[Federal Register Volume 67, Number 201 (Thursday, October 17, 2002)]
[Rules and Regulations]
[Pages 64275-64295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26406]



[[Page 64275]]

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Part V





Department of the Treasury





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Fiscal Service



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31 CFR Parts 351 et al.



Regulations Governing Treasury Securities; New Treasury Direct System; 
Final Rule

Federal Register / Vol. 67, No. 201 / Thursday, October 17, 2002 / 
Rules and Regulations

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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 351, 357, 359, 360, and 363


Regulations Governing Treasury Securities; New Treasury Direct 
System

AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: We are implementing a new book-entry, online system for 
purchasing, holding and conducting transactions in Treasury securities. 
The system is known as New Treasury Direct.
    The only Treasury security that may be held in New Treasury Direct 
at its initial implementation is the book-entry Series I savings bond. 
We plan to make the system available for other Treasury securities in 
the future as we expand the system.
    We are adding a new part to provide the governing regulations 
specific to the New Treasury Direct system, and the governing 
regulations for the book-entry Series I savings bond. The new part 
will, in the future, provide governing regulations for other eligible 
Treasury securities as we expand the system. Although most of the 
functionalities for the New Treasury Direct system will be available at 
the initial public implementation, a few functionalities will be 
delayed for a period of time. The delayed functionalities are those 
affecting the accounts of minors, the granting of viewing and 
transaction rights for secondary owners, and the granting of viewing 
rights for beneficiaries and others. Therefore, the regulations will 
have dual effective dates. The sections of part 363 that will be 
available at initial implementation will be effective upon publication 
in the Federal Register. The sections, or parts of sections, of part 
363 that will not be implemented initially will have a delayed 
effective date. We will announce the effective date of the affected 
sections by a Final Rule in the Federal Register.
    We revised the offering of United States savings bond of Series I 
to provide for the book-entry Series I savings bonds. We also rewrote 
the regulations in plain language.
    We revised the regulations governing United States savings bonds of 
Series I to make it clear that the regulations only refer to definitive 
Series I savings bonds.
    We revised the regulations governing book-entry Treasury bonds, 
notes and bills, to make clear the differences between TreasuryDirect, 
an existing book-entry system for purchasing and holding marketable 
Treasury securities, and the New Treasury Direct.
    We revised the offering of United States savings bonds of Series I, 
and the offering of United States savings bonds of Series EE, to permit 
the mailing of savings bonds to foreign addresses under certain 
circumstances.

DATES: Effective October 17, 2002. However, sections 363.24(e), (f), 
(g), (h), (m), 363.27, 363.28, 363.29, 363.30, 363.31, 363.32, and 
363.69(d), (e), (f), (g), are stayed indefinitely; the Fiscal Service 
will announce the effective date(s) when they will take effect.

ADDRESSES: You can download this final rule at the following Internet 
address: http://www.publicdebt.treas.gov.

FOR FURTHER INFORMATION CONTACT: 

Elisha Whipkey, Director, Division of Program Administration, Office of 
Securities Operations, Bureau of the Public Debt, at (304) 480-6319 or 
elisha.whipkey@bpd.treas.gov.
Susan Klimas, Attorney-Adviser, Office of the Chief Counsel, Bureau of 
the Public Debt, at (304) 480-8692 or susan.klimas@bpd.treas.gov.
Dean Adams, Assistant Chief Counsel, Office of the Chief Counsel, 
Bureau of the Public Debt, at (304) 480-8692 or 
dean.adams@bpd.treas.gov.
Edward Gronseth, Deputy Chief Counsel, Bureau of the Public Debt, at 
(304) 480-8692 or edward.gronseth@bpd.treas.gov.

SUPPLEMENTARY INFORMATION:

Background

    Public Debt has developed a new account-based, online, book-entry 
system for purchasing, holding, and conducting transactions in Treasury 
securities via the Internet. The new system is known as New Treasury 
Direct. We are adding a new part to the Code of Federal Regulations to 
provide the governing regulations for the new system and for securities 
held within the new system.
    Upon initial implementation of the system, only book-entry Series I 
savings bonds will be offered through New Treasury Direct. We plan to 
offer other Treasury securities in future enhancements to the system.
    The new system is not replacing the current TreasuryDirect system 
for holding book-entry marketable Treasury securities; at least for 
some period of time the two systems will coexist even after marketable 
securities are offered through New Treasury Direct.
    We will continue to offer definitive Series I savings bonds at 
least for some period of time.
    The New Treasury Direct system will benefit the investor by 
enabling the investor to purchase eligible Treasury securities, conduct 
transactions, and self-manage his or her New Treasury Direct account 
using the Internet. The system will provide greater flexibility and 
convenience for the investor by eliminating the paperwork burden 
inherent in the current TreasuryDirect system.
    The New Treasury Direct system and the book-entry Series I savings 
bonds will benefit the government by providing a cost-effective and 
efficient processing environment, thereby reducing processing costs to 
Treasury.

New Treasury Direct

    This final rule provides the governing regulations for the New 
Treasury Direct system. The system is substantively different from the 
current TreasuryDirect system.
    New Treasury Direct permits only one individual (the purchaser) to 
hold an account in his or her own right. The New Treasury Direct 
account will hold securities over which the account owner has control, 
in various forms of registration. New Treasury Direct is accessed 
through the Internet.
    At the initial implementation, New Treasury Direct will be 
available to the general public for individual purchasers with a valid 
social security number, an account at a United States depository 
financial institution that accepts debits and credits using the 
Automated Clearing House (ACH) method of payment, and a United States 
address. We plan to expand the system in future enhancements to include 
trusts and business entities.
    The system will initially offer only book-entry Series I savings 
bonds. We plan to offer marketable Treasury securities and exchanges of 
selected definitive savings bonds in future enhancements to the system.
    We will authenticate the identity of an applicant for a New 
Treasury Direct account using an online authentication service. Once 
the applicant's identity has been authenticated, he or she will create 
a password to access the account. The account owner may then purchase 
securities and conduct transactions online through his or her account 
using the password. At our option, we may require a written application 
containing the applicant's certified signature. All payments for 
purchases and redemptions will be made by debits and credits using the 
ACH method.

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    The online transactions that an account owner may conduct include: 
Purchasing eligible Treasury securities; redeeming savings bonds held 
in the account; changing or removing a beneficiary or secondary owner; 
transferring securities; granting or revoking secondary owner rights; 
delivering securities purchased as gifts to the recipient's New 
Treasury Direct account; making changes to account information; 
changing ACH information; viewing histories of transactions and pending 
transactions; changing or deleting pending transactions; changing a 
password; changing account security information; and viewing or 
redeeming securities by a secondary owner when he or she has been 
granted those rights.
    When the New Treasury Direct system is expanded to marketable 
securities, other transactions may be available online as well.
    A parent may open an account for a minor through the account of the 
parent. The parent will create the password for the minor's account and 
will certify online that he or she is acting on behalf of the minor. 
The parent may redeem securities through the minor's account but may 
not purchase securities through the account. The parent may not 
transfer securities from the minor's account. A person who purchases a 
security as a gift for the minor may deliver the gift security to the 
minor's account. The parent may then redeem the security on the minor's 
behalf using the minor's account. We have set the age of majority for 
purposes of the regulations at 18 years. When the minor reaches the age 
of 18 years, the parent is required to give the minor control of the 
minor's account. If the parent or legal guardian fails to give the 
minor control of the minor's account, we will provide offline 
procedures for the minor to gain control of the account.

Book-Entry Series I Savings Bonds

    We will be offering a book-entry Series I savings bond. The 
offering circular for Series I savings bonds is being amended to 
provide for the offering of the book-entry I bond, and has also been 
rewritten in plain language.
    Both definitive and book-entry Series I savings bonds earn interest 
according to a formula indexed to inflation. However, the terms and 
conditions of the two securities, including registration options, 
differ in many respects.
    The forms of registration for book-entry Series I savings bonds are 
single owner, primary owner with secondary owner, and owner with 
beneficiary. In addition, several special forms of registration are 
offered for securities belonging to the estates of deceased owners and 
legally incompetent persons.
    The primary owner with secondary owner form of registration 
replaces the coowner form used for other savings bonds. In the coowner 
form of registration, both coowners have an equal right to the bond. In 
the primary owner with secondary owner form, the purchaser of the bond, 
the primary owner, has control of the bond. The primary owner may give 
the secondary owner the right to view or the right to make transactions 
in the bond, and may at any time revoke any rights given. The primary 
owner may remove the secondary owner without the consent of the 
secondary owner.
    The single owner and owner with beneficiary forms of registration 
are similar to the registrations offered currently in definitive Series 
I savings bonds.
    Special forms of registration are offered for bonds belonging to 
the estates of deceased owners and legally incompetent individuals. At 
this time, special forms of registration will not be offered for 
initial purchases. Bonds may be registered in the name of the legal 
guardian or legal representative, and may be held in the personal New 
Treasury Direct account of the legal guardian or legal representative. 
The legal guardian or legal representative is not permitted to make new 
purchases on behalf of the estate of the decedent or incompetent 
person.
    The book-entry Series I savings bonds may be transferred from one 
New Treasury Direct account to another in order to give a gift (or in 
response to a final judgment, court order, divorce decree, or a 
property settlement agreement). The owner of the bond must certify 
online that the transfer is for the purpose of a gift or for one of the 
specified exceptions.
    A Series I savings bonds may also be purchased as an irrevocable 
gift. The purchaser may deliver a gift bond to the account of the 
intended recipient immediately upon issue, or the purchaser may hold 
the bond until the purchaser chooses to deliver the bond to the 
intended recipient.
    When the gift bond is transferred or delivered to the recipient, it 
will be transferred or delivered in the single owner form of 
registration to the owner named on the gift bond.
    The limitation on purchases for a book-entry Series I savings bond 
is $30,000 per account per year for bonds purchased by the account 
owner in his or her own right. Bonds purchased as gifts are included in 
the amount limitation of the recipient when delivered. The book-entry 
Series I savings bond may be purchased in a minimum amount of $25, with 
one-cent increments above that amount per transaction. The book-entry 
bond may be redeemed or transferred as a gift (or transferred pursuant 
to other permitted transfers) in an amount of $25 or greater redemption 
value.
    The provisions relating to judicial proceedings are consistent with 
those governing definitive Series I savings bonds. However, the primary 
owner with secondary owner form of registration for book-entry Series I 
savings bonds mandates that some issues are treated differently. In the 
primary owner with secondary owner form of registration, the secondary 
owner has no right to redeem unless the primary owner gives him or her 
that right, and the right is revocable at any time. Thus, for purposes 
of judicial proceedings, a secondary owner is treated the same as a 
beneficiary.
    The regulations that provide for the offering of Series EE and I 
savings bonds are being amended to remove the prohibition against 
mailing bonds to foreign addresses.
    We are amending the regulations governing book-entry Treasury 
bonds, notes and bills. This part covers the existing TreasuryDirect 
system, which has been in place since 1986. The amendment will 
differentiate the two systems and reference the New Treasury Direct 
regulations.

Procedural Requirements

    This final rule does not meet the criteria for a ``significant 
regulatory action'' as defined in Executive Order 12866. Therefore, the 
regulatory review procedures contained therein do not apply.
    This final rule relates to matters of public contract and 
procedures for United States securities. The notice and public 
procedures requirements and delayed effective date requirements of the 
Administrative Procedure Act are inapplicable, pursuant to 5 U.S.C. 
553(a)(2).
    As no notice of proposed rulemaking is required, the Regulatory 
Flexibility Act (5 U.S.C. 601, et seq.) does not apply.
    We ask for no new collections of information in this final rule. 
Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does not apply.

List of Subjects

31 CFR Part 351

    Bonds, Federal Reserve system, Government securities.

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31 CFR Part 357

    Bonds, Electronic funds transfer, Federal Reserve system, 
Government securities, Securities.

31 CFR Part 359

    Bonds, Federal Reserve system, Government securities, Securities.

31 CFR Part 360

    Bonds, Federal Reserve system, Government securities, Securities.

31 CFR Part 363

    Bonds, Electronic funds transfer, Federal Reserve system, 
Government securities, Securities.


    Accordingly, for the reasons set out in the preamble, 31 CFR 
Chapter II, Subchapter B, is amended as follows:

PART 351--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES EE

    1. The authority citation for part 351 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.


    2. Revise Sec.  351.6 to read as follows:


Sec.  351.6  Delivery of bonds.

    Issuing agents are authorized to arrange for the delivery of Series 
EE bonds. Deliveries are made by mail to the address given by the 
purchaser. If the purchaser's address is within the United States, its 
territories or possessions, or the Commonwealth of Puerto Rico, bonds 
will be delivered at the risk of the United States. Bonds delivered 
elsewhere will be delivered at the risk of the purchaser; however, at 
the discretion of the United States, delivery to an address within the 
United States may be required, or delivery may be refused to addresses 
in countries referred to in part 211 of this chapter.

PART 357--REGULATIONS GOVERNING BOOK-ENTRY TREASURY BONDS, NOTES 
AND BILLS (DEPARTMENT OF THE TREASURY CIRCULAR, PUBLIC DEBT SERIES 
NO. 2-86)

    3. The authority citation for part 357 continues to read as 
follows:

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

    4. Revise Sec.  357.0 to read as follows:


Sec.  357.0  Book-entry systems.

    (a) Treasury bills, notes and bonds. Treasury bills, notes and 
bonds shall be maintained in either of the following two book-entry 
systems:
    (1) Treasury/Reserve Automated Debt Entry System (TRADES). A 
Treasury security is maintained in TRADES if it is credited by a 
Federal Reserve Bank to a Participant's Securities Account. See subpart 
B of this part for rules pertaining to TRADES.
    (2) TREASURY DIRECT Book-entry Securities System (TREASURY DIRECT). 
A Treasury security is maintained in TREASURY DIRECT if it is credited 
to a TREASURY DIRECT account as described in Sec.  357.20. Such 
accounts may be accessed by investors in accordance with subpart C of 
this part through a designated Federal Reserve Bank or the Bureau of 
the Public Debt. See subpart C of this part for rules pertaining to 
TREASURY DIRECT.
    (b) Transferability between TRADES and TreasuryDirect. A Treasury 
security eligible to be maintained in Treasury Direct under the terms 
of its offering circular or pursuant to notice published by the 
Secretary may be transferred to or from an account in TRADES from or to 
an account in TREASURY DIRECT in accordance with Sec.  357.22(a).
    (c) New Treasury Direct System (New Treasury Direct). New Treasury 
Direct is an online (Internet-based), book-entry system maintained by 
Treasury. The TreasuryDirect system is a separate book-entry system for 
marketable Treasury securities only. The regulations governing New 
Treasury Direct are found at part 363, and are substantially different 
from the terms and conditions of securities held in TreasuryDirect.

