[Federal Register Volume 61, Number 190 (Monday, September 30, 1996)]
[Proposed Rules]
[Pages 51186-51194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24949]
[[Page 51185]]
_______________________________________________________________________
Part VI
Department of the Treasury
_______________________________________________________________________
Fiscal Service
_______________________________________________________________________
31 CFR Part 203
Treasury Tax and Loan Depositaries and Payment of Federal Taxes;
Proposed Rule
Federal Register / Vol. 61, No. 190 / Monday, September 30, 1996 /
Proposed Rules
[[Page 51186]]
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 203
RIN 1510-AA37
Treasury Tax and Loan Depositaries and Payment of Federal Taxes
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Internal Revenue Code mandates that certain taxpayers use
electronic funds transfer (EFT) for the payment of Federal taxes.
Temporary regulations published by the Internal Revenue Service (IRS)
implement this requirement, providing guidance to taxpayers relating to
the deposit of taxes using EFT mechanisms. These proposed regulations
are necessary for the operation of the Electronic Federal Tax Payment
System (EFTPS). The EFTPS is projected to begin operation in the fall
of 1996. These regulations provide rules for financial institutions and
Federal Reserve Banks that use EFT mechanisms to process Federal tax
payments through the EFTPS. The regulations also update the rules
governing Treasury's investment program. The Small Business Job
Protection Act of 1996 provides that certain taxpayers are not required
to begin using EFT until July 1, 1997 (rather than, as originally
scheduled, on January 1, 1997). This change does not affect and is not
addressed in these regulations.
DATES: Comments must be received on or before November 29, 1996.
ADDRESSES: Comments or inquiries may be mailed to Cynthia L. Johnson,
Director, Cash Management Policy and Planning Division, Financial
Management Service, Room 420, 401 14th Street, S.W., Washington, DC
20227. A copy of this proposed rule is being made available for
downloading from the Financial Management Service home page at the
following address: http://www.ustreas.gov/treasury/bureaus/finman/.
FOR FURTHER INFORMATION CONTACT: Mark Matolak, Financial Program
Specialist; Donald E. Clark, Financial Program Specialist; Cynthia L.
Johnson, Director, Cash Management Policy and Planning Division, 401
14th Street, S.W., Washington, D.C. 20227, (202) 874-6590; or Margaret
Roy, Principal Attorney, at (202) 874-6680.
SUPPLEMENTARY INFORMATION:
Background
Currently, 31 CFR Part 203 governs the designation of certain
financial institutions as Treasury tax and loan (TT&L) depositaries;
TT&L depositary participation in the paper-based Federal Tax Deposit
(FTD) system; and investment of Treasury's excess operating cash in
TT&L investments. This document proposes use of five new electronic
methods of paying taxes, and proposes slight changes to the investment
program.
Tax Payment Methods
Pursuant to section 6302(h) of the Internal Revenue Code, the
Secretary of the Treasury is to develop and implement an electronic
funds transfer (EFT) system to be used for the collection of depository
taxes, so that the taxes are credited to the General Account of the
Treasury on the tax due date. See Pub. L. No. 103-182, Sec. 523, 107
Stat. 2057, 2161 (1993); codified at 26 U.S.C. 6302(h). The Act
mandates that a certain percentage of certain types of taxes be
collected using EFT methods each year. To meet these requirements, the
Financial Management Service (FMS) has, in conjunction with the
Internal Revenue Service (IRS) and Federal Reserve Banks (FRB), devised
the Electronic Federal Tax Payment System (EFTPS), which is an
electronic system for reporting and paying Federal taxes. The EFTPS
will benefit both taxpayers and the Federal Government by providing
greater payment and reporting efficiencies and by expediting the
availability of funds and investment decision-making information. These
revisions will govern the processing of tax payments through the EFTPS
by financial institutions and the FRBs.
Currently, most depository taxes are paid using the paper-based FTD
system, which requires the taxpayer to present its tax payment and a
paper coupon to a financial institution designated by the Treasury
Department (Treasury) as a TT&L depositary. The depositary stamps the
coupon, forwards it to Treasury, and credits the payment to a non-
interest bearing TT&L account. The depositary retains the funds
overnight. The next day the TT&L account is debited and the funds are
either invested in obligations of the TT&L depositary or are
transferred to Treasury's General Account (TGA) at the FRB.
The effort to convert the current paper-based FTD system to an
electronic system has been underway since 1990 with the use of the
prototype ADEPT and TAXLINK systems. Most recently, TAXLINK was
developed to test two methods of electronic payment: Automated Clearing
House (ACH) debit and credit entries. These two methods are well
established in both the Federal and private sectors. Using the ACH
debit method, Treasury, through a financial agent and with the
authorization of the taxpayer, sends an electronic debit entry to a
taxpayer's account at the taxpayer's financial institution. Using the
ACH credit method, the taxpayer authorizes its financial institution to
send an electronic credit entry from the taxpayer's account to
Treasury. After the initial authorization process, the financial
institution must begin the ACH payment process at least one business
day before the tax due date. Thus, ACH debit and credit entries are
``future-day'' entries. These methods have proved successful in the
TAXLINK program, and are incorporated into the EFTPS system.
The EFTPS program also offers three other payment methods. These
methods, Fedwire value, Fedwire non-value, and Direct Access, are
different from ACH methods in that Treasury gains the value of the
payment the same day that the payment is initiated. Thus, these three
methods are called ``same-day'' payment methods. They are considered
exception processing and are offered to accommodate the needs of
certain taxpayers that do not have information available to initiate
the transaction one business day prior to the tax due date, or to
correct a deficiency in an ACH payment.
Fedwire value is a funds transfer system owned and operated by the
FRBs and currently is used by the FMS for collections. Fedwire non-
value is a new method of collection, which involves sending information
and authorization to make payments over the FRBs' Fedwire system. The
Direct Access method also involves sending information to the Federal
Reserve, but uses a computer interface or a new application called the
``Fedline Taxpayer Deposit Application.'' The FMS reserves the right to
add additional methods of electronic funds transfer in the future, as
appropriate.
Financial Institution Participation and Responsibilities
The EFTPS will increase the ability of all financial institutions
to participate in processing Federal tax payments. Currently, financial
institutions must be designated as TT&L depositaries to process FTD
payments, and must pledge collateral to secure the tax collections they
process. In contrast, financial institutions processing tax payments
under the EFTPS need not be designated as TT&L depositaries and need
not pledge collateral, unless they elect to participate in Treasury's
investment program.
[[Page 51187]]
In order to provide maximum flexibility to taxpayers and financial
institutions, the FTD system is not being eliminated at this time.
