 6402 and 
applicable regulations. The Department of the Treasury's Financial 
Management Service (FMS) administers centralized offset through the 
Treasury Offset Program. Offset occurs when the Federal government 
withholds part or all of a debtor's Federal payment to satisfy the 
debtor's delinquent debt owed to the government.
    (2) Special rules apply to the collection of delinquent, nontax 
debts through the centralized offset of certain types of Federal 
payments, including tax refunds (31 CFR 285.2), Federal benefit payments 
(31 CFR 285.4), and Federal salary payments (31 CFR 285.7). While this 
rule applies to such payments, nothing in this rule is intended to 
contradict any provision of those more specific sections. To the extent 
any provision of this rule is inconsistent with a more specific 
provision of Sec. Sec. 285.2, 285.4 or 285.7 of this part, the more 
specific provision shall apply.
    (3) The receipt of collections pursuant to this section does not 
preclude a Federal agency from pursuing other debt collection remedies 
in conjunction with centralized offset. Nothing in this section 
precludes an agency from pursuing all available debt collection remedies 
simultaneously, provided that collections do not exceed the amount of 
the debt, including any interest, penalties, and administrative costs.
    (b) Definitions. As used in this section:
    Agency or Federal agency means a department, agency or subagency, 
court, court administrative office, or instrumentality in the executive, 
judicial, or legislative branch of the Federal Government, including 
government corporations.
    Centralized offset means the offset of Federal payments through the 
Treasury Offset Program to collect debts which creditor agencies have 
certified pursuant to 31 U.S.C. 3716(c), 3720A(a) and applicable 
regulations. The term ``centralized offset'' includes the Treasury 
Offset Program's processing of offsets of Federal payments disbursed by 
disbursing officials other than FMS.
    Creditor agency has the same meaning as found at 31 U.S.C. 
3701(e)(1) and means any Federal agency that is owed a claim or debt 
that seeks to collect that claim or debt through offset of Federal 
payments.
    Debt or claim has the meaning contained in 31 U.S.C. 3701(b) and 
means any amount of money, funds, or property that has been determined 
by an appropriate official of the Federal government to be owed to the 
United States by a person, organization, or entity, except another 
Federal agency. The terms ``debt'' and ``claim'' are synonymous and 
include debt administered by a third party acting as an agent for the 
Federal Government. For purposes of this section, the term ``debt'' does 
not include debts arising under the Internal Revenue Code of 1986 (26 
U.S.C. 1 et seq.), the tariff laws of the United States, or the Social 
Security Act (42 U.S.C. 301 et seq.), except to the extent provided in 
sections 204(f) and 1631(b)(4) of such Act (42 U.S.C. 404(f) and 
1383(b)(4)(A), respectively) and 31 U.S.C. 3716(c).
    Debt collection center means a Federal agency or a unit or subagency 
within a Federal agency that has been designated by the Secretary to 
collect debt owed to the United States.

[[Page 125]]

    Debtor means a person who owes a debt to the United States.
    Delinquent or past-due refers to the status of a debt and means a 
debt has not been paid by the date specified in the agency's initial 
written demand for payment, or applicable agreement or instrument 
(including a post-delinquency payment agreement), unless other payment 
arrangements satisfactory to the creditor agency have been made. Nothing 
in this section is intended to define whether a debt is delinquent or 
past-due for purposes other than offset under this section.
    Delinquent debt record means information about a past-due, legally 
enforceable debt submitted by a creditor agency to FMS for purposes of 
offset in accordance with the provisions of this section. Information 
about a past-due, legally enforceable debt includes, but is not limited 
to, the amount of the debt and the debtor's name, address, and taxpayer 
identifying number.
    Disbursing official means an official who has authority to disburse 
public money pursuant to 31 U.S.C. 3321 or another law, including an 
official of the Department of the Treasury, the Department of Defense, 
the United States Postal Service, or any other government corporation, 
or any official of the United States designated by the Secretary of the 
Treasury to disburse public money.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury and its disbursing office. FMS is responsible 
for administering centralized offset.
    Legally enforceable refers to a characteristic of a debt and means 
there has been a final agency determination that the debt, in the amount 
stated, is due, and there are no legal bars to collection by offset. 
Debts that are not legally enforceable for purposes of this section 
include, but are not limited to, debts subject to the automatic stay in 
bankruptcy proceedings or debts covered by a statute that prohibits 
collection of such debt by offset. For example, if a delinquent debt is 
the subject of a pending administrative review process required by 
statute or regulation, and if collection action during the review 
process is prohibited, the debt is not considered legally enforceable 
for purposes of this section. Nothing in this section is intended to 
define whether a debt is legally enforceable for purposes other than 
offset under this section.
    Match means the taxpayer identifying number and name (or derivative 
thereof) of the payee on a payment record are the same as the taxpayer 
identifying number and name of the debtor on a delinquent debt record.
    Offset means withholding funds payable by the United States to, or 
held by the United States for, a person to satisfy a debt owed by the 
payee.
    Past-due has the same meaning as ``delinquent'', as defined above.
    Payee means a person who is due a payment from a disbursing official 
as certified by the payment agency. For purposes of this section, a 
``payee'' is a person who is entitled to the benefit of all or part of a 
payment from a disbursing official.
    Payment agency means any agency that transmits payment requests, in 
the form of certified payment vouchers or other similar forms, to a 
disbursing official for disbursement.
    Payment record means information contained on a payment request, in 
the form of a certified payment voucher or other similar form, that has 
been transmitted to a disbursing official for disbursement in accordance 
with the provisions of 31 U.S.C. 3325 and 3528 or other applicable law. 
For purposes of matching, ``payment record'' may include information 
extracted from a payment request. Such information could include, but is 
not limited to, the amount and type of payment and the payee's name, 
address, and taxpayer identifying number.
    Person means an individual, corporation, partnership, association, 
organization, State or local government, or any other type of entity 
other than a Federal agency.
    Recurring payment means a payment to an individual that is expected 
to be payable to a payee at regular intervals, at least four times 
annually. The term ``recurring payment'' does not include payments made 
pursuant to a Federal contract, grant or cooperative agreement.

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    Representative payee means a person named as payee on the payment 
voucher certified by the payment agency who is acting on behalf of a 
person entitled to receive the benefit of all or part of the payment.
    Secretary means the Secretary of the Treasury.
    Taxpayer identifying number means the identifying number described 
under section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 
6109). For an individual, the taxpayer identifying number is generally 
the individual's social security number.
    (c) General rule. (1) Creditor agencies shall submit delinquent 
debts to FMS for purposes of offset in accordance with paragraph (d) of 
this section.
    (2) Disbursing officials shall compare payment records with 
delinquent debt records submitted to FMS for collection by offset. When 
a match occurs, and all other requirements for offset have been met, the 
disbursing official shall offset the payment to satisfy, in whole or 
part, the payee's debt to the extent allowed by law. The disbursing 
official shall pay any amounts not offset to the payee. See paragraphs 
(e), (f), (g), and (h) of this section.
    (d) Requirements for creditor agencies--(1) Mandatory notification 
of delinquent debts. As required by 31 U.S.C. 3716(c)(6), and in 
accordance with the provisions of this section, a creditor agency shall 
notify FMS of all legally enforceable debts over 180 days delinquent 
that are owed to the creditor agency. By complying with this 
requirement, creditor agencies will satisfy the requirement of 31 U.S.C. 
3720A(a) to notify the Secretary of past due, legally enforceable debt 
for purposes of tax refund offset. If a debt which is over 180 days 
delinquent is considered not legally enforceable solely because it is 
under review as described in paragraph (d)(6)(ii)(C) of this section, 
the agency must submit the debt to FMS for collection by offset within 
30 days of completing the review.
    (2) Discretionary notification of delinquent debts. Creditor 
agencies may notify FMS of any debt that is less than 180 days 
delinquent, so long as the requirements of paragraph (d)(3) of this 
section are met.
    (3) Debt eligibility. (i) A debt submitted to FMS for collection by 
centralized offset must be:
    (A) Past-due in the amount stated by the creditor agency;
    (B) Legally enforceable;
    (C) Less than 10 years delinquent, unless the debt legally may be 
offset if more than 10 years delinquent;
    (D) More than $25, or such other amount as FMS may prescribe; and
    (E) Not secured by collateral subject to a pending foreclosure 
action, unless the creditor agency certifies that offset will not affect 
the Government's rights to the secured collateral.
    (ii) The creditor agency must certify that the debt is eligible for 
collection by offset, as required in paragraph (d)(6) of this section.
    (iii) Debts owed by foreign sovereigns may be referred to Treasury 
Offset Program at the discretion of the creditor agency to the extent 
allowed by law, but are excluded from mandatory referral under paragraph 
(d)(1) of this section.
    (iv) In accordance with 31 U.S.C. 3719 and the procedures 
promulgated thereunder, creditor agencies must report to Treasury the 
amount of debt over 180 days delinquent eligible for the Treasury Offset 
Program. The procedures require that such report include the amount of 
debt over 180 days delinquent that the creditor agency has determined is 
not eligible for the Treasury Offset Program and the reasons for such 
determination.
    (4) Creditor agency regulations. Prior to submitting a debt to FMS 
for purposes of offset, Federal agencies shall prescribe regulations in 
accordance with the requirements of 31 U.S.C. 3716(b), 31 CFR 
901.3(b)(4), 31 U.S.C. 3720A(a), and 31 CFR 285.2(c). Before submitting 
debts to FMS for purposes of offsetting Federal salary payments, 
creditor agencies must also publish regulations pursuant to 5 U.S.C. 
5514, 31 CFR 285.7(d)(2), and 5 CFR 550.1104.
    (5) Delinquent debt information requirements. For each debt 
submitted to FMS for offset, the creditor agency shall provide the 
following information:
    (i) Name and taxpayer identifying number of the person who owes the 
debt;

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    (ii) Debtor's address last known to the creditor agency;
    (iii) The amount of the debt (including, as applicable, interest, 
penalties and administrative costs) and the date on which the debt 
became delinquent;
    (iv) The address and telephone number of the contact point within 
the creditor agency who will handle questions, concerns or 
communications regarding the debt;
    (v) Written certification as required in paragraph (d)(6) of this 
section; and
    (vi) Other information as may be requested by FMS.
    (6) Creditor agency certification. At the time the creditor agency 
notifies FMS of a debt for purposes of collection by offset, the 
creditor agency shall provide, in the manner required by FMS, written 
certification to FMS that:
    (i) The debt meets the requirements described in paragraph (d)(3)(i) 
of this section;
    (ii) In compliance with 31 U.S.C. 3716, 3720A, 26 U.S.C. 6402, and 
applicable regulations, the creditor agency has made a reasonable 
attempt to provide each debtor with:
    (A) Written notification, at least sixty days prior to submitting 
the debt and at the debtor's most current address known to the agency, 
of the nature and the amount of the debt, the intention of the creditor 
agency to collect the debt through offset, and an explanation of the 
rights of the debtor;
    (B) An opportunity to inspect and copy the records of the creditor 
agency with respect to the debt;
    (C) An opportunity for a review within the creditor agency of the 
determination of indebtedness, including the opportunity to present 
evidence that all or part of the debt is not past-due or legally 
enforceable;
    (D) An opportunity to enter into a written repayment agreement with 
the creditor agency; and
    (E) In the case of Federal employees, an opportunity for a hearing 
prior to submitting the debt for Federal salary offset. See 5 U.S.C. 
5514 and 5 CFR 550.1104. (See 31 CFR 285.7(d), which describes the 
authority to waive the salary offset certification as a prerequisite to 
referring the debt for other types of offsets.)
    (iii) The creditor agency has complied with all statutes, 
regulations, and policies applicable to the creditor agency's assessment 
of interest, penalties and administrative costs (including, as 
applicable, 31 U.S.C. 3717), and that the creditor agency has provided a 
written notice to debtors explaining the creditor agency's requirements 
concerning any such charges assessed against those debtors;
    (iv) The individual signing the certification has the delegated 
authority to execute the certification on behalf of the head of the 
creditor agency; and
    (v) such additional information that FMS may from time to time 
require in compliance with law, regulation or policy.
    (7) Updating Certification. After a debt has been submitted to FMS 
for purposes of collection by offset, the creditor agency shall provide, 
at least annually, in the manner and time frames required by FMS, 
written certification to FMS that:
    (i) The debt continues to meet the requirements described in 
paragraph (d)(3) of this section; and
    (ii) The creditor agency has properly credited all collections to 
the debt balance (other than collections received through centralized 
offset).
    (8) FMS instructions to creditor agencies. Agencies will provide the 
certification in a form and manner prescribed by FMS. FMS will instruct 
agencies as to the form such written certifications will take and how 
certifications can be delivered to FMS, including, but not limited to, 
the use of electronic data transmission.
    (9) Agencies which are both creditor and disbursing officials. A 
creditor agency that also designates disbursing officials pursuant to 31 
U.S.C. 3321(c) is not required to certify debts arising out of its 
operations to FMS before such agency's disbursing officials offset to 
collect such claims. This paragraph (d)(9) does not apply to FMS when it 
submits debts which it is servicing pursuant to 31 U.S.C. 3711(g).
    (10) Correcting and updating debt information. (i) When submitting 
debts for offset, the creditor agency must properly credit all 
collections, other than collections received from centralized offset.

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    (ii) The creditor agency shall update delinquent debt records, in 
the manner and time frames required by FMS, to reflect any amounts 
credited by the creditor agency to the debtor's account after submission 
of the debt to FMS (other than credits for amounts collected by 
centralized offset).
    (iii) The creditor agency may update delinquent debt records to 
reflect any increases in the amount of the debt submitted to FMS for 
collection by offset provided that the creditor agency has complied with 
the requirements of paragraph (d)(6) of this section with regard to the 
increased amounts.
    (iv) The creditor agency shall notify FMS immediately of any change 
in the status of the legal enforceability of the debt--for example, if 
the creditor agency receives notice that the debtor has filed for 
bankruptcy protection.
    (v) The creditor agency shall notify FMS if it has returned any 
monies to the debtor/payee.
    (11) Debts at FMS, a debt collection center, or the Department of 
Justice. If a creditor agency has transferred a debt to FMS or a 
Treasury-designated debt collection center pursuant to 31 U.S.C. 3711(g) 
and 31 CFR 285.12, or if a creditor agency has referred a debt to the 
Department of Justice for enforced collection, then FMS, the debt 
collection center, or the Department of Justice, as the case may be, is 
responsible for submitting the debt information to FMS to satisfy the 
creditor agency's obligations under 31 U.S.C. 3716(c)(6) and this 
section.
    (12) Certification of amount to be offset if different than maximum 
allowed by law. Generally, the amount of an offset will be calculated as 
set forth in paragraph (f)(2) of this section. If the creditor agency 
certifies to FMS that the creditor agency has determined the offset 
amount allowed by law would result in financial hardship to the debtor 
and that a lesser offset amount (specified either in dollar amount or as 
a percentage of the payment) is reasonable and appropriate based on the 
debtor's financial circumstances, then the disbursing official shall 
offset such lesser amount specified by the creditor agency.
    (13) Duplication of notices not required. Nothing in this section 
requires any creditor agency to duplicate any notice or opportunity for 
hearing or review provided to the debtor prior to offset.
    (e) Payments made by the United States--(1) Payments eligible for 
offset. Except as set forth in paragraph (e)(2) of this section, all 
Federal payments are eligible for offset under this section. Eligible 
Federal payments include, but are not limited to, Federal wage, salary, 
and retirement payments, vendor and expense reimbursement payments, 
certain benefit payments, travel advances and reimbursements, grants, 
fees, refunds, judgments (including those certified for payment pursuant 
to 31 U.S.C. 1304), tax refunds, and other payments made by Federal 
agencies.
    (2) Payments excluded from offset under this section. This section 
does not apply to the following payments:
    (i) Black Lung Part C benefit payments, or Railroad Retirement tier 
2 payments;
    (ii) Payments made under the tariff laws of the United States;
    (iii) Veterans Affairs benefit payments to the extent such payments 
are exempt from offset pursuant to 38 U.S.C. 5301;
    (iv) Payments made under any program administered by the Secretary 
of Education under title IV of the Higher Education Act of 1965 for 
which payments are certified by the Department of Education;
    (v) Payments made under any other Federal law if offset is expressly 
prohibited by Federal statute;
    (vi) Payments made under any program for which the Secretary has 
granted an exemption in accordance with the provisions of 31 U.S.C. 
3716(c)(3)(B) and paragraph (e)(7) of this section; and
    (vii) Federal loan payments other than travel advances.
    (3) Specific rules for certain payment types. (i) Specific rules 
apply with respect to the offset of the following types of payments:
    (A) Social Security benefit payments (excluding Supplemental 
Security Income payments), Black Lung (part B) payments, and Railroad 
Retirement

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(other than tier 2) payments to the extent such payments are subject to 
offset under 31 U.S.C. 3716(c)(3)(A) (see 31 CFR 285.4);
    (B) Federal salary payments (see 31 CFR 285.7; 5 CFR 550.1101 
through 550.1108); and
    (C) Tax refund payments (see 31 CFR 285.2).
    (ii) This section governs the offset of such payments to the extent 
that this section is not inconsistent with the special rules that apply 
for a particular type of payment.
    (4) Payments made to joint payees. If a payment is certified to more 
than one payee (i.e., joint payees), the entire payment (including a tax 
refund payment) will be subject to offset for a debt of either payee, 
unless otherwise prohibited by law or regulation. See 31 CFR 285.2(g) 
regarding offset of joint tax refunds and claims to return offset funds 
to the non-debtor, joint payee.
    (5) Payments made to representative payees. If a payment is made to 
a person solely in that person's capacity as a representative payee for 
another person having the beneficial interest in a payment, the 
disbursing official shall offset that payment only to collect debts owed 
by the person having the beneficial interest in the payment. Payment 
agencies are responsible for identifying representative payees.
    (6) Assigned payments. (i) If a person, including a Federal 
contractor, assigns the right to receive a Federal payment to a third 
party (the ``assignee''), the assigned payment will be subject to offset 
to collect a delinquent debt owed by the assignee.
    (ii) An assigned payment will also be subject to offset to collect 
delinquent debts owed by the assignor unless:
    (A) In accordance with 41 U.S.C. 15(e)-(f), the payment has been 
properly assigned to a financial institution pursuant to a Federal 
contract, the contract contains provisions prohibiting the payment from 
being reduced or offset for debts owed by the contractor, and the debt 
arose independently of the contract; or
    (B) pursuant to 31 U.S.C. 3727, the payment is being made to the 
assignee as settlement or satisfaction of a claim brought by the 
assignee against the creditor agency based upon the contract, and the 
debt of the contractor arises independently of the contract; or
    (C) the debtor has properly assigned the right to such payments and 
the debt arose after the effective date of the assignment.
    (7) Payment agency requests for exemptions from centralized offset 
pursuant to 31 U.S.C. 3716(c)(3)(B)--(i) Means-tested payments. The 
Secretary will exempt from centralized offset payments made under means-
tested programs when requested by the head of the agency making such 
payments. For purposes of this section ``means-tested programs'' are 
those which base eligibility on a determination that the income and/or 
assets of the beneficiary are inadequate to provide the beneficiary with 
an adequate standard of living without program assistance.
    (ii) Payments made under programs which are not means-tested. Upon 
written request from the payment agency, the Secretary may exempt 
classes of payments which are not means-tested. Payment agencies may 
request that the Secretary exempt 100% of each payment in a payment 
class or that the Secretary exempt a specific lesser percentage. The 
Secretary will consider such requests under standards prescribed by the 
Secretary and published on the FMS Web site. See www.fms.treas.gov/debt.
    (iii) Procedures for requesting exemptions. The head of the payment 
agency must make a request for exemption in writing. The request must 
comply with the procedures published by FMS and made available at its 
Web site. See www.fms.treas.gov/debt.
    (iv) Exemptions apply to classes of payments. The Secretary will 
only exempt classes of payments. Requests for exemption of individual 
payments will not be considered.
    (8) Payment agency responsibilities. (i) Payment agencies shall 
prepare and submit payment vouchers in the manner prescribed by the 
disbursing official to ensure that all payments legally eligible for 
offset will be offset and all payments not eligible will not be offset. 
Payment agencies shall notify the disbursing agency, in the manner 
prescribed by FMS, that a payment is a recurring payment.

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    (ii) Payment agencies shall also review the nature of payments the 
agency certifies and notify FMS of any legal bars to centralized offset 
of payments.
    (9) Payment and disbursing officials have satisfied the obligation 
underlying the payment. When an offset occurs, the debtor has received 
payment in full for the underlying obligation represented by the 
payment. Pursuant to 31 U.S.C. 3716(c)(2)(A), neither the disbursing 
official nor the payment agency shall be liable for the amount of the 
offset on the basis that the underlying obligation was not satisfied. 
For example, if an agency certifies a payment to a Federal contractor 
for work completed or services provided, and that payment is offset to 
collect a delinquent debt that the contractor owes to another Federal 
agency, the contractor has been paid in full for its services. When the 
creditor agency credits the offset amount to the contractor's delinquent 
debt, the contractor has received full value for the services performed 
under the contract.
    (f) Offset--(1) When offset occurs. When a match occurs and all 
other requirements for offset under 31 U.S.C. 3716(c), 3720A, and 
applicable regulations have been met, the disbursing official shall 
offset the payee's Federal payment to satisfy, in whole or part, the 
debt owed by the debtor. Offsets will continue until the debt, including 
any interest, penalties, and administrative costs, is paid in full or 
otherwise resolved to the satisfaction of the creditor agency.
    (2) Offset amount. (i) Except as otherwise provided in 31 CFR 
285.4(e) and 285.7(g) (addressing centralized offset of certain Federal 
benefit payments and salary payments, respectively), the disbursing 
official shall offset the lesser of:
    (A) The amount of the payment as shown on the payment record; or
    (B) The amount of the debt, including any interest, penalties and 
administrative costs; or
    (C) In the case of retirement annuity payments certified by the 
Office of Personnel Management, up to twenty-five percent of the amount 
of the payment as shown on the payment record.
    (ii) Notwithstanding paragraph (f)(2)(i) of this section, if a 
creditor agency has specified another amount, either in dollars or as a 
percentage of the payment, pursuant to paragraph (d)(15) of this 
section, the disbursing official shall offset the amount specified by 
the creditor agency.
    (3) Priorities for collecting multiple debts owed by the payee. (i) 
A levy pursuant to the Internal Revenue Code of 1986 shall take 
precedence over deductions under this section.
    (ii) When a payment may be offset to collect more than one debt, 
amounts offset will be applied:
    (A) First, to satisfy any past due support debts assigned to a State 
pursuant to sections 402(a)(26) and 471(a)(17) of the Social Security 
Act (see 26 U.S.C. 6402(c) and Sec. Sec. 285.1 and 285.3 of this part);
    (B) Second, to satisfy any debts owed to Federal agencies, as 
described in this Sec. 285.5;
    (C) Third, to satisfy any qualifying past-due support claims not 
assigned to a State (see 26 U.S.C. 6402(c) and Sec. Sec. 285.1 and 
285.3 of this part); and
    (D) Fourth, to any debts owed to States for debts other than past-
due support (see Sec. 285.8 of this part).
    (g) Notices--(1) Warning notice by disbursing official to payee/
debtor. Before offsetting a recurring payment, the disbursing official, 
or FMS on behalf of the disbursing official, will notify the payee in 
writing when offsets will begin (which may be stated as a number of days 
or number of payments from the time of the notice) and the anticipated 
amount of such offset (which may be stated as a percentage of the 
payment). Such notice shall also provide the information contained in 
paragraph (g)(3) of this section. Failure to send such notice does not 
affect the validity of the offset.
    (2) No additional warning notice when collections are suspended and 
resumed. As described in paragraph (f)(3)(iii) of this section, FMS may 
suspend or reduce the application of collections from a recurring 
payment for one debt when another debt, which is owed by the same debtor 
and has a higher legal priority, is submitted to FMS for collection. The 
disbursing official is not required to send additional warning notices 
when collections for the lower priority debt resume; however, pursuant 
to paragraph (g)(3) of this section,

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each offset will be accompanied by an offset notice, which explains how 
the offset amounts were applied.
    (3) Offset notice. When an offset occurs under this section, the 
disbursing official, or FMS on behalf of the disbursing official, shall 
notify the payee in writing that an offset has occurred including:
    (i) A description of the payment and the amount of offset taken;
    (ii) The identity of the creditor agency requesting the offset; and
    (iii) The address and telephone number of the contact point within 
the creditor agency who will handle concerns regarding the offset.
    (h) Notification to creditor and payment agencies. (1) FMS will 
notify the creditor agency of all offsets made to collect the creditor 
agency's debts. Such notification shall include the complete name and 
taxpayer identifying number of each debtor/payee, the total amounts 
collected from each debtor/payee's payment, and the amount of any fees 
charged by FMS and any other disbursing official conducting offsets. FMS 
will not advise the creditor agency of the source of payment from which 
such amounts were collected.
    (2) When a non-Treasury disbursing official conducts the offset, 
that disbursing official will transmit to FMS all of the information 
necessary for FMS to send notification under paragraph (h)(1) of this 
section, including the amount of any fees that the creditor agency is 
responsible for paying.
    (3) FMS will make available to the payment agency the information 
contained in the notification of offset, so that the payment agency may 
direct any questions concerning the claim to the appropriate contact 
person in the creditor agency.
    (i) Disposition of amounts collected. (1) FMS will transmit amounts 
collected for debts, less fees charged pursuant to paragraph (j) of this 
section, to the appropriate creditor agency or agencies. Alternatively, 
FMS may bill the creditor agency for any fees charged pursuant to 
paragraph (j) of this section.
    (2) If FMS learns from a paying agency that a payment should not 
have been made, and thus not offset, FMS will notify the creditor 
agency. FMS may deduct the offset amount from future amounts payable to 
the creditor agency. Alternatively, upon FMS's request, the creditor 
agency shall return promptly to the disbursing official an amount equal 
to the amount of the offset (without regard to whether any other amounts 
payable to such disbursing official have been paid).
    (3) Generally, the disbursing official is not responsible for 
refunding money to debtors. The creditor agency shall notify FMS any 
time the creditor agency returns all or any part of an offset payment to 
an affected payee. See paragraph (d)(10)(v) of this section. FMS and the 
creditor agency shall adjust the debtor records appropriately.
    (j) Fees. FMS may charge a fee sufficient to cover the full cost of 
implementing the centralized offset program, including the amount of any 
fees charged by other disbursing officials conducting an offset under 
this section. FMS may deduct the fees from amounts collected by offset 
or may bill the creditor agencies. FMS will charge fees only for actual 
offsets collected.
    (k) Waiver of certain provisions under the Computer Matching Privacy 
and Protection Act of 1988. As authorized by 31 U.S.C. 3716(f), FMS, 
under a delegation of authority from the Secretary, has waived certain 
requirements of the Computer Matching and Privacy Protection Act of 
1988, Pub. L. No. 100-503, as amended, for matches between delinquent 
debt records and payment records for offset purposes upon written 
certification by the head of the creditor agency that the requirements 
of 31 U.S.C. 3716(a) have been met. Specifically, for administrative 
offset of Federal payments other than tax refunds, FMS has waived the 
requirements for a computer matching agreement contained in 5 U.S.C. 
552a(o) and for post-match notice and verification contained in 5 U.S.C. 
552a(p) so long as the creditor agency provides certification to FMS in 
accordance with the provisions of paragraph (d)(6) of this section. Such 
waiver is not necessary for offset of Federal tax refunds, pursuant to 5 
U.S.C. 552a(a)(8)(B). The Data Integrity Board of the Department of the 
Treasury shall review and include in reports under 5 U.S.C. 
552a(u)(3)(D) a description of the matching activities conducted for 
centralized offset under

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this section. No other Data Integrity Board is required to take any 
action under 5 U.S.C. 552a(u) concerning these computerized comparisons.

[67 FR 78942, Dec. 26, 2002, as amended at 70 FR 7135, Jan. 21, 2005]



Sec. 285.6  Administrative offset under reciprocal agreements with states.

    (a) Scope. (1) This section sets forth the rules that apply to the 
administrative offset of Federal nontax payments to collect delinquent 
debts owed to States. As set forth in 31 U.S.C. 3716(h), States may 
participate in administrative offset so long as they meet certain 
requirements, including entering into reciprocal agreements with the 
Secretary of the Treasury. Such reciprocal agreements may contain any 
requirements that the Secretary considers appropriate to facilitate 
offset. Participation in offset under this section is voluntary for both 
FMS and the States. This section prescribes the minimum requirements for 
such reciprocal agreements, including provisions applicable to the 
offset of State payments, pursuant to State law, to collect delinquent 
Federal debts. Such offsets are defined in this section as ``State 
payment offsets.''
    (2) This section does not apply to the offset of Federal salary 
payments, Federal tax refunds (see 31 CFR 285.8), or the collection of 
past-due support debts (see 31 CFR 285.1 and 285.3).
    (b) Definitions. (1) Unless otherwise defined in paragraph Sec. 
285.5(b) of this subpart.
    (2) For purposes of this section:
    Administrative offset has the meaning set forth in 31 U.S.C. 3701(a) 
and means withholding funds payable by the United States to, or held by 
the United States for, a person to satisfy a debt owed by the payee. The 
term debt in this definition means a State debt.
    Debtor means a person who owes a debt to the United States or a 
State.
    Federal debt means any amount of money, funds or property that has 
been determined by an appropriate official of the Federal government to 
be owed to the United States by a person, organization, or entity, 
except another Federal agency. The term includes debt administered by a 
third party acting as an agent for the Federal Government. For purposes 
of this section, the term ``Federal debt'' does not include debts 
arising under the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.), 
the tariff laws of the United States, or the Social Security Act (42 
U.S.C. 301 et seq.), except to the extent provided in sections 204(f) 
and 1631(b)(4) of such Act (42 U.S.C. 404(f) and 1383(b)(4)(A), 
respectively) and 31 U.S.C. 3716(c).
    Offset means withholding funds payable to a person to satisfy a debt 
owed by the payee.
    Participating State means a State that has entered into a reciprocal 
agreement under this section.
    Reciprocal agreement means a written agreement between FMS and a 
State, entered into pursuant to 31 U.S.C. Sec. 3716(h), which provides 
for administrative offset and State payment offset.
    State has the meaning set forth in 31 U.S.C. 3701(b)(2) and includes 
the several states of the United States, the District of Columbia, 
American Samoa, Guam, the United States Virgin Islands, the Commonwealth 
of the Northern Mariana Islands, and the Commonwealth of Puerto Rico.
    State debt means any amount of money, funds or property that has 
been determined by an appropriate State official to be owed to that 
State by a person, organization, or entity, except the United States, a 
foreign sovereign, or another State (including local governments within 
a State). For purposes of this rule, the term includes debt administered 
by a third party acting as an agent for the State.
    State payment offset means withholding funds payable by a State to, 
or held by a State for, a person to satisfy a debt owed by the payee to 
the United States.
    (c) General rule. FMS and other disbursing officials of the Federal 
Government will conduct administrative offset to collect past-due State 
debts certified to FMS, and participating States will conduct State 
payment offset to collect delinquent Federal debts in accordance with 
the terms of reciprocal agreements entered into between the States and 
FMS, acting on behalf of the Secretary. Upon notification of a 
delinquent State debt from a participating State to FMS, disbursing 
officials of the United States shall offset

[[Page 133]]

the Federal payments specified in the reciprocal agreement to collect 
the State debt. The amount offset, minus an offset fee, shall be 
forwarded to the State to be distributed in accordance with applicable 
laws and procedures. Upon notification of a delinquent Federal debt from 
FMS to a participating State, authorized officials of the participating 
State shall conduct State payment offset as specified in the applicable 
reciprocal agreement to collect the Federal debt.
    (d) Reciprocal agreements. (1) FMS may enter into reciprocal 
agreements with States for administrative offset and State payment 
offset. The agreements shall contain any requirements which FMS 
considers appropriate to facilitate the offset and prevent duplicative 
efforts, and shall require States to prescribe procedures governing the 
collection of delinquent State debts which are substantially similar to 
requirements imposed on Federal agencies pursuant to 31 U.S.C. Sec. 
3716(b). States may prescribe such procedures through legislation or 
regulations, as deemed appropriate by State officials. States which have 
entered into a reciprocal agreement with FMS pursuant to this section 
may thereafter request, in the manner prescribed in the reciprocal 
agreement, that administrative offsets be performed. Such requests shall 
be made by the appropriate State disbursing official, which, for 
purposes of this section, means an appropriate official of the State 
agency that is responsible for collecting the State debt. Reciprocal 
agreements must be signed by a State official authorized to enter into 
such agreements.
    (2) Once FMS has entered into a reciprocal agreement with a State 
pursuant to this section, FMS may request that the State perform State 
payment offsets to collect delinquent Federal debts in accordance with 
the terms of the reciprocal agreement.
    (3) A duly executed reciprocal agreement is required before a State 
may request an administrative offset pursuant to 31 U.S.C. 3716(h).
    (e) Requirements for submitting State debts for administrative 
offset--(1) Debt eligibility. A State debt submitted to FMS for 
collection by administrative offset must meet the debt eligibility 
requirements of 31 CFR 285.5(d)(3)(i).
    (2) Certification. At the time a participating State notifies FMS of 
a State debt for purposes of collection by administrative offset under 
this section, the State shall comply with the certification requirements 
set forth in paragraph 31 CFR 285.5(d)(6) with the following two 
exceptions:
    (i) Paragraph (d)(6)(ii)(E)--Federal salary offset; and
    (ii) Paragraph (d)(6)(iii)--Federal requirements for the assessment 
of interest and penalties to Federal debts. Additionally, with respect 
to paragraph (d)(6)(ii) of Sec. 285.5, States shall only be required to 
certify that they have complied with the requirements of 31 U.S.C. 3716 
(not 31 U.S.C. 3720A or 26 U.S.C. 6402) and this section 285.6. States 
shall also certify that they have complied with any requirements imposed 
by State law or procedure that may be applicable to administrative 
offset.
    (f) State debts submitted to FMS for tax refund offset prior to the 
effective date of this section. A State shall be deemed to have complied 
with the requirements of paragraph (e)(2) of this section with respect 
to any State debt that the State certified to Treasury prior to the 
effective date of this section for collection pursuant to 31 CFR 285.8, 
Offset of tax refund payments to collect state income tax obligations. 
However, within 30 days of an administrative offset under this section, 
the State shall notify the debtor in writing that the debtor may 
exercise the rights set forth in the applicable sections of 31 CFR 
285.5(d) as set forth in paragraph (e) of this section, only if the 
State has not previously informed the debtor in writing that Federal 
payments other than tax refunds may be offset to collect the State debt, 
and the debtor has not exercised such rights previously with respect to 
the State debt that was collected by the offset. Nothing in this section 
requires any State to duplicate any notice or any opportunity for a 
hearing or review provided to the debtor prior to administrative offset.
    (g) Federal Payments subject to administrative offset under this 
section. (1) The Federal payments that will be offset to collect a 
participating State's debts

[[Page 134]]

shall be set forth in the reciprocal agreement. Federal payments that 
are excluded from administrative offset under this section include:
    (i) Any payments described in 31 CFR 285.5(e)(2) ``Payments excluded 
from offset'';
    (ii) Payments due to an individual under the Social Security Act;
    (iii) Payments due an individual pursuant to part B of the Black 
Lung Benefits Act;
    (iv) Payments due an individual pursuant to any law administered by 
the Railroad Retirement Board;
    (v) Federal tax refunds; and
    (vi) Federal salary payments.
    (h) Conducting the administrative offset. (1) Disbursing officials 
shall conduct administrative offset under this section in the same 
manner as set forth in 31 CFR 285.5(f) through (i).
    (2) When a payee owes more than one delinquent State debt which has 
been referred to FMS for collection, amounts will be applied to 
delinquent State debts under this section after any amounts offset 
pursuant to any other section of this subpart A and any amounts levied 
pursuant 26 U.S.C. 6331.
    (i) Liability of disbursing officials and payment agencies. Neither 
the Federal disbursing official nor the agency authorizing the Federal 
payment shall be liable to a debtor for the amount of the administrative 
offset on the basis that the underlying obligation, represented by the 
payment before the administrative offset was taken, was not satisfied.
    (j) Notification to a State of Federal debt. (1) A State may set 
forth in the reciprocal agreement the requirements for FMS to follow 
when submitting a Federal debt for collection by State payment offset. 
Such agreements shall set forth all requirements contained in State law 
for the State payment offset. Such requirements, however, may not exceed 
the requirements for collecting Federal debts by administrative offset 
as set forth in Sec. 285.5(d) of this subpart.
    (2) FMS shall certify to a participating State that each debt FMS 
submits for State payment offset has been certified by the Federal 
creditor agency to be delinquent, valid, and legally enforceable in the 
amount stated, and that the Federal creditor agency owed the debt has 
complied with the requirements of 31 U.S.C. 3716(a) prior to submitting 
the debt for offset.
    (k) Conducting State payment offset. (1) An official of a 
participating State shall conduct State payment offset pursuant to the 
laws and regulations of the participating State; provided that:
    (i) If a payment is owed jointly to more than one payee, the entire 
payment shall be offset for a debt of either payee, unless otherwise 
prohibited by law or regulation; and
    (ii) If a payment is made to a person solely in that person's 
capacity as a representative payee for another person having the 
beneficial interest in the payment, the disbursing official shall offset 
that payment only to collect debts owed by the person having the 
beneficial interest in the payment.
    (2) Any prohibitions on offsetting a joint payment described in 
paragraph (k)(1)(i) of this section shall be set forth in the reciprocal 
agreement.
    (3) An official of the participating State shall notify the payee of 
the State payment offset. The reciprocal agreement may contain detailed 
guidance and procedures regarding sending such notice, but shall, at a 
minimum require that the notice inform the payee of:
    (i) The type and amount of the payment that was offset;
    (ii) The identity of the Federal agency that requested the offset; 
and
    (iii) A contact point within the Federal agency that will handle 
concerns regarding the offset.
    (l) Limitations. A debt properly submitted to FMS or the State for 
administrative offset or State payment offset shall remain subject to 
collection until withdrawn by the entity that submitted the debt for 
collection, provided the debt remains past-due and legally enforceable 
for purposes of administrative offset or State payment offset, as 
applicable. A debt which has been reduced to a judgment shall remain 
legally enforceable for purposes of administrative offset and State 
payment offset for as long as the judgment remains enforceable against 
the debtor.
    (m) Fees. FMS shall deduct a fee from each administrative offset and 
State payment offset amount before transferring the balance of the 
offset funds to the State or Federal agency owed the

[[Page 135]]

debt. Pursuant to 31 U.S.C. 3716(c)(4), the fee will be in an amount 
that FMS has determined to be sufficient to reimburse FMS for the full 
cost of the offset procedure. FMS will notify the States and creditor 
agencies, annually and in advance, of the amount of the fee FMS will 
charge for each offset.

[72 FR 1286, Jan. 11, 2007]



Sec. 285.7  Salary offset.

    (a) Purpose and scope. (1) This section establishes FMS's procedures 
for the centralized offset of Federal salary payments to collect 
delinquent nontax debts owed to the United States. This process is known 
as centralized salary offset. Rules issued by the Office of Personnel 
Management contain the requirements Federal agencies must follow prior 
to conducting centralized or non-centralized salary offset and the 
procedures for requesting offsets directly from a paying agency, rather 
than through TOP. See 5 CFR 550.1101 through 550.1108.
    (2) This section implements the requirement under 5 U.S.C. 
5514(a)(1) that all Federal agencies, using a process known as 
centralized salary offset computer matching, identify Federal employees 
who owe delinquent nontax debt to the United States. Centralized salary 
offset computer matching is the computerized comparison of delinquent 
debt records with records of Federal employees. The purpose of 
centralized salary offset computer matching is to identify those debtors 
whose Federal salaries should be offset to collect delinquent debts owed 
to the Federal Government.
    (3) This section specifies the delinquent debt records and Federal 
employee records that must be included in the salary offset matching 
process. For purposes of this section, delinquent debt records consist 
of the debt information submitted to the Financial Management Service 
for purposes of administrative offset as required under 31 U.S.C. 
3716(c)(6). Agencies that submit their debt to FMS for purposes of 
administrative offset are not required to submit duplicate information 
for purposes of centralized salary offset computer matching under 5 
U.S.C. 5514 and this section.
    (4) This section establishes an interagency consortium to implement 
centralized salary offset computer matching on a government-wide basis 
as required under 5 U.S.C. 5514(a)(1).
    (5) The receipt of collections from salary offsets does not preclude 
a creditor agency from pursuing other debt collection remedies, 
including the offset of other Federal payments to satisfy delinquent 
nontax debt owed to the United States. A creditor agency should pursue, 
when deemed appropriate by such agency, such debt collection remedies 
separately or in conjunction with salary offset.
    (6) This section does not govern the centralized offset of final 
salary payments or lump-sum payments made to employees who have left an 
agency's employ. The centralized offset of such payments is governed by 
Sec. 285.5 of this part.
    (b) Definitions. For purposes of this section:
    Administrative offset means withholding funds payable by the United 
States to, or held by the United States for, a person to satisfy a debt 
owed by the payee.
    Agency means a department, agency or subagency, court, court 
administrative office, or instrumentality in the executive, judicial, or 
legislative branch of the Federal government, including government 
corporations.
    Centralized salary offset computer matching means the computerized 
comparison of Federal employee records with delinquent debt records to 
identify Federal employees who owe such debts.
    Creditor agency means any agency that is owed a debt.
    Debt means any amount of money, funds, or property that has been 
determined by an appropriate official of the Federal government to be 
owed to the United States by a person, including debt administered by a 
third party acting as an agent for the Federal Government. For purposes 
of this section, the term ``debt'' does not include debts arising under 
the Internal Revenue Code of 1986 (26 U.S.C.).
    Delinquent debt record means information about a past-due, legally 
enforceable debt, submitted by a creditor

[[Page 136]]

agency to FMS for purposes of administrative offset (including salary 
offset) in accordance with the provisions of 31 U.S.C. 3716 and 
applicable regulations. Debt information includes the amount and type of 
debt and the debtor's name, address, and taxpayer identifying number.
    Disbursing official means an officer or employee designated to 
disburse Federal salary payments. This section applies to all disbursing 
officials of Federal salary payments, including but not limited to, 
disbursing officials of the Department of the Treasury, the Department 
of Defense, the United States Postal Service, any government 
corporation, and any disbursing official of the United States designated 
by the Secretary.
    Disposable pay has the same meaning as that term is defined in 5 CFR 
550.1103.
    Federal employee means a current employee of an agency, including a 
current member of the Armed Forces or a Reserve of the Armed Forces 
(Reserves), employees of the United States Postal Service, and seasonal 
and temporary employees.
    Federal employee records means records of Federal salary payments 
that a paying agency has certified to a disbursing official for 
disbursement.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Paying agency means the agency that employs the Federal employee who 
owes the debt and authorizes the payment of his or her current pay. A 
paying agency also includes an agency that performs payroll services on 
behalf of the employing agency.
    Salary offset means administrative offset to collect a debt owed by 
a Federal employee from the current pay account of the employee.
    Secretary means the Secretary of the Treasury or his or her 
delegate.
    Taxpayer identifying number means the identifying number described 
under section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 
6109). For an individual, the taxpayer identifying number is the 
individual's social security number.
    (c) Establishment of the consortium. As required by the provisions 
of 5 U.S.C. 5514(a)(1), by issuance of this section, the Secretary 
establishes an interagency consortium to implement centralized salary 
offset computer matching. The consortium initially includes all agencies 
that disburse Federal salary payments, including but not limited to, 
FMS, the Department of Defense, the United States Postal Service, 
government corporations, and agencies with Treasury-designated 
disbursing officials. The membership of the consortium may be changed at 
the discretion of the Secretary, and the Secretary will be responsible 
for the ongoing coordination of the activities of the consortium.
    (d) Creditor agency participation. (1) As required under 5 U.S.C. 
5514(a)(1), creditor agencies shall participate at least annually in 
centralized salary offset computer matching. By notifying FMS of all 
past-due, legally enforceable debts delinquent for more than 180 days 
for purposes of 31 U.S.C. 3716(c)(6), creditor agencies shall have met 
the requirement set forth in 5 U.S.C. 5514(a)(1). Additionally, creditor 
agencies may notify FMS of past-due, legally enforceable debts 
delinquent for less than 180 days for purposes of centralized offset.
    (2) Prior to submitting debts to FMS for purposes of administrative 
offset (including salary offset) and centralized salary offset computer 
matching, Federal agencies shall prescribe regulations in accordance 
with the requirements of 31 U.S.C. 3716 (administrative offset) and 5 
U.S.C. 5514 (salary offset).
    (3) Prior to submitting a debt to FMS for purposes of collection by 
administrative offset, including salary offset, creditor agencies shall 
provide written certification to FMS that:
    (i) The debt is past-due and legally enforceable in the amount 
submitted to FMS and that the creditor agency will ensure that 
collections (other than collections through offset) are properly 
credited to the debt;
    (ii) Except in the case of a judgment debt or as otherwise allowed 
by law, the debt is referred for offset within ten years after the 
agency's right of action accrues;
    (iii) The creditor agency has complied with the provisions of 31 
U.S.C. 3716 (administrative offset) and related

[[Page 137]]

regulations including, but not limited to, the provisions requiring that 
the creditor agency provide the debtor with applicable notices and 
opportunities for a review of the debt; and
    (iv) The creditor agency has complied with the provisions of 5 
U.S.C. 5514 (salary offset) and related regulations including, but not 
limited to, the provisions requiring that the creditor agency provide 
the debtor with applicable notices and opportunities for a hearing.
    (4) The creditor agency is not required to submit the certification 
set forth in paragraph (d)(3)(iv) of this section prior to submitting a 
debt to FMS. However, if the creditor agency does not provide such 
certification initially, the creditor agency shall provide the Federal 
employee with the notices and opportunity for a hearing, as required by 
5 U.S.C. 5514 and applicable regulations, and shall make the necessary 
certification before the disbursing official offsets a salary payment 
pursuant to this section. A creditor agency may submit a debt without 
the requirement set forth in paragraph (d)(3)(iv) of this section, only 
if the creditor agency intends to complete the certification after 
complying with the provisions of 5 U.S.C. 5514 and applicable 
regulations.
    (5) The creditor agency shall notify FMS immediately of any payments 
credited by the creditor agency to the debtor's account, other than 
credits for amounts collected by offset, after submission of the debt to 
FMS. The creditor agency also shall notify FMS immediately of any change 
in the status of the legal enforceability of the debt, for example, if 
the creditor agency receives notice that the debtor has filed for 
bankruptcy protection.
    (e) Centralized salary offset computer match. (1) Delinquent debt 
records will be compared with Federal employee records maintained by 
members of the consortium or paying agencies. The records will be 
compared to identify Federal employees who owe delinquent debts for 
purposes of collecting the debt by administrative offset. A match will 
occur when the taxpayer identifying number and name of a Federal 
employee are the same as the taxpayer identifying number and name of a 
debtor.
    (2) As authorized by the provisions of 31 U.S.C. 3716(f), FMS, under 
a delegation of authority from the Secretary, has waived certain 
requirements of the Computer Matching and Privacy Protection Act of 
1988, 5 U.S.C. 552a, as amended, for administrative offset, including 
salary offset, upon written certification by the head of the creditor 
agency that the requirements of 31 U.S.C. 3716(a) have been met. 
Specifically, FMS has waived the requirements for a computer matching 
agreement contained in 5 U.S.C. 552a(o) and for post-match notice and 
verification contained in 5 U.S.C. 552a(p). The creditor agency will 
provide certification in accordance with the provisions of paragraph 
(d)(3)(iii) of this section.
    (f) Salary offset. When a match occurs and all other requirements 
for offset have been met, as required by the provisions of 31 U.S.C. 
3716(c) the disbursing official shall offset the Federal employee's 
salary payment to satisfy, in whole or part, the debt owed by the 
employee. Alternatively, the paying agency, on behalf of the disbursing 
official, may deduct the amount of the offset from an employee's 
disposable pay before the employee's salary payment is certified to a 
disbursing official for disbursement. The salary paying agency shall use 
such records as it deems necessary to accurately calculate disposable 
pay in accordance with 5 CFR 550.1103.
    (g) Offset amount. (1) The amount offset from a salary payment under 
this section shall be the lesser of:
    (i) The amount of the debt, including any interest, penalties and 
administrative costs; or
    (ii) An amount up to 15% of the debtor's disposable pay.
    (2) Alternatively, the amount offset may be an amount agreed upon, 
in writing, by the debtor and the creditor agency.
    (3) Offsets will continue until the debt, including any interest, 
penalties, and costs, is paid in full or otherwise resolved to the 
satisfaction of the creditor agency.
    (h) Priorities. (1) A levy pursuant to the Internal Revenue Code of 
1986 shall take precedence over other deductions under this section.

[[Page 138]]

    (2) When a salary payment may be reduced to collect more than one 
debt, amounts offset under this section will be applied to a debt only 
after amounts offset have been applied to satisfy past due child support 
debts assigned to a State pursuant to 402(a)(26) or section 471(a)(17) 
of the Social Security Act.
    (i) Notice. (1) Before offsetting a salary payment, the disbursing 
official, or the paying agency on behalf of the disbursing official, 
shall notify the Federal employee in writing of the date deductions from 
salary will commence and of the amount of such deductions.
    (2)(i) When an offset occurs under this section, the disbursing 
official, or the paying agency on behalf of the disbursing official, 
shall notify the Federal employee in writing that an offset has occurred 
including:
    (A) A description of the payment and the amount of offset taken;
    (B) The identity of the creditor agency requesting the offset; and,
    (C) A contact point within the creditor agency that will handle 
concerns regarding the offset.
    (ii) The information described in paragraphs (i)(2)(i)(B) and 
(i)(2)(i)(C) of this section does not need to be provided to the Federal 
employee when the offset occurs if such information was included in a 
prior notice from the disbursing official or paying agency.
    (3) The disbursing official will advise each creditor agency of the 
names, mailing addresses, and taxpayer identifying numbers of the 
debtors from whom amounts of past-due, legally enforceable debt were 
collected and of the amounts collected from each debtor for that agency. 
The disbursing official will not advise the creditor agency of the 
source of payment from which such amounts were collected.
    (j) Fees. Agencies that perform centralized salary offset computer 
matching services may charge a fee sufficient to cover the full cost for 
such services. In addition, FMS, or a paying agency acting on behalf of 
FMS, may charge a fee sufficient to cover the full cost of implementing 
the administrative offset program. FMS may deduct the fees from amounts 
collected by offset or may bill the creditor agencies. Fees charged for 
offset shall be based on actual administrative offsets completed.
    (k) Disposition of amounts collected. The disbursing official 
conducting the offset will transmit amounts collected for debts, less 
fees charged under paragraph (j) of this section, to the appropriate 
creditor agency. If an erroneous offset payment is made to a creditor 
agency, the disbursing official will notify the creditor agency that an 
erroneous offset payment has been made. The disbursing official may 
deduct the amount of the erroneous offset payment from future amounts 
payable to the creditor agency. Alternatively, upon the disbursing 
official's request, the creditor agency shall return promptly to the 
disbursing official or the affected payee an amount equal to the amount 
of the erroneous payment (without regard to whether any other amounts 
payable to such agency have been paid). The disbursing official and the 
creditor agency shall adjust the debtor records appropriately.

[63 FR 23357, Apr. 28, 1998, as amended at 70 FR 22789, May 3, 2005]



Sec. 285.8  Offset of tax refund payments to collect state income tax 

obligations.

