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Title 31 – Money and Finance: Treasury–Volume 2

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Title 31 – Money and Finance: Treasury–Volume 2



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

Part


chapter ii – Fiscal Service, Department of the Treasury

202

chapter iv – Secret Service, Department of the Treasury

401


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

CHAPTER II – FISCAL SERVICE, DEPARTMENT OF THE TREASURY

SUBCHAPTER A – BUREAU OF THE FISCAL SERVICE


Editorial Note:Nomenclature changes to subchapter A appear at 78 FR 60697, Oct. 2, 2013.

PARTS 200-201 [RESERVED]

PART 202 – DEPOSITARIES AND FINANCIAL AGENTS OF THE FEDERAL GOVERNMENT
1



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



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

§ 202.1 Scope of regulations.

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


[62 FR 45520, Aug. 27, 1997]


§ 202.2 Designations.

(a) Financial institutions of the following classes are designated as Depositaries and Financial Agents of the Government if they meet the eligibility requirements stated in paragraph (b) of this section:


(1) Financial institutions insured by the Federal Deposit Insurance Corporation.


(2) Credit unions insured by the National Credit Union Administration.


(3) Banks, savings banks, savings and loan, building and loan, and homestead associations, credit unions created under the laws of any State, the deposits or accounts of which are insured by a State or agency thereof or by a corporation chartered by a State for the sole purpose of insuring deposits or accounts of such financial institutions, United States branches of foreign banking corporations authorized by the State in which they are located to transact commercial banking business, and Federal branches of foreign banking corporations, the establishment of which has been approved by the Comptroller of the Currency.


(b) In order to be eligible for designation, a financial institution is required to possess, under its charter and the regulations issued by its chartering authority, either general or specific authority to perform the services outlined in § 202.3(b). A financial institution is required also to possess the authority to pledge collateral to secure public funds.


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


§ 202.3 Authorization.

(a) To accept deposits covered by the appropriate Federal or State insurer. Every depositary is authorized to accept a deposit of public money in an official account, other than an account in the name of the United States Treasury, in which the maximum balance does not exceed the “Recognized Insurance Coverage.” “Recognized Insurance Coverage” means the insurance provided by the Federal Deposit Insurance Corporation, the National Credit Union Administration, and by insurance organizations specifically qualified by the Secretary of the Treasury.


(b) To perform other services. (1) The Secretary of the Treasury may authorize a depositary to perform other services including, but not limited to:


(i) The maintenance of official accounts in which balances will be in excess of the applicable Federal or State insurance coverage;


(ii) The maintenance of accounts in the name of the United States Treasury;


(iii) The acceptance of deposits for credit of the United States Treasury;


(iv) The furnishing of bank drafts in exchange for collections.


(2) To obtain authorization to perform services, a depositary must:


(i) File with the Secretary of the Treasury an appropriate agreement and resolution of its board of directors authorizing the agreement (both on forms prescribed by the Bureau of the Fiscal Service and available from Federal Reserve Banks), and


(ii) Pledge collateral security as provided for in § 202.6.


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


§ 202.4 Agreement of deposit.

A depositary which accepts a deposit under this part enters into an agreement of deposit with the Treasury Department. The terms of this agreement include:


(a) All of the provisions of this part.


(b) Any instructions issued pursuant to this part by the Treasury or by Federal Reserve Banks as Fiscal Agents of the United States or by any other Government agency.


(c) The provisions prescribed in Executive Order 11246, entitled “Equal Employment Opportunity,” as amended by Executive Orders 11375 and 12086, and regulations issued thereunder at 41 CFR chapter 60, as amended.


(d) The requirements of section 503 of the Rehabilitation Act of 1973, as amended, and the regulations issued thereunder at 41 CFR part 60-741, requiring Federal contractors to take affirmative action to employ and advance in employment qualified individuals with disabilities.


(e) The requirements of section 503 of the Vietnam Era Veterans’ Readjustment Assistance Act of 1972, as amended, 38 U.S.C. 4212, Executive Order 11701, and the regulations issued thereunder at 41 CFR parts 60-250 and 61-250, requiring Federal contractors to take affirmative action to employ and advance in employment qualified special disabled and Vietnam Era veterans.


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


§ 202.5 Previously designated depositaries.

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


[32 FR 14215, Oct. 13, 1967]


§ 202.6 Collateral security.

(a) Requirement. Prior to receiving deposits of public money, a depositary authorized to perform services under § 202.3(b) must pledge collateral security in the amount required by the Secretary of the Treasury.


(b) Acceptable security. Types and valuations of acceptable collateral security are addressed in 31 CFR part 380. For a current list of acceptable classes of securities and instruments described in 31 CFR part 380 and their valuations, see the Bureau of the Fiscal Service’s web site at www.publicdebt.treas.gov.


(c) Deposits of securities. Unless the Secretary of the Treasury provides otherwise, collateral security under this part must be deposited with the Federal Reserve Bank or Branch of the district in which the depositary is located (depositaries located in Puerto Rico and the Virgin Islands will be considered as being located in the New York Federal Reserve district), or with a custodian or custodians within the United States designated by the Federal Reserve Bank, under terms and conditions prescribed by the Federal Reserve Bank. Securities deposited with a Federal Reserve Bank must be accompanied by a letter stating specifically the purpose for which the securities are being deposited.


(d) Assignment. A depository that pledges securities which are not negotiable without its endorsement or assignment may, in lieu of placing its unqualified endorsement on each security, furnish an appropriate resolution and irrevocable power of attorney authorizing the Federal Reserve Bank to assign the securities. The resolution and power of attorney shall conform to such terms and conditions as the Federal Reserve Banks shall prescribe.


(e) Disposition of principal and interest payments of the pledged securities after a depositary is declared insolvent – (1) General. In the event of the depositary’s insolvency or closure, or in the event of the appointment of a receiver, conservator, liquidator, or other similar officer to terminate its business, the depositary agrees that all principal and interest payments on any security pledged to protect public money due as of the date of the insolvency or closure, or thereafter becoming due, shall be held separate and apart from any other assets and shall constitute a part of the pledged security available to satisfy any claim of the United States, including those not arising out of the depositary relationship.


(2) Payment procedures. (i) Subject to the waiver in paragraph (e)(2)(iii) of this section, each depositary (including, with respect to such depositary, an assignee for the benefit of creditors, a trustee in bankruptcy, or a receiver in equity) shall immediately remit each payment of principal and/or interest received by it with respect to collateral pledged pursuant to this section to the Federal Reserve Bank of the district, as fiscal agent of the United States, and in any event shall so remit no later than ten days after receipt of such a payment.


(ii) Subject to the waiver in paragraph (e)(2)(iii) of this section, each obligor on a security pledged by a depositary pursuant to this section shall make each payment of principal and/or interest with respect to such security directly to the Federal Reserve Bank of the district, as fiscal agent of the United States.


(iii) The requirements of paragraphs (e)(2) (i) and (ii) of this section are hereby waived for only so long as a pledging depositary remains solvent. The foregoing waiver is terminated without further action immediately upon the involvency of a pledging depositary or, if earlier, upon notice by the Treasury of such termination. For purposes of this paragraph, a depositary is insolvent when, voluntarily or by action of competent authority, it is closed because of present or prospective inability to meet the demands of its depositors or shareholders.


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


§ 202.7 Maintenance of balances within authorizations.

(a) Federal Government agencies shall contact the Department of the Treasury, Bureau of the Fiscal Service, before making deposits with a financial institution insured by a State or agency thereof or by a corporation chartered by a State for the sole purpose of insuring deposits or accounts. The contact should be directed to the Cash Management Policy and Planning Division, Federal Finance, Bureau of the Fiscal Service, Department of the Treasury, Washington, DC 20227.


(b) Government agencies having control or jurisdiction over public money on deposit in accounts with depositaries are responsible for the maintenance of balances in such accounts within the limits of the authorizations specified by the Secretary of the Treasury.


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


PART 203 – PAYMENT OF FEDERAL TAXES AND THE TREASURY TAX AND LOAN PROGRAM


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


Source:72 FR 59181, Oct. 19, 2007, unless otherwise noted.

Subpart A – General Information

§ 203.1 Scope.

The regulations in this part govern the processing by financial institutions of electronic and paper-based deposits and payments of Federal taxes; the operation of the Treasury Tax and Loan (TT&L) program; the designation of TT&L depositaries; and the operation of the investment program. A financial institution may participate in the TT&L program by participating in the investment program or by accepting Federal tax payments, or both. A financial institution that accepts Federal tax payments may do so through the paper tax system (PATAX), or Electronic Federal Tax Payment System (EFTPS), or both. However, a financial institution is not designated as a TT&L depositary if it only processes EFTPS payments.


§ 203.2 Definitions.

Advice of credit (AOC) means the paper or electronic form depositaries use to summarize and report Federal Tax Deposit (FTD) coupon deposits to the Internal Revenue Service (IRS) and the Federal Reserve Bank (FRB).


Automated Clearing House (ACH) credit entry means a credit transaction originated by a financial institution, at the direction of the taxpayer, in accordance with applicable ACH formats and applicable laws, regulations, and procedural instructions.


ACH debit entry means a debit transaction originated by the Treasury Financial Agent (TFA), at the direction of the taxpayer, in accordance with applicable ACH formats and applicable laws, regulations, and instructions.


Balance limit means the highest amount a depositary has stated it will accept in its Treasury Investment Program (TIP) main account.


Borrower-In-Custody (BIC) collateral means an arrangement by which a financial institution pledging collateral to secure special direct investments and certain term investments is permitted to retain possession of that collateral, subject to terms and conditions agreed upon between the FRB and the financial institution.


Business day means any day on which a financial institution’s FRB is open.


Capacity means a TT&L depositary’s ability to accept additional investments in its TIP main account balance and/or its Special Direct Investment (SDI) account balance. With respect to a TT&L depositary’s TIP main account balance, capacity means the balance limit or current collateral value, whichever is lower, minus the total of: the depositary’s current TIP main account balance and any pending investments, plus any pending withdrawals. With respect to an SDI account balance, capacity means the dollar amount of collateral that the depositary has pledged for SDIs under a BIC arrangement minus the total of: the depositary’s current SDI account balance and any pending investments, plus any pending withdrawals.


Collector depositary means a TT&L depositary that accepts paper tax payments from business customers and that may also process electronic tax payments from customers, but that does not retain any such deposits as investments or accept dynamic, direct, or special direct investments. A collector depositary may accept term investments.


Direct investment means the Department of the Treasury’s (Treasury’s) placement of funds with a TT&L depositary, which results in an increase to the depositary’s TIP main account balance and a credit to its reserve account.


Dynamic investment means Treasury’s placement of funds with a TT&L depositary throughout the day, which results in an increase to the depositary’s TIP main account balance and a credit to its reserve account.


Electronic Federal Tax Payment System (EFTPS) means the system through which taxpayers remit Federal tax payments electronically.


Federal Reserve Bank (FRB) means the FRB of the district where the financial institution is located, or such other FRB that may be designated in an FRB operating circular, or such other FRB that may be designated by the Treasury. A financial institution is deemed located in the same district it would be deemed located for purposes of Regulation D (12 CFR 204.3(b)(2)), even if the financial institution is not otherwise subject to Regulation D.


Federal Tax Deposit (FTD) means a Federal tax deposit made using an FTD coupon.


FTD coupon means a paper form supplied to a taxpayer by Treasury to accompany deposits of Federal taxes made through PATAX.


Federal taxes means those Federal taxes or other payments specified by the Secretary of the Treasury as eligible for payment through the procedures described in this part.


Fedwire ®1 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 [email protected] type 1090 message to authorize a payment.


Fedwire ® value transfer means a Federal tax payment made by a financial institution using a Fedwire ® type 1000 message.


Financial institution means any bank, savings bank, savings association, credit union, or similar institution.


Fiscal agent means the FRB acting as agent for Treasury.


Investment program is the all-inclusive name given to the programs by which Treasury invests excess operating cash.


Investor depositary means a TT&L depositary that is authorized to participate in the investment program by accepting funds from Treasury via direct investments, special direct investments, dynamic investments, or term investments. In addition, an investor depositary may accept electronic or paper Federal tax payments from its business customers and retain a portion of those tax deposits, depending on the capacity of its TIP main account balance.


Paper Tax System (PATAX) means the paper-based system through which taxpayers remit Federal tax payments by presenting an FTD coupon and payment to a TT&L depositary.


Procedural instructions means the procedures contained in the Treasury Financial Manual, Volume IV (IV TFM), other Treasury instructions issued by Treasury or through Treasury’s Financial Agents and FRB operating circulars, and agreements issued consistent with this part.


Recognized insurance coverage means the insurance provided by the Federal Deposit Insurance Corporation, the National Credit Union Administration, and insurance organizations specifically qualified by the Secretary.


Reserve account means an account at an FRB with reserve or clearing balances held by a financial institution or its designated correspondent financial institution, if applicable.


Retainer depositary means a TT&L depositary that accepts electronic and/or paper Federal tax payments from its business customers and retains a portion of the Federal tax deposits in its TIP main account balance, depending on its balance limit, account balance, and collateral value. A retainer depositary may also accept term investments.


Same-day payment means a payment made by a Fedwire ® non-value transaction or a Fedwire ® value transaction.


Secretary means the Secretary of the Treasury, or the Secretary’s delegate.


Special Direct Investment (SDI) means the placement by Treasury of funds with an investor depositary secured by collateral pledged under a BIC arrangement.


SDI account balance means an open-ended, interest-bearing note maintained on the books of the Treasury Support Center representing the amount of SDIs held by an investor depositary and secured by collateral pledged under a BIC arrangement.


Tax due date means the day on which a Federal tax payment is due to Treasury, as determined by statute and IRS regulations.


Term Investments means Treasury’s excess operating funds that have been offered for a predetermined period of time and accepted by depositaries participating in the Term Investment Option.


Term Investment Option (TIO) means the program available to depositaries that offers the ability to borrow excess Treasury operating funds for a predetermined period of time.


TIO account balance means an interest-bearing note maintained on the books of the Treasury Support Center for a predetermined period of time.


Treasury Financial Agent (TFA) means a financial institution designated as an agent of Treasury for processing EFTPS enrollments, consolidating EFTPS tax payment information, and originating ACH debit entries on behalf of Treasury as authorized by the taxpayer.


Treasury General Account (TGA) means an account maintained in the name of the United States Treasury at an FRB.


Treasury Investment Program (TIP) means the automated system under the TT&L program that receives tax collections, invests funds, and monitors collateral pledged to secure public money.


TIP main account balance means an open-ended interest-bearing note maintained on the books of the Treasury Support Center (TSC) representing a retainer or investor depositary’s current net amount of (i) Federal tax deposits retained by the depositary and/or (ii) Treasury investments made under the Direct investment program.


Treasury Support Center (TSC) means the office at the FRB that, as Treasury’s Fiscal agent, monitors collateral pledged to secure Treasury funds, manages TT&L program participation for depositaries, and/or carries on its books depositaries’ TIP main account balances, SDI account balances, and/or Term Investment Option (TIO) account balances.


Treasury Tax and Loan (TT&L) account means a record of transactions on the books of a TT&L depositary reflecting paper tax deposits received by the depositary.


TT&L depositary or depositary means a financial institution designated as a depositary by Treasury or the FRB of St. Louis acting as Treasury’s Fiscal agent, for the purpose of participating in the investment program and/or PATAX. There are three kinds of TT&L depositaries: investor depositaries, retainer depositaries, and collector depositaries.


TT&L program means the program for collecting Federal taxes and investing the Government’s excess operating funds.


TT&L rate of interest means the interest charged on the TIP main account balance and the SDI account balance. The TT&L rate of interest is the rate prescribed by the Secretary taking into consideration prevailing market interest rates. The rate and any rate changes will be announced through a TT&L Special Notice to Depositaries and will be published in the Federal Register and on a Web site maintained by Treasury’s Bureau of the Fiscal Service at http://www.fiscal.treasury.gov.


§ 203.3 TT&L depositaries.

A financial institution that participates in PATAX and/or the investment program must be a TT&L depositary. There are three kinds of TT&L depositaries. A collector depositary is a TT&L depositary that accepts paper Federal tax payments and also may accept electronic Federal tax payments, but does not accept direct investments or SDIs. A retainer depositary is a TT&L depositary that accepts electronic and/or paper Federal tax payments and retains a portion ofthe tax deposits in its TIP main account balance. An investor depositary is a TT&L depositary that accepts direct investments, SDIs, or dynamic investments and may accept electronic and/or paper Federal tax payments and retain a portion of those tax deposits. Collector, retainer, and investor depositaries may accept term investments. Retainer and investor depositaries do not have to participate in PATAX.


§ 203.4 Financial institution eligibility for designation as a TT&L depositary.

(a) To be designated as a TT&L depositary, a financial institution must be insured as a national banking association, state bank, savings bank, savings association, 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 must possess the authority to pledge collateral to secure TT&L account balances, a TIP main account balance, an SDI account balance, or a no account balance as applicable.


(c) In order to be designated as a TT&L depositary for the purposes of processing Federal tax deposits through PATAX, a financial institution must possess under its charter either general or specific authority permitting the maintenance of the TT&L account, the balance of which is payable on demand without previous notice of intended withdrawal. In addition, investor depositaries and retainer depositaries must possess either general or specific authority permitting the maintenance of a TIP main account 27 balance or an SDI account balance. Investor, retainer, and collector depositaries that accept term investments must possess either general or specific authority permitting the maintenance of a TIO account balance. In the case of investor and retainer depositaries maintaining a TIP main account balance or an SDI account balance, the authority must perm it the maintenance of a TIP main account balance or an SDI account balance which is payable on demand without previous notice of intended withdrawal.


§ 203.5 Designation of financial institutions as TT&L depositaries.

(a) Parties to the agreement. To be designated as a TT&L depositary, a financial institution must enter into a depositary agreement with Treasury or Treasury’s Fiscal agent. By entering into this agreement, the financial institution agrees to be bound by this part, and procedural instructions issued pursuant to this part. Treasury will not compensate depositaries for servicing and maintaining a TT&L account, or for processing tax payments through EFTPS or PATAX, unless otherwise provided for in procedural instructions.


(b) Application procedures. (1) An eligible financial institution seeking designation as a TT&L depositary must file the forms specified in the procedural instructions with the TSC. A TT&L depositary must elect to be one or more of the following:


(i) A collector depositary;


(ii) A retainer depositary;


(iii) An investor depositary.