However, the FMS anticipates that by 1999, it will transition those
taxpayers using the FTD system to another form of payment, such as a
lockbox arrangement. The proposed regulations governing the FTD system
are not substantially changed from the current rule.
Financial institutions which process EFTPS payments for their
taxpayer customers have the following responsibilities: assisting
taxpayers in enrolling in the system; initiating and responding to ACH
prenotification entries; processing both ACH and/or same-day
transactions; and providing a transaction trace number to the taxpayer
as evidence that the taxpayer has completed those actions necessary to
initiate a tax payment. By contract with the taxpayers, financial
institutions may impose conditions to making payments, consistent with
these regulations and applicable law.
To assist in the processing of the tax payments and tax
information, the FMS has designated two financial institutions as
Treasury's financial agents. These two institutions will enroll all
mandated and voluntary EFT taxpayers in the EFTPS, compile payment
information for Treasury, and in the case of the ACH debit method,
originate the debit entries to the taxpayer's financial institution. In
addition, the FRBs, in their capacity as fiscal agents for Treasury,
play a role in the system by providing same-day reporting and payment
mechanisms.
In general, this rulemaking proposes to place liability for errors
on the party making the errors. If the taxpayer properly instructs the
financial institution and complies with all requirements of its
financial institution, and the financial institution is late in
transmitting the tax payment to Treasury, then the FMS will charge the
financial institution for the lost value of funds.
The regulations provide that, by processing these transactions, the
financial institution authorizes the FRB to charge the interest to the
financial institution's reserve account. This interest provision serves
the dual purposes of encouraging financial institutions to follow
efficient procedures, and of recovering the value of the funds for the
Government.
The two financial institutions designated as Treasury's financial
agents to perform services such as compiling payment information, and
originating ACH debit entries, are prohibited from charging taxpayers
for these services.
Treasury's Investment Program
In addition to providing guidance for financial institutions in
processing tax payments, these regulations also govern Treasury's
investment program. Under that program, Treasury invests in open-ended,
interest-bearing obligations of the financial institution held in a
``note balance.'' To receive investments, a financial institution must
be designated as a TT&L depositary and must post collateral.
Currently, funds for investment are derived from FTD payments. With
the implementation of the EFTPS, electronic payments also will be a
source of funds.
For TT&L note option depositaries processing EFTPS payments, an
important consideration in selecting an electronic payment mechanism is
the availability of funds to Treasury's investment program. Of the five
EFT methods, Fedwire value is the least appealing to both Treasury and
TT&L note option depositaries. Under Fedwire value, monies collected
are not directly invested in interest-bearing obligations of TT&L note
option depositaries, but instead are credited first to the TGA at the
FRB. Use of Fedwire value thus not only diverts funds from the banking
system, but also delays Treasury's investment opportunities.
Related Rules
Regulations promulgated by the IRS govern the rights and
responsibilities of taxpayers using the EFTPS. See temporary
regulations published at 59 FR 35,414 and 61 FR 11548. The ACH debit
and credit entries covered by this Part also will be subject to 31 CFR
Part 210. The FMS published for comment proposed revisions to Part 210
on September 30, 1995. (See 59 FR 50,112). The FMS anticipates issuing
a revised notice of proposed rulemaking for Part 210 in the near
future. Publication of the revisions to 31 CFR Part 203 at this time is
important because of the dramatic increase in volume of EFT tax
payments expected as the EFTPS is implemented. Procedural instructions
for financial institutions on the EFTPS will be found in the Treasury
Financial Manual, and FRB Operating Circulars.
Comments
The FMS invites comments on all aspects of these proposed
regulations. The FMS is interested in how these rule changes may affect
the banks' participation in this program and their relationships with
their customers. In particular, comments are requested on the
following:
1. Section 203.13 of the proposed regulations provides that the FMS
may establish that ACH credit entries made at the direction of
taxpayers be delivered to the FRB by a deadline that is different from
that currently required for ACH credit entries.
The FMS anticipates that if a different deadline is required, it
would be approximately 11:00 p.m. on the day before the entry is to
settle. This potential deadline ensures sufficient time for the
transfer of credit entry information to Treasury for purposes of
maximizing the timely investment of tax receipts.
2. In Sec. 203.13(c)(1) of the proposed regulations, financial
institutions are required to send an ACH prenotification entry for each
new taxpayer paying taxes using the ACH credit entry method. This entry
may be in the form of a zero dollar ACH entry.
This requirement is to validate taxpayer data to ensure that future
payments can be posted to the credit of the correct taxpayer.
3. Section 203.6(a) of the proposed regulations allows depositaries
the option of either electing to continue to process paper-based FTDs,
or choosing not to process such FTDs. This section affords financial
institutions maximum flexibility to determine the services they wish to
offer, and relies on market forces to provide sufficient services.
4. The FMS is contemplating restricting the use of the same-day
options (Fedwire non-value and Direct Access) to TT&L note option
depositaries. This action will ensure that tax payments will remain
within the commercial banking system by flowing directly to TT&L note
option depositaries, thereby maximizing Treasury's investment
opportunities.
5. What effects, if any, these changes have on the business
relationships of financial institutions with taxpayer/customers and/or
with the Government?
Section by Section Analysis
The following lists the proposed sections, and notes the changes
from the current regulation.
1. Subpart A--General Information--Secs. 203.1-203.9 generally
update the current rule, with no substantive changes.
Several new definitions are added to Sec. 203.2 (Definitions) to
reflect the new methods of payment; other definitions are updated and
clarified. Sections 203.3 and 203.4, regarding financial institution
eligibility and application for depositary status, are revised, with
minor nonsubstantive changes, from Sec. 203.3 of the current rule.
Section 203.5 regarding the depositary agreement, is based on current
Sec. 203.6. Section 203.6, regarding the obligations of the
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depositary, updates current Sec. 203.7 and adds a provision regarding
the obligation of a depositary which only processes electronic
payments.
Section 203.7 (Compensation for Services) retains the intent of
current Sec. 203.13, and adds that the Federal Government may decide
not to compensate financial institutions for processing tax payments.
Section 203.8 combines the information in current Secs. 203.11 and
203.15 regarding termination of depositary status and change of
options. Section 203.9 (Additional Instructions) combines references to
procedural instructions and Federal Reserve instructions.
2. Subpart B--Electronic Federal Tax Payments--Secs. 203.10-203.17
are entirely new; the current rule provides only for paper tax
payments. Section 203.10 defines the scope of the subpart and states
that financial institutions which process electronic tax payments shall
adhere to the provisions of Part 203.
Section 203.11 describes the financial institution's responsibility
in processing taxpayer enrollments. Financial institutions shall verify
enrollment information and sign the enrollment form. The enrollment
information must be transmitted to Treasury's financial agent in paper
form and may also be transmitted electronically.