    (a) Definitions. For purposes of this section:
    Debt as used in this section means past-due, legally enforceable 
State income tax obligation unless otherwise indicated.
    Debtor as used in this section means a person who owes a state 
income tax obligation.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    IRS means the Internal Revenue Service, a bureau of the Department 
of the Treasury.
    Past-due, legally enforceable State income tax obligation means a 
debt which resulted from:
    (1) A judgment rendered by a court of competent jurisdiction which 
has determined an amount of State income tax to be due,
    (2) A determination after an administrative hearing which has 
determined an amount of state income tax to be due and which is no 
longer subject to judicial review, or
    (3) A State income tax assessment (including self-assessments) which 
has

[[Page 139]]

become final in accordance with State law but not collected and which 
has not been delinquent for more than 10 years.
    State means the several States of the United States. The term 
``State'' also includes the District of Columbia, American Samoa, Guam, 
the United States Virgin Islands, the Commonwealth of the Northern 
Mariana Islands, and the Commonwealth of Puerto Rico.
    State income tax obligation means State income tax obligations as 
determined under State law. For purposes of this section, State income 
tax obligation includes any local income tax administered by the chief 
tax administration agency of the State.
    Tax refund offset means withholding or reducing a tax refund 
overpayment by an amount necessary to satisfy a debt owed by the 
payee(s).
    Tax refund payment means any overpayment of Federal taxes to be 
refunded to the person making the overpayment after the IRS makes the 
appropriate credits as provided in 26 U.S.C. 6402(a) and 26 CFR 6402-
3(a)(6)(i) for any liabilities for any Federal tax on the part of the 
person who made the overpayment.
    (b) General rule. (1) FMS will collect past-due, legally enforceable 
State income tax obligations by tax refund offset upon notification to 
FMS of a past-due, legally enforceable State income tax obligation in 
accordance with 26 U.S.C. 6402(e) and this section.
    (2) FMS will compare tax refund payment records, as certified by the 
IRS, with records of debts submitted to FMS. A match will occur when the 
taxpayer identifying number (as that term is used in 26 U.S.C. 6109) and 
name on a payment certification record are the same as the taxpayer 
identifying number and name on a delinquent debtor record. When a match 
occurs and all other requirements for tax refund offset have been met, 
FMS will reduce the amount of any tax refund payment payable to a debtor 
by the amount of any past-due, legally enforceable State income tax 
obligation owed by the debtor. Any amounts not offset will be paid to 
the payee(s) listed in the payment certification record.
    (3) FMS only will offset a tax refund payment if the address shown 
on the Federal tax return for the taxable year of the overpayment is an 
address within the State seeking the offset.
    (c) Notification of past-due, legally enforceable State income tax 
obligations. (1) Notification to FMS of past-due, legally enforceable 
State income tax obligations. States notifying FMS of state income tax 
obligations shall do so in the manner and format prescribed by FMS. The 
notification of liability must be accompanied by a certification that 
the debt is past-due and legally enforceable and that the State has 
complied with the requirements contained in paragraph (c)(3) of this 
section and with any requirements applicable to the offset of Federal 
tax refunds to collect past-due, legally enforceable State income tax 
obligations imposed by State law or procedures. The certification must 
specifically state that none of the debts submitted for collection by 
offset are debts owed by an individual who has claimed immunity from 
state taxation by reason of being an enrolled member of an Indian tribe 
who lives on a reservation and derives all of his or her income from 
that reservation unless such claim has been adjudicated de novo on its 
merits in accordance with paragraph (c)(3). FMS may reject a 
notification of past-due, legally enforceable State income tax 
obligations which do not comply with the requirements of this section. 
Upon notification of the rejection and the reason for rejection, the 
State may resubmit a corrected notification.
    (2) Minimum amount of past-due, legally enforceable State income tax 
obligations that may be submitted. FMS only will accept notification of 
past-due, legally enforceable State income tax obligations of $25 or 
more or such higher amounts as determined by FMS. States will be 
notified annually of any changes in the minimum debt amount.
    (3)(i) Advance notification to the debtor of the State's intent to 
collect by Federal tax refund offset. The State is required to provide a 
written notification to the debtor by certified mail, return receipt 
requested, informing the debtor that the State intends to refer the debt 
for

[[Page 140]]

collection by tax refund offset. The notice must also give the debtor at 
least 60 days to present evidence, in accordance with procedures 
established by the State, that all or part of the debt is not past-due 
or not legally enforceable.
    (ii) Determination. The State must, in accordance with procedures 
established by the State, consider any evidence presented by a debtor in 
response to the notice described in paragraph (c)(3)(i) of this section 
and determine whether an amount of such debt is past-due and legally 
enforceable. In those cases where a debtor claims that he or she is 
immune from State taxation by reason of being an enrolled member of an 
Indian tribe who lives on a reservation and derives all of his or her 
income from that reservation, State procedures shall include 
consideration of such claims de novo on the merits unless such claims 
have been previously adjudicated by a court of competent jurisdiction. 
States shall, upon request from the Secretary of the Treasury, make such 
procedures available to the Secretary of the Treasury for review.
    (iii) Reasonable efforts. Prior to submitting a debt to FMS for 
collection by tax refund offset the State must make reasonable efforts 
to collect the debt. Reasonable efforts include making written demand on 
the debtor for payment and complying with any other prerequisites to 
offset established by the State.
    (4) Correcting and updating notification. The State shall, in the 
manner and in the time frames provided by FMS, notify FMS of any 
deletion or decrease in the amount of past-due, legally enforceable 
State income tax obligation referred to FMS for collection by tax refund 
offset. The State may notify FMS of any increases in the amount of the 
debt referred to FMS for collection by tax refund offset provided that 
the State has complied with the requirements of paragraph (c)(3) of this 
section with regard to those debts.
    (d) Priorities for offset. (1) As provided in 26 U.S.C. 6402, a tax 
refund payment shall be reduced first by the amount of any past-due 
support assigned to a State; second, by the amount of any past-due, 
legally enforceable debt owed to a Federal agency; third, by the amount 
of any qualifying past-due support not assigned to a State and fourth, 
by any past-due, legally enforceable State income tax obligation.
    (2) Reduction of the tax refund payment pursuant to 26 U.S.C. 
6402(a), (c), (d) and (e) shall occur prior to crediting the overpayment 
to any future liability for an internal revenue tax. Any amount 
remaining after tax refund offset under 26 U.S.C. 6402(a), (c), (d) and 
(e) shall be refunded to the taxpayer, or applied to estimated tax, if 
elected by the taxpayer pursuant to IRS regulations.
    (3) If FMS receives notice from a State of more than one debt 
subject to this section that is owed by a debtor to the State, any 
overpayment by the debtor shall be applied against such debts in the 
order in which such debts accrued.
    (e) Post-offset notice. (1) When an offset occurs, FMS shall notify 
the debtor in writing of:
    (i) The amount and date of the offset and that the purpose of the 
offset was to satisfy a past-due, legally enforceable State income tax 
obligation;
    (ii) The State to which this amount has been paid or credited; and
    (iii) A contact point within the State that will handle concerns or 
questions regarding the offset.
    (2) The notice in paragraph (e)(1) of this section also will advise 
any non-debtor spouse who may have filed a joint return with the debtor 
of the steps which the non-debtor spouse may take in order to secure his 
or her proper share of the tax refund. See paragraph (f) of this 
section.
    (3) FMS will advise States of the names, mailing addresses, and 
taxpayer identifying numbers of the debtors from whom amounts of state 
income tax obligations were collected, and of the amounts collected from 
each debtor through tax refund offset.
    (4) At least weekly, FMS will notify the IRS of the names and 
taxpayer identifying numbers of the debtors from whom amounts owed for 
past-due, legally enforceable State income tax obligations were 
collected from tax refund offsets and the amounts collected from each 
debtor.
    (f) Offset made with regard to a tax refund payment based upon joint 
return. If

[[Page 141]]

the person filing a joint return with a debtor owing the past-due, 
legally enforceable State income tax obligation takes appropriate action 
to secure his or her proper share of a tax refund from which an offset 
was made, the IRS will pay the person his or her share of the refund and 
request that FMS deduct that amount from future amounts payable to the 
State or that FMS otherwise obtain the funds back from the State. FMS, 
or the appropriate State, will adjust their debtor records accordingly.
    (g) Disposition of amounts collected. FMS will transmit amounts 
collected for debts, less fees charged under paragraph (h) of this 
section, to the appropriate State. If FMS learns that an erroneous 
offset payment is made to any State, FMS will notify the appropriate 
State that an erroneous offset payment has been made. FMS may deduct the 
amount of the erroneous offset payment from future amounts payable to 
the State. Alternatively, upon FMS' request, the State shall return 
promptly to the affected taxpayer or FMS an amount equal to the amount 
of the erroneous payment (unless the State previously has paid such 
amounts, or any portion of such amounts, to the affected taxpayer). 
States shall notify FMS any time a State returns an erroneous offset 
payment to an affected taxpayer. FMS, or the appropriate State, will 
adjust their debtor records accordingly.
    (h) Fees. The State will pay a fee to FMS to cover the full cost of 
offsets taken. The fee will be established annually in such amount as 
FMS determines to be sufficient to reimburse FMS for the full cost of 
the offset procedure. FMS will deduct the fees from amounts collected 
prior to disposition and transmit a portion of the fees deducted to 
reimburse the IRS for its share of the cost of administering the tax 
refund offset program for purposes of collecting past-due, legally 
enforceable State income tax obligations reported to FMS by the States. 
Fees will be charged only for actual tax refund offsets completed.
    (i) Review of tax refund offsets. In accordance with 26 U.S.C. 
6402(f), any reduction of a taxpayer's refund made pursuant to 26 U.S.C. 
6402(e) shall not be subject to review by any court of the United States 
or by the Secretary of the Treasury, FMS or IRS in an administrative 
proceeding. No action brought against the United States to recover the 
amount of this reduction shall be considered to be a suit for refund of 
tax. This subsection does not preclude any legal, equitable, or 
administrative action against the State to which the amount of such 
reduction was paid.
    (j) Access to and use of confidential tax information. Access to and 
use of confidential tax information in connection with the tax refund 
offset program is permitted to the extent necessary in establishing 
appropriate agency records, locating any person with respect to whom a 
reduction under 26 U.S.C. 6402(e) is sought for purposes of collecting 
the debt, and in the defense of any litigation or administrative 
procedure ensuing from a reduction made under section 6402(e).
    (k) Effective date. This section applies to tax refund payments 
payable under 26 U.S.C. 6402 beginning January 1, 2000.

[64 FR 71231, Dec. 20, 1999]



                 Subpart B_Authorities Other Than Offset



Sec. 285.11  Administrative wage garnishment.

    (a) Purpose. This section provides procedures for Federal agencies 
to collect money from a debtor's disposable pay by means of 
administrative wage garnishment to satisfy delinquent nontax debt owed 
to the United States.
    (b) Scope. (1) This section applies to any Federal agency that 
administers a program that gives rise to a delinquent nontax debt owed 
to the United States and to any agency that pursues recovery of such 
debt.
    (2) This section shall apply notwithstanding any provision of State 
law.
    (3) Nothing in this section precludes the compromise of a debt or 
the suspension or termination of collection action in accordance with 
applicable law. See, for example, the Federal Claims Collection 
Standards (FCCS), 31 CFR parts 900-904.

[[Page 142]]

    (4) The receipt of payments pursuant to this section does not 
preclude a Federal agency from pursuing other debt collection remedies, 
including the offset of Federal payments to satisfy delinquent nontax 
debt owed to the United States. A Federal agency may pursue such debt 
collection remedies separately or in conjunction with administrative 
wage garnishment.
    (5) This section does not apply to the collection of delinquent 
nontax debt owed to the United States from the wages of Federal 
employees from their Federal employment. Federal pay is subject to the 
Federal salary offset procedures set forth in 5 U.S.C. 5514 and other 
applicable laws.
    (6) Nothing in this section requires agencies to duplicate notices 
or administrative proceedings required by contract or other laws or 
regulations.
    (c) Definitions. As used in this section the following definitions 
shall apply:
    Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of the Federal Government, including government corporations. For 
purposes of this section, agency means either the agency that 
administers the program that gave rise to the debt or the agency that 
pursues recovery of the debt.
    Business day means Monday through Friday. For purposes of 
computation, the last day of the period will be included unless it is a 
Federal legal holiday.
    Day means calendar day. For purposes of computation, the last day of 
the period will be included unless it is a Saturday, a Sunday, or a 
Federal legal holiday.
    Debt or claim means any amount of money, funds or property that has 
been determined by an appropriate official of the Federal Government to 
be owed to the United States by an individual, including debt 
administered by a third party as an agent for the Federal Government.
    Debtor means an individual who owes a delinquent nontax debt to the 
United States.
    Delinquent nontax debt means any nontax debt that has not been paid 
by the date specified in the agency's initial written demand for 
payment, or applicable agreement, unless other satisfactory payment 
arrangements have been made. For purposes of this section, the terms 
``debt'' and ``claim'' are synonymous and refer to delinquent nontax 
debt.
    Disposable pay means that part of the debtor's compensation 
(including, but not limited to, salary, bonuses, commissions, and 
vacation pay) from an employer remaining after the deduction of health 
insurance premiums and any amounts required by law to be withheld. For 
purposes of this section, ``amounts required by law to be withheld'' 
include amounts for deductions such as social security taxes and 
withholding taxes, but do not include any amount withheld pursuant to a 
court order.
    Employer means a person or entity that employs the services of 
others and that pays their wages or salaries. The term employer 
includes, but is not limited to, State and local Governments, but does 
not include an agency of the Federal Government.
    Evidence of service means information retained by the agency 
indicating the nature of the document to which it pertains, the date of 
mailing of the document, and to whom the document is being sent. 
Evidence of service may be retained electronically so long as the manner 
of retention is sufficient for evidentiary purposes.
    Garnishment means the process of withholding amounts from an 
employee's disposable pay and the paying of those amounts to a creditor 
in satisfaction of a withholding order.
    Withholding order means any order for withholding or garnishment of 
pay issued by an agency, or judicial or administrative body. For 
purposes of this section, the terms ``wage garnishment order'' and 
``garnishment order'' have the same meaning as ``withholding order.''
    (d) General rule. Whenever an agency determines that a delinquent 
debt is owed by an individual, the agency may initiate proceedings 
administratively to garnish the wages of the delinquent debtor.
    (e) Notice requirements. (1) At least 30 days before the initiation 
of garnishment proceedings, the agency shall

[[Page 143]]

mail, by first class mail, to the debtor's last known address a written 
notice informing the debtor of:
    (i) The nature and amount of the debt;
    (ii) The intention of the agency to initiate proceedings to collect 
the debt through deductions from pay until the debt and all accumulated 
interest, penalties and administrative costs are paid in full; and
    (iii) An explanation of the debtor's rights, including those set 
forth in paragraph (e)(2) of this section, and the time frame within 
which the debtor may exercise his or her rights.
    (2) The debtor shall be afforded the opportunity:
    (i) To inspect and copy agency records related to the debt;
    (ii) To enter into a written repayment agreement with the agency 
under terms agreeable to the agency; and
    (iii) For a hearing in accordance with paragraph (f) of this section 
concerning the existence or the amount of the debt or the terms of the 
proposed repayment schedule under the garnishment order. However, the 
debtor is not entitled to a hearing concerning the terms of the proposed 
repayment schedule if these terms have been established by written 
agreement under paragraph (e)(2)(ii) of this section.
    (3) The agency will retain evidence of service indicating the date 
of mailing of the notice.
    (f) Hearing--(1) In general. Agencies shall prescribe regulations 
for the conduct of administrative wage garnishment hearings consistent 
with this section or shall adopt this section without change by 
reference.
    (2) Request for hearing. The agency shall provide a hearing, which 
at the agency's option may be oral or written, if the debtor submits a 
written request for a hearing concerning the existence or amount of the 
debt or the terms of the repayment schedule (for repayment schedules 
established other than by written agreement under paragraph (e)(2)(ii)) 
of this section.
    (3) Type of hearing or review. (i) For purposes of this section, 
whenever an agency is required to afford a debtor a hearing, the agency 
shall provide the debtor with a reasonable opportunity for an oral 
hearing when the agency determines that the issues in dispute cannot be 
resolved by review of the documentary evidence, for example, when the 
validity of the claim turns on the issue of credibility or veracity.
    (ii) If the agency determines that an oral hearing is appropriate, 
the time and location of the hearing shall be established by the agency. 
An oral hearing may, at the debtor's option, be conducted either in-
person or by telephone conference. All travel expenses incurred by the 
debtor in connection with an in-person hearing will be borne by the 
debtor. All telephonic charges incurred during the hearing will be the 
responsibility of the agency.
    (iii) In those cases when an oral hearing is not required by this 
section, an agency shall nevertheless accord the debtor a ``paper 
hearing,'' that is, an agency will decide the issues in dispute based 
upon a review of the written record. The agency will establish a 
reasonable deadline for the submission of evidence.
    (4) Effect of timely request. Subject to paragraph (f)(13) of this 
section, if the debtor's written request is received by the agency on or 
before the 15th business day following the mailing of the notice 
described in paragraph (e)(1) of this section, the agency shall not 
issue a withholding order under paragraph (g) of this section until the 
debtor has been provided the requested hearing and a decision in 
accordance with paragraphs (f)(10) and (f)(11) of this section has been 
rendered.
    (5) Failure to timely request a hearing. If the debtor's written 
request is received by the agency after the 15th business day following 
the mailing of the notice described in paragraph (e)(1) of this section, 
the agency shall provide a hearing to the debtor. However, the agency 
will not delay issuance of a withholding order unless the agency 
determines that the delay in filing the request was caused by factors 
over which the debtor had no control, or the agency receives information 
that the agency believes justifies a delay or cancellation of the 
withholding order.
    (6) Hearing official. A hearing official may be any qualified 
individual, as determined by the head of the agency, including an 
administrative law judge.

[[Page 144]]

    (7) Procedure. After the debtor requests a hearing, the hearing 
official shall notify the debtor of:
    (i) The date and time of a telephonic hearing;
    (ii) The date, time, and location of an in-person oral hearing; or
    (iii) The deadline for the submission of evidence for a written 
hearing.
    (8) Burden of proof. (i) The agency will have the burden of going 
forward to prove the existence or amount of the debt.
    (ii) Thereafter, if the debtor disputes the existence or amount of 
the debt, the debtor must present by a preponderance of the evidence 
that no debt exists or that the amount of the debt is incorrect. In 
addition, the debtor may present evidence that the terms of the 
repayment schedule are unlawful, would cause a financial hardship to the 
debtor, or that collection of the debt may not be pursued due to 
operation of law.
    (9) Record. The hearing official must maintain a summary record of 
any hearing provided under this section. A hearing is not required to be 
a formal evidentiary-type hearing, however, witnesses who testify in 
oral hearings will do so under oath or affirmation.
    (10) Date of decision. The hearing official shall issue a written 
opinion stating his or her decision, as soon as practicable, but not 
later than sixty (60) days after the date on which the request for such 
hearing was received by the agency. If an agency is unable to provide 
the debtor with a hearing and render a decision within 60 days after the 
receipt of the request for such hearing:
    (i) The agency may not issue a withholding order until the hearing 
is held and a decision rendered; or
    (ii) If the agency had previously issued a withholding order to the 
debtor's employer, the agency must suspend the withholding order 
beginning on the 61st day after the receipt of the hearing request and 
continuing until a hearing is held and a decision is rendered.
    (11) Content of decision. The written decision shall include:
    (i) A summary of the facts presented;
    (ii) The hearing official's findings, analysis and conclusions; and
    (iii) The terms of any repayment schedules, if applicable.
    (12) Final agency action. The hearing official's decision will be 
the final agency action for the purposes of judicial review under the 
Administrative Procedure Act (5 U.S.C. 701 et seq.).
    (13) Failure to appear. In the absence of good cause shown, a debtor 
who fails to appear at a hearing scheduled pursuant to paragraph (f)(4) 
of this section will be deemed as not having timely filed a request for 
a hearing.
    (g) Wage garnishment order. (1) Unless the agency receives 
information that the agency believes justifies a delay or cancellation 
of the withholding order, the agency should send, by first class mail, a 
withholding order to the debtor's employer:
    (i) Within 30 days after the debtor fails to make a timely request 
for a hearing (i.e., within 15 business days after the mailing of the 
notice described in paragraph (e)(1) of this section), or,
    (ii) If a timely request for a hearing is made by the debtor, within 
30 days after a final decision is made by the agency to proceed with 
garnishment, or,
    (iii) As soon as reasonably possible thereafter.
    (2) The withholding order sent to the employer under paragraph 
(g)(1) of this section shall be in a form prescribed by the Secretary of 
the Treasury. The withholding order shall contain the signature of, or 
the image of the signature of, the head of the agency or his/her 
delegatee. The order shall contain only the information necessary for 
the employer to comply with the withholding order. Such information 
includes the debtor's name, address, and social security number, as well 
as instructions for withholding and information as to where payments 
should be sent.
    (3) The agency will retain evidence of service indicating the date 
of mailing of the order.
    (h) Certification by employer. Along with the withholding order, the 
agency shall send to the employer a certification in a form prescribed 
by the Secretary of the Treasury. The employer shall complete and return 
the certification to the agency within the time

[[Page 145]]

frame prescribed in the instructions to the form. The certification will 
address matters such as information about the debtor's employment status 
and disposable pay available for withholding.
    (i) Amounts withheld. (1) After receipt of the garnishment order 
issued under this section, the employer shall deduct from all disposable 
pay paid to the applicable debtor during each pay period the amount of 
garnishment described in paragraph (i)(2) of this section.
    (2)(i) Subject to the provisions of paragraphs (i)(3) and (i)(4) of 
this section, the amount of garnishment shall be the lesser of:
    (A) The amount indicated on the garnishment order up to 15% of the 
debtor's disposable pay; or
    (B) The amount set forth in 15 U.S.C. 1673(a)(2) (Restriction on 
Garnishment). The amount set forth at 15 U.S.C. 1673(a)(2) is the amount 
by which a debtor's disposable pay exceeds an amount equivalent to 
thirty times the minimum wage. See 29 CFR 870.10.
    (3) When a debtor's pay is subject to withholding orders with 
priority the following shall apply:
    (i) Unless otherwise provided by Federal law, withholding orders 
issued under this section shall be paid in the amounts set forth under 
paragraph (i)(2) of this section and shall have priority over other 
withholding orders which are served later in time. Notwithstanding the 
foregoing, withholding orders for family support shall have priority 
over withholding orders issued under this section.
    (ii) If amounts are being withheld from a debtor's pay pursuant to a 
withholding order served on an employer before a withholding order 
issued pursuant to this section, or if a withholding order for family 
support is served on an employer at any time, the amounts withheld 
pursuant to the withholding order issued under this section shall be the 
lesser of:
    (A) The amount calculated under paragraph (i)(2) of this section, or
    (B) An amount equal to 25% of the debtor's disposable pay less the 
amount(s) withheld under the withholding order(s) with priority.
    (iii) If a debtor owes more than one debt to an agency, the agency 
may issue multiple withholding orders provided that the total amount 
garnished from the debtor's pay for such orders does not exceed the 
amount set forth in paragraph (i)(2) of this section. For purposes of 
this paragraph (i)(3)(iii), the term agency refers to the agency that is 
owed the debt.
    (4) An amount greater than that set forth in paragraphs (i)(2) and 
(i)(3) of this section may be withheld upon the written consent of 
debtor.
    (5) The employer shall promptly pay to the agency all amounts 
withheld in accordance with the withholding order issued pursuant to 
this section.
    (6) An employer shall not be required to vary its normal pay and 
disbursement cycles in order to comply with the withholding order.
    (7) Any assignment or allotment by an employee of his earnings shall 
be void to the extent it interferes with or prohibits execution of the 
withholding order issued under this section, except for any assignment 
or allotment made pursuant to a family support judgment or order.
    (8) The employer shall withhold the appropriate amount from the 
debtor's wages for each pay period until the employer receives 
notification from the agency to discontinue wage withholding. The 
garnishment order shall indicate a reasonable period of time within 
which the employer is required to commence wage withholding.
    (j) Exclusions from garnishment. The agency may not garnish the 
wages of a debtor who it knows has been involuntarily separated from 
employment until the debtor has been reemployed continuously for at 
least 12 months. The debtor has the burden of informing the agency of 
the circumstances surrounding an involuntary separation from employment.
    (k) Financial hardship. (1) A debtor whose wages are subject to a 
wage withholding order under this section, may, at any time, request a 
review by the agency of the amount garnished, based on materially 
changed circumstances such as disability, divorce, or catastrophic 
illness which result in financial hardship.
    (2) A debtor requesting a review under paragraph (k)(1) of this 
section shall submit the basis for claiming

[[Page 146]]

that the current amount of garnishment results in a financial hardship 
to the debtor, along with supporting documentation. Agencies shall 
consider any information submitted in accordance with procedures and 
standards established by the agency.
    (3) If a financial hardship is found, the agency shall downwardly 
adjust, by an amount and for a period of time agreeable to the agency, 
the amount garnished to reflect the debtor's financial condition. The 
agency will notify the employer of any adjustments to the amounts to be 
withheld.
    (l) Ending garnishment. (1) Once the agency has fully recovered the 
amounts owed by the debtor, including interest, penalties, and 
administrative costs consistent with the FCCS, the agency shall send the 
debtor's employer notification to discontinue wage withholding.
    (2) At least annually, an agency shall review its debtors' accounts 
to ensure that garnishment has been terminated for accounts that have 
been paid in full.
    (m) Actions prohibited by the employer. An employer may not 
discharge, refuse to employ, or take disciplinary action against the 
debtor due to the issuance of a withholding order under this section.
    (n) Refunds. (1) If a hearing official, at a hearing held pursuant 
to paragraph (f)(3) of this section, determines that a debt is not 
legally due and owing to the United States, the agency shall promptly 
refund any amount collected by means of administrative wage garnishment.
    (2) Unless required by Federal law or contract, refunds under this 
section shall not bear interest.
    (o) Right of action. The agency may sue any employer for any amount 
that the employer fails to withhold from wages owed and payable to an 
employee in accordance with paragraphs (g) and (i) of this section. 
However, a suit may not be filed before the termination of the 
collection action involving a particular debtor, unless earlier filing 
is necessary to avoid expiration of any applicable statute of 
limitations period. For purposes of this section, ``termination of the 
collection action'' occurs when the agency has terminated collection 
action in accordance with the FCCS or other applicable standards. In any 
event, termination of the collection action will have been deemed to 
occur if the agency has not received any payments to satisfy the debt 
from the particular debtor whose wages were subject to garnishment, in 
whole or in part, for a period of one (1) year.

[63 FR 25139, May 6, 1998, as amended at 64 FR 22908, Apr. 28, 1999; 66 
FR 51868, Oct. 11, 2001]



Sec. 285.12  Transfer of debts to Treasury for collection.

    (a) Definitions. For purposes of this section:
    Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of the Federal Government, including government corporations.
    Creditor agency means any Federal agency that is owed a debt.
    Debt means any amount of money, funds or property that has been 
determined by an appropriate official of the Federal government to be 
owed to the United States by a person. As used in this section, the term 
``debt'' does not include debts arising under the Internal Revenue Code 
of 1986.
    Debt collection center means an agency or a unit or subagency within 
an agency that has been designated by the Secretary of the Treasury to 
collect debt owed to the United States. FMS is a debt collection center.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Person means an individual, corporation, partnership, association, 
organization, State or local government, or any other type of entity 
other than a Federal agency.
    Secretary means the Secretary of the Treasury.
    (b) In general. Cross-servicing means that FMS or another debt 
collection center is taking appropriate debt collection action on behalf 
of one or more Federal agencies or a unit or subagency thereof.
    (c) Mandatory transfer of debts to FMS. (1) Except as set forth in 
paragraph (d) of this section, a creditor agency shall

[[Page 147]]

transfer any debt that is more than 180 days delinquent to FMS for debt 
collection services. For accounting and reporting purposes, the debt 
remains on the books and records of the agency which transferred the 
debt.
    (2) On behalf of the creditor agency, FMS will take appropriate 
action to collect or compromise the transferred debt, or to suspend or 
terminate collection action thereon, in accordance with the statutory 
and regulatory requirements and authorities applicable to the debt and 
the action. Appropriate action to collect a debt may include referral to 
another debt collection center, a private collection contractor, or the 
Department of Justice for litigation. The creditor agency shall advise 
FMS, in writing, of any specific statutory or regulatory requirements 
pertaining to their debt and will agree, in writing, to a collection 
strategy which includes parameters for entering into compromise and 
repayments agreements with debtors.
    (3)(i) A debt is considered 180 days delinquent for purposes of this 
section if it is 180 days past due and is legally enforceable. A debt is 
past-due if it has not been paid by the date specified in the agency's 
initial written demand for payment or applicable agreement or instrument 
(including a post-delinquency payment agreement) unless other 
satisfactory payment arrangements have been made. A debt is legally 
enforceable if there has been a final agency determination that the 
debt, in the amount stated, is due and there are no legal bars to 
collection action. Where, for example, a debt is the subject of a 
pending administrative review process required by statute or regulation 
and collection action during the review process is prohibited, the debt 
is not considered legally enforceable for purposes of mandatory transfer 
to FMS and is not to be transferred even if the debt is more than 180 
days past-due.
    (ii) When a final agency determination is made after an 
administrative appeal or review process, the creditor agency must 
transfer such debt to FMS, if more than 180 days delinquent, within 30 
days after the date of the final decision.
    (iii) Nothing in this section is intended to impact the date of 
delinquency of a debt for other purposes such as for purposes of 
accruing interest and penalties.
    (4) Agencies are not required to transfer to FMS debts which are 
less than $25 (including interest, penalties, and administrative costs), 
or such other amount as FMS may determine. Agencies may transfer debts 
less than $25 to FMS if the creditor agency, in consultation with FMS, 
determines that transfer is important to ensure compliance with the 
agency's policies or programs. Agencies may combine individual debts of 
less than $25 owed by the same debtor for purposes of meeting the $25 
threshold.
    (d) Exceptions to mandatory transfer. (1) A creditor agency is not 
required to transfer a debt to FMS pursuant to paragraph (c)(1) of this 
section only during such period of time that the debt:
    (i) Is in litigation or foreclosure as described in paragraph (d)(2) 
of this section;
    (ii) Is scheduled for sale as described in paragraph (d)(3) of this 
section;
    (iii) Is at a private collection contractor if the debt has been 
referred to a private collection contractor in accordance with paragraph 
(e) of this section;
    (iv) Is at a debt collection center if the debt has been referred to 
a Treasury-designated debt collection center in accordance with 
paragraph (f) of this section;
    (v) Is being collected by internal offset as described in paragraph 
(d)(4) of this section; or
    (vi) Is covered by an exemption granted by the Secretary as 
described in paragraph (d)(5) of this section.
    (2)(i) A debt is in litigation if:
    (A) The debt has been referred to the Attorney General for 
litigation by the creditor agency; or
    (B) The debt is the subject of proceedings pending in a court of 
competent jurisdiction, including bankruptcy proceedings, whether 
initiated by the creditor agency, the debtor, or any other party.
    (ii) A debt is in foreclosure if:
    (A)(1) Collateral securing the debt is the subject of judicial 
foreclosure proceedings in a court of competent jurisdiction; or

[[Page 148]]

    (2) Notice has been issued that collateral securing the debt will be 
foreclosed upon, liquidated, sold, or otherwise transferred pursuant to 
applicable law in a nonjudicial proceeding; and
    (B) The creditor agency anticipates that proceeds will be available 
from the liquidation of the collateral for application to the debt.
    (3) A debt is scheduled for sale if:
    (i) The debt will be disposed of under an asset sales program within 
one (1) year after becoming eligible for sale; or
    (ii) The debt will be disposed of under an asset sales program and a 
schedule established by the creditor agency and approved by the Director 
of the Office of Management and Budget.
    (4) A debt is being collected by internal offset if a creditor 
agency expects the debt to be collected in full within three (3) years 
from the date of delinquency through internal offset. A debt is being 
collected by internal offset if the creditor agency is withholding funds 
payable to the debtor by the creditor agency, or if the creditor agency 
has issued notice to the debtor of the creditor agency's intent to 
offset such funds.
    (5)(i) Upon the written request of the head of an agency, or as the 
Secretary may determine on his/her own initiative, the Secretary may 
exempt any class of debts from the application of the requirement 
described in paragraph (c)(1) of this section. In determining whether to 
exempt a class of debts, the Secretary will determine whether exemption 
is in the best interests of the Government after considering the 
following factors:
    (A) Whether an exemption is the best means to protect the 
government's financial interest, taking into consideration the number, 
dollar amount, age and collection rates of the debts for which exemption 
is requested;
    (B) Whether the nature of the program under which the delinquencies 
have arisen is such that the transfer of such debts would interfere with 
program goals; and
    (C) Whether an exemption would be consistent with the purposes of 
the Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-134, 110 
Stat. 1321-358 (April 26, 1996).
    (ii) Requests for exemptions must clearly identify the class of 
debts for which an exemption is sought and must explain how application 
of the factors listed above to that class of debts warrants an 
exemption.
    (iii) Requests for exemption must be made by the head of the agency 
requesting the exemption, the Chief Financial Officer of the agency, or 
the Deputy Chief Financial Officer of the agency. For purposes of this 
section, the head of an agency does not include the head of a 
subordinate organization within a department or agency.
    (6) In accordance with paragraph (d)(5)(i) of this section, debts 
being serviced and/or collected in accordance with applicable statutes 
and/or regulations by third parties, such as private lenders or guaranty 
agencies are exempt from the requirements in paragraph (c)(1) of this 
section.
    (e) Schedule of private collection contractors. FMS will maintain a 
schedule of private collection contractors eligible for referral of 
debts from FMS, other debt collection centers, and creditor agencies for 
collection action. An agency with debt which has not been transferred to 
FMS or referred to another debt collection center, for example, debt 
that is less than 180 days delinquent, may refer such debt to a private 
collection contractor listed on FMS' schedule of private collection 
contractors provided they do so in accordance with procedures 
established by FMS. Alternatively, an agency may refer debt that is less 
than 180 days delinquent to a private collection contractor pursuant to 
a contract between the creditor agency and the private collection 
contractor, as authorized by law.
    (f) Debt collection centers. A creditor agency may transfer debt 
that has not been transferred to FMS, such as debt less than 180 days 
delinquent, to a Treasury-designated debt collection center, with the 
consent of, and in accordance with procedures established by FMS. Debt 
collection centers will take action upon a debt in accordance with the 
statutory or regulatory requirements and other authorities that apply to 
the debt or to the particular action being taken. Debt collection 
centers may, on behalf of the creditor

[[Page 149]]

agency and subject to the terms under which the debt collection center 
has been designated as such by the Secretary, take any action to 
collect, compromise, suspend or terminate collection action on debts, in 
accordance with terms and conditions agreed upon in writing by the 
creditor agency and the debt collection center or FMS. Debt collection 
centers may charge fees for the debt collection services in accordance 
with the provisions of paragraph (j) of this section.
    (g) Administrative offset. As described in paragraph (c) of this 
section, under the DCIA, agencies are required to transfer all debts 
over 180 days delinquent to FMS for purposes of debt collection (i.e., 
cross-servicing). Agencies are also required, under the DCIA, to notify 
the Secretary of all debts over 180 days delinquent for purposes of 
administrative offset. Administrative offset is one type of collection 
tool used by FMS and Treasury-designated debt collection centers to 
collect debts transferred under this section. Thus, by transferring debt 
to FMS or to a Treasury-designated debt collection center under this 
section, Federal agencies will satisfy the requirement to notify the 
Secretary of debts for purposes of administrative offset and duplicate 
referrals are not required. A debt which is not transferred to FMS for 
purposes of debt collection, however, such as a debt which falls within 
one of the exempt categories listed in paragraph (d) of this section, 
nevertheless may be subject to the DCIA requirement of notification to 
the Secretary for purposes of administrative offset.
    (h) Voluntary referral of debts less than 180 days delinquent. A 
creditor agency may refer any debt that is less than 180 days delinquent 
to FMS or, with the consent of FMS, to a Treasury-designated debt 
collection center for debt collection services.
    (i) Certification. Before a debt may be transferred to FMS or 
another debt collection center, the head of the creditor agency or his 
or her delegatee must certify, in writing, that the debts being 
transferred are valid, legally enforceable, and that there are no legal 
bars to collection. Creditor agencies must also certify that they have 
complied with all prerequisites to a particular collection action under 
the laws, regulations or policies applicable to the agency unless the 
creditor agency has requested, and FMS has agreed, to do so on the 
creditor agency's behalf. The creditor agency shall notify FMS 
immediately of any change in the status of the legal enforceability of 
the debt, for example, if the creditor agency receives notice that the 
debtor has filed for bankruptcy protection.
    (j) Fees. FMS and other debt collection centers (as defined in 
paragraph (a) of this section) may charge fees sufficient to cover the 
full cost of providing debt collection services authorized by this 
section. Fees paid to recover amounts owed may not exceed amounts 
collected. Nothing in this rule precludes a creditor agency from 
agreeing to pay fees for debt collection services which are not based on 
amounts collected. FMS and debt collection centers are authorized to 
retain fees from amounts collected and may deposit and use such fees in 
accordance with 31 U.S.C. 3711(g). Fees charged by FMS and other debt 
collection centers may be added to the debt as an administrative cost if 
authorized under 31 U.S.C. 3717(e).

[63 FR 16356, Apr. 2, 1998, as amended at 64 FR 22908, Apr. 28, 1999]



Sec. 285.13  Barring delinquent debtors from obtaining Federal loans or loan 

insurance or guarantees.

    (a) Definitions. For purposes of this section:
    Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of the Federal Government, including government corporations.
    Creditor agency means any Federal agency that is owed a debt.
    Debt means any amount of money, funds or property that has been 
determined by an appropriate official of the Federal Government to be 
owed to the United States or an agency thereof by a person, including 
debt administered by a third party as an agent for the Federal 
Government.
    Federal financial assistance or financial assistance means any 
Federal loan

[[Page 150]]

(other than a disaster loan), loan insurance, or loan guarantee.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Nontax debt means any debt other than a debt under the Internal 
Revenue Code of 1986 (26 U.S.C. 1 et seq.).
    Person means an individual, corporation, partnership, association, 
organization, State or local government, or any other type of entity 
other than a Federal agency.
    Secretary means the Secretary of the Treasury.
    (b) Purpose and scope. (1) This section prescribes standards for 
determining whether an outstanding nontax debt owed to the Federal 
Government is in delinquent status and whether such delinquency is 
resolved for the purpose of denying Federal financial assistance to a 
debtor. In addition, this section prescribes the circumstances under 
which the Secretary may exempt a class of debts from affecting a 
debtor's loan eligibility. This section also outlines the factors an 
agency should consider when determining whether waiver of the general 
rule in paragraph (c) of this section is appropriate.
    (2) Additional guidance concerning debt collection and debt 
management is provided in ``Managing Federal Receivables'' and other FMS 
publications.
    (3) Nothing in this section requires an agency to grant Federal 
financial assistance if denial otherwise is authorized by statute, 
regulation, or agency policies and procedures. For example, if an agency 
requires borrowers to have a satisfactory credit history, the agency may 
deny financial assistance even if a delinquent debt has been resolved.
    (4) This section does not confer any new rights or benefits on 
persons seeking Federal financial assistance.
    (5) This section applies to any person owing delinquent nontax debt 
and to any agency that administers a program that grants Federal 
financial assistance.
    (c) General rule. (1) As required by the provisions of 31 U.S.C. 
3720B, a person owing an outstanding nontax debt that is in delinquent 
status shall not be eligible for Federal financial assistance. This 
eligibility requirement applies to all persons seeking Federal financial 
assistance and owing an outstanding nontax debt in delinquent status, 
including, but not limited to, guarantors. This eligibility requirement 
applies to all Federal financial assistance even if creditworthiness or 
credit history is not otherwise a factor for eligibility purposes, e.g., 
student loans. A person may be eligible for Federal financial assistance 
only after the delinquency is resolved in accordance with this section. 
An agency may waive this eligibility requirement in accordance with 
paragraph (g) of this section.
    (2) An agency from which a person seeks Federal financial assistance 
may determine, under standards issued by the agency, that a person is 
ineligible for Federal financial assistance under this section if:
    (i) The person is controlled by a person owing an outstanding nontax 
debt that is in delinquent status (e.g., a corporation is controlled by 
an officer, director, or shareholder who owes a debt); or
    (ii) The person controls a person owing an outstanding nontax debt 
that is in delinquent status (e.g., a corporation controls a wholly-
owned or partially-owned subsidiary which owes a debt).
    (3) A creditor agency may obtain information concerning whether or 
not a person seeking Federal financial assistance owes a delinquent debt 
from, among other sources, credit reports, information contained on 
credit applications, and the Department of Housing and Urban 
Development's Credit Alert Interactive Voice Response System (CAIVRS). 
For information about participating in the CAIVRS program, agencies 
should contact the Director of Information Resources Management, Policy 
and Management Division, Office of Information Technology, Department of 
Housing and Urban Development, 451 7th Street, S.W., Washington, DC 
20410.
    (d) Delinquent status. (1) Except as otherwise provided in paragraph 
(d)(2) of this section, a debt is in ``delinquent status'' for purposes 
of this section if the debt has not been paid within 90 days of the 
payment due date. The payment due date is the date specified in the 
creditor agency's initial written

[[Page 151]]

demand for payment or applicable agreement or instrument (including a 
post-delinquency repayment agreement).
    (2) For purposes of this section, a debt is not in delinquent status 
if:
    (i) The person seeking Federal financial assistance has been 
released by the creditor agency from any obligation to pay the debt, or 
there has been an adjudication or determination that such person does 
not owe or does not have to pay the debt;
    (ii) The debtor is the subject of, or has been discharged in, a 
bankruptcy proceeding, and if applicable, the person seeking Federal 
financial assistance is current on any court authorized repayment plan; 
or
    (iii) The existence of the debt or the agency's determination that 
the debt is delinquent is being challenged under an ongoing 
administrative appeal or contested judicial proceeding and the appeal 
was filed by the debtor in a timely manner. Unless otherwise prohibited, 
an agency may defer making a determination as to whether or not to 
extend credit until the appeal process is completed.
    (3) Unless the provisions of paragraph (d)(2) apply, a debt is in 
delinquent status even if the creditor agency has suspended or 
terminated collection activity with respect to such debt. For example, a 
delinquent nontax debt that has been written off the books of the 
creditor agency or reported to the Internal Revenue Service as 
discharged (i.e., canceled) is in delinquent status for purposes of this 
section.
    (4) Nothing in this section defines the terms ``delinquent'' or 
``delinquent status'' for any purposes other than those described in 
this section.
    (e) Delinquency resolution. (1) For purposes of this section, a 
person's delinquent debt is resolved only if the person:
    (i) Pays or otherwise satisfies the delinquent debt in full;
    (ii) Pays the delinquent debt in part if the creditor agency accepts 
such part payment as a compromise in lieu of payment in full;
    (iii) Cures the delinquency under terms acceptable to the creditor 
agency in that the person pays any overdue payments, plus all interest, 
penalties, late charges, and administrative charges assessed by the 
creditor agency as a result of the delinquency; or
    (iv) Enters into a written repayment agreement with the creditor 
agency to pay the debt, in whole or in part, under terms and conditions 
acceptable to the creditor agency.
    (2) Unless the provisions of paragraph (e)(1) of this section apply, 
a delinquent debt is not resolved even if the creditor agency has 
suspended or terminated collection activity with respect to such debt. 
For example, a delinquent nontax debt that has been written off the 
books of the creditor agency or reported to the Internal Revenue Service 
as discharged (i.e., canceled) would not be ``resolved.'' If the 
provisions of paragraph (e)(1) of this section do apply, a delinquent 
debt is considered resolved. For example, if a portion of a debt has 
been written off after the person has paid the debt in part where the 
creditor agency accepts such part payment as a compromise in lieu of 
payment in full, the entire debt would be deemed ``resolved'' for 
purposes of this section in accordance with paragraph (e)(1)(ii) of this 
section.
    (f) Exemptions by the Secretary. (1) Upon the written request and 
recommendation of the head of the creditor agency to which a class of 
debts is owed, the Secretary may exempt any class of debts from 
affecting a debtor's eligibility for Federal financial assistance based 
on the provisions of 31 U.S.C. 3720B and this section.
    (2) The creditor agency recommending an exemption for a class of 
debts will provide the Secretary with information about:
    (i) The nature of the program under which the delinquencies have 
arisen;
    (ii) The number, dollar amount, and age of the debts in the program 
for which exemption is recommended;
    (iii) The reasons why an exemption is justified, including why the 
granting of financial assistance to persons owing the type of debt for 
which exemption is requested would not be contrary to the Government's 
goal to reduce losses by requiring proper screening of potential 
borrowers; and,
    (iv) Other information the Secretary deems necessary to consider the 
exemption request.

[[Page 152]]

    (3) The Secretary may exempt a class of debts if exemption is in the 
best interests of the Federal Government.
    (g) Waivers by the agency. (1) The head of an agency from which a 
person seeks to obtain Federal financial assistance may waive the 
eligibility requirement described in paragraph (c) of this section. 
Waivers shall be granted only on a person by person basis. The head of 
the agency may delegate the waiver authority only to the Chief Financial 
Officer of the agency. The Chief Financial Officer may redelegate the 
authority only to the Deputy Chief Financial Officer of the agency.
    (2) The authorized agency official should balance the following 
factors when deciding whether to grant a waiver under paragraph (g)(1) 
of this section:
    (i) Whether the denial of the financial assistance to the person 
would tend to interfere substantially with or defeat the purposes of the 
financial assistance program or otherwise would not be in the best 
interests of the Federal Government; and
    (ii) Whether the agency's granting of the financial assistance to 
the person is contrary to the Government's goal to reduce losses from 
debt management activities by requiring proper screening of potential 
borrowers.
    (3) When balancing the factors described in paragraph (d)(2) of this 
section, the authorized agency official should consider:
    (i) The age, amount, and cause(s) of the delinquency and the 
likelihood that the person will resolve the delinquent debt; and
    (ii) The amount of total debt, delinquent or otherwise, owed by the 
person and the person's credit history with respect to repayment of 
debt.
    (4) Each agency shall retain a centralized record of the number and 
type of waivers granted under this section.
    (h) Effect of denial of Federal financial assistance. Nothing 
contained in this section precludes a person who has been denied Federal 
financial assistance from obtaining such assistance after that person's 
delinquent debt has been resolved in accordance with paragraph (e)(1) of 
this section.

[63 FR 67756, Dec. 8, 1998]

[[Page 153]]



                 SUBCHAPTER B_BUREAU OF THE PUBLIC DEBT



PART 306_GENERAL REGULATIONS GOVERNING U.S. SECURITIES--Table of Contents




                      Subpart A_General Information

Sec.
306.0 Applicability of regulations.
306.1 Official agencies.
306.2 Definitions of words and terms as used in these regulations.
306.3 Transportation charges and risks in the shipment of securities.

                         Subpart B_Registration

306.10 General.
306.11 Forms of registration for transferable securities.
306.12 Errors in registration.
306.13 Nontransferable securities.

               Subpart C_Transfers, Exchanges and Reissues

306.15 Transfers and exchanges of securities--closed periods.
306.16 Exchanges of registered securities.
306.17 Exchanges of registered securities for coupon securities.
306.18 Exchanges of coupon securities for registered securities.
306.19 Denominational exchanges of coupon securities.
306.20 Reissue of registered transferable securities.
306.21 Reissue of nontransferable securities.
306.22 Exchange of Treasury Bonds, Investment Series B-1975-80.
306.23 Securities eligible to be held in the TREASURY DIRECT Book-entry 
          Securities System.
306.24 Collection of fees on definitive securities.

                     Subpart D_Redemption or Payment

306.25 Presentation and surrender.
306.26 Redemption of registered securities at maturity, upon prior call, 
          or for prerefunding or advance refunding.
306.27 Redemption of bearer securities at maturity, upon prior call, or 
          for advance refunding or prerefunding.

                           Subpart E_Interest

306.35 Computation of interest.
306.36 Termination of interest.
306.37 Interest on registered securities.
306.38 Interest on bearer securities.

Appendix to Subpart E--Interest--Computation of Interest on Treasury 
          Bonds, Treasury Notes, and Treasury Certificates of 
          Indebtedness, and Computation of Discount on Treasury Bills--
          Interest Tables

         Subpart F_Assignments of Registered Securities_General

306.40 Execution of assignments.
306.41 Form of assignment.
306.42 Alterations and erasures.
306.43 Voidance of assignments.
306.44 Discrepancies in names.
306.45 Certifying individuals.

          Subpart G_Assignments by or in Behalf of Individuals

306.55 Signatures, minor errors and change of name.
306.56 Assignment of securities registered in the names of or assigned 
          to two or more persons.
306.57 Minors and incompetents.
306.58 Nontransferable securities.

      Subpart H_Assignments in Behalf of Estates of Deceased Owners

306.65 Decedent's estate.
306.66-306.67 [Reserved]
306.68 Nontransferable securities.

     Subpart I_Assignments by or in Behalf of Trustees and Similar 
                               Fiduciaries

306.75 Individual fiduciaries.
306.76 Fiduciaries acting as a unit.
306.77 Corepresentatives and fiduciaries.
306.78 Nontransferable securities.

   Subpart J_Assignments in Behalf of Private or Public Organizations

306.85 Private corporations and unincorporated associations (including 
          nominees).
306.86 Change of name and succession of private organizations.
306.87 Partnerships (including nominee partnerships).
306.88 Political entities and public corporations.
306.89 Public officers.
306.90 Nontransferable securities.

                       Subpart K_Attorneys in Fact

306.95 Attorneys in fact.
306.96 Nontransferable securities.

             Subpart L_Transfer Through Judicial Proceedings

306.100 Transferable securities.

[[Page 154]]

306.101 Evidence required.
306.102 Nontransferable securities.

            Subpart M_Requests for Suspension of Transactions

306.105 Requests for suspension of transactions in registered 
          securities.
306.106 Requests for suspension of transactions in bearer securities.

Subpart N_Relief for Loss, Theft, Destruction, Mutilation, or Defacement 
                              of Securities

306.110 Statutory authority and requirements.
306.111 Procedure for applying for relief.
396.112 Type of relief granted.
306.113 Cases not requiring bonds of indemnity.

                     Subpart O_Book-Entry Procedure

306.115 Definition of terms.
306.116 Scope and effect of book-entry procedure.
306.117 Withdrawal of eligible book-entry Treasury securities for 
          conversion to registered form.

                   Subpart P_Miscellaneous Provisions

306.125 Additional requirements.
306.126 Waiver of regulations.
306.127 Preservation of existing rights.
306.128 Supplements, amendments or revisions.

    Authority: 31 U.S.C. Chapter 31; 5 U.S.C. 301; 12 U.S.C. 391.

    Source: 38 FR 7078, Mar. 15, 1973, unless otherwise noted.



                      Subpart A_General Information



Sec. 306.0  Applicability of regulations.

    These regulations apply to all U.S. transferable and nontransferable 
securities,\1\ other than U.S. Savings Bonds and U.S. Savings Notes, to 
the extent specified in these regulations, the offering circulars or 
special regulations governing such securities.
---------------------------------------------------------------------------

    \1\ These regulations may also be applied to securities issued by 
certain agencies of the United States and certain Government and 
Government-sponsored corporations.
---------------------------------------------------------------------------



Sec. 306.1  Official agencies.

    The Bureau of the Public Debt of the Department of the Treasury is 
charged with matters relating to transactions in securities. 
Correspondence concerning transactions in securities and requests for 
appropriate forms may be addressed to the Division of Customer Service, 
Parkersburg, WV 26102.

[64 FR 38125, July 15, 1999]



Sec. 306.2  Definitions of words and terms as used in these regulations.

    (a) Advance refunding offer is an offer to a holder of a security, 
usually a year or more in advance of its call or maturity date, to 
exchange it for another security.
    (b) A bearer security is payable on its face at maturity or call for 
redemption before maturity in accordance with its terms to bearer. The 
ownership is not recorded. Title to such a security may pass by delivery 
without endorsement and without notice. A coupon security is a bearer 
security with interest coupons attached.
    (c) Bureau refers to the Bureau of the Public Debt, Division of 
Customer Service, Parkersburg, WV 26102.
    (d) Call date or date of call is the date fixed in the official 
notice of call published in the Federal Register as the date on which 
the obligor will make payment of the security before maturity in 
accordance with its terms.
    (e) Court means one which has jurisdiction over the parties and the 
subject matter.
    (f) Department refers to the Department of the Treasury.
    (g) Depository institution means an entity described in section 
19(b)(1)(A)(i)--(vi) of the Federal Reserve Act (12 U.S.C. 
461(b)(1)(A)(i)--(vi)). Under section 19(b) of the Federal Reserve Act, 
the term depository institution includes:
    (1) Any insured bank as defined in 12 U.S.C. 1813 or any bank which 
is eligible to make application to become an insured bank under 12 
U.S.C. 1815;
    (2) Any mutual savings bank as defined in 12 U.S.C. 1813 or any bank 
which is eligible to make application to become an insured bank under 12 
U.S.C. 1815;
    (3) Any savings bank as defined in 12 U.S.C. 1813 or any bank which 
is eligible to make application to become an insured bank under 12 
U.S.C. 1815;
    (4) Any insured credit union as defined in 12 U.S.C. 1752 or any 
credit

[[Page 155]]

union which is eligible to make application to become an insured credit 
union under 12 U.S.C. 1781;
    (5) Any member as defined in 12 U.S.C. 1422; and
    (6) Any savings association (as defined in 12 U.S.C. 1813) which is 
an insured depository institution, as defined in the Federal Deposit 
Insurance Act, 12 U.S.C. 1811, et seq., or is eligible to apply to 
become an insured depository institution under such Act.
    (h) Face maturity date is the payment date specified in the text of 
a security.
    (i) Incompetent refers to a person under any legal disability except 
minority.
    (j) Joint owner and joint ownership refer to any permitted form of 
ownership by two or more persons.
    (k) Nontransferable securities are those issued only in registered 
form which according to their terms are payable only to the registered 
owners or recognized successors in title to the extent and in the manner 
provided in the offering circulars or special applicable regulations.
    (l) Payment and redemption, unless otherwise indicated by the 
context, are used interchangeably for payment at maturity or payment 
before maturity pursuant to a call for redemption in accordance with the 
terms of the securities.
    (m) Prerefunding offer is an offer to a holder of a security, 
usually within the year preceding its call or maturity date, to exchange 
it for another security.
    (n) Redemption-exchange is any authorized redemption of securities 
for the purpose of applying the proceeds in payment for other securities 
offered in exchange.
    (o) A registered security refers to a security the ownership of 
which is registered on the books of the Department. It is payable at 
maturity or call for redemption before maturity in accordance with its 
terms to the person in whose name it is inscribed, or his assignee.
    (p) Securities assigned in blank or securities so assigned as to 
become in effect payable to bearer refers to registered securities which 
are assigned by the owner or his authorized representative without 
designating the assignee. Registered securities assigned simply to The 
Secretary of the Treasury or in the case of Treasury Bonds, Investment 
Series B--1975-80, to The Secretary of the Treasury for exchange for the 
current Series EA or EO Treasury notes are considered to be so assigned 
as to become in effect payable to bearer.
    (q) Signature guarantee program means a signature guarantee program 
established in response to Rule 17 Ad-15 (17 CFR 240.17Ad-15), issued 
under authority of the Securities Exchange Act of 1934. For the purpose 
of the regulations, in this part, the Securities Transfer Agents 
Medallion Program (STAMP), the Stock Exchanges Medallion Program (SEMP), 
and the New York Stock Exchange, Inc. Medallion Signature Program (MSP) 
are recognized by Treasury as such signature guarantee programs.
    (r) Taxpayer identifying number means the appropriate identifying 
number as required on tax returns and other documents submitted to the 
Internal Revenue Service, i.e., an individual's social security account 
number or an employer identification number. A social security account 
number is composed of nine digits separated by two hyphens, for example, 
123-45-6789; an employer identification number is composed of nine 
digits separated by one hyphen, for example, 12-3456789. The hyphens are 
an essential part of the numbers and must be included.
    (s) Transferable securities, which may be in either registered or 
bearer form, refers to securities which may be sold on the market and 
transfer of title accomplished by assignment and delivery if in 
registered form, or by delivery only if in bearer form.
    (t) Treasury securities, Treasury bonds, Treasury notes, Treasury 
certificates of indebtedness, and Treasury bills, or simply securities, 
bonds, notes, certificates, and bills, unless otherwise indicated by the 
context, refer only to transferable securities.
    (u) Voluntary representative means the person qualified by the 
Department of the Treasury to request payment or make an assignment of a 
decedent's securities pursuant to Sec. 306.65.

[38 FR 7078, Mar. 15, 1973, as amended at 59 FR 59036, Nov. 15, 1994; 64 
FR 38125, July 15, 1999; 70 FR 57429, Sept. 30, 2005]

[[Page 156]]



Sec. 306.3  Transportation charges and risks in the shipment of securities.

    The following guidelines apply to the transportation of reissued 
securities or securities presented for authorized transactions:
    (a) The securities may be presented in person by the owner or the 
owner's agent.
    (b) If securities are not presented in person, shipment of the 
securities is at the owner's risk and expense.
    (c) Reissued securities will be delivered by certified mail or by 
other means, at the risk of the registered owner and at the expense of 
the Department.

[64 FR 38125, July 15, 1999]



                         Subpart B_Registration



Sec. 306.10  General.

    The registration used must express the actual ownership of a 
security and may not include any restriction on the authority of the 
owner to dispose of it in any manner, except as otherwise specifically 
provided in these regulations. The Treasury Department reserves the 
right to treat the registration as conclusive of ownership. Requests for 
registration should be clear, accurate, and complete, conform with one 
of the forms set forth in this subpart, and include appropriate taxpayer 
identifying numbers.\2\ The registration of all bonds owned by the same 
person, organization, or fiduciary should be uniform with respect to the 
name of the owner and, in the case of a fiduciary, the description of 
the fiduciary capacity. Individual owners should be designated by the 
names by which they are ordinarily known or under which they do 
business, preferably including at least one full given name. The name of 
an individual may be preceded by any applicable title, as, for example, 
Mrs., Miss, Ms., Dr., or Rev., or followed by a designation such as 
M.D., D.D., Sr., or Jr. Any other similar suffix should be included when 
ordinarily used or when necessary to distinguish the owner from a member 
of his family. A married woman's own given name, not that of her 
husband, must be used, for example, Mrs. Mary A. Jones, not Mrs. Frank 
B. Jones. The address should include, where appropriate, the number and 
street, route, or any other local feature and the Zip Code.
---------------------------------------------------------------------------

    \2\ Taxpayer identifying numbers are not required for foreign 
governments, nonresident aliens not engaged in trade or business within 
the United States, international organizations and foreign corporations 
not engaged in trade or business and not having an office or place of 
business or a financial or paying agent within the United States, and 
other persons or organizations as may be exempted from furnishing such 
numbers under regulations of the Internal Revenue Service.
---------------------------------------------------------------------------



Sec. 306.11  Forms of registration for transferable securities.