(2) A financial institution is not authorized to maintain a TT&L account, TIP main account balance, SDI account balance, or TIO account balance until the TSC designates it as a TT&L depository.


§ 203.6 Obligations of TT&L depositaries.

A TT&L depositary must:


(a) Administer a TIP main account balance, SDI account balance, or TIO account balance, as applicable, if participating in the investment program.


(b) Administer a TT&L account, if participating in PATAX.


(c) Comply with the requirements of Section 202 of Executive Order 11246, entitled “Equal Employment Opportunity” (3 CFR, 1964-1965 Comp., p. 339) as amended by Executive Orders 11375 and 12086 (3 CFR, 1966-1970 Comp., p. 684; 3 CFR, 1978 Comp., p. 230), and the regulations issued thereunder at 41 CFR chapter 60.


(d) Comply with the requirements of Section 503 of the Rehabilitation Act of 1973, as amended, and the regulations issued thereunder at 41 CFR part 60-741, requiring Federal contractors to take affirmative action to employ and advance in employment qualified individuals with disabilities.


(e) Comply with the requirements of Section 503 of the Vietnam Era Veterans’ Readjustment Assistance Act of 1972, as amended, 38 U.S.C. 4212, Executive Order 11701 (3 CFR 1971-1975 Comp., p. 752), and the regulations issued thereunder at 41 CFR parts 60-250 and 61-250, requiring Federal contractors to take affirmative action to employ and advance in employment qualified special disabled veterans and Vietnam-era veterans.


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

(a) Termination by Treasury. The Secretary may terminate the agreement of a TT&L 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 TT&L depositary may terminate its depositary agreement, or change its option or election, consistent with this part and the procedural instructions, by prior written notice to the TSC.


§ 203.8 Application of part and procedural instructions.

The terms of this part and the procedural instructions issued pursuant to this part will be binding on financial institutions that process Federal tax payments or maintain a TT&L account, TIP main account balance, SDI account balance, or a TIO account balance under this part. By accepting or originating Federal tax payments, the financial institution agrees to be bound by this part and by procedural instructions issued pursuant to this part.


Subpart B – Electronic Federal Tax Payments

§ 203.9 Scope of the subpart.

This subpart prescribes the rules that financial institutions must follow when they process electronic Federal tax payment transactions. A financial institution is not required to be designated as a TT&L depositary in order to process electronic Federal tax payments. In addition, a financial institution does not become a TT&L depositary by processing electronic Federal tax payments under this subpart and may not represent itself as a TT&L depositary because it does so.


§ 203.10 Electronic payment methods.

(a) General. Electronic payment methods for Federal tax payments available under this subpart include ACH debit entries, ACH credit entries, and same-day payments.


(b) Conditions to making an electronic payment. This part does not affect the authority of financial institutions to enter into contracts with their customers regarding the terms and conditions for processing payments, as long as the terms and conditions of those contracts are not inconsistent with this part and with any laws that apply to the particular transactions.


(c) Payment of interest for time value of funds held. Treasury will not pay interest on any payment that a financial institution erroneously originates and that subsequently is refunded.


§ 203.11 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 the deadline established by Treasury in the procedural instructions.


(b) Fedwire ® non-value transaction. By initiating a Fedwire ® non-value transaction, a financial institution authorizes the TSC to debit its reserve account for the amount of the Federal tax payment specified in the transaction.


(1) For an investor or retainer depositary using a Fedwire ® non-value transaction, the TSC will credit the Federal tax payment amount, up to the depositary’s available TIP main account balance capacity, to the depositary’s TIP main account balance on the day of the transaction. Throughout the course of the day, the TSC will debit from the depositary’s reserve account, and credit to the TGA, any portion of a tax payment amount that would exceed the institution’s available TIP main account balance capacity.


(2) For a collector depositary or a non-TT&L depositary financial institution using a Fedwire ® non-value transaction, the TSC will debit the financial institution’s reserve account for the Federal tax payment amount and credit that amount to the TGA on the day of the transaction.


(c) Cancellations and reversals. In addition to cancellations due to insufficient funds in the financial institution’s reserve account, the FRB may reverse a same-day transaction:


(1) If the transaction:


(i) Is originated by a financial institution after the deadline established by Treasury in the procedural instructions;


(ii) Has an unenrolled taxpayer identification number; or


(iii) Does not meet the edit and format requirements set forth in the procedural instructions; or


(2) At the direction of the IRS, for the following reasons:


(i) Incorrect taxpayer name;


(ii) Overpayment; or


(iii) Unidentified payment; or


(3) At the request of the financial institution that sent the same-day transaction, if the request is made prior to the payment day deadline established by Treasury in the procedural instructions.


(d) Other than as stated in paragraph (c) of this section, Treasury is not obligated to reverse all or any part of a payment.


§ 203.12 EFTPS interest assessments.

(a) Circumstances subject to interest assessments. Treasury may assess interest on a financial institution in instances where a taxpayer that failed to meet a tax due date proves to the IRS that the delivery of Federal tax payment instructions to the financial institution was timely and that the taxpayer satisfied the conditions imposed by the financial institution pursuant to § 203.10(b). Treasury also may assess interest where a financial institution fails to respond to an ACH prenotification entry on an ACH debit as required under part 210 of this title, or fails to originate an ACH prenotification or zero dollar entry on an ACH credit at a taxpayer’s request, which then results in a late payment.


(b) Calculation of interest assessment. Any interest assessed under this section will be at the TT&L rate of interest. Treasury will assess the interest from the day the taxpayer specified that its payment should settle to the Treasury until the day Treasury receives the payment, subject to the following limitations: for ACH debit transactions, interest will be limited to no more than seven calendar days; For ACH credit and same-day transactions, interest will be limited to no more than 45 calendar days. The limitation of liability in this paragraph does not apply to any interest assessment in which there is an indication of fraud, the presentation of a false claim, or misrepresentation or embezzlement on the part of the financial institution or any employee or agent of the financial institution.


(c) Authorization to assess interest. A financial institution that processes Federal tax payments made electronically under this subpart is deemed to authorize the TSC to debit its reserve account for any interest assessed under this section. Upon the direction of Treasury, the TSC will debit the financial institution’s reserve account for the amount of the assessed interest.


(d) Circumstances not resulting in the assessment of interest. (1) Treasury will not assess interest on a taxpayer’s financial institution if a taxpayer fails to meet a tax due date because the taxpayer has not satisfied conditions imposed by the financial institution pursuant to § 203.10(b) and the financial institution has not contributed to the delay. The burden is on the financial institution to establish, pursuant to the procedures in § 203.13, that the taxpayer has not satisfied the conditions and that the financial institution has not caused or contributed to the delay.


(2) Treasury will not assess interest on a financial institution if a taxpayer fails to meet a tax due date because the FRB or the TFA caused a delay and the financial institution did not contribute to the delay. The burden is on the financial institution to establish, pursuant to the procedures in § 203.13, that it did not cause or contribute to the delay.


§ 203.13 Appeal and dispute resolution.

(a) Contest. A financial institution may contest any interest assessed under § 203.12 or any late fees assessed under § 203.17. To do so, the financial institution must submit information supporting its position and the relief sought. The information must be received, in writing, by the Treasury officer or Fiscal agent identified in the procedural instructions, no later than 90 calendar days after the date the TSC debits the Federal reserve account of the financial institution under § 203.12 or § 203.17. The Treasury officer or Fiscal agent will make a decision to: Uphold, reverse, or modify the assessment, or mandate other action.


(b) Appeal. The financial institution may appeal the decision referenced in subsection (a) to Treasury as set forth in the procedural instructions. No further administrative review of Treasury’s decision is available under this part.


(c) Recoveries. In the event of an over or under recovery of interest, principal, or late fees, Treasury will instruct the TSC to credit or debit the financial institution’s reserve account.


Subpart C – PATAX

§ 203.14 Scope of the subpart.

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


§ 203.15 Tax deposits using FTD coupons.

A TT&L depositary processing FTD coupons may choose to be designated as a retainer depositary, an investor depositary, or a collector depositary. A TT&L depositary that accepts FTD coupons through any of its offices that accept demand and/or savings deposits must:


(a) Accept from a taxpayer that presents an FTD coupon: 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. A TT&L 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.


(b) Place a stamp impression on the face of each FTD coupon in the space provided. The stamp must reflect the date on which the TT&L depositary received the tax deposit and the name and location of the depositary. The IRS will determine whether the tax payment is on time by referring to the date stamped on the FTD coupon.


(c) Forward, each day, to the IRS Service Center serving the geographical area in which the TT&L depositary is located, the FTD coupons for all FTD deposits received that day and a copy of the AOC reflecting the total amount of all FTD coupons.


(d) Establish an adequate record of all FTD deposits prior to transmitting them to 36 the IRS Service Center so that the TT&L depositary will be able to identify deposits in the event the FTD coupons are lost in shipment. To be adequate, the record must show, at a minimum for each deposit, the date of the deposit, the taxpayer identification number, the amount of the deposit, the tax period ending date, the type of tax deposited, and the employer name. Alternatively, the TT&L depositary may retain a copy of each FTD coupon forwarded to the IRS Service Center.


(e) On the business day following receipt of an FTD coupon, submit the AOC information electronically to the TSC.


(f) Not accept compensation from taxpayers for accepting FTDs and handling them as required by this section.


§ 203.16 Retainer and investor depositaries.

(a) Credit to TIP main account balance. On the business day that the TSC receives an AOC from a retainer or investor depositary, the TSC will credit the depositary’s TIP main account balance for the amount reported on the AOC unless there isn’t sufficient capacity. In that case, any amount in excess of the capacity will be debited to the reserve account and credited to the TGA.


(b) Late delivery of AOC. If an AOC does not arrive at the TSC before the designated cutoff time for receipt, the TSC will credit the amount of funds to the depositary’s TIP main account balance as of the date of receipt of the AOC. However, the date on which funds will begin to earn interest for Treasury is the next business day after the AOC date.


§ 203.17 Collector depositaries.

(a) Debit to reserve account. On the business day that the TSC receives an AOC from a collector depositary, the TSC will debit the depositary’s reserve account for the amount reported on the AOC and credit that amount to Treasury’s account.


(b) Late delivery of AOC. If an AOC does not arrive at the TSC before the designated cutoff time on the first business day after the AOC date, an FTD late fee in the form of interest at the TT&L rate of interest will.be assessed for each day’s delay in receipt of the AOC. Upon the direction of Treasury, the TSC will debit the depositary’s reserve account for the amount of the late fee.


Subpart D – Investment Program and Collateral Security Requirements for TT&L Depositaries

§ 203.18 Scope of the subpart.

This subpart governs the operation of the investment program, including the rules that TT&L depositaries must follow in crediting and debiting TIP main account balances, SDI account balances, and TIO account balances, and pledging collateral security.


§ 203.19 Sources of balances.

A financial institution must be a collector depositary that accepts term investments, an investor depositary, or a retainer depositary to participate in the investment program. Depositaries electing to participate in the investment program can receive Treasury’s investments in obligations of the depositary from the following sources:


(a) FTDs that have been credited to the depositary’s TIP main account balance pursuant to subpart C of this part;


(b) EFTPS ACH credit and debit transactions, Fedwire ® non-value transactions, and Fedwire ® value transfers pursuant to subpart B of this part;


(c) Direct investments, SDIs, dynamic investments, and term investments pursuant to subpart D of this part; and


(d) Other excess Treasury operating funds.


§ 203.20 Investment account requirements.

(a) Additions. Treasury will invest funds in obligations of collector depositaries that accept term investments, investor depositaries, or retainer depositaries. Such obligations will be in the form of open-ended interest-bearing notes, or in the case of term investments, interest-bearing notes maintained for a predetermined period of time, and additions and reductions will be reflected on the books of the TSC.


(1) PATAX. The TSC will credit the TIP main account balance as stated in § 203.16(a) for an investor or retainer depositary processing tax deposits through PATAX.


(2) EFTPS – (i) ACH debit and ACH credit. The TSC will credit a depositary’s TIP main account balance, and credit the depositary’s reserve account if capacity exists, for the amount of EFTPS ACH debit and credit entries on the day such entries settle.


(ii) Fedwire ® value and non-value transactions. The TSC will credit a depositary’s TIP main account balance if capacity exists, throughout the day on the day of settlement, for the amount of Fedwire ® value and non-value transactions. In the case of Fedwire ® value transactions, the depositary’s reserve account will also be credited.


(b) Additional offerings. Other funds from Treasury may be offered from time to time to depositaries participating in the investment program through direct investments, SDIs, term investments, or other investment programs.


(c) Withdrawals. The amount of a TIP main account balance or SDI account balance is payable on demand without prior notice. The TSC will make calls for payment at the direction of the Secretary. On behalf of Treasury, the TSC will debit the depositary’s reserve account on the day specified in the call for payment.


(d) Interest. The TIP main account balance and the SDI account balance bear interest at the TT&L rate of interest. Such interest is payable by a charge to the depositary’s reserve account in the manner prescribed in the procedural instructions.


(e) Balance limits – (1) Retainer and investor depositaries. A retainer or investor depositary must establish an initial balance limit for its TIP main account balance by providing notice to that effect in writing to the TSC. The balance limit is the amount of funds for which a retainer or investor depositary is willing to provide collateral in accordance with § 203.21(c)(1). The depositary must follow the procedural instructions before reducing the established balance limit unless the reduction results from a collateral revaluation as determined by the FRB. That portion of any PATAX or EFTPS tax payment which, when posted at the FRB, would cause the TIP main account balance to exceed the balance limit specified by the depositary, will be withdrawn by the FRB that day.


(2) Direct investments. An investor depositary that participates in direct investments must set a balance limit for direct investment purposes which is higher than the peak balance normally generated by the depositary’s PATAX and EFTPS tax payment inflow. The depositary must follow the procedural instructions before reducing the established balance limit.


(3) SDIs. SDIs are credited to the SDI account balance and are not considered in setting the amount of the TIP main account balance limit or in determining the amounts to be withdrawn where a depositary exceeds its TIP main account balance limit.


(f) TIO. Treasury may, from time to time, invest excess operating funds in obligations of depositaries awarded funds under TIO. Such obligations will be in the form of interest-bearing notes payable upon a predetermined period of time not to exceed 90 days. Such notes will bear interest at a rate prescribed by the Secretary by auction or otherwise taking into consideration prevailing market interest rates.


§ 203.21 Collateral security requirements.

Financial institutions that process EFTPS tax payments, but that are not TT&L depositaries, have no collateral requirements under this part. Financial institutions that are TT&L depositaries have collateral security requirements, as follows:


(a) Investor and retainer depositaries – (1) PATAX and EFTPS tax payments. Investor and retainer depositaries must pledge collateral security in accordance with the requirements of paragraphs (c)(l), (d), and (e) of this section in an amount that is sufficient to cover the TIP main account balance and the balance in the TT&L account that exceeds the recognized insurance coverage.


(2) Direct investments. An investor depositary is required to pledge collateral in accordance with the requirements of paragraphs (c), (d), and (e) of this section no later than the day before a direct investment is placed. However, each investor depositary participating in same-day direct investments must pledge, prior to the announcement, collateral up to its balance limit to obtain the depositary’s maximum portion of the same-day direct investment.


(3) SDIs. The day before SDIs are credited to an investor depositary’s SDI account balance, the depositary must pledge collateral security, in accordance with the requirements of paragraphs (c)(2), (d), and (e) of this section, to cover the total of the SDIs to be received.


(4) TIO. Each depositary participating in the term investment program must pledge, prior to the time the term investment is placed, collateral in accordance with paragraphs (c)(1), (c)(2) for certain term investments as determined by Treasury, (d), and (e) of this section sufficient to cover the total TIO account balance.


(b) Collector depositaries. Prior to crediting FTD deposits to the TT&L account, a collector depositary must pledge collateral security, in accordance with the requirements of paragraphs (c)(1), (d), and (e) of this section, in an amount which is sufficient to cover the balance in the TT&L account that exceeds the recognized insurance coverage.


(c) Deposits of securities. (1) Collateral security required under paragraphs (a)(1), (2), (4) (except as provided in subparagraph (2) below), and (b) of this section must be deposited with the depositary’s FRB, or with a custodian or custodians within the United States designated by the TSC or FRB, under terms and conditions prescribed by the TSC or FRB.


(2) A depositary pledging collateral security as required under paragraph (a)(3) or paragraph (a)(4) (when permitted) of this section must pledge the collateral under a written security agreement on a form provided by the FRB. The collateral security pledged to satisfy the requirements of paragraphs (a)(3) and (a)(4) (when permitted) of this section may remain in the pledging depositary’s possession provided that the pledging is evidenced by advices of custody incorporated by reference in the written security agreement. The depositary must provide the written security agreement and all advices of custody covering collateral security pledged under that agreement to the FRB. Collateral security pledged under the agreement may not be substituted for or released without the advance approval of the FRB, and any collateral security subject to the security agreement will remain so subject until an approved substitution is made. No substitution or release will be approved until an advice of custody containing the description required by the written security agreement is received by the FRB.


(3) Treasury’s security interest in collateral security pledged by a depositary in accordance with paragraphs (c)(2) of this section to secure SDIs and certain term investments is perfected without Treasury taking possession of the collateral security by filing or, absent filing, for a period not to exceed 20 calendar days from the day of the depositary’s receipt of the special direct or term investment.


(d) Acceptable collateral. The types of securities that may be used as collateral, and how those securities are valued, are set forth in 31 CFR part 380.


(e) Assignment of securities. By pledging acceptable securities which are not negotiable without the depositary’s endorsement or assignment, a TT&L depositary, in lieu of placing its unqualified endorsement on each security, appoints the FRB or its assigns as the depositary’s attorney-in-fact with full irrevocable power and authority to endorse, assign or transfer the securities, and represents and warrants that an appropriate resolution authorizing the granting of such irrevocable power of attorney has been executed and adopted. The powers of attorney so granted are coupled with an interest and are irrevocable, and full power of substitution is granted to the assignee or holder.