Section 203.12 describes generally the five types of electronic
payment methods.
Section 203.13 lists the responsibilities of financial institutions
in originating and receiving ACH credit and debit entries. Financial
institutions are required to verify the accuracy of the first entry
sent to or from Treasury, in order to ensure that the taxpayer's
payment will be credited correctly. This section also states that
credits sent by financial institutions can only be reversed with the
approval of the IRS.
Section 203.14 lists the responsibilities of the financial
institutions in originating same-day payments. Same-day payments must
be received by 2:00 p.m. FRB head office local zone time. If not
received by that time, the FRB will return the payments to the
financial institution. A financial institution may obtain a reversal of
a payment prior to 2:00 p.m., but, after that time, the financial
institution may obtain a reversal only in certain circumstances and
only with the assent of the IRS. Further, the financial institution
must be prepared to supply the taxpayer with a transaction trace
number, in case of questions regarding the payment.
Section 203.15 imposes late fees on financial institutions which
delay the transmission of the tax payment. These late fees are similar
to those currently imposed by Sec. 203.10. Generally, the regulations
attempt to recover the value of funds lost due to late payments.
Financial institutions will not be charged late fees when the delay or
non-payment is due to the taxpayer failing to satisfy financial
institution conditions.
Section 203.16 explains that all debit entries to the Treasury are
examined for prior authorization. In the unlikely event that such an
unauthorized entry is posted to the TGA, this section imposes a higher
rate of interest on the financial institution originating the entry.
Section 203.17 provides an administrative appeal process for
financial institutions which are assessed late fees or interest
charges.
3. Subpart C--Federal Tax Deposits--Secs. 203.18-203.20 are modeled
on current Secs. 203.5, 203.9 and 203.10, governing the acceptance and
processing of FTD coupons. Definitions of classes of depositaries in
current Secs. 203.9(a) and 203.10(a) are deleted and will be contained
in procedural instructions.
4. Subpart D--Investment Program--Secs. 203.22-203.25 describe
Treasury's investment program and collateral security requirements.
This is the program in which Treasury invests in obligations of the
TT&L note option depositary using tax payments transmitted by the
depositary; and/or makes direct or special direct investments, which
are additional funds invested in depositary obligations.
Section 203.25(f) is modeled on existing Sec. 203.14(f)(1). The FMS
has in the past received inquiries regarding its interpretation of
existing Sec. 203.14(f)(1). The existing provision provides that in the
event of a depositary's insolvency, the pledged collateral is available
to satisfy any claim of the United States. The FMS interprets this
provision broadly. Specifically, in the event a depositary is placed in
receivership, existing Sec. 203.14(f)(1) authorizes the FMS to apply
the collateral to satisfy any claim of the United States, including,
but not limited to, claims arising out of the depositary relationship
for which the collateral was originally pledged. This position is
consistent with the FMS' longstanding interpretation of Part 203.
Proposed Sec. 203.25(f) expands Treasury's authority to liquidate
collateral pledged by TT&L depositaries in the event the depositary
fails to pay timely amounts owed to the United States. This provision
is calculated to protect the Federal Government from loss.
The list of acceptable securities found at current Sec. 203.14(d)
is deleted and will be contained in procedural instructions.
Regulatory Analysis
The regulations are not a significant regulatory action as defined
in Executive Order 12866. Accordingly, a regulatory assessment is not
required. It is hereby certified that this revision will not have a
significant economic impact on a substantial number of small entities.
Therefore, a regulatory flexibility analysis is not required. This
change will not impose significant costs on small businesses. It is
expected that costs, if any, associated with electronic tax processing
will be offset by cost savings resulting from reductions in the
paperwork burden and the availability of a user-friendly electronic tax
collection system.
List of Subjects in 31 CFR Part 203
Banks, Banking, Electronic Funds Transfers, Taxes.
For the reasons set out in the preamble, 31 CFR part 203 is
proposed to be revised to read as follows:
PART 203--TREASURY TAX AND LOAN DEPOSITARIES AND PAYMENT OF FEDERAL
TAXES
Subpart A--General Information
Sec.
203.1 Scope.
203.2 Definitions.
203.3 Financial institution eligibility for designation as a
Treasury tax and loan depositary.
203.4 Designation of financial institutions as Treasury tax and
loan depositaries.
203.5 Parties to the agreement.
203.6 Obligations of the depositary.
203.7 Compensation for services.
203.8 Termination of agreement or change of election or option.
203.9 Additional instructions.
Subpart B--Electronic Federal Tax Payments
203.10 Scope of the subpart.
203.11 Enrollment.
203.12 Electronic payment methods.
203.13 Future-day reporting and payment mechanisms.
203.14 Same-day reporting and payment mechanisms.
203.15 Electronic Federal Tax Payment System late fees.
203.16 Prohibited Automated Clearing House debits.
203.17 Appeal and dispute resolution.
Subpart C--Federal Tax Deposits
203.18 Scope of the subpart.
203.19 Tax deposits using Federal tax deposit coupons.
203.20 Note option.
203.21 Remittance option.
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Subpart D--Investment Program and Collateral Security Requirements for
Treasury Tax and Loan Depositaries
203.22 Scope of the subpart.
203.23 Sources of balances.
203.24 Note balance.
203.25 Collateral security requirements.
Authority: 12 U.S.C. 90, 265-266, 332, 391, 1452(d), 1464(k),
1767, 1789a, 2013, 2122, and 3102; 26 U.S.C. 6302; 31 U.S.C. 321,
323 and 3301-3304.
Subpart A--General Information
Sec. 203.1 Scope.
The regulations in this part govern the processing of Federal tax
payments by financial institutions and the Federal Reserve Banks (FRB)
using electronic payment or paper methods; the designation of Treasury
tax and loan (TT&L) depositaries; and the operation of the Treasury
Department's (Treasury) investment program.
Sec. 203.2 Definitions.
As used in this part:
Advice of credit means the Treasury form (Standard Form 2284) used
in the Federal Tax Deposit (FTD) system which is supplied to
depositaries to use in summarizing and reporting deposits. Advice of
credit information also may be delivered electronically.
Automated Clearing House (ACH) credit entry means a transaction
originated by a financial institution in accordance with applicable ACH
association formats and applicable laws, regulations, and procedural
instructions.
Automated Clearing House (ACH) debit entry means a transaction
originated by Treasury's financial agent, in accordance with applicable
ACH association formats and applicable laws, regulations, and
instructions.
Business day means any day on which the FRB of the district is open
to the public.
Direct Access transaction means same-day Federal tax payment
information transmitted by a financial institution directly to the
Electronic Tax Application at a FRB using computer interface or the
Fedline Taxpayer Deposit Application.