    The forms of registration described below are authorized for 
transferable securities:
    (a) Natural persons in their own right. In the names of natural 
persons who are not under any legal disability, in their own right, 
substantially as follows:
    (1) One person. In the name of one individual. Examples:

John A. Doe (123-45-6789).
Mrs. Mary C. Doe. (123-45-6789).
Miss Elizabeth Jane Doe (123-45-6789).


An individual who is sole proprietor of a business conducted under a 
trade name may include a reference to the trade name. Examples:

John A. Doe, doing business as Doe's Home Appliance Store (123-45-6789).

or

John A. Doe (123-45-6789), doing business as Doe's Home Appliance Store.

    (2) Two or more persons--general. Securities will not be registered 
in the name of one person payable on death to another, or in any form 
which purports to authorize transfer by less than all the persons named 
in the registration (or all the survivors).\3\ Securities will

[[Page 157]]

not be registered in the forms John A. Doe and Mrs. Mary C. Doe, or 
either of them or William C. Doe or Henry J. Doe, or either of them and 
securities so assigned will be treated as though the words or either of 
them do not appear in the assignments. The taxpayer identifying number 
of any of the joint owners may be shown on securities registered in 
joint ownership form.
---------------------------------------------------------------------------

    \3\ Warning. Difference Between Transferable Treasury Securities 
Registered in the Names of Two or More Persons and United States Savings 
Bonds in Coownership Form. The effect of registering Treasury securities 
to which these regulations apply in the names of two or more persons 
differs decidedly from registration of savings bonds in coownership 
form. Savings bonds are virtually redeemable on demand at the option of 
either coowner on his signature alone. Transferable Treasury securities 
are redeemable only at maturity or upon prior call by the Secretary of 
the Treasury.
    \4-6\ [Reserved]
---------------------------------------------------------------------------

    (i) With right of survivorship. In the names of two or more 
individuals with right of survivorship. Examples:

John A. Doe (123-45-6789) or Mrs. Mary C. Doe or the survivor.
John A. Doe (123-45-6789) or Mrs. Mary C. Doe or Miss Mary Ann Doe or 
the survivors or survivor.
John A. Doe (123-45-6789) or Mrs. Mary C. Doe.
John A. Doe (123-45-6789) and Mrs. Mary C. Doe.
John A. Doe (123-45-6789) and Mrs. Mary C. Doe as joint tenants with 
right of survivorship and not as tenants in common.

Limited to husband and wife:

John A. Doe (123-45-6789) and Mrs. Mary C. Doe, as tenants by the 
entireties.

    (ii) Without right of survivorship. In the names of two or more 
individuals in such manner as to preclude the right of survivorship. 
Examples:

John A. Doe (123-45-6789) and William B. Doe as tenants in common.
John A. Jones as natural guardian of Henry B. Jones, a minor, and Robert 
C. Jones (123-45-6789), without right of survivorship.

Limited to husband and wife:

Charles H. Brown (123-45-6789) and Ann R. Brown, as partners in 
community.

    (b) Minors and incompetents--(1) Natural guardians of minors. A 
security may be registered in the name of a natural guardian of a minor 
for whose estate no legal guardian or similar representative has legally 
qualified. Example:

John R. Jones as natural guardian of Henry M. Jones, a minor (123-45-
6789).


Either parent with whom the minor resides, or if he does not reside with 
either parent, the person who furnishes his chief support, will be 
recognized as his natural guardian and will be considered a fiduciary. 
Registration in the name of a minor in his own right as owner or as 
joint owner is not authorized. Securities so registered, upon 
qualification of the natural guardian, will be treated as though 
registered in the name of the natural guardian in that capacity.
    (2) Custodian under statute authorizing gifts to minors. A security 
may be purchased as a gift to a minor under a gifts to minors statute in 
effect in the State in which either the donor or the minor resides. The 
security should be registered as provided in the statute, with an 
identifying reference to the statute if the registration does not 
clearly identify it. Examples:

William C. Jones, as custodian for John A. Smith, a minor (123-45-6789), 
under the California Uniform Gifts to Minors Act.
Robert C. Smith, as custodian for Henry L. Brown, a minor (123-45-6789), 
under the laws of Georgia; Chapter 48-3, Code of Ga. Anno.

    (3) Incompetents not under guardianship. Registration in the form 
John A. Brown, an incompetent (123-45-6789), under voluntary 
guardianship, is permitted only on reissue after a voluntary guardian 
has qualified for the purpose of collecting interest. (See Sec. Sec. 
306.37(c)(2) and 306.57(c)(2)). Otherwise, registration in the name of 
an incompetent not under legal guardianship is not authorized.
    (c) Executors, administrators, guardians, and similar 
representatives or fiduciaries. A security may be registered in the 
names of legally qualified executors, administrators, guardians, 
conservators, or similar representatives or fiduciaries of a single 
estate. The names and capacities of all the representatives or 
fiduciaries, as shown in their letters of appointment, must be included 
in the registration and must be followed by an adequate identifying 
reference to the estate. Examples:

John Smith, executor of will (or administrator of estate) of Henry J. 
Jones, deceased (12-3456789).
William C. Jones, guardian (or conservator, etc.) of estate of James D. 
Brown, a minor (or an incompetent) (123-45-6789).

    (d) Life tenant under will. A security may be registered in the name 
of a life

[[Page 158]]

tenant followed by an adequate identifying reference to the will. 
Example:

Anne B. Smith, life tenant under the will of Adam A. Smith, deceased 
(12-3456789).

The life tenant will be considered a fiduciary.
    (e) Private trust estates. A security may be registered in the name 
and title of the trustee or trustees of a single duly constituted 
private trust, followed by an adequate identifying reference to the 
authority governing the trust. Examples:

John Jones and Blank Trust Co., Albany, NY, trustees under will of Sarah 
Jones, deceased (12-3456789).
John Doe and Richard Roe, trustees under agreement with Henry Jones 
dated February 9, 1970 (12-3456789).


The names of all trustees, in the form used in the trust instrument, 
must be included in the registration, except as follows:
    (1) If there are several trustees designated as a board or 
authorized to act as a unit, their names should be omitted and the words 
Board of Trustees substituted for the word trustees. Example:

Board of Trustees of Blank Co. Retirement Fund, under collective 
bargaining agreement dated June 30, 1970 (12-3456789).

    (2) If the trustees do not constitute a board or otherwise act as a 
unit, and are either too numerous to be designated in the inscription by 
names and title, or serve for limited terms, some or all of the names 
may be omitted. Examples:

John Smith, Henry Jones, et al., trustees under will of Henry J. Smith, 
deceased (12-3456789).
Trustees under will of Henry J. Smith, deceased (12-3456789).
Trustees of Retirement Fund of Industrial Manufacturing Co., under 
directors' resolution of June 30, 1950 (12-3456789).

    (f) Private organizations (corporations, unincorporated associations 
and partnerships). A security may be registered in the name of any 
private corporation, unincorporated association, or partnership, 
including a nominee, which for purposes of these regulations is treated 
as the owner. The full legal name of the organization, as set forth in 
its charter, articles of incorporation, constitution, partnership 
agreement, or other authority from which its powers are derived, must be 
included in the registration and may be followed, if desired, by a 
reference to a particular account or fund, other than a trust fund, in 
accordance with the rules and examples given below:
    (1) A corporation. The name of a business, fraternal, religious, or 
other private corporation must be followed by descriptive words 
indicating the corporate status unless the term corporation or the 
abbreviation Inc. is part of the name or the name is that of a 
corporation or association organized under Federal law, such as a 
national bank or Federal savings and loan association. Examples:

Smith Manufacturing Co., a corporation (12-3456789).
The Standard Manufacturing Corp. (12-3456789).
Jones & Brown, Inc.--Depreciation Acct. (12-3456789).
First National Bank of Albemarle (12- 3456789).
Abco & Co., Inc., a nominee corporation (12-3456789).

    (2) An unincorporated association. The name of a lodge, club, labor 
union, veterans' organization, religious society, or similar self-
governing organization which is not incorporated (whether or not it is 
chartered by or affiliated with a parent organization which is 
incorporated) must be followed by the words an unincorporated 
association. Examples:

American Legion Post No. ----, Department of the D.C., an unincorporated 
association (12-3456789).
Local Union No. 100, Brotherhood of Locomotive Engineers, an 
unincorporated association (12-3456789).

Securities should not be registered in the name of an unincorporated 
    association if the legal title to its property in general, or the 
    legal title to the funds with which the securities are to be 
    purchased, is held by trustees. In such a case the securities should 
    be registered in the title of the trustees in accordance with 
    paragraph (e) of this section. The term unincorporated association 
    should not be used to describe a trust fund, a partnership or a 
    business conducted under a trade name.

[[Page 159]]

    (3) A partnership. The name of a partnership must be followed by the 
words a partnership. Example:

Smith & Brown, a partnership (12-3456789).
Acme Novelty Co., a limited partnership (12-3456789).
Abco & Co., a nominee partnership (12-3456789).

    (g) States, public bodies, and corporations and public officers. A 
security may be registered in the name of a State or county, city, town, 
village, school district, or other political entity, public body or 
corporation established by law (including a board, commission, 
administration, authority or agency) which is the owner or official 
custodian of public funds, other than trust funds, or in the full legal 
title of the public officer having custody. Examples:

State of Maine.
Town of Rye, NY.
Maryland State Highway Administration.
Treasurer, City of Springfield, IL.
Treasurer of Rhode Island--State Forestry Fund.

    (h) States, public officers, corporations or bodies as trustees. A 
security may be registered in the title of a public officer or in the 
name of a State or county or a public corporation or public body acting 
as trustee under express authority of law. An appropriate reference to 
the statute creating the trust may be included in the registration. 
Examples:

Insurance Commissioner of Pennsylvania, trustee for benefit of 
policyholders of Blank Insurance Co. (12-3456789), under Sec. ----, Pa. 
Stats.
Rhode Island Investment Commission, trustee of General Sinking Fund 
under Ch. 35, Gen. Laws of RI.
State of Colorado in trust for Colorado Surplus Property Agency.

[38 FR 7078, Mar. 15, 1973; 38 FR 8153, Mar. 29, 1973]



Sec. 306.12  Errors in registration.

    If an erroneously inscribed security is received, it should not be 
altered in any respect, but the Bureau should be furnished full 
particulars concerning the error and asked to furnish instructions.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38125, July 15, 1999]



Sec. 306.13  Nontransferable securities.

    Upon authorized reissue, Treasury Bonds, Investment Series B--1975-
80, may be registered in the forms set forth in Sec. 306.11.



               Subpart C_Transfers, Exchanges and Reissues



Sec. 306.15  Transfers and exchanges of securities--closed periods.

    (a) General. The transfer of registered securities should be made by 
assignment in accordance with subpart F of this part. Transferable 
registered securities are eligible for denominational exchange. Specific 
instructions for issuance and delivery of the new securities, signed by 
the owner or his authorized representative, must accompany the 
securities presented. (Form PD 3905 or PD 1827, as appropriate, may be 
used.) Denominational exchanges may be made at any time. Securities 
presented for transfer must be received by the Bureau not less than 1 
full month before the date on which the securities mature or become 
redeemable pursuant to a call for redemption before maturity. Any 
security so presented which is received too late to comply with this 
provision will be accepted for payment only.
    (b) Closing of transfer books. The transfer books are closed for one 
full month preceding interest payment dates and call or maturity dates. 
If the date set for closing of the transfer books falls on Saturday, 
Sunday, or a legal holiday, the books will be closed as of the close of 
business on the last business day preceding that date. The books are 
reopened on the first business day following the date on which interest 
falls due. Registered securities which have not matured or been called, 
submitted for transfer, reissue, and coupon securities which have not 
matured or been called, submitted for exchange for registered 
securities, which are received during the period the books for that loan 
are closed, will be processed on or after the date such books are 
reopened. If registered securities are received for transfer, or coupon 
securities are received for exchange for registered securities, during

[[Page 160]]

the time the books are closed for payment of final interest at maturity 
or call, unless otherwise provided in the offering circular or notice of 
call, the following action will be taken:
    (1) Payment of final interest will be made to the registered owner 
of record on the date the books were closed.
    (2) Payment of principal will be made to the assignee under a proper 
assignment of the securities.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38125, July 15, 1999]



Sec. 306.16  Exchanges of registered securities.

    No assignments will be required for:
    (a) Authorized denominational exchanges of registered securities for 
like securities in the same names and forms of registration and
    (b) Redemption-exchanges, or prefundings, or advance refundings in 
the same names and forms as appear in the registration or assignments of 
the securities surrendered.



Sec. 306.17  Exchanges of registered securities for coupon securities.

    Exchanges of registered securities for bearer securities are not 
permitted.

[64 FR 38126, July 15, 1999]



Sec. 306.18  Exchanges of coupon securities for registered securities.

    Coupon securities presented for exchange for registered securities 
should have all matured interest coupons detached. All unmatured coupons 
should be attached, except that if presented when the transfer books are 
closed (in which case the exchange will be effected on or after the date 
on which the books are reopened), the next maturing coupons should be 
detached and held for collection in ordinary course when due. If any 
coupons which should be attached are missing, the securities must be 
accompanied by a remittance in an amount equal to the face amount of the 
missing coupons. The new registered securities will bear interest from 
the interest payment date next preceding the date on which the exchange 
is made.



Sec. 306.19  Denominational exchanges of coupon securities.

    Denominational exchanges of bearer securities are not permitted.

[64 FR 38126, July 15, 1999]



Sec. 306.20  Reissue of registered transferable securities.

    Assignments are not required for reissue of registered transferable 
securities in the name(s) of:
    (a) The surviving joint owner(s) of securities registered in the 
names of or assigned to two or more persons, unless the registration or 
assignment includes words which preclude the right of survivorship,
    (b) A succeeding fiduciary or other lawful successor,
    (c) A remainderman, upon termination of a life estate,
    (d) An individual, corporation or unincorporated association whose 
name has been legally changed,
    (e) A corporation or unincorporated association which is the lawful 
successor to another corporation or unincorporated association, and
    (f) A successor in title to a public officer or body.

Evidence of survivorship, succession, or change of name, as appropriate, 
must be furnished. The appropriate taxpayer identifying number also must 
be furnished if the registration of the securities submitted does not 
include such number for the person or organization to be named on the 
reissued securities.



Sec. 306.21  Reissue of nontransferable securities.

    Treasury Bonds, Investment Series B--1975-80, may be reissued only 
in the names of:
    (a) Lawful successors in title,
    (b) The legal representatives or distributees of a deceased owner's 
estate, or the distributees of a trust estate, and
    (c) State supervisory authorities in pursuance of any pledge 
required of the owner under State law, or upon termination of the pledge 
in the names of the pledgors or their successors.

Bonds presented for reissue must be accompanied by evidence of 
entitlement.

[[Page 161]]



Sec. 306.22  Exchange of Treasury Bonds, Investment Series B-1975-80.

    Bonds of this series presented for exchange for 1\1/2\ percent 5-
year Treasury notes must bear duly executed assignments to ``The 
Secretary of the Treasury for exchange for the current series of EA or 
EO Treasury notes to be delivered to (inserting the name and address of 
the person to whom the notes are to be delivered).'' The notes will bear 
the April 1 or October 1 date next preceding the date the bonds, duly 
assigned with supporting evidence, if necessary, are received by the 
Bureau or a Federal Reserve Bank or Branch. Interest accrued at the rate 
of 2\3/4\ percent on the bonds surrendered from the next preceding 
interest payment date to the date of exchange will be credited, and 
interest at the rate of 1\1/2\ percent on the notes for the same period 
will be charged and the difference will be paid to the owner.



Sec. 306.23  Securities eligible to be held in the TREASURY DIRECT Book-entry 

Securities System.

    (a) Eligible issues. The Secretary will, from time to time, cause to 
be published in the Federal Register a notice describing those series of 
Treasury issues of bonds and notes issued before August 1, 1986, that 
will be eligible for conversion to the TREASURY DIRECT Book-entry 
Securities System. The notice shall specify the period during which 
requests for conversion will be accepted.
    (b) Establishment of TREASURY DIRECT account. To convert a bearer or 
registered security to book-entry form to be held in TREASURY DIRECT, 
the owner(s) must establish at the time of conversion, or prior thereto, 
an account in TREASURY DIRECT in accordance with Sec. 357.20 of part 
357. Similarly, to transfer to TREASURY DIRECT a security held in book-
entry form under subpart O of this part, the owner(s) must establish at 
the time of transfer, or prior thereto, an account in TREASURY DIRECT in 
accordance with Sec. 357.20 of part 357.
    (c) Procedure for conversion of bearer security. To convert a bearer 
security to TREASURY DIRECT, the owner must present it to the Department 
of the Treasury, accompanied by a request for conversion, which must 
include the information needed for establishing a TREASURY DIRECT 
account, unless such account has been previously established, and is 
identified by its number in the request.
    (d) Procedures for conversion of registered security. To convert a 
registered security to TREASURY DIRECT, the owner(s) thereof must 
execute an assignment in accordance with subpart F of this part. The 
assignment must be in substantially the following form: ``To the 
Secretary of the Treasury for conversion to book-entry and deposit in 
TREASURY DIRECT,''. The security should be accompanied by the 
information needed for establishing the TREASURY DIRECT account, or 
where an account has been previously established, the above assignment 
should be reworded to include the account number.
    (e) Procedure for transfer of book-entry security held under subpart 
O. To transfer a book-entry security held under subpart O of this part, 
the owner(s) must arrange with the bank or other entity where the 
security is being held to transfer the same to TREASURY DIRECT. No such 
transfer will be accepted unless a TREASURY DIRECT account has 
previously been established and the number thereof is shown in the 
transfer request.
    (f) Terms and conditions of securities held in TREASURY DIRECT. An 
eligible security held in TREASURY DIRECT shall be subject to subpart C 
and other applicable portions of part 357, and the provisions of part 
306 shall not apply thereto.
    (g) Re-conversion from TREASURY DIRECT to registered form or to 
book-entry under subpart O. The owner(s) of a security converted or 
transferred to TREASURY DIRECT in the manner herein provided may, by 
executing an appropriate transaction request, transfer the book-entry 
security to a book-entry account held under the provisions of subpart O 
of this part. Thereafter, to the extent that the security was originally 
eligible for such conversion the book-entry security held under subpart 
O may be converted to one in registered form. Securities transferred 
from TREASURY DIRECT

[[Page 162]]

under this subsection shall be thereupon subject to the provisions of 
part 306, and part 357 shall no longer apply thereto.

[53 FR 15554, May 2, 1988, as amended at 64 FR 38126, July 15, 1999]



Sec. 306.24  Collection of fees on definitive securities.

    A fee shall be charged for each registered security, as defined in 
Sec. 306.115 (a), issued as a result of a transfer, exchange, reissue, 
withdrawal from book-entry, or the granting of relief on account of 
loss, theft, destruction, mutilation, or defacement. The applicable fee, 
and the basis for its determination, will be published by notice in the 
Federal Register.

[60 FR 4377, Jan. 23, 1995, as amended at 64 FR 38126, July 15, 1999]



                     Subpart D_Redemption or Payment



Sec. 306.25  Presentation and surrender.

    (a) General. Securities, whether in registered or bearer form, are 
payable in regular course of business at maturity unless called for 
redemption before maturity in accordance with their terms, in which case 
they will be payable in regular course of business on the date of call. 
The Secretary of the Treasury may provide for the exchange of maturing 
or called securities, or in advance of call or maturity, may afford 
owners the opportunity of exchanging a security for another security 
pursuant to a prerefunding or an advance refunding offer. Registered and 
bearer securities should be presented and surrendered for redemption to 
the Bureau. No assignments or evidence in support of assignments will be 
required by or on behalf of the registered owner or assignee for 
redemption for his or its account, or for redemption-exchange, or 
exchange pursuant to a prerefunding or an advance refunding offer, if 
the new securities are to be registered in exactly the same names and 
forms as appear in the registrations or assignments of the securities 
surrendered. To the extent appropriate, these rules also apply to 
securities registered in the title of public officers who are official 
custodians of public funds.
    (b) ``Overdue'' securities. If a bearer security or a registered 
security assigned in blank, or to bearer, or so assigned as to become in 
effect payable to bearer, is presented and surrendered for redemption 
after it has become overdue, the Secretary of the Treasury will 
ordinarily require satisfactory proof of ownership. (Form PD 1071 may be 
used.) A security shall be considered to be overdue after the lapse of 
the following periods of time from its face maturity:
    (1) One month for securities issued for a term of 1 year or less.
    (2) Three months for securities issued for a term of more than 1 
year but not in excess of 7 years.
    (3) Six months for securities issued for a term of more than 7 
years.

[38 FR 7078, Mar. 15, 1973; 38 FR 8432, Apr. 2, 1973, as amended by 64 
FR 38126, July 15, 1999]



Sec. 306.26  Redemption of registered securities at maturity, upon prior 

call, or for prerefunding or advance refunding.

    Registered securities presented and surrendered for redemption at 
maturity or pursuant to a call for redemption before maturity need not 
be assigned, unless the owner desires that payment be made to some other 
person, in which case assignments should be made to ``The Secretary of 
the Treasury for redemption for the account of (inserting name and 
address of person to whom payment is to be made). Specific instructions 
for the issuance and delivery of the redemption check, signed by the 
owner or his authorized representative, must accompany the securities, 
unless included in the assignment. (Form PD 3905 may be used.) Payment 
of the principal will be made by check drawn on the United States 
Treasury to the order of the persons entitled and mailed in accordance 
with the instructions received. Securities presented for prerefunding or 
advance refunding should be assigned as provided in the prerefunding or 
advance refunding offer.

[64 FR 38126, July 15, 1999]

[[Page 163]]



Sec. 306.27  Redemption of bearer securities at maturity, upon prior call, or 

for advance refunding or prerefunding.

    All interest coupons due and payable on or before the date of 
maturity or date fixed in the call for redemption before maturity should 
be detached from coupon securities presented for redemption and should 
be collected separately in regular course. All coupons bearing dates 
subsequent to the date fixed in a call for redemption, or offer of 
prerefunding or advance refunding, should be left attached to the 
securities. If any such coupons are missing, the full face amount 
thereof will be deducted from the payment to be made upon redemption or 
the prerefunding or advance refunding adjustment unless satisfactory 
evidence of their destruction is submitted. Any amounts so deducted will 
be held in the Department to provide for adjustments or refunds in the 
event it should be determined that the missing coupons were subsequently 
presented or their destruction is later satisfactorily established. In 
the absence of other instructions, payment or bearer securities will be 
made by check drawn to the order of the person presenting and 
surrendering the securities and mailed to him at his address, as given 
in the advice accompanying the securities. (Form PD 3905 may be used.) 
Under appropriate circumstances, payment to a financial institution for 
detached past due coupons may be made by crediting the amount of the 
proceeds to the account maintained by the financial institution at the 
Federal Reserve bank of its district.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38126, July 15, 1999]



                           Subpart E_Interest



Sec. 306.35  Computation of interest.

    The interest on Treasury securities accrues and is payable on a 
semiannual basis unless otherwise provided in the circular offering them 
for sale or exchange. If the period of accrual is an exact 6 months, the 
interest accrual is an exact one-half year's interest without regard to 
the number of days in the period. If the period of accrual is less than 
an exact 6 months, the accrued interest is computed by determining the 
daily rate of accrual on the basis of the exact number of days in the 
full interest period and multiplying the daily rate by the exact number 
of days in the fractional period for which interest has actually 
accrued. A full interest period does not include the day as of which 
securities were issued or the day on which the last preceding interest 
became due, but does include the day on which the next succeeding 
interest payment is due. A fractional part of an interest period does 
not include the day as of which the securities were issued or the day on 
which the last preceding interest payment became due, but does include 
the day as of which the transaction terminating the accrual of interest 
is effected. The 29th of February in a leap year is included whenever it 
falls within either a full interest period or a fractional part 
thereof.\7\
---------------------------------------------------------------------------

    \7\ The appendix to this subpart contains a complete explanation of 
the method of computing interest on a semiannual basis on Treasury 
bonds, notes, and certificates of indebtedness, and an outline of the 
method of computing the discount rates on Treasury bills. Also included 
are tables of computation of interest on semiannual and annual basis.
---------------------------------------------------------------------------



Sec. 306.36  Termination of interest.

    Securities will cease to bear interest on the date of their maturity 
unless they have been called for redemption before maturity in 
accordance with their terms, or are presented and surrendered for 
redemption-exchange or exchange pursuant to an advance refunding or 
prerefunding offer, in which case they will cease to bear interest on 
the date of call, or the exchange date, as the case may be.



Sec. 306.37  Interest on registered securities.

    (a) Method of payment. The interest on registered securities is 
payable by checks drawn on the United States Treasury to the order of 
the registered owners, except as otherwise provided herein. Interest 
checks are prepared by the Department in advance of the interest payment 
data and are ordinarily mailed in time to reach the addresses

[[Page 164]]

on that date. Interest on a registered security which has not matured or 
been called and which is presented for any transaction during the period 
the books for that loan are closed will be paid by check drawn to the 
order of the registered owner of record. Upon receipt of notice of the 
death or incompetency of an individual named as registered owner, a 
change in the name or in the status of a partnership, corporation, or 
unincorporated association, the removal, resignation, succession, or 
death of a fiduciary or trustee, delivery of interest checks will be 
withheld pending receipt and approval of evidence showing who is 
entitled to receive the interest checks. If the inscriptions on 
securities do not clearly identify the owners, delivery of interest 
checks will be withheld pending reissue of the securities in the correct 
registration. The final installment of interest, unless otherwise 
provided in the offering circular or notice of call, will be paid by 
check drawn to the order of the registered owner of record and mailed in 
advance of the interest payment date in time to reach the addressee on 
or about that date. Interest on securities presented for prerefunding or 
advance refunding will be adjusted as provided in the prerefunding or 
advance refunding offer.
    (b) Change of address. To assure timely delivery of interest checks, 
owners should promptly notify the Bureau of any change of address. (Form 
PD 345 may be used.) The notification must be signed by the registered 
owner or a joint owner or an authorized representative, and should show 
the owner's taxpayer identifying number, the old and new addresses, the 
serial number and denomination of each security, the titles of the 
securities (for example: 4\1/4\ percent Treasury Bonds of 1987-92, dated 
August 15, 1962), and the registration of each security. Notifications 
by attorneys in fact, trustees, or by the legal representatives of the 
estates of deceased, incompetent, or minor owners should be supported by 
proof of their authority, unless, in the case of trustees or legal 
representatives, they are named in the registration.
    (c) Collection of interest checks--(1) General. Interest checks may 
be collected in accordance with the regulations governing the 
endorsement and payment of Government warrants and checks, which are 
contained in the current revision of Department Circular No. 21 (part 
240 of this chapter).
    (2) By voluntary guardians of incompetents. Interest checks drawn to 
the order of a person who has become incompetent and for whose estate no 
legal guardian or similar representative has been appointed should be 
returned to the Bureau with a full explanation of the circumstances. For 
collection of interest, the Department will recognize the relative 
responsible for the incompetent's care and support or some other person 
as voluntary guardian for the incompetent. (Application may be made on 
Form PD 1461.)
    (d) Nonreceipt, loss, theft, or destruction of interest checks. If 
an interest check is not received within a reasonable period after an 
interest payment date, or if a check is lost, stolen, or destroyed after 
receipt, notification should be sent to the Bureau of the Public Debt, 
Division of Customer Service, Parkersburg, WV 26102. Notification should 
include the name and address of the owner, his taxpayer identifying 
number, and the serial number, denomination, and title of the security 
upon which the interest was payable. If the check is subsequently 
received or recovered, the Bureau should be notified.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38126, July 15, 1999]



Sec. 306.38  Interest on bearer securities.

    Unless the offering circular and notice of call provide otherwise, 
interest on coupon securities is payable in regular course of business 
upon presentation and surrender of the interest coupons as they mature. 
Such coupons are payable at participating Federal Reserve banks or by 
the Bureau.\8\ Interest on Treasury bills, and any other bearer 
securities which may be sold and issued on a discount basis and which 
are payable at par at maturity,

[[Page 165]]

is represented by the difference between the purchase price and the par 
value, and no coupons are attached.
---------------------------------------------------------------------------

    \8\ Banking institutions will usually cash the coupons without 
charge as an accommodation to their customers.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38126, July 15, 1999]

Appendix to Subpart E of Part 306--Interest--Computation of Interest on 
      Treasury Bonds, Treasury Notes, and Treasury Certificates of 
 Indebtedness, and Computation of Discount on Treasury Bills--Interest 
                                 Tables

                 computation of interest on annual basis

      One Day's Interest is \1/365\ or \1/366\ of 1-Year's Interest

    Computation of interest on Treasury bonds, notes, and certificates 
of indebtedness will be made on an annual basis in all cases where 
interest is payable in one amount for the full term of the security, 
unless such term is an exact half-year (6 months), and it is provided 
that interest shall be computed on a semi-annual basis.
    If the term of the securities is exactly 1 year, the interest is 
computed for the full period at the specified rate regardless of the 
number of days in such period.
    If the term of the securities is less than 1 full year, the annual 
interest period for purposes of computation is considered to be the full 
year from but not including the date of issue to and including the 
anniversary of such date.
    If the term of the securities is more than 1 full year, computation 
is made on the basis of one full annual interest period, ending with the 
maturity date, and a fractional part of the preceding full annual 
interest period.
    The computation of interest for any fractional part of an annual 
interest period is made on the basis of 365 actual days in such period, 
or 366 days if February 29 falls within such annual period.

               computation of interest on semiannual basis

  One Day's Interest is \1/181\, \1/182\, \1/183\ or \1/184\ or \1/2\ 
                             Year's Interest

    Computation of interest on Treasury bonds, notes, and certificates 
of indebtedness will be made on a semiannual basis in all cases where 
interest is payable for one or more full half-year (6 months) periods, 
or for one or more full half-year periods and a fractional part of a 
half-year period. A semiannual interest period is an exact half-year or 
6 months, for computation purposes, and may comprise 181, 182, 183 or 
184 actual days.
    An exact half-year's interest at the specified rate is computed for 
each full period of exactly 6 months, irrespective of the actual number 
of days in the half-year.
    If the initial interest covers a fractional part of a half-year, 
computation is made on the basis of the actual number of days in the 
half-year (exactly 6 months) ending on the day such initial interest 
becomes due. If the initial interest covers a period in excess of 6 
months, computation is made on the basis of one full half-year, ending 
with the interest due date, and a fractional part of the preceding full 
half-year period.
    Interest for any fractional part of a full half-year period is 
computed on the basis of the exact number of days in the full period, 
including February 29 whenever it falls within such a period.
    The number of days in any half-year period is shown in the following 
table:

                                                For the Half-Year
----------------------------------------------------------------------------------------------------------------
                                                                   Beginning and ending    Beginning and ending
                                                                   days are 1st or 15th    days are last days of
                                                                  of months listed under    months listed under
                                                                      interest period         interest period
                         Interest period                             (number of days)        (number of days)
                                                                 -----------------------------------------------
                                                                    Regular                 Regular
                                                                     year      Leap year     year      Leap year
----------------------------------------------------------------------------------------------------------------
January to July.................................................         181         182         181         182
February to August..............................................         181         182         184         184
March to September..............................................         184         184         183         183
April to October................................................         183         183         184         184
May to November.................................................         184         184         183         183
June to December................................................         183         183         184         184
July to January.................................................         184         184         184         184
August to February..............................................         184         184         181         182
September to March..............................................         181         182         182         183
October to April................................................         182         183         181         182
November to May.................................................         181         182         182         183
December to June................................................         182         183         181         182
                                                                 -----------------------------------------------
1 year (any 2 consecutive half-years)...........................         365         366         365         366
----------------------------------------------------------------------------------------------------------------


[[Page 166]]

    The following are dates for end-of-the-month interest computations.

------------------------------------------------------------------------
                                            Interest-computation period
      When interest period ends on--         will be from but will not
                                                     include--
------------------------------------------------------------------------
January 31...............................  July 31.
February 28 in 365-day year..............  August 31.
February 29..............................   Do.
March 30, 31.............................  September 30.
April 30.................................  October 31.
May 30, 31...............................  November 30.
June 30..................................  December 31.
July 31..................................  January 31.
August 29, 30, or 31.....................  February 28 in 365-day year.
                                           February 29 in leap year.
September 30.............................  March 31.
October 30, 31...........................  April 30.
November 30..............................  May 31.
December 30, 31..........................  June 30.
------------------------------------------------------------------------

                         use of interest tables

    In the appended tables decimals are set forth for use in computing 
interest for fractional parts of interest periods. The decimals cover 
interest on $1,000 for 1 day in each possible semiannual (Table I), and 
annual (Table II) interest period, at all rates of interest, in steps of 
\1/8\ percent, from \1/8\ to 9 percent. The amount of interest accruing 
on any date (for a fractional part of an interest period) on $1,000 face 
amount of any issue of Treasury bonds, Treasury notes, or Treasury 
certificates of indebtedness may be ascertained in the following way:
    (1) The date of issue, the dates for the payment of interest, the 
basis (semiannual or annual) upon which interest is computed, and the 
rate of interest (percent per annum) may be determined from the text of 
the security, or from the official circular governing the issue.
    (2) Determine the interest period of which the fraction is a part, 
and calculate the number of days in the full period to determine the 
proper column to be used in selecting the decimal for 1 day's interest.
    (3) Calculate the actual number of days in the fractional period 
from but not including the date of issue or the day on which the last 
preceding interest payment was made, to and including the day on which 
the next succeeding interest payment is due or the day as of which the 
transaction which terminates the accrual of additional interest is 
effected.
    (4) Multiply the appropriate decimal (1 day's interest on $1,000) by 
the number of days in the fractional part of the interest period. The 
appropriate decimal will be found in the appended table for interest 
payable semiannually or annually, as the case may be, opposite the rate 
borne by the security, and in the column showing the full interest 
period of which the fractional period is a part. (For interest on any 
other amount, multiply the amount of interest on $1,000 by the other 
amount expressed as a decimal of $1,000.)

                                treasury

    The methods of computing discount rates on U.S. Treasury bills are 
given below:
    Computation will be made on an annual basis in all cases. The annual 
period for bank discount is a year of 360 days, and all computations of 
such discount will be made on that basis. The annual period for true 
discount is 1 full year from but not including the date of issue to and 
including the anniversary of such date. Computation of true discount for 
a fractional part of a year will be made on the basis of 365 days in the 
year, or 366 days if February 29 falls within the year.

                              bank discount

    The bank discount rate on a Treasury bill may be ascertained by: (1) 
Subtracting the sale price of the bill from its face value to obtain the 
amount of discount; (2) dividing the amount of discount by the number of 
days the bill is to run to obtain the amount of discount per day; (3) 
multiplying the amount of discount per day by 360 (the number of days in 
a commercial year of 12 months of 30 days each) to obtain the amount of 
discount per year; and (4) dividing the amount of discount per year by 
the face value of the bill to obtain the bank discount rate.

For example:

91-day bill:
  Principal amount--maturity value..........................     $100.00
  Price at issue--amount received...........................       99.50
                                                             -----------
    Amount of discount......................................         .50
$0.50/91x360/$100=.01978 or 1.978 percent
 

                              true discount

    The true discount rate on a Treasury bill of not more than one-half 
year in length may be ascertained by (1 and 2) obtaining the amount of 
discount per day by following the first two steps described under ``Bank 
Discount''; (3) multiplying the amount of discount per day by the actual 
number of days in the year from date of issue (365 ordinarily, but 366 
if February 29 falls within the year from date of issue) to obtain the 
amount of discount per year; and (4) dividing the amount of discount per 
year by the sale price of the bill to obtain the true discount rate.

For example:

91-day bill:
  Principal amount--maturity value..........................     $100.00
  Price at issue--amount received...........................       99.50
                                                             -----------
    Amount of discount......................................         .50
$0.50/91x365/$99.50=.02016 or 2.016 percent
 


[[Page 167]]


   Table I--Decimal for 1 Day's Interest on $1,000 at Various Rates of Interest, Payable Semiannually or on a
 Semiannual Basis, in Regular Years of 365 Days and in Leap Years of 366 Days (to Determine Applicable Number of
                           Days, See ``Computation of Interest on Semiannual Basis'')
----------------------------------------------------------------------------------------------------------------
                                                Half-year of     Half-year of     Half-year of     Half-year of
          Rate per annum (percent)                184 days         183 days         182 days         181 days
----------------------------------------------------------------------------------------------------------------
\1/8\.......................................   $0.003 396 739   $0.003 415 301   $0.003 434 066   $0.003 453 039
\1/4\.......................................     .006 793 478     .006 830 601     .006 868 132     .006 906 077
\3/8\.......................................     .010 190 217     .010 245 902     .010 302 198     .010 359 116
\1/2\.......................................     .013 586 957     .013 661 202     .013 736 264     .013 812 155
\5/8\.......................................     .016 983 696     .017 076 503     .017 170 330     .017 265 193
\3/4\.......................................     .020 380 435     .020 491 803     .020 604 396     .020 718 232
\7/8\.......................................     .023 777 174     .023 907 104     .024 038 462     .024 171 271
1...........................................     .027 173 913     .027 322 404     .027 472 527     .027 624 309
1\1/8\......................................     .030 570 652     .030 737 705     .030 906 593     .031 077 348
1\1/4\......................................     .033 967 391     .034 153 005     .034 340 659     .034 530 387
1\3/8\......................................     .037 364 130     .037 568 306     .037 774 725     .037 983 425
1\1/2\......................................     .040 760 870     .040 983 607     .041 208 791     .041 436 464
1\5/8\......................................     .044 157 609     .044 398 907     .044 642 857     .044 889 503
1\3/4\......................................     .047 554 348     .047 814 208     .048 076 923     .048 342 541
1\7/8\......................................     .050 951 087     .051 229 508     .051 510 989     .051 795 580
2...........................................     .054 347 826     .054 644 809     .054 945 055     .055 248 619
2\1/8\......................................     .057 744 565     .058 060 109     .058 379 121     .058 701 657
2\1/4\......................................     .061 141 304     .061 475 410     .061 813 187     .062 154 696
2\3/8\......................................     .064 538 043     .064 890 710     .065 247 253     .065 607 735
2\1/2\......................................     .067 934 783     .068 306 011     .068 681 319     .069 060 773
2\5/8\......................................     .071 331 522     .071 721 311     .072 115 385     .072 513 812
2\3/4\......................................     .074 728 261     .075 136 612     .075 549 451     .075 966 851
2\7/8\......................................     .078 125 000     .078 551 913     .078 983 516     .079 419 890
3...........................................     .081 521 739     .081 967 213     .082 417 582     .082 872 928
3\1/8\......................................     .084 918 478     .085 382 514     .085 851 648     .086 325 967
3\1/4\......................................     .088 315 217     .088 797 814     .089 285 714     .089 779 006
3\3/8\......................................     .091 711 957     .092 213 115     .092 719 780     .093 232 044
3\1/2\......................................     .095 108 696     .095 628 415     .096 153 846     .096 685 083
3\5/8\......................................     .098 505 435     .099 043 716     .099 021 978     .100 138 122
3\3/4\......................................     .101 902 174     .102 459 016     .103 021 978     .103 591 160
3\7/8\......................................     .105 298 913     .105 874 317     .106 456 044     .107 044 190
4...........................................     .108 695 652     .109 289 617     .109 890 110     .110 497 238
4\1/8\......................................     .112 092 391     .112 704 918     .113 324 176     .113 950 236
4\1/4\......................................     .115 489 130     .116 120 219     .116 758 242     .117 403 375
4\3/8\......................................     .118 885 870     .119 535 519     .120 192 308     .120 856 317
4\1/2\......................................     .122 282 609     .122 950 820     .123 626 374     .124 309 394
4\5/8\......................................     .125 679 348     .126 366 120     .127 060 440     .127 762 432
4\3/4\......................................     .129 076 087     .129 781 421     .130 494 505     .131 215 471
4\7/8\......................................     .132 472 826     .133 196 721     .133 928 571     .134 668 500
5...........................................     .135 869 565     .136 612 022     .137 362 637     .138 121 548
5\1/8\......................................     .139 266 304     .140 027 322     .140 796 703     .141 574 586
5\1/4\......................................     .142 663 043     .143 442 623     .144 230 769     .145 027 624
5\3/8\......................................     .146 059 783     .146 857 923     .147 664 835     .148 480 663
5\1/2\......................................     .149 456 522     .150 273 224     .151 098 901     .151 933 702
5\5/8\......................................     .152 853 261     .153 688 525     .154 532 967     .155 386 748
5\3/4\......................................     .156 250 000     .157 103 825     .157 967 033     .158 839 706
5\7/8\......................................     .159 646 739     .160 519 126     .161 401 099     .162 292 876
6...........................................     .163 043 478     .163 934 426     .164 835 165     .165 745 856
6\1/8\......................................      166 440 217     .167 349 727     .168 269 231     .169 198 895
6\1/4\......................................     .169 836 957     .170 765 027     .171 703 297     .172 651 934
6\3/8\......................................     .173 233 696     .174 180 328     .175 137 363     .176 104 972
6\1/2\......................................     .176 630 435     .177 595 628     .178 571 429     .179 558 011
6\5/8\......................................     .180 027 174     .181 010 929     .182 005 495     .183 011 050
6\3/4\......................................     .183 423 913     .184 426 230     .185 439 560     .186 464 088
6\7/8\......................................     .186 820 652     .187 841 530     .188 873 626     .189 917 127
7...........................................     .190 217 391     .191 256 831     .192 307 692     .193 370 166
7\1/8\......................................     .193 614 130     .194 672 131     .195 741 758     .196 823 204
7\1/4\......................................     .197 010 870     .198 087 432     .199 175 824     .200 276 243
7\3/8\......................................     .200 407 609     .201 502 732     .202 609 890     .203 729 282
7\1/2\......................................     .203 804 348     .204 918 033     .206 043 956     .207 182 320
7\5/8\......................................     .207 201 087     .208 333 333     .209 478 022     .210 635 359
7\3/4\......................................     .210 597 826     .211 748 634     .212 912 088     .214 088 398
7\7/8\......................................     .213 994 565     .215 163 934     .216 346 154     .217 541 436
8...........................................     .217 391 304     .218 579 235     .219 780 220     .220 994 475
8\1/8\......................................     .220 788 043     .221 994 536     .223 214 286     .224 447 514
8\1/4\......................................     .224 184 783     .225 409 836     .226 648 352     .227 900 552
8\3/8\......................................     .227 581 522     .228 825 137     .230 082 418     .231 353 591

[[Page 168]]

 
8\1/2\......................................     .230 978 261     .232 240 437     .233 516 484     .234 806 630
8\5/8\......................................     .234 375 000     .235 655 738     .236 950 549     .238 259 669
8\3/4\......................................     .237 771 739     .239 071 038     .240 384 615     .241 712 707
8\7/8\......................................     .241 168 478     .242 486 339     .243 818 681     .245 165 746
9...........................................     .244 565 217     .245 901 639     .247 252 747     .248 618 785
9\1/8\......................................     .247 961 957     .249 316 940     .250 686 813     .252 071 823
9\1/4\......................................     .251 358 696     .252 732 240     .254 120 879     .255 524 862
9\3/8\......................................     .254 755 435     .256 147 541     .257 554 945     .258 977 901
9\1/2\......................................     .258 152 174     .259 562 842     .260 989 011     .262 430 939
9\5/8\......................................     .261 548 913     .262 978 142     .264 423 077     .265 883 978
9\3/4\......................................     .264 945 652     .266 393 443     .267 857 143     .269 337 017
9\7/8\......................................     .268 342 391     .269 808 743     .271 291 209     .272 790 055
10..........................................     .271 739 130     .273 224 044     .274 725 275     .276 243 094
10\1/8\.....................................     .275 135 870     .276 639 344     .278 159 341     .279 696 133
10\1/4\.....................................     .278 853 609     .280 054 645     .281 593 407     .283 149 171
10\3/8\.....................................     .281 929 348     .283 469 945     .285 027 473     .286 602 210
10\1/2\.....................................     .285 326 087     .286 885 246     .288 461 538     .290 055 249
10\5/8\.....................................     .288 722 826     .290 300 546     .291 895 604     .293 508 287
10\3/4\.....................................     .292 119 565     .293 715 847     .295 329 670     .296 961 326
10\7/8\.....................................     .295 516 304     .297 131 148     .298 763 736     .300 414 365
11..........................................     .298 913 043     .300 546 448     .302 197 802     .303 867 403
11\1/8\.....................................     .302 309 783     .303 961 749     .305 631 868     .307 320 442
11\1/4\.....................................     .305 706 522     .307 377 049     .309 065 934     .310 773 481
11\3/8\.....................................     .309 103 261     .310 792 350     .312 500 000     .314 226 519
11\1/2\.....................................     .312 500 000     .314 207 650     .315 934 066     .317 679 558
11\5/8\.....................................     .315 896 739     .317 622 951     .319 368 132     .321 132 597
11\3/4\.....................................     .319 293 478     .321 038 251     .322 802 198     .324 585 635
11\7/8\.....................................     .322 690 217     .324 453 552     .326 236 264     .328 038 674
12..........................................     .326 086 957     .327 868 852     .329 670 330     .331 491 713
----------------------------------------------------------------------------------------------------------------


  Table II--Decimal for 1 Day's Interest on $1,000 at Various Rates of
  Interest, Payable Annually or on an Annual Basis, in Regular Years of
                 365 Days and in Leap Years of 366 Days
------------------------------------------------------------------------
                                         Regular year,    Leap year, 366
       Rate per annum (percent)             365 days           days
------------------------------------------------------------------------
\1/8\.................................   $0.003 424 658   $0.003 415 301
\1/4\.................................     .006 849 315     .006 830 601
\3/8\.................................     .010 273 973     .010 245 902
\1/2\.................................     .013 698 630     .013 661 202
\5/8\.................................     .017 123 288     .017 076 503
\3/4\.................................     .020 547 945     .020 491 803
\7/8\.................................     .023 972 603     .023 907 104
1.....................................     .027 397 260     .027 322 404
1\1/8\................................     .030 821 918     .030 737 705
1\1/4\................................     .034 246 575     .034 153 005
1\3/8\................................     .037 671 233     .037 568 306
1\1/2\................................     .041 095 890     .040 983 607
1\5/8\................................     .044 520 548     .044 398 907
1\3/4\................................     .047 945 205     .047 814 208
1\7/8\................................     .051 369 863     .051 229 508
2.....................................     .054 794 521     .054 644 809
2\1/8\................................     .058 219 178     .058 060 109
2\1/4\................................     .061 643 836     .061 475 410
2\3/8\................................     .065 068 493     .064 890 710
2\1/2\................................     .068 493 151     .068 306 011
2\5/8\................................     .071 917 808     .071 721 311
2\3/4\................................     .075 342 466     .075 136 612
2\7/8\................................     .078 767 123     .078 551 913
3.....................................     .082 191 781     .081 967 213
3\1/8\................................     .085 616 438     .085 382 514
3\1/4\................................     .089 041 096     .088 797 814
3\3/8\................................     .092 465 753     .092 213 115
3\1/2\................................     .095 890 411     .095 628 415
3\5/8\................................     .099 315 068     .099 043 716
3\3/4\................................     .102 739 726     .102 459 016
3\7/8\................................     .106 164 384     .105 874 317
4.....................................     .109 589 041     .109 289 617
4\1/8\................................     .113 013 699     .112 704 918
4\1/4\................................     .116 438 356     .116 120 219
4\3/8\................................     .119 863 014     .119 535 519
4\1/2\................................     .123 287 671     .122 950 820
4\5/8\................................     .126 712 329     .126 366 120
4\3/4\................................     .130 136 986     .129 781 421
4\7/8\................................     .133 561 644     .133 196 721
5.....................................     .136 986 301     .136 612 022
5\1/8\................................     .140 410 959     .140 027 322
5\1/4\................................     .143 835 616     .143 442 623
5\3/8\................................     .147 260 274     .146 857 923
5\1/2\................................     .150 684 932     .150 273 224
5\5/8\................................     .154 109 589     .153 688 525
5\3/4\................................     .157 534 247     .157 103 825
5\7/8\................................     .160 958 904     .160 519 126
6.....................................     .164 383 562     .163 934 426
6\1/8\................................     .167 808 219     .167 349 727
6\1/4\................................     .171 232 877     .170 765 027
6\3/8\................................     .174 657 534     .174 180 328
6\1/2\................................     .178 082 192     .177 595 628
6\5/8\................................     .181 506 849     .181 010 929
6\3/4\................................     .184 931 507     .184 426 230

[[Page 169]]

 
6\7/8\................................     .188 356 164     .187 841 530
7.....................................     .191 780 822     .191 256 831
7\1/8\................................     .195 205 479     .194 672 131
7\1/4\................................     .198 630 137     .198 087 432
7\3/8\................................     .202 054 795     .201 502 732
7\1/2\................................     .205 479 452     .204 918 033
7\5/8\................................     .208 904 110     .208 333 333
7\3/4\................................     .212 328 767     .211 748 634
7\7/8\................................     .215 753 425     .215 163 934
8.....................................     .219 178 082     .218 579 235
8\1/8\................................     .222 602 740     .221 994 536
8\1/4\................................     .226 027 397     .225 409 836
8\3/8\................................     .229 452 055     .228 825 137
8\1/2\................................     .232 876 712     .232 240 437
8\5/8\................................     .236 301 370     .235 655 738
8\3/4\................................     .239 726 027     .239 071 038
8\7/8\................................     .243 150 685     .242 486 339
9.....................................     .246 575 342     .245 901 639
9\1/8\................................     .250 000 000     .249 316 940
9\1/4\................................     .253 424 658     .252 732 240
9\3/8\................................     .256 849 315     .256 147 541
9\1/2\................................     .260 273 973     .259 562 842
9\5/8\................................     .263 698 630     .262 978 142
9\3/4\................................     .267 123 288     .266 393 443
9\7/8\................................     .270 547 945     .269 808 743
10....................................     .273 972 603     .273 224 044
10\1/8\...............................     .277 397 260     .276 639 344
10\1/4\...............................     .280 821 918     .280 054 645
10\3/8\...............................     .284 246 575     .283 469 945
10\1/2\...............................     .287 671 233     .286 885 246
10\5/8\...............................     .291 095 890     .290 300 546
10\3/4\...............................     .294 520 548     .293 715 847
10\7/8\...............................     .297 945 205     .297 131 148
11....................................     .301 369 863     .300 546 448
11\1/8\...............................     .304 794 521     .303 961 749
11\1/4\...............................     .308 219 178     .307 377 049
11\3/8\...............................     .311 643 836     .310 792 350
11\1/2\...............................     .315 068 493     .314 207 650
11\5/8\...............................     .318 493 151     .317 622 951
11\3/4\...............................     .321 917 808     .321 038 251
11\7/8\...............................     .325 342 466     .324 453 552
12....................................     .328 767 123     .327 868 852
------------------------------------------------------------------------


[38 FR 7078, Mar. 15, 1973; 38 FR 8153, Mar. 29, 1973; 38 FR 10004, Apr. 
23, 1973, as amended at 44 FR 34125, June 14, 1979]



         Subpart F_Assignments of Registered Securities_General



Sec. 306.40  Execution of assignments.

    The assignment of a registered security should be executed by the 
owner, or his or her authorized representative, in the presence of an 
individual authorized to certify assignments. All assignments must be 
made on the backs of the securities, unless otherwise authorized by the 
Bureau. An assignment by mark (X) must be witnessed not only by a 
certifying individual, but also by at least one other person, who should 
add an endorsement substantially as follows: ``Witness to signature by 
mark,'' followed by the witness' signature and address.

[59 FR 59036, Nov. 15, 1994, as amended by 64 FR 38126, July 15, 1999]



Sec. 306.41  Form of assignment.

    Registered securities may be assigned in blank, to bearer, to a 
specified transferee, or to the Secretary of the Treasury for redemption 
or for exchange for other securities offered at maturity, upon call or 
pursuant to an advance refunding or prerefunding offer. Assignments to 
``The Secretary of the Treasury,'' ``The Secretary of the Treasury for 
transfer,'' or ``The Secretary of the Treasury for exchange'' will not 
be accepted unless supplemented by specific instructions by or in behalf 
of the owner.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38126, July 15, 1999]



Sec. 306.42  Alterations and erasures.

    If an alteration or erasure has been made in an assignment, the 
assignor should appear before an authorized certifying officer and 
execute a new assignment to the same assignee. If the new assignment is 
to other than the assignee whose name has been altered or erased, a 
disclaimer from the first-named assignee should be obtained. Otherwise, 
an affidavit of explanation by the person responsible for the alteration 
or erasure should be submitted for consideration.



Sec. 306.43  Voidance of assignments.

    An assignment of a security to or for the account of another person, 
not completed by delivery, may be voided by a disclaimer of interest 
from that person. This disclaimer should be executed in the presence of 
an officer authorized to certify assignments of securities. Unless 
otherwise authorized by the Bureau, the disclaimer must be written, 
typed, or stamped on the back of the security in substantially the 
following form:

    The undersigned as assignee of this security hereby disclaims any 
interest herein.

                                                             (Signature)


[[Page 170]]


    I certify that the above-named person as described, whose identity 
is well known or proved to me, personally appeared before me the ------ 
day of ------------ (Month and year) at -------------------- (Place) and 
signed the above disclaimer of interest.
(seal)__________________________________________________________________
(Signature and official designation of certifying officer)


In the absence of a disclaimer, an affidavit or affidavits should be 
submitted for consideration explaining why a disclaimer cannot be 
obtained, reciting all other material facts and circumstances relating 
to the transaction, including whether or not the security was delivered 
to the person named as assignee and whether or not the affiants know of 
any basis for the assignee claiming any right, title, or interest in the 
security. After an assignment has been voided, in order to dispose of 
the security, an assignment by or on behalf of the owner will be 
required.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38126, July 15, 1999]



Sec. 306.44  Discrepancies in names.

    The Department will ordinarily require an explanation of 
discrepancies in the names which appear in inscriptions, assignments, 
supporting evidence or in the signatures to any assignments. (Form PD 
385 may be used for this purpose.) However, where the variations in the 
name of the registered owner, as inscribed on securities of the same or 
different issues, are such that both may properly represent the same 
person, for example, ``J. T. Smith'' and ``John T. Smith,'' no proof of 
identity will be required if the assignments are signed exactly as the 
securities are inscribed and are duly certified by the same certifying 
officer.



Sec. 306.45  Certifying individuals.