(f) Effecting payments of principal and interest on securities or instruments pledged as collateral – (1) General. Treasury, without notice or demand, may sell or otherwise collect the proceeds of all or part of the collateral, including additions, substitutions, interest, and distribution of principal, and apply the proceeds to satisfy any claims of the United States against the depositary, if any of the following events occur:


(i) 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, if applicable, its TIP main account balance, SDI account balance, or TIO account balance;


(ii) The depositary fails to pay when due amounts owed to the United States or the United States Treasury;


(iii) The depositary otherwise violates or fails to perform any of the terms of this part or any of the procedural instructions entered into hereunder; or


(iv) The depositary is closed for business by regulatory action or by proper corporate action, or a receiver, conservator, liquidator, or any other officer is appointed for the depositary. All principal and interest payments on any security pledged to protect the TIP main account balance, the SDI account balance, the TIO account balance or the TT&L account, as applicable, due as of the date of the insolvency or closure or thereafter becoming due, will be held separate and apart from any other assets and will 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) will, as soon as possible, remit to the FRB, as Fiscal agent, each payment of principal and/or interest received by it with respect to collateral pledged pursuant to this section. The remittance will be made no later than 10 days after receipt of such a payment.


(ii) Subject to the waiver in paragraph (f)(2)(iii) of this section, each obligor on a security pledged by a depositary pursuant to this section, upon notification that Treasury is entitled to any payment associated with that pledged security, must make each payment of principal and/or interest due with respect to such security directly to the FRB, 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 § 203.7 and also those circumstances identified in paragraph (f)(1) which may lead to the collection of the proceeds of collateral or the waiver is otherwise terminated by Treasury.


PART 204 [RESERVED]

PART 205 – RULES AND PROCEDURES FOR EFFICIENT FEDERAL-STATE FUNDS TRANSFERS


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


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

§ 205.1 What Federal assistance programs are covered by this part?

(a) This part prescribes rules for transferring funds between the Federal government and States for Federal assistance programs. This part applies to:


(1) All States as defined in § 205.2; and


(2) All Federal program agencies, except the Tennessee Valley Authority (TVA) and its Federal assistance programs.


(b) Only programs listed in the Catalog of Federal Domestic Assistance, as established by Chapter 61 of Title 31, United States Code (U.S.C) are covered by this part.


(c) This part does not apply to:


(1) Payments made to States acting as vendors on Federal contracts, which are subject to the Prompt Payment Act of 1982, as amended, 31 U.S.C. 3901 et seq., 5 CFR part 1315, and 48 CFR part 32; or


(2) Direct loans from the Federal government to States.


§ 205.2 What definitions apply to this part?

For purposes of this part:


Administrative costs means expenses incurred by a State associated with managing a Federal assistance program. This term includes indirect costs.


Auditable means records must be retained to allow for calculations outlined in the Treasury-State agreements to be reviewed and replicated for compliance purposes. States must maintain these records to be readily available, fully documented, and verifiable.


Authorized State official means a person with the authority under the laws of a State to make commitments on behalf of the State for the purposes of this part, or that person’s official designee as certified in writing.


Business day means a day when Federal Reserve Banks are open.


Catalog of Federal Domestic Assistance (CFDA) means the government-wide list of Federal assistance programs, projects, services, and activities which provide assistance or benefits to the American public. The listing includes financial and non-financial Federal assistance programs administered by agencies of the Federal government.


Clearance pattern means a projection showing the daily amount subtracted from a State’s bank account each day after the State makes a disbursement. For example, a State mailing out benefit checks may project that the percentage of checks cashed each day will be 0% for the first day, 10% for the second day, 80% on the third day, and 10% on the fourth day following issuance. Clearance patterns are used to schedule the transfer of funds with various funding techniques and to support interest calculations.


Compensating balance means funds maintained in State bank accounts and/or State Treasurer bank accounts to offset the costs of bank services.


Current project cost means a cost for which the State has recorded a liability on or after the day that the State last requested funds for the project.


Day means a calendar day unless otherwise specified.


Default procedures means efficient cash management practices that we prescribe for Federal funds transfers to a State if a Treasury-State agreement is not in place.


Disburse means to issue a check or initiate an electronic funds transfer payment, or to provide access to benefits through an electronic benefits transfer.


Discretionary grant project means a project for which a Federal Program Agency is authorized by law to exercise judgment in awarding a grant and in selecting a grantee, generally through a competitive process.


Dollar-weighted average day of clearance means the day when, on a cumulative basis, 50 percent of funds have been paid out. To calculate the dollar-weighted average day of clearance for a clearance pattern:


(1) For each day, multiply the percentage of dollars paid out that day by the number of days that have elapsed since the payments were issued. For example, on the first day payments were issued, multiply the percentage of dollars paid out on that day by zero, since zero days have elapsed. On the day after payments were issued, multiply the percentage of dollars paid out on that day by one, since one day has elapsed; and so forth.


(2) Total the results from paragraph (1) of this definition. Round to the nearest whole number. This is the dollar-weighted average day of clearance.


Draw down (verb) means a process in which a State requests and receives Federal funds.


Drawdown (noun) means Federal funds requested and received by a State.


Electronic Funds Transfer (EFT) means any transfer of funds, other than a transaction originated by cash, check, or similar paper instrument, that is initiated through an electronic terminal, telephone, computer, or magnetic tape, for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit an account.


Estimate means a projection of the needs of a Federal Assistance Program.


Federal assistance program means a program included in the Catalog of Federal Domestic Assistance where funds are transferred from the Federal government to a State. Federal assistance programs include cooperative agreements, but do not include vendor payments or direct loans.


Federal Program Agency means an executive agency as defined by 31 U.S.C. 102, except the Tennessee Valley Authority (TVA), that issues and administers Federal assistance programs to States or cooperative agreements with States.


Federal-State agreement means an agreement between a State and a Federal Program Agency specifying terms and conditions for carrying out a Federal assistance program or group of programs. This is different than a Treasury-State agreement.


Bureau of the Fiscal Service (we or us) means the Bureau of the U.S. Department of the Treasury responsible for implementation of this part.


Fiscal year means the twelve-month period that a State designates as its budget year.


Grant means, for purposes of this part, a funds transfer by the Federal government associated with a Federal assistance program listed in the Catalog of Federal Domestic Assistance.


Indirect cost rate means a formula that identifies the amount of indirect costs based on the amount of accrued direct costs. The applicable indirect cost rate shall be described in the Treasury-State agreement.


Indirect costs means costs a State incurs that are necessary to the operation and performance of its Federal assistance programs, but that are not readily identifiable with a particular project or Federal assistance program.


Interest calculation costs means those costs a State incurs in performing the actual calculation of interest liabilities, including those costs a State incurs in developing and maintaining clearance patterns in support of interest calculations.


Maintenance-of-effort means a requirement that a State spend at least a specified amount of State funds for Federal assistance program purposes.


Major Federal assistance program means a Federal assistance program which receives Federal funding in excess of the dollar thresholds found in Table A to § 205.5.


Obligational authority means the existence of a definite commitment on the part of the Federal government to provide appropriated funds to a State to carry out specified programs, whether the commitment is executed before or after a State pays out funds for Federal assistance program purposes.


Pay out means to debit the State’s bank account.


Pay out funds for Federal Assistance Program Purposes means, in the context of State payments, to debit a State account for the purpose of making a payment to:


(1) A person or entity that is not considered part of the State pursuant to the definition of “State” in this section; or


(2) A State entity that provides goods or services for the direct benefit or use of the payor State entity or the Federal government to further Federal assistance program goals.


Rebate means funds returned to a State by third parties after a State has paid out those funds for Federal assistance program purposes.


Refund means funds that a State recovers that it previously paid out for Federal assistance program purposes. Refunds include rebates received from third parties.


Refund transaction means an entry to the record of a State bank account representing a single deposit of refunds. A refund transaction may consist of a single check or item, or a bundle of accumulated checks.


Related banking costs means separately identified costs which are necessary and customary for maintaining an account in a financial institution, whether a commercial account or a State Treasurer account. Investment service fees and fees for credit-related services are not related banking costs.


Request for funds means a State’s request for funds that the State completes and submits in accordance with Federal Program Agency guidelines.


Reverse flow program means a Federal assistance program, such as Supplemental Security Income (SSI), for which the Federal government makes payments to recipients on behalf of a State.


Revolving loan fund means a pool of program funds managed by a State. States may loan funds from the pool to other entities in support of Federal assistance program goals. Investment income is earned on the funds that remain in the pool and on loans made from pool funds. A Federal Program Agency may require that all income derived from a revolving loan fund be used for Federal assistance program purposes.


Secretary means the Secretary of the United States Department of the Treasury. We are the Secretary’s representative in all matters concerning this part, unless otherwise specified.


State means a State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, and the Virgin Islands. It includes any agency, instrumentality, or fiscal agent of a State that is legally and fiscally dependent on the State Executive, State Treasurer, or State Comptroller.


(1) A State agency or instrumentality is any organization of the primary government of the State financial reporting entity, as defined by generally accepted accounting principles.


(2) A fiscal agent of a State is an entity that pays, collects, or holds Federal funds on behalf of the State in furtherance of a Federal assistance program, excluding private nonprofit community organizations.


(3) Local governments, Indian Tribal governments, institutions of higher education, hospitals, and nonprofit organizations are excluded from the definition of State.


Treasury-State agreement means a document describing the accepted funding techniques and methods for calculating interest and identifying the Federal assistance programs governed by this subpart A.


Trust fund for which the Secretary is the trustee means a trust fund administered by the Secretary.


Vendor payment means a funds transfer by a Federal Program Agency to a State to compensate the State for acting as a vendor on a Federal contract.


We and Us means Bureau of the Fiscal Service.


Subpart A – Rules Applicable to Federal Assistance Programs Included in a Treasury-State Agreement

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

(a) Generally, this subpart prescribes the rules that apply to Federal assistance programs which:


(1) Are listed in the Catalog of Federal Domestic Assistance;


(2) Meet the funding threshold for a major Federal assistance program; and


(3) Are included in a Treasury-State agreement or default procedures.


(b) Upon a State’s request, we will make additional Federal assistance programs subject to subpart A by lowering the funding threshold in the Treasury-State agreement. All of a State’s programs that meet this lower threshold would be subject to this subpart A.


(c) We may make additional Federal assistance programs subject to subpart A if a State or Federal Program Agency fails to comply with subpart B of this part.


§ 205.4 Are there any circumstances where a Federal assistance program that meets the criteria of § 205.3 would not be subject to this subpart A?

(a) A Federal assistance program that meets or exceeds the threshold for major Federal assistance programs in a State is not subject to this subpart A until it is included in a Treasury-State agreement or in default procedures.


(b) We and a State may agree to exclude components of a major Federal assistance program from interest calculations if the State administers the program through several State agencies and meets the following requirements:


(1) The dollar amount of the exempted cash flow does not exceed 5% of the State’s major Federal assistance program threshold and the total amount excluded under a single program by all State agencies administering the program does not exceed 10% of that Federal assistance program’s total expenditures;


(2) If less than the total amount of Federal assistance program funding is subject to interest calculation procedures, the interest liabilities should be pro-rated to 100% of the Federal assistance program funding;


(3) A State may not use this exclusion if a Federal assistance program is administered by only one State agency; and


(4) We may request Federal assistance program specific data on funding levels to determine exemptions.


(c) We and a State may exclude a Federal assistance program from this subpart A if the Federal assistance program has been discontinued since the most recent Single Audit and the remaining funding is below the threshold, or if the Federal assistance program is funded by an award not limited to one fiscal year and the remaining Federal assistance program funding is below the State’s threshold.


§ 205.5 What are the thresholds for major Federal assistance programs?

(a) Table A of this section defines major Federal assistance programs based on the dollar amount of an individual Federal assistance program and the dollar amount of all Federal assistance being received by a State for all Federal assistance programs including non-cash programs. A State must locate the appropriate row in Column A based upon the total amount of Federal assistance received. In that same row, a State must apply the percentage from Column B to the dollar value of all its Federal assistance programs to determine the State’s threshold for major Federal assistance programs. For example, if the total amount received by a State for all Federal assistance programs is $50 million, then that State’s threshold for major Federal assistance programs is 6% of $50 million or $3 million. A State which receives more than $10 billion under Federal assistance programs will have a minimum default threshold of $60 million.


(b) To ensure adequate coverage of all State programs, a State must, on an annual basis, compare its program coverage using the percentage obtained from Table A to the program coverage which would result using a percentage which is half of the percentage obtained from Table A. For example, a State receiving $1 billion in Federal Assistance would use Table A to learn that its threshold level would be .60 percent of $1 billion. A State would compare program coverage at .60 percent of $1 billion to program coverage at .30 percent of $1 billion.


(c) If the comparison conducted under paragraph (b) of this section results in a reduction of program coverage that is greater than 10%, a State must lower its threshold, or add programs, until the difference is less than or equal to 10%.


(d) In accordance with § 205.3(b), a State may lower its threshold to include additional programs. All of a State’s programs that meet this lower threshold would be subject to this subpart A.


(e) Unless specified otherwise, major Federal assistance programs must be determined from the most recent Single Audit data available.


Table A to § 205.5

Column A

Total amount of Federal Assistance for all programs per State:
Column B

Major Federal Assistance Program means any Federal assistance program that exceed these levels:
Between zero and $100 million inclusive6.00 percent of the total amount of Federal assistance.
Over $100 million but less than or equal to $10 billion0.60 percent of the total amount of Federal assistance.
Over $10 billionThe greater of 0.30 percent of the total Federal assistance of $60 million.

§ 205.6 What is a Treasury-State agreement?

(a) A Treasury-State agreement documents the accepted funding techniques and methods for calculating interest agreed upon by us and a State and identifies the Federal assistance programs governed by this subpart A. If anything in a Treasury-State agreement is inconsistent with this subpart A, that part of the Treasury-State agreement will not have any effect and this subpart A will govern.


(b) A Treasury-State agreement will be effective until terminated unless we and a State agree to a specific termination date. We or a State may terminate a Treasury-State agreement on 30 days written notice.


§ 205.7 Can a Treasury-State agreement be amended?

(a) We or a State may amend a Treasury-State agreement at any time if both we and the State agree in writing.


(b) The effective date of an amendment shall be the date both parties agree to the amendment in writing unless otherwise agreed to by both parties.


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


(1) Additions or deletions of Federal assistance programs subject to this subpart A;


(2) Changes in funding techniques; and


(3) Changes in clearance patterns.


(d) Additions or deletions to the list of Federal assistance programs subject to this subpart A take effect when a Treasury-State agreement is amended, unless otherwise agreed to by the parties.


(e) Federal assistance programs that are to be added to a Treasury-State agreement are not subject to this subpart A until the Treasury-State agreement is amended, except when a Federal assistance program subject to this subpart A is being replaced by a Federal assistance program governed by subpart B of this part, in which case the replacement program is immediately subject to this subpart A.


(f) Notwithstanding any other provision of this section, if no changes to the Treasury-State agreement are required, States must notify us annually.


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

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


§ 205.9 What is included in a Treasury-State agreement?

We will prescribe a uniform format for all Treasury-State agreements. A Treasury-State agreement must include, but is not limited to, the following:


(a) State agencies, instrumentalities, and fiscal agents that administer the Federal assistance programs subject to this subpart A.


(b) Federal assistance programs subject to this subpart A, consistent with §§ 205.3 and 205.4. A State must use its most recent Single Audit report as a basis for determining the funding thresholds for major Federal assistance programs, unless otherwise specified in the Treasury-State agreement. A State may use budget or appropriations data for a more recent period instead of Single Audit data, if specified in the Treasury-State agreement.


(c) Funding techniques to be applied to Federal assistance programs subject to this subpart A.


(d) Methods the State will use to develop and maintain clearance patterns and estimates, consistent with § 205.11. The method must include, at a minimum, a clear indication of:


(1) The data used;


(2) The sources of the data;


(3) The development process;


(4) For estimates, when and how the State will update the estimate to reflect the most recent data available;


(5) For estimates, when and how the State will make adjustments, if any, to reconcile the difference between the estimate and the State’s actual cash needs; and


(6) Any assumptions, standards, or conventions used in converting the data into the clearance pattern or estimate.


(e) Federal Program Agency provisions requiring reconciliation of estimates to actual outlays may be included in a Treasury-State agreement. The supporting documentation must be retained by the State for three years.


(f) States must include the results of the clearance pattern process in the Treasury-State agreement for programs where the timing of drawdowns is based on clearance patterns. For programs where the timing of drawdowns is not based on clearance patterns, the results of the clearance pattern process may be provided with the annual report required under § 205.26. The supporting documentation must be retained by the State for three years.


(g) Methods used by the State and Federal agencies to calculate interest liabilities pursuant to this subpart A. The method must include, but is not limited to, a clear indication of:


(1) The data used;


(2) The sources of the data;


(3) The calculation process; and


(4) Any assumptions, standards, or conventions used in converting the data into the interest liability amounts.


(h) Treasury-State agreements must include language describing how a State and Federal Program Agency will address a State request for supplemental funding. This language must include, but is not limited to, the following provisions:


(1) What constitutes a timely request for supplemental funds for Federal assistance program purposes by a State; and


(2) What constitutes a timely transfer of supplemental funds for Federal assistance program purposes from a Federal Program Agency to a State.


§ 205.10 How do you document funding techniques?

The Treasury-State agreement must include a concise description for each funding technique that a State will use. The description must include the following:


(a) What constitutes a timely request for funds;


(b) How the State determines the amount of funds to request;


(c) What procedures are used to project or reconcile estimates with actual and immediate cash needs;


(d) What constitutes the timely receipt of funds; and


(e) Whether a State or Federal interest liability accrues when the funding technique, including any associated procedure for projection or reconciliation, is properly applied.


§ 205.11 What requirements apply to funding techniques?

(a) A State and a Federal Program Agency must minimize the time elapsing between the transfer of funds from the United States Treasury and the State’s payout of funds for Federal assistance program purposes, whether the transfer occurs before or after the payout of funds.


(b) A State and a Federal Program Agency must limit the amount of funds transferred to the minimum required to meet a State’s actual and immediate cash needs.


(c) A State must not draw down funds from its account in the Unemployment Trust Fund (UTF) or from a Federal account in the UTF in advance of actual immediate cash needs for any purpose including maintaining a compensating balance.


(d) A Federal Program Agency must allow a State to submit requests for funds daily. This requirement should not be construed as a change to Federal Program Agency guidelines defining a properly completed request for funds.


(e) In accordance with the electronic funds transfer provisions of the Debt Collection Improvement Act of 1996 (31 U.S.C. 3332), a Federal Program Agency must use electronic funds transfer methods to transfer funds to States unless a waiver is available.


§ 205.12 What funding techniques may be used?

(a) We and a State may negotiate the use of mutually agreed upon funding techniques. We may deny interest liability if a State does not use a mutually agreed upon funding technique. Funding techniques should be efficient and minimize the exchange of interest between States and Federal agencies.


(b) We and a State may base our agreement on the sample funding techniques listed in paragraphs (b)(1) through (b)(5) of this section, or any other technique upon which both parties agree.