    5. Revise part 359 to read as follows:

PART 359--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES I

Subpart A--General Information

Sec.
359.0 What does this part cover?
359.1 What regulations govern Series I savings bonds?
359.2 [Reserved]
359.3 What special terms do I need to know to understand this part?
359.4 In what form are Series I savings bonds issued?
359.5 What is the maturity period of a Series I savings bonds?
359.6 When may I redeem my Series I bond?
359.7 If I redeem a Series I savings bonds before five years after 
the issue date, is there an interest penalty?
359.8 How does interest accrue on Series I savings bonds?
359.9 When are interest rates for Series I savings bonds announced?
359.10 What is the fixed rate of return?
359.11 What is the semiannual inflation rate?
359.12 What happens in deflationary conditions?
359.13 What are composite rates?
359.14 How are composite rates determined?
359.15 When is the composite rate applied to Series I savings bonds?
359.16 When does interest accrue on Series I savings bonds?
359.17 When is interest payable on Series I savings bonds?
359.18 Is the determination of the Secretary on rates and values 
final?
359.19 How is interest calculated?
359.20-359.24 [Reserved]

Subpart B--Definitive Series I Savings Bonds

359.25 What are the denominations and prices of definitive Series I 
savings bonds?
359.26 When are definitive Series I savings bonds validly issued?
359.27 What is the issue date of a definitive Series I savings 
bonds?
359.28 Are taxpayer identification numbers (TINs) required for the 
registration of definitive Series I savings bonds?
359.29 What amount of definitive Series I savings bonds may I 
purchase per year?
359.30 Are definitive Series I savings bonds purchased in the name 
of an individual computed separately from bonds purchased in a 
fiduciary capacity?
359.31 What definitive Series I savings bonds are included in the 
computation?
359.32 What definitive Series I savings bonds are excluded from the 
computation?
359.33 What happens if I purchase definitive Series I savings bonds 
in excess of the maximum amount?
359.34 May I purchase definitive Series I savings bonds over-the-
counter?
359.35 May I purchase definitive Series I savings bonds through a 
payroll savings plan?
359.36 May I purchase definitive Series I savings bonds through 
employee thrift, savings, vacation, and similar plans?
359.37 How are definitive Series I savings bonds delivered?
359.38 How is payment made when definitive Series I savings bonds 
are redeemed?
359.39 How are redemption values calculated for definitive Series I 
savings bonds?
359.40 How can I find out what my definitive Series I savings bonds 
are worth?
359.41-359.44 [Reserved]

Subpart C--Book-Entry Series I Savings Bonds

359.45 How are book-entry Series I savings bonds purchased and held?
359.46 What are the denominations and prices of book-entry Series I 
savings bonds?
359.47 How is payment made for purchases of book-entry Series I 
savings bonds?
359.48 How are redemption payments made for my redeemed book-entry 
Series I savings bonds?
359.49 What is the issue date of a book-entry Series I savings 
bonds?
359.50 What amount of book-entry Series I savings bonds may I 
purchase per year?

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359.51 What book-entry Series I savings bonds are included in the 
computation of purchases?
359.52 What happens if any person purchases book-entry Series I 
savings bonds in excess of the maximum amount?
359.53 Are taxpayer identification numbers (TINs) required for the 
registration of book-entry Series I savings bonds?
359.54 When is a book-entry Series I savings bonds validly issued?
359.55 How are redemption values calculated for book-entry Series I 
savings bonds?
359.56 How can I find out what my book-entry Series I savings bonds 
are worth?
359.57-359.64 [Reserved]

Subpart D--Miscellaneous Provisions

359.65 How are Series I savings bonds taxed?
359.66 Is the Education Savings Bonds Program available for Series I 
savings bonds?
359.67 Does Public Debt prohibit the issuance of Series I savings 
bonds in a chain letter scheme?
359.68 May Public Debt issue Series I savings bonds only in book-
entry form?
359.69 Does Public Debt make any reservations as to issue of Series 
I savings bonds?
359.70 May Public Debt waive any provision in this part?
359.71 What is the role of Federal Reserve Banks and Branches?
359.72 May the United States supplement or amend the offering of 
Series I savings bonds?
Appendix A to part 359--Redemption Value Calculations
Appendix B to part 359--Composite Semiannual Rate Period Table
Appendix C to part 359--Investment Considerations
Appendix D to part 359--Tax Considerations

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.

Subpart A--General Information


Sec.  359.0  What does this part cover?

    This part is the offering of United States Savings Bonds of Series 
I (referred to as Series I bonds or bonds) for sale to the people of 
the United States by the Secretary of the Treasury (Secretary). This 
offer was effective September 1, 1998, and will continue until 
terminated by the Secretary.


Sec.  359.1  What regulations govern Series I savings bonds?

    (a) The regulations in part 360 apply to definitive (paper) Series 
I savings bonds.
    (b) The regulations in part 363 apply to book-entry Series I 
savings bonds.
    (c) We expressly disclaim any representations or warranties 
regarding Series I savings bonds that in any way conflict with these 
regulations and other applicable law.


Sec.  359.2  [Reserved]


Sec.  359.3  What special terms do I need to know to understand this 
part?

    Accrual date is the first day of any month on which earnings on a 
Series I bond accrue. The redemption value of a bond does not change 
between these accrual dates.
    Automated Clearing House (ACH) means a funds transfer system 
governed by the Rules of the National Automated Clearing House 
Association (NACHA). NACHA provides for the interbank clearing of 
electronic entries for participating financial institutions.
    Bank account means your account at a United States depository 
financial institution (whether a bank or other financial institution) 
to which you have directed that ACH debits and payments be made.
    Beneficiary refers to the second individual named in the 
registration of a security held in definitive form registered ``John 
Doe SSN 123-45-6789 POD (payable on death to) Joseph Doe.'' In the New 
Treasury Direct system, beneficiary refers to the second individual 
named in the registration of a security registered ``John Doe SSN 123-
45-6789 POD (payable on death to) Joseph Doe SSN 987-65-4321.'' In 
these examples, Joseph Doe is the beneficiary.
    Book-entry bond means a Series I savings bonds maintained by 
Treasury solely as a computer record.
    Composite annual rate means an annual interest rate that combines 
an annual fixed rate of return and a semiannual inflation rate.
    Coowner means either the first or the second individual named in 
the registration of a definitive Series I savings bonds registered 
``John Doe SSN 123-45-6789 or Joseph Doe.'' In this example, John Doe 
and Joseph Doe are coowners.
    CPI-U, or U.S. City Average All Items Consumer Price Index for All 
Urban Consumers (non seasonally adjusted) is a monthly index of the 
prices paid by consumers for consumer goods and services, maintained by 
the Bureau of Labor Statistics of the U.S. Department of Labor.
    Definitive bond means a Series I savings bonds issued in paper 
form.
    Deflation means a decrease in the CPI-U from one month to another.
    Face amount refers to the amount inscribed on the front of a 
definitive Series I savings bonds.
    Fiduciary means the court-appointed or otherwise qualified person, 
regardless of title, who is legally authorized to act for another.
    Fixed rate or fixed rate of return is a component of the composite 
annual rate for a Series I savings bonds that is established by the 
Secretary of the Treasury for the life of the bond.
    Individual means a natural person. Individual does not mean an 
organization, representative, or fiduciary.
    Inflation means an increase in the CPI-U from one month to another.
    Interest, as used in this part, is the difference between the 
principal amount and the redemption value of the bond.
    Issue date is the first day of the month in which an authorized 
issuing agent receives payment of the issue price of the bond.
    Issuing agent means an organization that has been qualified under 
part 317.
    New Treasury Direct system (New Treasury Direct) is an online 
account system in which you may hold and conduct transactions in 
eligible book-entry Treasury securities.
    Owner is either a single owner, the first individual named in the 
registration of a bond held in the owner with beneficiary form of 
registration, or the primary owner of a book-entry bond held in the 
primary owner with secondary owner form of registration.
    Par means the principal amount of a Series I savings bond; for 
definitive bonds, par is the same as the face amount.
    Paying agent means a financial institution that has been qualified 
under part 321.
    Person means an entity including an individual, trust, estate, 
corporation, government entity, association, partnership, and any other 
similar organization. Person does not mean a Federal Reserve Bank.
    Primary owner means the first individual named in the registration 
of a book-entry bond held in New Treasury Direct registered ``John Doe 
SSN 123-45-6789 with Joseph Doe SSN 987-65-4321.'' In this example, 
John Doe is the primary owner.
    Principal amount means the amount of the original investment. 
Principal amount does not include any interest earned.
    Redemption of a book-entry Series I savings bonds refers to payment 
of principal and accrued interest on the bond at final maturity, or, at 
the option of the owner, prior to final maturity. The owner of a book-
entry savings bonds held in New Treasury Direct may redeem all 
principal and interest or a portion of the principal and the 
proportionate amount of interest.
    Redemption of a definitive Series I savings bonds refers to the 
payment of principal and accrued interest when the owner presents the 
bond for payment.

[[Page 64280]]

    Redemption value means principal plus accrued interest of a Series 
I savings bonds, as of the date of redemption. In the case of book-
entry Series I savings bonds, it also refers to a portion of the 
principal amount plus a proportionate amount of accrued interest of a 
bond, as of the date of redemption.
    Registration of a book-entry Series I savings bonds means that the 
name and Taxpayer Identification Number (TIN) of all registrants are 
maintained on our records for a book-entry bond.
    Registration of a definitive Series I savings bonds means that the 
name and TIN of the owner or first-named co-owner are inscribed on the 
face of the bond.
    Secondary owner means the second individual named in the 
registration of a book-entry bond held in New Treasury Direct 
registered ``John Doe SSN 123-45-6789 with Joseph Doe SSN 987-65-
4321.'' In this example, Joseph Doe is the secondary owner.
    Semiannual inflation rate means a component of the composite annual 
rate that is based on the six-month percentage change in the CPI-U.
    Semiannual rate periods are the six-month periods beginning on the 
date of issue and on each semiannual anniversary of the date of issue 
to maturity.
    Series I savings bond means a savings bonds, whether definitive or 
book-entry, that is purchased at par and pays interest based on a 
formula that incorporates both an annual fixed rate and a semiannual 
inflation rate.
    Single owner means the person named in the registration of a 
savings bonds without a coowner, beneficiary or secondary owner.
    Taxpayer identification number (TIN) means the identifying number 
required on tax returns and other documents submitted to the Internal 
Revenue Service; that is, an individual's social security account 
number (SSN) or an employer identification number (EIN). A SSN is 
composed of nine digits separated by two hyphens, for example, 123-45-
6789. An EIN is composed of nine digits separated by one hyphen, for 
example, 12-3456789. The hyphens are an essential part of the numbers.
    We, us, or our refers to the agency, the Bureau of the Public Debt. 
The term extends to the Secretary of the Treasury and the Secretary's 
delegates at the Treasury Department and Bureau of the Public Debt. The 
term also extends to any fiscal or financial agent we designate to act 
on behalf of the United States.
    You or your refers to an owner of a Series I savings bonds.


Sec.  359.4  In what form are Series I savings bonds issued?

    Series I savings bonds are issued in either book-entry or 
definitive form.


Sec.  359.5  What is the maturity period of a Series I savings bonds?

    Series I savings bonds have a total maturity period of 30 years 
from the issue date, consisting of an original maturity period of 20 
years and an extension period of 10 years.


Sec.  359.6  When may I redeem my Series I bond?

    You may redeem your Series I savings bond at any time beginning six 
months after its issue date.


Sec.  359.7  If I redeem a Series I savings bonds before five years 
after the issue date, is there an interest penalty?

    If you redeem a bond less than five years after the issue date, we 
will reduce the overall earning period by three months. For example, if 
you redeem a bond issued January 1, 2002, nine months later on October 
1, 2002, the redemption value will be determined by applying the value 
calculation procedures and composite rate for that bond as if the 
redemption date were three months earlier (July 1, 2002). However, we 
will not reduce the redemption value of a bond subject to the three-
month interest penalty below the issue price (par). This penalty does 
not apply to bonds redeemed five years or more after the issue date.


Sec.  359.8  How does interest accrue on Series I savings bonds?

    A bond accrues interest based on both a fixed rate of return and a 
semiannual inflation rate. A single, annual rate called the composite 
rate reflects the combined effects of the fixed rate and the semiannual 
inflation rate. For more information, see Appendix B of part 359.


Sec.  359.9  When are interest rates for Series I savings bonds 
announced?

    (a) The Secretary will furnish fixed rates, semiannual inflation 
rates, and composite rates for Series I savings bonds in announcements 
published each May 1 and November 1.
    (b) If the regularly scheduled date for the announcement is a day 
when the Treasury is not open for business, then the Secretary will 
make the announcement on the next business day. However, the effective 
date of the rates remains the first day of the month of the 
announcement.
    (c) The Secretary may announce rates at any other time.


Sec.  359.10  What is the fixed rate of return?

    The Secretary, or the Secretary's designee determines the fixed 
rate of return. The fixed rate is established for the life of the 
bond.\1\ The most recently announced fixed rate is only for bonds 
purchased during the six months following the announcement, or for any 
other period of time announced by the Secretary.
---------------------------------------------------------------------------

    \1\ However, the fixed rate is not a guaranteed minimum rate; 
the composite rate could possibly be less than the fixed rate in 
deflationary situations.
---------------------------------------------------------------------------


Sec.  359.11  What is the semiannual inflation rate?

    The index used to determine the semiannual inflation rate is the 
non-seasonally adjusted CPI-U (the Consumer Price Index for All Urban 
Consumers for the U.S. City Average for All Items, 1982-84=100) 
published by the Bureau of Labor Statistics of the U.S. Department of 
Labor. (For further information on CPI-U considerations, see Appendix C 
to part 359 at section 1.) The semiannual inflation rate reflects the 
percentage change, if any, in the CPI-U over a six-month period. We 
announce this rate twice a year, in May and November. The semiannual 
inflation rate we announced in May 2002 reflects the percentage change 
between the CPI-U figures from the preceding March 2002 and September 
2001. The rate of change over the six-month period, if any, will be 
expressed as a percentage, rounded to the nearest one-hundredth of one 
percent. More specifically, the semiannual inflation rate will be 
determined by the following formula (the resulting rate will be rounded 
to the nearest one-hundredth of one percent):

Semiannual inflation rate = (CPI-UCurrent - CPI-
UPrior) / CPI-UPrior


Sec.  359.12  What happens in deflationary conditions?