    (a) General. The following individuals may certify assignments of, 
or forms with respect to, securities:
    (1) Officers and employees of depository institutions, corporate 
central credit unions, and institutions that are members of Treasury-
recognized signature guarantee programs who have been authorized:
    (i) Generally to bind their respective institutions by their acts;
    (ii) Unqualifiedly to guarantee signatures to assignments of 
securities; or
    (iii) To certify assignments of securities.
    (2) Officers and authorized employees of Federal Reserve Banks and 
branches.
    (3) Officers of Federal Land Banks, Federal Intermediate Credit 
Banks and Banks for Cooperatives, and Federal Home Loan Banks.
    (4) Commissioned officers and warrant officers of the Armed Forces 
of the United States but only with respect to signatures executed by 
Armed Forces personnel, civilian field employees, and members of their 
families.
    (5) U.S. Attorneys, Collectors of Customs, and Regional 
Commissioners, District Directors, and Service Center Directors, 
Internal Revenue Service.
    (6) Judges and Clerks of U.S. Courts.
    (7) Such other persons as the Commissioner of the Public Debt or his 
designee may authorize.
    (b) Foreign countries. The following individuals are authorized to 
certify assignments of, or forms with respect to, securities executed in 
a foreign country:
    (1) United States diplomatic or consular officials.
    (2) Managers and officers of foreign branches of depository 
institutions and institutions that are members of Treasury-recognized 
signature guarantee programs.
    (3) Notaries public and other officers authorized to administer 
oaths, provided their official position and authority are certified by a 
United States diplomatic or consular official under seal of the office.
    (c) Duties and liabilities of certifying individuals--(1) General. 
Except as specified in paragraph (c)(2) of this section, a certifying 
individual shall require that the security or related form be signed in 
the certifying individual's presence after he or she has established the 
identity of the person seeking the certification. An employee who is not 
an officer should insert the words ``Authorized signature'' in the space 
provided for the title. A certifying individual and the organization for 
which he or she is acting are jointly and severally liable for any loss 
the United

[[Page 171]]

States may incur as a result of the individual's negligence in making 
the certification.
    (2) Signature guaranteed. The assignment or related form need not be 
executed in the presence of a certifying individual if he or she 
unqualifiedly guarantees the signature, in which case the certifying 
individual shall, after the signature, add the following endorsement: 
``Signature guaranteed, First National Bank of Smithville, Smithville, 
NH, by A.B. Doe, President'', and add the date. In guaranteeing a 
signature, the certifying individual and the organization for which he 
or she is acting warrant to the Department that the signature is genuine 
and that the signer had the legal capacity to execute the assignment or 
related form.
    (3) Absence of signature guaranteed by depository institution. A 
security or related form need not be actually signed by the owner in any 
case where a certifying individual associated with a depository 
institution has placed an endorsement on the security or the form 
reading substantially as follows: ``Absence of signature by owner and 
validity of transaction guaranteed, Second State Bank of Jonesville, 
Jonesville, NC, by B.R. Butler, Vice President''. The endorsement should 
be dated, and the seal of the institution should be added. This form of 
endorsement is an unconditional guarantee to the Department that the 
institution is acting for the owner under proper authorization.
    (d) Evidence of certifying individual's authority. The authority of 
a certifying individual to act is evidenced by affixing to the 
certification the following:
    (1) Officers and employees of depository institutions. The 
institution's seal or signature guarantee stamp; if the institution is 
an authorized paying agent for U.S. Savings Bonds, a legible imprint of 
the paying agent's stamp; or, if the institution is a member of the 
Securities Transfer Agents Medallion Program (STAMP), a legible imprint 
of the STAMP signature guarantee stamp.
    (2) Officers and authorized employees of institutions that are 
members of Treasury-recognized signature guarantee programs. A legible 
imprint of the program's signature guarantee stamp, e.g., the STAMP, 
SEMP, or MSP stamp for members of the Securities Transfer Agents 
Medallion Program, the Stock Exchanges Medallion Program, or the New 
York Stock Exchange Incorporated Medallion Signature Program, 
respectively.
    (3) Officers and authorized employees of Federal Reserve Banks. 
Whatever is prescribed in procedures established by the Department.
    (4) Officers and employees of corporate central credit unions and 
other entities listed in paragraph (a)(3) of this section. The entity's 
seal.
    (5) Notaries public, diplomatic or consular officials. The official 
seal or stamp of the office. If the certifying individual has no seal or 
stamp, then the official's position must be certified by some other 
authorized individual, under seal or stamp, or otherwise proved to the 
satisfaction of the Department.
    (6) Commissioned or warrant officers of the United States Armed 
Forces. A statement which sets out the officer's rank and the fact that 
the person executing the assignment or form is one whose signature the 
officer is authorized to certify under the regulations in this part.
    (7) A judge or clerk of the court. The seal of the court.
    (8) Any other certifying individual. The official seal or stamp of 
the office. If the certifying individual has no seal or stamp, then the 
certifying individual's position and signature must be certified by some 
other authorized individual under official seal or stamp, or otherwise 
proved to the satisfaction of the Department.
    (e) Interested persons not to act as certifying individual. Neither 
the transferor, the transferee, nor any person having an interest in a 
security involved in the transaction may act as a certifying individual. 
However, an authorized officer or employee of a depository institution 
or of an institution that is a member of a Treasury-recognized signature 
guarantee program may act as a certifying individual on a security or 
related form for transfer of a security to

[[Page 172]]

the institution, or any security or related form executed by another 
individual on behalf of the institution.

[59 FR 59037, Nov. 15, 1994]



          Subpart G_Assignments by or in Behalf of Individuals



Sec. 306.55  Signatures, minor errors and change of name.

    The owner's signature to an assignment should be in the form in 
which the security is inscribed or assigned, unless such inscription or 
assignment is incorrect or the name has since been changed. In case of a 
change of name, the signature to the assignment should show both names 
and the manner in which the change was made, for example, ``John Young, 
changed by order of court from Hans Jung.'' Evidence of the change will 
be required. However, no evidence is required to support an assignment 
if the change resulted from marriage and the signature, which must be 
duly certified by an authorized officer, is written to show that fact, 
for example, ``Mrs. Mary J. Brown, changed by marriage from Miss Mary 
Jones.''



Sec. 306.56  Assignment of securities registered in the names of or assigned 

to two or more persons.

    (a) Transfer or exchange. Securities registered in the names of or 
assigned to two or more persons may be transferred during the lives of 
all the joint owners only upon assignments by all or on their behalf by 
authorized representatives. Upon proof of the death of one, the 
Department will accept an assignment by or in behalf of the survivor or 
survivors, unless the form of registration or assignment includes words 
which precludes the right of survivorship.\9\ In the latter case, in 
addition to assignment by or in behalf of the survivor or survivors, an 
assignment in behalf of the decedent's estate will be required.
---------------------------------------------------------------------------

    \9\ See Sec. 306.11(a) (2) for forms of registration expressing or 
precluding survivorship.
---------------------------------------------------------------------------

    (b) Advance refunding or prerefunding offers. No assignments are 
required for exchange of securities registered in the names of or 
assigned to two or more persons if the securities to be received in the 
exchange are to be registered in the same names and form. If securities 
in a different form are to be issued, all persons named must assign, 
except that in case of death paragraph (a) of this section shall apply.
    (c) Redemption or redemption-exchange--(1) Alternative registration 
or assignment. Securities registered in the names of or assigned to two 
or more persons in the alternative, for example, ``John B. Smith or Mrs. 
Mary J. Smith'' or ``John B. Smith or Mrs. Mary J. Smith or the 
survivor,'' may be assigned by one of them at maturity or upon call, for 
redemption or redemption-exchange, for his own account or otherwise, 
whether or not the other joint owner or owners are deceased.
    (2) Joint registration or assignment. Securities registered in the 
names of or assigned to two or more persons jointly, for example, ``John 
B. Smith and Mrs. Mary J. Smith,'' or ``John B. Smith and Mrs. Mary J. 
Smith as tenants in common,'' or ``John B. Smith and Mary J. Smith as 
partners in community,'' may be assigned by one of them during the lives 
of all only for redemption at maturity or upon call, and then only for 
redemption for the account of all. No assignments are required for 
redemption-exchange for securities to be registered in the same names 
and forms as appear in the registration or assignment of the securities 
surrendered. Upon proof of the death of a joint owner, the survivor or 
survivors may assign securities so registered or assigned for redemption 
or redemption-exchange for any account, except that, if words which 
preclude the right of survivorship \9\ appear in the registration or 
assignment, assignment in behalf of the decedent's estate also will be 
required.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38126, July 15, 1999]



Sec. 306.57  Minors and incompetents.

    (a) Assignments by natural guardian of securities registered in name 
of minor. Securities registered in the name of a minor for whose estate 
no legal guardian or similar representative has qualified may be 
assigned by the natural guardian upon qualification. (Form PD 2481 may 
be used for this purpose.)

[[Page 173]]

    (b) Assignments of securities registered in name of natural guardian 
of minor. Securities registered in the name of a natural guardian of a 
minor may be assigned by the natural guardian for any authorized 
transaction except one for the apparent benefit of the natural guardian. 
If the natural guardian in whose name the securities are registered is 
deceased or is no longer qualified to act as natural guardian, the 
securities may be assigned by the person then acting as natural 
guardian. The assignment by the new natural guardian should be supported 
by proof of the death or disqualification of the former natural guardian 
and by evidence of his own status as natural guardian. (Form PD 2481 may 
be used for this purpose.) No assignment by a natural guardian will be 
accepted after receipt of notice of the minor's attainment of majority, 
removal of his disability of minority, disqualification of the natural 
guardian to act as such, qualification of a legal guardian or similar 
representative, or the death of the minor.
    (c) Assignments by voluntary guardian of incompetents. Registered 
securities belonging to an incompetent for whose estate no legal 
guardian or similar representative is legally qualified may be assigned 
by the relative responsible for his care and support or some other 
person as voluntary guardian:
    (1) For redemption, if the proceeds of the securities are needed to 
pay expenses already incurred, or to be incurred during any 90-day 
period, for the care and support of the incompetent or his legal 
dependents.
    (2) For redemption-exchange, if the securities are matured or have 
been called, or pursuant to an advance refunding or prerefunding offer, 
for reinvestment in other securities to be registered in the form ``A, 
an incompetent (123-45-6789) under voluntary guardianship.''

An application on Form PD 1461 by the person seeking authority to act as 
voluntary guardian will be required.
    (d) Assignments by legal guardians of minors or incompetents. 
Securities registered in the name and title of the legal guardian or 
similar representative of the estate of a minor or incompetent may be 
assigned by the representative for any authorized transaction without 
proof of his qualification. Assignments by a representative of any other 
securities belonging to a minor or incompetent must be supported by 
properly certified evidence of qualification. The evidence must be dated 
not more than 1 year before the date of the assignments and must contain 
a statement showing the appointment is in full force unless (1) it shows 
the appointment was made not more than 1 year before the date of the 
assignment, or (2) the representative or a corepresentative is a 
corporation. An assignment by the representative will not be accepted 
after receipt of notice of termination of the guardianship, except for 
transfer to the former ward.

[38 FR 7078, Mar. 15, 1973, as amended at 64 FR 38126, July 15, 1999]



Sec. 306.58  Nontransferable securities.

    The provisions of this subpart, so far as applicable, govern 
transactions in Treasury Bonds, Investment Series B- 1975-80.



      Subpart H_Assignments in Behalf of Estates of Deceased Owners



Sec. 306.65  Decedent's estate.

    (a) Estate is being administered. (1) A legal representative of a 
deceased owner's estate may request payment of matured securities to the 
estate, or may assign securities to or for the benefit of the persons 
entitled.
    (2) Appropriate proof of appointment for the legal representative of 
the estate is required. Letters of appointment must be dated not more 
than one year prior to the date of submission of the letters of 
appointment.
    (b) Estate has been settled previously. If the estate has been 
settled previously through judicial proceedings, the persons entitled 
may request payment of matured securities, or may request assignment of 
unmatured securities. A certified copy of the court-approved final 
accounting for the estate, the court's decree of distribution, or other 
appropriate evidence is required.
    (c) Special provisions under the law of the jurisdiction of the 
decedent's domicile. If there is no formal or regular administration and 
no representative of the

[[Page 174]]

estate is to be appointed, the person appointed to receive or distribute 
the assets of a decedent's estate without regular administration under 
summary or small estates procedures under applicable local law may 
request payment of matured securities, or may request assignment of the 
securities. Appropriate evidence is required.
    (d) When administration is required. If the total redemption value 
of the Treasury securities and undelivered payments, if any, held 
directly on our records that are the property of the decedent's estate 
is greater than $100,000, administration of the decedent's estate will 
be required. The redemption value of savings bonds and the principal 
amount of marketable securities will be used to determine the value of 
securities, and will be determined as of the date of death. 
Administration may also be required at the discretion of the Department 
for any case.
    (e) Voluntary representative for small estates that are not being 
otherwise administered--(1) General. A voluntary representative is a 
person qualified according to paragraph (e)(3) of this section, to 
request payment of a decedent's matured securities or to make an 
assignment of a decedent's unmatured securities. The voluntary 
representative procedures are for the convenience of the Department; 
entitlement to the decedent's securities and held payments, if any, is 
determined by the law of the jurisdiction in which the decedent was 
domiciled at the date of death. Voluntary representative procedures may 
be used only if:
    (i) There has been no administration, no administration is 
contemplated, and no summary or small estate procedures under applicable 
local law have been used;
    (ii) The total redemption value of the Treasury securities and held 
payments, if any, held directly on our records that are the property of 
the decedent's estate is $100,000 or less as of the date of death; and
    (iii) There is a person eligible to serve as the voluntary 
representative according to paragraph (e)(3) of this section.
    (2) Authority of voluntary representative. A voluntary 
representative may:
    (i) Request payment of the decedent's matured securities on behalf 
of the persons entitled by the law of the jurisdiction in which the 
decedent was domiciled at the date of death;
    (ii) Assign the decedent's securities to the persons entitled by the 
law of the jurisdiction in which the decedent was domiciled at the date 
of death.
    (3) Order of precedence for voluntary representative. An individual 
eighteen years of age or older may act as a voluntary representative 
according to the following order of precedence: a surviving spouse; if 
there is no surviving spouse, then a child of the decedent; if there are 
none of the above, then a descendant of a deceased child of the 
decedent; if there are none of the above, then a parent of the decedent; 
if there are none of the above, then a brother or sister of the 
decedent; if there are none of the above, then a descendant of a 
deceased brother or sister of the decedent; if there are none of the 
above, then a next of kin of the decedent, as determined by the law of 
the jurisdiction in which the decedent was domiciled at the date of 
death. As used in this order of precedence, child means a natural or 
adopted child of the decedent.
    (4) Liability. By serving, the voluntary representative warrants 
that the distribution of payments or securities is to or on behalf of 
the persons entitled by the law of the jurisdiction in which the 
decedent was domiciled at the date of death. The United States is not 
liable to any person for the improper distribution of payments or 
securities. Upon payment or assignment of the securities at the request 
of the voluntary representative, the United States is released to the 
same extent as if it had paid or delivered to a representative of the 
estate appointed pursuant to the law of the jurisdiction in which the 
decedent was domiciled at the date of death. The voluntary 
representative shall indemnify and hold harmless the United States and 
all creditors and persons entitled to the estate of the decedent. The 
amount of the indemnification is limited to an amount no greater than 
the value received by the voluntary representative.

[[Page 175]]

    (f) Creditor. If there has been no administration, no administration 
is contemplated, no summary or small estate procedures under applicable 
local law have been used, and there is no person eligible to serve as a 
voluntary representative pursuant to paragraph (e) of this section, then 
a creditor may make a claim for the amount of the debt, providing the 
debt has not been barred by applicable local law. The claim may only be 
satisfied by the proceeds of matured securities.

[70 FR 57429, Sept. 30, 2005]



Sec. Sec. 306.66-306.67  [Reserved]



Sec. 306.68  Nontransferable securities.

    The provisions of this subpart, so far as applicable, govern 
transactions in Treasury Bonds, Investment Series B- 1975-80.



     Subpart I_Assignments by or in Behalf of Trustees and Similar 
                               Fiduciaries



Sec. 306.75  Individual fiduciaries.

    (a) General. Securities registered in, or assigned to, the names and 
titles of individual fiduciaries will be accepted for any authorized 
transaction upon assignment by the designated fiduciaries without proof 
of their qualification. If the fiduciaries in whose names the securities 
are registered, or to whom they have been assigned, have been succeeded 
by other fiduciaries, evidence of successorship must be furnished. If 
the appointment of a successor is not required under the terms of the 
trust instrument or otherwise and is not contemplated, assignments by 
the surviving or remaining fiduciary or fiduciaries must be supported by 
appropriate proof. This requires:
    (1) Proof of the death, resignation, removal or disqualification of 
the former fiduciary and
    (2) Evidence that the surviving or remaining fiduciary or 
fiduciaries are fully qualified to administer the fiduciary estate, 
which may be in the form of a certificate by them showing the 
appointment of a successor has not been applied for, is not contemplated 
and is not necessary under the terms of the trust instrument or 
otherwise.

Assignments of securities registered in the titles, without the names of 
the fiduciaries, for example, ``Trustees of the George E. White Memorial 
Scholarship Fund under deed of trust dated 11/10/40, executed by John W. 
White,'' must be supported by proof that the assignors are the qualified 
and acting trustees of the designated trust estate, unless they are 
empowered to act as a unit in which case the provisions of Sec. 306.76 
shall apply. (Form PD 2446 may be used to furnish proof of incumbency of 
fiduciaries.) Assignments by fiduciaries of securities not registered or 
assigned in such manner as to show that they belong to the estate for 
which the assignors are acting must also be supported by evidence that 
the estate is entitled to the securities.
    (b) Life tenants. Upon termination of a life estate by reason of the 
death of the life tenant in whose name a security is registered, or to 
whom it has been assigned, the security will be accepted for any 
authorized transaction upon assignment by the remainderman, supported by 
evidence of entitlement.



Sec. 306.76  Fiduciaries acting as a unit.

    Securities registered in the name of or assigned to a board, 
committee or other body authorized to act as a unit for any public or 
private trust estate may be assigned for any authorized transaction by 
anyone authorized to act in behalf of such body. Except as otherwise 
provided in this section, the assignments must be supported by a copy of 
a resolution adopted by the body, properly certified under its seal, or, 
if none, sworn to by a member of the body having access to its records. 
(Form PD 2495 may be used.) If the person assigning is designated in the 
resolution by title only, his incumbency must be duly certified by 
another member of the body. (Form PD 2446 may be used.) If the 
fiduciaries of any trust estate are empowered to act as a unit, although 
not designated as a board, committee or other body, securities 
registered in their names or assigned to them as such, or in their 
titles without their names, may be assigned by anyone authorized by the 
group to act in its behalf. Such assignments may be supported by a sworn 
copy of a resolution adopted by the

[[Page 176]]

group in accordance with the terms of the trust instrument, and proof of 
their authority to act as a unit may be required. As an alternative, 
assignments by all the fiduciaries, supported by proof of their 
incumbency, if not named on the securities, will be accepted.

[38 FR 7078, Mar. 15, 1973; 38 FR 10004, Apr. 23, 1973]



Sec. 306.77  Corepresentatives and fiduciaries.

    If there are two or more executors, administrators, guardians or 
similar representatives, or trustees of an estate, all must unite in the 
assignment of any securities belonging to the estate. However, when a 
statute, a decree of court, or the instrument under which the 
representatives or fiduciaries are acting provides otherwise, 
assignments in accordance with their authority will be accepted. If the 
securities have matured or been called and are submitted for redemption 
for the account of all, or for redemption-exchange or pursuant to an 
advance refunding or prerefunding offer, and the securities offered in 
exchange are to be registered in the names of all, no assignment is 
required.



Sec. 306.78  Nontransferable securities.

    The provisions of this subpart, so far as applicable, govern 
assignments of Treasury Bonds, Investment Series B- 1975-80.



   Subpart J_Assignments in Behalf of Private or Public Organizations



Sec. 306.85  Private corporations and unincorporated associations (including 

nominees).

    Securities registered in the name of, or assigned to, an 
unincorporated association, or a private corporation in its own right or 
in a representative or fiduciary capacity, or as nominee, may be 
assigned in its behalf for any authorized transaction by any duly 
authorized officer or officers. Evidence, in the form of a resolution of 
the governing body, authorizing the assigning officer to assign, or to 
sell, or to otherwise dispose of the securities will ordinarily be 
required. Resolutions may relate to any or all registered securities 
owned by the organization or held by it in a representative or fiduciary 
capacity. (Form PD 1010, or any substantially similar form, may be used 
when the authority relates to specific securities; Form PD 1011, or any 
substantially similar form, may be used for securities generally.) If 
the officer derives his authority from a charter, constitution or 
bylaws, a copy, or a pertinent extract therefrom, properly certified, 
will be required in lieu of a resolution. If the resolution or other 
supporting document shows the title of an authorized officer, without 
his name, it must be supplemented by a certificate of incumbency. (Form 
PD 1014 may be used.)



Sec. 306.86  Change of name and succession of private organizations.

    If a private corporation or unincorporated association changes its 
name or is lawfully succeeded by another corporation or unincorporated 
association, its securities may be assigned in behalf of the 
organization in its new name or that of its successor by an authorized 
officer in accordance with Sec. 306.85. The assignment must be 
supported by evidence of the change of name or successorship.



Sec. 306.87  Partnerships (including nominee partnerships).

    An assignment of a security registered in the name of or assigned to 
a partnership must be executed by a general partner. Upon dissolution of 
a partnership, assignment by all living partners and by the persons 
entitled to assign in behalf of any deceased partner's estate will be 
required unless the laws of the jurisdiction authorize a general partner 
to bind the partnership by any act appropriate for winding up 
partnership affairs. In those cases where assignments by or in behalf of 
all partners are required this fact must be shown in the assignment; 
otherwise, an affidavit by a former general partner must be furnished 
identifying all the persons who had been partners immediately prior to 
dissolution. Upon voluntary dissolution, for any jurisdiction where a 
general partner may not act in winding up partnership affairs, an 
assignment by a liquidating partner, as such, must be supported by a

[[Page 177]]

duly executed agreement among the partners appointing the liquidating 
partner.



Sec. 306.88  Political entities and public corporations.

    Securities registered in the name of, or assigned to, a State, 
county, city, town, village, school district or other political entity, 
public body or corporation, may be assigned by a duly authorized 
officer, supported by evidence of his authority.



Sec. 306.89  Public officers.

    Securities registered in the name of, or assigned to, a public 
officer designated by title may be assigned by such officer, supported 
by evidence of incumbency. Assignments for the officer's own apparent 
individual benefit will not be recognized.



Sec. 306.90  Nontransferable securities.

    The provisions of this subpart apply to Treasury Bonds, Investment 
Series B-1975-80.



                       Subpart K_Attorneys in Fact



Sec. 306.95  Attorneys in fact.

    (a) General. Assignments by an attorney in fact will be recognized 
if supported by an adequate power of attorney. Every power must be 
executed in the presence of an authorized certifying officer under the 
conditions set out in Sec. 306.45 for certification of assignments. 
Powers need not be submitted to support redemption-exchanges or 
exchanges pursuant to advance refunding or prefunding offers where the 
securities to be issued are to be registered in the same names and forms 
as appear in the inscriptions or assignments of the securities 
surrendered. In all other cases, the original power, or a photocopy 
showing the grantor's autograph signature, properly certified, must be 
submitted, together with the security assigned on the owner's behalf by 
the attorney in fact. An assignment by a substitute attorney in fact 
must be supported by an authorizing power of attorney and power of 
substitution. An assignment by an attorney in fact or a substitute 
attorney in fact for the apparent benefit of either will not be accepted 
unless expressly authorized. (Form PD 1001 or 1003, as appropriate, may 
be used to appoint an attorney in fact. An attorney in fact may use Form 
PD 1006 or 1008 to appoint a substitute. However, any form sufficient in 
substance may be used.) If there are two or more joint attorneys in fact 
or substitutes, all must unite in an assignment, unless the power 
authorizes less than all to act. A power of attorney or of substitution 
not coupled with an interest will be recognized until the Bureau 
receives proof of revocation or proof of the grantor's death or 
incompetency.
    (b) For legal representatives and fiduciaries. Assignments by an 
attorney in fact or substitute attorney in fact for a legal 
representative or fiduciary, in addition to the power of attorney and of 
substitution, must be supported by evidence, if any, as required by 
Sec. Sec. 306.57(d), 306.66(b), 306.75, and 306.76. Powers must 
specifically designate the securities to be assigned.
    (c) For corporations or unincorporated associations. Assignments by 
an attorney in fact or a substitute attorney in fact in behalf of a 
corporation or unincorporated association, in addition to the power of 
attorney and power of substitution, must be supported by one of the 
following documents certified under seal of the organization, or, if it 
has no seal, sworn to by an officer who has access to the records:
    (1) A copy of the resolution of the governing body authorizing an 
officer to appoint an attorney in fact, with power of substitution, if 
pertinent, to assign, or to sell, or to otherwise dispose of, the 
securities, or
    (2) A copy of the charter, constitution, or bylaws, or a pertinent 
extract therefrom, showing the authority of an officer to appoint an 
attorney in fact, or
    (3) A copy of the resolution of the governing body directly 
appointing an attorney in fact.

If the resolution or other supporting document shows only the title of 
the authorized officer, without his name, a certificate of incumbency 
must also be furnished. (Form PD 1014 may be used.) The power may not be 
broader than the resolution or other authority.
    (d) For public corporations. A general power of attorney in behalf 
of a public

[[Page 178]]

corporation will be recognized only if it is authorized by statute.



Sec. 306.96  Nontransferable securities.

    The provisions of this subpart shall apply to nontransferable 
securities, subject only to the limitations imposed by the terms of the 
particular issues.



             Subpart L_Transfer Through Judicial Proceedings



Sec. 306.100  Transferable securities.

    The Department will recognize valid judicial proceedings affecting 
the ownership of or interest in transferable securities, upon 
presentation of the securities together with evidence of the 
proceedings. In the case of securities registered in the names of two or 
more persons, the extent of their respective interests in the securities 
must be determined by the court in proceedings to which they are parties 
or must otherwise be validly established.\10\
---------------------------------------------------------------------------

    \10\ Title in a finder claiming ownership of a registered security 
will not be recognized. A finder claiming ownership of a bearer security 
or a registered security assigned in blank or so assigned as to become 
in effect payable to bearer must perfect his title in accordance with 
the provisions of State law. If there are no such provisions, the 
Department will not recognize his title to the security.
---------------------------------------------------------------------------



Sec. 306.101  Evidence required.

    Copies of a final judgment, decree, or order of court and of any 
necessary supplementary proceedings must be submitted. Assignments by a 
trustee in bankruptcy or a receiver of an insolvent's estate must be 
supported by evidence of his qualification. Assignments by a receiver in 
equity or a similar court officer must be supported by a copy of an 
order authorizing him to assign, or to sell, or to otherwise dispose of, 
the securities. Where the documents are dated more than 6 months prior 
to presentation of the securities, there must also be submitted a 
certificate dated within 6 months of presentation of the securities, 
showing the judgment, decree, or order, or evidence of qualification, is 
in full force. Any such evidence must be certified under court seal.



Sec. 306.102  Nontransferable securities.

    The provisions of this subpart shall apply to Treasury Bonds, 
Investment Series B-1975-80, except that prior to maturity any reference 
to assignments shall be deemed to refer to assignments of the bonds for 
exchange for the current series of 1\1/2\ percent 5-year EA or EO 
Treasury notes.



            Subpart M_Requests for Suspension of Transactions



Sec. 306.105  Requests for suspension of transactions in registered 

securities.

    (a) Timely notice. If prior to the time a registered security 
bearing an apparently valid assignment has been functioned, a claim is 
received from the owner or his authorized representative showing that:
    (1) The security was lost, stolen, or destroyed and that it was 
unassigned, or not so assigned as to have become in effect payable to 
bearer, or
    (2) The assignment was affected by fraud, the transaction for which 
the security was received will be suspended.

The interested parties will be given a reasonable period of time in 
which to effect settlement of their interests by agreement, or to 
institute judicial proceedings.
    (b) Late notice. If, after a registered security has been 
transferred, exchanged, or redeemed in reliance on an apparently valid 
assignment, an owner notifies the Bureau that the assignment was 
affected by fraud or that the security had been lost or stolen, the 
Department will undertake only to furnish available information.
    (c) Forged assignments. A claim that an assignment of a registered 
security is a forgery will be investigated. If it is established that 
the assignment was in fact forged and that the owner did not authorize 
or ratify it, or receive any benefit therefrom, the Department will 
recognize his ownership and grant appropriate relief.



Sec. 306.106  Requests for suspension of transactions in bearer securities.

    (a) Securities not overdue. Neither the Department nor any of its 
agents will

[[Page 179]]

accept notice of any claim or of pending judicial proceedings by any 
person for the purpose of suspending transactions in bearer securities, 
or registered securities so assigned as to become in effect payable to 
bearer which are not overdue as defined in Sec. 306.25.\11\ However, if 
the securities are received and retired, the department will undertake 
to notify persons who appear to be entitled to any available information 
concerning the source from which the securities were received.
---------------------------------------------------------------------------

    \11\ It has been the longstanding policy of the Department to assume 
no responsibility for the protection of bearer securities not in the 
possession of persons claiming rights therein and to give no effect to 
any notice of such claims. This policy was formalized on April 27, 1867, 
when the Secretary of the Treasury issued the following statement:
    ``In consequence of the increasing trouble, wholly without practical 
benefit, arising from notices which are constantly received at the 
Department respecting the loss of coupon bonds, which are payable to 
bearer, and of Treasury notes issued and remaining in blank at the time 
of loss, it becomes necessary to give this public notice, that the 
Government cannot protect and will not undertake to protect the owners 
of such bonds and notes against the consequences of their own fault or 
misfortune.''
    ``Hereafter all bonds, notes, and coupons, payable to bearer, and 
Treasury notes issued and remaining in blank, will be paid to the party 
presenting them in pursuance of the regulations of the Department, in 
the course of regular business; and no attention will be paid to caveats 
which may be filed for the purpose of preventing such payment.''
---------------------------------------------------------------------------

    (b) Overdue securities. Reports that bearer securities, or 
registered securities so assigned as to become in effect payable to 
bearer, were lost, stolen, or possibly destroyed after they became 
overdue as defined in Sec. 306.25 will be accepted by the Bureau for 
the purpose of suspending redemption of the securities if the claimant 
establishes his interest. If the securities are presented, their 
redemption will be suspended and the presenter and the claimant will 
each be given an opportunity to establish ownership.



Subpart N_Relief for Loss, Theft, Destruction, Mutilation, or Defacement 
                              of Securities



Sec. 306.110  Statutory authority and requirements.

    Relief is authorized, under certain conditions, for the loss, theft, 
destruction, mutilation or defacement of U.S. securities, whether 
before, at, or after maturity. A bond of indemnity, in such form and 
with such surety, sureties or security as may be required to protect the 
interests of the United States, is required as a condition of relief on 
account of any bearer security or any registered security assigned in 
blank or so assigned as to become in effect payable to bearer, and is 
ordinarily required in the case of unassigned registered securities.



Sec. 306.111  Procedure for applying for relief.

    Prompt report of the loss, theft, destruction, mutilation or 
defacement of a security should be made to the Bureau. The report should 
include:
    (a) The name and present address of the owner and his address at the 
time the security was issued, and, if the report is made by some other 
person, the capacity in which he represents the owner.
    (b) The identity of the security by title of loan, issue date, 
interest rate, serial number and denomination, and in the case of a 
registered security, the exact form of inscription and a full 
description of any assignment, endorsement or other writing.
    (c) A full statement of the circumstances.

All available portions of a mutilated, defaced or partially destroyed 
security must also be submitted.



Sec. 306.112  Type of relief granted.

    (a) Prior to call or maturity. After a claim on account of the loss, 
theft, destruction, mutilation, or defacement of a security which has 
not matured or been called has been satisfactorily established and the 
conditions for granting relief have been met, a security of like 
description will be issued to replace the original security.

[[Page 180]]

    (b) At or after call or maturity. Payment will be made on account of 
the loss, theft, destruction, mutilation, or defacement of a called or 
matured security after the claim has been satisfactorily established and 
the conditions for granting relief have been met.
    (c) Interest coupons. Where relief has been authorized on account of 
a destroyed, mutilated or defaced coupon security which has not matured 
or been called, the replacement security will have attached all 
unmatured interest coupons if it is established to the satisfaction of 
the Secretary of the Treasury that the coupons were attached to the 
original security at the time of its destruction, mutilation or 
defacement. In every other case only those unmatured interest coupons 
for which the Department has received payment will be attached. The 
price of the coupons will be their value as determined by the Department 
at the time relief is authorized using interest rate factors based on 
then current market yields on Treasury securities of comparable 
maturities.



Sec. 306.113  Cases not requiring bonds of indemnity.

    A bond of indemnity will not be required as a condition of relief 
for the loss, theft, destruction, mutilation, or defacement of 
registered securities in any of the following classes of cases unless 
the Secretary of the Treasury deems it essential in the public interest:
    (a) If the loss, theft, destruction, mutilation, or defacement, as 
the case may be, occurred while the security was in the custody or 
control of the United States, or a duly authorized agent thereof (not 
including the Postal Service when acting solely in its capacity as 
public carrier of the mails), or while in the course of shipment 
effected under regulations issued pursuant to the Government Losses in 
Shipment Act (parts 260, 261, and 262 of this chapter).
    (b) If substantially the entire security is presented and 
surrendered and the Security of the Treasury is satisfied as to the 
identity of the security and that any missing portions are not 
sufficient to form the basis of a valid claim against the United States.
    (c) If the security is one which by the provisions of law or by the 
terms of its issue is nontransferable or is transferable only by 
operation of law.
    (d) If the owner or holder is the United States, a Federal Reserve 
bank, a Federal Government corporation, a State, the District of 
Columbia, a territory or possession of the United States, a municipal 
corporation, or, if applicable, a political subdivision of any of the 
foregoing, or a foreign government.



                     Subpart O_Book-Entry Procedure



Sec. 306.115  Definition of terms.

    For the purposes of this subpart, the definitions provided in 31 CFR 
357.3 are applicable, with the following additions:
    Definitive Treasury security means a Treasury bond, note, 
certificate of indebtedness, or bill issued under 31 U.S.C. chapter 31 
in engraved or printed form.
    Eligible book-entry Treasury security means a security maintained in 
TRADES that was originally issued prior to August 15, 1986, which by the 
terms of its offering circular is available in either definitive or 
book-entry form.

[61 FR 43637, Aug. 23, 1996]



Sec. 306.116  Scope and effect of book-entry procedure.

    (a) Except as provided in Sec. 306.117, the provisions of 31 CFR 
part 357, subparts A, B, and D apply.
    (b) This subpart is effective January 1, 1997.

[61 FR 43637, Aug. 23, 1996]



Sec. 306.117  Withdrawal of eligible book-entry Treasury securities for conversion to registered form.

    (a) Eligible book-entry Treasury securities may be withdrawn from 
TRADES by requesting delivery of like definitive Treasury securities.
    (b) Public Debt shall, upon receipt of appropriate instructions to 
withdraw eligible book-entry Treasury securities from book-entry form in 
TRADES, convert such securities into registered Treasury securities and 
deliver them in accordance with such instructions; no

[[Page 181]]

such conversion shall affect existing interests in such Treasury 
securities.
    (c) All requests for withdrawal of eligible book-entry Treasury 
securities must be made prior to the maturity or date of call of the 
securities.
    (d) Treasury securities which are to be delivered upon withdrawal 
may be issued in registered form, to the extent permitted by the 
applicable offering circular.

[61 FR 43637, Aug. 23, 1996; 64 FR 38126, July 15, 1999]



                   Subpart P_Miscellaneous Provisions



Sec. 306.125  Additional requirements.

    In any case or any class of cases arising under these regulations 
the Secretary of the Treasury may require such additional evidence and a 
bond of indemnity, with or without surety, as may in his judgment be 
necessary for the protection of the interests of the United States.



Sec. 306.126  Waiver of regulations.

    The Secretary of the Treasury reserves the right, in his discretion, 
to waive or modify any provision or provisions of these regulations in 
any particular case or class of cases for the convenience of the United 
States or in order to relieve any person or persons of unnecessary 
hardship, if such action is not inconsistent with law, does not impair 
any existing rights, and he is satisfied that such action would not 
subject the United States to any substantial expense or liability.



Sec. 306.127  Preservation of existing rights.

    Nothing contained in these regulations shall limit or restrict 
existing rights which holders of securities heretofore issued may have 
acquired under the circulars offering such securities for sale or under 
the regulations in force at the time of acquisition.



Sec. 306.128  Supplements, amendments or revisions.

    The Secretary of the Treasury may at any time, or from time to time, 
prescribe additional supplemental, amendatory or revised regulations 
with respect to U.S. securities. The Secretary also may lower the 
minimum and multiple requirements for stripping marketable Treasury 
notes and bonds issued prior to March 1, 1993, through an announcement 
as provided in Sec. 356.31 of this title.

[65 FR 66175, Nov. 3, 2000]



PART 308_GENERAL REGULATIONS GOVERNING FULL-PAID INTERIM CERTIFICATES--Table 

of Contents




Sec.
308.1 Issue.
308.2 Exchange for definitive securities.
308.3 Exchanges of denominations.
308.4 Applicable regulations.
308.5 Reservations.

    Authority: 80 Stat. 379; sec. 8. 50 Stat. 481, as amended; secs. 1, 
18, 5, 40 Stat. 288, as amended, 1309, as amended, 290, as amended; sec. 
32, 30 Stat. 466, as amended; 5 U.S.C. 301; 31 U.S.C. 738a, 752, 753, 
754, 756.

    Source: 6 FR 5289, Oct. 17, 1941, unless otherwise noted.



Sec. 308.1  Issue.

    Federal Reserve Banks, as Fiscal Agents of the United States, and 
the Treasury Department may issue full-paid interim certificates in lieu 
of definitive securities, against full-paid allotments of subscriptions, 
when specifically authorized by the Secretary of the Treasury in 
connection with the issue, hereafter, to the public, of United States 
securities. Interim certificates shall be in such form, and in such 
denominations, as the Secretary of the Treasury may determine when an 
issue is authorized.



Sec. 308.2  Exchange for definitive securities.

    Upon surrender of a full-paid interim certificate to a Federal 
Reserve Bank, or to the Treasury Department, Washington, DC 20226, the 
definitive securities described therein, when prepared, will be 
delivered. Exchanges shall be made on like par amount basis.



Sec. 308.3  Exchanges of denominations.

    Pending availability of definitive securities, exchanges of 
authorized denominations of interim certificates, from higher to lower 
will be permitted.

[[Page 182]]



Sec. 308.4  Applicable regulations.

    Except as may otherwise be provided, and in so far as applicable, 
the general regulations of the Treasury Department, as contained in part 
306 of this subchapter, as amended or revised, shall apply to full-paid 
interim certificates.



Sec. 308.5  Reservations.

    The Secretary of the Treasury reserves the right to withdraw or 
amend at any time or from time to time any or all of the provisions of 
this part.



PART 309_ISSUE AND SALE OF TREASURY BILLS--Table of Contents




Sec.
309.1 Authority for issue and sale.
309.2 Description of Treasury bills (General).
309.3 Denominations and exchange.
309.4 Taxation.
309.5 Acceptance of Treasury bills for various purposes.
309.6 Public notice of offering.
309.7 Tenders; submission through Federal Reserve Banks and branches and 
          to the Bureau of the Public Debt.
309.8 Tenders; when cash deposit is required.
309.9 Tenders; acceptance by the Secretary of the Treasury.
309.10 Tenders; reservation of right to reject.
309.11 Tenders; payment of accepted tenders.
309.12 Relief on account of loss, theft or destruction, etc.
309.13 Functions of Federal Reserve Banks.
309.14 Reservation as to terms of circular.

    Authority: 80 Stat. 379; sec. 8, 50 Stat. 481, as amended; sec. 5, 
40 Stat. 290, as amended; 5 U.S.C. 301; 31 U.S.C. 738a, 754.

    Source: 41 FR 44006, Oct. 5, 1976, unless otherwise noted.



Sec. 309.1  Authority for issue and sale.

    The Secretary of the Treasury is authorized by the Second Liberty 
Bond Act, as amended, to issue Treasury bills of the United States on an 
interest-bearing basis, on a discount basis, or on a combination 
interest-bearing and discount basis, at such price or prices and with 
interest computed in such manner and payable at such time or times as he 
may prescribe; and to fix the form, terms, and conditions thereof, and 
to offer them for sale on a competitive or other basis, under such 
regulations and upon such terms and conditions as he may prescribe. 
Pursuant to said authorization, the Secretary of the Treasury may, from 
time to time, by public notice, offer Treasury bills for sale, and 
invite tenders therefor, through the Federal Reserve Banks and branches 
and through the Department of the Treasury, Bureau of the Public Debt. 
The Treasury bills so offered, and the tenders made, will be subject to 
the terms and conditions and to the general rules and regulations herein 
set forth, except as they may be modified in the public notices issued 
by the Secretary of the Treasury in connection with particular 
offerings.\1\
---------------------------------------------------------------------------

    \1\ Accordingly, these regulations do not constitute a specific 
offering of Treasury bills.
---------------------------------------------------------------------------



Sec. 309.2  Description of Treasury bills (General).

    Treasury bills are bearer obligations of the United States promising 
to pay a specified amount on a specified date. They will be payable at 
maturity upon presentation to the Bureau of the Public Debt, Washington, 
DC 20226, or to any Federal Reserve Bank or branch. Treasury bills are 
issued only by Federal Reserve Banks and branches and the Bureau of the 
Public Debt pursuant to tenders accepted by the Secretary of the 
Treasury, and shall not be valid unless the issue date and the maturity 
date are entered thereon. Treasury bills bearing the same issue date and 
the same maturity date shall constitute a series.



Sec. 309.3  Denominations and exchange.

    Treasury bills will be issued in denominations (maturity value) of 
$10,000, $15,000, $50,000, $100,000, $500,000, and $1,000,000. Exchanges 
from higher to lower and lower to higher denominations of the same 
series (bearing the same issue and maturity dates) will be permitted at 
Federal Reserve Banks and branches and at the Bureau of the Public Debt, 
Washington, DC 20226. Insofar as applicable, the general regulations of 
the Treasury Department governing transactions in bonds and notes will 
govern transactions in Treasury bills.

[[Page 183]]



Sec. 309.4  Taxation.

    The income derived from Treasury bills, whether interest or gain 
from the sale or other disposition of the bills, shall not have any 
exemption, as such, and loss from the sale or other disposition of 
Treasury bills shall not have any special treatment, as such, under the 
Internal Revenue Code, or laws amendatory or supplementary thereto. The 
bills shall be subject to estate, inheritance, gift or other excise 
taxes, whether Federal or State, but shall be exempt from all taxation 
now or hereafter imposed on the principal or interest thereof by any 
State, or any of the possessions of the United States, or by any local 
taxing authority. For purposes of taxation the amount of discount at 
which Treasury bills are originally sold by the United States shall be 
considered to be interest.



Sec. 309.5  Acceptance of Treasury bills for various purposes.

    (a) Acceptable as security for public deposits. Treasury bills will 
be acceptable at maturity value to secure deposits of public monies.
    (b) Acceptable in payment of taxes. The Secretary of the Treasury, 
in his discretion, when inviting tenders for Treasury bills, may provide 
that Treasury bills of any series will be acceptable at maturity value, 
whether at or before maturity, under such rules and regulations as he 
shall prescribe or approve, in payment of income taxes payable under the 
provisions of the Internal Revenue Code. Treasury bills which by the 
terms of their issue are acceptable in payment of income taxes may be 
surrendered to any Federal Reserve Bank or Branch, acting as fiscal 
agent of the United States, or to the Bureau of the Public Debt, 
Washington, DC 20226, 15 days or less before the date on which the taxes 
become due.
    (1) In the case of payments of corporation income taxes (including 
payments of estimates) for taxable years ending on or after December 31, 
1967, the bills shall be accompanied by a preinscribed Form 503, Federal 
Tax Deposit, Corporation Income Taxes, on which the face amount of the 
bills being surrendered should be entered in the space provided for the 
amount of the tax deposit. The office receiving the bills and Form 503 
will acknowledge receipt of the bills to the owner corporation and 
effect the tax deposit on the date on which the taxes become due. 
Accordingly, in these cases, it will no longer be necessary to submit 
receipts for Treasury bills to the Internal Revenue Service with the 
corporation's declaration or tax return.
    (2) In the case of payments of all other income taxes the office 
receiving the bills will issue receipts (in duplicate) to the owners. 
The original of the receipt shall be submitted, by the owner, in lieu of 
the bills, together with the tax return, to the District Director, 
Internal Revenue Service.
    (c) Discounting by Federal Reserve Bank of notes secured by Treasury 
bills. Notes securied by Treasury bills are eligible for discount or 
rediscount at Federal Reserve Banks as provided under the provisions of 
section 13 of the Federal Reserve Act, as are notes securied by bonds 
and notes of the United States.
    (d) Acceptable in connection with foreign obligations held by United 
States. Treasury bills will be acceptable at maturity, but not before, 
in payment of interest or of principal on account of obligations of 
foreign governments held by the United States.



Sec. 309.6  Public notice of offering.

    When Treasury bills are to be offered, tenders therefor will be 
invited through public notice given by the Secretary of the Treasury. 
Such public notices may be issued by the Secretary of the Treasury in 
the name of ``the Treasury Department'' with the same force and effect 
as if issued in the name of the Secretary of the Treasury. In such 
notice there will be set forth the amount of Treasury bills for which 
tenders are then invited, the date of issue, the date or dates when such 
bills will become due and payable, the date and closing hour for the 
receipt of tenders at the Federal Reserve Banks and branches and at the 
Bureau of the Public Debt, Washington, DC 20226, and the date on which 
payment for accepted tenders must be made or completed.

[[Page 184]]



Sec. 309.7  Tenders; submission through Federal Reserve Banks and branches 

and to the Bureau of the Public Debt.

    Tenders in response to any such public notice will be received at 
the Federal Reserve Banks, or Branches thereof and at the Bureau of the 
Public Debt, Washington, DC 20226, and unless received before the time 
fixed for closing will be disregarded. Each tender must be for a minimum 
amount of $10,000. Tenders over $10,000 must be in multiples of $5,000 
(maturity value). In the case of competitive tenders the price or prices 
offered by the bidder for the amount or amounts (at maturity value) 
applied for must be stated, and must be expressed on the basis of 100, 
with not more than three decimals, e.g., 99.925. Fractions may not be 
used.



Sec. 309.8  Tenders; when cash deposit is required.

    Tenders should be submitted on the printed forms and forwarded in 
the special envelopes which will be supplied on application to any 
Federal Reserve Bank, or Branch or to the Bureau of the Public Debt, 
Washington, DC 20226. If a special envelope is not available, the 
inscription ``Tender for Treasury Bills'' should be placed on the 
envelope used. The instructions set forth in the public notice 
announcing the offering should be observed with respect to the 
submission of tenders. Banking institutions generally may submit tenders 
for account of customers provided the names of the customers are set 
forth in such tenders. Others than banking institutions, will not be 
permitted to submit tenders except for their own account. Tenders from 
incorporated banks and trust companies, and from responsible and 
recognized dealers in investment securities will be received without 
deposit. Tenders from all others must be accompanied by a payment of 
such percent of the face amount of the Treasury bills applied for as the 
Secretary of the Treasury may from time to time prescribe: Provided, 
however, That such deposit will not be required if the tender is 
accompanied by an express guaranty of payment in full by an incorporated 
bank or trust company. Forfeiture of the prescribed payment may be 
declared by the Secretary of the Treasury, if payment is not completed, 
in the case of accepted tenders, on the prescribed date.



Sec. 309.9  Tenders; acceptance by the Secretary of the Treasury.

    At the time fixed for closing, as specified in the public notice, 
all tenders received by the Federal Reserve Banks and Branches and by 
the Bureau of the Public Debt will be opened. The Secretary of the 
Treasury will determine the acceptable prices offered and will make 
public announcement thereof those submitting tenders will be advised of 
the acceptance or rejection thereof, and payment on accepted tenders 
must be made or completed on the date specified in the public notice.



Sec. 309.10  Tenders; reservation of right to reject.

    In considering the acceptance of tenders, the highest prices offered 
will be accepted in full down to the amount required, and if the same 
price appears in two or more tenders and it is necessary to accept only 
a part of the amount offered at such price, the amount accepted at such 
price will be prorated in accordance with the respective amounts applied 
for. However, the Secretary of the Treasury expressly reserves the right 
on any occasion to accept non-competitive tenders entered in accordance 
with specific offerings, to reject any or all tenders or parts of 
tenders, and to award less than the amount applied for; and any action 
he may take in any such respect or respects shall be final.



Sec. 309.11  Tenders; payment of accepted tenders.

    Settlement for accepted tenders in accordance with the bids must be 
made or completed at the appropriate Federal Reserve Bank or branch or 
at the Bureau of the Public Debt in cash or other immediately available 
funds on or before the date specified, except that the Secretary of the 
Treasury, in his discretion, when inviting tenders for Treasury bills, 
may provide:
    (a) That any qualified depositary may make such settlement by 
credit, on behalf of itself and its customers, up to any amount for 
which it shall be qualified in excess of existing deposits,

[[Page 185]]

when so notified by the Federal Reserve Bank of its District or
    (b) That such settlement may be made in maturing Treasury bills 
accepted in exchange.

Whenever the Secretary provides for settlement in maturing Treasury 
bills, cash adjustments will be made for differences between the par 
value of the maturing bills and the issue price of the new bills.



Sec. 309.12  Relief on account of loss, theft or destruction, etc.

    (a) Relief on account of the loss, theft, destruction, mutilation or 
defacement of Treasury bills may be given only under the authority of, 
and subject to the conditions set forth in section 8 of the act of July 
8, 1937 (50 Stat. 481), as amended (31 U.S.C. 738a) and the regulations 
pursuant thereto in (Treasury Department Circular No. 300 insofar as 
applicable.
    (b) In case of the loss, theft, destruction, mutilation or 
defacement of Treasury bills, immediate advice, with a full description 
of the bill or bills involved, should be sent to the Bureau of the 
Public Debt, Division of Securities Operations, Department of the 
Treasury, Washington, DC 20226, either direct or though any Federal 
Reserve Bank or Branch, and, if relief under the statutes may be given, 
instructions and necessary blank forms will be furnished.



Sec. 309.13  Functions of Federal Reserve Banks.

    Federal Reserve Banks and Branches, as fiscal agents of the United 
States, are authorized to perform all such acts as may be necessary to 
carry out the provisions of this circular and of any public notice or 
notices issued in connection with any offering of Treasury bills.



Sec. 309.14  Reservation as to terms of circular.

    The Secretary of the Treasury reserves the right further to amend, 
supplement, revise or withdraw all or any of the provisions of this 
circular at any time, or from time to time.



PART 312_FEDERAL SAVINGS AND LOAN ASSOCIATIONS AND FEDERAL CREDIT UNIONS AS 

FISCAL AGENTS OF THE UNITED STATES--Table of Contents




    Note: Pursuant to the regulations in this part, the Acting Secretary 
of the Treasury on September 15, 1936, designated for employment as 
fiscal agents of the United States for the purpose of taking 
applications solely from their own members and forwarding remittances 
for, and making delivery of, United States Savings Bonds, all Federal 
savings and loan associations and Federal credit unions in good standing 
having five hundred or more members, and further designated all Federal 
savings and loan associations in good standing for employment as fiscal 
agents of the United States, for the purpose of collecting delinquent 
accounts arising out of insurance and loan transactions of the 
Administrator under Title I of the National Housing Act, and making 
investigations and rendering reports respecting the said delinquencies 
as may be directed from time to time by the Administrator.
    Pursuant to these same regulations, the Fiscal Assistant Secretary 
has now designated for employment, as fiscal agents of the United 
States, for the purpose of taking applications from nonmembers, as well 
as their own members, and forwarding remittances for, and making 
delivery of United States Savings Bonds, all Federal credit unions in 
good standing.
Sec.
312.1 Authority.
312.2 [Reserved]
312.3 Collections, investigations, and reports for the Federal Housing 
          Administration.
312.4 Bond of indemnity.
312.5 Fiscal agents to serve without compensation.
312.6 Applications other than to Federal Reserve Banks.

    Authority: Secs. 5(k), 17, 48 Stat. 646, 1222; 12 U.S.C. 1464(k), 
1767.

    Source: 1 FR 1587, Sept. 17, 1936; 57 FR 34684, Aug. 6, 1992, unless 
otherwise noted.

    Cross References: For National Credit Union Administration, see 12 
CFR chapter VII. For Farm Credit Administration, see 12 CFR chapter VI. 
For Federal Home Loan Bank Board, see 12 CFR chapter V. For Federal 
Housing Commissioner, Office of Assistant Secretary for Housing, 
Department of Housing and Urban Development, see 24 CFR chapter II.



Sec. 312.1  Authority.

    (a) Home Owners' Loan Act. Section 5(k) of the Home Owners' Loan Act 
of

[[Page 186]]

1933, as amended (48 Stat. 645; 12 U.S.C. 1464(k), is as follows:

    (k) When designated for that purpose by the Secretary of the 
Treasury, any Federal savings and loan association * * * may be employed 
as fiscal agent of the Government under such regulations as may be 
prescribed by said Secretary and shall perform all such reasonable 
duties as fiscal agent of the Government as may be required of it * * *.

    (b) Federal Credit Union Act. Section 17 of the Federal Credit Union 
Act (48 Stat. 1222; 12 U.S.C. 1767) is as follows:

    Each Federal credit union organized under this Act, when requested 
by the Secretary of the Treasury, shall act as fiscal agent of the 
United States and shall perform such services as the Secretary of the 
Treasury may require in connection with * * * the lending, borrowing, 
and repayment of money by the United States, including the issue, sale, 
redemption or repurchase of bonds, notes, Treasury certificates of 
indebtedness, or other obligations of the United States * * *.



Sec. 312.2  [Reserved]



Sec. 312.3  Collections, investigations, and reports for the Federal Housing 

Administration.

    Federal savings and loan associations, when designated for 
employment as fiscal agents of the United States for the purpose of 
collecting delinquent accounts arising out of insurance and loan 
transactions of the Administrator under Title I of the National Housing 
Act (48 Stat. 1246, 1247; 12 U.S.C. 1702-1706), and making 
investigations and rendering reports respecting the said delinquencies 
as may be directed from time to time by the Administrator, shall 
promptly forward remittances in the form collected to the Commissioner 
of the Federal Housing Administration, except, that remittances received 
in cash should be forwarded in the form of money order or check.



Sec. 312.4  Bond of indemnity.

    No Federal savings and loan association or Federal credit union 
which may have been designated for employment mentioned in this part 
shall perform, or make any effort to perform any of the acts included in 
such employment, or advertise in any manner that it is authorized to 
perform such acts until it has qualified by the execution of, delivery 
to, and approval of a bond of indemnity in favor of the United States 
with satisfactory surety, or with the pledge of collateral security as 
provided in part 225 of this chapter, conditioned upon the faithful 
performance of the obligor's duties as fiscal agent of the United States 
in the principal amount of $1,000 and until the Federal Home Loan Bank 
Board or the Bureau of Federal Credit Unions, Department of Health, 
Education, and Welfare, respectively, shall have certified to the 
Secretary of the Treasury that such association or credit union is in 
good standing and is eligible, under the terms and conditions prescribed 
by the Secretary, to qualify for the performance of the designated acts. 
The Federal Home Loan Bank Board and the Bureau of Credit Unions, 
respectively, shall keep the Secretary of the Treasury currently advised 
of the changes in the lists of associations and credit unions which are 
eligible, under the aforesaid terms and conditions, to qualify for the 
performance of the designated acts.

[32 FR 3447, Mar. 2, 1967]



Sec. 312.5  Fiscal agents to serve without compensation.

    All of the fiscal agency employment mentioned in this part shall be 
performed without compensation, reimbursement for expenses, or allowance 
of service charges.



Sec. 312.6  Applications other than to Federal Reserve Banks.

    Nothing contained in this part shall be construed as preventing such 
associations and credit unions, if they desire to assume such 
responsibility, from acting as agents of prospective purchasers in 
making applications to, and obtaining United States Savings Bonds from 
post offices or other designated places of issuance.