(1) Zero balance accounting means that a Federal Program Agency transfers the actual amount of Federal funds to a State that are paid out by the State each day.


(2) Projected clearance means that a Federal Program Agency transfers to a State the projected amount of funds that the State pays out each day. The projected amount paid out each day is determined by applying a clearance pattern to the total amount the State will disburse.


(3) Average clearance means that a Federal Program Agency, on the dollar-weighted average day of clearance of a disbursement, transfers to a State a lump sum equal to the actual amount of funds that the State is paying out. The dollar-weighted average day of clearance is the day when, on a cumulative basis, 50 percent of the funds have been paid out. The dollar-weighted average day of clearance is calculated from a clearance pattern, consistent with § 205.20.


(4) Cash advance (pre-issuance or post-issuance) funding means that a Federal Program Agency transfers the actual amount of Federal funds to a State that will be paid out by the State, in a lump sum, not more than three business days prior to the day the State issues checks or initiates EFT payments.


(5) Reimbursable funding means that a Federal Program Agency transfers Federal funds to a State after that State has already paid out the funds for Federal assistance program purposes.


§ 205.13 How do you determine when State or Federal interest liability accrues?

(a) State or Federal interest liability may or may not accrue when mutually agreed to funding techniques are applied, depending on the terms of the Treasury-State agreement.


(b) We and a State may agree in a Treasury-State agreement that no State or Federal interest liability will accrue for indirect costs or indirect allocated costs based on an indirect cost rate. This indirect cost must be consistent with OMB Circular A-87 (For availability, see 5 CFR 1310.3.) and be in accordance with this subpart A. The indirect cost rate may be a Statewide indirect cost rate or a public assistance cost rate, where appropriate.


§ 205.14 When does Federal interest liability accrue?

(a) Federal interest liabilities may accrue in accordance with the following provisions:


(1) The Federal Program Agency incurs interest liability if a State pays out its own funds for Federal assistance program purposes with valid obligational authority under Federal law, Federal regulation, or Federal-State agreement. A Federal interest liability will accrue from the day a State pays out its own funds for Federal assistance program purposes to the day Federal funds are credited to a State bank account.


(2) If a State pays out its own funds for Federal assistance program purposes without obligational authority, the Federal Program Agency will incur an interest liability if obligational authority subsequently is established. However, if the lack of obligational authority is the result of the failure of the State to comply with a Federal Program Agency requirement established by statute, regulation, or agreement, interest liability may be denied. A Federal interest liability will accrue from the day a State pays out its own funds for Federal assistance program purposes to the day Federal funds are credited to a State bank account.


(3) If a State pays out its own funds prior to the day a Federal Program Agency officially notifies the State in writing that a discretionary grant project is approved, the Federal Program Agency does not incur an interest liability, notwithstanding any other provision of this section.


(4) If a State pays out its own funds prior to the availability of Federal funds authorized or appropriated for a future Federal fiscal year, the Federal Program Agency does not incur an interest liability, notwithstanding any other provision of this section.


(5) If a State fails to request funds timely as set forth in § 205.29, or otherwise fails to apply a funding technique properly, we may deny any resulting Federal interest liability, notwithstanding any other provision of this section.


(b) Federal Program Agency programs that have specific payment dates set by the Federal Program Agency that create interest liabilities are subject to this part.


(c) States must adhere to Federal Program Agency disbursement schedules when requesting funds. Notwithstanding any other provision of this section, we may deny a State’s claim for Federal interest liability for the period prior to a late drawdown request. States must time their funds drawdown so that it does not create Federal interest liability. The drawdown request must allow the Federal Program Agency sufficient time to meet its disbursement schedule. If the Federal Program Agency does not make a timely payout in accordance with the terms of the Treasury-State agreement, a State may submit a claim for interest liability.


§ 205.15 When does State interest liability accrue?

(a) General rule. State interest liability may accrue if Federal funds are received by a State prior to the day the State pays out the funds for Federal assistance program purposes. State interest liability accrues from the day Federal funds are credited to a State account to the day the State pays out the Federal funds for Federal assistance program purposes.


(b) Refunds. (1) A State incurs interest liability on refunds of Federal funds from the day the refund is credited to a State account to the day the refund is either paid out for Federal assistance program purposes or credited to the Federal government.


(2) We and a State may agree, in a Treasury-State agreement, that a State does not incur an interest liability on refunds in refund transactions under $50,000.


(c) Exception to the general rule. A State does not incur an interest liability to the Federal government if a Federal statute requires the State to retain or use for Federal assistance program purposes the interest earned on Federal funds, notwithstanding any other provision in this section.


(d) Mandatory matching of Federal funds. In programs utilizing mandatory matching of Federal funds with State funds, a State must not arbitrarily assign its earliest costs to the Federal government. A State incurs interest liabilities if it draws Federal funds in advance and/or in excess of the required proportion of agreed upon levels of State contributions in programs utilizing mandatory matching of Federal funds with State funds.


§ 205.16 What special rules apply to Federal assistance programs and projects funded by the Federal Highway Trust Fund?

The following applies to Federal assistance programs and projects funded out of the Federal Highway Trust Fund, notwithstanding any other provision of this part:


(a) A State must request funds at least weekly for current project costs, or Federal interest liability will not accrue prior to the day a State submits a request for funds.


(b) If a State pays out its own funds in the absence of a project agreement or in excess of the Federal obligation in a project agreement, the Federal Program Agency will not incur an interest liability.


§ 205.17 Are funds transfers delayed by automated payment systems restrictions based on the size and timing of the drawdown request subject to this part?

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


§ 205.18 Are administrative costs subject to this part?

(a) A State and Fiscal Service may agree, in a Treasury-State agreement, to the following funding conventions for indirect costs and administrative costs:


(1) The State will draw down a prorated amount of administrative costs on the date of the State payday. For example, the State would draw one-third of its quarterly administrative costs if payroll is monthly, or one-sixth of its quarterly administrative costs if payroll is semi-monthly.


(2) If an indirect cost rate is applied to a program, the State will include a proportionate share of the indirect cost allowance on each drawdown by applying the indirect cost rate to the appropriate direct costs on each drawdown.


(3) If costs must be allocated to various programs pursuant to a labor distribution or other system under an approved cost allocation plan, the State will draw down funds to meet cash outlay requirements based on the most recent, certified cost allocations, with subsequent adjustments made pursuant to the actual allocation of costs.


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


§ 205.19 How is interest calculated?

(a) A State must calculate Federal interest liabilities and State interest liabilities for each Federal assistance program subject to this subpart A.


(b) The interest rate for all interest liabilities for each Federal assistance program subject to this subpart A is the annualized rate equal to the average equivalent yields of 13-week Treasury Bills auctioned during a State’s fiscal year. We provide this rate to each State.


(c) A State must calculate and report interest liabilities on the basis of its fiscal year. A State must ensure that its interest calculations are auditable and retain a record of the calculations.


(d) As set forth in § 205.9, a Treasury-State agreement must include the method a State uses to calculate and document interest liabilities.


(e) A State may use actual data, a clearance pattern, or statistical sampling to calculate interest. A clearance pattern used to calculate interest must meet the standards of § 205.20. If a State uses statistical sampling to calculate interest, the State must sample transactions separately for each Federal assistance program subject to this subpart A. Each sample must be representative of the pool of transactions and be of sufficient size to accurately represent the flow of Federal funds under the Federal assistance program, including seasonal or other periodic variations.


(f) For the first year in which a Federal assistance program is covered in a Treasury-State agreement, funds transfers that occur prior to the first day of the State’s fiscal year must not be included in interest calculations and are not subject to the interest liability provisions of this part.


§ 205.20 What is a clearance pattern?

States use clearance patterns to project when funds are paid out, given a known dollar amount and a known date of disbursement. A State must ensure that clearance patterns meet the following standards:


(a) A clearance pattern must be auditable.


(b) A clearance pattern must accurately represent the flow of Federal funds under the Federal assistance programs to which it is applied.


(c) A clearance pattern must include seasonal or other periodic variations in clearance activity.


(d) A clearance pattern must be based on at least three consecutive months of disbursement data, unless additional data is required to accurately represent the flow of Federal funds.


(e) If a State uses statistical sampling to develop a clearance pattern, the sample size must be sufficient to ensure a 96 percent confidence interval no more than plus or minus 0.25 weighted days above or below the estimated mean.


(f) A clearance pattern must extend, at a minimum, until 99 percent of the dollars in a disbursement have been paid out for Federal assistance program purposes.


(g) We and a State may agree to other procedures, such as estimates to project when funds are paid out when the dollar amount and/or the timing of disbursements are not known.


§ 205.21 When may clearance patterns be used?

(a) A State may develop a clearance pattern for:


(1) An individual Federal assistance program;


(2) A logical group of Federal assistance programs that have the same disbursement method and type of payee;


(3) A bank account;


(4) A specific type of payment, such as payroll or vendor payments; or


(5) Anything that is agreed upon by us and a State. If a clearance pattern is used for multiple Federal assistance programs, a State must apply the clearance pattern separately to each Federal assistance program when scheduling funds transfers or calculating interest.


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


§ 205.22 How are accurate clearance patterns maintained?

(a) If a State has knowledge, at any time, that a clearance pattern no longer reflects a Federal assistance program’s actual clearance activity, or if a Federal assistance program undergoes operational changes that may affect clearance activity, the State must notify us, develop a new clearance pattern, and certify that the new pattern corresponds to the Federal assistance program’s clearance activity. Clearance patterns will remain in effect until a new clearance pattern is certified.


(b) An authorized State official must certify that a clearance pattern corresponds to the clearance activity of the Federal assistance program to which it is applied. An authorized State official must re-certify the accuracy of a clearance pattern at least every five years. If a State develops a clearance pattern for a bank account or a specific type of payment, or on another basis, as set forth in § 205.21, we may prescribe other requirements for re-certifying the accuracy of the clearance pattern. A State can begin to use a new clearance pattern on the date the new clearance pattern is certified.


§ 205.23 What requirements apply to estimates?

The following requirements apply when we and a State negotiate a mutually agreed upon funds transfer procedure based on an estimate of the State’s immediate cash needs:


(a) The State must ensure that the estimate reasonably represents the flow of Federal funds under the Federal assistance program or program component to which the estimate applies. The estimate must take into account seasonal or other periodic variations in activity throughout the period for which the Federal funds are available.


(b) As set forth in §§ 205.9 and 205.10, a Treasury-State agreement must include the method a State uses to develop, maintain, and document the estimate.


§ 205.24 How are accurate estimates maintained?

(a) If a State has knowledge that an estimate does not reasonably correspond to the State’s cash needs for a Federal assistance program or program component, or if a Federal assistance program undergoes operational changes that may affect cash needs, the State must immediately notify us in writing. We and the State will amend the funding technique provisions in the Treasury-State agreement or take other mutually agreed upon corrective action.


(b) When estimates are properly updated and applied, a State or Federal interest liability may or may not accrue, depending on the terms of the Treasury-State agreement.


(c) We may require a State to justify in writing that it is not feasible to use a more efficient basis for determining the amount of funds to be transferred under the Federal assistance program or program component to which an estimate is applied. We may prescribe requirements for certifying the reasonableness of an estimate.


§ 205.25 How does this part apply to certain Federal assistance programs or funds?

(a) Special rules apply to certain Federal assistance programs or funds described in this section. To the extent the provisions of this section are inconsistent with other provisions of this part, this section applies.


(b) A State’s interest liability on funds withdrawn from its account in the UTF equals the actual interest earned on such funds less the related banking costs. Actual interest earned does not include non-cash bank earnings. If funds withdrawn from the State account in the UTF are commingled with other funds, a proportionate share of interest earnings and banking costs must be allocated to the funds withdrawn from the State account. Interest liabilities on funds withdrawn from a Federal account in the UTF, except the Federal Unemployment Account, are calculated in accordance with § 205.19.


(c) Supplemental Security Income. (1) Except as provided in 42 U.S.C. 1382e(d), the Federal government incurs an interest liability from the day State funds are credited to the Federal government’s account to the day a Federal Program Agency pays out the State funds for Federal assistance program purposes. A State incurs an interest liability from the day a Federal Program Agency pays out Federal funds for Federal assistance program purposes to the day State funds are credited to the Federal government’s account.


(2) Interest liability must be calculated on the difference between a State’s monthly Supplemental Security Income payment and the State’s actual liability for the month.


(3) The Federal government will not incur interest liabilities on refunds of State funds under the Supplemental Security Income Program.


(4) Administrative fees charged by the Social Security Administration to States under the Supplemental Security Income program are not subject to this part.


(5) Supplemental State payments made in conjunction with Supplemental Security Income are not subject to this part.


(d) Funds collected under the Child Support Enforcement Program. (1) Funds collected by States from absent parents pursuant to Title IV-D of the Social Security Act are not subject to this part.


(2) Interest earned by States on undistributed collections must be treated as Federal assistance program income under 45 CFR 304.50(b) and is not subject to this part.


(3) Late payment fees collected by States from absent parents are not subject to interest liabilities under this part and are not subject to this part. However, such fees must be treated as Federal assistance program income in accordance with 45 CFR 302.75(b)(6).


(e) A State that earns interest on Special Supplemental Food Program for Women, Infants, and Children rebates is not subject to interest liability if the funds earned are used for Federal assistance program purposes.


(f) Revolving Loan Funds. (1) This part applies to any transfer of funds from the Federal Program Agency to the State for the Revolving Loan Fund.


(2) This part does not apply to interest a State earns on Revolving Loan Funds when Federal Program Agency regulations require that all interest earned on invested funds be used for Federal assistance program purposes.


§ 205.26 What are the requirements for preparing Annual Reports?

(a) A State must submit to us an Annual Report accounting for State and Federal interest liabilities of the State’s most recently completed fiscal year. Adjustments to the Annual Report must be limited to the two State fiscal years prior to the State fiscal year covered by the report. The authorized State official must certify the accuracy of a State’s Annual Report. A signed original of the Annual Report must be received by December 31 of the year in which the State’s fiscal year ends. We will provide copies of Annual Reports to Federal agencies. We will prescribe the format of the Annual Report, and may prescribe that the Annual Report be submitted by electronic means.


(b) A State must submit a description and supporting documentation for liability claims greater than $5,000. This information must include the following:


(1) The amount of funds requested;


(2) The date the funds were requested;


(3) The date the funds were paid out for Federal assistance program purposes;


(4) The date the funds were received by the State; and


(5) The date of award.


(c) A State claiming reimbursement of Interest Calculation Costs must submit its claim with its Annual Report in accordance with § 205.27. An authorized State official must certify the accuracy of a State’s claim for Interest Calculation Costs.


§ 205.27 How are Interest Calculation Costs calculated?

(a) We will compensate a State annually for the costs of calculating interest, including the cost of developing and maintaining clearance patterns in support of interest calculations, pursuant to this subpart A, subject to the conditions and limitations of this section.


(b) We may deny an interest calculation cost claim if a State does not:


(1) Have a Treasury-State agreement with us, as set forth in §§ 205.6 through 205.9;


(2) Submit timely a Treasury-State agreement, as set forth in §§ 205.6 through 205.9;


(3) Submit timely an updated list of Federal assistance programs subject to this subpart A, as set forth in §§ 205.6 through 205.9;


(4) Submit timely a claim for Interest Calculation Costs with its Annual Report, as set forth in § 205.26; or


(5) Submit timely its Annual Report, as set forth in § 205.26.


(c) A State must maintain documentation to substantiate its claim for Interest Calculation Costs. We may require a State to provide documentation to support its interest calculation cost claims. We will review all interest calculation cost claims for reasonableness. If we determine that a cost claim is unreasonable, we will not reimburse a State for that cost, notwithstanding any other provision of this section.


(d) Eligibility and treatment of Interest Calculation Costs. (1) Interest Calculation Costs do not include expenses for normal disbursing services, such as processing checks or maintaining records for accounting and reconciliation of cash accounts, or expenses for upgrading or modernizing accounting systems.


(2) Interest Calculation Costs in excess of $50,000 in any year are not eligible for reimbursement, unless a State can justify to us that the State is unable to develop and maintain clearance patterns in support of interest calculations, or perform the actual calculation of interest, without incurring such costs. Supporting documentation must accompany State requests for reimbursement in excess of $50,000.


(3) Interest Calculation Costs that a State incurs in fiscal years prior to its most recently completed Annual Report are not eligible for reimbursement.


(4) A State must not include Interest Calculation Costs in its Statewide cost allocation plan, as defined and provided for in OMB Circular A-87. All costs incurred by a State to implement this subpart A, other than Interest Calculation Costs, are subject to the procedures and principles of OMB Circular A-87.


(e) The payments from the Federal government to individual States to offset Interest Calculation Costs incurred are funded from the aggregate interest payments States make to the Federal government. The following limitations apply:


(1) We will not reduce or adjust interest liabilities for Federal assistance programs funded out of trust funds for which the Secretary is trustee. These programs include, but are not limited to, Unemployment Insurance Trust Fund (CFDA 17.225); Highway & Planning Trust Fund (CFDA 20.205); Airport Improvement Trust Fund (CFDA 20.106); Federal Transit Capital Improvement Trust Fund (CFDA 20.500); Federal Transit Capital & Operating Assistance Trust Fund (CFDA 20.507); and Social Security – Disability Insurance Trust Fund (CFDA 96.001); and


(2) The aggregate payments from the Federal government to States to offset Interest Calculation Costs will not be greater than the aggregate interest payments States make to the Federal government.


§ 205.28 How are interest payments exchanged?

(a) We offset the adjusted total State interest liability and the adjusted total Federal interest liability for each State to determine the net interest payable to or from each specific State. The payment of net interest and any Interest Calculation Costs, as set forth in § 205.27, for the most recently completed fiscal year must occur no later than March 31. We will notify a State of the final net interest liability. A State must submit a claim to receive payment.


(b) A State may appeal a decision by us on interest liabilities and interest calculation cost claims in accordance with § 205.31.


(c) If a State appeals the amount of interest payable in accordance with the provisions of § 205.31, payment must occur by March 31 for any portions not subject to the appeal.


(d) The Federal government will not be liable for interest on any payment of interest to a State.


§ 205.29 What are the State oversight and compliance responsibilities?

(a) A State must designate an official representative with the statutory or administrative authority to coordinate all interaction with the Federal government concerning this subpart A, and must notify us in writing of the representative’s name and title. A State must notify us immediately of any change in the official representative.