    In certain deflationary situations, the semiannual inflation rate 
may be negative. Negative semiannual inflation rates will be used in 
the same way as positive semiannual inflation rates. However, if the 
semiannual inflation rate is negative to the extent that it completely 
offsets the fixed rate of return, the redemption value of a Series I 
bond for any particular month will not be less than the value for the 
preceding month.


Sec.  359.13  What are composite rates?

    Composite rates are single, annual interest rates that reflect the 
combined effects of the fixed rate and the semiannual inflation rate.

[[Page 64281]]

Sec.  359.14  How are composite rates determined?

    Composite rates are set according to the following formula (See 
Appendix A to part 359 for examples of calculations involving composite 
interest rates.):

Composite rate = {(Fixed rate / 2) + Semiannual inflation rate + 
[Semiannual inflation rate x (Fixed rate / 2)]{time}  x 2.\2\
---------------------------------------------------------------------------

    \2\ Example for I bonds issued May 2002-October 2002:
    Fixed rate = 2.00%
    Inflation rate = 0.28%
    Composite rate = [0.0200 / 2 + 0.0028 + (0.0028 x 0.0200 / 2)] 
x2
    Composite rate = [0.0100 + 0.0028 + 0.000028] x2
    Composite rate = 0.012828 x 2
    Composite rate = 0.025656
    Composite rate = 0.0257 (rounded)
    Composite rate = 2.57% (rounded)
---------------------------------------------------------------------------


Sec.  359.15  When is the composite rate applied to Series I savings 
bonds?

    The most recently announced composite rate applies to a bond during 
its next semiannual rate period. A bond's semiannual rate periods are 
consecutive six-month periods, the first of which begins with the 
bond's issue date. This means that there can be a delay of several 
months from the time of a composite rate announcement to the time that 
rate determines interest earnings for a bond. For example, if you 
purchased a bond in April, its semiannual rate periods begin every 
April and October. At the beginning of the semiannual rate period in 
April, the most recently announced composite rate would have been the 
rate we announced the previous November. This rate will determine 
interest earnings for your bond for the next six months, through the 
end of September. At the beginning of the semiannual rate period in 
October, the most recently announced composite rate would be the rate 
announced the previous May. This rate will determine interest earnings 
for your bond through the end of the following March. However, if you 
purchased a bond instead in May, its semiannual rate periods begin in 
May and November. Therefore, the composite rates announced in May and 
November will apply immediately to this bond. (See Appendix C to part 
359 at Sec.  2 for a discussion of rate lag.)


Sec.  359.16  When does interest accrue on Series I savings bonds?

    (a) Interest, if any, accrues on the first day of each month; that 
is, we add the interest earned on a bond during any given month to its 
value at the beginning of the following month.
    (b) The accrued interest compounds semiannually.


Sec.  359.17  When is interest payable on Series I savings bonds?

    Interest earnings are payable upon redemption.


Sec.  359.18  Is the determination of the Secretary on rates and values 
final?

    The Secretary's determination of fixed rates of return, semiannual 
inflation rates, composite rates, and savings bonds redemption values 
is final and conclusive.


Sec.  359.19  How is interest calculated?

    We base all calculations of interest on a $25 unit. We use the 
value of this unit to determine the value of bonds in higher 
denominations. The effect of rounding off the value of the $25 unit 
increases at higher denominations. This can work to your slight 
advantage or disadvantage, depending on whether we round the value up 
or down.\3\
---------------------------------------------------------------------------

    \3\ For example: A composite rate of 2.57% will result in a 
newly purchased $25 unit increasing in value after six months to 
$25.32, when rounded to the nearest cent. Thus, a $5,000 bond 
purchased at the same time as the $25 unit will be worth $5,064 
after six months ([$5,000 divided by $25] x $25.32 = $5,064.) In 
contrast, if it applied directly to a $5,000 bond, the rate would 
render a value of $5,064.25 after six months, a difference of 25 
cents. (This example does not include any discussion of the three-
month interest penalty that applies if you redeem a bond less than 
five years after its issue date.)
---------------------------------------------------------------------------


Sec.  359.20-359.24  [Reserved]

Subpart B--Definitive Series I Savings Bonds


Sec.  359.25  What are the denominations and prices of definitive 
Series I savings bonds?

    Definitive bonds are issued in denominations of $50, $75, $100, 
$200, $500, $1,000, $5,000, and $10,000. These bonds are sold at par; 
that is, the purchase price is the same as the denomination (face 
value).


Sec.  359.26  When are definitive Series I savings bonds validly 
issued?

    A definitive bond is validly issued when it is registered as 
provided in part 360, and when it bears an issue date and the 
validation indicia of an authorized issuing agent.


Sec.  359.27  What is the issue date of a definitive Series I savings 
bonds?

    The issue date of a definitive bond is the first day of the month 
in which an authorized issuing agent receives payment of the issue 
price.


Sec.  359.28  Are taxpayer identification numbers (TINs) required for 
the registration of definitive Series I savings bonds?

    The inscription of a definitive bond must include the TIN of the 
owner or first-named co-owner. If the bond is being purchased as a gift 
or award and the owner's TIN is not known, the TIN of the purchaser 
must be included in the inscription on the bond.


Sec.  359.29  What amount of definitive Series I savings bonds may I 
purchase per year?

    The principal amount of definitive bonds that may be purchased in 
the name and TIN of any person, in any calendar year, is limited to 
$30,000.


Sec.  359.30  Are definitive Series I savings bonds purchased in the 
name of an individual computed separately from bonds purchased in a 
fiduciary capacity?

    We compute the purchases of bonds in the name of any person in an 
individual capacity separately from purchases in a fiduciary capacity 
(for instance, as representative for the estate of an individual).


Sec.  359.31  What definitive Series I savings bonds are included in 
the computation?

    In computing the purchases for each person, we include the 
following outstanding definitive bonds purchased in that calendar year:
    (a) All bonds registered in the name of and bearing the taxpayer 
identification number (TIN) of that person alone or as co-owner;
    (b) All bonds registered in the name of the representative of the 
estate of that person and bearing that person's TIN; and
    (c) All gift bonds registered in the name of that person but 
bearing the TIN of the purchaser.


Sec.  359.32  What definitive Series I savings bonds are excluded from 
the computation?

    In computing the purchases for each person, the following are 
excluded:
    (a) Bonds on which that person is named as beneficiary;
    (b) Bonds to which that person has become entitled upon the death 
of the registered owner;
    (c) Bonds to which that person has become entitled by virtue of the 
termination of a trust or the occurrence of a similar event; and
    (d) Bonds that are purchased and redeemed within the same calendar 
year.


Sec.  359.33  What happens if I purchase definitive Series I savings 
bonds in excess of the maximum amount?

    If you have bonds issued during any one calendar year in excess of 
the prescribed maximum amount, we reserve the right to take any action 
we deem necessary to adjust the excess. You should obtain instructions 
for adjustment of the excess from the Bureau of the Public Debt, 
Parkersburg, WV 26106-1328, or e-mail at 
<savbonds@bpd.treas.gov.

[[Page 64282]]

Sec.  359.34  May I purchase definitive Series I savings bonds over-
the-counter?

    You may purchase definitive bonds over-the-counter through any 
participating issuing agent.\4\ To purchase over-the-counter, you must 
submit a purchase application, along with payment in the amount of the 
issue price to an issuing agent. You may use any means of payment 
acceptable to the issuing agent. You may authorize purchases on a 
recurring basis in your application. The issuing agent bears the burden 
of collection and the risk of loss for non-collection or return of the 
payment.
---------------------------------------------------------------------------

    \4\ However, an organization serving as an issuing agent because 
of its status as an employer or an organization operating an 
employer's payroll savings plan under Sec.  317.2(c) may sell bonds 
only through payroll savings plans.
---------------------------------------------------------------------------


Sec.  359.35  May I purchase definitive Series I savings bonds through 
a payroll savings plan?

    You may purchase definitive bonds through deductions from your pay 
if your employer maintains a payroll savings plan. An authorized 
issuing agent must issue the bonds.


Sec.  359.36  May I purchase definitive Series I savings bonds through 
employee thrift, savings, vacation, and similar plans?

    You may purchase bonds registered in the names of employee plans in 
authorized denominations through a designated Federal Reserve Bank, as 
provided in part 360 of this chapter.


Sec.  359.37  How are definitive Series I savings bonds delivered?

    We deliver definitive bonds by mail to your address. If your 
address is within the United States, its territories or possessions, or 
the Commonwealth of Puerto Rico, we will deliver bonds at our risk. 
Bonds delivered elsewhere will be delivered at your risk; however, at 
our discretion, we may require delivery to an address within the United 
States, or refuse delivery to addresses in countries referred to in 
part 211 of this chapter.


Sec.  359.38  How is payment made when definitive Series I savings 
bonds are redeemed?

    A financial institution qualified as a paying agent under the 
provisions of part 321 will pay the current redemption value of a 
definitive Series I bond presented for payment. The bond must meet the 
requirements for payment specified in part 360. You must establish your 
identity and entitlement to redemption to the satisfaction of the 
agent, in accordance with our instructions and identification 
guidelines, and must sign and complete the request for payment.


Sec.  359.39  How are redemption values calculated for definitive 
Series I savings bonds?

    We determine the redemption value of a definitive savings bonds for 
the accrual date (the first day of each month) by first determining the 
composite rate as defined in Sec.  359.13. If the result of the 
composite rate calculation is a negative value, zero will be the 
assumed composite rate in the redemption value calculation. Redemption 
values are calculated using the following formula (For examples of the 
calculation, see Appendix A to part 359):

FV = PV x {[1 + (CR / 2)] (m / 6){time} 
Where:

FV (future value) = redemption value on the accrual date rounded to the 
nearest cent without consideration of penalty.
PV (present value) = redemption value at the beginning of the 
semiannual rate period calculated without consideration of penalty. For 
bonds that are older than five years, PV will equal the redemption 
value at the start of the semiannual rate period.
CR = composite rate converted to decimal form by dividing by 100.
m = number of full calendar months elapsed during the semiannual rate 
period.


Sec.  359.40  How can I find out what my definitive Series I savings 
bonds are worth?

    (a) Redemption values. Redemption values are available for 
definitive bonds in various formats and media.
    (1) You may determine the redemption value for definitive bonds on 
the Internet at <www.savingsbonds.gov.
    (2) You may download savings bonds calculators from the Internet at 
<www.savingsbonds.gov.
    (3) You may obtain paper tables from the Bureau of the Public Debt, 
Parkersburg, West Virginia 26106-1328. We reserve the right to cease 
making paper tables of redemption values available.
    (b) Redemption penalty. Redemption values published in the tables 
reflect the three-month interest penalty applied to bonds redeemed 
prior to five years from the date of issue.


Sec.  359.41-359.44  [Reserved]

Subpart C--Book-Entry Series I Savings Bonds


Sec.  359.45  How are book-entry Series I savings bonds purchased and 
held?

    Book-entry bonds must be purchased and held online through your New 
Treasury Direct account. We provide instructions for opening an account 
online at http://www.publicdebt.treas.gov.


Sec.  359.46  What are the denominations and prices of book-entry 
Series I savings bonds?

    Book-entry bonds are issued in a minimum amount of $25, with 
additional increments of one cent. Book-entry bonds are sold at par 
value.


Sec.  359.47  How is payment made for purchases of book-entry Series I 
savings bonds?

    Purchases of book-entry I bonds are made through your New Treasury 
Direct account. We will debit your designated account at a United 
States depository financial institution for payment of the bonds.


Sec.  359.48  How are redemption payments made for my redeemed book-
entry Series I savings bonds?

    We will make payments electronically by direct deposit, using the 
ACH method, to your designated account at a United States depository 
financial institution.


Sec.  359.49  What is the issue date of a book-entry Series I savings 
bonds?

    The issue date of a book-entry savings bonds is the first day of 
the month in which we receive ACH settlement for the bond.


Sec.  359.50  What amount of book-entry Series I savings bonds may I 
purchase per year?

    The principal amount of book-entry bonds that you may purchase in 
any calendar year is limited to $30,000 per New Treasury Direct 
account.


Sec.  359.51  What book-entry Series I savings bonds are included in 
the computation of purchases?

    (a) In computing the purchases for each New Treasury Direct account 
owner in any calendar year, we include all bonds purchased by the 
account owner in that calendar year.
    (b) Bonds purchased as gifts or in a fiduciary capacity are not 
included in the computation for the purchaser.
    (c) Bonds transferred or delivered from one New Treasury Direct 
account to another New Treasury Direct account are included in the 
computation for the recipient.

[[Page 64283]]

Sec.  359.52  What happens if any person purchases book-entry Series I 
savings bonds in excess of the maximum amount?

    We reserve the right to take any action we deem necessary to adjust 
the excess, including the right to remove the excess bonds from your 
New Treasury Direct account and refund the payment price to your bank 
account of record using the ACH method of payment.


Sec.  359.53  Are taxpayer identification numbers (TINs) required for 
registration of book-entry Series I savings bonds?

    The TIN of each person named in the registration is required to 
purchase a book-entry bond.


Sec.  359.54  When is a book-entry Series I savings bonds validly 
issued?

    A book-entry bond is validly issued when it is posted to your New 
Treasury Direct account.


Sec.  359.55  How are redemption values calculated for book-entry 
Series I savings bonds?

    We base current redemption values (CRV) for book-entry Series I 
savings bonds on the definitive savings bonds CRV. To calculate the 
book-entry values, we use the CRV for the $100 denomination Series I 
savings bonds and calculate a CRV prorated to the book-entry par 
investment amount for the corresponding issue and redemption dates. 
Calculated book-entry CRV will be rounded to the nearest one cent.\5\ 
The formula is as follows (Examples of the calculation are given in 
Appendix A to part 359.):
---------------------------------------------------------------------------

    \5\ Example: Calculated value of $25.044 rounds to $25.04; 
calculated value of $25.045 rounds to $25.05.

[Book-entry par investment / 100] x [CRV value for $100 bond].