PART 315_REGULATIONS GOVERNING U.S. SAVINGS BONDS, SERIES A, B, C, D, E, F, G, 

H, J, AND K, AND U.S. SAVINGS NOTES--Table of Contents




                      Subpart A_General Information

Sec.
315.0 Applicability.

[[Page 187]]

315.1 Official agencies.
315.2 Definitions.
315.3 Converting definitive savings bonds to book-entry bonds in New 
          Treasury Direct.

                         Subpart B_Registration

315.5 General rules.
315.6 Restrictions on registration.
315.7 Authorized forms of registration.

                Subpart C_Limitations on Annual Purchases

315.10 Limitations.
315.11 Excess purchases.

               Subpart D_Limitations on Transfer or Pledge

315.15 Transfer.
315.16 Pledge.

  Subpart E_Limitations on Judicial Proceedings_No Stoppage or Caveats 
                                Permitted

315.20 General.
315.21 Payment to judgment creditors.
315.22 Payment or reissue pursuant to judgment.
315.23 Evidence.

 Subpart F_Relief for Loss, Theft, Destruction, Mutilation, Defacement, 
                         or Nonreceipt of Bonds

315.25 General.
315.26 Application for relief--after receipt of bond.
315.27 Application for relief--nonreceipt of bond.
315.28 Recovery or receipt of bond before or after relief is granted.
315.29 Adjudication of claims.

                           Subpart G_Interest

315.30 Series E bonds and savings notes.
315.31 Series H bonds.
315.32 Series A, B, C, D, F, G, J, and K bonds.

                Subpart H_General Provisions for Payment

315.35 Payment (redemption).
315.36 Payment during life of sole owner.
315.37 Payment during lives of both coowners.
315.38 Payment during lifetime of owner of beneficiary bond.
315.39 Surrender for payment.
315.40 Special provisions for payment.
315.41 Partial redemption.
315.42 Nonreceipt or loss of check issued in payment.
315.43 Effective date of request for payment.
315.44 Withdrawal of request for payment.

              Subpart I_Reissue and Denominational Exchange

315.45 General.
315.46 Effective date of request for reissue.
315.47 Authorized reissue--during lifetime.
315.48 Restrictions on reissue.
315.49 Correction of errors.
315.50 Change of name.
315.51 Requests for reissue.

                      Subpart J_Certifying Officers

315.55 Individuals authorized to certify.
315.56 General instructions and liability.
315.57 When a certifying officer may not certify.
315.58 Forms to be certified.

     Subpart K_Minors, Incompetents, Aged Persons, Absentees, et al.

315.60 Conditions for payment to representative of an estate.
315.61 Payment after death.
315.62 Payment to minors.
315.63 Payment to a parent or other person on behalf of a minor.
315.64 Payment, reinvestment, or exchange--voluntary guardian of an 
          incapacitated person.
315.65 Reissue.

            Subpart L_Deceased Owner, Coowner or Beneficiary

315.70 General rules governing entitlement.
315.71 Decedent's estate.
315.72 [Reserved]

                          Subpart M_Fiduciaries

315.75 Payment or reissue during the existence of the fiduciary estate.
315.76 Payment or reissue after termination of the fiduciary estate.
315.77 Exchanges by fiduciaries.

      Subpart N_Private Organizations (Corporations, Associations, 
    Partnerships, etc.) and Governmental Agencies, Units and Officers

315.80 Payment to corporations or unincorporated associations.
315.81 Payment to partnerships.
315.82 Reissue or payment to successors of corporations, unincorporated 
          associations, or partnerships.
315.83 Reissue or payment on dissolution of corporation or partnership.
315.84 Payment to certain institutions.
315.85 Reissue in name of trustee or agent for reinvestment purposes.
315.86 Reissue upon termination of investment agency.

[[Page 188]]

315.87 Payment to governmental agencies, units, or their officers.

                   Subpart O_Miscellaneous Provisions

315.90 Waiver of regulations.
315.91 Additional requirements; bond of indemnity.
315.92 Preservation of rights.
315.93 Supplements, amendments, or revisions.

    Authority: 31 U.S.C. 3105 and 5 U.S.C. 301.

    Source: 45 FR 64091, Sept. 26, 1980, unless otherwise noted.



                      Subpart A_General Information



Sec. 315.0  Applicability.

    The regulations in this circular, Department of the Treasury 
Circular No. 530, and the provisions of the respective offering 
circulars, govern--
    (a) Definitive (paper) United States Savings Bonds of Series E that 
have not been converted to book-entry savings bonds in New Treasury 
Direct, and Series H and United States Savings Notes, and
    (b) United States Savings Bonds of Series A, B, C, D, F, G, J, and 
K, all of which have matured and are no longer earning interest.

The regulations in Department of the Treasury Circular, Public Debt 
Series No. 3-80 (31 CFR, part 353), govern United States Savings Bonds 
of Series EE and Series HH.

[45 FR 64091, Sept. 26, 1980, as amended at 70 FR 14941, Mar. 23, 2005]



Sec. 315.1  Official agencies.

    (a) The Bureau of the Public Debt of the Department of the Treasury 
is responsible for administering the Savings Bonds Program. Authority to 
process most transactions has been delegated to Federal Reserve Banks 
and Branches in the list below, as fiscal agents of the United States.
    (b) Communications concerning transactions and requests for forms 
should be addressed to:
    (1) A Federal Reserve Bank or Branch in the list below; the Bureau 
of the Public Debt. 200 Third Street, Parkersburg, WV 26101; or the 
Bureau of the Public Debt, Washington, DC 20226.
    (2)(i) The following Federal Reserve Offices have been designated to 
provide savings bond services:

------------------------------------------------------------------------
                                     Reserve districts   Geographic area
          Servicing office                 served            served
------------------------------------------------------------------------
Federal Reserve Bank, Buffalo        New York, Boston.  CT, MA, ME, NH,
 Branch, P.O. Box 961, Buffalo, NY                       NJ (northern
 14240.                                                  half), NY (City
                                                         & State), RI,
                                                         Vt, Puerto Rico
                                                         and Virgin
                                                         Islands.
Federal Reserve Bank, Pittsburgh     Cleveland,         DE, KY (eastern
 Branch, P.O. Box 867, Pittsburgh,    Philadelphia.      half), NJ
 PA 15230.                                               (southern
                                                         half), OH, PA,
                                                         WV (northern
                                                         panhandle).
Federal Reserve Bank of Richmond,    Richmond, Atlanta  AL, DC, FL, LA
 P.O. Box 27622, Richmond, VA 23261.                     (southern
                                                         half), MD, MS
                                                         (southern
                                                         half), NC, SC,
                                                         TN (eastern
                                                         half), VA, WV
                                                         (except
                                                         northern
                                                         panhandle).
Federal Reserve Bank of              Minneapolis,       IA, IL (northern
 Minneapolis, 250 Marquette Avenue,   Chicago.           half), IN
 Minneapolis, MN 55480.                                  (northern
                                                         half), MN, MT,
                                                         ND, SD, WI.
Federal Reserve Bank of Kansas       Dallas, San        AK, AR, AZ, CA,
 City, 925 Grand Avenue, Kansas       Francisco,         CO, HI, ID, IL
 City, MO 64198.                      Kansas City, St.   (southern
                                      Louis.             half), IN
                                                         (southern
                                                         half), KS, KY
                                                         (western half),
                                                         LA (northern
                                                         half), MO, MS
                                                         (northern
                                                         half), NE, NM,
                                                         NV, OK, OR, TN
                                                         (western half),
                                                         TX, WA, WY, UT
                                                         and GU.
------------------------------------------------------------------------

    (ii) Until March 1, 1996, other Federal Reserve Offices may continue 
to provide some savings bond services, but such services will be phased 
out over the period prior to that date.

[45 FR 64091, Sept. 26, 1980, as amended at 59 FR 10534, Mar. 4, 1994]



Sec. 315.2  Definitions.

    As used in these regulations--
    (a) Bond means a United States Savings Bond of any series except EE 
and HH, unless the context indicates otherwise. General references to 
bonds and direct references to Series E bonds also include United States 
Savings Notes, unless specifically excluded.
    (b) Converted bond means a savings bond originally issued as a 
definitive bond that has been surrendered to us

[[Page 189]]

and converted to a book-entry savings bond to be maintained by Treasury 
solely as a computer record.
    (c) Extended maturity period means any period after the original 
maturity date during which the owner may retain a bond and continue to 
earn interest on the maturity value or extended maturity value under 
applicable provisions of the circular offering the bond for sale.
    (d) Extended maturity value is the value of a bond at the end of the 
applicable extended maturity period.
    (e) Final extended maturity date is the date on which a bond will 
mature and cease to bear interest at the end of the final extended 
maturity period.
    (f) Incompetent means an individual who is incapable of handling his 
or her business affairs because of a legal, mental or medically-
established physical disability, except that a minor is not an 
incompetent solely because of age.
    (g) Inscription means the information that is printed on the face of 
the bond.
    (h) Issuing agent means an organization that has been qualified 
under the provisions of Department of the Treasury Circular, Public Debt 
Series No. 4-67, current revision (31 CFR part 317), to issue savings 
bonds.
    (i) Original maturity date means the date on which the bond reaches 
the end of the term for which it was initially offered and, unless 
further extended, ceases to earn interest.
    (j) Paying agent means a financial institution that has been 
qualified under the provisions of Department of the Treasury Circular 
No. 750, current revision (31 CFR part 321), to make payment of savings 
bonds.
    (k) Payment means redemption, unless otherwise indicated by context.
    (l) Person means any legal entity including, but without limitation, 
and individual, corporation (public or private), partnership, 
unincorporated association, or fiduciary estate.
    (m) Personal trust estates means trust estates established by 
natural persons in their own right for the benefit of themselves or 
other natural persons in whole or in part, and common trust funds 
comprised in whole or in part of such trust estates.
    (n) Registration means that the names of all persons named on the 
bond and the taxpayer identification number (TIN) of the owner, first-
named coowner, or purchaser of a gift bond are maintained on our 
records.
    (o) Reissue means the cancellation and retirement of a bond and the 
issuance of a new bond or bonds of the same series, same issue date, and 
same total face amount.
    (p) Representative of the estate of a minor, incompetent, aged 
person, absentee, et al. means the court-appointed or otherwise 
qualified person, regardless of title, who is legally authorized to act 
for the individual. The term does not include parents in their own 
right, voluntary or natural guardians, or the executors or 
administrators of decedents' estates.
    (q) Surrender means the actual receipt of a bond with an appropriate 
request for payment or reissue by either a Federal Reserve Bank or 
Branch, the Bureau of the Public Debt, or, if a paying agent is 
authorized to handle the transaction, the actual receipt of the bond and 
the request for payment by the paying agent.
    (r) Taxpayer identifying number means a social security account 
number or an employer identification number.
    (s) Voluntary guardian means an individual who is recognized as 
authorized to act for an incompetent, as provided by Sec. 315.64.
    (t) Voluntary representative means the person qualified by the 
Department of the Treasury to request payment or distribution of a 
decedent's savings bonds pursuant to Sec. 315.71.

[45 FR 64091, Sept. 26, 1980, as amended at 70 FR 14941, Mar. 23, 2005; 
70 FR 57430, Sept. 30, 2005; 71 FR 46856, Aug. 15, 2006]



Sec. 315.3  Converting definitive savings bonds to book-entry bonds in New 

Treasury Direct.

    Series E savings bonds that were originally issued as definitive 
bonds may be converted to book-entry bonds through New Treasury Direct, 
an online system for holding Treasury securities. The Web address for 
New Treasury Direct is www.treasurydirect.gov. Bond owners who wish to 
convert their definitive savings bonds should follow online instructions 
for conversion.

[[Page 190]]

Regulations governing converted bonds are found at 31 CFR part 363.

[70 FR 14941, Mar. 23, 2005]



                         Subpart B_Registration



Sec. 315.5  General rules.

    (a) Registration is conclusive of ownership. Savings bonds are 
issued only in registered form. The registration must express the actual 
ownership of, and interest in, the bond. The registration is conclusive 
of ownership, except as provided in Sec. 315.49.
    (b) Requests for registration. Registrations requested must be 
clear, accurate and complete, conform substantially with one of the 
forms set forth in this subpart, and include the taxpayer identifying 
number of the owner or first-named coowner. The taxpayer identifying 
number of the second-named coowner or beneficiary is not required but 
its inclusion is desirable. The registration of all bonds owned by the 
same person, organization, or fiduciary should be uniform with respect 
to the name of the owner and any description of the fiduciary capacity. 
An individual should be designated by the name he or she is ordinarily 
known by or uses in business, including at least one full given name. 
The name may be preceded or followed by any applicable title, such as 
Miss, Mr., Mrs., Ms., Dr., Rev., M.D., or D.D.. A suffix, such as Sr. or 
Jr., must be included when ordinarily used or when necessary to 
distinguish the owner from another member of his family. A married 
woman's own given name, not that of her husband, must be used; for 
example, Mary A. Jones or Mrs. Mary A. Jones, NOT Mrs. Frank B. Jones. 
The address must include, where appropriate, the number and street, 
route, or any other local feature, city, State, and ZIP Code.



Sec. 315.6  Restrictions on registration.

    (a) Natural persons. Only an individual in his or her own right may 
be designated as coowner or beneficiary along with any other individual, 
whether on original issue or reissue, except as provided in Sec. 
315.7(g).
    (b) Residence. The designation of an owner or first-named coowner is 
restricted, on original issue only, to persons (whether individuals or 
others) who are--
    (1) Residents of the United States, its territories and possessions, 
the Commonwealth of Puerto Rico, and the former Canal Zone;
    (2) Citizens of the United States residing abroad;
    (3) Civilian employees of the United States or members of its armed 
forces, regardless of their residence or citizenship; and
    (4) Residents of Canada or Mexico who work in the United States but 
only if the bonds are purchased on a payroll deduction plan and the 
owner provides a taxpayer identifying number.

A nonresident alien may be designated coowner or beneficiary or, on 
authorized reissue, owner, unless the nonresident alien is a resident of 
an area with respect to which the Department of the Treasury restricts 
or regulates the delivery of checks drawn against funds of the United 
States or its agencies or instrumentalities. See Department of the 
Treasury Circular No. 655, current revision (31 CFR part 211). 
Registration is not permitted in any form which includes the name of any 
alien who is a resident of any restricted area.
    (c) Minors. (1) Minors may purchase with their wages, earnings, or 
other funds belonging to them and under their control bonds registered 
in their names alone or with a coowner or beneficiary.
    (2) Bonds purchased by another person with funds belonging to a 
minor not under legal guardianship or similar fiduciary estate must be 
registered, without a coowner or beneficiary, in the name of the minor 
or a natural guardian on behalf of a minor.
    (3) Bonds purchased with funds of another may be registered to name 
the minor as owner, coowner, or beneficiary. If the minor is under legal 
guardianship or similar fiduciary estate, the registration must include 
an appropriate reference to it.
    (4) Bonds purchased as a gift to a minor under a gifts-to-minors 
statute must be registered as prescribed by the statute and no coowner 
or beneficiary may be named.

[[Page 191]]

    (5) Bonds purchased by a representative of a minor's estate must be 
registered in the name of the minor and must include in the registration 
an appropriate reference to the guardianship or similar fiduciary 
estate. Bonds purchased by a representative of the estates of two or 
more minors, even though appointed in a single proceeding, must be 
registered in the name of each minor separately with appropriate 
reference to the guardianship or similar fiduciary estate.
    (d) Incompetents. Bonds may be registered to a name as owner, 
coowner, or beneficiary an incompetent for whose estate a guardian or 
similar representative has been appointed, except that a coowner or 
beneficiary may not be named on bonds purchased with funds belonging to 
the incompetent. The registration must include appropriate reference to 
the guardianship or similar fiduciary estate. Bonds should not be 
registered in the name of an incompetent unless there is a 
representative for his or her estate, except as provided in Sec. 
315.64.



Sec. 315.7  Authorized forms of registration.

    (a) General. Subject to any limitations or restrictions contained in 
these regulations on the right of any person to be named as owner, 
coowner, or beneficiary, bonds should be registered as indicated below. 
A savings bond registered in a form not substantially in agreement with 
one of the forms authorized by this subpart is not considered validly 
issued.
    (b) Natural persons. A bond may be registered in the names of 
individuals in their own right, but only in one of the forms authorized 
by this paragraph.
    (1) Single ownership form. A bond may be registered in the name of 
one individual. Example:

    John A. Jones 123-45-6789.

    (2) Coownership form. A bond may be registered in the names of two 
individuals in the alternative as coowners. The form of registration ``A 
and B'' is not authorized. Examples:

John A. Jones 123-45-6789 or Ella S. Jones 987-65-4321.
John A. Jones 123-45-6789 or (Miss, Ms. or Mrs.) Ella S. Jones.
Ella S. Jones 987-65-4321 or John A. Jones.

    (3) Beneficiary form. A bond may be registered in the name of one 
individual payable on death to another. ``Payable on death to'' may be 
abbreviated to ``P.O.D.'' Examples:

John A. Jones 123-45-6789 payable on death to Mrs. Ella S. Jones.
John A. Jones 123-45-6789 P.O.D. Ella S. Jones 987-65-4321.

    (c) Fiduciaries (including legal guardians and similar 
representatives, certain custodians, natural guardians, executors, 
administrators, and trustees)--(1) General. A bond may be registered in 
the name of any person or persons or any organization acting as 
fiduciary of a single fiduciary estate, but not where the fiduciary will 
hold the bond merely or principally as security for the performance of a 
duty, obligation, or service. Registration should conform to a form 
authorized by this paragraph. A coowner or beneficiary may be named only 
in accordance with the applicable provisions of Sec. 315.6(c) and (d). 
A common trust fund established and maintained by a financial 
institution authorized to act as a fiduciary will be considered a single 
fiduciary estate within the meaning of these regulations.
    (2) Legal guardians, conservators, similar representives, certain 
custodians. A bond may be registered in the name and title or capacity 
of the legally appointed or authorized representative of the estate of a 
minor, incompetent, aged or infirm person, absentee, et al., or in the 
name of that individual followed by an appropriate reference to the 
estate. Examples:

Tenth National Bank, guardian (or conservator, trustee, etc.) of the 
estate of George N. Brown 123-45-6789, a minor (or an incompetent, aged 
person, infirm person, or absentee).
Henry C. Smith, conservator of the estate of John R. White 123-45-6789, 
an adult, pursuant to Sec. 633.572 of the Iowa Code.
John F. Green 123-45-6789, a minor (or an incompetent) under 
custodianship by designation of the Veterans Administration.
Frank M. Redd 123-45-6789, an incompetent for whom Eric A. Redd has been 
designated trustee by the Department of the Army pursuant to 37 U.S.C. 
602.

[[Page 192]]

Arnold A. Ames, as custodian for Barry B. Bryan 123-45-6789, under the 
California Uniform Gifts to Minors Act.
Thomas J. Reed, as custodian for Lawrence W. Reed 123-45-6789, a minor, 
under the laws of Georgia.
Richard A. Rowe 123-45-6789, for whom Reba L. Rowe is representative 
payee for social security benefits (or black lung benefits, as the case 
may be). (If the beneficiary is a minor, the words ``a minor'' should 
appear immediately after the social security number.)
Henry L. Green 123-45-6789 or George M. Brown, a minor under legal 
guardianship of the Tenth National Bank.
Henry L. Green 123-45-6789 P.O.D. George M. Brown, a minor under legal 
guardianship of the Tenth National Bank.
Redd State Hospital and School, selected payee for John A. Jones 123-45-
6789, a Civil Service annuitant, pursuant to 5 U.S.C. 8345(e).

    (3) Natural guardians. A bond may be registered in the name of 
either parent of a minor, as natural guardian. The registration of a 
bond in this form is considered as establishing a fiduciary 
relationship. A coowner or beneficiary may be named but only if the 
funds used to purchase the bond do not belong to the minor. Examples:

John A. Jones, as natural guardian for Henry M. Jones 123-45-6789.
Melba Smith, as natural guardian for Thelma Smith 123-45-6789 P.O.D. 
Bartholomew Smith.

    (4) Executors and administrators. A bond may be registered in the 
name of the representative appointed by a court to act for an estate of 
a decedent, or in the name of an executor authorized to administer a 
trust under the terms of a will although not named trustee. The name and 
capacity of all the representatives as shown in the letters of 
appointment must be included in the registration and be followed by an 
adequate identifying reference to the estate. Examples:

John H. Smith and Calvin N. Jones, executors of the will (or 
administrators of the estate) of Robert J. Smith, deceased 12-3456789.
John H. Smith, executor of the will of Robert J. Smith, deceased, in 
trust for Mrs. Jane L. Smith, with remainder over 12-3456789.

    (5) Trustee or life tenants under wills, deeds of trust, agreements, 
or similar instruments. A bond may be registered in the name and title 
of the trustee of a trust estate, or in the name of a life tenant, 
followed by an adequate identifying reference to the authority governing 
the trust or life tenancy. Examples:

Thomas J. White and Tenth National Bank, trustees under the will of 
Robert J. Smith, deceased 12-3456789.
Jane N. Black 123-45-6789, life tenant under the will of Robert J. 
Black, deceased.
Tenth National Bank, trustee under agreement with Paul E. White, dated 
2/1/76, 12-3456789.
Carl A. Black and Henry B. Green, trustees under agreement with Paul E. 
White, dated 2/1/76, 12-3456789.
Paul E. White, trustee under declaration of trust dated 2/1/76, 12-
3456789.

    (i) If the trust instrument designates by title only an officer of a 
board or an organization as trustee, only the title of the officer 
should be used. Example:

Chairman, Board of Trustees, First Church of Christ, Scientist, of 
Chicago, Illinois, in trust under the will of Robert J. Smith, deceased 
12-3456789.

    (ii) The names of all trustees, in the form used in the trust 
instrument, must be included in the registration, except as follows:
    (A) If there are several trustees designated as a board or they are 
required to act as a unit, their names may be omitted and the words 
``Board of Trustees'' substituted for the word ``trustee''. Example:

Board of Trustees of Immediate Relief Trust of Federal Aid Association, 
under trust indenture dated 2/1/76, 12-3456789.

    (B) If the trustees do not constitute a board or are not required to 
act as a unit, and are too numerous to be designated in the registration 
by names and title, some or all the names may be omitted. Examples:

John A. Smith, Henry B. Jones, et al., trustees under the will of Edwin 
O. Mann, deceased 12-3456789.
    Trustees under the will of Edwin O. Mann, deceased 12-3456789.

    (6) Employee thrift, savings, vacation and similar plans. A bond may 
be registered in the name and title, or title alone, of the trustee of 
an eligible employee thrift, savings, vacation or similar plan, as 
defined in Sec. 316.5, of Department of the Treasury Circular No. 653,

[[Page 193]]

current revision. If the instrument creating the trust provides that the 
trustees shall serve for a limited term, their names may be omitted. 
Examples:

Tenth National Bank, trustee of Pension Fund of Safety Manufacturing 
Company, U/A with the company, dated March 31, 1976, 12-3456789.
Trustees of Retirement Fund of Safety Manufacturing Company, under 
directors' resolution adopted March 31, 1976, 12-3456789.
County Trust Company, Trustee of the Employee Savings Plan of Jones 
Company, Inc., U/A dated January 17, 1976, 12-3456789.
Trustee of the Employee Savings Plan of Brown Brothers, Inc., U/A dated 
January 20, 1976, 12-3456789.

    (7) Funds of lodges, churches, societies, or similar organizations. 
A bond may be registered in the title of the trustees, or a board of 
trustees, holding funds in trust for a lodge, church, or society, or 
similar organization, whether or not incorporated. Examples:

Trustees of the First Baptist Church, Akron, Ohio, acting as a Board 
under section 15 of its bylaws 12-3456789.
Trustees of Jamestown Lodge No. 1000, Benevolent and Protective Order of 
Elks, under section 10 of its bylaws 12-3456789.
Board of Trustees of Lotus Club, Washington, Indiana, under Article 10 
of its constitution 12-3456789.

    (8) Investment agents for religious, educational, charitable and 
non-profit organizations. A bond may be registered in the name of a 
bank, trust company, or other financial institution, or an individual, 
as agent under an agreement with a religious, educational, charitable or 
non-profit organization, whether or not incorporated, if the agent holds 
funds for the sole purpose of investing them and paying the income to 
the organization. The name and designation of the agent must be followed 
by an adequate reference to the agreement. Examples:

Tenth National Bank, fiscal agent U/A with the Evangelical Lutheran 
Church of the Holy Trinity, dated 12/28/76, 12-3456789.
Sixth Trust Company, Investment Agent U/A dated September 16, 1976, with 
Central City Post, Department of Illinois, American Legion, 12-3456789.
John Jones, Investment Agent U/A dated September 16, 1976, with Central 
City Post, Department of Illinois, American Legion, 12-3456789.

    (9) Funds of school groups or activities. A bond may be registered 
in the title of the principal or other officer of a public, private, or 
parochial school holding funds in trust for a student body fund or for a 
class, group, or activity. If the amount purchased for any one fund does 
not exceed $2,500 (face amount), no reference need be made to a trust 
instrument. Examples:

Principal, Western High School, in trust for the Class of 1976 Library 
Fund, 12-3456789.
Director of Athletics, Western High School, in trust for Student 
Activities Association, under resolution adopted 5/12/76, 12-3456789.

    (10) Public corporations, bodies, or officers as trustees. A bond 
may be registered in the name of a public corporation or a public body, 
or in the title of a public officer, acting as trustee under express 
authority of law, followed by an appropriate reference to the statute 
creating the trust. Examples:

Rhode Island Investment Commission, trustee of the General Sinking Fund 
under Title 35, Ch. 8, Gen. Laws of Rhode Island.
Superintendent of the Austin State Hospital Annex, in trust for the 
Benefit Fund under Article 3183C, Vernon's Civ. Stat. of Texas Ann.

    (d) Private organizations (corporations, associations, 
partnerships)--(1) General. A bond may be registered in the name of any 
private organization in its own right. The full legal name of the 
organization as set forth in its charter, articles of incorporation, 
constitution, partnership agreement, or other authority from which its 
powers are derived, must be included in the registration and may be 
followed by a parenthetical reference to a particular account other than 
a trust account.
    (2) Corporations. A bond may be registered in the name of a 
business, fraternal, religious, non-profit, or other private 
corporation. The words ``a corporation'' must be included in the 
registration unless the fact of incorporation is shown in the name. 
Examples:

Smith Manufacturing Company, a corporation 12-3456789.
Green and Redd, Inc. 12-3456789 (Depreciation Acct.).

    (3) Unincorporated associations. A bond may be registered in the 
name of a club, lodge, society, or a similar self-

[[Page 194]]

governing association which is unincorporated. The words ``an 
unincorporated association'' must be included in the registration. This 
form of registration must not be used for a trust fund, board of 
trustees, a partnership, or a sole proprietorship. If the association is 
chartered by or affiliated with a parent organization, the name or 
designation of the subordinate or local organization must be given 
first, followed by the name of the parent organization. The name of the 
parent organization may be placed in parentheses and, if well known, may 
be abbreviated. Examples:

The Lotus Club, an unincorporated association, 12-3456789.
Local 447, Brotherhood of Railroad Trainmen, an unincorporated 
association, 12-3456789.
Eureka Lodge 317 (A.F. and A.M.), an unincorporated association, 12-
3456789.

    (4) Partnerships. A bond may be registered in the name of a 
partnership. The words ``a partnership'' must be included in the 
registration. Examples:

Smith & Jones, a partnership, 12-3456789.
Acme Novelty Company, a partnership, 12-3456789.

    (5) Sole proprietorships. A bond may be registered in the name of an 
individual who is doing business as a sole proprietor. A reference may 
be made to the trade name under which the business is conducted. 
Example:
    John Jones d.b.a. Jones Roofing Company, 123-45-6789

    (e) Institutions (churches, hospitals, homes, schools, etc.). A bond 
may be registered in the name of a church, hospital, home, school, or 
similar institution conducted by a private organization or by private 
trustees, regardless of the manner in which it is organized or governed 
or title to its property is held. Descriptive words, such as ``a 
corporation'' or ``an unincorporated association'', must not be included 
in the registration. Examples:

Shriners' Hospital for Crippled Children, St. Louis, MO, 12-3456789.
St. Mary's Roman Catholic Church, Albany, NY, 12-3456789.
Rodeph Shalom Sunday School, Philadelphia, PA, 12-3456789.

    (f) States, public bodies and corporations, and public officers. A 
bond may be registered in the name of a State, county, city, town, 
village, school district, or other political entity, public body, or 
corporation established by law (including a board, commission, 
administration, authority, or agency) which is the owner or official 
custodian of public funds, other than trust funds, or in the full legal 
title of the public officer having custody of the funds. Examples:

State of Maine.
Town of Rye, NY (Street Improvement Fund).
Maryland State Highway Administration.
Treasurer, City of Chicago.

    (g) The United States Treasury. A person who desires to have a bond 
become the property of the United States upon his or her death may 
designate the United States Treasury as coowner or beneficiary. 
Examples:

George T. Jones 123-45-6789 or the United States Treasury.
George T. Jones 123-45-6789 P.O.D. the United States Treasury.

[45 FR 64091, Sept. 26, 1980, as amended at 71 FR 46857, Aug. 15, 2006]



                Subpart C_Limitations on Annual Purchases



Sec. 315.10  Limitations.

    Specific limitations have been placed on the amounts of bonds of 
each series and savings notes that might be purchased in any one year in 
the name of any one person or organization. The amounts applicable to 
each series of bonds and savings notes for each specific year, which has 
varied from time to time, can be found in the appropriate offering 
circulars, as revised and amended.



Sec. 315.11  Excess purchases.

    The Commissioner of the Public Debt may permit excess purchases to 
stand in any particular case or class of cases.



               Subpart D_Limitations on Transfer or Pledge



Sec. 315.15  Transfer.

    Savings bonds are not transferable and are payable only to the 
owners

[[Page 195]]

named on the bonds, except as specifically provided in these regulations 
and then only in the manner and to the extent so provided.



Sec. 315.16  Pledge.

    (a) General. A savings bond may not be hypothecated, pledged, or 
used as security for the performance of an obligation, except as 
provided in paragraph (b) of this section.
    (b) Pledge under Treasury Circular No. 154. A bond may be pledged by 
the registered owner in lieu of surety under the provisions of 
Department of the Treasury Circular No. 154, current revision (31 CFR 
part 225), if the bond approving officer is the Secretary of the 
Treasury. In this case, an irrevocable power of attorney shall be 
executed authorizing the Secretary of the Treasury to request payment.



  Subpart E_Limitations on Judicial Proceedings_No Stoppage or Caveats 
                                Permitted



Sec. 315.20  General.

    The following general rules apply to the recognition of a judicial 
determination on adverse claims affecting savings bonds:
    (a) The Department of the Treasury will not recognize a judicial 
determination that gives effect to an attempted voluntary transfer inter 
vivos of a bond, or a judicial determination that impairs the rights of 
survivorship conferred by these regulations upon a coowner or 
beneficiary. All provisions of this Subpart are subject to these 
restrictions.
    (b) The Department of the Treasury will recognize a claim against an 
owner of a savings bond and conflicting claims of ownership of, or 
interest in, a bond between coowners or between the registered owner and 
the beneficiary, if established by valid, judicial proceedings, but only 
as specifically provided in this subpart. Section 315.23 specifies the 
evidence required to establish the validity of the judicial proceedings.
    (c) The Department of the Treasury and the agencies that issue, 
reissue, or redeem savings bonds will not accept a notice of an adverse 
claim or notice of pending judicial proceedings, nor undertake to 
protect the interests of a litigant not in possession of a savings bond.



Sec. 315.21  Payment to judgment creditors.

    (a) Purchaser or officer under levy. The Department of the Treasury 
will pay (but not reissue) a savings bond to the purchaser at a sale 
under a levy or to the officer authorized under appropriate process to 
levy upon property of the registered owner or coowner to satisfy a money 
judgment. Payment will be made only to the extent necessary to satisfy 
the money judgment. The amount paid is limited to the redemption value 
60 days after the termination of the judicial proceedings. Payment of a 
bond registered in coownership form pursuant to a judgment or a levy 
against only one coowner is limited to the extent of that coowner's 
interest in the bond. That interest must be established by an agreement 
between the coowners or by a judgment, decree, or order of a court in a 
proceeding to which both coowners are parties.
    (b) Trustee in bankruptcy, receiver, or similar court officer. The 
Department of the Treasury will pay, at current redemption value, a 
savings bond to a trustee in bankruptcy, a receiver of an insolvent's 
estate, a receiver in equity, or a similar court officer under the 
provisions of paragraph (a) of this section.



Sec. 315.22  Payment or reissue pursuant to judgment.

    (a) Divorce. The Department of the Treasury will recognize a divorce 
decree that ratifies or confirms a property settlement agreement 
disposing of bonds or that otherwise settles the interests of the 
parties in a bond. Reissue of a savings bond may be made to eliminate 
the name of one spouse as owner, coowner, or beneficiary, or to 
substitute the name of one spouse for that of the other spouse as owner, 
coowner, or beneficiary pursuant to the decree. However, if the bond is 
registered in the name of one spouse with another person as coowner, 
there must be submitted either:
    (1) A request for reissue by the other person or

[[Page 196]]

    (2) A certified copy of a judgment, decree, or court order entered 
in proceedings to which the other person and the spouse named on the 
bond are parties, determining the extent of the interest of that spouse 
in the bond.

Reissue will be permitted only to the extent of that spouse's interest. 
The evidence required under Sec. 315.23 must be submitted in every 
case. When the divorce decree does not set out the terms of the property 
settlement agreement, a certified copy of the agreement must be 
submitted. Payment, rather than reissue, will be made if requested.
    (b) Gift causa mortis. A savings bond belonging solely to one 
individual will be paid or reissued at the request of the person found 
by a court to be entitled by reason of a gift causa mortis from the sole 
owner.
    (c) Date for determining rights. When payment or reissue under this 
section is to be made, the rights of the parties will be those existing 
under the regulations current at the time of the entry of the final 
judgment, decree, or court order.



Sec. 315.23  Evidence.

    (a) General. To establish the validity of judicial proceedings, 
certified copies of the final judgment, decree, or court order, and of 
any necessary supplementary proceedings, must be submitted. If the 
judgment, decree, or court order was rendered more than six months prior 
to the presentation of the bond, there must also be submitted a 
certificate from the clerk of the court, under court seal, dated within 
six months of the presentation of the bond, showing that the judgment, 
decree, or court order is in full force.
    (b) Trustee in bankruptcy or receiver of an insolvent's estate. A 
request for payment by a trustee in bankruptcy or a receiver of an 
insolvent's estate must be supported by appropriate evidence of 
appointment and qualification. The evidence must be certified by the 
clerk of the court, under court seal, as being in full force on a date 
that is not more than six months prior to the presentation of the bond.
    (c) Receiver in equity or similar court officer. A request for 
payment by the receiver in equity or a similar court officer, other than 
a receiver of an insolvent's estate, must be supported by a copy of an 
order that authorizes the presentation of the bond for redemption, 
certified by the clerk of the court, under court seal, as being in full 
force on a date that is not more than six months prior to the 
presentation of the bond.



 Subpart F_Relief for Loss, Theft, Destruction, Mutilation, Defacement, 
                         or Nonreceipt of Bonds



Sec. 315.25  General.

    Relief, by the issue of a substitute bond or by payment, is 
authorized for the loss, theft, destruction, mutilation, or defacement 
of a bond after receipt by the owner or his or her representative. As a 
condition for granting relief, the Commissioner of the Public Debt, as 
designee of the Secretary of the Treasury, may require a bond of 
indemnity, in the form, and with the surety, or security, he considers 
necessary to protect the interests of the United States. In all cases 
the savings bond must be identified by serial number and the applicant 
must submit satisfactory evidence of the loss, theft, or destruction, or 
a satisfactory explanation of the mutilation or defacement.



Sec. 315.26  Application for relief--after receipt of bond.

    (a) Serial number known. If the serial number of the lost, stolen, 
or destroyed bond is known, the claimant should execute an application 
for relief on the appropriate form and submit it to the Bureau of the 
Public Debt, Parkersburg, WV 26101.
    (b) Serial number not known. If the bond serial number is not known, 
the claimant must provide sufficient information to enable the Bureau of 
the Public Debt to identify the bond by serial number. See Sec. 
315.29(c). The Bureau will furnish the proper application form and 
instructions.
    (c) Defaced or mutilated bond. A defaced bond and all available 
fragments of a mutilated bond should be submitted to the Bureau.

[[Page 197]]

    (d) Execution of claims application. The application must be made by 
the person or persons (including both coowners, if living) authorized 
under these regulations to request payment of the bonds. In addition--
    (1) If the bond is in beneficiary form and the owner and beneficiary 
are both living, both will ordinarily be required to join in the 
application.
    (2) If a minor named on a bond as owner, coowner, or beneficiary is 
not of sufficient competency and understanding to request payment, both 
parents will ordinarily be required to join in the application.
    (e) If the application is approved, relief will be granted by the 
issuance of a bond bearing the same issue date as the bond for which the 
claim was filed or by the issuance of a check in payment.



Sec. 315.27  Application for relief--nonreceipt of bond.

    If a bond issued on any transaction is not received, the issuing 
agent must be notified as promptly as possible and given all information 
available about the nonreceipt. An appropriate form and instructions 
will be provided. If the application is approved, relief will be granted 
by the issuance of a bond bearing the same issue date as the bond that 
was not received.



Sec. 315.28  Recovery or receipt of bond before or after relief is granted.

    (a) Recovery prior to granting relief. If a bond reported lost, 
stolen, destroyed, or not received, is recovered or received before 
relief is granted, the Bureau of the Public Debt, Parkersburg, WV 26101, 
must be notified promptly.
    (b) Recovery subsequent to granting of relief. A bond for which 
relief has been granted is the property of the United States and, if 
recovered, must be promptly submitted to the Bureau of the Public Debt, 
Parkersburg, WV 26101, for cancellation.



Sec. 315.29  Adjudication of claims.

    (a) General. The Bureau of the Public Debt will adjudicate claims 
for lost, stolen or destroyed bonds on the basis of records created and 
regularly maintained in the ordinary course of business.
    (b) Claims filed ten years after payment. A bond for which no claim 
has been filed within ten years of the recorded date of redemption will 
be presumed to have been properly paid. If a claim is subsequently 
filed, a photographic copy of the bond will not be available to support 
the disallowance. This provision will be effective 60 days after the 
effective date of the Eleventh Revision of Department of the Treasury 
Circular No. 530 (31 CFR part 315).
    (c) Claims filed six years after final maturity. No claim filed six 
years or more after the final maturity of a savings bond will be 
entertained, unless the claimant supplies the serial number of the bond.



                           Subpart G_Interest



Sec. 315.30  Series E bonds and savings notes.

    Series E bonds and savings notes are discount securities. The 
accrued interest is added to the issue price at stated intervals and is 
payable only at redemption as part of the redemption value. All Series E 
bonds and savings notes have been extended and continue to earn interest 
until their final maturity dates, unless redeemed earlier. Information 
regarding extended maturity periods, investment yields and redemption 
values is found in Department of the Treasury Circular No. 653, current 
revision (31 CFR part 316) for Series E bonds, and in Department of the 
Treasury Circular, Public Debt Series No. 3-67, current revision (31 CFR 
part 342) for savings notes.



Sec. 315.31  Series H bonds.

    (a) General. Series H bonds are current income bonds issued at par 
(face amount). Interest on a Series H bond is paid semiannually 
beginning six months from the issue date. Interest ceases at final 
maturity, or if the bond is redeemed prior to final maturity, as of the 
end of the interest period last preceding the date of redemption. For 
example, if a bond on which interest is payable on January 1 and July 1 
is redeemed on September 1, interest ceases as of the preceding July 1, 
and no interest will be paid for the period from July 1 to September 1. 
However, if the redemption date falls on an interest

[[Page 198]]

payment date, interest ceases on that date. Information regarding 
authorized extended maturity periods and investment yields is found in 
Department Circular No. 905, current revision (31 CFR part 332).
    (b) Payment of interest. Series H bond interest accounts are 
maintained by the Bureau of the Public Debt, Parkersburg, WV. Interest 
is paid on each payment date by check drawn to the order of the owner or 
both coowners or, upon request, by the Automated Clearing House (ACH) 
method to the owner or coowner's account at a financial institution. 
Checks will be mailed to the delivery address provided to the Bureau.
    (c) Delivery of interest--(1) Notices affecting the delivery of 
interest payments. To ensure appropriate action, notices affecting the 
delivery of interest payments on Series H bonds must be received by the 
Bureau of the Public Debt, Parkersburg, WV, 26102-1328, at least one 
month prior to the interest payment date. Each notice must include the 
owner or coowner's name and the taxpayer identifying number appearing on 
the account under which records of the bonds are maintained.

(Approved by the Office of Management and Budget under control number 
1535-0094)

    (2) Owner or coowner deceased--(i) Sole owner. Upon receipt of 
notice of the death of the owner of a bond, payment of interest will be 
suspended until satisfactory evidence is submitted as to who is 
authorized to receive and collect interest payments on behalf of the 
estate of the decedent, in accordance with the provisions of subpart L.
    (ii) Coowner. Upon receipt of notice of the death of the ooowner to 
whom interest payments have been directed, payment of interest will be 
suspended until delivery instructions are received from the other 
coowner, if living. If both coowners are deceased, payment of interest 
will be suspended until satisfactory evidence is submitted as to who is 
authorized to receive and collect interest payments on behalf of the 
estate of the last deceased coowner, in accordance with the provisions 
of subpart L.
    (iii) Owner with beneficiary. Interest on a bond registered in 
beneficiary form is paid to the owner during his or her lifetime. Upon 
receiving notice of the owner's death, the Bureau of the Public Debt 
will suspend payment of interest until the bond is presented for payment 
or reissue by the beneficiary, if surviving, or some other proper party. 
Interest so withheld will be paid to the person entitled to the bond.
    (d) Representative appointed for the estate of a minor, incompetent, 
absentee, et al. Interest on Series H bonds is paid in accordance with 
the provisions of Sec. 315.60 to the representative appointed for the 
estate of an owner who is a minor, incompetent, absentee, et al. If the 
registration of the bonds does not include reference to the owner's 
status, the bonds should be submitted for reissue to a designated 
Federal Reserve Bank so that interest payments may be properly 
delivered. They must be accompanied by proof of appointment as required 
by Sec. 315.60.
    (e) Adult incapacitated owner having no representative. If an adult 
owner of a Series H bond is incompetent to receive and collect interest 
payments, and no legal guardian or similar representative has been 
appointed to act for him or her, the relative, or other person, 
responsible for the owner's care and support may apply to the Bureau of 
the Public Debt for recognition as voluntary guardian for the purpose of 
receiving and collecting the payments.
    (f) Reissue during interest period. Physical reissue of a Series H 
bond may be made without regard to interest payment dates. The Series H 
accounts maintained by the Bureau of the Public Debt will be closed in 
the first week of the month preceding each interest payment date, and 
payments will be made pursuant to the information contained in the 
accounts as of the date they are closed.
    (g) Endorsement of checks. Interest checks must be endorsed in 
accordance with the regulations governing the payment of fiscal agency 
checks contained in 31 CFR part 355.
    (h) Deposit account information for ACH payments--(1) Payments on 
same account. Payments on all Series H bonds assigned to the same 
account maintained by the Bureau will be made to the same deposit 
account at a financial institution.

[[Page 199]]

    (2) Deposit account held by individuals in their own right. Where 
the Series H bonds are registered in the name of individual(s) as sole 
owner, or as owner and beneficiary, and the deposit account at the 
financial institution is held in the name of individual(s) in their own 
right, the owner's name must appear on the deposit account. Where the 
bonds are registered in the names of two individuals as coowners and the 
deposit account is held in the name of individual(s) in their own right, 
the registration of the bonds and the title of the account must contain 
at least one name that is common to both. The deposit account to which 
the interest payments are directed should preferably be established in a 
form identical to the registration of the bonds to ensure that rights of 
ownership and survivorship can be more easily identified and preserved. 
Neither the United States nor any Federal Reserve Bank shall be liable 
for any loss sustained because the interest(s) of the holder(s) of a 
deposit account to which payments are directed are not the same as the 
owner(s) of the bonds.
    (3) Deposit account held by organization. Where the deposit account 
to which interest payments are to be directed is held in the name of the 
financial institution itself, acting as sole trustee or as co-trustee, 
or is in the name of a commercially-managed investment fund, the owner 
or coowner should inquire whether the financial institution is able to 
receive ACH payments; if not, the owner or coowner should make 
alternative arrangements.
    (4) Financial institution cannot accept ACH payments. If after 
submission of deposit account information, it is determined that ACH 
payments cannot be accepted by the designated financial institution, 
pending receipt of new deposit account information, payment will be made 
by check drawn to the registered owner or both coowners and mailed to 
the address of record.
    (5) Cancellation of ACH arrangement. An ACH arrangement shall remain 
in effect until it is terminated by a request from the owner or coowner 
submitted to the Bureau of the Public Debt, Parkersburg, WV 26102-1328.
    (6) Rules. Series H interest payments made by the ACH method are 
governed by the regulations at 31 CFR part 370.
    (7) Nonreceipt or loss of interest payment. The Bureau of the Public 
Debt, Parkersburg, WV 26102 should be notified if:
    (i) An interest check is not received or is lost after receipt or
    (ii) An ACH payment is not credited to the designated account and 
the financial institution has no record of receiving it. The notice 
should include the owner or coowner's name and taxpayer identifying 
number and the interest payment date.

[54 FR 40255, Sept. 29, 1989, as amended at 59 FR 10535, Mar. 4, 1994; 
64 FR 40486, July 26, 1999]



Sec. 315.32  Series A, B, C, D, F, G, J, and K bonds.

    All bonds of these series have matured and no longer earn interest.



                Subpart H_General Provisions for Payment



Sec. 315.35  Payment (redemption).

    (a) General. Payment of a savings bond will be made to the person or 
persons entitled under the provisions of these regulations, except that 
checks in payment will not be delivered to addresses in areas with 
respect to which the Department of the Treasury restricts or regulates 
the delivery of checks drawn against funds of the United States. See 
Department of the Treasury Circular No. 655, current revision (31 CFR 
part 211). Payment will be made without regard to any notice of adverse 
claims to a bond and no notification of stoppage or caveat against 
payment of a bond will be made.
    (b) Series A, B, C, D, F, and J. A bond of Series A, B, C, D, F, or 
J will be paid at face value.
    (c) Series E and Savings Notes. A Series E bond will be paid at any 
time after two months from issue date at the appropriate redemption 
value shown in Department of the Treasury Circular No. 653 (31 CFR part 
316), current revision. A savings note will be paid at anytime at the 
appropriate redemption value shown in Department of the Treasury 
Circular, Public Debt

[[Page 200]]

Series No. 3-67, current revision (31 CFR part 342).
    (d) Series G and K. A bond of Series G or K will be paid at face 
value plus the final semiannual interest due. For Series G bonds, the 
final interest paid with principal is $1.25 per $100; for Series K 
bonds, the final interest is $6.90 per $500.
    (e) Series H. A Series H bond will be redeemed at face value at any 
time after six (6) months from issue date. In any case where Series H 
bonds are surrendered to a designated Federal Reserve Bank or Branch or 
the Department of the Treasury for redemption in the month prior to an 
interest payment date, redemption will not be deferred but will be made 
in regular course, unless the presenter specifically requests that the 
transaction be delayed until that date. A request to defer redemption 
made more than one month preceding the interest payment date will not be 
accepted.

[45 FR 64091, Sept. 26, 1980, as amended at 51 FR 23753, July 1, 1986; 
59 FR 10535, Mar. 4, 1994]



Sec. 315.36  Payment during life of sole owner.

    A savings bond registered in single ownership form (i.e., without a 
coowner or beneficiary) will be paid to the owner during his or her 
lifetime upon surrender with an appropriate request.



Sec. 315.37  Payment during lives of both coowners.

    A savings bond registered in coownership form will be paid to either 
coowner upon surrender with an appropriate request, and, upon payment 
(as determined in Sec. 315.43), the other coowner will cease to have 
any interest in the bond. If both coowners request payment and payment 
is to be made by check, the check will be drawn in the form, ``John A. 
Jones and Mary C. Jones''.



Sec. 315.38  Payment during lifetime of owner of beneficiary bond.

    A savings bond registered in beneficiary form will be paid to the 
registered owner during his or her lifetime upon surrender with an 
appropriate request. Upon payment (as determined in Sec. 315.43), the 
beneficiary will cease to have any interest in the bond.



Sec. 315.39  Surrender for payment.

    (a) Procedure for bonds of Series A to E, inclusive, in the names of 
individual owners or coowners only. An individual who is the owner or 
coowner of a bond of Series A, B, C, D, or E may present the bond to an 
authorized paying agent for redemption. The presenter must be prepared 
to establish his or her identity in accordance with Treasury 
instructions and identification guidelines. The owner or coowner must 
sign the request for payment on the bond or, if authorized, on a 
separate detached request, and add his or her address. In addition, in 
the case of a Series E bond or savings note, the presenter must record 
his or her social security number on the face of the security, provided 
it does not already appear in the inscription. Paying agents are 
authorized to refuse payment in any case where the presenter's number is 
not provided. If the request for payment has been signed, or signed and 
certified, before presentation of the bond, the paying agent must be 
satisfied that the person presenting the bond for payment is the owner 
or coowner and may require the person to sign the request for payment 
again. If the bond is in order for payment, the paying agent will make 
immediate payment at the current redemption value without charge to the 
presenter. Paying agents are not authorized to process any case 
involving partial redemption or any case in which supporting evidence is 
required.
    (b) Procedure for all other cases. In the case of a bond to which 
the procedure in paragraph (a) of this section does not apply, or if 
otherwise preferred, the owner or coowner, or other person entitled to 
payment, should appear before an officer authorized to certify requests 
for payment, establish his or her identity, sign the request for 
payment, and provide information as to the addresss to which the check 
in payment is to be mailed. In addition, in the case of a Series E bond 
or savings note, the presenter must record his or her social security 
number on the face of the security, provided it does not already appear 
in the inscription. The bond must be forwarded to a designated

[[Page 201]]

Federal Reserve Bank or Branch or the Bureau of the Public Debt. 
Usually, payment will be expedited by submission to a designated Federal 
Reserve Bank or Branch. In all cases, the cost and risk of presentation 
of a bond will be borne by the owner. Payment will be made by check 
drawn to the order of the registered owner or other person entitled and 
will be mailed to the address requested.
    (c) Date of request. Requests executed more than six months before 
the date of receipt of a bond for payment will not be accepted. Neither 
will a bond be accepted if payment is requested as of a date more than 
three months in the future.

[45 FR 64091, Sept. 26, 1980, as amended at 59 FR 10535, Mar. 4, 1994]



Sec. 315.40  Special provisions for payment.

    (a) Owner's signature not required. A bond may be paid by a paying 
agent or a designated Federal Reserve Bank without the owner's signature 
to the request for payment, if the bond bears the special endorsement of 
a financial institution specifically qualified to place such an 
endorsement on savings bonds under the provisions of Department of the 
Treasury Circular No. 888, current revision (31 CFR part 330).
    (b) Signature by mark. A signature by mark (X) must be witnessed by 
at least one disinterested person and a certifying officer. See subpart 
J. The witness must attest to the signature by mark substantially as 
follows: ``Witness to signature by mark,'' followed by his or her 
signature and address.
    (c) Name change. If the name of the owner, coowner, or other person 
entitled to payment, as it appears in the registration or in evidence on 
file in the Bureau of the Public Debt, has been changed in any legal 
manner, the signature to the request for payment must show both names 
and the manner in which the change was made; for example, ``Mary T. 
Jones Smith (Mary T. J. Smith or Mary T. Smith) changed by marriage from 
Mary T. Jones,'' or ``John R. Young, changed by order of court from Hans 
R. Jung.'' See Sec. 315.50.
    (d) Attorneys-in-fact. A request for payment, reinvestment, or 
exchange executed by an attorney-in-fact will be recognized if it is 
accompanied by a copy of the power of attorney that meets the following 
requirements:
    (1) The power of attorney must bear the grantor's signature, 
properly certified or notarized, in accordance with applicable State 
law;
    (2) The power of attorney must grant, by its terms, authority for 
the attorney-in-fact to sell or redeem the grantor's securities, sell 
his or her personal property, or, otherwise contain similar authority; 
and
    (3) In the case of a grantor who has become incapacitated, the power 
of attorney must conform with pertinent provisions of State law 
concerning its durability. Generally, in such circumstances, the power 
of attorney should provide that the authority granted will not be 
affected by the subsequent incompetence or incapacity of the grantor. 
Medical evidence or other proof of the grantor's condition may be 
required in any case.

[45 FR 64091, Sept. 26, 1980, as amended at 57 FR 39602, Sept. 1, 1992; 
59 FR 10535, Mar. 4, 1994]



Sec. 315.41  Partial redemption.

    A bond of any series may be redeemed in part at current redemption 
value, but only in an amount corresponding to one or more authorized 
denominations, upon surrender of the bond to a designated Federal 
Reserve Bank or Branch or to the Bureau of the Public Debt in accordance 
with Sec. 315.39(b). In any case in which partial redemption is 
requested, the phrase ``to the extent of $---- (face amount) and reissue 
of the remainder'' should be added to the request. Upon partial 
redemption of the bond, the remainder will be reissued as of the 
original issue date, as provided in subpart I.

[45 FR 64091, Sept. 26, 1980, as amended at 59 FR 10535, Mar. 4, 1994]



Sec. 315.42  Nonreceipt or loss of check issued in payment.

    If a Treasury check in payment of a bond surrendered for redemption 
is not received within a reasonable time or is lost after receipt, 
notice should be given to the same agency to which the bond was 
surrendered for payment. The notice should give the date the bond

[[Page 202]]

was surrendered for payment, and describe the bond by series, 
denomination, serial number, and registration, including the taxpayer 
identifying number of the owner.



Sec. 315.43  Effective date of request for payment.

    The Department of the Treasury will treat the receipt of a bond with 
an appropiate request for payment by:
    (a) A Federal Reserve Bank or Branch,
    (b) The Bureau of the Public Debt, or
    (c) A paying agent authorized to pay that bond, as the date upon 
which the rights of the parties are fixed for the purpose of payment.



Sec. 315.44  Withdrawal of request for payment.

    (a) Withdrawal by owner or coowner. An owner or coowner, who has 
surrendered a bond to a Federal Reserve Bank or Branch or to the Bureau 
of the Public Debt or an authorized paying agent with an appropriate 
request for payment, may withdraw the request if notice of intent to 
withdraw is received by the same agency prior to payment either in cash 
or through the issuance of the redemption check.
    (b) Withdrawal on behalf of deceased owner or incompetent. A request 
for payment may be withdrawn under the same conditions as in paragraph 
(a) of this section by the executor or administrator of the estate of a 
deceased owner or by the person or persons who would have been entitled 
to the bond under subpart L, or by the legal representative of the 
estate of a person under legal disability, unless surrender of the bond 
for payment has eliminated the interest of a surviving coowner or 
beneficiary. See Sec. 315.70 (b) and (c).



              Subpart I_Reissue and Denominational Exchange



Sec. 315.45  General.

    Reissue of a bond may be made only under the conditions specified in 
these regulations, and only at:
    (a) A Federal Reserve Bank or Branch, or
    (b) The Bureau of the Public Debt.