(b) A State must maintain records supporting interest calculations, clearance patterns, Interest Calculation Costs, and other functions directly pertinent to the implementation and administration of this subpart A for audit purposes. A State must retain the records for each fiscal year for three years from the date the State submits its Annual Report, or until any pending dispute or action involving the records and documents is completed, whichever is later. We, the Comptroller General, and the Inspector General or other representative of a Federal Program Agency must have the right of access to, and may require submission of, all records for the purpose of verifying interest calculations, clearance patterns, interest calculation cost claims, and the State’s accounting for Federal funds.


(c) A State’s implementation of this subpart A is subject to audit in accordance with 31 U.S.C. Chapter 75, “Requirements for Single Audits.”


(d) If a State repeatedly or deliberately fails to request funds in accordance with the procedures established for its funding techniques, as set forth in § 205.11, § 205.12, or a Treasury-State agreement, we may deny the State payment or credit for the resulting Federal interest liability, notwithstanding any other provision of this part.


(e) If a State materially fails to comply with this subpart A, we may, in addition to the action described in paragraph (d) of this section, take one or more of the following actions, as appropriate under the circumstances:


(1) Deny the reimbursement of all or a part of the State’s interest calculation cost claim;


(2) Send notification of the non-compliance to the affected Federal Program Agency for appropriate action, including, where appropriate, a determination regarding the impact of non-compliance on program funding;


(3) Request a Federal Program Agency or the General Accounting Office to conduct an audit of the State to determine interest owed to the Federal government, and to implement procedures to recover such interest;


(4) Initiate a debt collection process to recover claims owed to the United States; or


(5) Take other remedies legally available.


§ 205.30 What are the Federal oversight and compliance responsibilities?

(a) A Federal Program Agency must designate an official representative to coordinate all interaction with us and the States concerning this subpart A, and must notify us in writing of the representative’s name and title. A Federal Program Agency must notify us immediately of any change in the official representative.


(b) A Federal Program Agency’s implementation of this subpart A is subject to review pursuant to procedural instructions that we issue.


(c) We will consult with Federal agencies as necessary and appropriate before entering into or amending a Treasury-State agreement.


(d) We will distribute Annual Reports to Federal agencies, as set forth in § 205.26. Upon our request, a Federal Program Agency must review a State’s Annual Report for reasonableness and must report its findings to us within 30 days.


(e) A Federal Program Agency must notify us in writing if the program agency has knowledge, at any time, that:


(1) A State’s clearance pattern does not correspond to a Federal assistance program’s clearance activity; or


(2) Corrective action needs to be taken by a State, us, or another Federal Program Agency, with respect to the implementation of this subpart. We will notify the State or Federal Program Agency as appropriate in writing with a description of the Federal Program Agency’s assertion.


(f) A Federal Program Agency must notify us in writing of new Federal assistance programs listed in the Catalog of Federal Domestic Assistance.


(g) If a Federal Program Agency causes an interest liability by failing to comply with this subpart A, we may collect a charge from the Federal Program Agency. A Federal interest liability resulting from circumstances beyond the control of a Federal Program Agency does not constitute noncompliance. We will determine the charge using the following procedures:


(1) We will issue a Notice of Assessment to the Federal Program Agency, indicating the nature of the noncompliance, the amount of the charge, the manner in which it was calculated, and the right to file an appeal.


(2) To the maximum extent practicable, a Federal Program Agency must pay a charge for noncompliance out of appropriations available for the Federal Program Agency’s operations and not from the Federal Program Agency’s program funds.


(3) If a Federal Program Agency does not pay a charge for noncompliance within 45 days after receiving a Notice of Assessment, we will debit the appropriate Federal Program Agency account.


(4) In the event a Federal Program Agency appeals a charge imposed under the Notice of Assessment, we will defer the charge until we decide the appeal. If we deny the appeal, the effective date of the charge may be retroactive to the date indicated in the Notice of Assessment.


§ 205.31 How does a State or Federal Program Agency appeal a determination made by us and resolve disputes?

(a) This section documents the procedures for:


(1) A State to appeal the net interest charge that we have assessed;


(2) A State to appeal a determination we have made regarding the State’s claim for Interest Calculation Costs in accordance with § 205.27;


(3) A Federal Program Agency to appeal a charge for noncompliance that we have assessed in accordance with § 205.30; or


(4) A State or a Federal Program Agency to resolve other disputes with us or between or among each other concerning the implementation of this subpart A.


(b) A State or Federal Program Agency must submit a written petition (Petition) to the Assistant Commissioner, Federal Finance, Bureau of the Fiscal Service, (Assistant Commissioner), within 90 days of the date of the notice of assessment or the event that initiated the appeal or dispute. The Petition must include a concise factual statement, not to exceed 15 pages, with supporting documentation in the appendices, of the conditions forming the basis of the Petition and the action requested of the Assistant Commissioner. In the case of a dispute, the party submitting the petition to us must concurrently provide a copy of the petition to the other concerned parties. The other concerned parties may submit to the Assistant Commissioner a rebuttal within 90 days of the date of the petition. The rebuttal must include a concise factual statement, not to exceed 15 pages, with supporting documentation in the appendices.


(c) The Assistant Commissioner will review the Petition, any rebuttal, and all supporting documentation. As part of the review process, the Assistant Commissioner may request to meet with any or all parties and may request additional information.


(d) The Assistant Commissioner will issue a written decision within the later of 120 days of the date of the Petition or the rebuttal, in case of a dispute, or 120 days from receipt of any additional information. The Assistant Commissioner’s decision will be the final program agency action on our part for purposes of judicial review procedures under the Administrative Procedures Act, 5 U.S.C. 701-706 (APA), unless either the State or Federal Program Agency invokes the provisions of the Administrative Dispute Resolution Act of 1990 (ADRA), 5 U.S.C. 581-593.


(e) Either a State or Federal Program Agency may seek to invoke the provisions of the ADRA within 45 days after the date of the Assistant Commissioner’s written decision.


(1) The party invoking the ADRA must notify the Assistant Commissioner and any other concerned parties in writing. If all parties, including the Assistant Commissioner, agree in writing, a neutral party appointed under the provisions of the ADRA may assist in resolving the dispute through the use of alternate means of dispute resolution as defined in the ADRA.


(2) If the party invoking the ADRA is unable to reach a satisfactory resolution, the Assistant Commissioner’s decision will be the final agency action on our part for purposes of the judicial review procedures under the APA.


(f) Any amount due as a result of an appeal or dispute must be paid within 30 days of the date of the decision of the Assistant Commissioner or the date of the resolution under the ADRA. If a State fails to pay, the State will be subject to collection techniques under 31 U.S.C. 3701 et seq., including accrual of interest on outstanding balances and administrative offset.


Subpart B – Rules Applicable to Federal Assistance Programs Not Included in a Treasury-State Agreement

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

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


§ 205.33 How are funds transfers processed?

(a) A State must minimize the time between the drawdown of Federal funds from the Federal government and their disbursement for Federal program purposes. A Federal Program Agency must limit a funds transfer to a State to the minimum amounts needed by the State and must time the disbursement to be in accord with the actual, immediate cash requirements of the State in carrying out a Federal assistance program or project. The timing and amount of funds transfers must be as close as is administratively feasible to a State’s actual cash outlay for direct program costs and the proportionate share of any allowable indirect costs. States should exercise sound cash management in funds transfers to subgrantees in accordance with OMB Circular A-102 (For availability, see 5 CFR 1310.3.).


(b) Neither a State nor the Federal government will incur an interest liability under this part on the transfer of funds for a Federal assistance program subject to this subpart B.


§ 205.34 What are the Federal oversight and compliance responsibilities?

(a) A Federal Program Agency must review the practices of States as necessary to ensure compliance with this subpart B.


(b) A Federal Program Agency must notify us if a State demonstrates an unwillingness or inability to comply with this subpart B.


(c) A Federal Program Agency must formulate procedural instructions specifying the methods for carrying out the responsibilities of this section.


§ 205.35 What is the result of Federal Program Agency or State non-compliance?

We may require a State and a Federal Program Agency to make the affected Federal assistance programs subject to subpart A of this part, consistent with Federal assistance program purposes and regulations, notwithstanding any other provision of this part, if:


(a) A State demonstrates an unwillingness or inability to comply with this subpart B; or


(b) A Federal Program Agency demonstrates an unwillingness or inability to make Federal funds available to a State as needed to carry out a Federal assistance program.


Subpart C [Reserved]

PART 206 – MANAGEMENT OF FEDERAL AGENCY RECEIPTS, DISBURSEMENTS, AND OPERATION OF THE CASH MANAGEMENT IMPROVEMENTS FUND


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


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

§ 206.1 Scope and application.

(a) This subpart applies to all Government departments and agencies in the executive branch (except the Tennessee Valley Authority) and all monies collected and disbursed by these departments and agencies. This subpart does not apply to interagency transfers of funds, except that agencies are to use the Treasury’s On-Line Payment and Collection (OPAC) system for interagency payments between executive agencies, when cost-effective.


(b) Policies and guidelines are prescribed for promoting efficient, effective cash management through improved billing, collection, deposit, and payment of funds. These objectives seek to improve funds availability and the efficiency and effectiveness with which funds are transferred.


(c) Authority to implement this regulation has been delegated within the Department of the Treasury (hereinafter, “Treasury”) to the Commissioner (hereinafter, “the Commissioner”) of the Bureau of the Fiscal Service (hereinafter, “the Service).” The Service maintains the final authority as granted under the Deficit Reduction Act of 1984 to specify use of a particular method or mechanism of collection and deposit and to recover costs that result from noncompliance. Authority is also granted to the Service, under the Cash Management Improvement Act of 1990, as amended by the Cash Management Improvement Act Amendments of 1992, to provide for the timely disbursement of funds. An agency will require the collection or disbursement of funds by the agency via EFT as a provision of new contractual agreements or renewal of existing contracts that impact agency collection or payment mechanisms.


§ 206.2 Definitions.

For the purpose of this part, the following definitions apply:


Agency means any department, instrumentality, office, commission, board, service, Government corporation, or other establishment in the executive branch, except the Tennessee Valley Authority.


Billing means any of a variety of means by which the Government places a demand for payment against an entity that is indebted to the Government. The term encompasses invoices, notices, initial demand letters, and other forms of notification.


Cash management means practices and techniques designed to accelerate and control collections, ensure prompt deposit of receipts, improve control over disbursement methods, and eliminate idle cash balances. “Cash Management Review Process” means periodic examinations of collection and disbursement cash flows to ensure that the most effective mechanisms are used to process the funds.


Collection means the transfer of monies from a source outside the Federal Government to an agency or to a financial institution acting as an agent of the Government.


Collection mechanism means any one of a number of tools or systems by which monies are transferred to the Government from a source outside the Government.


Cutoff time means a time predesignated by a financial institution beyond which transactions presented or actions requested will be considered the next banking day’s business.


Day means a calendar day unless otherwise specified.


Deposit means as a noun, money that is being or has been presented for credit to the Treasury. Deposits can be made by an agency or directly by the remitter. All such transfers are effected through a Federal Reserve Bank or other financial institution. As a verb, deposit means the act of presenting monies for credit to the Treasury by an official of an agency.


Depositary means a bank or other financial institution that has been authorized by the Treasury to receive monies for credit to the Treasury.


Disburse means the initiation of an Electronic Funds Transfer (EFT) transaction or other methods of drawing funds from accounts maintained by the Government.


Electronic funds transfer (EFT) means any transfer of funds, other than a transaction originated by cash, check or similar paper instrument, that is initiated through an electronic terminal, telephone, computer, or magnetic tape, for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit an account. The term includes, but is not limited to, Fed Wire transfers, Automated Clearing House (ACH) transfers, transfers made at automatic teller machines (ATM) and Point-of-Sale (POS) terminals (to include use of the Government small purchase card), and other means of credit card transactions.


Fund means the Cash Management Improvements Fund.


Monies (or “receipts”) means EFT transactions, currency, negotiable instruments, and/or demand deposits owed to or collected by an agency.


Next-day deposit means a deposit made before the cutoff time on the day following the day on which the funds were received by an agency. For example, if an agency receives funds for deposit at 3 p.m. on Monday and transmits the deposits to the depositary by 2 p.m. on Tuesday (the depositary’s next cutoff time), then next-day deposit requirements are met.


Payment means a sum of money transferred to a recipient in satisfaction of an obligation. A payment includes any Federal Government benefit or nonbenefit payment.


(1) A benefit payment is a disbursement for a Federal Government entitlement program or annuity. Benefit payments may be one-time or recurring payments including, but not limited to, payments for Social Security, Supplemental Security Income, Black Lung, Civil Service Retirement, Railroad Retirement Board Retirement/Annuity, Department of Veterans Affairs Compensation/Pension, Central Intelligence Agency Annuity, Military Retirement Annuity, Coast Guard Retirement, and Worker’s Compensation.


(2) A nonbenefit payment is a Federal Government disbursement other than a benefit payment. Nonbenefit payments may be one-time or recurring payments including, but not limited to, payments for vendors, Internal Revenue Service tax refunds, Federal salaries and allotments therefrom, grants, travel disbursements and reimbursements, loans, principal and/or interest related to U.S. savings bonds, notes, and other savings-type securities, and payments of service fees to organizations qualified to issue and/or redeem savings bonds.


Point-of-sale (POS) terminal means an automated credit card or debit card transaction device.


Presumed EFT means that agencies will presume that new payment recipients will elect EFT as the means of payment delivery. Enrollment forms for use in establishing routine payments will be designed with this approach in mind, to obtain the required written consent of the recipient.


Recipient means a person, corporation, or other public or private entity receiving benefit or nonbenefit payments from the Government.


Same-day deposit means a deposit made before the cutoff time on the day on which the funds were received by an agency. For example, if an agency receives funds for deposit at 10 a.m. on Monday and transmits the deposits by 2 p.m. on Monday (the depositary’s cutoff time), then a same-day deposit has been achieved.


Service means the Bureau of the Fiscal Service, Department of the Treasury.


Treasury Financial Manual (TFM) means the manual issued by the Service containing procedures to be observed by all Government departments and agencies in relation to central accounting, financial reporting, and other Governmentwide fiscal responsibilities of the Department of the Treasury. Volume I, Chapter 6-8000 (I TFM 6-8000) contains agency cash management procedures to be followed pertaining to these regulations.


Copies of the TFM are available free to Government agencies. Others who are interested in ordering a copy may call (202) 208-1819 or write the Directives Management Branch, Bureau of the Fiscal Service, Department of the Treasury, Liberty Center (UCP-741), Washington, DC 20227 for further information.


§ 206.3 Billing policy and procedures.

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


§ 206.4 Collection and payment mechanisms.

(a) All funds are to be collected and disbursed by EFT when cost-effective, practicable, and consistent with current statutory authority.


(b) Collections and payments will be made by EFT when cost- effective, practicable, and consistent with current statutory authority. When consistent with these criteria, specific cash flows will utilize EFT as follows:


(1) Fees/fines. EFT will be adopted as the presumed method of collecting fees and fines, especially when these collection cash flows are recurring or of large dollar amounts.


(2) Tax collections. EFT will be adopted as the primary method for collecting taxes. EFT mechanisms may include ACH credit or debit cards.


(3) Salary payment. Presumed EFT will be adopted as the method for paying employees, and entrance enrollment forms for establishing regular payments will be designed to use this approach.


(4) Vendor and miscellaneous payments. Each department and agency will exercise its authority under the Federal Acquisition Regulation to require that all contractors are paid by EFT, unless a determination is made that it is not in the best interest of the Federal Government to do so. EFT will be adopted as the standard method of payment for all Federal program payments originated by agencies or their agents.


(5) Benefit payments. EFT will be presented to new beneficiaries as the presumed method for receiving benefits. EFT payment methods, such as Electronic Benefit Transfer, will be adopted and implemented to make EFT accessible to all benefit recipients.


(c)(1) Selection of the best collection and payment mechanism is a joint responsibility of an agency and the Service. An agency has responsibility for conducting cash management reviews; gathering volume and dollar data relative to the operation of the systems; and funding any implementation and operational costs above those normally funded by Treasury. The Service is the required approval authority when an agency desires to convert from one collection mechanism to another. The Service’s written approval is required prior to an agency entering into new contractual agreements or renewing existing contracts for agency collections or payments systems. Agencies will follow guidelines for the cost-effective usage of collection and payment mechanisms, published in the TFM, Volume I, Part 6-8000, in their selection and recommendation to the Service of an appropriate funds transfer mechanism. The agency will provide the Service with a recommended mechanism for any new or modified cash flows. The Service will review the recommendations, approve a mechanism, and assist with implementation.


(2) If an agency proposes a collection or payment mechanism other than EFT, it may be required to provide a cost-benefit analysis to justify its use. Cost/benefit analyses must include, at a minimum, known or estimated agency personnel costs, costs of procurement, recurring operational costs, equipment and system implementation and maintenance costs, costs to payment recipients, and costs to remitters. Agencies should consult with Treasury to determine the need to include interest costs associated with float in their computations of benefits and costs.


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


§ 206.5 Collection and deposit procedure exceptions.

(a) The following collection and deposit timeframe requirements are to be followed in exception cases where EFT mechanisms are not utilized:


(1) An agency will achieve same-day deposit of monies. Where same day deposit is not cost-effective or is impracticable, next day deposit of monies must be achieved except in those cases covered by I TFM 6-8000.


(2) Deposits will be made at a time of the day prior to the depositary’s specified cutoff time, but as late as possible in order to maximize daily deposit amounts.


(3) When cost-beneficial to the Government, an agency may make multiple deposits.


(b) Any additional exceptions to the above policies are listed in I TFM 6-8000.


§ 206.6 Cash management planning and review.

(a) An agency shall periodically perform cash management reviews to identify areas needing improvement.


(b) As part of its cash management review process, an agency is expected to document cash flows in order to provide an overview of its cash management activities and to identify areas that will yield savings after cash management initiatives are implemented. The Service will evaluate an agency’s EFT policy and application, to include mitigating circumstances that may prevent the use of EFT, as part of the cash management reviews.


(c) An agency’s cash management reviews will provide the basis for identification of improvements and preparation of cash flow reports for submission to the Service as prescribed by I TFM 6-8000. That Chapter provides requirements for an agency in performing periodic cash management reviews, identifying improvements, and preparing cash flow reports. In addition, the Chapter describes the timing and content of periodic reports that must be submitted by an agency to the Service on progress made in implementing cash management initiatives and associated savings.