Sec.  359.56  How can I find out what my book-entry Series I savings 
bonds are worth?

    (a) Redemption values. You may access redemption values for your 
book-entry bonds through your New Treasury Direct account.
    (b) Redemption penalty. Redemption values shown in your New 
Treasury Direct account reflect the three-month interest penalty 
applied to bonds redeemed prior to five years from the date of issue.


Sec.  359.57-359.64  [Reserved]

Subpart D--Miscellaneous Provisions


Sec.  359.65  How are Series I savings bonds taxed?

    Interest is subject to all taxes imposed under the Internal Revenue 
Code of 1986, as amended. The bonds are also subject to Federal and 
State estate, inheritance, gift, or other excise taxes. The bonds are 
exempt from all other taxation by any State or local taxing authority. 
(See Appendix D to part 359 for further information.)


Sec.  359.66  Is the Education Savings Bonds Program available for 
Series I savings bonds?

    You may be able to exclude from income for Federal income tax 
purposes all or part of the interest received on the redemption of 
qualified bonds during the year. To qualify for the program, you or the 
co-owner (in the case of definitive savings bonds) must have paid 
qualified higher education expenses during the same year. You also must 
have satisfied certain other conditions. This exclusion is known as the 
Education Savings Bonds Program. Information about the program can be 
found in Internal Revenue Service Publications. (For example, see 
Publication 17, ``Your Federal Income Tax,'' Publication 550, 
``Investment Income and Expenses,'' and Publication 970, ``Tax Benefits 
of Higher Education.'')


Sec.  359.67  Does Public Debt prohibit the issuance of Series I 
savings bonds in a chain letter scheme?

    We do not permit bonds to be issued in a chain letter or pyramid 
scheme. We authorize an issuing agent to refuse to issue a bond or 
accept a purchase order if there is reason to believe that a purchase 
is connected with a chain letter. The agent's decision is final.


Sec.  359.68  May Public Debt issue Series I savings bonds only in 
book-entry form?

    We reserve the right to issue bonds only in book-entry form.


Sec.  359.69  Does Public Debt make any reservations as to issue of 
Series I savings bonds?

    We may reject any application for Series I bonds, in whole or in 
part. We may refuse to issue, or permit to be issued, any bonds in any 
case or class of cases, if we deem the action to be in the public 
interest. Our action in any such respect is final.


Sec.  359.70  May Public Debt waive any provision in this part?

    We may waive or modify any provision of this part 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 material existing rights; and
    (c) If we are satisfied that such action would not subject the 
United States to any substantial expense or liability.


Sec.  359.71  What is the role of Federal Reserve Banks and Branches?

    (a) Federal Reserve Banks and Branches are fiscal agents of the 
United States. They are authorized to perform such services as we may 
request of them, in connection with the issue, servicing and redemption 
of Series I bonds.
    (b) We have currently designated the following Federal Reserve 
Offices to provide savings bonds services:

------------------------------------------------------------------------
                                   Reserve district     Geographic area
         Servicing site                 served              served
------------------------------------------------------------------------
Federal Reserve Bank, Buffalo     New York, Boston..  Connecticut,
 Branch, 160 Delaware Avenue,                          Maine,
 Buffalo, NY 14202.                                    Massachusetts,
                                                       New Hampshire,
                                                       New Jersey
                                                       (Northern half),
                                                       New York, Rhode
                                                       Island, Vermont,
                                                       Puerto Rico,
                                                       Virgin Islands.
Federal Reserve Bank, Pittsburgh  Cleveland,          Delaware, Kentucky
 Branch, 717 Grant Street,         Philadelphia.       (eastern half),
 Pittsburgh, PA 15219.                                 New Jersey,
                                                       (southern half),
                                                       Ohio,
                                                       Pennsylvania,
                                                       West Virginia
                                                       (northern
                                                       panhandle).
Federal Reserve Bank of           Richmond, Atlanta.  Alabama, District
 Richmond, 701 East Byrd Street,                       of Columbia,
 Richmond, VA 23219.                                   Florida, Georgia,
                                                       Louisiana
                                                       (southern half),
                                                       Maryland,
                                                       Mississippi
                                                       (southern half),
                                                       North Carolina,
                                                       South Carolina,
                                                       Tennessee
                                                       (eastern half),
                                                       Virginia, West
                                                       Virginia (except
                                                       northern
                                                       panhandle).

[[Page 64284]]

 
Federal Reserve Bank of           Minneapolis,        Illinois (northern
 Minneapolis, 90 Hennepin          Chicago.            half), Indiana
 Avenue, Minneapolis, MN 55401.                        (northern half),
                                                       Iowa, Michigan,
                                                       Minnesota,
                                                       Montana, North
                                                       Dakota, South
                                                       Dakota,
                                                       Wisconsin.
Federal Reserve Bank of Kansas    Dallas, San         Alaska, Arizona,
 City, 925 Grand Boulevard,        Francisco, Kansas   Arkansas,
 Kansas City, MO 64106.            City, St. Louis.    California,
                                                       Colorado, Hawaii,
                                                       Idaho, Illinois
                                                       (southern half),
                                                       Indiana (southern
                                                       half), Kansas,
                                                       Kentucky (western
                                                       half), Louisiana
                                                       (northern half),
                                                       Mississippi
                                                       (northern half),
                                                       Missouri,
                                                       Nebraska, Nevada,
                                                       New Mexico,
                                                       Oklahoma, Oregon,
                                                       Tennessee
                                                       (western half),
                                                       Texas, Utah,
                                                       Washington,
                                                       Wyoming, Guam.
------------------------------------------------------------------------

Sec.  359.72  May the United States supplement or amend the offering of 
Series I savings bonds?

    We may supplement or amend the terms of this offering of Series I 
bonds at any time.

Appendix A to Part 359--Redemption Value Calculations

1. What are some examples of calculations of redemption values for 
definitive Series I savings bonds?

    (a) A bond five years or older. Assume a composite rate of 
3.97%, effective May 1, 2003, for a $25 unit, with an issue date of 
September 1, 1998, and a redemption value of $31.90 as of September 
1, 2003. The February 1, 2004, redemption value is calculated as 
follows: bonds issue-dated in September have semiannual rate periods 
beginning each March 1 and September 1. The first semiannual rate 
period to begin on or after the date of the May 1, 2003, rate 
announcement of the composite rate would be the period beginning 
September 1, 2003. PV, the present value, $31.90, would be the 
redemption value of the bond at the beginning of the semiannual rate 
period (September 1, 2003). The composite rate, 3.97% converted to a 
decimal, would be 0.0397. The number of months, m, is five, since 
five full calendar months (September through January) have lapsed 
since the beginning of the semiannual rate period. FV, the 
redemption value (rounded to the nearest cent), is then the result 
of the formula:

FV = PV x {[1 + (CR / 2)] (m / 6){time} 
Where FV = 31.90 x {[1 + (0.0397 / 2)] (5 / 6){time}  = 
$32.43

    The redemption value for an actual denomination of a Series I 
bond can be determined by applying the appropriate multiple, for 
example:

$32.43 x ($100.00 / $25.00) for a bond with a $100.00 face amount; 
or
$32.43 x ($1000.00 / $25.00) for a bond with a $1000.00 face amount.

    (b) A bond less than five years old. Assume a composite rate of 
3.97% effective May 1, 2003, for a $25.00 unit, with an issue date 
of December 1, 2000, a redemption date of February 1, 2004, and a 
value on June 1, 2003, of $28.45, without consideration of penalty. 
A three-month penalty is assessed since the redemption date is less 
than five years after the issue date. The penalty is accounted for 
by assuming that the redemption date is three months earlier 
(November 1, 2003). The February 1, 2004, redemption value is then 
calculated as follows: bonds issue-dated in December have semiannual 
rate periods that begin each June 1 and December 1. The first 
semiannual rate period to begin on or after the May 1, 2003, rate 
announcement of the composite rate would be the period beginning 
June 1, 2003. PV, the present value, $28.45, is the value of the 
bond at the beginning of the semiannual rate period (June 1, 2003), 
without consideration of penalty. The composite rate, 3.97%, 
converted to a decimal, would be 0.0397. The number of months, m, is 
five, since five full calendar months (June through October) have 
elapsed since the beginning of the semiannual rate period and the 
redemption date (as adjusted for penalty). FV, the redemption value 
(rounded to the nearest cent), is then the result of the formula:

FV = PV x {[1 + (CR / 2)] (m / 6){time}  where
FV = $28.45 x {[1 + (0.397 / 2)] (5 / 6){time}  = $28.92

2. What is an example of a book-entry Series I savings bonds 
redemption value calculation?

    Assume a New Treasury Direct par investment amount in a book-
entry Series I savings bonds of $34.59, with an issue date of May, 
2001, and a redemption date of December, 2001. The published CRV for 
a definitive $100 Series I savings bonds issued May, 2001 and 
redeemed December, 2001 = $101.96.

Calculation:
[(Book-entry par investment) / (100)] x CRV value for $100 bond
[(34.59 / 100)] x 101.96
[0.3459] x 101.96
 35.267964
= $35.27

Appendix B to Part 359--Composite Semiannual Rate Period Table

    1. What months make up the composite semiannual rate period?
    You may use the following table to find when a bond's semiannual 
rate period begins and when we'll announce the rate that applies 
during each period.

----------------------------------------------------------------------------------------------------------------
                                   Then its semiannual
  If your Bond has an issue date   rate period begins--  We announce the rate that applies during a rate period
               of--                                                               in--
----------------------------------------------------------------------------------------------------------------
January..........................  January 1..........  November 1 (of the previous year).
                                   July 1.............  May 1.
February.........................  February 1.........  November 1 (of the previous year).
                                   August 1...........  May 1.
March............................  March 1............  November 1 (of the previous year).
                                   September 1........  May 1.
April............................  April 1............  November 1 (of the previous year).
                                   October 1..........  May 1.
May..............................  May 1..............  May 1.
                                   November 1.........  November 1.
June.............................  June 1.............  May 1.
                                   December 1.........  November 1.
July.............................  July 1.............  May 1.
                                   January 1..........  November 1 (of the previous year).
August...........................  August 1...........  May 1.
                                   February 1.........  November 1 (of the previous year).
September........................  September 1........  May 1
                                   March 1............  November 1 (of the previous year).

[[Page 64285]]

 
October..........................  October 1..........  May 1.
                                   April 1............  November 1 (of the previous year).
November.........................  November 1.........  November 1.
                                   May 1..............  May 1.
December.........................  December 1.........  November 1.
                                   June 1.............  May 1.
----------------------------------------------------------------------------------------------------------------

Appendix C to Part 359--Investment Considerations

    1. What are some index contingencies?
    (a) If a previously reported CPI-U is revised, we will continue to 
use the previously reported CPI-U in calculating redemption values.
    (b) If the CPI-U is rebased to a different year, we will continue 
to use the CPI-U based on the base reference period in effect when the 
security was first issued, as long as that CPI-U continues to be 
published.
    (c) If, while an inflation-indexed savings bonds is outstanding, 
the applicable CPI-U is discontinued or, in the judgment of the 
Secretary, fundamentally altered in a manner materially adverse to the 
interests of an investor in the security, or, in the judgment of the 
Secretary, altered by legislation or Executive Order in a manner 
materially adverse to the interests of an investor in the security, 
Treasury, after consulting with the Bureau of Labor Statistics or any 
successor agency, will substitute an appropriate alternative index. 
Treasury will then notify the public of the substitute index and how it 
will be applied. The Secretary's determinations in this regard will be 
final.
    (d) If the CPI-U for a particular month is not reported by the last 
day of the following month, we will announce an index number based on 
the last 12-month change in the CPI-U available. Any calculations of 
our payment obligations on the inflation-indexed savings bonds that 
rely on that month's CPI-U will be based on the index number that we 
have announced.
    2. How will inflation lag affect my Series I savings bonds?
    The inflation rate component of investor earnings will be 
determined twice each year. This rate will be the percentage change in 
the CPI-U for the six months ending each March and September. The rate 
will be included in the composite rate that is announced each May and 
November. For Series I bonds offered from September 1, 1998, through 
October 31, 1998, the inflation rate component of investor earnings 
will be the percentage change in the CPI-U for the six months ending 
March 31, 1998. This rate will be included in the composite rate that 
is announced for Series I bonds offered effective from September 1, 
1998, through October 31, 1998. In the event the Secretary, or the 
Secretary's designee, announces a composite rate at an effective date 
other than May 1 or November 1, the announcement will specify the 
period to be used to calculate the semiannual inflation rate. Each 
composite rate will be effective for the entirety of the applicable 
rate period that begins while the rate is in effect. Thus, an inflation 
rate may affect interest accruals from 3 to 13 months from the date 
that the CPI-U is measured.

    Example 1. The inflation rate determined from the CPI-U for the 
six-month period from October, 2003, through March, 2004, will be 
included in the composite rate announced in May, 2004. For a bond 
purchased in May 1999, this rate would go into effect immediately, 
since a new semiannual rate period for this bond will begin in May, 
2004. Series I bonds issued in May begin new semiannual rate periods 
in the months of May and November. In this example, the inflation 
rate will have its earliest impact in June 2004, when interest from 
May accrues, three months after the end of the six-month CPI-U 
period that ends in March, 2004.
    Example 2. The May 1, 2004, rate will apply similarly to a bond 
purchased in October 1999. Series I bonds issued in October begin 
new semiannual rate periods in the months of April and October. 
Thus, for this bond, the May 1, 2004, composite rate (which includes 
the inflation rate) will not go into effect until a new semiannual 
rate period begins on October 1, 2004. This rate, therefore, will 
determine the inflation-indexed portion of each interest accrual 
from November, 2004, through April, 2005. In this example, the 
inflation rate will have its latest impact in April 2005, 13 months 
following the six-month CPI-U period that ended March 31, 2004.