Reissue will not be made if the request is received less than one full 
calendar month before the final maturity date of a bond. The request, 
however, will be effective to establish ownership as though the reissue 
had been made.



Sec. 315.46  Effective date of request for reissue.

    The Department of the Treasury will treat the receipt by:
    (a) A Federal Reserve Bank or Branch or
    (b) The Bureau of the Public Debt of a bond and an acceptable 
request for reissue as determining the date upon which the rights of the 
parties are fixed for the purpose of reissue.

For example, if the owner or either coowner of a bond dies after the 
bond has been surrendered for reissue, the bond will be regarded as 
having been reissued in the decedent's lifetime.



Sec. 315.47  Authorized reissue--during lifetime.

    A bond belonging to an individual may be reissued in any authorized 
form of registration upon an appropriate request for the purposes 
outlined below:
    (a) Single ownership. A bond registered in single ownership form may 
be reissued--
    (1) To add a coowner or beneficiary;
    (2) To name a new owner, with or without a coowner or beneficiary, 
but only if:
    (i) The new owner is related to the previous owner by blood 
(including legal adoption) or marriage,
    (ii) The previous owner and the new owner are parties to a divorce 
or annulment, or
    (iii) The new sole owner is the trustee of a personal trust estate 
which was created by the previous owner or which designates as 
beneficiary either the previous owner or a person related to him or her 
by blood (including legal adoption) or marriage.
    (b) Coownership--(1) Reissue--to name a related individual as owner 
or coowner. During the lifetime of both coowners, a coownership bond may 
be reissued in the name of another individual related by blood 
(including legal adoption) or marriage to either coowner--
    (i) As single owner,
    (ii) As owner with one of the original coowners as beneficiary, or

[[Page 203]]

    (iii) As a new coowner with one of the original coowners.
    (2) Reissue--to name either coowner alone or with another individual 
as coowner or beneficiary. During the lifetime of both coowners, a 
coownership bond may be reissued in the name of either coowner alone or 
with another individual as coowner or beneficiary if--
    (i) After issue of the submitted bond, either coowner named thereon 
marries, or the coowners are divorced or legally separated from each 
other, or their marriage is annulled; or
    (ii) Both coowners on the submitted bond are related by blood 
(including legal adoption) or marriage to each other.
    (3) Reissue--to name the trustee of a personal trust estate. A bond 
registered in coownership form may be reissued to name a trustee of a 
personal trust estate created by either coowner or by some other person 
if:
    (i) Either coowner is a beneficiary of the trust, or
    (ii) A beneficiary of the trust is related by blood or marriage to 
either coowner.
    (c) Beneficiary. A bond registered in beneficiary form may be 
reissued--
    (1) To name the beneficiary as coowner;
    (2) To eliminate the name of the owner and to name as owner a 
custodian for the beneficiary, if a minor, under a statute authorizing 
gifts to minors;
    (3) To eliminate the beneficiary or to substitute another individual 
as beneficiary, but only if the request is supported by the certified 
consent of the beneficiary or by proof of his or her death; or
    (4) To eliminate the names of the owner and the beneficiary and to 
name as new owner the trustee of the personal trust estate which was 
created by the previous owner or which designates as beneficiary either 
the previous owner or a person related to him or her by blood (including 
legal adoption) or marriage, but only if the request is supported by the 
certified consent of the beneficiary or by proof of his or her death.



Sec. 315.48  Restrictions on reissue.

    (a) Denominational exchange. Reissue is not permitted solely to 
change denominations.
    (b) United States Treasury. Reissue may not be made to eliminate the 
United States Treasury as coowner or beneficiary.



Sec. 315.49  Correction of errors.

    A bond may be reissued to correct an error in registration upon 
appropriate request, supported by satisfactory proof of the error.



Sec. 315.50  Change of name.

    An owner, coowner, or beneficiary whose name is changed by marriage, 
divorce, annulment, order of court, or in any other legal manner after 
the issue of bond should submit the bond with a request for reissue to 
substitute the new name for the name inscribed on the bond. Documentary 
evidence may be required in any appropriate case.



Sec. 315.51  Requests for reissue.

    A request for reissue of bonds in coownership form during the 
lifetime of the coowners must be signed by both coowners, except that a 
request solely to eliminate the name of one coowner may be signed by 
that coowner only. A bond registered in beneficiary form may be reissued 
upon the request of the owner, supported by the certified consent of the 
beneficiary or by proof of his or her death. Public Debt forms are 
available for requesting reissue.



                      Subpart J_Certifying Officers



Sec. 315.55  Individuals authorized to certify.

    The following individuals are authorized to act as certifying 
officers for the purpose of certifying a request for payment, reissue, 
or a signature to a Public Debt form:
    (a) Officers generally authorized--(1) At banks, trust companies, 
and member organizations of the Federal Home Loan Bank System. (i) Any 
officer of a bank incorporated in the United States, the territories or 
possessions of the United States, or the Commonwealth of Puerto Rico.

[[Page 204]]

    (ii) Any officer of a trust company incorporated in the United 
States, the territories or possessions of the United States, or the 
Commonwealth of Puerto Rico.
    (iii) Any officer of an organization that is a member of the Federal 
Home Loan Bank System. This includes Federal savings and loan 
associations.
    (iv) Any officer of a foreign branch or a domestic branch of an 
institution described in paragraphs (a) (1)(i) through (iii) of this 
section.
    (v) Any officer of a Federal Reserve Bank, a Federal Land Bank, or a 
Federal Home Loan Bank.
    (vi) Any employee of an institution described in paragraphs 
(a)(1)(i) through (v) of this section, who is expressly authorized to 
certify by the institution.

Certification by these officers or designated employees must be 
authenticated by a legible imprint either of a corporate stamp of the 
institution or of the issuing or paying agent's stamp. An employee 
authorized to certify requests must sign his or her name over the title 
``Designated Employee''.
    (2) At issuing agents that are not banks or trust companies. Any 
officer of an organization, not a bank or a trust company, that is 
qualified as an issuing agent for savings bonds. The agent's stamp must 
be imprinted in the certification.
    (3) By United States officials. Any judge, clerk, or deputy clerk of 
a United States court, including United States courts for the 
territories and possessions of the United States, and the Commonwealth 
of Puerto Rico or any United States Commissioner or United States 
Attorney.
    (b) Officers with limited authority--(1) In the Armed Forces. Any 
commissioned officer or warrant officer of the Armed Forces of the 
United States, but only for members of the respective services, their 
families, and civilian employees at posts, bases, or stations. The 
certifying officer must indicate his or her rank and state that the 
individual signing the request is one of the class whose request the 
certifying officer is authorized to certify.
    (2) At Veterans Administration facilities, Federal penal 
institutions, and United States Public Health Service hospitals. Any 
officer in charge of a home, hospital, or other facility of the Veterans 
Administration, but only for the patients, or employees of the facility; 
any officer of a Federal penal institution or a United States Public 
Health Service hospital expressly authorized to certify by the Secretary 
of the Treasury or his designee, but only for the inmates, patients or 
employees of the institution involved. Officers of Veterans 
Administration facilities, Federal penal institutions, and Public Health 
Service hospitals must use the stamp of the particular institution or 
service.
    (c) Authorized officers in foreign countries. Any United States 
diplomatic or consular representative, or the officer of a foreign 
branch of a bank or trust company incorporated in the United States 
whose signature is attested by an imprint of the corporate stamp or is 
certified to the Department of the Treasury. If none of these 
individuals is available, a notary public or other officer authorized to 
administer oaths may certify, but his or her official character and 
jurisdiction must be certified by a United States diplomatic or consular 
officer under seal of his or her office.
    (d) Authorized officers in particular localities. The Governor and 
the Treasurer of Puerto Rico; the Governor and the Commissioner of 
Finance of the Virgin Islands; the Governor and the Director of Finance 
of Guam; and the Governor and the Director of Administrative Services of 
American Samoa; and designated officers of the Panama Canal Commission.
    (e) Special provisions. If no certifying officer is readily 
accessible, the Commissioner of the Public Debt, Deputy Commissioner, 
any Assistant Commissioner, or other designated official of the Bureau 
or of a Federal Reserve Bank or Branch is authorized to make special 
provision for any particular case.



Sec. 315.56  General instructions and liability.

    (a) Certification procedure. Certifying officers at financial 
institutions qualified as paying agents should observe the Treasury's 
payment instructions

[[Page 205]]

and identification guidelines in certifying savings bonds and savings 
notes being forwarded to a designated Federal Reserve Bank for any 
transaction. Other certifying officers should provide certification 
services for persons with whom they have substantial personal 
acquaintance, and for other persons whose identities have been 
unmistakably established. A notation showing exactly how identification 
was established should be placed on the back of the security or Public 
Debt form, or in a separate record. As part of the certification, the 
certifying officer must affix his or her official signature, title and 
address, the exact date of execution and, where one is available, a 
corporate stamp or issuing or paying agent's stamp.
    (b) Liability. The certifying officer and, if such person is an 
officer or an employee of an organization, the organization will be held 
fully responsible for the adequacy of the identification.

[45 FR 64091, Sept. 26, 1980, as amended at 59 FR 10535, Mar. 4, 1994]



Sec. 315.57  When a certifying officer may not certify.

    Certifying officers may not certify the requests for payment of 
bonds, or appropriate Public Debt forms if, in their own right or in a 
representative capacity, they
    (a) Have an interest in the bonds, or
    (b) Will, by virtue of the requests being certified, acquire an 
interest in the bonds.



Sec. 315.58  Forms to be certified.

    When required in the instructions on a Public Debt form, the form 
must be signed before an authorized certifying officer.



     Subpart K_Minors, Incompetents, Aged Persons, Absentees, et al.



Sec. 315.60  Conditions for payment to representative of an estate.

    (a) General. The representative of an estate of an owner who is a 
minor, an aged person, incompetent, absentee, et al., may receive upon 
request--
    (1) If the registration shows the name and capacity of the 
representative;
    (2) If the registration shows the capacity but not the name of the 
representative and the request is accompanied by appropriate evidence; 
or
    (3) If the registration includes neither the name of the 
representative nor his or her capacity but the request is accompanied by 
appropriate evidence.
    (b) Evidence. Appropriate evidence for paragraphs (a) (2) and (3) of 
this section includes a certified copy of the letters of appointment or, 
if the representative is not appointed by a court, other proof of 
qualification. Except in thee case of corporate fiduciaries, the 
evidence must show that the appointment is in full force and be dated 
not more than one year prior to the presentation of the bond for 
payment. The request for payment appearing on the back of a bond must be 
signed by the representative as such, for example, ``John S. Jones, 
guardian (committee) of the estate of Henry W. Smith, a minor (an 
incompetent).''



Sec. 315.61  Payment after death.

    After the death of the ward, and at any time prior to the 
representative's discharge, the representative of the estate will be 
entitled to obtain payment of a bond to which the ward was solely 
entitled.



Sec. 315.62  Payment to minors.

    If the owner of a savings bond is a minor and the form of 
registration does not indicate that there is a representative of the 
minor's estate, payment will be made to the minor upon his or her 
request, provided the minor is of sufficient competency to sign the 
request for payment and to understand the nature of the transaction. In 
general, the fact that the request for payment has been signed by a 
minor and certified will be accepted as sufficient proof of competency 
and understanding.



Sec. 315.63  Payment to a parent or other person on behalf of a minor.

    If the owner of a savings bond is a minor and the form of 
registration does not indicate that there is a representative of his or 
her estate, and if the minor is not of sufficient competency to sign the 
request for payment and to

[[Page 206]]

understand the nature of the transaction, payment will be made to either 
parent with whom the minor resides or to whom legal custody has been 
granted. If the minor does not reside with either parent, payment will 
be made to the person who furnishes the chief support for the minor. The 
request must appear on the back of the bond in one of the following 
forms:
    (a) Request by parent.

    I certify that I am the mother of John C. Jones (with whom he 
resides) (to whom legal custody has been granted). He is ---- years of 
age and is not of sufficient understanding to make this request.

Mary Jones on behalf of John C. Jones.

    (b) Request by other person.

    I certify that John C. Jones does not reside with either parent and 
that I furnish his chief support. He is ---- years of age and is not of 
sufficient understanding to make this request.

Alice Brown, grandmother, on behalf of John C. Jones.



Sec. 315.64  Payment, reinvestment, or exchange--voluntary guardian of an 

incapacitated person.

    (a) Payment of bonds. When an adult owner of bonds is incapable of 
requesting payment as a result of incapacity and there is no other 
person legally qualified to do so, the relative, or other person, 
responsible for the owner's care and support may submit an application 
for recognition as voluntary guardian for the purpose of redeeming the 
owner's bonds, if the total redemption value of all of the owner's bonds 
does not exceed $20,000. The redemption value of the bonds shall be 
determined as of the date the bonds are received, accompanied by an 
appropriate request for payment. If the total redemption value exceeds 
$20,000, a legal representative must be appointed, as set forth in Sec. 
315.60.
    (b) Reinvestment of bonds. If the bonds have finally matured and it 
is desired to redeem them and reinvest the proceeds in other savings 
bonds, the new bonds must be registered in the name of the incapacitated 
person, followed by words showing that he or she is under voluntary 
guardianship; for example, ``John Jones 123-45-6789, under voluntary 
guardianship''. A living coowner or beneficiary named on the matured 
bonds must be designated on the new bonds, unless such person furnishes 
a certified statement consenting to omission of his or her name. If an 
amount insufficient to purchase an additional bond of any authorized 
denomination of either series remains after the reinvestment, the 
voluntary guardian may furnish additional funds sufficient to purchase 
another bond of either series of the lowest available denomination. If 
additional funds are not furnished, the remaining amount will be paid to 
the voluntary guardian for the use and benefit of the incapacitated 
person.
    (c) Exchange of bonds. The provisions for reinvestment of the 
proceeds of matured bonds are equally applicable to any authorized 
exchange of bonds of one series for those of another.

[57 FR 39602, Sept. 1, 1992]



Sec. 315.65  Reissue.

    A bond on which a minor or other person under legal disability is 
named as the owner or coowner, or in which he or she has an interest, 
may be reissued under the following conditions:
    (a) A minor for whose estate no representative has been appointed 
may request reissue if the minor is of sufficient competency to sign his 
or her name to the request and to understand the nature of the 
transaction.
    (b) A bond on which a minor is named as beneficiary or coowner may 
be reissued in the name of a custodian for the minor under a statute 
authorizing gifts to minors upon the request of the adult whose name 
appears on the bond as owner or coowner.
    (c) A minor coowner for whose estate no representative has been 
appointed, may be named sole owner upon the request of the competent 
coowner.
    (d) Reissue to eliminate the name of a minor or incompetent for 
whose estate a legal representative has been appointed is permitted only 
if supported by evidence that a court has authorized the representative 
of the minor's or incompetent's estate to request the reissue. See Sec. 
315.23.

Except to the extent provided in paragraphs (a) through (d), of this 
section, reissue will be restricted to a form of registration which does 
not adversely

[[Page 207]]

affect the existing ownership or interest of a minor who is not of 
sufficient understanding to make a request, or other person under legal 
disability. Requests for reissue should be executed by the person 
authorized to request payment under Sec. Sec. 315.60 and 315.63, or the 
person who may request recognition as voluntary guardian under Sec. 
315.64.

[45 FR 64091, Sept. 26, 1980. Redesignated at 57 FR 39602, Sept. 1, 
1992]



            Subpart L_Deceased Owner, Coowner or Beneficiary



Sec. 315.70  General rules governing entitlement.

    The following rules govern ownership or entitlement where one or 
both of the persons named on a bond have died without the bond having 
been surrendered for payment or reissue:
    (a) Single owner bond. If the owner of a bond registered in single 
ownership form has died, the bond becomes the property of that 
decedent's estate, and payment or reissue will be made as provided in 
this subpart.
    (b) Coowner bond--(1) One coowner deceased. If one of the coowners 
named on a bond has died, the surviving coowner will be recognized as 
its sole and absolute owner, and payment or reissue will be made as 
though the bond were registered in the name of the survivor alone. Any 
request for reissue by the surviving coowner must be supported by proof 
of death of the other coowner.
    (2) Both coowners deceased. If both coowners named on a bond have 
died, the bond becomes the property of the estate of the coowner who 
died last, and payment or reissue will be made as if the bond were 
registered in the name of the last deceased coowner alone. Proof of 
death of both coowners will be required to establish the order of death.
    (3) Simultaneous death of both coowners. If both coowners die under 
conditions where it cannot be established, either by presumption of law 
or otherwise, which coowner died first, the bond becomes the property of 
both equally, and payment or reissue will be made accordingly.
    (c) Beneficiary bond--(1) Owner deceased. If the owner of a bond 
registered in beneficiary form has died and is survived by the 
beneficiary, upon proof of death of the owner, the beneficiary will be 
recognized as the sole and absolute owner of the bond. Payment or 
reissue will be made as though the bond were registered in the 
survivor's name alone. A request for payment or reissue by the 
beneficiary must be supported by proof of death of the owner.
    (2) Beneficiary deceased. If the beneficiary's death occurs before, 
or simultaneous with, that of the registered owner, payment or reissue 
will be made as though the bond were registered in the owner's name 
alone. Proof of death of the owner and beneficiary is required to 
establish the order of death.
    (d) Nonresident aliens. If the person who becomes entitled to a bond 
because of the death of an owner is an alien who is a resident of an 
area with respect to which the Department of the Treasury restricts or 
regulates the delivery of checks drawn against funds of the United 
States or its agencies or instrumentalities, delivery of the redemption 
check will not be made so long as the restriction applies. See 
Department of the Treasury Circular No. 655, current revision (31 CFR 
part 211).



Sec. 315.71  Decedent's estate.

    (a) Estate is being administered. (1) A legal representative of a 
deceased owner's estate may request payment of savings bonds to the 
estate, or may distribute the savings bonds to the persons entitled.
    (2) Appropriate proof of appointment for the legal representative of 
the estate is required. Letters of appointment must be dated not more 
than one year prior to the date of submission of the letters of 
appointment.
    (b) Estate has been settled previously. If the estate has been 
settled previously through judicial proceedings, the persons entitled 
may request payment or reissue of the savings bonds. A certified copy of 
the court-approved final accounting for the estate, the court's decree 
of distribution, or other appropriate evidence is required.
    (c) Special provisions under the law of the jurisdiction of the 
decedent's domicile. If there is no formal or regular administration and 
no representative of the estate is to be appointed, the person

[[Page 208]]

appointed to receive or distribute the assets of a decedent's estate 
without regular administration under summary or small estates procedures 
under applicable local law may request payment or reissue of savings 
bonds. Appropriate evidence is required.
    (d) When administration is required. If the total redemption value 
of the Treasury securities and undelivered payments, if any, held 
directly on our records that are the property of the decedent's estate 
is greater than $100,000, administration of the decedent's estate will 
be required. The redemption value of savings bonds and the principal 
amount of marketable securities will be used to determine the value of 
securities, and will be determined as of the date of death. 
Administration may also be required at the discretion of the Department 
for any case.
    (e) Voluntary representative for small estates that are not being 
otherwise administered--(1) General. A voluntary representative is a 
person qualified according to paragraph (e)(3) of this section, to 
redeem or to distribute a decedent's savings bonds. The voluntary 
representative procedures are for the convenience of the Department; 
entitlement to the decedent's savings bonds and held payments, if any, 
is determined by the law of the jurisdiction in which the decedent was 
domiciled at the date of death. Voluntary representative procedures may 
be used only if:
    (i) There has been no administration, no administration is 
contemplated, and no summary or small estate procedures under applicable 
local law have been used;
    (ii) The total redemption value of the Treasury securities and held 
payments, if any, held directly on our records that are the property of 
the decedent's estate is $100,000 or less as of the date of death; and
    (iii) There is a person eligible to serve as the voluntary 
representative according to paragraph (e)(3) of this section.
    (2) Authority of voluntary representative. A voluntary 
representative may:
    (i) Redeem the decedent's savings bonds on behalf of the persons 
entitled by the law of the jurisdiction in which the decedent was 
domiciled at the date of death;
    (ii) Distribute the decedent's savings bonds to the persons entitled 
by the law of the jurisdiction in which the decedent was domiciled at 
the date of death.
    (3) Order of precedence for voluntary representative. An individual 
eighteen years of age or older may act as a voluntary representative 
according to the following order of precedence: A surviving spouse; if 
there is no surviving spouse, then a child of the decedent; if there are 
none of the above, then a descendant of a deceased child of the 
decedent; if there are none of the above, then a parent of the decedent; 
if there are none of the above, then a brother or sister of the 
decedent; if there are none of the above, then a descendant of a 
deceased brother or sister of the decedent; if there are none of the 
above, then a next of kin of the decedent, as determined by the law of 
the jurisdiction in which the decedent was domiciled at the date of 
death. As used in this order of precedence, child means a natural or 
adopted child of the decedent.
    (4) Liability. By serving, the voluntary representative warrants 
that the distribution of payments or savings bonds is to the persons 
entitled by the law of the jurisdiction in which the decedent was 
domiciled at the date of death. The United States is not liable to any 
person for the improper distribution of payments or savings bonds. Upon 
payment or distribution of the savings bonds at the request of the 
voluntary representative, the United States is released to the same 
extent as if it had paid or delivered to a representative of the estate 
appointed pursuant to the law of the jurisdiction in which the decedent 
was domiciled at the date of death. The voluntary representative shall 
indemnify and hold harmless the United States and all creditors and 
persons entitled to the estate of the decedent. The amount of the 
indemnification is limited to an amount no greater than the value 
received by the voluntary representative.
    (f) Creditor. If there has been no administration, no administration 
is contemplated, no summary or small estate procedures under applicable 
local law have been used, and there is no person

[[Page 209]]

eligible to serve as a voluntary representative pursuant to paragraph 
(e) of this section, then a creditor may make a claim for payment for 
the amount of the debt, providing the debt has not been barred by 
applicable local law.

[70 FR 57430, Sept. 30, 2005]



Sec. 315.72  [Reserved]



                          Subpart M_Fiduciaries



Sec. 315.75  Payment or reissue during the existence of the fiduciary estate.

    (a) Payment or reissue before maturity--(1) Request from the 
fiduciary named in the registration. A request for reissue or payment 
prior to maturity must be signed by all of the fiduciaries unless by 
statute, decree of court, or the terms of the governing instrument, any 
lesser number may properly execute the request. If the fiduciaries named 
in the registration are still acting, no further evidence will be 
required. In other cases, evidence to support the request will be 
required, as specified:
    (i) Fiduciaries by title only. If the bond is registered only in the 
titles, without the names, of fiduciaries not acting as a board, 
satisfactory evidence of their incumbency must be furnished, except in 
the case of bonds registered in the title of public officers as 
trustees.
    (ii) Boards, committees, commissions, etc. If a bond is registered 
in the name of a governing body which is empowered to act as a unit, and 
which holds title to the property of a religious, educational, 
charitable or nonprofit organization or a public corporation, the 
request should be signed in the name of the body by an authorized 
person. Ordinarily, a signed and certified request will be accepted 
without further evidence.
    (iii) Corporate fiduciaries. If a bond is registered in the name of 
a public or private corporation or a governmental body as fiduciary, the 
request must be signed by an authorized officer in the name of the 
organization as fiduciary. Ordinarily, a signed and certified request 
will be accepted without further evidence.
    (2) Trustee of a common trust fund. A bond held by a financial 
institution in a fiduciary capacity may be reissued in the name of the 
institution as trustee of its common trust fund to the extent that 
participation in the common trust fund is authorized by law or 
regulation. The request for reissue should be executed by the 
institution and any cofiduciary.
    (3) Successor fiduciary. If the fiduciary in whose name the bond is 
registered has been replaced by another fiduciary, satisfactory evidence 
of successorship must be furnished.
    (b) Payment at or after final maturity. At or after final maturity, 
a request for payment signed by any one or more of the fiduciaries will 
be accepted. Payment will be made by check drawn as the bond is 
registered.



Sec. 315.76  Payment or reissue after termination of the fiduciary estate.

    A bond registered in the name or title of a fiduciary may be paid or 
reissued to the person who has become entitled by reason of the 
termination of a fiduciary estate. Requests for reissue made by a 
fiduciary pursuant to the termination of a fiduciary estate should be 
made on the appropriate form. Requests for payment or reissue by other 
than the fiduciary must be accompanied by evidence to show that the 
person has become entitled in accordance with applicable State law or 
otherwise. When two or more persons have become entitled, the request 
for payment or reissue must be signed by each of them.



Sec. 315.77  Exchanges by fiduciaries.

    Fiduciaries are authorized to request an exchange of bonds of one 
series for those of another, pursuant to any applicable Department of 
the Treasury offering. A living coowner or beneficiary named on the 
bonds submitted in exchange may be retained in the same capacity on the 
new bonds.

[[Page 210]]



      Subpart N_Private Organizations (Corporations, Associations, 
    Partnerships, etc.) and Governmental Agencies, Units and Officers



Sec. 315.80  Payment to corporations or unincorporated associations.

    A bond registered in the name of a private corporation or an 
unincorporated association will be paid to the corporation or 
unincorporated association upon a request for payment on its behalf by 
an authorized officer. The signature to the request should be in the 
form, for example, ``The Jones Coal Company, a corporation, by John 
Jones, President'', or ``The Lotus Club, an unincorporated association, 
by William A. Smith, Treasurer''. A request for payment so signed and 
certified will ordinarily be accepted without further evidence of the 
officer's authority.



Sec. 315.81  Payment to partnerships.

    A bond registered in the name of an existing partnership will be 
paid upon a request for payment signed by a general partner. The 
signature to the request should be in the form, for example, ``Smith and 
Jones, a partnership, by John Jones, a general partner''. A request for 
payment so signed and certified will ordinarily be accepted as 
sufficient evidence that the partnership is still in existence and that 
the person signing the request is authorized.



Sec. 315.82  Reissue or payment to successors of corporations, unincorporated 

associations, or partnerships.

    A bond registered in the name of a private corporation, an 
unincorporated associations, or a partnership which has been succeeded 
by another corporation, unincorporated association, or partnership by 
operation of law or otherwise, in any manner whereby the business or 
activities of the original organization are continued without 
substantial change, will be paid to or reissued in the name of the 
succeeding organization upon appropriate request on its behalf, 
supported by satisfactory evidence of successorship. The appropriate 
form should be used.



Sec. 315.83  Reissue or payment on dissolution of corporation or partnership.

    (a) Corporations. A bond registered in the name of a private 
corporation which is in the process of dissolution will be paid to the 
authorized representative of the corporation upon a request for payment, 
supported by satisfactory evidence of the representative's authority. At 
the termination of dissolution proceedings, the bond may be reissued 
upon the request of the authorized representative in the names of those 
persons, other than creditors, entitled to the assets of the 
corporation, to the extent of their respective interests. Proof will be 
required that all statutory provisions governing the dissolution of the 
corporation have been complied with and that the persons in whose names 
reissue is requested are entitled and have agreed to the reissue. If the 
dissolution proceedings are under the direction of a court, a certified 
copy of an order of the court, showing the authority of the 
representative to make the distribution requested must be furnished.
    (b) Partnerships. A bond registered in the name of a partnership 
which has been dissolved by death or withdrawal of a partner, or in any 
other manner--
    (1) Will be paid upon a request for payment by any partner or 
partners authorized by law to act on behalf of the dissolved 
partnership, or
    (2) Will be paid to or reissued in the names of the persons entitled 
as the result of such dissolution to the extent of their respective 
interests, except that reissue will not be made in the names of 
creditors.

The request must be supported by satisfactory evidence of entitlement, 
including proof that the debts of the partnership have been paid or 
properly provided for. The appropriate form should be used.



Sec. 315.84  Payment to certain institutions.

    A bond registered in the name of a church, hospital, home, school, 
or similar institution, without reference in the registration to the 
manner in which it is organized or governed or to the manner in which 
title to its property is held, will be paid upon a request

[[Page 211]]

for payment signed on behalf of such institution by an authorized 
representative. A request for payment signed by a pastor of a church, 
superintendent of a hospital, president of a college, or by any official 
generally recognized as having authority to conduct the financial 
affairs of the particular institution will ordinarily be accepted 
without further proof of authority. The signature to the request should 
be in the form, for example, ``Shriners' Hospital for Crippled Children, 
St. Louis, MO, by William A. Smith, Superintendent'', or ``St. Mary's 
Roman Catholic Church, Albany, NY, by the Rev. John Smyth, Pastor''.



Sec. 315.85  Reissue in name of trustee or agent for reinvestment purposes.

    A bond registered in the name of a religious, educational, 
charitable or nonprofit organization, whether or not incorporated, may 
be reissued in the name of a financial institution, or an individual, as 
trustee or agent. There must be an agreement between the organization 
and the trustee or agent holding funds of the organization, in whole or 
in part, for the purpose of investing and reinvesting the principal and 
paying the income to the organization. Reissue should be requested on 
behalf of the organization by an authorized officer using the 
appropriate form.



Sec. 315.86  Reissue upon termination of investment agency.

    A bond registered in the name of a financial institution, or 
individual, as agent for investment purposes only, under an agreement 
with a religious, an educational, a charitable, or a nonprofit 
organization, may be reissued in the name of the organization upon 
termination of the agency. The former agent should request such reissue 
and should certify that the organization is entitled by reason of the 
termination of the agency. If such request and certification are not 
obtainable, the bond will be reissued in the name of the organization 
upon its own request, supported by satisfactory evidence of the 
termination of the agency. The appropriate form should be used.



Sec. 315.87  Payment to governmental agencies, units, or their officers.

    (a) Agencies and units. A bond registered in the name of a State, 
county, city, town, village, or in the name of a Federal, State, or 
local governmental agency, such as a board, commission, or corporation, 
will be paid upon a request signed in the name of the governmental 
agency or unit by an authorized officer. A request for payment so signed 
and certified will ordinarily be accepted without further proof of the 
officer's authority.
    (b) Officers. A bond registered in the official title of an officer 
of a governmental agency or unit will be paid upon a request for payment 
signed by the officer. The request for payment so signed and certified 
will ordinarily be accepted as proof that the person signing is the 
incumbent of the office.



                   Subpart O_Miscellaneous Provisions



Sec. 315.90  Waiver of regulations.

    The Commissioner of the Public Debt, as designee of the Secretary of 
the Treasury, may waive or modify any provision or provisions of these 
regulations. He may do so in any particular case or class of cases for 
the convenience of the United States or in order to relieve any person 
or persons of unnecessary hardship:
    (a) If such action would not be inconsistent with law or equity, (b) 
if it does not impair any existing rights, and (c) if he is satisfied 
that such action would not subject the United States to any substantial 
expense or liability.



Sec. 315.91  Additional requirements; bond of indemnity.

    The Commissioner of the Public Debt, as designee of the Secretary of 
the Treasury, may require
    (a) Such additional evidence as he may consider necessary or 
advisable, or
    (b) A bond of indemnity, with or without surety, in any case in 
which he may consider such a bond necessary for the protection of the 
interests of the United States.

[[Page 212]]



Sec. 315.92  Preservation of rights.

    Nothing contained in these regulations shall be construed to limit 
or restrict existing rights which holders of savings bonds previously 
issued may have acquired under circulars offering the bonds for sale or 
under the regulations in force at the time of the purchase.



Sec. 315.93  Supplements, amendments, or revisions.

    The Secretary of the Treasury may at any time, or from time to time, 
prescribe additional, supplemental, amendatory, or revised rules and 
regulations governing the United States Savings Bonds and Savings Notes 
to which this circular applies.



PART 316_OFFERING OF UNITED STATES SAVINGS BONDS, SERIES E--Table of Contents




Sec.
316.1 Offering of bonds.
316.2 Description of bonds.
316.3 Governing regulations.
316.4 Registration.
316.5 Limitation on holdings.
316.6 Purchase of bonds.
316.7 Delivery of bonds.
316.8 Extended terms and yields for outstanding bonds.
316.9 Taxation.
316.10 Payment or redemption.
316.11 Reservation as to issue of bonds.
316.12 Fiscal agents.
316.13 Reservation as to terms of offer.

    Authority: 31 U.S.C. 3105 and 5 U.S.C. 301.

    Source: 57 FR 14276, Apr. 17, 1992, unless otherwise noted.



Sec. 316.1  Offering of bonds.

    The Secretary of the Treasury offered for sale to the people of the 
United States, United States Savings Bonds of Series E, hereinafter 
generally referred to as ``Series E bonds'' or ``bonds''.
    This offer was terminated as of December 31, 1979, except that, as 
to bonds purchased under payroll savings plans and employee plans, the 
offer was terminated as of June 30, 1980.



Sec. 316.2  Description of bonds.

    (a) General. Definitive (paper) Series E bonds bear a facsimile of 
the signature of the Secretary of the Treasury and of the Seal of the 
Department of the Treasury. They were issued only in registered form and 
are nontransferable.
    (b) Denominations and prices. Series E bonds were issued on a 
discount basis. The denominations and issue prices were:

 
                       Denomination                          Issue price
 
$25.......................................................        $18.75
50........................................................         37.50
75........................................................         56.25
100.......................................................         75.00
200.......................................................        150.00
500.......................................................        375.00
1,000.....................................................        750.00
10,000....................................................      7,500.00
100,000\1\................................................     75,000.00
 
\1\ The $100,000 denomination was available only for purchase by
  trustees of employee savings and savings and vacation plans (see
  paragraph (b) of Sec.  316.5).

    (c) Inscription and issue. At the time of issue, the issuing agent:
    (1) Inscribed on the face of each bond the name, social security 
number and address of the owner, and the name of the beneficiary, if 
any, or the name, social security number and address of the first-named 
coowner and the name of the other coowner (the inscription of the social 
security number was required for bonds issued on or after January 1, 
1974);
    (2) Entered the issue date in the upper right-hand portion of the 
bond; and
    (3) Imprinted the agent's validation indicia in the lower right-hand 
portion to show the date the bond was actually inscribed. A bond was 
valid only if an authorized issuing agent received payment therefor and 
duly inscribed, dated and imprinted validation indicia on the bond.
    (d) Term. A Series E bond was dated as of the first day of the month 
in which payment of the purchase price was received by an agent 
authorized to issue the bonds. This date is the issue date. The bonds 
mature as shown in Sec. 316.8. The bond may not be called for 
redemption by the Secretary of the Treasury prior to maturity or the end 
of any extended maturity period (see paragraph (a) of Sec. 316.8). The 
bond may be redeemed at the owner's option at any time at fixed 
redemption values.
    (e) Investment yield (interest). The investment yield (interest) on 
Series E bonds is defined in paragraphs (c) and

[[Page 213]]

(d) of Sec. 316.8. Beginning in the third month from its issue date, a 
bond increased in redemption value on the first day of each month, up to 
and including the thirtieth month from issue date, so as to provide for 
such period an investment yield of no less than 4 percent per annum, 
compounded semiannually. Thereafter, its redemption value increases at 
the beginning of each successive half-year period. The interest is paid 
as part of the redemption value.

[57 FR 14276, Apr. 17, 1992, as amended at 70 FR 14941, Mar. 23, 2005]



Sec. 316.3  Governing regulations.

    (a) The regulations in 31 CFR part 315 apply to definitive Series E 
bonds that have not been converted to book-entry bonds.
    (b) The regulations in 31 CFR part 363 apply to definitive Series E 
bonds that have been converted to book-entry bonds through New Treasury 
Direct.

[70 FR 14941, Mar. 23, 2005]



Sec. 316.4  Registration.

    Series E bonds were permitted to be registered as set forth in 
subpart B of 31 CFR part 315, also published as Department of the 
Treasury Circular No. 530, current revision.



Sec. 316.5  Limitation on holdings.

    (a) General limitation. The amount of Series E bonds, originally 
issued during any one calendar year, that could be held by any one 
person, computed in accordance with the governing regulations, ranged 
from $5,000 (face amount) to $20,000 (face amount), depending upon the 
issue date.
    (b) Special limitation for employee savings plans. A special 
limitation for employee savings plans was provided, which was $2,000 
(face amount) multiplied by the highest number of participants in any 
employee savings plan, as defined in paragraph (b)(1) of this section, 
at any time during the year in which the bonds were issued. The plan had 
to be established, as set forth below.
    (1) Definition of plan and conditions of eligibility. (i) The 
employee savings plan must have been established by the employer for the 
exclusive and irrevocable benefit of employees or their beneficiaries, 
afforded employees the means of making regular savings from their wages 
through payroll deduction, and provided for employer contributions to be 
added to such savings.
    (ii) The entire assets thereof must have been credited to the 
individual accounts of participating employees and the assets so 
credited could be distributed only to the employees or their 
beneficiaries, except as otherwise provided herein.
    (iii) Series E bonds were to be purchased only with assets credited 
to the accounts of participating employees and only if the amount taken 
from any account at any time for that purpose was equal to the purchase 
price of a bond or bonds in an authorized denomination or denominations, 
and shares therein were credited to the accounts of the individuals from 
whom the purchase price thereof was derived, in amounts corresponding 
with such shares. For example, if $37.50 credited to the account of John 
Jones was commingled with funds credited to the accounts of other 
employees to make a total of $7,500, with which a Series E bond in the 
denomination of $10,000 (face amount) was purchased in December 1978 and 
registered in the name and title of the trustee, the plan must have 
provided, in effect, that John Jones' account would be credited to show 
that he was the owner of a Series E bond in the denomination of $50 
(face amount) bearing the issue date of December 1, 1978.
    (iv) Each participating employee has an irrevocable right at any 
time to demand and receive from the trustee all assets credited to his 
or her account or the value thereof, if he or she so prefers, without 
regard to any condition other than the loss or suspension of the 
privilege of participating further in the plan. However, a plan was not 
deemed to be inconsistent herewith if it limited or modified the 
exercise of any such right by providing that the employer's contribution 
did not vest absolutely until the employee had made contributions under 
the plan in each of not more than 60 calendar months succeeding the 
month for which the employer's contribution was made.

[[Page 214]]

    (v) Upon the death of an employee, his or her beneficiary has the 
absolute and unconditional right to demand and receive from the trustee 
all assets credited to the account of the employee, or the value 
thereof, if he or she so prefers.
    (vi) When settlement is made with an employee, or his or her 
beneficiary, with respect to any bond registered in the name and title 
of the trustee in which the employee has a share (see paragraphs (b)(1) 
(ii) and (iii) of this section), the bond must be submitted for 
redemption or reissue to the extent of such share. If an employee or his 
or her beneficiary is to receive distribution in kind, bonds bearing the 
same issue dates as those credited to the employee's account will be 
reissued in the name of the distributee to the extent to which he or she 
is entitled, in any authorized form of registration, upon the request 
and certification of the trustee, in accordance with the governing 
reguations.
    (2) Definitions of terms used in paragraph (b)--related provisions. 
(i) The term savings plan includes any regulations issued under the plan 
with regard to Series E bonds. A trustee desiring to purchase bonds in 
excess of the general limitation in any calendar year should have 
submitted to the Federal Reserve Bank of the district a copy of the 
plan, any such regulations, and the trust agreement, all certified to be 
true copies, in order to establish eligibility.
    (ii) The term assets means all funds, including the employee 
contributions and employer contributions and assets purchased therewith, 
as well as accretions thereto, such as dividends on stock, the increment 
in value on bonds and all other income; but, notwithstanding any other 
provision of this paragraph, the right to demand and receive all assets 
credited to the account of an employee shall not be construed to require 
the distribution of assets in kind when it would not be possible or 
practicable to make such distribution; for example, Series E bonds may 
not be reissued in unauthorized denominations, and fractional shares of 
stock are not readily distributable in kind.
    (iii) The term beneficiary means the person or persons, if any, 
designated by the employee in accordance with the terms of the plan to 
receive the benefits of the trust upon his or her death, or the estate 
of the employee, and the term distributee means the employee, or his or 
her beneficiary.



Sec. 316.6  Purchase of bonds.

    Series E bonds were purchased, as follows:
    (a) Over-the-counter for cash--(1) Bonds registered in names of 
natural persons in their own right only. At such incorporated banks, 
trust companies, and other agencies as had been duly qualified as 
issuing agents.
    (2) Bonds registered in names of trustees of employee savings plans. 
At such incorporated bank, trust company, or other agency, duly 
qualified as an issuing agent, provided the agent was trustee of an 
approved employee savings plan eligible for the special limitation in 
paragraph (b) of Sec. 316.5 and prior approval to issue the bonds was 
obtained from the Federal Reserve Bank of the agent's district.
    (3) Bonds registered in all authorized forms. At Federal Reserve 
Banks and Branches and at the Department of the Treasury, Washington, DC 
20226.
    (b) On mail order. By mail upon application to any Federal Reserve 
Bank or Branch or to the Department of the Treasury, accompanied by a 
remittance to cover the issue price. Any form of exchange, including 
personal checks, was accepted, subject to collection. Checks or other 
forms of exchange were to be drawn to the order of the Federal Reserve 
Bank or the United States Treasury, as the case may be. Checks payable 
by endorsement were not acceptable. Any depositary qualified pursuant to 
the provisions of 31 CFR part 203, also published as Department of the 
Treasury Circular No. 92, current revision, was permitted to make 
payment by credit for bonds applied for on behalf of its customers up to 
any amount for which it was qualified in excess of existing deposits, 
when so notified by the Federal Reserve Bank of its district.
    (c) Savings stamps. The sale of United States Savings Stamps was 
terminated effective June 30, 1970. However, outstanding stamps affixed 
in fully or partially completed albums could be used to purchase Series 
E bonds at banks or

[[Page 215]]

other financial institutions authorized to issue such bonds. Stamps may 
be redeemed at banks and other financial institutions, through 
designated Federal Reserve Banks and the Bureau of the Public Debt, 
Parkersburg, West Virginia.

[57 FR 14276, Apr. 17, 1992, as amended at 59 FR 10535, Mar. 4, 1994]



Sec. 316.7  Delivery of bonds.

    Issuing agents were authorized to deliver Series E bonds either 
over-the-counter in person, or by mail at the risk and expense of the 
United States, to the address given by the purchaser, but only within 
the United States, its territories and possessions, and the Commonwealth 
of Puerto Rico. No mail deliveries elsewhere were made. If purchased by 
citizens of the United States temporarily residing abroad, the bonds 
were delivered to such address in the United States as the purchaser 
directed.



Sec. 316.8  Extended terms and yields for outstanding bonds.

    (a) General. The terms extended maturity period, second extended 
maturity period, third extended maturity period and fourth extended 
maturity period, when used herein, refer to periods of 10 years or less 
after the original maturity dates during which owners may retain their 
bonds and continue to earn interest. No special action is required to 
take advantage of any extensions heretofore or herein granted. Series E 
bonds cease to accrue interest upon reaching final maturity.
    (b) Extended maturity periods--(1) Bonds issued from May 1, 1941 
through April 1, 1952. Series E bonds with issue dates of May 1, 1941, 
through April 1, 1952, reached or will reach final maturity 40 years 
after their respective issue dates, as shown below.

------------------------------------------------------------------------
                                        Life of   Final maturity dates--
       Issue dates--1st day of        bonds yrs.        1st day of
------------------------------------------------------------------------
May 1941-Apr. 1952..................          40  May 1981-Apr. 1992.
------------------------------------------------------------------------

    (2) Bonds issued from May 1, 1952 through November 1, 1965. Bonds 
with issue dates of May 1, 1952, through November 1, 1965, will receive 
an additional extension of maturity ranging from 4 months to 2 years and 
3 months, as shown below, so that these bonds will reach final maturity 
40 years after their respective issue dates.

------------------------------------------------------------------------
                                       Previous
                                      maturities      Previous maturity
      Issue dates--lst day of      ----------------   dates--1st day of
                                     yrs.    mos.
------------------------------------------------------------------------
May 1952-Jan. 1957................      39       8  Jan. 1992-Sept.
                                                     1996.
Feb. 1957-May 1959................      38      11  Jan. 1996-Apr. 1998.
Jun. 1959-Nov. 1965...............      37       9  Mar. 1997-Aug. 2003.
------------------------------------------------------------------------


------------------------------------------------------------------------
                                               Additional
                                                extended
                                                maturity       Life of
          Issue dates--1st day of                period      bonds--yrs.
                                            ----------------
                                              yrs.    mos.
------------------------------------------------------------------------
May 1952-Jan. 1957.........................  ......       4           40
Feb. 1957-May 1959.........................       1       1           40
Jun. 1959-Nov. 1965........................       2       3          40.
------------------------------------------------------------------------


------------------------------------------------------------------------
                                              Final maturity dates--1st
          Issue dates--1st day of                      day of
------------------------------------------------------------------------
May 1952-Jan. 1957........................  May 1992-Jan. 1997.
Feb. 1957-May 1959........................  Feb. 1997-May 1999.
Jun. 1959-Nov. 1965.......................  June. 1999-Nov. 2005.
------------------------------------------------------------------------

    (3) Bonds issued from December 1, 1965 through June 1, 1980. Bonds 
with issue dates of December 1, 1965, through June 1, 1980, will receive 
an additional extension of maturity ranging from 3 years to 5 years, as 
shown below, so that these bonds will reach final maturity 30 years 
after their respective issue dates.

------------------------------------------------------------------------
                                       Previous
                                      maturities      Previous maturity
      Issue dates--1st day of      ----------------   dates--1st day of
                                     yrs.    mos.
------------------------------------------------------------------------
Dec. 1965-May 1969................      27  ......  Dec. 1992-May 1996.
June. 1969-Nov. 1973..............      25      10  Apr. 1995-Sept.
                                                     1999.
Dec. 1973-Jun. 1980...............      25  ......  Dec. 1998-Jun. 2005.
------------------------------------------------------------------------


------------------------------------------------------------------------
                                               Additional
                                                extended
                                                maturity       Life of
          Issue dates--1st day of                period      bonds--yrs.
                                            ----------------
                                              yrs.    mos.
------------------------------------------------------------------------
Dec. 1965-May 1969.........................       3  ......           30
Jun. 1969-Nov. 1973........................       4       2           30
Dec. 1973-Jun. 1980........................       5  ......           30
------------------------------------------------------------------------


------------------------------------------------------------------------
                                              Final maturity dates--1st
          Issue dates--1st day of                      day of
------------------------------------------------------------------------
Dec. 1965-May 1969........................  Dec. 1995-May 1999.
Jun. 1969-Nov. 1973.......................  Jun. 1999-Nov. 2003.
Dec. 1973-Jun. 1980.......................  Dec. 2003-Jun. 2010.
------------------------------------------------------------------------


[[Page 216]]

    (c) Guaranteed minimum investment yield--(1) General. Except as 
provided in paragraph (c)(2) of this section, the guaranteed minimum 
investment yields for outstanding Series E bonds are as follows:
    (i) For Series E bonds that were in original or extended maturity 
periods prior to November 1, 1982, the guaranteed minimum investment 
yield was 8.5 percent per annum, compounded semiannually, effective for 
the period from the first semiannual interest accrual date on or after 
May 1, 1981, through the end of such periods, unless the bonds reached 
final maturity before November 1, 1981. \3\ For bonds that entered 
extensions, see paragraphs (c)(1)(ii) through (c)(1)(iv) of this 
section.
---------------------------------------------------------------------------

    \3\ Series E bonds issued from May 1, 1941, through October 1, 1941, 
had reached final maturity May 1, 1981, through October 1, 1981, before 
the 8.5 percent yield had become effective.
    \4,5\ [Reserved]
---------------------------------------------------------------------------

    (ii) For Series E bonds that entered extended maturity periods 
during the period of November 1, 1982, through October 1, 1986, the 
guaranteed minimum yield was or is 7.5 percent per annum, compounded 
semiannually, for such periods, including bonds that entered into an 
extended maturity period, as shown below:

------------------------------------------------------------------------
                                                      Entered on 1st day
    Issue dates--1st day of--          Extension             of--
------------------------------------------------------------------------
Mar. 1953-Nov. 1957..............  3rd.............  Nov. 1982-Oct.
                                                      1986.
Feb. 1965-Dec. 1970..............  2nd.............  Nov. 1982-Oct.
                                                      1986.
Nov. 1977-June 1980..............  1st.............  Nov. 1982-June
                                                      1985.
------------------------------------------------------------------------

    (iii) For Series E bonds that entered into extended maturity periods 
during the period of November 1, 1986, through February 1, 1993, the 
guaranteed minimum yield was or is 6 percent per annum, compounded 
semiannually, for such periods, including bonds that entered into an 
extended maturity period, as shown below:

------------------------------------------------------------------------
                                                      Entered on 1st day
    Issue dates--1st day of--       Extension \4\            of--
------------------------------------------------------------------------
May 1952-Aug. 1953..............  4th (final) \5\..  Jan. 1992-Apr.
                                                      1993.
Dec. 1957-May 1965..............  3rd..............  Nov. 1986-Feb.
                                                      1993.
Dec. 1965-Feb. 1966.............  3rd (final)......  Dec. 1992-Feb.
                                                      1993.
Jan. 1971-Feb. 1978.............  2nd..............  Nov. 1986-Feb.
                                                      1993.
------------------------------------------------------------------------
\4\ Interest for interest accrual periods of less than 6 months is
  prorated.
\5\ All Series E bonds issued between May 1, 1941 and April 1, 1953,
  have matured and are no longer earning interest.

    (iv) For Series E bonds entering extended maturity periods on or 
after March 1, 1993, the guaranteed minimum yield is 4 percent per 
annum, compounded semiannually, or the guaranteed minimum investment 
yield in effect at the beginning of the period, including bonds that 
enter extended maturity periods, as shown below: \6\
---------------------------------------------------------------------------

    \6\ Series E bonds with issue dates of July 1 and August 1, 1953, 
entered a final maturity period of 4 months on March 1, and April 1, 
1993, respectively, and received a minimum investment yield of 6 percent 
per annum, compounded semiannually, for that period.
    \7\[Reserved]

------------------------------------------------------------------------
                                                      Entered on 1st day
    Issue dates--1st day of--        Extension \7\           of--
------------------------------------------------------------------------
Sep. 1953-May 1965..............  4th (final).......  May 1993-Feb.
                                                       2003.
Jun. 1965-Nov. 1965.............  3rd...............  Mar. 1993-Aug.
                                                       1993.
Jun. 1965-Nov. 1965.............  4th (final).......  Mar. 2003-Aug.
                                                       2003.
Mar. 1966-Feb. 1978.............  3rd (final).......  Mar. 1993-Feb.
                                                       2003.
Mar. 1978-Jun. 1980.............  2nd...............  Mar. 1993-Jun.
                                                       1995
Mar. 1978-Jun. 1980.............  3rd (final).......  Mar. 2003-Jun.
                                                       2005.
------------------------------------------------------------------------
\7\ See footnote 2 above.

    (2) Eleven-year bonus. If a bond bearing an issue date of January 1, 
1951, or thereafter, was held for the 11-year period from the first 
semianual interest accrual period that began on or after January 1, 
1980, its guaranteed minimum investment yield for such period was 
increased by one-half of one percent per annum, compounded semiannually.
    (d) Market-based variable investment yield. In order to be eligible 
for the market-based variable investment yield, Series E savings bonds 
had to be held at least five years beginning with the first semiannual 
interest accrual date occurring on or after November 1, 1982. The 
market-based variable investment yield shall be determined by the 
Secretary of the Treasury as follows:

[[Page 217]]

    (1) For each 6-month period, starting with the period beginning May 
1, 1982, the average market yield on outstanding marketable Treasury 
securities with a remaining term to maturity of approximately 5 years 
during such period is determined. Such determination by the Secretary of 
the Treasury or his or her delegate shall be final and conclusive.
    (2) For bonds which entered an extended maturity period prior to May 
1, 1989, the market-based variable investment yield from the first 
semiannual interest accrual date occurring on or after November 1, 1982 
to each semiannual interest accrual date occurring on or after November 
1, 1987, will be 85 percent, rounded to the nearest one-fourth of one 
percent, of the arithmetic average of the market yield averages, as 
determined in accordance with paragraph (d)(1) of this section, for the 
appropriate number of 6-month periods involved, starting with the period 
beginning May 1, 1982.
    (3) For bonds which entered an extended maturity period on or after 
May 1, 1989, the market-based variable investment yield from the first 
semiannual interest accrual date occurring on or after November 1, 1982 
to each semiannual interest accrual date occurring on or after November 
1, 1989, will be 85 pecent, rounded to the nearest one-hundredth of one 
percent, of the arithmetic average of the market yield averages, as 
determined in accordance with paragraph (d)(1) of this section, for the 
appropriate number of 6-month periods involved, starting with the period 
beginning May 1, 1982.
    (e) Determination of redemption values during any extended maturity 
period. The redemption value of a bond on a given interest accrual date 
during any extended maturity period will be the higher of the value 
produced by using the applicable guaranteed minimum investment yield or 
the value produced by using the appropriate market-based variable 
investment yield. The calculation of these values is described below:
    (1) Guaranteed minimum investment yield and resulting values during 
an extended maturity period. A bond has a guaranteed minimum investment 
yield for each of its extended maturity periods. The applicable 
guaranteed minimum investment yields for the current extended maturity 
period and any subsequent periods are specified in paragraph (c) of this 
section. In order to determine the value of a bond during an extended 
maturity period, the value of the bond either at the end of the next 
preceding maturity period or when the guaranteed minimum investment 
yield last increased,\8\ whichever occurs later, is determined using the 
applicable guaranteed minimum investment yield. This value is then used 
as the base upon which interest accrues during the extended maturity 
period at the guaranteed minimum investment yield in effect for savings 
bonds at the beginning of that period. The resulting semiannual values 
are then compared with the corresponding values determined by using the 
applicable market-based variable investment yields.
---------------------------------------------------------------------------

    \8\ The 11-year bonus was the last increase in the guaranteed 
minimum investment yield (see paragraph (b)(2)). Series E bonds which 
were eligible to receive this bonus received it on the first semiannual 
interest accrual date occuring on or after January 1, 1991.
---------------------------------------------------------------------------

    (2) Market-based variable investment yield and resulting values 
during an extended maturity period. The market-based variable investment 
yield from the first semiannual interest accrual date occuring on or 
after November 1, 1982 to each semiannual interest accrual date 
occurring on or after November 1, 1987, is determined as specified in 
paragraph (d) of this section. The value of a bond on its first 
seimannual interest accrual date occurring on or after November 1, 1982 
is used as the base upon which interest accrues during an extended 
maturity period at the applicable market-based variable investment 
yield. If redeemed, the bond will receive the higher of the two values 
produced by using the applicable guaranteed minimum investment yield and 
the applicable market-based variable investment yield.
    (f) Market-based variable investment yields and tables of redemption 
values. The market-based variable investment yields for bonds redeemed 
during each 6-month period, beginning on May 1 and November 1 of each 
year, are made available prior to each of those dates

[[Page 218]]

by the Bureau of the Public Debt, Parkersburg, West Virginia 26106-1328, 
accompanied by tables of the redemption values of bonds for the 
following 6 months, based on either the applicable market-based variable 
investment yields or guaranteed minimum investment yields.

[57 FR 14276, Apr. 17, 1992, as amended at 58 FR 60936, 60937, Nov. 18, 
1993]



Sec. 316.9  Taxation.