(d) The Service will periodically review an agency’s cash management program to ensure that adequate progress is being made to improve overall cash management at an agency. As part of its oversight authority, the Service may visit an agency and review all or specific cash management activities of an agency. An agency will be notified in advance of the Service’s review and will be required to provide the Service with documentation of the agency cash management review within the timeframes required by I TFM 6-8000.


§ 206.7 Compliance.

(a) The Service will monitor agency cash management performance. Part of the monitoring process will include establishing implementation end dates for conversion to, or expansion of, EFT mechanisms, as well as the identification of mitigating circumstances that may prevent the use of EFT.


(b) In cases where an agency fails to meet a scheduled date within its control, or where an agency converts to a less cost-effective transfer mechanism without prior, written Service approval as determined in accordance with § 206.4(c), the Service will send a formal Notice of Deficiency to an agency’s designated cash management official. A separate Notice will be sent for each initiative.


(1) Collections cash flows. For collections cash flows, the Notice of Deficiency will include the nature of the deficiency, the amount of the proposed charge, the method of calculation, the right to file an appeal, and the date the charge will be imposed in the absence of an appeal. The amount of the charge will be equal to the cost of such noncompliance to the Treasury’s General Fund.


(2) Payments cash flows. [Reserved]


§ 206.8 Appeals.

(a) An agency that chooses to file an appeal must submit the appeal in writing to the Commissioner within 45 days of the date of the Notice of Deficiency. In the event of an appeal, the charge imposed under Notice of Deficiency will be deferred pending the results of the appeal. If an appeal is not submitted (i.e., received by the Commissioner) within 45 days, the amount indicated in the Notice of Deficiency will be charged per § 206.9(a).


(b) The appeal will contain the elements and follow the submission procedures specified in I TFM 6-8000. The appeal will include the background leading to the Notice of Deficiency, the basis of the appeal, and the action requested by an agency. An agency should state its disagreements with the Notice of Deficiency which may include cost-benefit factors, the amount of the charge, and other items.


(c) An agency must state what action it requests in its appeal. An agency may request that the Notice of Deficiency be completely overturned for cost-benefit or other considerations. Alternatively, an agency may request a reduced charge, deferral of the charge, an alternative solution to cash management improvement, or a combination of these actions.


(d) Appeals Board. The Commissioner will refer the appeal to an Appeals Board. The Appeals Board will consist of three members – two permanent members and one temporary member. The permanent members will be the Deputy Chief Financial Officer, Department of the Treasury, and the Assistant Commissioner, Federal Finance, of the Service. The temporary board member will be a cash management official from an agency other than the agency appealing the Notice of Deficiency. The Board will be convened on an as-needed basis. The order of agency assignment to the Board will be published by Treasury in Volume I, Chapter 6-8000 of the TFM. The Deputy Chief Financial Officer, Department of the Treasury, the Assistant Commissioner, Federal Finance, and the designated agency cash management official may delegate their responsibility to a staff subordinate having sufficient experience in cash management matters. The Assistant Commissioner’s designee may be from any area other than that which issued the Notice of Deficiency.


(e) Appeal review process. The Appeals Board will review the Notice of Deficiency, any additional information submitted by the Service, and the written appeal from an agency. Based on this review, the Board may decide additional investigation is required. The Board may request an agency and/or the Service to meet with the Board as part of the review process.


(f) Appeal finding. A written majority decision will be rendered by the Appeals Board within 30 days of receipt of the appeal. The Board may extend this period for an additional period, not to exceed 30 days, if required. The Appeals Board will notify the Commissioner and the agency of the decision. The decision of the Board whether to uphold the Notice of Deficiency, to overturn the Notice of Deficiency, or to mandate some other action will be stated in the finding. Other action mandated may include a reduced charge, a deferral of the charge, an alternate solution to cash management improvement, or a combination of these actions. The basis of the decision, the amount of the charge, and the effective date of the charge will be stated in the finding. The effective date of the charge may be retroactive to the date indicated in the Notice of Deficiency.


(g) Any terms related to charge deferral shall be stated; the Service and an agency will be required to submit evidence of compliance to such terms at a future specified date. At this future time, the Appeals Board will review the evidence of compliance. Based on this evidence, the Board will decide whether to impose a charge.


§ 206.9 Charges.

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


(b) Collection noncompliance. In the case of cash management collection noncompliance, an agency will absorb the charge from amounts appropriated or otherwise made available to carry out the program to which the collections relate. Charges collected from an executive agency in the case of cash management collection noncompliance will be deposited in the Cash Management Improvements Fund as outlined in § 206.10.


(c) Payment noncompliance. [Reserved]


(d) If an agency does not voluntarily pay the charge assessed under § 206.9(a), the Service will debit the appropriate account automatically. By failing to pay voluntarily the charges as required by the Deficit Reduction Act of 1984, an agency will be deemed to authorize the automatic debit to its account.


(e) The Commissioner will formally terminate the charge when the Commissioner has determined that an agency has complied. In addition, on an annual basis, the Commissioner will review an agency’s performance and calculation of the charge, and will notify an agency in writing of any changes to the amount being charged.


§ 206.10 Operation of and payments from the Cash Management Improvements Fund.

(a) The Cash Management Improvements Fund (Fund) will be operated as a revolving fund by the Service. Charges assessed under § 206.9(a) for cash management collection noncompliance will be deposited into the Fund according to the Deficit Reduction Act of 1984. The Service will also disburse any payments from the Fund based on projects selected by a project selection and approval committee.


(b) Committee composition. The committee will consist of three members – two permanent members and one temporary member. The permanent members will be the Commissioner and the Assistant Commissioner, Federal Finance, of the Service. The temporary committee member will be a cash management official from an agency other than an agency being considered for funds. The order of agency assignment to the Committee will be published in a TFM Bulletin, when funds are first deposited to the Fund. Decisions of the project selection and approval committee cannot be appealed. Agencies will be notified of any available amounts in the Fund and requirements to apply for such monies through a TFM bulletin.


(c) As provided by 31 U.S.C. 3720, sums in the Fund will be available without fiscal year limitation for the payment of expenses incurred in developing improved methods of collection and deposit and the expenses incurred in carrying out collections and deposits using such methods, including the costs of personal services and the costs of the lease or purchase of equipment and operating facilities.


(d) In addition to all reports required by law and regulation, for each fiscal year during which there is a balance in Fund, the Service will prepare and publish, by the 60th day following the close of the fiscal year, a full report on payments, receipts, disbursements, balances of the Fund, and full disclosure on projects financed by the Fund.


PART 208 – MANAGEMENT OF FEDERAL AGENCY DISBURSEMENTS


Authority:5 U.S.C. 301; 12 U.S.C. 90, 265, 266, 1767, 1789a; 31 U.S.C. 321, 3122, 3301, 3302, 3303, 3321, 3325, 3327, 3328, 3332, 3335, 3336, 6503.


Source:85 FR 25291, May 1, 2020, unless otherwise noted.

§ 208.1 Scope and application.

This part applies to all Federal payments made by an agency. Except as specified in § 208.4, this part requires payments, other than payments made under the Internal Revenue Code of 1986, to be made by electronic funds transfer.


§ 208.2 Definitions.

The following definitions apply to this part:


Agency means any department, agency, or instrumentality of the United States Government, or a corporation owned or controlled by the Government of the United States.


Authorized payment agent means any individual or entity that is appointed or otherwise selected as a representative payee or fiduciary, under regulations of the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board, or other agency making Federal payments, to act on behalf of an individual entitled to a Federal payment.


Direct Express® card means the prepaid debit card issued to recipients of Federal benefits by a Financial Agent pursuant to requirements established by Treasury.


Disbursement means, in the context of payments delivered to Treasury-sponsored accounts, the performance of the following duties by a Financial Agent acting as agent of the United States:


(1) The establishment of an account for the recipient that meets the requirements of the Federal Deposit Insurance Corporation or the National Credit Union Administration Board for deposit or share insurance;


(2) The maintenance of such an account;


(3) The receipt of Federal payments through the Automated Clearing House system or other electronic means and crediting of Federal payments to the account; and


(4) The provision of recipient access to funds in the account on the terms specified by Treasury.


Electronic benefits transfer (EBT) means the provision of Federal benefit, wage, salary, and retirement payments electronically, through disbursement by a financial institution acting as a Financial Agent. For purposes of this part and Public Law 104-208, EBT includes, but is not limited to, disbursement through a Treasury-sponsored account or a Federal/State EBT program.


Electronic funds transfer means any transfer of funds, other than a transaction originated by cash, check, or similar paper instrument that is initiated through an electronic terminal, telephone, computer, or magnetic tape, for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit an account. The term includes, but is not limited to, Automated Clearing House transfers, Fedwire transfers, and transfers made at automated teller machines and point-of-sale terminals. For purposes of this part only, the term electronic funds transfer includes a credit card transaction.


Federal payment means any payment made by an agency. The term includes, but is not limited to:


(1) Federal wage, salary, and retirement payments;


(2) Vendor and expense reimbursement payments;


(3) Benefit payments;


(4) Miscellaneous payments including, but not limited to: Interagency payments; grants; loans; fees; principal, interest, and other payments related to U.S. marketable and nonmarketable securities; overpayment reimbursements; and payments under Federal insurance or guarantee programs for loans; and


(5) Payments under the Internal Revenue Code of 1986 (26 U.S.C.).


Federal/State EBT program means any program that provides access to Federal benefit, wage, salary, and retirement payments and to State-administered benefits through a single delivery system and in which Treasury designates a Financial Agent to disburse the Federal payments.


Federally-insured financial institution means any financial institution, the deposits of which are insured by the Federal Deposit Insurance Corporation under 12 U.S.C. Chapter 16 or, in the case of a credit union, the member accounts of which are insured by the National Credit Union Share Insurance Fund under 12 U.S.C. Chapter 14, Subchapter II.


Financial Agent means a financial institution that has been designated by Treasury as a Financial Agent for the provision of electronic funds transfer or EBT services under any provision of Federal law, including 12 U.S.C. 90, 265, 266, 1767, and 1789a, and 31 U.S.C. 3122 and 3303, as amended by the Omnibus Consolidated Appropriations Act, 1997, Section 664, Public Law 104-208.


Financial institution means:


(1) Any insured bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(2) Any mutual savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(3) Any savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(4) Any insured credit union as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is eligible to make application to become an insured credit union under section 201 of such Act (12 U.S.C. 1781);


(5) Any savings association as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is eligible to apply to become an insured depository institution under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and


(6) Any agency or branch of a foreign bank as defined in section 1(b) of the International Banking Act, as amended (12 U.S.C. 3101).


Individual means a natural person.


Recipient means an individual, corporation, or other public or private entity that is authorized to receive a Federal payment from an agency.


Secretary means Secretary of the Treasury.


Treasury means the United States Department of the Treasury.


Treasury-sponsored account means a Direct Express card account, a U.S. Debit Card account, or another account established pursuant to § 208.5 or § 208.11.


U.S. Debit Card means the prepaid debit card issued to recipients of certain Federal payments by a Financial Agent pursuant to requirements established by Treasury.


§ 208.3 Payment by electronic funds transfer.

Subject to § 208.4, and notwithstanding any other provision of law, all Federal payments made by an agency shall be made by electronic funds transfer. This requirement does not apply to payments under the Internal Revenue Code of 1986.


§ 208.4 Waivers.

(a) Payment by electronic funds transfer is not required in the following cases:


(1) Where an individual:


(i) Was born prior to May 1, 1921, and was receiving payment by check on March 1, 2013;


(ii) Receives a type of payment for which Treasury does not offer delivery to a Treasury-sponsored account. In such cases, those payments are not required to be made by electronic funds transfer, unless and until such payments become eligible for deposit to a Treasury-sponsored account;


(iii) Is ineligible for a Treasury-sponsored account because of suspension or cancellation of the individual’s Treasury-sponsored account by the Financial Agent;


(iv) Has filed a waiver request with Treasury certifying that payment by electronic funds transfer would impose a hardship because of the individual’s inability to manage an account at a financial institution or a Treasury-sponsored account due to a mental impairment, and Treasury has not rejected the request; or


(v) Has filed a waiver request with Treasury certifying that payment by electronic funds transfer would impose a hardship because of the individual’s inability to manage an account at a financial institution or a Treasury-sponsored account due to the individual living in a remote geographic location lacking the infrastructure to support electronic financial transactions, and Treasury has not rejected the request;


(2) Where the political, financial, or communications infrastructure in a foreign country does not support payment by electronic funds transfer;


(3) Where the payment is to a recipient within an area designated by the President or an authorized agency administrator as a disaster area. This waiver is limited to payments made within 120 days after the disaster is declared;


(4) Where either:


(i) A military operation is designated by the Secretary of Defense in which uniformed services undertake military actions against an enemy; or


(ii) A call or order to, or retention on, active duty of members of the uniformed services is made during a war or national emergency declared by the President or Congress;


(5) Where a threat may be posed to national security, the life or physical safety of any individual may be endangered, or a law enforcement action may be compromised;


(6) Where the agency does not expect to make payments to the same recipient within a one-year period on a regular, recurring basis and remittance data explaining the purpose of the payment is not readily available from the recipient’s financial institution receiving the payment by electronic funds transfer; and


(7) Where an agency’s need for goods and services is of such unusual and compelling urgency that the Government would be seriously injured unless payment is made by a method other than electronic funds transfer; or, where there is only one source for goods or services and the Government would be seriously injured unless payment is made by a method other than electronic funds transfer.


(b) An individual who requests a waiver under paragraphs (a)(1)(iv) and (v) of this section shall provide, in writing, to Treasury a certification supporting that request, in such form that Treasury may prescribe. The individual shall attest to the certification before a notary public, or otherwise file the certification in such form that Treasury may prescribe.


§ 208.5 Accounts for disbursement of Federal payments.

Treasury may designate a Financial Agent to establish and administer Treasury-sponsored accounts for individuals for the disbursement of Federal payments, including benefit, retirement, salary, miscellaneous, vendor, expense reimbursement and tax payments. Such accounts may be established upon terms and conditions that the Secretary considers appropriate or necessary and shall be made available at a reasonable cost and with the same consumer protections provided to other account holders at the financial institution. Treasury may deliver payments to such accounts and the maintenance of accounts and the provision of account-related services under this section shall constitute reasonable duties of a Financial Agent of the United States.


§ 208.6 Availability of Treasury-sponsored accounts.

An individual who receives a Federal payment shall be eligible to open a Treasury-sponsored account under terms and conditions established by Treasury.


§ 208.7 Agency responsibilities.

An agency shall put into place procedures that allow recipients to provide the information necessary for the delivery of payments to the recipient by electronic funds transfer to an account at the recipient’s financial institution or to a Treasury-sponsored account.


§ 208.8 Recipient responsibilities.

Each recipient who is required to receive payment by electronic funds transfer shall provide the information necessary to effect payment by electronic funds transfer. For recipients who do not designate a bank account for the receipt of payments, Treasury may disburse payments to a Treasury-sponsored account or to an account to which the recipient is receiving other Federal payments.


§ 208.9 Compliance.

(a) Treasury will monitor agencies’ compliance with this part. Treasury may require agencies to provide information about their progress in converting payments to electronic funds transfer.


(b) If an agency fails to make payment by electronic funds transfer, as prescribed under this part, Treasury may assess a charge to the agency pursuant to 31 U.S.C. 3335.


§ 208.10 Reservation of rights.

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


§ 208.11 Accounts for disaster victims.

Treasury may establish and administer accounts at any financial institution designated as a Financial Agent for disaster victims in order to allow for the delivery by electronic funds transfer of one or more Federal payments. Such accounts may be established upon terms and conditions that the Secretary considers appropriate or necessary in light of the circumstances. Treasury may deliver payments to these accounts notwithstanding any other payment instructions from the recipient and without regard to the requirements of §§ 208.4 and 208.7 and § 210.5 of this chapter. For purposes of this section, “disaster victim” means an individual or entity located within an emergency area, or an individual or entity that has relocated or been displaced from an emergency area as a result of a major disaster or emergency. “Emergency area” means a geographical area in which there exists an emergency or disaster declared by the President pursuant to the National Emergencies Act (50 U.S.C. 1601 et seq.) or the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.). The maintenance of accounts and the provision of account-related services under this section shall constitute reasonable duties of a Financial Agent of the United States.


PART 210 – FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED CLEARING HOUSE


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


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

§ 210.1 Scope; relation to other regulations.

This part governs all entries and entry data originated or received by an agency through the Automated Clearing House (ACH) network, except as provided in paragraphs (a) and (b) of this section. This part also governs reclamations of benefit payments.


(a) Federal tax payments received by the Federal Government through the ACH system that are governed by part 203 of this title shall not be subject to any provision of this part that is inconsistent with part 203.


(b) ACH credit or debit entries for the purchase of, or payment of principal and interest on, United States securities that are governed by part 370 of this title shall not be subject to any provision of this part that is inconsistent with part 370.


§ 210.2 Definitions.

For purposes of this part, the following definitions apply. Any term that is not defined in this part shall have the meaning set forth in the ACH Rules.


(a) ACH Rules means the 2021 Operating Rules & Guidelines, including Supplement #1-2021, (both incorporated by reference, see § 210.3(b)) published by Nacha, a national association of regional member clearing house associations, ACH Operators, and participating financial institutions located in the United States.


(b) Actual or constructive knowledge, when used in reference to an RDFI’s or agency’s knowledge of the death or incapacity of a recipient or death of a beneficiary, means that the RDFI or agency received information, by whatever means, of the death or incapacity and has had a reasonable opportunity to act on such information or that the RDFI or agency would have learned of the death or incapacity if it had followed commercially reasonable business practices. For purposes of subpart B of this part, an agency is presumed to have constructive knowledge of death or incapacity at the time it stops certifying recurring payments to a recipient if the agency:


(1) Does not re-initiate payments to the recipient; and


(2) Subsequently initiates a reclamation for one or more payments made to the recipient.


(c) Agency means any department, agency, or instrumentality of the United States Government, or a corporation owned or controlled by the Government of the United States. The term agency does not include a Federal Reserve Bank.