Direct investment means placement of Treasury funds with a
depositary and a corresponding increase in a depositary's note balance.
Electronic Federal Tax Payment System (EFTPS) means that system
through which taxpayers remit Federal tax payments electronically.
Electronic Tax Application (ETA) means a subsystem of EFTPS that
receives, processes, and transmits Federal tax payment information for
taxpayers. ETA activity is comprised of Fedwire value transfers,
Fedwire non-value transactions, and Direct Access transactions.
Electronic Tax Application (ETA) reference number means the unique
number assigned to each ETA transaction by a FRB.
Federal funds rate means the Federal funds rate published weekly by
the Board of Governors of the Federal Reserve System.
Federal Reserve account means a reserve or clearing account held by
a financial institution with an FRB.
Federal Reserve Bank (FRB) head office local zone time (head office
LZT) means the local time of the FRB head office through which a
financial institution, or its authorized correspondent bank, sends a
same-day payment to an FRB.
Federal Reserve Bank of the district means the FRB that services
the geographical area in which the depositary is located, or such other
FRB that may be designated in an FRB operating circular.
Federal tax deposit (FTD) means a tax deposit made using an FTD
coupon.
Federal tax deposit coupon (FTD coupon) means a paper form (form
8109) supplied to a taxpayer by the Treasury for use in the FTD system
to accompany deposits of Federal taxes.
Federal Tax Deposit system (FTD system) means the paper-based
system in which taxpayers present an FTD coupon (form 8109) and payment
to a depositary or an FRB, which prepares an advice of credit listing
the FTDs.
Federal taxes means those Federal taxes or other payments specified
by the Secretary as eligible for payment through the procedures
prescribed in this part.
Fedwire means the funds transfer system owned and operated by the
FRBs.
Fedwire non-value transaction means the same-day Federal tax
payment information transmitted by a financial institution to an FRB
using a Fedwire type 1090 message to authorize a payment.
Fedwire value transfer means a Federal tax payment made by a
financial institution using a Fedwire entry.
Financial institution means any bank, savings bank, savings and
loan association, credit union, or similar institution.
Input Message Accountability Data (IMAD) means a unique number
assigned to each Fedwire transaction by the financial institution
sending the transaction to an FRB.
Note option means that program available to a depositary under
which Treasury invests in obligations of the depositary. The amount of
such investments will be evidenced by an open-ended interest-bearing
note balance maintained at the FRB of the district.
Procedural instructions are the procedures contained in the
Treasury Financial Manual, Volume IV (IV TFM). The FRBs may issue
operating circulars consistent with the regulations in this part.
Recognized insurance coverage means the insurance provided by the
Federal Deposit Insurance Corporation, the National Credit Union Share
Insurance Fund, or insurance organizations specifically qualified by
the Secretary.
Remittance option means that program available to a depositary that
processes FTD payments, under which the amount of deposits credited by
the depositary to the TT&L account will be withdrawn by the FRB for
deposit to the Treasury's General Account on the day that the FRB
receives the advices of credit supporting such deposits.
Same-day payment means the following ETA payment options: (1)
Direct Access transaction; (2) Fedwire non-value transaction; and (3)
Fedwire value transfer.
Secretary means the Secretary of the Treasury, or the Secretary's
delegate.
Special direct investment means the placement of Treasury funds
with a depositary and a corresponding increase in a depositary's note
balance, where the investment specifically is identified as a ``special
direct investment'' and may be secured by collateral retained in the
possession of the depositary pursuant to the terms of
Sec. 203.25(c)(2)(i).
Tax due date means the day on which a tax payment is due to
Treasury, as determined by statute and IRS regulations.
Transaction trace number means a unique number assigned by the
taxpayer's financial institution to each ACH credit transaction and by
Treasury's Financial Agent to each ACH debit transaction.
Treasury's Financial Agent (TFA) means a financial institution
designated as an agent of Treasury for processing EFTPS enrollments,
receiving EFTPS tax payment information, and originating ACH debit
entries on behalf of Treasury.
Treasury's General Account (TGA) means an account maintained in the
name of the United States Treasury at an FRB.
Treasury tax and loan (TT&L) account means the Treasury account
maintained by a depositary in which funds are credited by the
depositary after receiving and collateralizing FTDs.
[[Page 51190]]
Treasury tax and loan depositary (depositary) means a financial
institution designated as a depositary by the FRB of the district for
the purpose of maintaining a TT&L account and/or note balance.
Treasury tax & loan (TT&L) rate of interest means the Federal funds
rate less twenty-five basis points (i.e., 1/4 of 1 percent).
Sec. 203.3 Financial institution eligibility for designation as a
Treasury tax and loan depositary.
(a) To be designated as a TT&L depositary, a financial institution
must be an FRB, or insured as a national banking association, state
bank, savings bank, savings and loan, building and loan, homestead
association, Federal home loan bank, credit union, trust company, or a
U.S. branch of a foreign banking corporation, the establishment of
which has been approved by the Comptroller of the Currency.
(b) A financial institution shall possess the authority to pledge
collateral to secure TT&L account balances and/or a note balance.
(c) In order to be designated as a TT&L depositary for the purposes
of processing tax deposits in the FTD system, a financial institution
shall possess under its charter either general or specific authority
permitting the maintenance of the TT&L account, the balance of which is
payable on demand without previous notice of intended withdrawal and
either general or specific authority permitting the maintenance of a
note balance, which is payable on demand without previous notice of
intended withdrawal.
Sec. 203.4 Designation of financial institutions as Treasury tax and
loan depositaries.
(a) Application procedures. An eligible financial institution
seeking designation as a depositary and, thereby, the authority to
maintain a TT&L account and/or a note balance shall file with the FRB
Financial Management Service Form 458 ``Financial Institution Agreement
and Application for Designation as a TT&L depositary,'' and Financial
Management Service Form 459, ``Resolutions Authorizing the Financial
Institution Agreement and Application for Designation as a TT&L
depositary,'' certified by its board of directors. Financial Management
Service Forms 458 and 459 are available upon request from the FRB.
(b) Designation. Each financial institution satisfying the
eligibility requirements and the application procedures will receive
from the FRB notification of its specific designation as a TT&L
depositary. A financial institution is not authorized to maintain a
TT&L account or note balance until it has been designated as a TT&L
depositary by the FRB. Depositaries processing tax payments in the FTD
System are required to elect either the remittance or the note option.
Sec. 203.5 Parties to the agreement.
To be designated as a TT&L depositary, a financial institution
shall enter into a depositary agreement with Treasury's fiscal agent,
the FRB. By entering into this agreement, the financial institution
agrees to be bound by this part, and instructions issued pursuant to
this part.