Appendix D to Part 359--Tax Considerations

    1. What are some general tax considerations?
    General. Interest is subject to all taxes imposed under the 
Internal Revenue Code of 1986, as amended. The bonds are also 
subject to Federal and State estate, inheritance, gift, or other 
excise taxes. The bonds are exempt from all other taxation by any 
State or local taxing authority.
    2. What reporting methods are available for savings bonds?
    (a) Reporting methods. You may use either of the following two 
methods for reporting the increase in the redemption value of the 
bond for Federal income tax purposes:
    (1) Cash basis method. You may defer reporting the increase to 
the year of final maturity, redemption, or other disposition, 
whichever is earliest; or
    (2) Accrual basis method. You may elect to report the increase 
each year, in which case the election applies to all Series I bonds 
that you then own, those subsequently acquired, and to any other 
obligations purchased on a discount basis, such as savings bonds of 
Series E or EE.
    (b) Changing methods. If you use the cash basis method, you may 
change to the accrual basis method without obtaining permission from 
the Internal Revenue Service. However, once you elect to use the 
accrual basis method in paragraph (a)(2), you may change the method 
of reporting the increase only by following the specific procedures 
prescribed by the Internal Revenue Service for making an automatic 
method change. For further information, you may contact the Internal 
Revenue Service director for your area, or the Internal Revenue 
Service, Washington, DC 20224.
    3. What transactions have potential tax consequences?
    The following types of transactions, among others, may have 
potential tax consequences:
    (a) A reissue that affects the rights of any of the persons 
named on a definitive Series I savings bonds may have tax 
consequences for the owner.
    (b) The transfer of a book-entry Series I savings bonds from one 
owner to another may have tax consequences for the purchaser.
    (c) The redemption of a book-entry Series I savings bonds by the 
secondary owner may have tax consequences for the primary owner.
    (d) The purchase of a Series I savings bonds as a gift may have 
gift tax consequences for the purchaser.

PART 360--REGULATIONS GOVERNING DEFINITIVE UNITED STATES SAVINGS 
BONDS, SERIES I

    6. The authority citation for part 360 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 31 U.S.C. 3105 and 3125.

    7. Revise the heading of part 360 to read as set forth above.

    8. Revise Sec.  360.0 to read as follows:

[[Page 64286]]

Sec.  360.0  Applicability

    The regulations in this part govern transactions in definitive 
United States Savings Bonds of Series I bearing issue dates of 
September 1, 1998, or later.

    9. Revise paragraph (a) of Sec.  360.2 to read as follows:


Sec.  360.2  Definitions.

    (a) Bond, or Series I savings bonds, as used in this part, means a 
definitive United States Savings Bonds of Series I.
* * * * *

    10. Add part 363 to read as follows:

PART 363--REGULATIONS GOVERNING SECURITIES HELD IN THE NEW TREASURY 
DIRECT SYSTEM

Subpart A--General

Sec.
363.0 What is the New Treasury Direct system?
363.1 What Treasury securities are covered by these regulations?
363.2 What agency administers New Treasury Direct?
363.3 What Treasury securities may be held in New Treasury Direct?
363.4 How is New Treasury Direct different from the Treasury Direct 
system?
363.5 How do I contact Public Debt?
363.6 What special terms do I need to know to understand this part?
363.7-363.14 [Reserved]

Subpart B--New Treasury Direct System

363.15 What is a New Treasury Direct account?
363.16 Who is eligible to open a New Treasury Direct account?
363.17 How can I open a New Treasury Direct account?
363.18 How will you authenticate my identity?
363.19 What is the procedure for offline authentication?
363.20 How do I access my account?
363.21 Who is liable if someone else accesses my New Treasury Direct 
account using my password?
363.22 Is Public Debt liable if the electronic transmission of my 
data is intercepted?
363.23 What should I do if I become aware that my password has 
become compromised?
363.24 What transactions can I perform online through my New 
Treasury Direct account?
363.25 How do I conduct transactions in my account or in Treasury 
securities held in my account?
363.26 What is a transfer?
363.27 May a New Treasury Direct account be opened in the name of a 
minor?
363.28 What is the procedure for opening a New Treasury Direct 
account for a minor?
363.29 How are transactions conducted in the minor's account?
363.30 What transactions are permitted in securities held in the New 
Treasury Direct account of a minor?
363.31 How can a minor gain control of his or her account when he or 
she reaches the age of 18 years?
363.32 Does Public Debt assume any liability for any transactions 
conducted by a parent or legal guardian in the minor's account?
363.33 Can an attorney-in-fact conduct transactions in my New 
Treasury Direct account?
363.34 What happens if an owner becomes incompetent after opening a 
New Treasury Direct account?
363.35 When is a transaction effective?
363.36 What securities can I purchase and hold in my New Treasury 
Direct account?
363.37 How do I purchase eligible Treasury securities to be held in 
my New Treasury Direct account?
363.38 What happens if the ACH debit for purchase of a book-entry 
Series I savings bonds is returned by my financial institution?
363.39 Will I receive a confirmation of my request to purchase a 
Treasury security?
363.40 How are payments of principal and interest made?
363.41 What happens if an ACH payment of principal or interest to my 
account at a financial institution is returned to Public Debt?
363.42 How will my interest income be reported for tax purposes?
363.43 What are the procedures for certifying my signature on an 
offline application for a New Treasury Direct account, or on an 
offline transaction form?
363.44-363.49 [Reserved]

Subpart C--Book-Entry Series I Savings Bonds

General

363.50 What Treasury securities does this subpart cover?
363.51 Who may purchase and hold a book-entry Series I savings 
bonds?
363.52 What amount of book-entry Series I savings bonds may I 
purchase in one year?
363.53 What is the minimum amount of book-entry Series I savings 
bonds that I may purchase in any transaction?
363.54 What is the minimum amount of a book-entry Series I savings 
bonds that I must hold in my account?
363.55 May I transfer my book-entry savings bonds to another person?
363.56 What is the minimum amount of book-entry Series I savings 
bonds that I may transfer in any one transaction?
363.57 What is the minimum amount of book-entry Series I savings 
bonds that I may redeem in any one transaction?
363.58 May book-entry Series I savings bonds be pledged or used as 
collateral?
363.59-363.64 [Reserved]

Registration

363.65 What do I need to know about the registration of book-entry 
Series I savings bonds?
363.66 What forms of registration are available for book-entry 
Series I savings bonds?
363.67 What do I need to know about the single owner form of 
registration?
363.68 What do I need to know about the owner with beneficiary form 
of registration?
363.69 What do I need to know about the primary owner with secondary 
owner form of registration?
363.70 What are special forms of registration?
363.71 What special forms of registration are permitted?
363.72-363.79 [Reserved]

Minors

363.80 May a minor purchase book-entry Series I savings bonds?
363.81 May book-entry Series I savings bonds be purchased for a 
minor as a gift?
363.82 May an account owner deliver a book-entry Series I savings 
bonds purchased as a gift to a minor?
363.83 May an account owner transfer a book-entry Series I savings 
bonds to a minor?
363.84 [Reserved]

Incompetent Person

363.85 May Series I savings bonds be registered in the name of an 
incompetent person for whom a legal guardian has been appointed?
363.86-363.89 [Reserved]

Deceased Owners

363.90 What happens when a New Treasury Direct account owner dies 
and his or her estate is entitled to Series I savings bonds held in 
the account?
363.91-363.94 [Reserved]

Gifts

363.95 How may I give a book-entry Series I savings bonds as a gift?
363.96 What do I need to know if I initially purchase a bonds as a 
gift?
363.97 What do I need to know if I transfer a book-entry Series I 
savings bonds to another person as a gift?
363.98 [Reserved]
363.99 What is the minimum amount of a bond that I may transfer or 
deliver as a gift in any one transaction?
363.100-363.104 [Reserved]

Transactions

363.105 Who has the right to conduct transactions in book-entry 
Series I savings bonds?
363.106 How are online transactions conducted in Series I savings 
bonds?
363.107 Does Public Debt reserve the right to require that any 
transactions be conducted offline?
363.108-363.109 [Reserved]

Judicial and Administrative Proceedings

363.110 Will Public Debt recognize a court order that attempts to 
defeat the survivorship rights of a beneficiary, secondary owner, or 
recipient of an undelivered gift bond?
363.111 Will Public Debt accept notice of an adverse claim or notice 
of pending judicial proceedings involving book-entry Series I 
savings bonds?
363.112 Is Public Debt a proper party in a judicial proceeding 
involving competing

[[Page 64287]]

claims to a book-entry Series I savings bonds?
363.113 Will Public Debt pay or transfer book-entry Series I savings 
bonds pursuant to an order in a divorce proceeding?
363.114 Will Public Debt recognize a court order?
363.115 Will Public Debt pay a savings bonds pursuant to a levy?
363.116 Will Public Debt pay a bond to the Internal Revenue Service 
(IRS) pursuant to a levy?
363.117 Will Public Debt pay a bond to a trustee in bankruptcy or 
similar court officer?
363.118 What evidence is required to establish the validity of 
judicial proceedings?
363.119 Will Public Debt pay a bond pursuant to a forfeiture 
proceeding?
363.120-363.124 [Reserved]

Payment

363.125 How is payment made on a book-entry Series I savings bonds?
363.126 Under what circumstances will payment be made?
363.127-363.129 [Reserved]

Subparts C through E--[Reserved]

Subpart F--Miscellaneous

363.175 May Public Debt waive these regulations?
363.176 Can I be required to provide additional evidence to support 
a transaction?
363.177 May Public Debt amend or supplement these regulations?

    Authority: 5 U.S.C. 301; 31 U.S.C. 3102, et seq., 3105 and 3125; 
12 U.S.C. 391

Subpart A--General


Sec.  363.0  What is the New Treasury Direct system?

    The New Treasury Direct system (New Treasury Direct) is an online 
account system in which you may hold and conduct transactions in 
eligible book-entry Treasury securities.


Sec.  363.1  What Treasury securities are covered by these regulations?

    The regulations in this part apply to book-entry Treasury 
securities held in the New Treasury Direct system.


Sec.  363.2  What agency administers New Treasury Direct?

    The Bureau of the Public Debt (Public Debt), Department of the 
Treasury (Treasury) is responsible for administering New Treasury 
Direct. Public Debt may delegate authority to process certain 
transactions in New Treasury Direct to Federal Reserve Banks and 
Branches as fiscal agents of the United States.


Sec.  363.3  What Treasury securities may be held in New Treasury 
Direct?

    Initially, only book-entry Series I savings bonds may be held in 
New Treasury Direct. We intend to offer other Treasury securities to be 
held in New Treasury Direct in future releases to the system.


Sec.  363.4  How is New Treasury Direct different from the 
TreasuryDirect system?

    New Treasury Direct is an online (Internet-based) system. The 
existing TreasuryDirect system (TreasuryDirect) is a separate book-
entry system, available since 1986, for marketable Treasury securities 
only. The terms and conditions for TreasuryDirect are found at part 
357, and are substantially different from the terms and conditions of 
securities held in New Treasury Direct.


Sec.  363.5  How do I contact Public Debt?

    (a) Emails may be sent to: 
<treasury.direct@bpd.treas.gov. We will reply by e-mail 
unless you request otherwise. We are not responsible for the security 
of e-mail messages you may send to us, or replies we may send to you.
    (b) Letters should be addressed to: Bureau of the Public Debt, New 
Treasury Direct, Parkersburg, WV 26106-1328.


Sec.  363.6  What special terms do I need to know to understand this 
part?

    Account means a New Treasury Direct account as described in Sec.  
363.15.
    Authentication service means a public or private service that 
authenticates the identity of an online applicant for a New Treasury 
Direct account using information provided by the applicant.
    Automated Clearing House (ACH) means a funds transfer system 
governed by the Rules of the National Automated Clearing House 
Association (NACHA). NACHA provides for the interbank clearing of 
electronic entries for participating financial institutions.
    Beneficiary refers to the second individual named in the 
registration of a security held in the New Treasury Direct system 
registered ``John Doe SSN 123-45-6789 POD (payable on death to) Joseph 
Doe SSN 987-65-4321.'' In this example, Joseph Doe is the beneficiary.
    Book-entry security means a Treasury security maintained by us in 
electronic or paperless form as a computer record.
    Business day means any day that funds may be settled through ACH.
    Court means a court of law with jurisdiction over the parties and 
the subject matter.
    Definitive security means a Treasury security held in paper form.
    Delivery means moving a minimum amount of $25 (consisting of 
principal and proportionate interest) of a security held as a gift from 
the account of the purchaser to the account of the recipient.
    Depository financial institution means an entity described in 12 
U.S.C. 461 (b)(1)(A)(i)-(vi).
    Federal Reserve Bank (Reserve Bank) means a Federal Reserve Bank or 
Branch.
    Final maturity of a savings bonds means the date beyond which an 
unredeemed savings bonds no longer earns interest.\1\
---------------------------------------------------------------------------

    \1\ 1 Series I savings bonds have a maturity period of 30 years, 
consisting of an original maturity period of 20 years and an 
extension period of 10 years.
---------------------------------------------------------------------------

    Gift means a Treasury security purchased for or transferred to an 
intended recipient, without consideration.
    Individual means a natural person. Individual does not mean an 
organization, representative, or fiduciary.
    Interest on a savings bonds means the difference between the 
principal (par) and the redemption value of the bond.
    Legal guardian of a minor or incompetent person refers to the 
court-appointed or otherwise qualified person, regardless of title, who 
is legally authorized to act for the minor or incompetent individual.
    Legal representative refers to the court-appointed or otherwise 
qualified person, regardless of title, who is legally authorized to 
manage and settle the estate of a decedent. The term includes an 
executor and an administrator.
    Legally incompetent means a court has declared an individual to be 
incapable of handling his or her business affairs.
    Minor means an individual who is under the age of 18 years.
    Online means use of the Internet.
    Owner is either a single owner, the first person named in the 
registration of a security held in the owner with beneficiary form of 
registration, or the primary owner of a security held in the primary 
owner with secondary owner form of registration.
    Person means an entity including an individual, trust, estate, 
corporation, government entity, association, partnership, and any other 
similar organization. Person does not mean a Federal Reserve Bank.
    Primary owner means the first person named in the registration of a 
security held in New Treasury Direct registered, e.g., ``John Doe SSN 
123-45-6789 with Joseph Doe SSN 987-65-4321.'' In this example, John 
Doe is the primary owner.
    Principal amount means the amount of the original investment. 
Principal