(d) Applicable ACH Rules means the ACH Rules, except:


(1) Subsections 1.2.2, 1.2.3, 1.2.4, 1.2.5 and 1.2.6; Appendix Seven; Appendix Eight; and Appendix Nine (governing the enforcement of the ACH Rules and claims for compensation);


(2) Section 1.14 (governing the Participating DFI Contact registry);


(3) Section 2.10 and section 3.6 (governing the reclamation of benefit payments);


(4) The requirement in Appendix Three that the Effective Entry Date of a credit entry be no more than two Banking Days following the date of processing by the Originating ACH Operator (see definition of “Effective Entry Date” in Appendix Three);


(5) Section 2.2 (setting forth ODFI obligations to enter into agreements with, and perform risk management relating to, Originators and Third-Party Senders) and section 1.6 (Security Requirements);


(6) Section 2.17.2.2-2.17.2.6 (requiring reduction of high rates of entries returned as unauthorized);


(7) The requirements of Section 2.5.8 (International ACH Transactions) shall not apply to entries representing the payment of a Federal tax obligation by a taxpayer; and


(8) Until March 19, 2022, the requirement of section 2.5.17.4(a) that the Originator utilize a fraudulent transaction detection system that validates an account to be debited for the first use of such account number and for any subsequent change(s) to the account number.


(e) Authorized payment agent means any individual or entity that is appointed or otherwise selected as a representative payee or fiduciary, under regulations of the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board, or other agency making Federal payments, to act on behalf of an individual entitled to a Federal payment.


(f) Automated Clearing House or ACH means a funds transfer system governed by the ACH Rules which provides for the interbank clearing of electronic entries for participating financial institutions.


(g) Beneficiary means a natural person other than a recipient who is entitled to receive the benefit of all or part of a benefit payment.


(h) Benefit payment is a payment for a Federal entitlement program or for an annuity, including, but not limited to, payments for Social Security, Supplemental Security Income, Black Lung, Civil Service Retirement, Railroad Retirement annuity and Railroad Unemployment and Sickness benefits, Department of Veterans Affairs Compensation and Pension, and Worker’s Compensation.


(i) Federal payment means any payment made by an agency. The term includes, but is not limited to:


(1) Federal wage, salary, and retirement payments;


(2) Vendor and expense reimbursement payments;


(3) Benefit payments; and


(4) Miscellaneous payments including, but not limited to, interagency payments; grants; loans; fees; principal, interest, and other payments related to United States marketable and nonmarketable securities; overpayment reimbursements; and payments under Federal insurance or guarantee programs for loans.


(j)(1) Financial institution means:


(i) Any insured bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to apply to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(ii) Any mutual savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to apply to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(iii) Any savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to apply to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(iv) Any insured credit union as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is eligible to apply to become an insured credit union pursuant to section 201 of such Act (12 U.S.C. 1781);


(v) Any savings association as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository institution as defined in such Act (12 U.S.C. 1811 et seq.) or is eligible to apply to become an insured depository institution under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and


(vi) Any agency or branch of a foreign bank as defined in section 1(b) of the International Banking Act, as amended (12 U.S.C. 3101).


(2) In this part, a financial institution may be referred to as an Originating Depository Financial Institution (ODFI) if it transmits entries to its ACH Operator for transmittal to a Receiving Depository Financial Institution (RDFI), or it may be referred to as an RDFI if it receives entries from its ACH Operator for debit or credit to the accounts of its customers.


(k) Government entry means an ACH credit or debit entry or entry data originated or received by an agency.


(l) Green Book means the manual issued by the Service which provides financial institutions with procedures and guidelines for processing Government entries.


(m) Notice of reclamation means notice sent by electronic, paper, or other means by the Federal Government to an RDFI which identifies the benefit payments that should have been returned by the RDFI because of the death or legal incapacity of a recipient or death of a beneficiary.


(n) Outstanding total means the sum of all benefit payments received by an RDFI from an agency after the death or legal incapacity of a recipient or the death of a beneficiary, minus any amount returned to, or recovered by, the Federal Government.


(o) Recipient means a natural person, corporation, or other public or private entity that is authorized to receive a Federal payment from an agency.


(p) Service means the Bureau of the Fiscal Service, Department of the Treasury.


(q) Treasury means the United States Department of the Treasury.


(r) Treasury Financial Manual means the manual issued by the Service containing procedures to be observed by all agencies and Federal Reserve Banks with respect to central accounting, financial reporting, and other Federal Government-wide fiscal responsibilities of the Treasury.


[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000; 66 FR 10580, Feb. 16, 2001; 67 FR 17902, Apr. 11, 2002; 68 FR 33829, June 5, 2003; 70 FR 67366, Nov. 7, 2005; 73 FR 52584, Sept. 10, 2008; 76 FR 59030, Sept. 23, 2011; 79 FR 42980, July 24, 2014; 82 FR 42608, Sept. 11, 2017; 85 FR 15720, Mar. 19, 2020; 87 FR 46, Jan. 3, 2022]


§ 210.3 Governing law.

(a) Federal law. The rights and obligations of the United States and the Federal Reserve Banks with respect to all Government entries, and the rights of any person or recipient against the United States and the Federal Reserve Banks in connection with any Government entry, are governed by this part, which has the force and effect of Federal law.


(b) Incorporation by reference. Certain material is incorporated by reference into this part with the approval of the Director of the Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that specified in this section, the Bureau of the Fiscal Service must publish a document in the Federal Register and the material must be available to the public. All approved material is available for inspection at the Bureau of the Fiscal Service, 401 14th Street SW, Room 400A, Washington, DC 20227, ph. (202) 874-6680 and from the sources listed below. It is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email [email protected] or go to www.archives.gov/federal-register/cfr/ibr-locations.html.


(1) Nacha, 2550 Wasser Terrace, Suite 400, Herndon, Virginia 20171, tel. 703-561-1100, [email protected]


(i) 2021 Nacha Operating Rules & Guidelines: The Guide to the Rules Governing the ACH Network, copyright 2021; into § 210.2.


(ii) Supplement #1-2021, Notice of Amendment to the 2021 Nacha Operating Rules, dated April 8, 2021; into § 210.2.


(2) [Reserved]


(c) Application of this part. Any person or entity that originates or receives a Government entry agrees to be bound by this part and to comply with all instructions and procedures issued by the Service under this part, including the Treasury Financial Manual and the Green Book. The Treasury Financial Manual is available for downloading at the Service’s web site at http://www.fiscal.treasury.gov/ or by calling (202) 874-9940 or writing the Directives Management Branch, Bureau of the Fiscal Service, Department of the Treasury, 3700 East West Highway, Room 500C, Hyattsville, MD 20782. The Green Book is available for downloading at the Service’s web site at http://www.fiscal.treasury.gov/fmsnews.html or by calling (202) 874-6540 or writing the Product Promotion Division, Bureau of the Fiscal Service, Department of the Treasury, 401 14th Street, SW., Room 309, Washington, DC 20227.


[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000; 66 FR 10580, Feb. 16, 2001; 67 FR 17903, Apr. 11, 2002; 68 FR 33830, June 5, 2003; 69 FR 18803, Apr. 9, 2004; 70 FR 67367, Nov. 7, 2005; 73 FR 52584, Sept. 10, 2008; 76 FR 59030, Sept. 23, 2011; 79 FR 42980, July 24, 2014; 82 FR 42608, Sept. 11, 2017; 85 FR 15721, Mar. 19, 2020; 87 FR 46, Jan. 3, 2022]


Subpart A – General

§ 210.4 Authorizations and revocations of authorizations.

(a) Requirements for authorization. Each debit and credit entry subject to this part shall be authorized in accordance with the applicable ACH Rules and the following additional requirements:


(1) The agency or the RDFI that accepts the recipient’s authorization shall verify the identity of the recipient and, in the case of a written authorization requiring the recipient’s signature, the validity of the recipient’s signature.


(2) Unless authorized in writing, or similarly authenticated, by an agency, no person or entity shall initiate or transmit a debit entry to that agency, other than a reversal of a credit entry previously sent to the agency.


(b) Terms of authorizations. By executing an authorization for an agency to initiate entries, a recipient agrees:


(1) To the provisions of this part;


(2) To provide accurate information;


(3) To verify the recipient’s identity to the satisfaction of the RDFI or agency, whichever has accepted the authorization;


(4) That any new authorization inconsistent with a previous authorization shall supersede the previous authorization; and


(5) That the Federal Government may reverse any duplicate or erroneous entry or file as provided in § 210.6(f) of this part.


(c) Termination and revocation of authorizations. An authorization shall remain valid until it is terminated or revoked by:


(1) With respect to a recipient of benefit payments, a change in the recipient’s ownership of the deposit account as reflected in the deposit account records, including the removal of the name of the recipient, the addition of a power of attorney, or any action which alters the interest of the recipient;


(2) The death or legal incapacity of a recipient of benefit payments or the death of a beneficiary;


(3) The closing of the recipient’s account at the RDFI by the recipient or by the RDFI. With respect to a recipient of benefit payments, if an RDFI closes an account to which benefit payments currently are being sent, it shall provide 30 calendar days written notice to the recipient prior to closing the account, except in cases of fraud; or


(4) The RDFI’s insolvency, closure by any state or Federal regulatory authority or by corporate action, or the appointment of a receiver, conservator, or liquidator for the RDFI. In any such event, the authorization shall remain valid if a successor is named. The Federal Government may temporarily transfer authorizations to a consenting RDFI. The transfer is valid until either a new authorization is executed by the recipient, or 120 calendar days have elapsed since the insolvency, closure, or appointment, whichever occurs first.


§ 210.5 Account requirements for Federal payments.

(a) Notwithstanding ACH Rules 2.1.2, 4.1.3, and Appendix Two, section 2.2 (listing general ledger and loan accounts as permissible transaction codes), an ACH credit entry representing a Federal payment other than a vendor payment shall be deposited into a deposit account at a financial institution. For all payments other than vendor payments, the account at the financial institution shall be in the name of the recipient, except as provided in paragraph (b) of this section.


(b)(1) Where an authorized payment agent has been selected, the Federal payment shall be deposited into an account titled in accordance with the regulations governing the authorized payment agent.


(2) Where a Federal payment is to be deposited into an investment account established through a securities broker or dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, or an investment account established through an investment company registered under the Investment Company Act of 1940 or its transfer agent, such payment may be deposited into an account designated by such broker or dealer, investment company, or transfer agent.


(3) Where an agency is issuing part or all of an employee’s travel reimbursement payment to the official travel card issuing bank, as authorized or required by Office of Management and Budget guidance or the Federal Travel Regulation, the ACH credit entry representing the payment may be deposited to the account of the travel card issuing bank for credit to the employee’s travel card account at the bank.


(4) Where a Federal payment is to be disbursed through a debit card, stored value card, prepaid card or similar payment card program established by the Service, the Federal payment may be deposited to an account at a financial institution designated by the Service as a financial or fiscal agent. The account title, access terms and other account provisions may be specified by the Service.


(5)(i) Where a Federal payment is to be deposited to a prepaid account that meets the following requirements:


(A) The account is held at an insured financial institution;


(B) The account is set up to meet the requirements for pass-through deposit or share insurance such that the funds accessible through the card are insured for the benefit of the recipient by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund in accordance with applicable law (12 CFR part 330 or 12 CFR part 745);


(C) The account is not attached to a line of credit or loan agreement under which repayment from the account is triggered upon delivery of the Federal payments; and


(D) The issuer of the account complies with all of the requirements, and provides the holder of the account with all of the consumer protections, that apply to a prepaid account under the rules implementing the Electronic Fund Transfer Act and the Truth in Lending Act.


(ii) No person or entity may issue a prepaid account that receives Federal payments in violation of this paragraph (b)(5), and no financial institution may maintain a prepaid account that receives Federal payments if the issuer violates this paragraph (b)(5).


(iii) For the purposes of this paragraph (b)(5), the term –


(A) “Prepaid account” means a prepaid account as defined for purposes of regulations implementing the Electronic Fund Transfer Act, as amended; and


(B) “Issuer” means a person or entity that issues a prepaid account.


(6) Where a Federal payment is disbursed to a resident of a nursing facility, as defined in 42 U.S.C. 1396r, the payment may be deposited into a resident trust or patient fund account established by the nursing facility pursuant to requirements under Federal law relating to the protection of such funds.


(7) Where a Federal payment is disbursed to a member of a religious order who has taken a vow of poverty, the payment may be deposited to an account established by the religious order. As used in this paragraph, the phrase “member of a religious order who has taken a vow of poverty” is defined as it would be by the Internal Revenue Service for Federal tax purposes.


(8) The Secretary of the Treasury may waive the requirements of paragraph (a) of this section in any case or class of cases.


[64 FR 17478, Apr. 9, 1999, as amended at 65 FR 18869, Apr. 7, 2000; 73 FR 52584, Sept. 10, 2008; 75 FR 80339, Dec. 22, 2010; 76 FR 59031, Sept. 23, 2011; 82 FR 42609, Sept. 11, 2017]


§ 210.6 Agencies.

Notwithstanding any provision of the ACH Rules, including Subsections 2.4.5, 2.8.4, 4.3.5, 2.9.2, 3.2.2, and 3.13.3, agencies shall be subject to the obligations and liabilities set forth in this section in connection with Government entries.


(a) Receiving entries. An agency may receive ACH debit or credit entries only with the prior written authorization of the Service.


(b) Liability to a recipient. An agency will be liable to the recipient for any loss sustained by the recipient as a result of the agency’s failure to originate a credit or debit entry in accordance with this part. The agency’s liability shall be limited to the amount of the entry(ies).


(c) Liability to an originator. An agency will be liable to an Originator or an ODFI for any loss sustained by the originator or ODFI as a result of the agency’s failure to credit an ACH entry to the agency’s account in accordance with this part. The agency’s liability shall be limited to the amount of the entry(ies).


(d) Liability to an RDFI or ACH association. Except as otherwise provided in this part, an agency will be liable to an RDFI for losses sustained in processing duplicate or erroneous credit and debit entries originated by the agency. An agency’s liability shall be limited to the amount of the entry(ies), and shall be reduced by the amount of the loss resulting from the failure of the RDFI to exercise due diligence and follow standard commercial practices in processing the entry(ies). This section does not apply to credits received by an RDFI after the death or legal incapacity of a recipient of benefit payments or the death of a beneficiary as governed by subpart B of this part. An agency shall not be liable to any ACH association.


(e) Acquittance of the agency. The final crediting of the amount of an entry to a recipient’s account shall constitute full acquittance of the Federal Government.


(f) Reversals. An agency may reverse any duplicate or erroneous entry, and the Federal Government may reverse any duplicate or erroneous file. In initiating a reversal, an agency shall certify to the Service that the reversal complies with applicable law related to the recovery of the underlying payment. An agency that reverses an entry shall indemnify the RDFI as provided in the applicable ACH Rules, but the agency’s liability shall be limited to the amount of the entry. If the Federal Government reverses a file, the Federal Government shall indemnify the RDFI as provided in the applicable ACH Rules, but the extent of such liability shall be limited to the amount of the entries comprising the duplicate or erroneous file. Reversals under this section shall comply with the time limitations set forth in the applicable ACH Rules.


(g) Point-of-purchase debit entries. An agency may originate a Point-of-Purchase (POP) entry using a check drawn on a consumer or business account and presented at a point-of-purchase. The requirements of the applicable ACH Rules, incorporated by reference, see § 210.3(b), shall be met for such an entry if the Receiver presents the check at a location where the agency has posted the notice required by the ACH Rules and has provided the Receiver with a copy of the notice.


(h) Return Fee Entry. An agency that has authority to collect returned item service fees may do so by originating a Return Fee Entry if the agency provides notice to the Receiver in accordance with the ACH Rules.


[82 FR 42609, Sept. 11, 2017, as amended at 85 FR 15721, Mar. 19, 2020; 87 FR 47, Jan. 3, 2022]


§ 210.7 Federal Reserve Banks.

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


(b) Routing numbers. All routing numbers issued by a Federal Reserve Bank to an agency require the prior approval of the Service.


§ 210.8 Financial institutions.

(a) Status as a Treasury depositary. The origination or receipt of an entry subject to this part does not render a financial institution a Treasury depositary. A financial institution shall not advertise itself as a Treasury depositary on such basis.


(b) Liability. Notwithstanding ACH Rules Subsections 2.4.5, 2.8.4, 4.3.5, 2.9.2, 3.2.2, and 3.13.3, if the Federal Government sustains a loss as a result of a financial institution’s failure to handle an entry in accordance with this part, the financial institution shall be liable to the Federal Government for the loss, up to the amount of the entry, except as otherwise provided in this section. A financial institution shall not be liable to any third party for any loss or damage resulting directly or indirectly from an agency’s error or omission in originating an entry. Nothing in this section shall affect any obligation or liability of a financial institution under Regulation E, 12 CFR part 1005, or the Electronic Funds Transfer Act, 12 U.S.C. 1693 et seq.


(c) Acquittance of the financial institution. The final crediting of the correct amount of an entry received and processed by the Federal Reserve Bank and posted to the TGA shall constitute full acquittance of the ODFI and the originator for the amount of the entry. Full acquittance shall not occur if the entries do not balance, are incomplete, are incorrect, or are incapable of being processed. In the case of funds collected by an agency through origination of a debit entry, full acquittance shall not occur until the underlying payment becomes final.


(d) Notice of misdirected payment. If an RDFI becomes aware that an agency has originated an ACH credit entry to an account that is not owned by the payee whose name appears in the ACH payment information, the RDFI shall promptly notify the agency. An RDFI that originates a Notification of Change (NOC) entry with the correct account and/or Routing and Transit Number information, or returns the original ACH credit entry to the agency with an appropriate return reason code, shall be deemed to have satisfied this requirement.


[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004; 70 FR 67367, Nov. 7, 2005; 79 FR 42981, July 24, 2014; 79 FR 73841, Dec. 12, 2014; 82 FR 42609, Sept. 11, 2017]


Subpart B – Reclamation of Benefit Payments

§ 210.9 Parties to the reclamation.

(a) Agreement of RDFI. An RDFI’s acceptance of a benefit payment pursuant to this part shall constitute its agreement to this subpart. By accepting a benefit payment subject to this part, the RDFI authorizes the debiting of the Federal Reserve Bank account utilized by the RDFI in accordance with the provisions of § 210.10(e).


(b) The Federal Government. In processing reclamations pursuant to this subpart, the Service shall act pursuant to the direction of the agency that certified the benefit payment(s) being reclaimed.


§ 210.10 RDFI liability.

(a) Full liability. An RDFI shall be liable to the Federal Government for the total amount of all benefit payments received after the death or legal incapacity of a recipient or the death of a beneficiary unless the RDFI has the right to limit its liability under § 210.11 of this part. An RDFI shall return any benefit payments received after the RDFI becomes aware of the death or legal incapacity of a recipient or the death of a beneficiary, regardless of the manner in which the RDFI discovers such information. If the RDFI learns of the death or legal incapacity of a recipient or death of a beneficiary from a source other than notice from the agency issuing payments to the recipient, the RDFI shall immediately notify the agency of the death or incapacity. The proper use of the R15 or R14 return reason code shall be deemed to constitute such notice.