Sec. 203.6 Obligations of the depositary.
A depositary shall:
(a) Administer a note balance, if not participating in the FTD
System.
(b) Administer a TT&L account and, if applicable, a note balance,
if participating in the FTD System.
(c) Comply with the requirements of Section 202 of Executive Order
11246, entitled ``Equal Employment Opportunity'' as amended by
Executive Orders 11375 and 12086, and the regulations issued thereunder
at 41 CFR Chapter 60.
(d) Comply with the requirements of Section 503 of the
Rehabilitation Act of 1973, as amended, and the regulations issued
thereunder at 41 CFR part 60-741, requiring Government contractors to
take affirmative action to employ and advance in employment qualified
individuals with disabilities.
(e) Comply with the requirements of Section 503 of the Vietnam Era
Veterans' Readjustment Assistance Act of 1972, as amended, 38 U.S.C.
4212, Executive Order 11701, and the regulations issued thereunder at
41 CFR parts 60-250 and 61-250 requiring contractors to take
affirmative action to employ and advance in employment qualified
special disabled veterans and Vietnam Era veterans.
Sec. 203.7 Compensation for services.
Except as provided in the procedural instructions, Treasury will
notcompensate financial institutions for servicing and maintaining the
TT&L account, or for processing tax payments.
Sec. 203.8 Termination of agreement or change of election or option.
(a) Termination by Treasury. The Secretary may terminate the
agreement of a depositary at any time upon notice to that effect to
that depositary, effective on the date set forth in the notice.
(b) Termination or change of election or option by the depositary.
A depositary may terminate its depositary agreement, or change its
option or election, consistent with this part, by submitting notice to
that effect in writing to the FRB effective at a prospective date set
forth in the notice.
Sec. 203.9 Additional instructions.
Procedural instructions on this part are found in the Treasury
Financial Manual, Volume IV (IV TFM). In addition, each FRB may issue
operating circulars and other instructions not inconsistent with this
part or the Treasury Financial Manual, governing the handling of tax
payments and TT&L accounts, and containing such provisions as are
required or permitted by this part. These instructions and the terms of
this part shall be binding on financial institutions that process tax
payments and/or maintain a TT&L account or note balance under this
part. By accepting or originating Federal tax payments, the financial
institution agrees to be bound by this part, and instructions issued
pursuant to this part.
Subpart B--Electronic Federal Tax Payments.
Sec. 203.10 Scope of the subpart.
This subpart prescribes the rules by which financial institutions
shall process Federal tax payment transactions electronically.
Sec. 203.11 Enrollment.
(a) General. Taxpayers shall complete an enrollment process with
the TFA prior to making their first electronic Federal tax payment.
Taxpayers may enroll using either a paper-based or an electronic
method.
(b) Types of enrollment. (1) Paper. The TFA shall provide financial
institutions and taxpayers with enrollment forms upon request. The
taxpayer is responsible for completing the enrollment form, obtaining
the required financial institution verification and signature, and
returning the enrollment form to the TFA.
(2) Electronic. A financial institution may choose to assist its
customers with the enrollment process by offering electronic
enrollment. If a financial institution chooses to offer electronic
enrollment, the financial institution shall follow the procedural
instructions and the instructions provided by the TFA. An authorized
financial institution representative shall verify and sign the
enrollment form and provide a paper copy of the completed enrollment
form to the taxpayer for submission to the TFA.
(c) Verification. If the taxpayer elects the ACH debit entry method
of paying
[[Page 51191]]
taxes, either through the paper or electronic enrollment process, an
authorized representative of the financial institution shall verify the
accuracy of the financial institution routing number, taxpayer account
number, and taxpayer account type. The authorized financial institution
representative shall sign the enrollment form attesting to the accuracy
of the financial institution information.
Sec. 203.12 Electronic payment methods.
(a) General. Electronic payment methods for Federal tax payments
available under this subpart include ACH credit entries, ACH debit
entries, and same-day payments. Any financial institution that is
capable of originating and/or receiving transactions for these payment
methods by itself or through a correspondent, may do so on behalf of a
taxpayer.
(b) Conditions to making an electronic payment. Nothing contained
in this part shall affect the authority of financial institutions to
enter into contracts with their customers regarding the terms and
conditions for processing payments, provided that such terms and
conditions are not inconsistent with this subpart and applicable law
governing the particular transaction type.
(c) Payment of interest for time value of funds held. Treasury will
not pay interest on any payments erroneously paid to Treasury and
subsequently refunded to the financial institution.
Sec. 203.13 Future-day reporting and payment mechanisms.
(a) General. A financial institution may receive an ACH debit
entry, originated by the TFA at the direction of the taxpayer; or, a
financial institution may originate an ACH credit entry, at the
direction of the taxpayer. Taxpayers will be credited for the actual
amount received by Treasury. Treasury will not credit taxpayers for any
amount deducted for system charges.
(b) ACH debit. A financial institution receiving an ACH debit entry
originated by the TFA shall, as applicable:
(1) Timely verify the information contained in the ACH
prenotification entry;
(2) Timely return to the FRB or other ACH processor a
prenotification entry that contains an invalid account number or is
otherwise erroneous or unprocessable;
(3) Properly notify the TFA of incorrect information on entries
received, using a Notification of Change entry; and
(4) Timely return an entry not posted, e.g., a return or a
contested dishonored return for acceptable return reasons, as set forth
in the procedural instructions.
(c) ACH credit. A financial institution originating an ACH credit
entry at the direction of a taxpayer, by itself or through a
correspondent, shall:
(1) Originate an ACH prenotification that may be in the form of a
zero dollar ACH entry. The originator may initiate an ACH credit entry
no earlier than 10 calendar days after the date the prenotification was
transmitted to an FRB or other ACH processor;
(2) Format the ACH credit entry in the ACH format approved by
Treasury for Federal tax payments;
(3) Originate and deliver an ACH credit entry to the FRB or other
ACH processor by the deadline, as specified by the FRB or Treasury,
whichever is earlier, in order to meet the tax due date specified by
the taxpayer;
(4) Provide the taxpayer, upon request, a transaction trace number;
(5) Process all ACH entries received from the FRB or other ACH
processor on a timely basis.
(d) ACH credit corrections. Correction of ACH credit entries must
be approved in advance by the IRS. The financial institution will find
procedures for requesting corrections in the procedural instructions.
Once approval is received, corrections will be processed by the TFA.
Sec. 203.14 Same-day reporting and payment mechanisms.
(a) General. A financial institution or its authorized
correspondent may initiate same-day reporting and payment transactions
on behalf of taxpayers. A same-day payment must be received by the FRB
by 2:00 p.m., FRB head office LZT. Taxpayers will be credited for the
actual amount received by Treasury. Treasury will not credit taxpayers
for any amount deducted for system charges.