    (a) General. For the purpose of determining taxes and tax 
exemptions, the increment in value represented by the difference between 
the price paid for Series E bonds and the redemption value received 
therefor constitutes interest. Such interest is subject to all taxes 
imposed under the Internal Revenue Code of 1986, as amended. The bonds 
are subject to estate, inheritance, gift, or other excise taxes, whether 
Federal or State, but are exempt from all other taxation now or 
hereafter imposed on the principal or interest thereof by any State, or 
any of the possesions of the United States, or by any local taxing 
authority.
    (b) Federal income tax on bonds. An owner of Series E bonds who is a 
cash-basis taxpayer may use either of the following two methods of 
reporting the increase in the redemption value of the bonds for Federal 
income tax purposes:
    (1) Defer reporting the increase to the year of final maturity, 
actual redemption, or other disposition, whichever is earlier; or
    (2) Elect to report the increases each year as they accrue, in which 
case the election applies to all Series E bonds then owned and those 
subsequently acquired, as well as to any other similar obligations 
purchased on a discount basis. If the method in paragraph (b)(1) of this 
section is used, the taxpayer may change to the method in paragraph 
(b)(2) of this section without obtaining permission from the Internal 
Revenue Service. However, once the election to use the method in 
paragraph (b)(2) of this section is made, the taxpayer may not change 
the method of reporting without permission from the Internal Revenue 
Service. For further information on Federal income taxes, the Service 
Center Director, or District Director, Internal Revenue Service, of the 
taxpayer's district may be contacted.



Sec. 316.10  Payment or redemption.

    (a) General. A Series E bond may be redeemed in accordance with its 
terms at the appropriate redemption value shown in the applicable table 
described in paragraph (f) of Sec. 316.8. The redemption values of 
bonds in the denomination of $100,000 are not shown in the tables. 
However, the redemption value of a bond in that denomination will be 
equal to ten times the redemption value of a $10,000 bond of the same 
issue date. A bond in a denomination higher that $25 (face amount) may 
be redeemed in part but only in the amount of an authorized denomination 
or multiple thereof.
    (b) Federal Reserve Banks and Branches and United States Treasury. 
Owners of Series E bonds may obtain payment upon presentation and 
surrender of the bonds to a Federal Reserve Bank or Branch referred to 
in Sec. 316.12 or to the Department of the Treasury with the request 
for payment on the bonds duly executed and certified in accordance with 
the governing regulations.
    (c) Incorporated banks, savings and loan associations and other 
financial institutions. (1) A financial institution qualified as a 
paying agent under the provisions of 31 CFR part 321, also published as 
Department of the Treasury Circular, Public Debt Series No. 750, as 
revised, will pay the current redemption value of a Series E bond 
presented for payment by an individual whose name is inscribed on the 
bond as owner or coowner, provided:
    (i) The bond is in order for payment; and
    (ii) The presenter establishes his or her identity to the 
satisfaction of the agent, in accordance with Treasury instructions and 
identification guidelines, and signs and completes the requests for 
payment.
    (2) A paying agent may (but is not required to) pay a Series E bond, 
at current redemption value, upon the request of a legal representative 
designated in the bond's registration by name and capacity, a court-
appointed

[[Page 219]]

legal representative of the last-deceased registrant's estate, or a 
beneficiary, if he or she survives the owner, provided:
    (i) The bond is in order for payment; and
    (ii) The presenter establishes his or her identity to the 
satisfaction of the agent, in accordance with Treasury instructions, 
indentification guidelines, and otherwise complies with evidentiary 
requirements.

[57 FR 14276, Apr. 17, 1992, as amended at 59 FR 10535, Mar. 4, 1994]



Sec. 316.11  Reservation as to issue of bonds.

    The Secretary of the Treasury reserved the right to reject any 
application for purchase of Series E bonds, in whole or in part, and to 
refuse to issue, or permit to be issued hereunder, any such bonds in any 
case or any class or classes of cases if such action was deemed to be in 
the public interest. Any action in any such respect was final.



Sec. 316.12  Fiscal agents.

    (a) Federal Reserve Banks and Branches referred to below, as fiscal 
agents of the United States, are authorized to perform such services as 
may be requested of them by the Secretary of the Treasury in connection 
with the redemption and payment of Series E bonds.
    (b)(1) The following Federal Reserve Offices have been designated to 
provide savings bond services:

------------------------------------------------------------------------
                                     Reserve districts   Geographic area
          Servicing office                 served            served
------------------------------------------------------------------------
Federal Reserve Bank, Buffalo        New York, Boston.  CT, MA, ME, NH,
 Branch, P.O. Box 961, Buffalo, NY                       NJ (northern
 14240.                                                  half), NY (City
                                                         & State), RI,
                                                         VT, Puerto Rico
                                                         and Virgin
                                                         Islands.
Federal Reserve Bank, Pittsburgh     Cleveland,         DE, KY (eastern
 Branch, P.O. Box 867, Pittsburgh,    Philadelphia.      half), NJ
 PA 15230.                                               (southern
                                                         half), OH, PA,
                                                         WV (northern
                                                         panhandle).
Federal Reserve Bank of Richmond,    Richmond, Atlanta  AL, DC, FL, LA
 P.O. Box 27622, Richmond, VA 23261.                     (southern
                                                         half), MD, MS
                                                         (southern
                                                         half), NC, SC,
                                                         TN (eastern
                                                         half), VA, WV
                                                         (except
                                                         northern
                                                         panhandle).
Federal Reserve Bank of              Minneapolis,       IA, IL (northern
 Minneapolis, 250 Marquette Avenue,   Chicago.           half), IN
 Minneapolis, MN 55480.                                  (northern
                                                         half), MN, MT,
                                                         ND, SD, WI.
Federal Reserve Bank of Kansas       Dallas, San        AK, AR, AZ, CA,
 City, 925 Grand Avenue, Kansas       Francisco,         CO, HI, ID, IL
 City, MO 64198.                      Kansas City, St.   (southern
                                      Louis.             half), IN
                                                         (southern
                                                         half), KS, KY
                                                         (western half),
                                                         LA (northern
                                                         half), MO, MS
                                                         (northern
                                                         half), NE, NM,
                                                         NV, OK, OR, TN
                                                         (western half),
                                                         TX, WA, WY, UT
                                                         and GU.
------------------------------------------------------------------------

    (2) Until March 1, 1996, other Federal Reserve Offices may continue 
to provide some savings bond services, such services will be phased out 
over the period prior to that date.

[59 FR 10535, Mar. 4, 1994]



Sec. 316.13  Reservation as to terms of offer.

    The Secretary of the Treasury may at any time, or from time to time, 
supplement or amend the terms of this offering of bonds, or of any 
amendments or supplements thereto.



PART 317_REGULATIONS GOVERNING AGENCIES FOR ISSUE OF UNITED STATES SAVINGS 

BONDS--Table of Contents




Sec.
317.0 Purpose and effective date.
317.1 Definitions.
317.2 Organizations authorized to act.
317.3 Procedure for qualifying and serving as issuing agent.
317.4 Issuing agents currently qualified.
317.5 Termination of qualification.
317.6 Issuance of bonds.
317.7 Obtaining and accounting for bond stock.
317.8 Remittance of sales proceeds and registration records.
317.9 Role of Federal Reserve Banks.
317.10 Reservation.

    Authority: 2 U.S.C. 901; 5 U.S.C. 301; 12 U.S.C. 391; 12 U.S.C. 
1767; 31 U.S.C. 3105.

[[Page 220]]


    Source: 54 FR 40830, Oct. 3, 1989, unless otherwise noted.



Sec. 317.0  Purpose and effective date.

    The regulations in this part govern the manner in which an 
organization may qualify and act as an agent for the sale and issue of 
Series EE and Series I United States Savings Bonds.

[63 FR 38041, July 14, 1998]



Sec. 317.1  Definitions.

    (a) Bond(s) means Series EE United States Savings Bonds and Series I 
United States Savings Bonds.
    (b) Federal Reserve Bank refers to the Federal Reserve Bank or 
Branch providing savings bond services to the district in which the 
issuing agent or the applicant organization is located. See Sec. 
317.9(a).
    (c) Issuing agent refers to an organization that has been qualified 
by a designated Federal Reserve Bank or the Commissioner of the Bureau 
of the Public Debt to sell savings bonds. An issuing agent acts as an 
agent of the purchaser in handling the remittance. The definition 
encompasses:
    (1) Each organization that accepts and processes purchase orders for 
bonds sold over-the-counter, but does not inscribe bonds, and
    (2) Each organization that is authorized to inscribe bonds sold 
over-the-counter or through payroll savings plans.
    (d) Offering circular refers to Department of the Treasury Circular, 
Public Debt Series No. 1-80, current revision, for Series EE savings 
bonds, and to Department of the Treasury Circular, Public Debt Series 
No. 1-98 for Series I savings bonds.
    (e) Organization means an entity, as described in Sec. 317.2, that 
may qualify as an issuing agent of bonds.

[63 FR 64550, Nov. 20, 1998]



Sec. 317.2  Organizations authorized to act.

    The following organizations are eligible to apply for qualification 
and to serve as savings bond issuing agents:
    (a) Banks, credit unions, trust companies and savings institutions, 
if they are chartered by or incorporated under the laws of the United 
States, any State or Territory of the United States, the District of 
Columbia, or the Commonwealth of Puerto Rico.
    (b) Agencies of the United States and State and local governments.
    (c) Employers operating payroll savings plans for the purchase of 
United States Savings Bonds, as well as organizations operating payroll 
savings plans on behalf of employers.
    (d) Other organizations specifically and individually qualified by 
the Commissioner of the Bureau of the Public Debt whenever the 
Commissioner deems such a qualification to be in the public interest. In 
selecting an issuing agent, the Commissioner may use such process that 
the Commissioner deems to be appropriate. The selected issuing agent 
will be subject to such conditions that the Commissioner deems to be 
appropriate.

[63 FR 64550, Nov. 20, 1998, as amended at 65 FR 2035, Jan. 13, 2000]



Sec. 317.3  Procedure for qualifying and serving as issuing agent.

    (a) Execution of application agreement. An organization seeking 
issuing agent qualification generally shall obtain from and file with a 
designated Federal Reserve Bank an application-agreement form. However, 
if an organization seeks qualification under Sec. 317.2(d) or because 
of its status as an organization operating a payroll savings plan on 
behalf of an employer under Sec. 317.2(c), it shall make application 
directly to the Bureau of the Public Debt for approval by the 
Commissioner of the Bureau of the Public Debt. An application-agreement 
sent directly to the Bureau of the Public Debt shall be supplemented by 
such other information as the Bureau of the Public Debt may request.
    (1) The terms of each application agreement shall include the 
provisions prescribed by section 202 of Executive Order No. 11246, 
entitled ``Equal Employment Opportunity'' (3 CFR, subchapter B, 42 
U.S.C. 2000e note).
    (2) The provisions of the Privacy Act of 1974, as amended (5 U.S.C. 
552a), and regulations issued pursuant thereto (31 CFR part 1, subpart 
C).
    (b) Certificate of qualification. Upon approval of an application-
agreement, the designated Federal Reserve Bank or the Bureau of the 
Public Debt will

[[Page 221]]

issue a certificate of qualification to the organization. Until the 
receipt of such a certificate, an organization shall not perform any act 
as an issuing agent, or advertise in any manner that it is authorized to 
so act or that it has applied for qualification as an issuing agent. 
After receipt of a certificate of qualification, an organization may 
perform the functions of an issuing agent. Under the terms of the 
application-agreement, the proceeds of the sale of bonds are at all 
times the property of the United States for which the organization shall 
be fully accountable.
    (c) Adverse action or change in qualification. An organization will 
be notified by the designated Federal Reserve Bank or the Bureau of the 
Public Debt if its application-agreement to act as issuing agent is not 
approved, or if, after issuance, its certificate of qualification is 
terminated.

[54 FR 40830, Oct. 3, 1989, as amended at 59 FR 10535, 10536, Mar. 4, 
1994; 63 FR 64550, Nov. 20, 1998]



Sec. 317.4  Issuing agents currently qualified.

    Each organization, qualified as an issuing agent under a trust 
agreement currently in effect, is authorized to continue to act in that 
capacity without requalification. By so acting, it shall be subject to 
the terms and conditions of the previously executed application-
agreement and these regulations in the same manner and to the same 
extent as though it had requalified hereunder.



Sec. 317.5  Termination of qualification.

    (a) By the United States. The Secretary of the Treasury or a 
delegate may terminate the qualification of an issuing agent at any 
time, upon due notice to the agent. If this action is taken, the agent 
will be required to make a final accounting for the balance of savings 
bond stock for which it is charged, based on the records of the 
designated Federal Reserve Bank. The agent must surrender all unissued 
bonds and remit the issue price of any remaining bonds included in its 
accountability.
    (b) At request of issuing agent. A designated Federal Reserve Bank 
will terminate the qualification of an issuing agent upon its request, 
provided the agent is in full compliance with the terms of its agreement 
and the applicable regulations and instructions, and renders a final 
accounting.

[54 FR 40830, Oct. 3, 1989, as amended at 59 FR 10536, Mar. 4, 1994]



Sec. 317.6  Issuance of bonds.

    (a) General. Each issuing agent shall comply with all regulations 
and instructions issued by the Department of the Treasury directly, or 
through the designated Federal Reserve Bank, concerning the sale, 
inscription, dating, and validation of bonds; the acceptance, 
processing, and transmittal of over-the-counter purchase orders; the 
remittance of sales proceeds; and the disposition of paper and 
electronic registration records. No issuing agent shall have authority 
to sell bonds other than as provided in the offering circular.
    (b) Fees. Each issuing agent, other than a Federal agency, will be 
paid fees. Only issuing agents are eligible to collect fees. With prior 
approval, agents that are authorized to inscribe bonds and receive fee 
payments will also be paid a bonus for presorting savings bond mailings. 
Schedules reflecting the amount of the fees and presort bonuses, and the 
basis on which they are computed and paid, will be published separately 
in the Federal Register.
    (c) No charge to customers. Any issuing agent that accepts fees from 
the Department of the Treasury for selling savings bonds, and/or 
accepting over-the-counter purchase orders, shall not make any charge to 
customers for the same service.

[54 FR 40830, Oct. 3, 1989, as amended at 55 FR 39960, Oct. 1, 1990; 58 
FR 63529, Dec. 2, 1993; 59 FR 10536, Mar. 4, 1994; 63 FR 64550, Nov. 20, 
1998]



Sec. 317.7  Obtaining and accounting for bond stock.

    An issuing agent that is authorized to inscribe bonds sold over-the-
counter or through payroll savings plans may obtain bond stock from the 
designated Federal Reserve Bank. The bond stock is, at all times, the 
property of the United States. The organization shall be fully 
accountable for the bond stock

[[Page 222]]

consigned to it in accordance with all regulations and instructions 
issued by the Department of the Treasury.

[54 FR 40830, Oct. 3, 1989, as amended at 59 FR 10536, Mar. 4, 1994]



Sec. 317.8  Remittance of sales proceeds and registration records.

    An issuing agent shall account for and remit bond sales proceeds and 
registration records promptly in accordance with regulations and 
instructions issued by the Department of the Treasury, either directly 
or through the designated Federal Reserve Banks. Failure to comply with 
these instructions may subject an agent to penalties, including 
termination of its qualification as an issuing agent.

 Appendix to Sec. 317.8--Remittance of Sales Proceeds and Registration 
 Records, Department of the Treasury Circular, Public Debt Series No. 4-
  67, Third Revision (31 CFR Part 317), Fiscal Service, Bureau of the 
                               Public Debt

                     Subpart A--General Information

    1. Purpose. This appendix is issued for the guidance of 
organizations qualified as issuing agents of Series EE and I United 
States Savings Bonds under the provisions of Department of the Treasury 
Circular, Public Debt Series No. 4-67, current revision. Its purpose is 
to supplement the provisions of Sec. 317.8 of the Circular relating to 
the remittance of savings bond sales proceeds and registration records, 
including the interest charge to be collected for late remittances.
    2. Definition of terms. As used in this appendix:
    (a) Issue Date is the date as of which a bond begins to earn 
interest. It is the date entered by the issuing agent in the upper right 
corner of the bond.
    (b) Validation Date is the date as of which a bond is actually 
inscribed for issue. It is entered by the issuing agent immediately 
below the ``Issue Date'' in the area marked ``Issuing Agent's Dating 
Stamp''.
    (c) Over-the-counter sale means any sale of savings bonds other than 
payroll sales.
    (d) Payroll sale includes all issues of savings bonds paid for with 
deductions withheld from the pay of employees of organizations which 
maintain (i) payroll savings plans or (ii) thrift, savings, vacation, or 
similar plans.
    (e) Issuing agent, as provided in Sec. 317.1(c) of the Circular, 
refers to an organization that has been qualified by a designated 
Federal Reserve Bank or the Commissioner of the Bureau of the Public 
Debt to sell savings bonds.
    (f) Immediately available funds are remittances of funds which are 
available for the use by the Department of the Treasury immediately upon 
receipt by the Department or its fiscal agents, and include, but are not 
limited to:
    (1) A change to the remitter's (or a correspondent depository 
institution's) reserve account with a Federal Reserve Bank;
    (2) A Federal funds check;
    (3) A United States Government check; or
    (4) A postal money order.
    (g) Financial institutions refers to banks, trust companies, credit 
unions, and savings institutions chartered by or incorporated under the 
laws of the United States, or those of any State or Territory of the 
United States, the District of Columbia, or the Commonwealth of Puerto 
Rico.
    (h) Nonfinancial institutions refers to any issuing agent not 
described under paragraph (g) of this appendix.
    3. Determination of issue date. The obligation of the United States 
to pay interest on a savings bond is determined by its issue date. That 
date is the first day of the month in which a qualified issuing agent 
receives or accumulates the full purchase price of the bond. In the case 
of a bond purchased under a payroll savings plan operated by an 
organization which is not an issuing agent, the issue date should be 
fixed as of the month in which the organization accumulates the full 
purchase price of the bond. Such funds must, however, be remitted to the 
issuing agent in time to permit such dating.
    4. Forms of remittance. Issuing agents shall remit sales proceeds in 
timely fashion as follows:
    (a) Issuing agents which are financial institutions must remit in 
immediately available funds.
    (b) Issuing agents which are nonfinancial institutions should remit 
in immediately available funds.
    (c) The Commissioner of the Public Debt, as designee of the 
Secretary of the Treasury, may waive or modify this provision. The 
Commissioner may do so in any particular case or class of cases for the 
convenience of the United States or in order to relieve any agent or 
agents of unusual hardship:
    (1) If such action would not be inconsistent with law or equity,
    (2) If it does not impair any existing rights, and
    (3) If the Commissioner is satisfied that such action would not 
subject the United States to any substantial expense or liability.
    5. Remittance date. Sales proceeds should be remitted on the date 
shown on the transmittal document, i.e., PD F 3252-OC or PD F 5255-RDS 
for over-the-counter sales or PD F 4848 for payroll sales. If there is a 
significant time difference between the date on the transmittal document 
and the date of receipt

[[Page 223]]

in the designated Federal Reserve Bank, the transmittal date may be 
determined, for purposes of this appendix, by the postmark, if the 
remittance is mailed, or the receipt date, if the remittance is 
forwarded by courier, messenger, or similar means.

                    Subpart B--Over-the-Counter Sales

    1. Regional Delivery (RDS) participants. An agent participating in 
the Regional Delivery System (RDS) is authorized to sell bonds over-the-
counter. It will accept and review customer purchase orders, but it will 
not inscribe the bonds. Purchase order information will be forwarded to 
a designated Federal Reserve Bank for inscription of the bonds. An 
authorized RDS participant shall remit sales proceeds and purchase 
orders (on paper or in an electronically processible format) to a 
designated Federal Reserve Bank within five (5) business days of receipt 
from the customer.
    2. Issues-on-Tape Program participants. An agent that has been 
authorized by the Bureau of the Public Debt to inscribe bonds sold over-
the-counter and report such sales on magnetic tape shall remit sales 
proceeds and electronic issue records no less often than once a week on 
a schedule established by the designated Federal Reserve Bank.

             Subpart C--Remittance of Payroll Sales Proceeds

    1. Application of requirements. The remittance requirements for 
payroll sales apply only to issuing agents. An employer that maintains a 
payroll savings plan but does not issue bonds shall be notified by the 
servicing issuing agent that it must remit sales proceeds to the issuing 
agent in sufficient time to permit compliance with the requirements.
    2. Remittance of payroll sales deductions. Issuing agents shall 
remit sales proceeds throughout the month shown in the issue date as 
soon as the full amount of the purchase price of the bonds has been 
received or accumulated. In no case should such proceeds be remitted 
later than the second business day of the month following the month 
shown in the issue date. The issuing agent shall ensure that its system 
properly accounts for and recognizes when the full purchase price has 
been received, or has been accumulated, so that timely remittance can be 
made. The issuing agent shall transmit registration records in an 
electronically processible format within thirty (30) days following the 
month shown on the issue date.

                 Subpart D--Interest on Late Remittances

    1. Rate of interest. Interest will be assessed for each day's delay 
in the remittance of sales proceeds, based on the actual date of 
remittance. The rate of interest to be used will be the current value of 
funds to the Department of the Treasury, as set forth each quarter in 
the Treasury Financial Manual. The rate applied will be that in effect 
during the entire period in which the remittance is late. The interest 
assessment will be collected by the designated Federal Reserve Bank.
    2. Waiver. Interest will be waived in the situations described below 
as well as in any specific case where, in the judgment of the 
Commissioner of the Public Debt, the circumstances warrant such action. 
The Commissioner's decision on any waiver action shall be final.
    (a) Bonds inscribed by issuing agent--(i) Payroll sales. If, during 
any three (3) month period, the interest assessed on an issuing agent's 
late remittance of proceeds from payroll savings plan sales or thrift, 
savings, vacation, or similar plan sales accumulates to less than $50 
for each type of sales, the interest assessed for the first month will 
be waived. The interest assessed for each type of sales for the 
remaining two (2) months will then be carried forward to the next period 
of three (3) consecutive months.
    (ii) Over-the-counter issues. The interest assessed on an agent's 
late remittance of over-the-counter sales proceeds transmitted during a 
given month will be waived if it is less than $50.
    (b) Bonds inscribed by the designated Federal Reserve Bank. The 
interest assessed on late remittance of all sales proceeds transmitted 
during a given month will be waived if it is less than $25.
    (c) Suspension of waiver. The Commissioner may suspend the 
application of the waiver in the case of any agent that consistently 
fails to meet the remittance requirements.

[54 FR 40830, Oct. 3, 1989, as amended at 59 FR 10536, Mar. 4, 1994; 63 
FR 38041, July 14, 1998; 63 FR 64550, Nov. 20, 1998]



Sec. 317.9  Role of Federal Reserve Banks.

    (a) Role as fiscal agents. In their capacity as fiscal agents of the 
United States, the Federal Reserve Banks referred to below are 
authorized to perform such duties, including the issuance of 
instructions and forms, as may be necessary to fulfill the purposes and 
requirements of these regulations.
    (b) The following Federal Reserve Offices have been designated to 
provide savings bond services:

[[Page 224]]



------------------------------------------------------------------------
                                     Reserve districts   Geographic area
          Servicing office                 served            served
------------------------------------------------------------------------
Federal Reserve Bank, Buffalo        New York, Boston.  CT, MA, ME, NH,
 Branch, P.O. Box 961, Buffalo, NY                       NJ (northern
 14240.                                                  half), NY (City
                                                         & State), RI,
                                                         VT, Puerto Rico
                                                         and Virgin
                                                         Islands.
Federal Reserve Bank, Pittsburgh     Cleveland,         DE, KY (eastern
 Branch, P.O. Box 867, Pittsburgh,    Philadelphia.      half), NJ
 PA 15230.                                               (southern
                                                         half), OH, PA,
                                                         WV (northern
                                                         panhandle).
Federal Reserve Bank of Richmond,    Richmond, Atlanta  AL, DC, FL, LA
 P.O. Box 27622, Richmond, VA 23261.                     (southern
                                                         half), MD, MS
                                                         (southern
                                                         half), NC, SC,
                                                         TN (eastern
                                                         half), VA, WV,
                                                         (except
                                                         northern
                                                         panhandle).
Federal Reserve Bank of              Minneapolis,       IA, IL (northern
 Minneapolis, 90 Hennepin Avenue,     Chicago.           half), IN
 Minneapolis MN 55401.                                   (northern
                                                         half), MI, MN,
                                                         MT, ND, SD, WI.
Federal Reserve Bank of Kansas       Dallas, San        AK, AR, AZ, CA,
 City, 925 Grand Avenue, Kansas       Francisco,         CO, HI, ID, IL
 City, MO 64198.                      Kansas City, St.   (southern
                                      Louis.             half), IN
                                                         (southern
                                                         half), KS, KY
                                                         (western half),
                                                         LA (northern
                                                         half), MO, MS
                                                         (northern
                                                         half), NE, NM,
                                                         NV, OK, OR, TN
                                                         (western half),
                                                         TX, WA, WY, UT
                                                         and GU.
------------------------------------------------------------------------

    (c) Specific activities of designated Federal Reserve Banks. The 
specific activities of designated Federal Reserve Banks include:
    (1) Qualifying issuing agents;
    (2) Supplying agents with bond stock, maintaining records of agent 
accountability, and monitoring compliance with stock consignment rules;
    (3) Instructing agents regarding the sale and issue of bonds, the 
custody and control of bond stock, and the accounting for and remittance 
of sales proceeds; and
    (4) Providing guidelines covering the amount of bond stock agents 
may ordinarily requisition and maintain.

[54 FR 40830, Oct. 3, 1989, as amended at 59 FR 10536, Mar. 4, 1994; 63 
FR 38041, July 14, 1998]



Sec. 317.10  Reservation.

    The Secretary of the Treasury may at any time, or from time to time, 
supplement or amend the terms of these regulations.



PART 321_PAYMENTS BY BANKS AND OTHER FINANCIAL INSTITUTIONS OF UNITED STATES 

SAVINGS BONDS AND UNITED STATES SAVINGS NOTES (FREEDOM SHARES)--Table of 

Contents




                      Subpart A_General Information

Sec.
321.0 Purpose.
321.1 Definitions.

                 Subpart B_Procedures for Qualification

321.2 Eligible organizations.
321.3 Procedure for qualifying and serving as paying agent.
321.4 Paying agents previously qualified.
321.5 Termination of qualification.

                      Subpart C_Scope of Authority

321.6 General.
321.7 Authorized cash payments.
321.8 Redemption-exchange of Series E and EE savings bonds and savings 
          notes.
321.9 Specific limitations on payment authority.
321.10 Responsibilities of paying agents.

             Subpart D_Payment and Transmittal of Securities

321.11 Payment.
321.12 Redemption value of securities.
321.13 Cancellation of redeemed securities.
321.14 Transmittal to and settlement by Federal Reserve Bank.

           Subpart E_Losses Resulting From Erroneous Payments

321.15 Liability for losses.
321.16 Report of erroneous payment.
321.17 Investigation of potential loss.
321.18 Determination of loss.
321.19 Certification of signatures.
321.20 Applicability of provisions.
321.21 Replacement and recovery of losses.

                       Subpart F_Forwarding Items

321.22 Forwarding securities not payable by an agent.

                   Subpart G_Miscellaneous Provisions

321.23 Paying agent fees and charges.
321.24 Claims on account of lost securities.
321.25 Role of Federal Reserve Banks.
321.26 Preservation of rights.
321.27 Supplements, amendments, or revisions.

[[Page 225]]


Appendix to Part 321--Appendix to Department of the Treasury Circular 
          No. 750, Fourth Revision

    Authority: 2 U.S.C. 901; 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 
3105, 3126.

    Source: 53 FR 37511, Sept. 26, 1988, unless otherwise noted.



                      Subpart A_General Information



Sec. 321.0  Purpose.

    These regulations govern the manner in which financial institutions 
may qualify and act as paying agents for the redemption of:
    (a) United States Savings Bonds of Series A, B, C, D, E, EE, and I, 
and United States Savings Notes (Freedom Shares), presented for cash 
payment; and
    (b) Eligible Series E and EE savings bonds and savings notes 
presented for redemption in exchange for Series HH savings bonds under 
the provisions of Department of the Treasury Circular, Public Debt 
Series No. 2-80 (31 CFR part 352).

[53 FR 37511, Sept. 26, 1988, as amended at 63 FR 38042, July 14, 1998]



Sec. 321.1  Definitions.

    (a) ACH payment or ACH means an Automated Clearing House method of 
transferring funds under the provisions of 31 CFR part 210.
    (b) Beneficiary means an individual whose name is inscribed on a 
security as the person to whom it is payable in his or her right upon 
the prior death of the other individual designated thereon as owner, 
shown commonly in the form: ``A P.O.D. [payable on death to] B.''
    (c) Cash payment means payment in currency, by check or by credit to 
a checking, savings or share account.
    (d) Central Site refers to the Federal Reserve Bank of Cleveland, 
Pittsburgh Branch, EZ CLEAR Department.
    (e) EZ CLEAR refers to the system by which financial institutions 
present redeemed securities to a Federal Reserve Bank through the 
commercial check collection system in the same manner as other cash 
items.
    (f) Federal Reserve Bank or Branch refers to the Federal Reserve 
Bank to which the agent is instructed to transmit redeemed securities; 
or to which the agent is instructed to forward securities for payment or 
other transactions, and includes parent Banks, Branches and Regional 
Check Processing Centers, as appropriate.
    (g) Legal Representative or representative means the court-appointed 
(or otherwise qualified) person, regardless of title, who is legally 
authorized to act for the estate of a minor, incompetent, aged person, 
absentee, et al., the court-appointed executor or administrator, 
regardless of title, who is legally authorized to act for a decedent's 
estate; and the trustee of a personal trust estate.
    (h) Mixed cash letter refers to a bundle containing nonsegregated 
redeemed securities, cash items, and other items submitted to a Federal 
Reserve Bank via the commercial check collection system.
    (i) Paying agent or agent means:
    (1) A financial institution that is qualified under the provisions 
of this part as originally issued, or any subsequent revision, to make 
payment of securities, and includes branches located within the United 
States, its territories and possessions, and the Commonwealth of Puerto 
Rico; and
    (2) Any banking facilities of such institutions establishing at 
military installations overseas, provided the offering of such 
redemption services has been authorized by the Department of the 
Treasury.
    (j) Presenter means the individual requesting the redemption or 
redemption-exchange of securities.
    (k) Presenting institution means the organization from which the 
Federal Reserve Bank receives redeemed securities to be processed via EZ 
CLEAR. If a paying agent submits separately sorted or mixed cash letters 
directly to the Bank, using its own ABA code, it is the presenting 
institution. If a correspondent financial institution submits cash 
letters on behalf of another institution using the correspondent's ABA 
code, the correspondent is the presenting institution.
    (l) Redemption and payment are used interchangeably for payment of a 
security in accordance with the terms of its offering and governing 
regulations, including redemption-exchange.

[[Page 226]]

    (m) Redemption-exchange means the authorized redemption of eligible 
securities for the purpose of applying the proceeds in payment for other 
securities offered in exchange by the Treasury.
    (n) Registrant means a person whose name is inscribed on a security 
as owner, coowner, or beneficiary.
    (o) Security means a United States Savings Bond of Series A, B, C, 
D, E, EE, or I and/or a United States Savings Note (Freedom Share).
    (p) Separately sorted cash letter refers to a bundle of redeemed 
securities that have been segregated from all other items prior to 
transmittal to a Federal Reserve Bank via EZ CLEAR.
    (q) Taxpayer identifying number means a social security account 
number or an employer identification number.

[53 FR 37511, Sept. 26, 1988; 53 FR 39581, Oct. 7, 1988, as amended at 
55 FR 35395, Aug. 29, 1990; 59 FR 10536, Mar. 4, 1994; 63 FR 38042, July 
14, 1998]



                 Subpart B_Procedures for Qualification



Sec. 321.2  Eligible organizations.

    (a) Organizations eligible to apply for qualification and to serve 
as paying agents are commercial banks, trust companies, savings banks, 
savings and loan associations, building and loan associations (including 
cooperative banks), credit unions, cash depositories, industrial banks, 
or similar financial institutions which:
    (1) Are incorporated under Federal law or the laws of a State, 
territory or possession of the United States, the District of Columbia, 
or the Commonwealth of Puerto Rico;
    (2) In the usual course of business accept, subject to withdrawal, 
funds for desposit or the purchase of shares;
    (3) Are under the supervision of the banking department or 
equivalent authority of the jurisdiction in which they are incorporated; 
and
    (4) Maintain regular offices for the transaction of business.
    (b)(1) An organization that desires to redeem securities must first 
qualify as a paying agent. An organization that has qualified and is 
serving as a paying agent must:
    (i) MICR-encode data on securities accepted for payment,
    (ii) Submit them directly to the Check Department of the appropriate 
Federal Reserve Bank or Branch or the Regional Check Processing Center, 
and
    (iii) Receive payment of fees by ACH, or arrange to obtain one or 
more of these services from another financial institution.
    (2) All presenting institutions, as defined in Sec. 321.1, must 
qualify as savings bond paying agents and enroll in EZ CLEAR.

[53 FR 37511, Sept. 26, 1988, as amended at 59 FR 10536, Mar. 4, 1994]



Sec. 321.3  Procedure for qualifying and serving as paying agent.

    (a) Execution of application-agreement. An eligible organization 
wishing to act as a paying agent shall obtain from, execute, and file an 
application-agreement with the appropriate Federal Reserve Office 
referred to in Sec. 321.25. The terms of each application-agreement 
shall include a reference to the following provisions to which paying 
agents are subject:
    (1) The provisions prescribed by section 202 of Executive Order 
11246, entitled ``Equal Employment Opportunity'', as amended (42 U.S.C. 
2000e note); and
    (2) The provisions of the Privacy Act of 1974, as amended (5 U.S.C. 
552a), and regulations issued pursuant thereto (31 CFR part 1, subpart 
C).

For the purpose of these regulations, eligible institutions in Puerto 
Rico and the Virgin Islands shall make application to the Federal 
Reserve Bank Branch in Buffalo, New York and eligible institutions in 
Guam shall make application to the Federal Reserve Bank of Kansas City.
    (b) Qualification. Each Federal Reserve Bank referred to in Sec. 
321.25, as fiscal agent of the United States, is authorized to qualify 
any eligible organization, located in the Reserve Bank's geographical 
area, as shown in Sec. 321.25, which possesses adequate authority under 
its charter to act as paying agent. Upon approval of an application-

[[Page 227]]

agreement, the Bank will issue a certificate of qualification to the 
organization. Such a certificate automatically qualifies the branches of 
the organization to redeem securities as provided in this part.
    (c) Announcement of authority. Upon receipt of a certificate of 
qualification from a Federal Reserve Bank referred to in Sec. 321.25, a 
financial institution may announce or advertise its authority to redeem 
eligible securities for cash and to process eligible Series E and EE 
savings bonds and savings notes presented for redemption in exchange for 
Series HH savings bonds under the provisions of Department of the 
Treasury Circular, Public Debt Series No. 2-80 (31 CFR part 352).
    (d) Adverse action. An organization will be notified by the 
appropriate Federal Reserve Bank referred to in Sec. 321.25, in 
writing, if its application-agreement to act as paying agent is not 
approved.

[53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35395, Aug. 29, 1990; 
59 FR 10537, Mar. 4, 1994; 63 FR 38042, July 14, 1998]



Sec. 321.4  Paying agents previously qualified.

    Institutions qualified as paying agents under previous revisions of 
this Part are authorized to continue to act in that capacity without 
requalification. By so acting, they shall be subject to the terms and 
conditions of their previously executed application-agreements and these 
regulations in the same manner and to the same extent as though they had 
requalified hereunder.



Sec. 321.5  Termination of qualification.

    (a) By the Treasury. The Secretary of the Treasury, or a designee, 
may authorize a Federal Reserve Bank referred to in Sec. 321.25 to 
terminate the qualification of any paying agent at any time, following 
prior written notice of such action to the agent.
    (b) At request of paying agent. A Federal Reserve Bank referred to 
in Sec. 321.25 will terminate the qualification of a paying agent upon 
its written request, provided the agent renders a final accounting for 
all redeemed securities and is found to have fully complied with the 
terms of its agreement and the applicable regulations and instructions.
    (c) Reservation. Termination of the qualification as paying agent of 
any institution shall not prejudice the right of the Treasury to recover 
the amounts of any erroneous payment(s) made by the institution.

[53 FR 37511, Sept. 26, 1988, as amended at 59 FR 10537, Mar. 4, 1994]



                      Subpart C_Scope of Authority



Sec. 321.6  General.

    Securities are issued only in registered form (subject to 31 CFR 
359.11), are not transferable, may not be hypothecated or used as 
collateral for a loan, and, except as otherwise specifically provided in 
the governing regulations and this part, are payable to the owner or 
coowner named on the security. The regulations governing Series EE and 
HH bonds are contained in Department of the Treasury Circular, Public 
Debt Series No. 3-80, current revision (31 CFR part 353); those 
governing Series I bonds are contained in Department of the Treasury 
Circular, Public Debt Series No. 2-98 (31 CFR part 360); and, those 
governing all other series of U.S. savings securities are contained in 
Department of the Treasury Circular No. 530, current revision (31 CFR 
part 315).

[63 FR 38042, July 14, 1998]



Sec. 321.7  Authorized cash payments.

    (a) General. Subject to the terms and conditions appearing on the 
securities, the governing regulations, and the provisions of this part, 
and any instructions issued in connection therewith, an agent may make 
payment of savings bonds of Series A, B, C, D, E, EE, and I, and savings 
notes, presented for cash redemption. Except as provided in paragraphs 
(b) through (d), and (f) of this section, the securities must be 
presented by an individual whose name is inscribed on the securities as 
owner or coowner, and who is known to the agent, or who can establish 
his or her identity in accordance with Treasury instructions and 
guidelines (See Sec. 321.11(b)).
    (b) Change of name by marriage. If the name of the presenter has 
been

[[Page 228]]

changed by marriage from that shown on the security, and the agent knows 
or establishes that the presenter and the person whose name appears on 
the security are one and the same individual, the agent may pay the 
security in accordance with paragraph (a) of this section. The signature 
to the request for payment should show both names, e.g., ``Mary J. 
Smith, changed by marriage from Mary T. Jones.''
    (c) Parent of a minor. Payment of a security bearing the name of a 
minor child, who is not of sufficient competency and understanding to 
sign the request for payment and comprehend the nature of the act, may 
be made to either parent with whom the minor resides or to whom custody 
has been granted, provided the form of registration does not indicate 
that a guardian or similar representative of the estate of the minor has 
been appointed or is otherwise legally qualified. Payment under this 
subsection may not be made to any person other than a parent. The parent 
requesting payment must sign the request for payment in the form, e.g., 
``John A. Jones, on behalf of John C. Jones.'' The following endorsement 
must be typed or imprinted on the back of the security:

    I certify that I am the (father or mother) of John C. Jones and the 
person (with whom he resides) (to whom custody has been granted). He is 
---- years of age and is not of sufficient competency and understanding 
to sign the request.

    (d) Payment to beneficiary. An agent may redeem a security 
registered ``A P.O.D. [payable on death to] B'' for cash at the request 
of the surviving beneficiary following the owner's death. A copy of the 
owner's death certificate, certified under seal of the State or local 
registrar, must be furnished to support the request for payment.
    (e) Payment to a legal representative designated on a security by 
name and title. An agent may redeem a security registered in the name 
and title of a legal representative as defined in Sec. 321.1(f), if the 
legal representative is known to the agent, or can establish identity in 
accordance with Treasury instructions and guidelines. The request for 
payment on the back of each security must be signed by the legal 
representative designated by name and title in the registration on the 
front of the security, or by a person authorized or empowered to act for 
a corporate legal representative so designated. The full title of the 
legal representative should be shown adjacent to each signature and, in 
the case of a corporate legal representative, the full corporate name, 
as well as the title, i.e., vice president, trust officer, etc., should 
be shown. Examples:

    Henry C. Smith, conservator of the estate of John R. White, an 
adult, pursuant to Sec. 633.572 of the Iowa Code.
    Tenth National Bank by Arnold A. Ames, Vice President, guardian of 
the estate of Barry B. Bryan, a minor.

    (f) Payment to a legal representative of a decedent's estate not 
designated on a security. An agent may redeem a security bearing the 
names of deceased persons in the registration, if the legal 
representative of the estate of the last deceased registrant:
    (1) Presents the security;
    (2) Signs the request for payment on the back of the security, 
showing the representative's full title adjacent to the signature; and
    (3) Presents acceptable evidence of the legal representative's 
appointment and of the dates of death of all persons named in the 
security's registration, in accordance with this part and the appendix.

In the case of a corporate legal representative, the full corporate 
name, as well as the title, must be shown. Examples:

    John H. Smith and Charles N. Jones, co-executors of the will of 
Robert J. Smith, deceased.
    Tenth National Bank by John F. Green, Trust Officer, executor of the 
will of George N. Brown, deceased.

    (g) Interest reporting. A paying agent is required to report 
interest in the amount of $10 or more, paid as part of the redemption 
value of securities, to the payee and to the Internal Revenue Service, 
in accordance with 26 CFR 1.6049-4. (See Item 26 of the appendix to this 
part for information concerning

[[Page 229]]

the education feature of Series EE savings bonds issued on or after 
January 1, 1990, and of Series I savings bonds.)

[53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35395, Aug. 29, 1990; 
63 FR 38042, July 14, 1998]



Sec. 321.8  Redemption-exchange of Series E and EE savings bonds and savings notes.

    (a) General. Subject to the provisions of Circular No. 2-80 (31 CFR 
part 352), the governing regulations, and the provisions of this part 
and its appendix, an agent may make payment of eligible securities 
presented for redemption in exchange for Series HH bonds. Securities 
eligible for exchange are:
    (1) Series EE bonds bearing issue dates of January 1, 2003, or 
earlier, presented no earlier than six months from their issue dates;
    (2) Series EE bonds bearing issue dates of February 1, 2003, or 
thereafter, presented no earlier than 12 months from their issue dates; 
and
    (3) Series E bonds and savings notes presented no later than one 
year from the month in which they reached final maturity. The total 
redemption value of the securities presented for exchange must be at 
least $500.
    (b) Requirements for redemption-exchange. An agent shall not accept 
and redeem eligible securities on exchange unless:
    (1) The securities are accompanied by a completed exchange 
subscription signed by the presenter;
    (2) The presenter is the owner, the legal representative (excluding 
a representative of a decedent's estate), the surviving coowner or 
beneficiary, or the principal coowner (as defined in Sec. 352.7(e)(2) 
in 31 CFR part 352 (Circular No. 2-80)) of the securities presented for 
exchange and is to be named as owner or first-named coowner on the 
Series HH bonds; and
    (3) The request for payment on each security is signed by the 
presenter. A presenter who is a legal representative should show the 
full title adjacent to each signature and, in the case of a corporate 
legal representative, should show the full corporate name, as well as 
the title. If the name of the presenter has been changed by marriage, or 
if the presenter is named as beneficiary or legal representative on the 
securities, the agent may process the transaction in accordance with the 
provisions of Sec. 321.7 (b), (d), or (e) of this part. If the agent is 
authorized and elects to use the special endorsement procedure, set out 
in 31 CFR part 330 (Circular No. 888, current revision), the requests 
for payment do not need to be signed; however, this special endorsement 
may not be used in lieu of the presenter's signature on the exchange 
subscription.
    (c) Interest reporting. To the extent that it represents interest of 
$10 or more, a paying agent is required to report cash, refunded in an 
exchange transaction, to the presenter and to the Internal Revenue 
Service under the provisions of 26 CFR 1.6049-4.
    (d) Completion of transaction. An agent shall transmit for 
settlement via EZ CLEAR securities redeemed on exchange and, at the same 
time, forward the exchange application (PD F 3253) and any additional 
cash needed to complete the transaction, to the Fiscal Agency Department 
of the servicing Federal Reserve Bank referred to in Sec. 321.25. 
Securities redeemed on exchange may be commingled with cash redemptions 
in mixed or separately sorted cash letters.''

[53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35396, Aug. 29, 1990; 
59 FR 10537, Mar. 4, 1994; 68 FR 2666, Jan. 17, 2003; 68 FR 7427, Feb. 
14, 2003]



Sec. 321.9  Specific limitations on payment authority.

    An agent is not authorized to redeem a security for cash or on 
redemption-exchange:
    (a)(1) If it is a Series EE bond or a Series I bond issued on 
January 1, 2003, or earlier, presented for payment prior to six months 
from its issue date; or
    (2) If it is a Series EE bond or a Series I bond issued on February 
1, 2003, or thereafter, presented for payment prior to 12 months from 
its issue date.
    (b) If it is a savings bond of Series F, G, H, J, K, or HH.
    (c) If the presenter is acting under a power of attorney.
    (d) If the agent does not know or cannot establish the identity of 
the presenter as a person entitled to request payment as provided in 
Sec. 321.7.

[[Page 230]]

    (e) If the presenter does not sign his or her name in ink as it is 
inscribed on the security (except as provided in Sec. 321.7 (b) or (c) 
of this part, or appears in evidence of appointment (see Sec. 
321.7(f)), and show a home or business address.
    (f) If the taxpayer identifying number of the presenter, or the 
estate represented by the presenter, is not known to the agent and the 
presenter refuses to furnish the number.
    (g) If the security bears a material irregularity, such as an 
illegible, incomplete or unauthorized inscription, issue date, or 
issuing agent's validating data, or if any essential part of the 
security appears to have been altered or is mutilated or defaced in such 
a manner as to create doubt or arouse suspicion.
    (h) If the security is registered in the name of a corporation, 
association, partnership, or other organization in its own right.
    (i) If Treasury regulations require the submission of documentary 
evidence to support the redemption, except as provided in Sec. 321.7 
(d) or (f) of this part, as in the case of incompetents, minors under 
legal guardianship, or the change of a registrant's name other than by 
marriage.
    (j) If the presenter is a minor who, in the opinion of the agent, is 
not of sufficient competency and understanding to sign the request for 
payment and comprehend the nature of the act.
    (k) If it is known to the agent that the presenter has been legally 
declared incompetent to manage his or her affairs.
    (l) If partial redemption is requested.

[53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35396, Aug. 29, 1990; 
63 FR 38042, July 14, 1998; 68 FR 2666, Jan. 17, 2003; 68 FR 7427, Feb. 
14, 2003]



Sec. 321.10  Responsibilities of paying agents.

    (a) Payment of securities. A paying agent is required to redeem 
eligible securities during its regular business hours for any presenter, 
whether or not a customer, who can establish his or her identity as the 
owner or co-owner named on the securities, in accordance with the 
provisions of this part, and the appendix to this part, and the Treasury 
Identification Guide for Cashing United States Savings Bonds. An agent 
is encouraged, but is not required, to redeem eligible securities during 
its regular business hours for a surviving beneficiary, a legal 
representative designated in the registration of securities presented, 
or a legal representative of the last deceased registrant's estate who 
can provide acceptable evidence (see Sec. 321.7 (d) or (f)) and 
establish identity in accordance with this part.
    (b) Restrictions. A paying agent shall not advance money, make loans 
on, or discount the redemption value of securities, nor in any manner 
assist others to do so. An agent shall not pay a presenter the current 
value of a security and then defer presentation to the Treasury for the 
purpose of obtaining for its own profit an increased value.

[53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35396, Aug. 29, 1990]



             Subpart D_Payment and Transmittal of Securities



Sec. 321.11  Payment.

    (a) Examination. Before making a payment of a security, a paying 
agent shall examine the security to determine that it is eligible for 
redemption and is one the agent is authorized to pay under the 
provisions of this part.
    (b) Identification and evidence of entitlement. The agent shall 
determine that the presenter of the security is entitled to request 
payment, as provided in Sec. 321.7 of this part. Unless the presenter 
is a person whose identity is well-known to the agent or is an 
established customer, he or she should be asked to furnish satisfactory 
identification in accordance with the Treasury instructions and 
guidelines. At the time of payment, the agent should make a notation on 
the back of the security, or in its own records, specifying precisely 
what was relied on to establish the presenter's identity.
    (c) Evidence--Payment to a beneficiary. The agent shall determine 
that the presenter of the security as beneficiary is entitled to request 
payment, as provided in Sec. 321.7(d). In addition to establishing the 
presenter's identification,

[[Page 231]]

as required by paragraph (b) of this section, the agent shall require 
presentation of the owner's death certificate in accordance with this 
part and the appendix.
    (d) Evidence--Payment to a legal representative of the last deceased 
registrant's estate. The agent shall determine whether the legal 
representative is entitled to request payment, as provided in Sec. 
321.7(f). In addition to establishing the presenter's identification, as 
required by paragraph (b) of this section, the agent shall require 
evidence of appointment as well as evidence of the dates of death of all 
persons named in the registrations of the securities presented. Evidence 
of the representative's appointment must be either a court certificate 
or a copy of the letters of appointment, certified to be true and 
correct under seal of the court or clerk of court. If the original 
appointment was made more than one year prior to the presentation of the 
securities it must also bear the court clerk's statement that the 
appointment is in full force and effect. This statement must be under 
seal of the court or clerk of court and dated within six months of the 
presentation. Such evidence of appointment must pertain to the estate of 
the last deceased registrant designated on the securities. A copy of a 
death certificate, certified under seal of the State or local registrar, 
is the only acceptable evidence of the date of death.
    (e) Execution of request. (1) The agent shall require:
    (i) That the request for payment on the back of each security be 
signed by the presenter in the presence of one of its officers or 
authorized employees; and
    (ii) That the presenter's address be furnished. Fiduciaries must 
sign as provided in Sec. 321.7 (e) and (f).
    (2) If the agent is qualified under 31 CFR part 330 (Circular No. 
888, current revision) and elects to use the special endorsement 
procedure, the request for payment need not be signed. If the request 
has already been signed when the security is presented, it should be 
signed again.
    (f) Certification of request. An agent is not required to complete 
the certification to the requests for payment on securities it redeems. 
When an agent transmits redeemed securities for settlement, as indicated 
in Sec. 321.14 of this part, such agent shall be understood by such 
submission to have represented and certified that the identity of the 
presenter, and his or her entitlement to request payment, have been 
established in accordance with this part and the appendix hereto.

[53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35396, Aug. 29, 1990; 
59 FR 10537, Mar. 4, 1994]



Sec. 321.12  Redemption value of securities.

    The redemption value of each savings security is determined by the 
terms of its offering and the length of time it has been outstanding. 
The Bureau of the Public Debt determines redemption values for Series A-
E bonds, eligible Series EE and I bonds, and savings notes, that should 
be used in redeeming savings securities.

[63 FR 38042, July 14, 1998]



Sec. 321.13  Cancellation of redeemed securities.

    An agent shall cancel each redeemed security by imprinting the word 
``PAID'' on its face and entering the amount and date of the actual 
payment and the agent's name, location, and four-digit code number 
assigned by the appropriate Federal Reserve Bank. The recordation of 
this data shall constitute a certification by the agent that the 
security was redeemed in accordance with the provisions of this part, 
that the presenter's identity and entitlement to request payment were 
duly established, and that the proceeds were paid to the presenter or 
remitted to an appropriate Federal Reserve Bank in payment for Series HH 
bonds.

[53 FR 37511, Sept. 26, 1988, as amended at 59 FR 10537, Mar. 4, 1994]



Sec. 321.14  Transmittal to and settlement by Federal Reserve Bank.

    In accordance with Federal Reserve Bank instructions, a paying agent 
shall transmit with an EZ CLEAR cash letter securities redeemed for cash 
and on redemption-exchange, either directly or through a correspondent 
institution,

[[Page 232]]

to the Check Department of the appropriate Bank or Branch, or to a 
Regional Check Processing Center (RCPC). Upon receipt of the securities, 
the Bank, Branch, or RCPC will arrange for immediate settlement with the 
presenting institution. Such settlement shall be made by a credit to the 
presenting institution's Reserve or other clearing account in the total 
amount paid, as reflected on the cash letter, and shall be subject to 
adjustment via a charge or credit to that account if any discrepancy is 
subsequently discovered.

[59 FR 10537, Mar. 4, 1994]



           Subpart E_Losses Resulting From Erroneous Payments



Sec. 321.15  Liability for losses.

    Under the governing statute, as amended (31 U.S.C. 3126(a)), an 
agent cannot be relieved of liability for a loss resulting from an 
erroneous payment unless the Secretary of the Treasury can make a 
determination that the loss resulted from no fault or negligence on the 
agent's part.



Sec. 321.16  Report of erroneous payment.

    If an agent discovers an erroneous payment of securities, it should 
immediately advise the Bureau of the Public Debt, Parkersburg, WV 26106-
1328, (304) 420-6402. If the circumstances of the payment warrant such 
action, the agent should also notify the nearest office of the United 
States Secret Service.



Sec. 321.17  Investigation of potential loss.

    (a) Notice to an agent. When it determines that a loss has occurred, 
because of the erroneous payment of securities, the Bureau of the Public 
Debt will notify the agent in writing and identify the securities.
    (b) Investigative procedure. The Bureau of the Public Debt may 
request the United States Secret Service to investigate potential 
losses. Upon request, the agent shall make available to the Bureau of 
the Public Debt, or its investigative agent, all records and information 
pertaining to the transaction in question, including the disposition of 
the redemption proceeds. If the proceeds were deposited in an account 
maintained by the agent, the information made available shall include 
the ultimate disposition of the redemption proceeds from the account.



Sec. 321.18  Determination of loss.

    Upon completion of the investigation, and after consideration of the 
results, the Bureau of the Public Debt shall advise the agent through 
which the payment occurred:
    (a) That no final loss to the United States has occurred, and, 
accordingly, that the agent is relieved from liability for the payment, 
or that no claim for reimbursement shall be made unless and until a loss 
has been sustained; or
    (b) That while a final loss to the United States has occurred, the 
agent is not required to make reimbursement therefor, as the Secretary 
of the Treasury, or his designee, has determined that such loss resulted 
from no fault or negligence on the part of such agent; or
    (c) That a final loss to the United States has occurred, and that, 
the Secretary of the Treasury, or his designee, has been unable to make 
an affirmative finding that such loss resulted from no fault or 
negligence on the part of such agent, reimbursement must be made 
promptly, except where credit for the payment had not previously been 
extended.



Sec. 321.19  Certification of signatures.

    The regulations in this subpart shall, to the extent appropriate, 
apply to losses resulting from payments made in reliance on 
certifications of signatures by an officer or designated employee of any 
financial institution authorized to certify requests for payment.



Sec. 321.20  Applicability of provisions.

    The provisions of this subpart shall apply to securities redeemed by 
any Federal Reserve Bank referred to in Sec. 321.25, as fiscal agent, 
or any Treasury office authorized to redeem securities, as well as to 
paying agents.

[53 FR 37511, Sept. 26, 1988, as amended at 59 FR 10537, Mar. 4, 1994]

[[Page 233]]



Sec. 321.21  Replacement and recovery of losses.

    (a) If a final loss results from the redemption of a security, and 
the paying agent redeeming the security is not relieved of liability for 
such loss under 31 U.S.C. 3126(a), the Bureau of the Public Debt will 
demand that the paying agent promptly reimburse the United States in the 
amount of the final loss and will take such other action as may be 
necessary to collect such amount as set out in the procedure described 
in Paragraph 21 of the appendix to this part.
    (b) If a final loss has resulted from the redemption of a security, 
and no reimbursement has been or will be made, the loss shall be subject 
to replacement out of the fund established by the Government Losses in 
Shipment Act, as amended.

[61 FR 37197, July 16, 1996]



                       Subpart F_Forwarding Items



Sec. 321.22  Forwarding securities not payable by an agent.