[[Page 64288]]

amount does not include any interest earned.
    Recipient means the person to whom a gift is given.
    Redemption of a savings bonds refers to the payment of principal 
and interest at final maturity, or prior to final maturity at the 
option of the owner. The owner may redeem all principal and interest or 
a portion of the principal and the proportionate amount of interest.
    Redemption value means principal plus accrued interest of a bond, 
or a portion of the principal plus a proportionate amount of accrued 
interest on the bond, as of the date of redemption.
    Registration or Registered means that the name and taxpayer 
identification number(s) (TIN) of the person(s) named on the security 
are maintained on our records.
    Secondary owner means the second person named in the registration 
of a book-entry security held in New Treasury Direct registered, e.g. 
``John Doe SSN 123-45-6789 with Joseph Doe SSN 987-65-4321.'' In this 
example, Joseph Doe is the secondary owner.
    Security, or Treasury security, as used in this part, means an 
obligation issued by Treasury that may be held in New Treasury Direct.
    Series I savings bonds is a savings bonds, either in definitive 
(paper) form or in book-entry form, that sells at par and pays interest 
in accordance with a formula that includes a fixed component and a 
component indexed to the rate of inflation.
    Signature guarantee program means a signature guarantee program 
established under 17 CFR 240.17Ad-15, issued under authority of the 
Securities Exchange Act of 1934. For the purpose of this part, we 
recognize the Securities Transfer Agents Medallion Program (STAMP), the 
Stock Exchanges Medallion Program (SEMP), and the New York Stock 
Exchange, Inc., Medallion Signature Program (MSP). These certifications 
are acceptable for transfers of securities, but are not acceptable for 
offline account establishment.
    Single owner means the person named in the registration of a book-
entry Treasury security without a beneficiary or secondary owner.
    Social security account number or social security number (SSN) 
means the identifying number required on tax returns and other 
documents submitted to the Internal Revenue Service by an individual. A 
SSN is composed of nine digits separated by two hyphens, for example, 
123-45-6789.
    Taxpayer identification number (TIN) means the identifying number 
required on tax returns and other documents submitted to the Internal 
Revenue Service; that is, an individual's social security number (SSN) 
or an employer identification number (EIN). A SSN is composed of nine 
digits separated by two hyphens, for example, 123-45-6789. An EIN is 
composed of nine digits separated by one hyphen, for example, 12-
3456789. The hyphens are an essential part of the numbers.
    Transaction is any action affecting Treasury securities or account 
information.
    Transfer means moving a minimum amount of $25 (consisting of 
principal and proportionate interest) of a security from one New 
Treasury Direct account to another New Treasury Direct account in a 
transaction involving a change in the ownership of the security. The 
transfer of a specific security may be restricted by the terms of this 
part that apply to that security.
    We, us, or our refers to the Bureau of the Public Debt. The term 
includes the Secretary of the Treasury and the Secretary's delegates at 
the Treasury Department and Bureau of the Public Debt. The term also 
includes any fiscal or financial agent we designate to act on behalf of 
the United States.
    You or your refers to a New Treasury Direct account holder.


Sec. Sec.  363.7-363.14  [Reserved]

Subpart B--New Treasury Direct System


Sec.  363.15  What is a New Treasury Direct account?

    A New Treasury Direct account is an online account maintained by us 
solely in your name in which you may hold and conduct transactions in 
eligible book-entry Treasury securities. Your New Treasury Direct 
account may contain Treasury securities that are your personal 
holdings, gifts that have not yet been delivered, and Treasury 
securities that you hold on behalf of someone else, as permitted by 
these regulations.


Sec.  363.16  Who is eligible to open a New Treasury Direct account?

    In order to open a New Treasury Direct account, you must:
    (a) Have a valid social security number;
    (b) Have a United States address of record;
    (c) Have an account at a United States depository financial 
institution that will accept debits and credits using the Automated 
Clearing House method of payment;
    (d) Be 18 years of age or over;
    (e) Be legally competent; and
    (f) Be an individual.


Sec.  363.17  How can I open a New Treasury Direct account?

    You must establish a New Treasury Direct account online before you 
purchase a Treasury security to be held in your account. Instructions 
for online account establishment may be found at the official Public 
Debt website at http://www.publicdebt.treas.gov, or such other Internet 
address as Public Debt may from time to time announce by publication in 
the Federal Register. When you have completed the application, you will 
create a password to access your account. We will authenticate your 
identity and send your account number to you by email when your account 
application is approved.


Sec.  363.18  How will you authenticate my identity?

    We may use an online authentication service to authenticate your 
identity using information you provide about yourself on the 
application. At our option, we may require offline authentication.


Sec.  363.19  What is the procedure for offline authentication?

    In the event we require offline authentication, we will provide a 
printable authentication form. Your signature on the form must be 
certified or guaranteed as provided at Sec.  363.43, and the form must 
be mailed to us at the address provided in Sec.  363.5.


Sec.  363.20  How do I access my account?

    You may access your account online using your account number and 
password.


Sec.  363.21  Who is liable if someone else accesses my New Treasury 
Direct account using my password?

    You are solely responsible for the confidentiality and use of your 
password. We will treat any transactions conducted using your password 
as having been authorized by you. We are not liable for any loss, 
liability, cost or expense that you may incur as a result of 
transactions made using your password.


Sec.  363.22  Is Public Debt liable if the electronic transmission of 
my data is intercepted?

    We are not liable for any interception of electronic data or 
communication.


Sec.  363.23  What should I do if I become aware that my password has 
become compromised?

    You should change your password immediately if you become aware 
that your password has become compromised. If you become aware of any 
misuse of your password, you

[[Page 64289]]

should notify us by email at treasury.direct@bpd.treas.gov or call us 
at 304-480-8783.


Sec.  363.24  What transactions can I perform online through my New 
Treasury Direct account?

    The following transactions are by way of illustration only, and are 
not intended to limit transactions that may be added to the system in 
the future:
    (a) You can purchase eligible Treasury securities in your own right 
or as gifts;
    (b) You can redeem savings bonds;
    (c) You can make changes to the registration of securities held in 
your account on which you are the single owner, owner with beneficiary, 
or primary owner;
    (d) You can transfer a Treasury security to another person;
    (e) You can grant and revoke the right to view a security held in 
your account to any other New Treasury Direct account owner, providing 
the security is:
    (1) in the single owner form of registration, and
    (2) not being held in your account as a gift;
    (f) You can grant and revoke the right to view a security held in 
your account to the beneficiary named in the registration of the 
security, if the beneficiary is a New Treasury Direct account owner;
    (g) You can grant and revoke the right to view or the rights to 
view and redeem a security on which you are the primary owner to the 
secondary owner, if the secondary owner is a New Treasury Direct 
account owner;
    (h) You can view or redeem Treasury securities on which you are the 
secondary owner, if the primary owner has granted those rights to you, 
and if you are a New Treasury Direct account owner;
    (i) You can deliver gift Treasury securities to the New Treasury 
Direct account of another person;
    (j) You can make changes to your account information;
    (k) You can change your ACH information;
    (l) You can view a history of purchases, transactions, and pending 
transactions;
    (m) You can change or delete pending transactions;
    (n) You can change your password; and
    (o) You can change account security information.


Sec.  363.25  How do I conduct transactions in my account or in 
Treasury securities held in my account?

    We will provide online instructions for conducting transactions 
through your account. If you are unable to conduct a transaction 
online, you should contact us at the address provided in Sec.  363.5. 
Offline transactions will require a certified or guaranteed signature. 
See Sec.  363.43 for instructions for obtaining a certified or 
guaranteed signature.


Sec.  363.26  What is a transfer?

    (a) A transfer is a transaction to move a minimum amount of $25 
(consisting of principal and proportionate interest) of a Treasury 
security from one New Treasury Direct account to another New Treasury 
Direct account, in which the ownership of the security changes.
    (b) Transfers of a specific type of security may be limited by the 
subparts that refer to that security.


Sec.  363.27  May a New Treasury Direct account be opened in the name 
of a minor?

    A parent or legal guardian may open an account for a minor. The 
parent or legal guardian must have an existing New Treasury Direct 
account in order to open the minor's account. The parent or legal 
guardian will open the minor's account through the New Treasury Direct 
account of the parent or guardian. The account will be held in the name 
and SSN of the minor.


Sec.  363.28  What is the procedure for opening a New Treasury Direct 
account for a minor?

    Online instructions will be provided to the parent or legal 
guardian of a minor for establishing an account for a minor child. The 
parent or legal guardian will select the password for the account. The 
parent or legal guardian must certify that he or she is acting on 
behalf of the minor, and that all transactions conducted through the 
account will be on the minor's behalf.


Sec.  363.29  How are transactions conducted in the minor's account?

    The parent or guardian must conduct all transactions in the minor's 
account on behalf of the minor.


Sec.  363.30  What transactions are permitted in securities held in the 
New Treasury Direct account of a minor?

    We will not permit purchases or transfers to be conducted from the 
account of a minor. Treasury securities may be transferred to the 
minor's account, and gift Treasury securities may be delivered to the 
minor's account.


Sec.  363.31  How can a minor gain control of his or her account when 
he or she reaches the age of 18 years?

    The parent or legal guardian who opened the account on the minor's 
behalf must provide the minor with the password and control of the 
account when the minor reaches the age of 18 years. If the parent or 
guardian fails to provide the password and control of the account to 
the minor when he or she reaches the age of 18 years, the minor may 
contact us for instructions.


Sec.  363.32  Does Public Debt assume any liability for any 
transactions conducted by a parent or legal guardian in the minor's 
account?

    We assume no liability for any transactions conducted by any person 
in an account opened on behalf of a minor.


Sec.  363.33  Can an attorney-in-fact conduct transactions in my New 
Treasury Direct account?

    (a) An attorney-in-fact who provides a copy of a durable power of 
attorney granting him or her the authority to conduct New Treasury 
Direct transactions on behalf of the owner may conduct transactions 
online.
    (b) An attorney-in-fact who provides a copy of a limited power of 
attorney may only conduct transactions that he or she is permitted by 
his or her power. Such transactions will be through an offline process.
    (c) A written copy of the power of attorney must be sent to the 
address provided in Sec.  363.5. We may require any additional evidence 
that we consider necessary to support the power.


Sec.  363.34  What happens if an owner becomes incompetent after 
opening a New Treasury Direct account?

    If we receive written notice that the owner of a New Treasury 
Direct account has become incompetent, we will suspend all transactions 
in the account until we establish the authority of another person to 
act in his or her behalf.


Sec.  363.35  When is a transaction effective?

    A transaction is effective when we post it to our records.


Sec.  363.36  What securities can I purchase and hold in my New 
Treasury Direct account?

    You can purchase and hold eligible Treasury securities in your 
account. Initially, the only eligible securities will be book-entry 
Series I savings bonds. We intend to designate additional Treasury 
securities as eligible securities from time to time.


Sec.  363.37  How do I purchase eligible Treasury securities to be held 
in my New Treasury Direct account?

    Eligible Treasury securities can only be purchased online through 
your New Treasury Direct account. Payment for the securities is made by 
a debit to your designated account at a United States

[[Page 64290]]

depository financial institution using the ACH method.


Sec.  363.38  What happens if the ACH debit for purchase of a book-
entry Series I savings bonds is returned by my financial institution?

    If your designated financial institution returns the ACH debit for 
payment of a bond, we reserve the right to reinitiate the debit at our 
option, and to remove the bond from your New Treasury Direct account. 
We are not responsible for any fees your financial institution may 
charge relating to returned ACH debits.


Sec.  363.39  Will I receive a confirmation of my request to purchase a 
Treasury security?

    At the time that you submit a request to purchase a Treasury 
security through your New Treasury Direct account, we will make 
available a printable online confirmation of your request. Final 
confirmation will occur when the security is issued into your account. 
You will not receive a mailed confirmation.


Sec.  363.40  How are payments of principal and interest made?

    You must select a specific bank account at a United States 
depository financial institution for your payment. This selected bank 
account may be the same one that you designated as your primary bank 
account in your New Treasury Direct account, or it may be a different 
bank account. We will make payments using the ACH method.


Sec.  363.41  What happens if an ACH payment of principal or interest 
to my account at a financial institution is returned to Public Debt?

    We will notify you electronically of the returned payment. We will 
hold your payment until you provide us with instructions. Returned 
payments will not earn interest. We reserve the right to redirect 
returned payments to the bank account at a financial institution that 
you have designated in your New Treasury Direct account as your primary 
bank account, if that account is different from the one that returned 
the payment to us. We are not responsible for any fees your financial 
institution may charge relating to returned ACH payments.


Sec.  363.42  How will my interest income be reported for tax purposes?

    When you open your New Treasury Direct account, you consent to 
receive the appropriate tax reporting forms by electronic means. We 
will notify you when your tax reporting forms are available. The form 
will be available in printable form through your New Treasury Direct 
account. If you withdraw your consent to receive tax reporting forms by 
electronic means, we reserve the right to redeem any Series I savings 
bonds held in your account and close your account.


Sec.  363.43  What are the procedures for certifying my signature on an 
offline application for a New Treasury Direct account, or on an offline 
transaction form?

    (a) Certification within the United States. For certifications 
within the United States, the certifying individual must be authorized 
to bind his or her institution by his or her acts, to guarantee 
signatures to assignments of securities, or to certify assignments of 
securities. The following table provides a list of authorized 
certifying individuals and the required evidence of authority. Members 
of Treasury-recognized signature guarantee programs are for security 
transfers only.

------------------------------------------------------------------------
                                              Evidence of certifying
 Who can certify signatures in the U.S.       individual's authority
------------------------------------------------------------------------
(1) Officers and employees of            (i) We require the
 depository institutions.                 institution's seal or
                                          signature guarantee stamp.
                                         (ii) If the institution is an
                                          authorized paying agent for
                                          U.S. Savings Bonds, we require
                                          a legible imprint of the
                                          paying agent's stamp.
(2) Institutions that are members of     We require the imprint of the
 Treasury--recognized signature           signature guarantee stamp,
 guarantee programs (for security         i.e., the STAMP, SEMP, or MSP
 transfers only).                         stamp for members of the
                                          Securities Transfer Agents
                                          Medallion Program, the Stock
                                          Exchanges Medallion Program,
                                          or the New York Stock Exchange
                                          Inc. Medallion Signature
                                          Program.
(3) Officers and employees of corporate  We require the entity's seal.
 central credit unions, Federal Land
 Banks, Federal Intermediate Credit
 Banks and Banks for Cooperatives, the
 Central Bank for Cooperatives, and
 Federal Home Loan Banks.
(4) Commissioned or warrant officers of  (i) We require a statement that
 the United States Armed Forces, for      the person executing he
 signatures executed by Armed Forces      assignment is one whose
 personnel, civilian field employees,     signature the officer is
 and members of their families.           authorized to certify under
                                          our regulations.
                                         (ii) The certifying official's
                                          rank must be shown.
(5) A judge or clerk of the court......  We require the seal of the
                                          court.
(6) Other persons as designated by the   Evidence is determined by our
 Commissioner or Deputy Commissioner of   procedures.
 Public Debt.
------------------------------------------------------------------------

    (b) Certification within foreign countries. The following table 
lists the authorized certifying individuals for foreign countries and 
the required evidence of the individual's authority.