(b) Fedwire Value transfer. To initiate a Fedwire value tax
payment, the financial institution shall be a Fedwire participant and
shall comply with the FRB's Fedwire format for tax payments. The
taxpayer's financial institution shall provide, upon request by the
taxpayer, the IMAD and the ETA reference numbers for a Fedwire value
transfer. The financial institution may obtain the ETA reference number
for Fedwire value transfers from its FRB by supplying the related IMAD
number. Fedwire value transfers settle immediately to the TGA and thus
are not credited to a depositary's note balance.
(c) Fedwire non-value transaction. To initiate a Fedwire non-value
tax payment, the financial institution shall be a Fedwire participant
and shall comply with the FRB's Fedwire format for tax payments. The
taxpayer's financial institution shall provide the taxpayer, upon
request, the IMAD and ETA reference number for the Fedwire non-value
transaction. The financial institution may obtain the ETA reference
number for Fedwire non-value transactions from its FRB by supplying the
related IMAD number.
(1) For a note option depositary, tax payments made using the
Fedwire non-value method will be credited to the depositary's note
balance.
(2) For a financial institution that is not a note option
depositary, tax payments made using the Fedwire non-value method will
be debited from the financial institution's Federal Reserve account and
credited to the TGA on the day of the transaction. By initiating a
Fedwire non-value transaction, a financial institution authorizes the
FRB to debit its Federal Reserve account in the amount of the tax
payment specified in the transaction.
(d) Direct Access transaction. By initiating a Direct Access
transaction, a financial institution authorizes the FRB to debit its
Federal Reserve account or the Federal Reserve account of its
designated correspondent in the amount of the tax payment specified in
the transaction. The taxpayer's financial institution shall provide,
upon request of the taxpayer, the ETA reference number for a Direct
Access transaction.
(1) For a note option depositary, tax payments made using Direct
Access will be credited to the depositary's note balance.
(2) For a financial institution that is not a note option
depositary, tax payments made using Direct Access will be debited from
the financial institution's Federal Reserve account, or the Federal
Reserve account of its designated correspondent, and credited to the
TGA on the day of the transaction.
(e) Cancellations and reversals. The FRB may reverse a same-day
transaction:
(1) If the transaction:
(i) Is originated by a financial institution after 2:00 p.m. FRB
head office LZT;
(ii) Has an unenrolled taxpayer identification number;
(iii) Does not meet the edit and format requirements set forth in
the procedural instructions;
(2) At the direction of the IRS, for the following reasons:
(i) Incorrect taxpayer name;
(ii) Overpayment;
(iii) Unidentified payment; or,
(3) At the request of the financial institution that sent the same-
day transaction, if the request is made prior
[[Page 51192]]
to 2:00 p.m. FRB head office LZT on the day the payment was made.
(f) Other than as stated in paragraph (e) of this section, Treasury
is not obligated to reverse all or any part of a payment.
Sec. 203.15 Electronic Federal Tax Payment System late fees.
(a) Circumstances subject to late fees. Treasury may assess a late
fee on a financial institution in instances where a taxpayer that
failed to meet a tax due date proves to the IRS that the delivery of
tax payment instructions to the financial institution was timely and
that the taxpayer satisfied the conditions imposed by the financial
institution pursuant to Sec. 203.12(b).
(b) Calculation of late fees. Any late fee assessed under this
section shall be in the form of interest at the TT&L rate. The late fee
will be assessed from the day the taxpayer specified that its payment
should settle to Treasury until the receipt of the payment by Treasury.
(c) Authorization to assess late fees. A financial institution that
processes Federal tax payments made by electronic payment methods under
this subpart is deemed to authorize the FRB to debit its Federal
Reserve account or the account of its designated correspondent for any
late fee assessed under this section. Upon the direction of Treasury,
the FRB shall debit the Federal Reserve account of the financial
institution or the account of its designated correspondent for the
amount of the late fee.
(d) Circumstances not subject to late fees. Treasury will not
assess a late fee on a taxpayer's financial institution if a taxpayer
fails to meet a tax due date because the taxpayer has not satisfied
conditions imposed by the financial institution pursuant to
Sec. 203.12(b). The burden is on the financial institution to establish
the taxpayer has not satisfied the conditions.
Sec. 203.16 Prohibited Automated Clearing House debits.
(a) General. The Treasury has instituted operational safeguards to
scrutinize all debit entries sent to the Treasury. In the unlikely
event an unauthorized debit entry is posted to the TGA, this section
sets forth the liability of financial institutions originating such
debits. Accordingly, a financial institution shall not originate an ACH
debit to the TGA without the prior written permission of Treasury.
(b) Liability. A financial institution that originates an
unauthorized ACH debit entry that is posted to the TGA shall be liable
to Treasury for the amount of the transaction and shall be liable for
interest charges as specified in paragraph (d) of this section.
(c) Authorization to recover principal and assess interest charge.
By initiating an unauthorized ACH debit entry, a financial institution
is deemed to authorize the FRB to debit its Federal Reserve account or
the account of its designated correspondent for any principal and, if
applicable, interest charge assessed by Treasury under this section.
(d) Interest charge calculation. The interest charge shall be at a
rate equal to the Federal funds rate plus two percent. The interest
charge shall be assessed for each calendar day, from the day the TGA
was debited to the day the TGA is recredited with the full amount due.
Sec. 203.17 Appeal and dispute resolution.
(a) Appeal. A financial institution may appeal any late fee or
interest charge assessed under either Sec. 203.15 or Sec. 203.16. An
appeal must be received, in writing, by the Treasury officer identified
in the procedural instructions, no later than 90 calendar days after
the date of the charge. The financial institution shall submit
information supporting its position and the relief sought.
(b) Decision. Treasury will decide to: uphold the fee or charge;
reverse the fee or charge; or mandate another action. Treasury's
decision will be final.
(c) Recoveries. In the event of an over or under recovery of late
fees or interest charges, Treasury will reimburse, or instruct the FRB
to credit or debit the Federal Reserve account of the financial
institution or its designated correspondent, as appropriate.
Subpart C--Federal Tax Deposits
Sec. 203.18 Scope of the subpart.
This subpart applies to all depositaries that accept FTD coupons
and governs the acceptance and processing of those coupons.
Sec. 203.19 Tax deposits using Federal tax deposit coupons.