    Any securities an agent is not authorized to pay under the 
provisions of this part should be forwarded for redemption to the Fiscal 
Agency Department of a Federal Reserve Bank referred to in Sec. 321.25. 
The requests for payment on the securities should be properly certified. 
Any documentary evidence required to support the redemption should 
accompany the securities. If the securities are presented for 
redemption-exchange, they must also be accompanied by a completed and 
signed exchange subscription and any additional cash needed to complete 
the transaction. Unpaid securities so forwarded must not be commingled 
with redeemed securities transmitted for settlement.

[53 FR 37511, Sept. 26, 1988, as amended at 59 FR 10537, Mar. 4, 1994]



                   Subpart G_Miscellaneous Provisions



Sec. 321.23  Paying agent fees and charges.

    (a) Fees. Fees shall be paid as outlined in this section. A schedule 
setting out the fees, and the basis on which they are computed and paid, 
is separately published in the Federal Register. Current information is 
available from a Federal Reserve Bank referred to in Sec. 321.25.
    (1) Securities transmitted via EZ CLEAR. A fee will be paid for each 
security redeemed during a calendar month and transmitted via EZ CLEAR 
to a Federal Reserve Bank in separately sorted cash letters. Payment 
will be made to the presenting institution by ACH. No fees will be paid 
for redeemed securities received by a Bank in mixed cash letters.
    (2) To comply with the provisions of the Balanced Budget and 
Emergency Deficit Control Act of 1985, as amended (2 U.S.C. 901, et 
seq.), or the legislative resolution resulting therefrom, the Secretary 
may authorize, upon notice in the Federal Register, the discontinuance, 
reduction or delay of fee payments. Fee payments so affected may 
subsequently be paid in accordance with the schedule of fees as 
hereafter published, subject to the availability of funds therefor, and 
to the extent permitted by law. Fee payments for servicing occurring 
after notice of the resumption of such payments has been published in 
the Federal Register will be made in accordance with the schedule of 
fees published in such notice.
    (b) Charges to presenters. A paying agent shall not make any charge 
whatever to persons entitled to request payment of securities, for 
redeeming them under the provisions of this part.

[53 FR 37511, Sept. 26, 1988; 53 FR 39581, Oct. 7, 1988, as amended at 
55 FR 39960, Oct. 1, 1990; 59 FR 10537, Mar. 4, 1994]



Sec. 321.24  Claims on account of lost securities.

    If a security redeemed by an agent is lost, stolen or destroyed 
while in its custody or in transit prior to settlement, the agent's 
claim for reimbursement of the missing security's redemption value on 
the original payment date will be considered, provided the security can 
be identified by serial number.

[[Page 234]]



Sec. 321.25  Role of Federal Reserve Banks.

    (a) The Federal Reserve Banks referred to below, as fiscal agents of 
the United States, shall perform such services in connection with this 
part as may be requested by the Secretary of the Treasury, or his 
designee. The Banks are authorized and directed to perform such duties, 
including the issuance of instructions and forms, as may be necessary to 
fulfill the purposes and requirements of these regulations.
    (b) The following Federal Reserve Offices have been designated to 
provide savings bond services:

------------------------------------------------------------------------
                                     Reserve districts   Geographic area
          Servicing office                 served            served
------------------------------------------------------------------------
Federal Reserve Bank, Buffalo        New York, Boston.  CT, MA, ME, NH,
 Branch, P.O. Box 961, Buffalo, NY                       NJ (northern
 14240.                                                  half), NY (City
                                                         & State), RI,
                                                         VT, Puerto Rico
                                                         and Virgin
                                                         Islands.
Federal Reserve Bank, Pittsburgh     Cleveland,         DE, KY (eastern
 Branch, P.O. Box 867, Pittsburgh,    Philadelphia.      half), NJ
 PA 15230.                                               (southern
                                                         half), OH, PA,
                                                         WV (northern
                                                         panhandle).
Federal Reserve Bank of Richmond,    Richmond, Atlanta  AL, DC, FL, LA
 P.O. Box 27622, Richmond, VA 23261.                     (southern
                                                         half), MD, MS
                                                         (southern
                                                         half), NC, SC,
                                                         TN (eastern
                                                         half), VA, WV
                                                         (except
                                                         northern
                                                         panhandle).
Federal Reserve Bank of              Minneapolis,       IA, IL (northern
 Minneapolis, 90 Hennepin Avenue,     Chicago.           half), IN
 Minneapolis MN 55401.                                   (northern
                                                         half), MI, MN,
                                                         MT, ND, SD, WI.
Federal Reserve Bank of Kansas       Dallas, San        AK, AR, AZ, CA,
 City, 925 Grand Avenue, Kansas       Francisco,         CO, HI, ID, IL
 City, MO 64198.                      Kansas City, St.   (southern
                                      Louis.             half), IN
                                                         (southern
                                                         half), KS, KY
                                                         (western half),
                                                         LA (northern
                                                         half), MO, MS
                                                         (northern
                                                         half), NE, NM,
                                                         NV, OK, OR, TN
                                                         (western half),
                                                         TX, WA, WY, UT
                                                         and GU.
------------------------------------------------------------------------


[59 FR 10537, Mar. 4, 1994, as amended at 63 FR 38042, July 14, 1998]



Sec. 321.26  Preservation of rights.

    Nothing contained in this part shall limit or restrict any existing 
rights which holders of securities may have acquired under the offering 
circulars and the applicable regulations.



Sec. 321.27  Supplements, amendments, or revisions.

    The Secretary of the Treasury may, at any time or from time to time, 
revise, supplement, amend or withdraw, in whole or in part, the 
provisions of this part.

 Appendix to Part 321--Appendix to Department of the Treasury Circular 
                        No. 750, Fourth Revision

                Fiscal Service, Bureau of the Public Debt

                     Subpart A--General Information

    1. Purpose. This appendix is issued for the guidance of banks and 
other financial institutions qualified as paying agents of United States 
Savings Bonds and United States Savings Notes (Freedom Shares) under the 
provisions of 31 CFR part 321 [Department of the Treasury Circular No. 
750, Fourth Revision]. Its purpose is to provide information to 
supplement the regulations contained in the part and specific 
instructions for processing redemption and redemption-exchange 
transactions. The information and instructions are indexed to the 
sections and subsections of part 321 which they explain or expand.
    2. Other pertinent publications. In addition to part 321, agents 
should be familiar with the provisions of the following publications:
    (a) Offering circulars. Department of the Treasury Circulars, Public 
Debt Series Nos. 1-80 (31 CFR part 351, Series EE bonds), 2-80 (31 CFR 
part 352, Series HH bonds), 1-98 (31 CFR part 359, Series I bonds), and 
3-67 (31 CFR part 342, savings notes), and Department of the Treasury 
Circulars Nos. 653 (31 CFR part 316, Series E bonds) and 905 (31 CFR 
part 339, Series H bonds).
    (b) Regulations. Department of the Treasury Circular, Public Debt 
Series No. 3-80 (Series EE and HH bonds); Department of the Treasury 
Circular, Public Debt Series 2-98 (Series I bonds); Department of the 
Treasury Circulars Nos. 530 (all other series of savings securities) and 
888 (special endorsements); Federal Tax Regulations (26 CFR 1.6049); 
Federal Claims Collection Standards (4 CFR parts 101-105); Regulation J, 
Collection of Checks and Other Items and Wire Transfers of Funds (12 CFR 
part 210); and operating circulars issued by Federal Reserve Banks 
relating to the collection of cash items and Federal payments by ACH.

[[Page 235]]

                 Subpart B--Procedures for Qualification

    3. Qualification of branches. [Sec. 321.3(b)] Qualification of an 
institution as a paying agent automatically qualifies only its domestic 
branches. A foreign branch of a qualified paying agent may redeem 
securities provided settlement is made through a qualified facility 
located in the Unied States.
    4. Paying agent code numbers. [Sec. Sec. 321.3(b) and 321.13] The 
appropriate Federal Reserve Bank will assign a four-digit code number to 
each agent it qualifies. A separate number will be assigned to each 
branch authorized to redeem and submit redeemed securities for its own 
account to a Federal Reserve Bank or Branch or to a Regional Check 
Processing Center. At the paying agent's request, only one four-digit 
code will be assigned for use by all of its branches. The presenting 
institution's ABA number will be used in the adjustment of discrepancies 
and in the computation and payment of fees for securities transmitted in 
separately sorted cash letters.
    5. Requalification. [Sec. 321.3(b)] If there has been a change in 
the corporate name of an agent, whether through merger, consolidation, 
sale of assets, or in any other manner, the agent may be asked by the 
appropriate Federal Reserve Bank referred to in Sec. 321.25 to 
requalify to reflect the change. Ordinarily, requalification is not 
required unless (a) the change results in a corporation that, under 
State law, cannot retain the rights of the corporation that ceased to 
exist, or (b) in the case of a purchase of assets and assumption of 
liability, the purchaser corporation is not a qualified paying agent.
    6. Announcement of authority. [Sec. 321.3(c)] On and after the 
effective date of its qualification, a paying agent may appropriately 
announce or advertise its authority to redeem eligible securities for 
cash and in exchange for Series HH bonds. Such statements and notices 
should not, directly or indirectly, encourage the encashment of the 
securities. Two examples of acceptable statements for use in 
advertisements or displays are:
    (a) ``We are an authorized agent for payment of U.S. Savings Bonds 
and U.S. Savings Notes (Freedom Shares).''
    (b) ``This (bank/savings and loan association/credit union, etc.) is 
authorized to pay U.S. Savings Bonds and U.S. Savings Notes (Freedom 
Shares) and process eligible Series E and EE bonds and savings notes in 
exchange for Series HH bonds.''

                      Subpart C--Scope of Authority

    7. Authorized cash payments. [Sec. 321.7]
    (a) General. [Sec. 321.7(a)] The general authority of paying agents 
to redeem savings securities for cash extends to Series A, B, C, D, E, 
EE, and I bonds and savings notes presented by the owner, coowner, 
surviving beneficiary, parent on behalf of a minor, legal representative 
designated in the registrations of savings securities presented, or 
legal representative of the last deceased registrant's estate. The 
presenter must sign the requests for payment and establish his or her 
identity and, in the case of a beneficiary, parent or legal 
representative of the last deceased registrant's estate, entitlement to 
request payment.
    (b) Securities submitted by mail. [Sec. 321.7(a)] An agent may 
accept eligible securities submitted, for redemption by mail, from known 
customers. The agent should be satisfied that the customer is entitled 
to request payment and that he or she has signed the requests for 
payment. The agent should obtain written instructions to credit the 
redemption proceeds to the customer's account or to make some other 
disposition. For its protection, the agent should retain such 
instructions for as long as ten years in the event the transaction is 
later questioned.
    (c) Interest reporting. [Sec. 321.7(e)] Pursuant to 26 CFR 1.6049-4, 
an agent is required to report interest income in the amount of $10 or 
more paid as part of the redemption value of securities. Reports to 
payees should be made on Form 1099-INT or an IRS-approved substitute; 
reports to the Internal Revenue Service should be made in accordance 
with that agency's instructions. A separate report may be made for each 
transaction in which interest in the amount of $10 or more is paid, or 
all interest payments, made during a calendar year, may be aggregated 
and reported annually should the total amount be $10 or more.
    8. Redemption-exchange of Series E and EE savings bonds and savings 
notes. [Sec. 321.8]
    (a) General. [Sec. 321.8 (a) and (b)] The general authority of 
paying agents to redeem securities in exchange for Series HH bonds 
extends only to eligible Series E and EE savings bonds and savings notes 
presented with a completed Form PD 3253, ``Exchange Subscription for 
United States Savings Bonds of Series HH.'' Securities eligible for 
exchange are: (1) Series EE bonds issued January 1, 2003, or earlier, 
presented no earlier than six months from their issue dates; (2) Series 
EE bonds issued February 1, 2003, or thereafter, presented no earlier 
than 12 months from their issue dates; and (3) Series E bonds and 
savings notes presented no later than one year from the month in which 
they reached final maturity. The current redemption value of securities 
presented in one transaction must be at least $500. The presenter must 
establish his or her identity and entitlement to request the exchange 
and sign the exchange subcription and the requests for payment on the 
securities.
    (b) Securities in the name of a minor. [Sec. 321.8(b)] If an 
exchange subscription is submitted on behalf of a minor who is too young 
to comprehend the nature of the transaction,

[[Page 236]]

the form must be completed to request that the Series HH bonds be 
registered either in the minor's name alone or in exactly the same form 
as the securities presented for exchange. Agents are instructed to 
discourage exchange transactions involving minors who are too young to 
conduct them on their own.
    (c) Interest reporting. [Sec. 321.8(c)] Pursuant to 26 CFR 1.6049-4, 
an agent is required to report interest income in the amount of $10 or 
more included in any cash refunded in a redemption-exchange transaction. 
Reports to payees should be made on Form 1099-INT or an IRS-approved 
substitute; reports to the Internal Revenue Service should be made in 
accordance with that agency's instructions. A separate report may be 
made for each redemption-exchange transaction in which interest in the 
amount of $10 or more is refunded, or all interest paid in both cash 
transactions and redemption-exchanges during a calendar year may be 
aggregated and reported annually should the total amount be $10 or more.
    9. Specific limitations on payment authority. [Sec. 321.9]
    (a) Allowable exceptions. [Sec. 321.9] Securities which an agent may 
not redeem because of the limitations in Sec. 321.9 should be forwarded 
to the Fiscal Agency Department of a Federal Reserve Bank referred to in 
Sec. 321.25 for handling. However, if an agent is willing to assume 
full responsibility, it may make payment of an eligible security which 
bears a minor irregularity, such as a misspelled name, a transposition 
of letters, etc., because of its knowledge of the facts, or because it 
wishes to rely on the integrity of the presenter.
    (b) Taxpayer identifying number of presenter. [Sec. 321.9(f)] An 
agent shall refuse payment of any security if the taxpayer identifying 
number of the presenter, or the estate represented by the presenter, is 
not known to the agent and the presenter is unwilling to furnish the 
number. A parent who requests payment on behalf of a minor in accordance 
with Sec. 321.7(c) of this part must provide the minor's social 
security number.
    (c) Payments to minors. [Sec. 321.9(j)] A minor may not request 
payment of securities if he or she is not of sufficient competency and 
understanding to comprehend the nature of the act. Because of individual 
differences in comprehension, the Treasury has not established any rule 
as to the exact age at which a minor should be able to redeem 
securities. An agent may interview a minor to ascertain his or her 
ability to understand the transaction.
    10. Responsibilities of paying agents. [Sec. 321.10]
    (a) Requirements for redeeming securities. [Sec. 321.10(a)] A 
paying agent shall redeem eligible savings securities during its regular 
business hours for a presenter who establishes his or her identity as 
the owner or coowner of the securities, in accordance with this part and 
this appendix. While a paying agent is not required to redeem eligible 
Series E and EE savings bonds and savings notes in exchange for Series 
HH bonds for any presenter, or Series E, EE, or I bonds or savings notes 
for cash upon the request of a surviving beneficiary or legal 
representative, it is encouraged to do so, provided the presenter can 
establish his/her identity and provide acceptable evidence to accordance 
with this part and this appendix (See Sec. 321.7 (d) and (f)). An agent 
is not required to redeem savings securities during Saturday and evening 
hours if it is open during such periods primarily as a service for its 
depositors.
    (b) Restrictions. [Sec. 321.10(b)] Violation of the regulatory 
prohibitions on making charges for redeeming securities; on advancing 
money on, making loans on, or discounting the redemption value of 
securities; and on deferring presentation of redeemed securities to 
obtain a larger credit, will be cause for disqualification and recovery 
of the redemption proceeds and profits realized therefrom.

            Subpart D--Payment and Transmittal of Securities

    11. Identification of presenter. [Sec. 321.11(b)]
    (a) Identification guide. [Sec. 321.11(b)] The Treasury Department 
has issued an identification guide, Form PD 3900, to assist paying 
agents in redeeming securities. Careful compliance with the instructions 
contained therein will enable agents to accommodate reasonable 
redemption requests and protect themselves from losses. Reliance on 
newly opened customer accounts as identification, or paying more than 
$1,000 in a single transaction based on documentary evidence alone, 
should be particularly avoided.
    (b) Record of identification practice and evidence presented. [Sec. 
321.11 (b) through (d)] At the time of payment, the agent should make a 
notation on the back of the security or in its own records specifying 
precisely what was relied on to establish the presenter's identity. The 
identification should be adequate to identify the payee under the 
circumstances of the transaction. If an agent redeems a security upon 
the request of a surviving beneficiary or a legal representative of the 
last deceased registrant's estate, it should also make a notation of the 
evidence presented to establish the payee's entitlement; this might 
include the document or case number on the death certificate(s) and/or 
evidence of the legal representative's appointment, the date(s) of 
death, and the names and locations of the issuing authorities. The 
notations should be sufficient to permit a determination of the evidence 
of identity and entitlement at a later date. Otherwise, the agent runs 
the risk that no evidence can be developed to

[[Page 237]]

show that it acted without fault or negligence, in which case it could 
not be relieved of liability should a loss occur.
    12. Request for payment. [Sec. 321.11(d)]
    (a) Signature. [Sec. 321.11(e)] Except where an agent qualified 
under 31 CFR part 330 (Circular No. 888) elects to use the special 
endorsement procedure, each security redeemed by the agent must bear the 
signature of the presenter. The name must be signed exactly as it is 
inscribed on the security, unless the provisions of 31 CFR part 330 and 
this appendix provide for an exception, such as in cases involving a 
change of name by marriage, a request by a parent on behalf of a minor, 
or a legal representative of the last deceased registrant's estate. An 
agent may be held liable if the request for payment is not properly 
signed. Legal representatives must sign as provided in Sec. 321.7 (e) 
and (f).
    (b) Address. [Sec. 321.11(d)] The presenter must enter a current 
home or business address in the space provided on the back of the 
security. If a single transaction includes a group of securities, the 
address must be shown on at least one security of each of the following 
types: (1) Paper securities issued prior to October 1957; (2) punch card 
or machine readable paper securities issued prior to January 1989; and 
(3) machine readable paper securities issued subsequent to December 
1988.
    13. Redemption value of securities. [Sec. 321.12]
    (a) Redemption value tables. [Sec. 321.12] The Bureau of the Public 
Debt distributes redemption values in various formats and as part of 
programs for personal computers, for: (1) Series E bonds, (2) Series EE 
bonds, (3) Series I bonds, and (4) savings notes. Additional tables or 
information may be requested from the appropriate Federal Reserve Bank 
referred to in Sec. 321.25.
    (b) Use of tables. [Sec. 321.12] Care should be exercised to 
correctly determine the current redemption value of the security 
presented for the month in which it is redeemed. Incorrect payments can 
lead to costly and time-consuming adjustments for the agent, Department 
of the Treasury, and the appropriate Federal Reserve Bank referred to in 
Sec. 321.25.
    (c) Cash redemption. [Sec. 321.12] The correct redemption value of 
securities redeemed by an agent should be paid to the presenter in 
currency or, upon request, by check payable to the presenter or by 
credit to his or her account.
    (d) Redemption-exchange. [Sec. 321.12] The redemption values of 
eligible Series E and EE savings bonds and savings notes presented for 
exchange (Series I savings bonds are not eligible for exchange) for 
Series HH bonds shall be those payable in the month the agent accepts a 
correctly completed and signed exchange subscription, Public Debt Form 
3253. The total redemption value of securities presented for exchange in 
any one transaction must be at least $500. If the redemption value is 
$500 or an even multiple thereof, Series HH bonds must be requested in 
that exact amount. If the redemption value exceeds $500, but is not an 
even multiple of that amount, the presenter may add cash to increase the 
amount of the subscription to the next higher $500 multiple, or reduce 
the amount of the subscription to the next lower $500 multiple. The 
maximum amount which may be added to or refunded in an exchange 
transaction is $499.99. For example, if the total redemption value of 
the securities is $4,253.33, the presenter may request no less than 
$4,000 and no more than $4,500 in Series HH bonds. In the first 
instance, the agent will pay the presenter $253.33; in the second, it 
will collect $246.67 when it accepts the exchange subscription.
    14. Cancellation of redeemed securities. [Sec. 321.13]
    (a) Paying agent stamp. [Sec. 321.13] Each redeemed security must be 
cancelled by the imprint of a payment stamp. The stamp may not exceed 
1\1/8\ inches in any dimension and must include the following 
information in the arrangement shown:
Paid $------ (for recording amount paid).
Name, location, and four-digit paying agent code number assigned by the 
          appropriate Federal Reserve Bank referred to in Sec. 321.25 
          (subject to abbreviation and arrangement by the Bank).

Date ------ (for recording actual date of payment).
By ------ (for use by agent in recording initials, or signature, codes, 
symbols, etc., of the officer or employee who approved or made the 
payment).

    (b) Procurement of stamps. [Sec. 321.12] A paying agent may 
requisition stamps from the Fiscal Agency Department of the appropriate 
Federal Reserve Bank referred to in Sec. 321.25 or purchase its own 
stamps. Stamps not provided by the appropriate Federal Reserve Bank 
referred to in Sec. 321.25 must conform exactly in size and design to 
that prescribed or approved by the Bank. To insure legible impressions, 
stamps should be replaced when worn.
    (c) Imprinting payment stamp and recording payment date. [Sec. 
321.13] After determining that a security is eligible for payment, the 
agent should carefully imprint the payment stamp on its face in the open 
space immediately to the left of, and as close as possible to, the issue 
date and issuing agent validating data. It is important not to overprint 
any data on the security, particularly the serial number, since the 
security will subsequently be microfilmed. No other stamps shall be 
placed on the face of the security. Care should be taken to record 
legibly the correct amount, the exact date of redemption, and the 
signature, initials, or other

[[Page 238]]

identification of the agent's employee who approved or made the payment. 
A dark-colored ink must be used, and care should be taken not to smear 
the stamp impression or the writing.
    (d) Redemption-exchange. [Sec. 321.13] Eligible Series E and EE 
savings bonds and savings notes presented for redemption-exchange shall 
be stamped ``PAID'' in the same manner as securities redeemed for cash, 
but only when all elements of the transaction have been completed, 
including receipt of any additional cash. The exact date of redemption 
shall also be recorded on the exchange subscription to enable the 
appropriate Federal Reserve Bank referred to in Sec. 321.25 to 
establish the proper issue date for the Series HH bonds. An officer or 
other authorized employee of the agent shall also sign the exchange 
subscription, in his or her official capacity, and furnish other 
requested information that identifies the paying agent.
    (e) MICR-encoding of payment information. [Sec. 321.13] An agent 
shall MICR-encode the redemption value in the ``Amount'' field on the 
face of each security or arrange to have this service performed by 
another financial institution. If the agent transmits securities in 
mixed cash letters, it must also MICR-encode the routing/transit number 
assigned to the Bureau of the Public Debt's savings bond activity in the 
``R/T'' field on the face of all pre-October 1957 paper securities and 
those punch card securities on which it does not already appear. The 
Bureau's routing/transit number is 000090007. Care should be taken in 
repairing MICR-encoded items so as not to obliterate any data in 
surrounding MICR fields or elsewhere on the face of the security.
    15. Transmittal of securities to Federal Reserve Bank. [Sec. 
321.14] An agent shall transmit and receive settlement for redeemed 
securities via EZ CLEAR, i.e., the Check Department of a Federal Reserve 
Bank or Branch or the Regional Check Processing Center. Redeemed 
securities may be transmitted in separately sorted or mixed cash letters 
to the Check Department of a Federal Reserve Bank or Branch, or to a 
Regional Check Processing Center, either directly, or via a parent 
office or correspondent institution. An agent shall transmit redeemed 
securities under cover of the appropriate transmittal document. Eligible 
Series E and EE savings bonds and savings notes redeemed in exchange for 
Series HH bonds must be transmitted for settlement via EZ CLEAR at the 
same time as the exchange application (Public Debt Form 3253) and any 
additional cash needed to complete the transaction are forwarded to the 
Fiscal Agency Department of the servicing Federal Reserve Bank referred 
to in Sec. 321.25. Eligible Series E and EE savings bonds and savings 
notes redeemed on exchange may be commingled with cash redemptions in 
mixed or separately sorted cash letters.
    16. Transmittal of securities to Federal Reserve Bank via fiscal 
agency system. [Sec. 321.14] The Fiscal Agency Department of a Federal 
Reserve Bank or Branch will not accept for settlement securities an 
agent has redeemed.
    17. Transmittal of securities to Federal Reserve Bank via EZ CLEAR. 
[Sec. 321.14]
    (a) Form to be used. [Sec. 321.14] The presenting institution shall 
transmit all redeemed securities to the Check Department of a Federal 
Reserve Bank or Branch or Regional Check Processing Center in accordance 
with the Bank's instructions. Except as otherwise provided in the Bank's 
instructions and operating circulars, cash letters may be comprised of 
one or more bundles of separately sorted redeemed securities (separately 
sorted cash letter) or one or more bundles of mixed items (mixed cash 
letter). The cash letter shall show the name, address, and ABA number of 
the presenting institution, the date of presentation, the total number 
of pieces transmitted, the value of each of the bundles in the cash 
letter, and the total value of the cash letter.
    (b) Composition of cash letters. [Sec. 321.14] Series A, B, C, D, 
E, EE, and I bonds and savings notes redeemed for cash or eligible 
Series E and EE bonds and savings notes redeemed on exchange may be 
commingled in mixed cash letters containing commercial checks and other 
items or separately sorted cash letters containing only redeemed 
securities. Each cash letter shall also contain a listing prepared in 
accordance with the Federal Reserve Bank's instructions.
    (c) Transmittal of securities. [Sec. 321.14] Cash letters containing 
redeemed securities shall be transmitted to a Federal Reserve Bank in 
accordance with the Bank's circulars and instructions.
    (d) Timing of transmittals. [Sec. 321.14] Cash letters containing 
redeemed securities should be transmitted according to the same schedule 
used for other commercial check collection system items.
    (e) Settlement for the audit of paid securities--(1) Settlement. 
[Sec. 321.14] The Federal Reserve Bank will make immediate settlement 
for the total value of redeemed securities as shown on each cash letter. 
Settlement will be made by a credit to the reserve or clearing account 
of the agent or designated correspondent institution. Data concerning 
redeemed security transmittals will be sent to the Bureau of the Public 
Debt for audit. The amount will be subject to adjustment if 
discrepancies are discovered after settlement has been made.
    (2) Audit and adjustment [Sec. 321.14] The Bureau of the Public 
Debt will audit all redemption data received from the Central

[[Page 239]]

Site as promptly as possible. Each presenting institution will, in due 
course, be notified by the Bank of any adjustments required. The Bank 
will adjust via a charge or credit to the presenting institution's 
Reserve or clearing account any amounts previously credited to that 
account.
    (3) Requests for Adjustments. Depositors who discover errors in 
their EZ CLEAR cash letters subsequent to deposit should allow sixty 
(60) calendar days from the date of their EZ CLEAR cash letter before 
requesting adjustments for the cash letter. This will allow sufficient 
time for the Treasury to classify the savings bonds, forward adjustments 
to the Central Site and for the Central Site to research and function 
adjustments to the depositor.
    (4) Separately Sorting Depositors should submit adjustment requests 
directly to the Central Site Adjustments Department in correspondence. 
However, all requests for adjustments due to incorrect cash letter 
crediting should be directed to the servicing Federal Reserve Bank.
    (5) Mixed Depositors should submit adjustment requests to their 
servicing Federal Reserve Bank.
    18. Record of securities paid. [Sec. Sec. 321.14 and 321.24] A 
record of the serial number and the amount paid for each redeemed 
security must be retained by the agent for one year so that settlement 
can be made if the security is lost in transit, and so that the agent 
can process any subsequent adjustment as described in paragraph 17(e)(2) 
above. For that purpose, agents are authorized to microfilm the face and 
back of each security they redeem. Such film records shall be kept 
confidential and prints therefrom may be made only with the permission 
of the Bureau of the Public Debt or an appropriate Federal Reserve Bank.

           Subpart E--Losses Resulting from Erroneous Payments

    19. Report of erroneous payment. [Sec. 321.16] Any erroneous payment 
that comes to the attention of an agent should be reported immediately 
to the Bureau of the Public Debt, Parkersburg, WV 26106-1328. The 
nearest office of the Secret Service should also be notified if the 
agent believes that a security presented for redemption may be 
counterfeit or stolen, or if the circumstances of the presentation are 
suspicious in any other respect.
    20. Notice to agent. [Sec 321.17(a)] The paying agent will be 
notified if an erroneous payment has occurred. The notice will generally 
be in writing from the Bureau of the Public Debt. If an investigation is 
to be made, the notice will enable the agent to notify its bonding 
company, assemble pertinent information concerning the transaction for 
presentation during the investigation, and take any other action it 
deems appropriate to protect its interest.
    21. Determination of liability. [Sec. 321.18 and Sec. 321.21]
    (a) Upon completing the investigation, the Bureau of the Public Debt 
will examine the available information and determine whether a paying 
agent may be relieved of liability for any loss that may have resulted. 
If the paying agent cannot be relieved of liability, demand will be made 
upon the paying agent to reimburse the Treasury promptly. Any amount not 
paid within 30 days following the mailing of the first demand letter is 
subject to the following charges.
    (1) Interest shall accrue from the date the first demand letter is 
mailed to the date reimbursement is made. The rate of interest to be 
used will be the current value of funds rate published annually or 
quarterly in the Federal Register and in effect during the entire period 
in which the remittance is late.
    (2) Administrative costs shall be assessed as set out in the first 
demand letter, if reimbursement is not made within 30 days of the date 
the first demand letter is mailed.
    (3) Penalty charges shall be assessed, in accordance with 31 U.S.C. 
3717(e), if reimbursement is not made within 120 days of the date the 
first demand letter is mailed. The penalty charge will accrue and be 
calculated from 30 days after the date the first demand letter is mailed 
to the date of reimbursement.
    (b) When a paying agent fails, within 120 days of the date the first 
demand letter is mailed, to make such reimbursement or to submit new 
evidence sufficient for Public Debt to change the determination of 
liability, by virtue of the paying agent's acceptance of settlement via 
credits to a Reserve, correspondent, or clearing account with a Federal 
Reserve Bank or Branch, the agent is deemed to have authorized the 
Federal Reserve Bank to debit the amount due from that account 
designated or utilized by the agent at the Federal Reserve Bank or 
Branch. An institution, designated by a paying agent to receive 
settlement on its behalf, in authorizing such paying agent to utilize 
its Reserve, correspondent, or clearing account on the books at the 
Federal Reserve Bank shall similarly be deemed to authorize such debits 
from that account.
    (c) Reconsideration of a determination of liability will be made in 
any case when a paying agent so requests and presents additional 
evidence and information regarding the transaction.
    22. Relief for lack of timely notice. [Sec 321.18] A paying agent 
will be relieved of liability to the United States for any loss 
resulting from the erroneous payment of securities where the Secretary 
of the Treasury, or his designee, determines that written notice of 
either liability or potential liability has not been given to the agent 
within ten years of the date of the erroneous payment.

[[Page 240]]

                       Subpart F--Forwarding Items

    23. Securities forwarded to Federal Reserve Bank for payment. [Sec 
321.22]
    (a) General. [Sec 321.22] Securities presented for cash payment or 
redemption-exchange, that an agent is not authorized to redeem, shall be 
forwarded to the Fiscal Agency Department of the appropriate Federal 
Reserve Bank referred to in Sec. 321.25, with all required supporting 
documentation and any necessary payment instructions.
    (b) Signature to and certification of request for payment. [Sec 
321.22] An agent qualified under part 330 (Circular No. 888) may elect 
to specially endorse securities for presenters in lieu of requiring 
completion of the requests for payment. Unless this procedure is used, 
the presenter must sign the request on each security and the signature 
must be certified. Before completing the certification, the agent should 
establish the identity of the presenter. The Treasury's identification 
guidelines should be followed in view of the potential liability that 
attaches to such certification.
    (c) Address and Taxpayer identifying number. [Sec 321.22] In every 
case, a current address shall be furnished. The presenter's taxpayer 
identifying number (social security number or employer identification 
number) shall be provided if it is not included in the inscription.
    (d) Redemption-exchange. [Sec 321.22] For redemption-exchange 
transactions submitted as forwarding items, the issue date of the Series 
HH bonds will be the first day of the month in which a correctly 
completed and signed exchange subscription and full payment are received 
by the appropriate Federal Reserve Bank referred to in Sec. 321.25.
    (e) Partial redemption. [Sec. Sec. 321.9(l) and 321.22] Partial 
redemption of a security other than a $25 Series E bond or savings note, 
a $50 Series EE or I bond, or a $500 Series H or HH bond may be made by 
the appropriate Federal Reserve Bank referred to in Sec. 321.25. The 
amount paid must be equal to the redemption value of one or more 
authorized denominations on the date of the transaction. If a security 
is received by an agent for partial redemption, the words ``to the 
extent of $ (face amount) and reissue of the remainder'' should be added 
to the first sentence of the request for payment. The request should 
then be completed in the regular manner and the signature of the 
presenter certified or guaranteed. The security shall be forwarded to 
the Fiscal Agency Department of a Federal Reserve Bank.

                   Subpart G--Miscellaneous Provisions

    24. Fees and charges. [Sec 321.23] Service fees are not intended to 
compensate paying agents for the reporting of interest paid as part of 
the redemption value of securities as required by Federal Tax 
Regulations (26 CFR 1.0649-4).
    Fees will be paid to the presenting institution for securities 
redeemed during each calendar month that are submitted in separately 
sorted cash letters; such fee payments will be made only by ACH. No fees 
will be paid for securities received by the Federal Reserve Bank in 
mixed cash letters. The Bank will charge the presenting institution for 
processing redeemed securities received in mixed cash letters. Inquiries 
regarding separately sorted cash letters should be directed to the 
Pittsburgh Branch, Federal Reserve Bank of Cleveland, P.O. Box 867, 
Pittsburgh, PA 15230-0867. Inquiries regarding mixed cash letters should 
be directed to the Federal Reserve Bank or Branch or Regional Check 
Processing Center where the cash letters were directed.
    25. Claims on account of lost securities [Sec. 321.24] If a 
security redeemed by an agent is lost, stolen, or destroyed while in the 
custody of the agent, or in transit prior to settlement or audit, relief 
will be considered, provided the security can be identified by serial 
number. [See paragraph 18 of this appendix regarding the maintenance of 
records of redeemed securities]. The presenting institution should 
resubmit a photocopy of the security to obtain settlement in accordance 
with established procedures. Questions concerning the established 
procedures should be referred to the servicing Federal Reserve Bank.
    26. Education savings bond program. [Sec. 321.7(g)]
    (a) Section 6009 of the Technical Corrections and Miscellaneous 
Revenue Act of 1988, Public Law 100-647 (see 26 U.S.C. 135), permits 
taxpayers to exclude all, or a portion, of the interest earned on Series 
EE savings bonds bearing issue dates on or after January 1, 1990, and on 
Series I savings bonds from their income under certain conditions. This 
legislation did not create new savings bond redemption and interest 
reporting requirements for savings bond paying agents. However, if a 
bond owner indicates that he or she intends to seek the special tax 
treatment offered under this program, the paying agent is encouraged to 
provide assistance by:
    (1) Suggesting that he or she read IRS Form 8815 (particularly, the 
instructions on the form) as well as relevant portions of IRS 
Publication 17, ``Your Federal Income Tax ``, and Publication 550, 
``Investment Income and Expenses,'' for detailed information; and
    (2) Suggesting that the presenter make a record of eligible bonds 
redeemed either by using IRS Optional Form 8818, or otherwise.
    (b) Bond owners seeking to benefit from the special tax exclusion, 
available through the savings bond education feature, should be aware of 
the following basic rules:
    (1) Only interest earned on Series EE bonds bearing issue dates on 
or after January 1,

[[Page 241]]

1990, is eligible for the exclusion of interest income, where the 
proceeds from the redemption of the bonds are used to pay qualified 
post-secondary education expenses. Interest received on bonds bearing 
issue dates prior to January 1, 1990, is not eligible.
    (2)(i) The bonds must be registered in the name of a taxpayer as 
sole owner, or in the name of the taxpayer as co-owner, with the 
taxpayer's spouse as the other co-owner. Bonds registered in the name of 
the taxpayer's child, as owner or co-owner, will not qualify for the 
exclusion. A taxpayer may purchase bonds registered in beneficiary form, 
i.e., ``A payable on death to B'', naming any individual, including a 
child, as beneficary.
    (ii) The bonds must be registered in the name of a taxpayer who has 
attained the age of 24 years at the time of issue. Generally, a taxpayer 
must be 24 years of age on or before the first day of the month in which 
the taxpayer purchases the bond, because savings bonds bear the issue 
date of the first day of the month in which purchased.
    (3) The bond must be redeemed by the owner or co-owner. It may not 
be transferred to-the educational institution.
    (4) If the entire amount of the proceeds of the eligible bonds is 
less than, or equal to, the qualified post-secondary educational 
expenses incurred by the owner, his or her spouse, or his or her 
dependent, all interest received is excludable, subject to the 
limitations in paragraph (b)(7) of this section. If the amount of the 
proceeds exceeds such qualified expenses, the excludable portion of the 
interest will be reduced by a pro rata amount.
    (5) Qualified educational expenses are limited to tuition and fees 
required for the enrollment of, or attendance by, the taxpayer, or the 
taxpayer's spouse or dependent, at an eligible educational institution. 
These expenses are calculated net of scholarships, fellowships, 
employer-provided educational assistance, and other tuition reduction 
amounts, and must be incurred during the tax year of the redemption of 
the bonds for which the interest exclusion is claimed.
    (6) Eligible educational institutions include those defined in 
sections 1201(a) and 481(a)(1) (C) and (D) of the Higher Education Act 
of 1965, as in effect on October 21, 1988, excluding proprietary 
institutions. Such eligible institutions include post-secondary 
institutions, and vocational schools that meet the standards for 
participation in Federal financial aid programs, excluding proprietary 
institutions. Additional gudiance concerning eligible institutions 
should be obtained from the Department of Education.
    (7)(i) Interest exclusion benefits are based on the modified 
adjusted gross income of the taxpayer. For taxpayers filing a joint 
Federal income tax return, the exclusion is gradually decreased for 
modified adjusted gross income between $60,000 and $90,000. Married 
taxpayers filing jointly who have modified adjusted gross incomes above 
$90,000 are ineligible for the exclusion. For single taxpayers and heads 
of households, the exclusion is gradually decreased for such incomes 
between $40,000 and $55,000. Single taxpayers with such incomes above 
$55,000 are ineligible for the exclusion. After 1990, these income 
limits will be adjusted for inflation.
    (ii) Married taxpayers must file a joint return in order to qualify 
for the exclusion. Married taxpayers filing separate returns will not 
qualify for the exclusion, regardless of their modified adjusted gross 
incomes.
    (8) The taxpayer is responsible for maintaining adequate records of 
bond redemption transactions to support claims for the exclusion, in 
accordance with applicable rules and regulations of the Internal Revenue 
Service.
    (9) The Internal Revenue Service should be consulted for advice 
concerning the eligibility and tax treatment of bonds for the income 
exclusion under the educational savings bond program.
    27. Additional information. [Sec 321.25] Requests for additional 
advice, clarification of the payment regulations or this Appendix, and 
other matters relating to the actions of a financial institution as 
paying agent should generally be made to the appropriate Federal Reserve 
Bank referred to in Sec. 321.25.

[53 FR 37511, Sept. 26, 1988; 53 FR 39581, Oct. 7, 1988, as amended at 
55 FR 35397, Aug. 29, 1990; 59 FR 10538, Mar. 4, 1994; 61 FR 37197, July 
16, 1996; 63 FR 38042, 38043, July 14, 1998; 68 FR 2666, Jan. 17, 2003; 
68 FR 7427, Feb. 14, 2003]



PART 323_DISCLOSURE OF RECORDS--Table of Contents




Sec.
323.1 Purpose of regulations.
323.2 Rules governing availability of information.
323.3 Materials available for inspection and copying.
323.4 Requests for identifiable records.
323.5 Fees.

    Authority: 80 Stat. 379; sec. 3, 60 Stat. 238, as amended; 5 U.S.C. 
301, 552.

    Source: 32 FR 9967, July 7, 1967, unless otherwise noted.



Sec. 323.1  Purpose of regulations.

    The regulations of this part are issued to implement 5 U.S.C. 552(a) 
(2) and (3). The requirements of 5 U.S.C. 552(a)(1) are met through the 
publication in the Federal Register of the

[[Page 242]]

statement of the organization, functions and procedures available of the 
Fiscal Service, including the Bureau of the Public Debt, and revisions 
thereof, and through the publication therein of substantive and 
procedural regulations of the Bureau. A synopsis of the statements of 
Bureau organization, functions and procedures available will be 
published annually by the Office of the Federal Register in the U.S. 
Government Organization Manual.



Sec. 323.2  Rules governing availability of information.

    (a) General. The records of the Bureau of the Public Debt required 
by 5 U.S.C. 552 to be made available to the public shall be made 
available in accordance with the regulations on the Disclosure of 
Records of the Office of the Secretary issued under 5 U.S.C. 552 and 
published as part I of title 31 of the Code of Federal Regulations, 32 
FR 9562, July 1, 1967, except as specifically provided in this part.
    (b) Limitations on the availability of records relating to 
securities. Records relating to the purchase, ownership of, and 
transactions in Treasury securities or other securities handled by the 
Bureau of the Public Debt for government agencies or wholly or partially 
Government-owned corporations will ordinarily be disclosed only to the 
owners of such securities, their executors, administrators or other 
legal representatives or to their survivors or to investigative and 
certain other agencies of the Federal and State governments, to trustees 
in bankruptcy, receivers of insolvents' estates or where a proper order 
has been entered requesting disclosure of information to Federal and 
State courts. These records are confidential because they relate to 
private financial affairs of the owners under this Part. In addition, 
the information falls within the category of ``personnel and medical 
files and similar files the disclosure of which would constitute a 
clearly unwarranted invasion of personal privacy'' under the Freedom of 
Information Act (FOIA), 5 U.S.C. 552(b)(6). FOIA Exemption (b)(6) 
protects the privacy of living persons who own securities as well as the 
close survivors of deceased owners. Privacy interests, in the sense of 
the right to control, use, or disclose information about oneself, cease 
at death. However, the exemption protects the deceased person's family-
related privacy interests that survive death where disclosure would 
cause embarrassment, pain, grief, or disrupt the peace of mind, of the 
surviving family. The Bureau of the Public Debt will determine, under 
FOIA exemption (b)(6), whether disclosure of the records is in the 
public interest by balancing the surviving family members' privacy 
interest against the public's right to know the information.

[32 FR 9967, July 7, 1967, as amended at 68 FR 67944, Dec. 5, 2003]



Sec. 323.3  Materials available for inspection and copying.

    (a) Availability. The materials which are required under 5 U.S.C. 
552(a)(2) to be made available for inspection and copying are:
    (1) Final opinions or orders made in the adjudication of cases. Any 
issued by the Bureau of the Public Debt would be in the form of letters 
or memorandums setting out determinations made in disposing of any 
matter before the Bureau.
    (2) Statements of policy and interpretations which have been adopted 
by the Bureau but not published in the Federal Register.
    (3) Administrative staff manuals and instructions to the staff that 
affect any member of the public. Some Federal Reserve Bank memorandums 
and Public Debt memorandums will be made available under this provision.
    (b) Location. The materials listed in paragraph (a) of this section 
are available for inspection and copy during office hours in the Public 
Reading Room of the Treasury Department, 15th Street and Pennsylvania 
Avenue NW., Washington, DC 20220.



Sec. 323.4  Requests for identifiable records.

    (a) Procedure. (1) A written request for an identifiable record 
relating to a U.S. savings bond or note shall be addressed to the Deputy 
Commissioner, Bureau of the Public Debt, Chicago, IL 60605.

[[Page 243]]

    (2) A request for an identifiable record relating to any Treasury 
Department security, other than a savings bond or note, or a security of 
a Government agency or a wholly or partially Government-owned 
corporation, the record of which is maintained by the Bureau of the 
Public Debt, shall be addressed to the Chief, Division of Loans and 
Currency, Bureau of the Public Debt, Washington, DC 20226.
    (3) A request for an identifiable record relating to any security of 
a Government agency or wholly or partially Government-owned corporation, 
the record for which is maintained by the Federal Reserve Bank of New 
York, shall be addressed to the Federal Reserve Bank of New York, New 
York, NY 10045.
    (4) A written request for any identifiable record that the Bureau of 
the Public Debt has other than those set out in paragraphs (a) (1), (2), 
and (3) of this section shall be addressed to the Commissioner of the 
Public Debt, Washington, DC 20220.
    (5) A request may be presented in person at the office to which a 
written request would be addressed.
    (b) Determination of availability. Determination as to whether or 
not a requested record shall be disclosed will be made by the Officer to 
whom the request should be directed under paragraph (a) of this section, 
and by the Bureau of Public Debt Information Officer for requests 
directed to the Office of the Commissioner, subject to an appeal to the 
Commissioner of the Public Debt. The decision of the Commissioner shall 
constitute final agency action unless he refers the appeal to the Fiscal 
Assistant Secretary, in which case the decision of the Fiscal Assistant 
Secretary shall constitute final agency action.



Sec. 323.5  Fees.

    The fees provided in part 1 of title 31 of the CFR (32 FR 9562, July 
1, 1967), shall apply to all requests for identifiable records under 
this part except as follows:
    (a) No charge will be made for verifying the record of a savings 
bond or note identified by series and denomination and either the 
registration and issue date or the serial number at the request of the 
owner, coowner, or surviving beneficiary or person entitled to the 
security under the applicable regulations.
    (b) No charge will be made for verifying the record of a registered 
Treasury security, other than a savings bond or note, or a registered 
security of a Government agency or a wholly or partially Government-
owned corporation, identified as to loan and registration for an owner, 
joint owner or person entitled to the security under the applicable 
regulations.
    (c) No charge will be made for advising a person who has submitted 
satisfactory evidence of ownership as to the status of a bearer Treasury 
security or a bearer security of a Government agency or a wholly or 
partially Government-owned corporation.
    (d) No charge will be made for furnishing an owner, coowner, joint 
owner, surviving beneficiary, or person who is entitled to the security 
under the applicable regulations a photocopy or similar reproduction of 
any Treasury security, with any necessary supporting documents, which it 
is alleged was improperly paid or was reissued, transferred or redeemed 
on a forged or defective request, endorsement, or assignment.
    (e) Fees may be waived for other classes of requested records upon a 
finding by the Commissioner of the Public Debt that the person 
requesting the information is entitled to the record requested without 
charge.



PART 328_RESTRICTIVE ENDORSEMENTS OF U.S. BEARER SECURITIES--Table of Contents




Sec.
328.1 Scope of regulations.
328.2 Definitions.
328.3 Authorization for restrictive endorsements.
328.4 Effect of restrictive endorsements.
328.5 Forms of endorsement.
328.6 Requirements for endorsement.
328.7 Shipment of securities.
328.8 Loss, theft, or destruction of securities bearing restrictive 
          endorsements.
328.9 Miscellaneous.

    Authority: R.S. 3706; 40 Stat. 288, 502, 1309; 46 Stat. 20; 48 Stat. 
343; 49 Stat. 20; 56 Stat. 189; 73 Stat. 622; 85 Stat. 5, 74 (31 U.S.C. 
738a,

[[Page 244]]

739, 752, 752a, 753, 754, 754a and 754b); and 5 U.S.C. 301.

    Source: 38 FR 10682, Apr. 30, 1973, unless otherwise noted.



Sec. 328.1  Scope of regulations.

    The regulations in this part are applicable only to U.S. bearer 
securities \1\ presented:
---------------------------------------------------------------------------

    \1\ Certain agencies of the United States and certain Government and 
Government-sponsored corporations also authorize the restrictive 
endorsement of bearer securities.
---------------------------------------------------------------------------

    (a) By or through banks for payment at or after their maturity or 
call date, or in exchange for any securities under any exchange 
offering,
    (b) By banks for conversion to book-entry securities,
    (c) By or through banks at any time prior to their maturity or call 
date for redemption at par and application of the entire proceeds in 
payment of Federal estate taxes, provided said securities by the terms 
of their issue are eligible for such redemption, and
    (d) By Service Center Directors and District Directors, Internal 
Revenue Service, for redemption, with the proceeds to be applied in 
payment of taxes (other than securities presented under paragraph (c) of 
this section).

These regulations do not apply to bearer securities presented for any 
other transactions, or to registered securities assigned in blank, or to 
bearer, or so assigned as to become, in effect, payable to bearer.



Sec. 328.2  Definitions.

    Certain words and terms, as used in these regulations, are defined 
as follows:
    (a) Banks refer to, and include, incorporated banks (i.e., banks 
doing a general commercial banking business), incorporated trust 
companies (i.e., trust companies doing either a general banking business 
or a general trust business), and savings and loan associations, 
building and loan associations, and such other financial institutions as 
may be designated by the Federal Reserve banks. This definition is 
limited to institutions incorporated within the United States, its 
territories and possessions, the Commonwealth of Puerto Rico and the 
Canal Zone.
    (b) Bearer securities or securities are those which are payable on 
their face to bearer, the ownership of which is not recorded. They 
include Treasury bonds,Treasury notes, Treasury certificates of 
indebtedness, and Treasury bills.



Sec. 328.3  Authorization for restrictive endorsements.

    (a) By banks. Banks are authorized, under the conditions and in the 
form hereinafter provided, to place restrictive endorsements upon the 
face of bearer securities owned by themselves or their customers for the 
purpose of presentation to Federal Reserve banks or branches, or to the 
Bureau of the Public Debt, as follows:
    (1) For payment or redemption--at any time within 1 calendar month 
prior to their maturity date, or the date on which they become payable 
pursuant to a call for redemption, or at any time after their maturity 
or call date;
    (2) For exchange--during any period for their presentation pursuant 
to an exchange offering;
    (3) For redemption at par in payment of Federal estate taxes (only 
eligible securities)--at any time prior to their maturity or call 
redemption date; and
    (4) For conversion to book-entry securities under subpart O of part 
306 of this chapter--at any time prior to their maturity or call 
redemption date.
    (b) By Service Center Directors and District Directors, Internal 
Revenue Service. Service Center Directors and District Directors, 
Internal Revenue Service, are authorized, under the conditions and in 
the form hereinafter provided, to place restrictive endorsements upon 
the face of bearer securities for the purpose of presentation to Federal 
Reserve banks or branches, or to the Bureau of the Public Debt, for 
redemption and application of the proceeds in payment of taxes (other 
than securities presented for redemption at par and application of the 
proceeds in payment of Federal estate taxes).
    (c) Instructions from Federal Reserve banks. Federal Reserve banks 
will inform eligible banks and Service Center Directors and District 
Directors, Internal Revenue Service, in their respective districts as to 
the procedure to be followed under the authority granted

[[Page 245]]

by these regulations. Restrictive endorsements shall not be placed on 
securities until such information is received from the Federal Reserve 
banks.



Sec. 328.4  Effect of restrictive endorsements.

    Bearer securities bearing restrictive endorsements as herein 
provided will thereafter be nonnegotiable and payment, redemption, or 
exchange will be made only as provided in such endorsements.



Sec. 328.5  Forms of endorsement.

    (a) When presented by banks--(1) For payment or exchange. The 
endorsement placed on a bearer security presented for payment or 
exchange by a bank should be in the following form:

For presentation to the Federal Reserve Bank of --------------------, 
Fiscal Agent of the United States, for redemption or in exchange for 
securities of a new issue, in accordance with written instructions 
submitted by --------------------. (Insert name of presenting bank)

    (2) For redemption at par. The endorsement placed on a bearer 
security presented for redemption at par in payment of Federal estate 
taxes should be in the following form:

For presentation to the Federal Reserve Bank of ----------------, Fiscal 
Agent of the United States, for redemption at par in payment of Federal 
estate taxes, in accordance with written instructions submitted by ----
----------------------------. (Insert name of presenting bank)

    (b) For conversion to book-entry securities. The endorsement placed 
on a bearer security presented for conversion to a book-entry security 
shall be in the following form:

For presentation to the Federal Reserve Bank of ------------------, 
Fiscal Agent of the United States, for conversion to book-entry 
securities by ------------------. (Insert name of presenting bank)

    (c) When presented by Service Center Directors or District 
Directors, Internal Revenue Service. The endorsement placed on a bearer 
security by a Service Center Director or a District Director, Internal 
Revenue Service, should be in the following form:

For presentation to the Federal Reserve Bank of --------------;, Fiscal 
Agent of the United States, for redemption, the proceeds to be credited 
to the account of the Service Center Director, Internal Revenue Service, 
at ----------, for credit on the Federal ------------------ (Income, 
gifts, or other) taxes due from ------------------. (Name and address)



Sec. 328.6  Requirements for endorsement.

    (a) On bearer securities. The endorsement must be imprinted in the 
lefthand portion of the face of each security with the first line 
thereof parallel to the left edge of the security and in such manner as 
to be clearly legible and in such position that it will not obscure the 
serial number, series designation, or other identifying data, and cover 
the smallest possible portion of the text on the face of the security. 
The dimensions of the endorsement should be approximately 4 inches in 
width and 1\1/2\ inches in height, and must be imprinted by stamp or 
plate of such character as will render the endorsement substantially 
ineradicable. The name of the Federal Reserve bank of the district must 
appear on the plate or stamp used for the imprinting of the endorsement, 
and presentation to the appropriate branch of the Federal Reserve bank 
named will be considered as presentation to the bank. When securities 
are to be presented to the Bureau of the Public Debt, the words ``United 
States Treasury'' should be used in lieu of the words ``Federal Reserve 
Bank of --------------, Fiscal Agent of the United States.'' No 
subsequent endorsement will be recognized. If the form of endorsement on 
a security is different than that prescribed in Sec. 328.5, the 
provisions of Sec. Sec. 328.7 and 328.8 shall not apply to the 
security.
    (b) On coupons. Unmatured coupons attached to restrictively endorsed 
securities should be canceled by imprinting the prescribed endorsement 
in such manner that a substantial portion of the endorsement will appear 
on each such coupon. If any such coupons are missing, deduction of their 
face amount will be made in cases of redemption, and in cases of 
exchange, remittance equal to the face amount of the missing coupons 
must accompany the securities. All matured coupons, including coupons 
which will mature on

[[Page 246]]

or before the date of redemption or exchange (except as otherwise 
specifically provided in an announcement of an exchange offering), 
should be detached from securities upon which restrictive endorsements 
are to be imprinted.



Sec. 328.7  Shipment of securities.

    Securities bearing restrictive endorsements may be shipped, at the 
risk and expense of the shipper, by registered mail, messenger, armored 
car service, or express to the Federal Reserve bank of the district in 
which the presenting bank, the Service Center Director, or the District 
Director, Internal Revenue Service, is located, or to the appropriate 
branch of such Federal Reserve bank, shipments to the Bureau of the 
Public Debt, Washington, DC, should be made by messenger or armored car.



Sec. 328.8  Loss, theft, or destruction of securities bearing restrictive 

endorsements.

    (a) General. Relief will be provided on account of securities 
bearing restrictive endorsements proved to have been lost, stolen or 
destroyed, upon the owner's application, in the same manner as 
registered securities which have not been assigned. (See subpart N of 
the current revision of Department Circular No. 300, the general 
regulations governing United States securities.) Except for bearer 
securities submitted for redemption at par in payment of Federal est