------------------------------------------------------------------------
 Who can certify signatures in foreign        Evidence of certifying
               countries                      individual's authority
------------------------------------------------------------------------
(1) United States diplomatic or          (i) We require the seal or
 consular officials.                      stamp of the office.
                                         (ii) If there is no seal or
                                          stamp, then we require
                                          certification by some other
                                          authorized individual, under
                                          seal or stamp.
(2) Managers and officers of foreign     We require the seal of the
 branches of U.S. depository              depository institution, or the
 institutions and institutions that are   imprint of the signature
 members of Treasury-recognized           guarantee stamp, i.e., the
 signature guarantee programs (for        STAMP, SEMP, or MSP stamp for
 security transfers only).                members of the Securities
                                          Transfer Agents Medallion
                                          Program, the Stock Exchanges
                                          Medallion Program, or the New
                                          York Stock Exchange
                                          Incorporated Medallion
                                          Signature Program.
(3) Notaries Public and other officers   (i) We require the official
 authorized to administer oaths,          seal or stamp of the office.
 provided their authority is certified   (ii) If there is no seal or
 by a United States diplomatic or         stamp, the position must be
 consular official.                       certified by some other
                                          authorized individual, under
                                          seal or stamp, or otherwise
                                          proved to our satisfaction.
------------------------------------------------------------------------


[[Page 64291]]

    (c) Duties and liabilities of certifying individuals.
    (1) The certifying individual must first establish the identity of 
the signer.
    (2) The form must be signed in the presence of the certifying 
individual.
    (3) If the certifying individual is not an officer, the certifying 
individual must insert the words ``Authorized Signature'' in the space 
provided for the title.
    (4) If the certifying individual is negligent in making the 
certification, the certifying individual and his or her organization 
are jointly and severally liable for any loss the United States may 
incur as a result of the negligence.
    (d) Guaranteed signatures. (1) A security or other form requiring 
certification need not be executed in the presence of a certifying 
individual if the signature is unconditionally guaranteed by the 
certifying individual. To guarantee a signature, the certifying 
individual must add a dated endorsement after the signature. For 
example:

Signature guaranteed, First National Bank of Smithville, Smithville, 
NH, by A. B. Doe, President, dated 1/1/2001.

    (2) The certifying individual and his or her organization 
unconditionally guarantee to us that the signature is genuine and the 
signer had the legal capacity to execute the assignment or related 
form.
    (e) Guaranteed absence of a signature. (1) A form requiring a 
certified signature need not be signed when a certifying individual 
associated with a depository financial institution places the following 
endorsement on the security or the form:

Absence of signature by owner and validity of transaction 
guaranteed, Second State Bank of Jonesville, Jonesville, NC, by B. 
R. Butler, Vice President, dated 11/1/2001.

    (2) The endorsement must be dated and the seal of the institution 
must be added.
    (3) This form of endorsement is an unconditional guarantee to us 
that the institution is acting for the signer under proper 
authorization.
    (f) Persons who cannot act as certifying individuals. Any person 
having an interest in a security involved in the transaction cannot act 
as a certifying individual. However, an authorized officer or employee 
of a depository financial institution that is a member of a Treasury-
recognized signature guarantee program can act as a certifying 
individual for transfer of a security to the institution or on behalf 
of the institution.


Sec. Sec.  363.44-363.49  [Reserved]

Subpart C--Book-Entry Series I Savings Bonds

General


Sec.  363.50  What Treasury securities does this subpart cover?

    This subpart covers book-entry Series I savings bonds only. As we 
designate other securities as eligible to be held in New Treasury 
Direct, the applicable terms and conditions will be set forth in 
separate subparts. The offering of Series I savings bonds is contained 
in part 359.


Sec.  363.51  Who may purchase and hold a book-entry Series I savings 
bonds?

    (a) A New Treasury Direct account holder may purchase and hold 
bonds through his or her account.
    (b) Bonds may not be purchased through the account of a minor.
    (c) We do not permit a legally incompetent person to purchase 
savings bonds once we have been provided with an acceptable court order 
determining incompetency.
    (d) We do not permit a legal representative or a legal guardian to 
purchase savings bonds on behalf of the estate of a decedent or an 
incompetent person.


Sec.  363.52  What amount of book-entry Series I savings bonds may I 
purchase in one year?

    (a) Purchase limitation. The amount of bonds that you may purchase 
in any calendar year is limited to $30,000 per account.
    (b) Computation of amount for gifts. Bonds purchased or transferred 
as gifts will be included in the computation of the purchase limitation 
for the account of the recipient for the year in which the bonds are 
delivered to the recipient.


Sec.  363.53  What is the minimum amount of book-entry Series I savings 
bonds that I may purchase in any transaction?

    Each bond purchase must be in a minimum amount of $25, with 
additional one-cent increments above that amount, in any one 
transaction. For example, a purchase may be $25.00, $25.01, $25.02, or 
$25.03, and so forth.


Sec.  363.54  What is the minimum amount of a book-entry Series I 
savings bonds that I must hold in my account?

    Each bond held in your account must have a redemption value of at 
least $25. If you request a transaction that would reduce the remaining 
redemption value of the bond to an amount less than $25, we will not 
permit the transaction to occur.


Sec.  363.55  May I transfer my book-entry savings bonds to another 
person?

    (a) You may transfer a bond or a portion of a bond to the New 
Treasury Direct account of another individual as a gift, or in response 
to a final judgment, court order, a divorce decree, or property 
settlement agreement. You must certify online that the transfer is a 
gift or a specified exception.
    (b) We do not permit the transfer of Series I savings bonds for 
consideration, unless it is an exception specified in paragraph (a) of 
this section.
    (c) The bond will be transferred in the single owner form of 
registration.
    (d) We reserve the right to limit the transferability of Series I 
savings bonds at any time by amendment to these regulations.


Sec.  363.56  What is the minimum amount of book-entry Series I savings 
bonds that I may transfer in any one transaction?

    Each transfer must be in a minimum amount of $25 redemption value, 
with additional one-cent increments above that amount, in any one 
transaction. For example, you may transfer $25.00, $25.01, $25.02, or 
$25.03, and so forth. Transfers will be comprised of principal and 
proportionate interest.


Sec.  363.57  What is the minimum amount of book-entry Series I savings 
bonds that I may redeem in any one transaction?

    Each redemption must be in a minimum amount of $25 redemption 
value, with additional one-cent increments above that amount, in any 
one transaction. For example, you may redeem $25.00, $25.01, $25.02, or 
$25.03, and so forth. Redemptions will be comprised of principal and 
proportionate interest.


Sec.  363.58  May book-entry Series I savings bonds be pledged or used 
as collateral?

    Bonds may not be pledged or used as collateral for the performance 
of an obligation.


Sec. Sec.  363.59-363.64  [Reserved]

Registration


Sec.  363.65  What do I need to know about the registration of book-
entry Series I savings bonds?

    (a) Registration must express the actual ownership of, and interest 
in, the bond. Registration conclusively establishes ownership of a 
bond.
    (b) You must provide a last name and a first name for each 
individual included in the registration.
    (c) You must provide the valid social security number of the owner 
of the bond.

[[Page 64292]]

Sec.  363.66  What forms of registration are available for book-entry 
Series I savings bonds?

    The forms of registration available are single owner, owner with 
beneficiary, primary owner with secondary owner, and several special 
forms of registration.


Sec.  363.67  What do I need to know about the single owner form of 
registration?

    (a) An individual is the single owner of the bond.
    (b) A single owner may add a beneficiary or secondary owner.
    (c) A single owner may conduct online transactions on bonds held in 
his or her account.
    (d) Upon the death of the single owner, his or her estate is 
entitled to the bond. In determining entitlement, the law of the 
decedent's domicile will be followed.
    (e) Registration example: ``John Doe, SSN 123-45-6789.''


Sec.  363.68  What do I need I need to know about the owner with 
beneficiary form of registration?

    (a) The purchaser must be named as the owner with another 
individual as beneficiary.
    (b) The owner may remove or change the beneficiary without the 
consent of the beneficiary.
    (c) The owner may conduct online transactions on bonds held in his 
or her account without the consent of the beneficiary.
    (d) The beneficiary has no ownership rights to the bond during the 
owner's lifetime. Upon the death of the owner, the beneficiary is the 
absolute owner of the bond, despite any attempted testamentary 
disposition by the owner or any state law to the contrary.
    (e) If the beneficiary does not survive the owner, the bond belongs 
to the estate of the owner.
    (f) If both the owner and the beneficiary die under conditions 
where it cannot be established, either by presumption of law or 
otherwise, which one died first, the bond is the property of the estate 
of the owner.
    (g) In order for the beneficiary to obtain the bond or the bond 
proceeds after the death of the owner, the beneficiary must provide 
proof of death of the owner. If the beneficiary has a New Treasury 
Direct account, the bond will be transferred to that account. If the 
beneficiary does not have an account, he or she may establish an 
account or request redemption. If the beneficiary requests redemption, 
he or she must provide ACH instructions for the payment.
    (h) Registration example: ``John Doe, SSN 123-45-6789 POD (payable 
on death to) Jane Doe, SSN 987-65-4321.''


Sec.  363.69  What do I need to know about the primary owner with 
secondary owner form of registration?

    (a) The purchaser must be named in the registration as the primary 
owner.
    (b) The primary owner holds the bonds in his or her account and may 
view or conduct online transactions in the bonds.
    (c) The primary owner may remove the secondary owner without the 
consent of the secondary owner.
    (d) The secondary owner has no rights to view or conduct 
transactions in any bond unless the primary owner gives the secondary 
owner these rights.
    (e) The primary owner may give the secondary owner the right to 
view any bond or rights to view and redeem any bond, online from the 
account of the secondary owner.
    (f) Once the right to conduct transactions in a bond has been given 
to the secondary owner, the primary owner may view and conduct 
transactions in the bond from his or her account, and the secondary 
owner may view and redeem the bond using his or her own account.
    (g) The primary owner may revoke any rights previously given to the 
secondary owner at any time.
    (h) Upon the death of either the primary or secondary owner, the 
survivor is the absolute owner of the bond, despite any attempted 
testamentary disposition or any state law to the contrary.
    (i) If both the primary and the secondary owner die under 
conditions where it cannot be established, either by presumption of law 
or otherwise, which one died first, the bond is the property of the 
estate of the primary owner.
    (j) In order for the secondary owner to obtain the bond or the bond 
proceeds after the death of the owner, the secondary owner must provide 
proof of death of the owner. If the secondary owner has a New Treasury 
Direct account, the bond will be transferred to that account. If the 
secondary owner does not have an account, he or she may establish an 
account or request redemption. If the secondary owner requests 
redemption, he or she must provide ACH instructions.
    (k) Registration example: ``John Doe, SSN 123-45-6789 with Joseph 
Doe, SSN 987-65-4321.''


Sec.  363.70  What are special forms of registration?

    (a) Special forms of registration are used when a legal guardian or 
representative is appointed by a court to handle the affairs of a 
decedent or an incompetent individual.
    (b) Special forms of registration are not permitted on original 
issue.
    (c) Bonds registered in this form may be held in the New Treasury 
Direct account of the legal guardian or representative.


Sec.  363.71  What special forms of registration are permitted?

    (a) Legal guardian of the estate of an incompetent individual. A 
court-appointed legal guardian may hold bonds on behalf of an 
incompetent individual.
    (b) Legal representative of the estate of a decedent. A court-
appointed legal representative of the estate of a decedent may hold 
bonds on behalf of the estate.
    (c) General rule. Bonds registered in the name of a legal guardian 
of an incompetent person or legal representative of an estate will be 
held in the New Treasury Direct account of the legal guardian or legal 
representative.


Sec. Sec.  363.72-363.79  [Reserved]

Minors


Sec.  363.80  May a minor purchase book-entry Series I savings bonds?

    We do not permit a minor to purchase bonds.


Sec.  363.81  May book-entry Series I savings bonds be purchased for a 
minor as a gift?

    A New Treasury Direct account owner may purchase bonds as a gift 
with a minor as the recipient.


Sec.  363.82  May an account owner deliver a book-entry Series I 
savings bonds purchased as a gift to a minor?

    An account owner may deliver a bond purchased as a gift to the New 
Treasury Direct account of the recipient who is a minor.


Sec.  363.83  May an account owner transfer a book-entry Series I 
savings bonds to a minor?

    An account owner may transfer a bond to a minor as a gift or 
pursuant to one of the specified exceptions in Sec.  363.55(a).


Sec.  363.84  [Reserved]

Incompetent Person


Sec.  363.85  May Series I savings bonds be registered in the name of 
an incompetent person for whom a legal guardian has been appointed?

    (a) If a person owning bonds becomes incompetent, and there is a 
legally qualified guardian, the bonds must be registered in the name of 
the guardian.
    (b) We will require satisfactory evidence of appointment.
    (c) Registration will be as follows: ``John Doe, SSN 123-45-6789, 
Legal Guardian of the estate of James Doe, an incompetent, SSN 987-65-
4321.''

[[Page 64293]]

Sec. Sec.  363.86-363.89  [Reserved]

Deceased Owners


Sec.  363.90  What happens when a New Treasury Direct account owner 
dies and his or her estate is entitled to Series I savings bonds held 
in the account?