(a) FTD coupons. A depositary that accepts FTD coupons shall,
through any of its offices that accept demand and/or savings deposits:
(1) Accept from a taxpayer, cash, a postal money order drawn to the
order of the depositary, or a check or draft drawn on and to the order
of the depositary, covering an amount to be deposited as Federal taxes
when accompanied by an FTD coupon on which the amount of the deposit
has been properly entered in the space provided. A depositary may
accept, at its discretion, a check drawn on another financial
institution, but it does so at its option and absorbs for its own
account any float and other costs involved.
(2) Issue a counter receipt when requested to do so by a taxpayer
that makes an FTD deposit over the counter.
(3) Place a stamp impression on the face of each FTD coupon in the
space provided. The stamp shall reflect the date on which the tax
deposit was received and the name and location of the depositary. The
timeliness of the tax payment will be determined by reference to the
date stamped by the depositary on the FTD coupon.
(4) Credit, on the date of receipt, all FTD deposits to the TT&L
account and administer that account pursuant to the provisions of this
part.
(5) Forward, each day, to the IRS Center servicing the geographical
area in which the depositary is located, the FTD coupons for all FTD
deposits received that day. The FTD coupons shall be accompanied by an
advice of credit reflecting the total amount of all FTD coupons.
(6) Establish an adequate record of all FTD deposits prior to
transmittal to the IRS Center so that the depositary will be able to
identify deposits in the event tax deposit coupons are lost in
shipment. For tracking purposes, a record shall be made of each FTD
deposit showing, at a minimum, the date of deposit, the taxpayer
identification number, and the amount of the deposit. The depositary's
copy of the advice of credit may be used to provide the necessary
information if individual deposits are listed separately, showing date,
taxpayer identification number, and amount.
(7) Deliver its advices of credit to the FRB by the cutoff hour
designated by the FRB for receipt of advices.
(8) Not accept compensation from taxpayers for accepting deposits
of Federal taxes and handling them as required by this section.
(b) FTD deposits with Federal Reserve Banks. An FRB shall:
(1) Accept an FTD deposit directly from a taxpayer when such tax
deposit is:
(i) Mailed or delivered by a taxpayer; and
(ii) Provided in the form of cash or a check or postal money order
payable to the order of that FRB: and,
(iii) Accompanied by an FTD coupon on which the amount of the tax
deposit has been properly entered in the space provided.
(2) Issue a counter receipt, when requested to do so by a taxpayer
that makes an FTD deposit over the counter; and,
(3) Place, in the space provided on the face of each FTD coupon
accepted
[[Page 51193]]
directly from a taxpayer, a stamp impression reflecting the name of the
FRB and the date on which the tax deposit will be credited to the TGA.
Timeliness of the Federal tax payment will be determined by this date.
However, if such a deposit is mailed to an FRB, it shall be subject to
the ``Timely mailing treated as timely filing and paying'' clause of
the Internal Revenue Code (26 U.S.C. 7502); and,
(4) Credit the TGA with the amount of the tax payment;
(i) On the date the payment is received, if payment is made in
cash; or,
(ii) On the date the proceeds of the tax payment are collected, if
payment is made by postal money order or check.
Sec. 203.20 Note option.
(a) Late delivery of advices of credit. If an advice of credit does
not arrive at the FRB before the designated cutoff hour for receipt of
such advices, the FRB will post the funds to the note balance as of the
next business day after the date on the advice of credit. This is the
date on which funds will begin to earn interest for Treasury.
(b) Transfer of funds from TT&L account to the note balance. For a
depositary selecting the note option, funds equivalent to the amount of
deposits credited by a depositary to the TT&L account shall be
withdrawn by the depositary and credited to the note balance on the
business day following the receipt of the tax payment.
Sec. 203.21 Remittance option.
(a) FTD late fee. If an advice of credit does not arrive at the FRB
before the designated cutoff hour for receipt of such advices, an FTD
late fee in the form of interest at the TT&L rate will be assessed for
each day's delay in receipt of such advice. Upon the direction of
Treasury, the FRB shall debit the Federal Reserve account of the
financial institution or the account of its designated correspondent
for the amount of the late fee.
(b) Withdrawals. For a depositary selecting the Remittance Option,
the amount of deposits credited by a depositary to the TT&L account
will be withdrawn upon receipt by the FRB of the advices of credit. The
FRB will charge the depositary's Federal Reserve account or the account
of the depositary's designated correspondent.
Subpart D--Investment Program and Collateral Security Requirements
for Treasury Tax and Loan Depositaries
Sec. 203.22 Scope of the subpart.
This subpart provides rules for TT&L depositaries on crediting note
balances under the various payment methods; debiting note balances; and
pledging collateral security.
Sec. 203.23 Sources of balances.
Depositaries electing to participate in the investment program can
receive Treasury's investments in obligations of the depositary from
the following sources:
(a) FTD deposits that have been credited to the TT&L account
pursuant to subpart C of this part;
(b) EFTPS ACH credit and ACH debit transactions, Fedwire non-value
transactions, and Direct Access transactions pursuant to subpart B of
this part; and
(c) Direct investments and special direct investments pursuant to
subpart D of this part.
Sec. 203.24 Note balance.
(a) Additions. Treasury will invest funds in obligations of
depositaries selecting the note option. Such obligations shall be in
the form of open-ended, interest-bearing notes; and additions and
reductions will be reflected on the books of the FRB of the district.
(1) FTD system. A depositary processing tax deposits using the FTD
system and electing the note option shall debit the TT&L account and
credit its note balance as stated in 203.20(b).
(2) EFTPS. (i) ACH credit and ACH debit. A note option depositary
processing EFTPS ACH debit entries and/or ACH credit entries shall
credit its note balance for the value of the transactions on the
settlement day. Financial institutions may refer to the procedural
instructions for information on how to ascertain the amount of the
credit to the note balance;
(ii) Fedwire non-value and Direct Access. A note option depositary
processing Fedwire non-value and/or Direct Access transactions pursuant
to subpart B of this part shall credit its note balance and debit its
customer's account for the value of the transactions on the transaction
date.
(b) Other additions. Other funds from Treasury may be offered from
time to time to certain note option depositaries through direct
investments, special direct investments or other investment programs.
(c) Note balance withdrawals. The amount of the note balance shall
be payable on demand without previous notice. Calls for payment on the
note will be by direction of the Secretary through the FRBs. On behalf
of Treasury, the FRB shall charge the reserve account of the depositary
or the depositary's designated correspondent on the day specified in
the call for payment.
(d) Interest. A note shall bear interest at the TT&L rate. Such
interest is payable monthly by a charge to the Federal Reserve account
of the depositary or its designated correspondent.
(e) Maximum balance.
(1) Note depositaries. A depositary selecting the note option shall
establish a maximum balance for its note by providing notice to that
effect in writing to the FRB. The maximum balance is the amount of
funds for which a note option depositary is willing to provide
collateral in accordance with Sec. 203.25(c)(1). That portion of any
advice of credit or EFTPS tax payment, which, when posted at the FRB,
would cause the note balance to exceed the maximum balance amount
specified by the depositary, will be withdrawn by the FRB that day.