    (a) Estate is being administered. (1) We will require appropriate 
proof of appointment for the legal representative of the estate. 
Letters of appointment must be dated within six months of submission, 
unless the appointment was made within one year before submission.
    (2) The bonds will be registered in the following form: ``John Doe, 
SSN 123-45-6789, Legal Representative of the estate of James Doe, 
deceased, SSN 987-65-4321.''
    (3) The bonds may be held in the New Treasury Direct account of the 
legal representative.
    (4) The legal representative of the estate may request payment of 
bonds to the estate or to the person(s) entitled, or may have the bonds 
transferred to the New Treasury Direct account(s) of the person(s) 
entitled.
    (5) The legal representative of the estate may not purchase bonds 
on behalf of the estate.
    (6) If payment is requested, we will require ACH instructions.
    (b) Estate has been settled previously. If the estate has been 
previously settled through judicial proceedings, the person(s) entitled 
may request payment of bonds or may have the bonds transferred to the 
New Treasury Direct account of the person(s) entitled. If payment is 
requested, we will require ACH instructions. We will require a 
certified copy of the court-approved final accounting for the estate, 
the court's decree of distribution, or other appropriate evidence.
    (c) Summary administration procedures. If there is no formal 
administration and no representative of the estate is to be appointed, 
the person(s) entitled under state law summary or small estates 
procedures may request payment of bonds or may have the bonds 
transferred to the New Treasury Direct account(s) of the person(s) 
entitled. We will require appropriate evidence. If payment is 
requested, we will require ACH instructions.
    (d) Survivors' order of precedence for payment or transfer. If 
there has been no administration, no administration is contemplated, no 
summary or small estate procedures have been used, and the redemption 
value of the bonds is $100,000 or less,\2\ then bonds may be paid or 
transferred to the persons named in the following order of precedence:
---------------------------------------------------------------------------

    \2\ We require estates with bonds over $100,000 redemption value 
to be administered.
---------------------------------------------------------------------------

    (1) There is a surviving spouse and no surviving child or 
descendant of a deceased child: to the surviving spouse.
    (2) There is a surviving spouse and a child or children of the 
decedent, or descendants of deceased children: one-half to the 
surviving spouse and one-half to the child or children of the decedent, 
and the descendants of deceased children, by representation, or by 
agreement of all persons entitled in this class;
    (3) There is no surviving spouse and there is a surviving child or 
descendant of deceased children: to the child or children of the 
decedent, and the descendants of deceased children, by representation.
    (4) There are no surviving spouse, no surviving child, and no 
surviving descendants of deceased children: to the parents of the 
decedent, one-half to each, or in full to the survivor.
    (5) There are no surviving spouse, no surviving child or surviving 
descendants of deceased children, and no surviving parents: to the 
brothers and sisters and descendants of deceased brothers and sisters 
by representation.
    (6) There are no surviving spouse, no surviving child or surviving 
descendants of deceased children, no surviving parents, and no brothers 
or sisters or descendants of deceased brothers and sisters: to other 
next of kin, as determined by the laws of the decedent's domicile at 
the time of death.
    (7) There are no surviving spouse, no surviving child or surviving 
descendants of deceased children, no surviving parents, no brothers or 
sisters or descendants of deceased brothers and sisters, and no next of 
kin, as determined by the laws of the decedent's domicile at the time 
of death: to persons related to the decedent by marriage, i.e., heirs 
of a spouse of the last decedent where the spouse predeceased that 
registrant.
    (8) There are no surviving spouse, no surviving child or surviving 
descendants of deceased children, no surviving parents, no brothers or 
sisters or descendants of deceased brothers and sisters, no next of 
kin, as determined by the laws of the decedent's domicile at the time 
of death, and no persons related to the decedent by marriage: to the 
person who paid the burial and funeral expenses, or a creditor of the 
decedent's estate, but payment may be made only to the extent that the 
person has not been reimbursed. Transfers are not permitted.
    (9) Escheat according to the applicable state law.
    (e) When we make payments or transfers according to paragraph (d) 
of this section, we will make the payments by the ACH method to either 
a person individually, or individually and on behalf of all other 
persons entitled. We will require ACH instructions for payment. A 
person who receives payment of bond proceeds individually and on behalf 
of others agrees to make distribution of the proceeds to the other 
persons entitled by the law of the decedent's domicile. The provisions 
of this section are for our convenience and do not determine ownership 
of the bonds or their proceeds. We may rely on information provided by 
the person who requests payment or transfer, and are not liable for any 
action taken in reliance on the information furnished.


Sec. Sec.  363.91-363.94  [Reserved]

Gifts


Sec.  363.95  How may I give a book-entry Series I savings bonds as a 
gift?

    You may give a book-entry Series I savings bonds as a gift in two 
ways:
    (a) You may purchase a bond online as a gift; or
    (b) You may transfer a bond that you own to another person as a 
gift with immediate delivery.


Sec.  363.96  What do I need to know if I initially purchase a bond as 
a gift?

    (a) The gift bond will be registered in the name of the 
recipient(s). The registration is irrevocable with regard to the owner 
named on the gift bond.
    (b) You must provide the SSN of the recipient.
    (c) You may deliver the bond upon purchase, or you may hold the 
bond in your New Treasury Direct account until you are ready to deliver 
the bond to the owner named on the gift bond.
    (d) If the purchaser dies before delivering a gift bond to the 
recipient, the bond belongs to the owner named on the gift bond, 
notwithstanding any testamentary attempts to the contrary by the 
purchaser, or any state law to the contrary. We will hold the bond 
until we receive instructions from the owner named on the gift bond.
    (e) When the gift bond is delivered, it will be delivered in the 
single owner form of registration to the owner named on the gift bond.


Sec.  363.97  What do I need to know if I transfer a book-entry Series 
I savings bonds to another person as a gift?

    (a) You must certify online that the transfer is a gift.

[[Page 64294]]

    (b) You must provide the SSN of the recipient.
    (c) Once the transfer is made, the gift is irrevocable.
    (d) The bond will be transferred in the single owner form of 
registration to the recipient.


Sec.  363.98  [Reserved]


Sec.  363.99  What is the minimum amount of a bond that I may transfer 
or deliver as a gift in any one transaction?

    You may transfer or deliver gift bonds in any one-cent increment 
value equal to or greater than $25.00 redemption value. For example, 
you may deliver a gift bond with a redemption value of $25.00, $25.01, 
$25.02, and so forth. If the bond was held in your account prior to 
delivery to the recipient for a period of time and has accrued 
interest, the delivery will include principal and proportionate 
interest.


Sec. Sec.  363.100-363.104  [Reserved]

Transactions


Sec.  363.105  Who has the right to conduct transactions in book-entry 
Series I savings bonds?

    (a) Single owner form of registration. A single owner can conduct 
transactions in bonds held in his or her New Treasury Direct account.
    (b) Owner with beneficiary form of registration. The owner can 
conduct transactions in bonds held in his or her New Treasury Direct 
account. The beneficiary has no rights during the lifetime of the owner 
and therefore cannot conduct transactions in the bonds.
    (c) Primary Owner with secondary owner form of registration. The 
primary owner can conduct transactions in bonds held in his or her New 
Treasury Direct account. The secondary owner can redeem bonds using his 
or her New Treasury Direct account providing the primary owner has 
given the secondary owner that right, and has not revoked that right.
    (d) Legal guardian of an incompetent form of registration. A legal 
guardian or other court-appointed representative of an incompetent can 
conduct transactions in bonds belonging to the incompetent consistent 
with the authority of the legal guardian.
    (e) Legal representative of an estate. A legal representative of an 
estate can conduct transactions in bonds belonging to the estate 
consistent with the authority of the legal representative.


Sec.  363.106  How are online transactions conducted in Series I 
savings bonds?

    We will provide online forms, including instructions, for 
transactions.


Sec.  363.107  Does Public Debt reserve the right to require that any 
transaction be conducted offline?

    We reserve the right to require any transaction to be conducted 
offline using an approved form. Signatures on offline transactions must 
be certified or guaranteed as provided in instructions in Sec.  363.43.


Sec. Sec.  363.108-363.109  [Reserved]

Judicial and Administrative Proceedings


Sec.  363.110  Will Public Debt recognize a court order that attempts 
to defeat the survivorship rights of a beneficiary, secondary owner, or 
recipient of an undelivered gift bond?

    We will not recognize a judicial determination that attempts to 
defeat or impair the rights of survivorship of a beneficiary, secondary 
owner, or recipient of an undelivered gift bond, after the death of the 
owner or primary owner.


Sec.  363.111  Will Public Debt accept notice of an adverse claim or 
notice of pending judicial proceedings involving book-entry Series I 
savings bonds?

    We are not subject to and will not accept a notice of an adverse 
claim or notice of pending judicial proceedings involving book-entry 
Series I savings bonds.


Sec.  363.112  Is Public Debt a proper party in a judicial proceeding 
involving competing claims to a book-entry Series I savings bonds?

    Treasury, Public Debt, and the Federal Reserve Banks are not proper 
defendants in a judicial proceeding involving competing claims to a 
book-entry Series I savings bonds.


Sec.  363.113  Will Public Debt pay or transfer book-entry Series I 
savings bonds pursuant to an order in a divorce proceeding?

    We will pay or transfer bonds pursuant to a divorce decree that 
either disposes of savings bonds or ratifies a property settlement 
agreement disposing of bonds. The owner (as defined in Sec.  363.6) of 
the bonds must be a party to the proceedings. If the divorce decree 
does not set out the terms of the property settlement agreement, we 
will require a certified copy of the agreement.


Sec.  363.114  Will Public Debt recognize a court order?

    We will recognize a final order entered by a court that affects 
ownership rights in a Series I book-entry savings bonds only to the 
extent that the order is consistent with the provisions of this part. 
The owner (as defined in Sec.  363.6) of the bond must be a party to 
the proceedings. We will require a certified copy of the court order.


Sec.  363.115  Will Public Debt pay a savings bonds pursuant to a levy?

    We will pay a savings bonds pursuant to a valid levy to satisfy a 
money judgment against the owner (as defined in Sec.  363.6) of the 
bond. Payment will be made only to the extent necessary to satisfy the 
money judgment.


Sec.  363.116  Will Public Debt pay a bond to the Internal Revenue 
Service (IRS) pursuant to a levy?

    We will honor an IRS administrative levy under Sec.  6331 of the 
Internal Revenue Code with respect to the owner (as defined in Sec.  
363.6).


Sec.  363.117  Will Public Debt pay a bond to a trustee in bankruptcy 
or similar court officer?

    We will pay a savings bonds to a trustee in bankruptcy, a receiver 
of an insolvent's estate, a receiver in equity, or a similar court 
officer, if the original court order is against the owner (as defined 
in Sec.  363.6).


Sec.  363.118  What evidence is required to establish the validity of 
judicial proceedings?

    (a) We require certified copies of the final judgment, decree, or 
court order, and any necessary supplementary proceedings.
    (b) A request for payment by a trustee in bankruptcy or a receiver 
of an insolvent's estate must be supported by evidence of appointment 
and qualification.
    (c) A request for payment by a 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 redemption of the 
bond.


Sec.  363.119  Will Public Debt pay a bond pursuant to a forfeiture 
proceeding?

    (a) General. Bonds will be paid pursuant to a judicial or 
administrative forfeiture made by a Federal agency. We will rely 
exclusively upon the information provided by the Federal forfeiting 
agency and will not make any independent evaluation of the validity of 
the forfeiture order, the request for payment, or the authority of the 
individual signing the request for payment. The amount paid is limited 
to the redemption value of the savings bonds as of the date of 
forfeiture. All inquiries or claims from the previous owner will be 
referred to the forfeiting agency.
    (b) Definition of special terms relating to forfeitures.
    Contact point means the individual designated by the Federal 
investigative

[[Page 64295]]

agency, United States Attorney's Office, or forfeiting agency, to 
receive referrals from Public Debt, using Public Debt Form 1522.
    Forfeiting agency means the federal law enforcement agency 
responsible for the forfeiture.
    Forfeiture means the process by which property may be forfeited by 
a federal agency. Administrative forfeiture is forfeiture by a federal 
agency without judicial proceedings; judicial forfeiture is a 
forfeiture through either a civil or criminal proceeding in a United 
States District Court resulting in a final judgment and order of 
forfeiture.
    Public Debt Form 1522 (PD 1522) is the form on which written 
notification of the forfeiture is provided by the forfeiting agency to 
Public Debt.
    (c) Procedures for a forfeiting agency to request forfeiture of 
Treasury securities. A forfeiting agency must request forfeiture on PD 
1522. An individual authorized by the forfeiting agency must sign the 
form. The completed PD 1522 must be mailed to the Department of the 
Treasury, Bureau of the Public Debt, Parkersburg, WV 26106-1328.
    (d) Public Debt procedures upon receipt of PD 1522. (1) Upon 
receipt and review of the Public Debt Form 1522, we will make payment 
to the forfeiture fund specified on the form. We will record the 
forfeiture, the forfeiture fund into which the proceeds were paid, the 
contact point, and any related information.
    (2) We will rely exclusively upon the information provided by the 
Federal agency and will not make any independent evaluation of the 
validity of the forfeiture order, the request for payment, or the 
authority of the individual signing the request for payment.
    (e) Amount paid on a forfeiture. The amount we will pay on a 
forfeiture is limited to the redemption value of the savings bonds as 
of the date of forfeiture.
    (f) Inquiries from previous owners of forfeited Treasury 
securities.
    (1) We will refer all inquiries from the previous owner, including 
requests for payment, reissue, or applications for relief, to the 
contact point.
    (2) We will tell the person who inquired that we referred his or 
her inquiry to the contact point.
    (3) We will not investigate the inquiry.
    (4) We will defer to the forfeiting agency's determination of the 
appropriate course of action, including settlement where appropriate.
    (5) Any settlement will be paid from the forfeiture fund into which 
the proceeds were deposited.


Sec. Sec.  363.120-363.124  [Reserved]

Payment


Sec.  363.125  How is payment made on a book-entry Series I savings 
bonds?

    We will make payment by the ACH method to the designated account at 
a United States depository financial institution.


Sec.  363.126  Under what circumstances will payment be made?

    We will make payment:
    (a) Upon your request for redemption prior to maturity;
    (b) When the bond reaches final maturity; and
    (c) If a person who becomes entitled to the bond is unable, 
unwilling or ineligible to open a New Treasury Direct account.


Sec. Sec.  363.127-363.129  [Reserved]

Subparts C through E [Reserved]

Subpart F Miscellaneous


Sec.  363.175  May Public Debt waive these regulations?

    We may waive or modify any provision of the regulations in this 
part. We 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 the waiver would not be inconsistent with law or equity;
    (b) If the waiver does not impair any material existing rights; and
    (c) If we are satisfied that the waiver would not subject the 
United States to any substantial expense or liability.


Sec.  363.176  Can I be required to provide additional evidence to 
support a transaction?

    We may require additional evidence and/or a bond of indemnity, with 
or without surety, in any case where we determine it necessary to 
protect the interests of the United States.


Sec.  363.177  May Public Debt amend or supplement these regulations?

    We may amend, revise, or supplement these regulations at any time.

    Dated: October 11, 2002.
Donald V. Hammond,
Fiscal Assistant Secretary.
[FR Doc. 02-26406 Filed 10-11-02; 1:50 pm]
BILLING CODE 4810-39-P