(2) Direct investment depositaries. A note depositary that
participates in the direct investment program will set a maximum
balance for direct investment purposes which is higher than its peak
balance normally generated by the depositary's advices of credit and
EFTPS tax payment inflow.
(3) Special direct investment depositaries. Special direct
investments, while credited to the note balance, shall not be
considered in setting the amount of the maximum balance or in
determining the amounts to be withdrawn where a depositary's maximum
balance is exceeded.
Sec. 203.25 Collateral security requirements.
Financial institutions that process EFTPS tax payments, but are not
TT&L depositaries, have no collateral requirements under this part.
Financial institutions that are note option depositaries or remittance
option depositaries have collateral security requirements, as follows:
(a) Note option. (1) FTD deposits and EFTPS tax payments. A
depositary shall pledge collateral security in accordance with the
requirements of paragraphs (c)(1), (d), and (e) of this section in an
amount that is sufficient to cover the pre-established maximum balance
for the note, and, if applicable, the closing balance in the TT&L
account which exceeds recognized insurance coverage. Depositaries shall
pledge collateral for the full amount of the maximum balance at the
time the maximum balance is established. If the depositary maintains a
TT&L account, the depositary shall pledge collateral security before
crediting deposits to the TT&L account.
[[Page 51194]]
(2) Direct investments. A note option depositary that participates
in Treasury's direct investment program is not required to pledge
collateral continuously in the amount of the pre-established maximum
balance. However, each direct investment depositary shall pledge, no
later than the day the direct investment is placed, the additional
collateral in accordance with paragraphs (c)(1), (d), and (e) of this
section to cover the total note balance including those funds received
through the direct investment program. If a direct investment
depositary has a history of frequent collateral deficiencies, it shall
fully collateralize its maximum balance at all times.
(3) Special direct investments. Before special direct investments
are credited to a depositary's note balance, the note option depositary
shall pledge collateral security in accordance with the requirements of
paragraphs (c)(2) and (e) of this section, to cover 100 percent of the
amount of the special direct investments to be received.
(b) Remittance option. Prior to crediting FTD deposits to the TT&L
account, a remittance option depositary shall pledge collateral
security in accordance with the requirements of paragraph (c)(1), (d),
and (e) of this section in an amount which is sufficient to cover the
balance in the tax and loan account at the close of business each day,
less recognized insurance coverage.
(c) Deposits of securities. (1) Collateral security required under
paragraphs (a)(1), (2), and (b) of this section shall be deposited with
the FRB of the district, or with a custodian or custodians within the
United States designated by the FRB, under terms and conditions
prescribed by the FRB.
(2)(i) Collateral security required under paragraph (a)(3) of this
section shall be pledged under a written security agreement on a form
provided by the FRB of the district. The collateral security pledged to
satisfy the requirements of paragraph (a)(3) of this section may remain
in the pledging depositary's possession and the fact that it has been
pledged shall be evidenced by advices of custody to be incorporated by
reference in the written security agreement. The written security
agreement and all advices of custody covering collateral security
pledged under that agreement shall be provided by the depositary to the
FRB of the district. Collateral security pledged under the agreement
shall not be substituted for or released without the advance written
approval of the FRB of the district, and any collateral security
subject to the security agreement shall remain so subject until an
approved substitution is made. No substitution or release shall be
approved until an advice of custody containing the description required
by the written security agreement is received by the FRB of the
district.
(ii) Treasury's security interest in collateral security pledged by
a depositary in accordance with paragraph (c)(2)(i) of this section to
secure special direct investments is perfected without Treasury taking
possession of the collateral security for a period not to exceed 21
days from the day of the depositary's receipt of the special direct
investment.
(d) Acceptable securities. Unless otherwise specified by the
Secretary, collateral security pledged under this section may be
transferable securities, owned by the depositary free and clear of all
liens, charges, or claims, of any of the classes listed in the
procedural instructions. Collateral will be accepted at values assigned
by the FRB of the district.
(e) Assignment of securities. A TT&L depositary that pledges
acceptable securities which are not negotiable without its endorsement
or assignment may furnish, in lieu of placing its unqualified
endorsement on each security, an appropriate resolution and irrevocable
power of attorney authorizing the FRB to assign the securities. The
resolution and power of attorney shall conform to such terms and
conditions as the FRB shall prescribe.
(f) Effecting payments of principal and interest on securities
pledged as collateral. (1) General. If the depositary fails to pay,
when due, the whole or any part of the funds received by it for credit
to the TT&L account, and/or if applicable, its note balance; or
otherwise violates or fails to perform any of the terms of this part,
or fails to pay when due amounts owed to the United States or the
United States Treasury; or if the depositary is closed for business by
regulatory action or by proper corporate action, or in the event that a
receiver, conservator, liquidator or any other officer is appointed;
then the Treasury, without notice or demand, may sell, or otherwise
collect the proceeds of all or part of the collateral, including
additions and substitutions; and apply the proceeds, to satisfy any
claims of the United States against the depositary. All principal and
interest payments on any security pledged to protect the note balance
(if applicable) and/or the TT&L account (if applicable), due as of the
date of the insolvency or closure, or thereafter becoming due, shall be
held separate and apart from any other assets and shall constitute a
part of the pledged security available to satisfy any claim of the
United States.
(2) Payment procedures. (i) Subject to the waiver in paragraph
(f)(2)(iii) of this section, each depositary (including, with respect
to such depositary, an assignee for the benefit of creditors, a trustee
in bankruptcy, or a receiver in equity) shall immediately remit each
payment of principal and/or interest received by it with respect to
collateral pledged pursuant to this section to the FRB of the district,
as fiscal agent of the United States, and in any event shall so remit
no later than 10 days after receipt of such a payment.
(ii) Subject to the waiver in paragraph (f)(2)(iii) of this
section, each obligor on a security pledged by a depositary pursuant to
this section shall make each payment of principal and/or interest due
with respect to such security directly to the FRB of the district, as
fiscal agent of the United States.
(iii) The requirements of paragraphs (f)(2)(i) and (ii) of this
section are hereby waived for only so long as a pledging depositary
avoids both termination from the program under Sec. 203.8; and also,
those circumstances identified in paragraph (f)(1) which may lead to
the collection of the proceeds of collateral or the waiver is otherwise
terminated by Treasury.
Dated: September 25, 1996.
Russell D. Morris,
Commissioner.
[FR Doc. 96-24949 Filed 9-27-96; 8:45 am]
BILLING CODE 4810-35-P