(b) Actual or Constructive Knowledge of Death. Actual or constructive knowledge, when used in reference to an RDFI’s or agency’s knowledge of the death or incapacity of a recipient or death of a beneficiary, means that the RDFI or agency received information, by whatever means, of the death or incapacity and has had a reasonable opportunity to act on such information or that the RDFI or agency would have learned of the death or incapacity if it had followed commercially reasonable business practices. For purposes of this subpart, an agency is presumed to have constructive knowledge of death or incapacity at the time it stops certifying recurring payments to a recipient if the agency:


(1) Does not re-initiate payments to the recipient; and


(2) Subsequently initiates a reclamation for one or more payments made to the recipient.


(c) Exception to liability rule. An RDFI shall not be liable for post-death benefit payments sent to a recipient acting as a representative payee or fiduciary on behalf of a beneficiary, if the beneficiary was deceased at the time the authorization was executed and the RDFI did not have actual or constructive knowledge of the death of the beneficiary.


(d) Time limits. An agency that initiates a request for a reclamation must do so within 120 calendar days after the date that the agency first has actual or constructive knowledge of the death or legal incapacity of a recipient or the death of a beneficiary. An agency may not reclaim any post-death or post-incapacity payment made more than six years prior to the date of the notice of reclamation; provided, however, that if the account balance at the time the RDFI receives the notice of reclamation exceeds the total amount of post-death or post-incapacity payments made by the agency during such six-year period, this limitation shall not apply and the RDFI shall be liable for the total amount of all post-death or post-incapacity payments made, up to the amount in the account at the time the RDFI receives the notice of reclamation and has had a reasonable opportunity to act on the notice (not to exceed one business day).


(e) Debit of RDFI’s account. If an RDFI does not return the full amount of the outstanding total or any other amount for which the RDFI is liable under this subpart in a timely manner, the Federal Government will collect the amount outstanding by instructing the appropriate Federal Reserve Bank to debit the account utilized by the RDFI. The Federal Reserve Bank will provide advice of the debit to the RDFI.


[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004; 85 FR 15721, Mar. 19, 2020]


§ 210.11 Limited liability.

(a) Right to limit its liability. If an RDFI does not have actual or constructive knowledge of the death or legal incapacity of a recipient or the death of a beneficiary at the time it receives one or more benefit payments on behalf of the recipient, the RDFI’s liability to the agency for those payments shall be limited to:


(1) An amount equal to:


(i) The amount in the account at the time the RDFI receives the notice of reclamation and has had a reasonable opportunity (not to exceed one business day) to act on the notice, plus any additional benefit payments made to the account by the agency before the RDFI responds in full to the notice of reclamation, or


(ii) The outstanding total, whichever is less; plus


(2) If the agency is unable to collect the entire outstanding total, an additional amount equal to:


(i) The benefit payments received by the RDFI from the agency within 45 days after the death or legal incapacity of the recipient or death of the beneficiary, or


(ii) The balance of the outstanding total, whichever is less.


(b) Qualification for limited liability. In order to limit its liability as provided in this section, an RDFI shall:


(1) Certify that at the time the benefit payments were credited to or withdrawn from the account, the RDFI had no actual or constructive knowledge of the death or legal incapacity of the recipient or death of the beneficiary;


(2) Certify the date the RDFI first had actual or constructive knowledge of the death or legal incapacity of the recipient or death of the beneficiary, regardless of how and where such information was obtained;


(3)(i) Provide the name, last known address and phone number, as shown on the RDFI’s records, of the following person(s):


(A) The recipient and any co-owner(s) of the recipient’s account;


(B) All other person(s) authorized to withdraw funds from the recipient’s account; and


(C) All person(s) who withdrew funds from the recipient’s account after the death or legal incapacity of the recipient or death of the beneficiary.


(ii) If persons are not identified for any of these subcategories, the RDFI must certify that no such information is available and why no such information is available; and


(4) Fully and accurately complete all certifications on the notice of reclamation and comply with the requirements of this part.


(c) Payment of limited liability amount. If the RDFI qualifies for limited liability under this subpart, it shall immediately return to the Federal Government the amount specified in § 210.11(a)(1). The agency will then attempt to collect the amount of the outstanding total not returned by the RDFI. If the agency is unable to collect that amount, the Federal Government will instruct the appropriate Federal Reserve Bank to debit the account utilized by the RDFI at that Federal Reserve Bank for the amount specified in § 210.11(a)(2).


(d) Violation of subpart B. An RDFI that fails to comply with any provision of this subpart in a timely and accurate manner, including but not limited to the certification requirements at § 210.11(b) and the notice requirements at § 210.13, shall be liable to the Federal Government for any loss resulting from its act or omission. Any such liability shall be in addition to the amount(s) for which the RDFI is liable under § 210.10 or § 210.11, as applicable.


[64 FR 17487, Apr. 9, 1999, as amended at 69 FR 13189, Mar. 19, 2004; 76 FR 59031, Sept. 23, 2011]


§ 210.12 RDFI’s rights of recovery.

(a) Matters between the RDFI and its customer. This subpart does not authorize or direct an RDFI to debit or otherwise affect the account of a recipient. Nothing in this subpart shall be construed to affect the right an RDFI has under state law or the RDFI’s contract with a recipient to recover any amount from the recipient’s account.


(b) Liability unaffected. The liability of the RDFI under this subpart is not affected by actions taken by the RDFI to recover any portion of the outstanding total from any party.


§ 210.13 Notice to account owners.

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


§ 210.14 Erroneous death information.

(a) Notification of error to the agency. If, after the RDFI responds fully to the notice of reclamation, the RDFI learns that the recipient or beneficiary is not dead or legally incapacitated or that the date of death is incorrect, the RDFI shall inform the agency that certified the underlying payment(s) and directed the Service to reclaim the funds in dispute.


(b) Resolution of dispute. The agency that certified the underlying payment(s) and directed the Service to reclaim the funds will attempt to resolve the dispute with the RDFI in a timely manner. If the agency determines that the reclamation was improper, in whole or in part, the agency shall notify the RDFI and shall return the amount of the improperly reclaimed funds to the RDFI. Upon certification by the agency of an improper reclamation, the Service may instruct the appropriate Federal Reserve Bank to credit the account utilized by the RDFI at the Federal Reserve Bank in the amount of the improperly reclaimed funds.


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


PART 211 – DELIVERY OF CHECKS AND WARRANTS TO ADDRESSES OUTSIDE THE UNITED STATES, ITS TERRITORIES AND POSSESSIONS


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

§ 211.1 Withholding delivery of checks.

(a) It is hereby determined that postal, transportation or banking facilities in general or local conditions in the Republic of Cuba and the Democratic People’s Republic of Korea (North Korea) are such that there is not a reasonable assurance that a payee in those areas will actually receive checks or warrants drawn against funds of the United States, or agencies or instrumentalities thereof, and be able to negotiate the same for full value.


(b) A check or warrant intended for delivery in any of the areas named in paragraph (a) of this section shall be withheld unless the check or warrant is specifically released by the Secretary of the Treasury.


(c) Before a check or warrant drawn against funds blocked pursuant to the provisions of Executive Order No. 8389 (3 CFR, 1943 Cum. Supp.), as amended, and which remain blocked under the proviso clause of General License No. 101 of the Foreign Funds Control Regulations (31 CFR 520.101) may be released, it will be necessary for a license authorizing the release to be issued by the Department of the Treasury, Office of Foreign Assets Control, pursuant to E.O. 8389, as amended. In this regard, attention is also directed to the following regulations issued by the Secretary of the Treasury:


(1) The Foreign Assets Control Regulations issued on December 17, 1950 (31 CFR part 500), pursuant to Executive Order 9193 (3 CFR, 1943 Cum. Supp.), which prohibit transactions involving payments to nationals of the Democratic People’s Republic of Korea (North Korea), the Socialist Republic of Vietnam, and Democratic Kampuchea, except to the extent that any such payments have been authorized by appropriate license,


(2) The Cuban Assets Control Regulations issued on July 8, 1963 (31 CFR part 515), pursuant to the same authority, which prohibit similar transactions with nationals of Cuba unless licensed, and


(3) The Iranian Assets Control Regulations issued on November 14, 1979 (31 CFR part 535), as amended on April 17, 1980, pursuant to Executive Orders 12170 and 12211, which prohibit transactions in property of the Iranian Government or its instrumentalities and transfers of funds to persons in Iran, except as authorized by appropriate license.


(d) Powers of attorney for the receipt or collection of checks or warrants or for the proceeds of checks or warrants included within the determination of the Secretary of the Treasury set forth in paragraph (a) of this section will not be recognized.


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


§ 211.2 Claims for the release of withheld checks or for the proceeds thereof.

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


[61 FR 41739, Aug. 12, 1996]


§ 211.3 Exceptions.

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


[45 FR 47678, July 16, 1980]


§ 211.4 Implementing instructions.

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


[41 FR 15847, Apr. 15, 1976]


PART 212 – GARNISHMENT OF ACCOUNTS CONTAINING FEDERAL BENEFIT PAYMENTS


Authority:5 U.S.C. 8346; 5 U.S.C. 8470; 5 U.S.C. 1103; 31 U.S.C. 321; 31 U.S.C. 3321; 31 U.S.C. 3332; 38 U.S.C. 5301(a); 38 U.S.C. 501(a); 42 U.S.C. 405(a); 42 U.S.C. 407; 42 U.S.C. 659; 42 U.S.C. 1383(d)(1); 45 U.S.C. 231f(b); 45 U.S.C. 231m; 45 U.S.C. 352(e); 45 U.S.C. 362(1).


Source:76 FR 9955, Feb. 23, 2011, unless otherwise noted.

§ 212.1 Purpose.

The purpose of this part is to implement statutory provisions that protect Federal benefits from garnishment by establishing procedures that a financial institution must follow when served a garnishment order against an account holder into whose account a Federal benefit payment has been directly deposited.


§ 212.2 Scope.

This part applies to:


(a) Entities. All financial institutions, as defined in § 212.3.


(b) Funds. Federal benefit payments protected from garnishment pursuant to the following authorities:


(1) SSA benefit payments protected under 42 U.S.C. 407 and 42 U.S.C. 1383(d)(1);


(2) VA benefit payments protected under 38 U.S.C. 5301(a);


(3) RRB benefit payments protected under 45 U.S.C. 231m(a) and 45 U.S.C. 352(e); and


(4) OPM benefit payments protected under 5 U.S.C. 8346 and 5 U.S.C. 8470.


§ 212.3 Definitions.

For the purposes of this part, the following definitions apply.


Account means an account, including a master account or sub account, at a financial institution and to which an electronic payment may be directly routed.


Account holder means a natural person against whom a garnishment order is issued and whose name appears in a financial institution’s records as the direct or beneficial owner of an account.


Account review means the process of examining deposits in an account to determine if a benefit agency has deposited a benefit payment into the account during the lookback period.


Benefit agency means the Social Security Administration (SSA), the Department of Veterans Affairs (VA), the Office of Personnel Management (OPM), or the Railroad Retirement Board (RRB).


Benefit payment means a Federal benefit payment referred to in § 212.2(b) paid by direct deposit to an account with the character “XX” encoded in positions 54 and 55 of the Company Entry Description field and the number “2” encoded in the Originator Status Code field of the Batch Header Record of the direct deposit entry.


Federal banking agency means the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, or the National Credit Union Administration.


Financial institution means a bank, savings association, credit union, or other entity chartered under Federal or State law to engage in the business of banking.


Freeze or account freeze means an action by a financial institution to seize, withhold, or preserve funds, or to otherwise prevent an account holder from drawing on or transacting against funds in an account, in response to a garnishment order.


Garnish or garnishment means execution, levy, attachment, garnishment, or other legal process.


Garnishment fee means any service or legal processing fee, charged by a financial institution to an account holder, for processing a garnishment order or any associated withholding or release of funds.


Garnishment order or order means a writ, order, notice, summons, judgment, levy or similar written instruction issued by a court, a State or State agency, a municipality or municipal corporation, or a State child support enforcement agency, including a lien arising by operation of law for overdue child support or an order to freeze the assets in an account, to effect a garnishment against a debtor.


Lookback period means the two month period that begins on the date preceding the date of account review and ends on the corresponding date of the month two months earlier, or on the last date of the month two months earlier if the corresponding date does not exist. Examples illustrating the application of this definition are included in appendix C to this part.


Protected amount means the lesser of the sum of all benefit payments posted to an account between the close of business on the beginning date of the lookback period and the open of business on the ending date of the lookback period, or the balance in an account when the account review is performed. Examples illustrating the application of this definition are included in Appendix C to this part.


State means a State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, or the United States Virgin Islands.


State child support enforcement agency means the single and separate organizational unit in a State that has the responsibility for administering or supervising the State’s plan for child and spousal support pursuant to Title IV, Part D, of the Social Security Act, 42 U.S.C. 654.


United States means:


(1) A Federal corporation,


(2) An agency, department, commission, board, or other entity of the United States, or


(3) An instrumentality of the United States, as set forth in 28 U.S.C. 3002(15).


[76 FR 9955, Feb. 23, 2011, as amended at 78 FR 32109, May 29, 2013]


§ 212.4 Initial action upon receipt of a garnishment order.

(a) Examination of order for Notice of Right to Garnish Federal Benefits. Prior to taking any other action related to a garnishment order issued against a debtor, and no later than two business days following receipt of the order, a financial institution shall examine the order to determine if the United States or a State child support enforcement agency has attached or included a Notice of Right to Garnish Federal Benefits, as set forth in Appendix B to this part.


(b) Notice of Right to Garnish Federal Benefits is attached to or included with the order. If a Notice of Right to Garnish Federal Benefits is attached to or included with the garnishment order, then the financial institution shall follow its otherwise customary procedures for handling the order and shall not follow the procedures in § 212.5 and § 212.6.


(c) No Notice of Right to Garnish Federal Benefits. If a Notice of Right to Garnish Federal Benefits is not attached to or included with the garnishment order, then the financial institution shall follow the procedures in § 212.5 and § 212.6.


§ 212.5 Account review.

(a) Timing of account review. When served a garnishment order issued against a debtor, a financial institution shall perform an account review:


(1) No later than two business days following receipt of (A) the order, and (B) sufficient information from the creditor that initiated the order to determine whether the debtor is an account holder, if such information is not already included in the order; or


(2) In cases where the financial institution is served a batch of a large number of orders, by a later date that may be permitted by the creditor that initiated the orders, consistent with the terms of the orders. The financial institution shall maintain records on such batches and creditor permissions, consistent with § 212.11(b),


(b) No benefit payment deposited during lookback period. If the account review shows that a benefit agency did not deposit a benefit payment into the account during the lookback period, then the financial institution shall follow its otherwise customary procedures for handling the garnishment order and shall not follow the procedures in § 212.6.


(c) Benefit payment deposited during lookback period. If the account review shows that a benefit agency deposited a benefit payment into the account during the lookback period, then the financial institution shall follow the procedures in § 212.6.


(d) Uniform application of account review. The financial institution shall perform an account review without consideration for any other attributes of the account or the garnishment order, including but not limited to:


(1) The presence of other funds, from whatever source, that may be commingled in the account with funds from a benefit payment;


(2) The existence of a co-owner on the account;


(3) The existence of benefit payments to multiple beneficiaries, and/or under multiple programs, deposited in the account;


(4) The balance in the account, provided the balance is above zero dollars on the date of account review;


(5) Instructions to the contrary in the order; or


(6) The nature of the debt or obligation underlying the order.


(e) Priority of account review. The financial institution shall perform the account review prior to taking any other actions related to the garnishment order that may affect funds in the account.


(f) Separate account reviews. The financial institution shall perform the account review separately for each account in the name of an account holder against whom a garnishment order has been issued. In performing account reviews for multiple accounts in the name of one account holder, a financial institution shall not trace the movement of funds between accounts by attempting to associate funds from a benefit payment deposited into one account with amounts subsequently transferred to another account.


§ 212.6 Rules and procedures to protect benefits.

The following provisions apply if an account review shows that a benefit agency deposited a benefit payment into an account during the lookback period.


(a) Protected amount. The financial institution shall immediately calculate and establish the protected amount for an account. The financial institution shall ensure that the account holder has full and customary access to the protected amount, which the financial institution shall not freeze in response to the garnishment order. An account holder shall have no requirement to assert any right of garnishment exemption prior to accessing the protected amount in the account.


(b) Separate protected amounts. The financial institution shall calculate and establish the protected amount separately for each account in the name of an account holder, consistent with the requirements in § 212.5(f) to conduct distinct account reviews.


(c) No challenge of protection. A protected amount calculated and established by a financial institution pursuant to this section shall be conclusively considered to be exempt from garnishment under law.


(d) Funds in excess of the protected amount. For any funds in an account in excess of the protected amount, the financial institution shall follow its otherwise customary procedures for handling garnishment orders, including the freezing of funds, but consistent with paragraphs (f) and (g) of this section.


(e) Notice. The financial institution shall issue a notice to the account holder named in the garnishment order, in accordance with § 212.7.


(f) One-time account review process. The financial institution shall perform the account review only one time upon the first service of a given garnishment order. The financial institution shall not repeat the account review or take any other action related to the order if the same order is subsequently served again upon the financial institution. If the financial institution is subsequently served a new or different garnishment order against the same account holder, the financial institution shall perform a separate and new account review.


(g) No continuing or periodic garnishment responsibilities. The financial institution shall not continually garnish amounts deposited or credited to the account following the date of account review, and shall take no action to freeze any funds subsequently deposited or credited, unless the institution is served with a new or different garnishment order, consistent with the requirements of this part.


(h) Impermissible garnishment fee. The financial institution may not charge or collect a garnishment fee against a protected amount. The financial institution may charge or collect a garnishment fee up to five business days after the account review if funds other than a benefit payment are deposited to the account within this period, provided that the fee may not exceed the amount of the non-benefit deposited funds.


[76 FR 9955, Feb. 23, 2011, as amended at 78 FR 32109, May 29, 2013]


§ 212.7 Notice to the account holder.

A financial institution shall issue the notice required by § 212.6(e) in accordance with the following provisions.


(a) Notice requirement. The financial institution shall send the notice in cases where:


(1) A benefit agency deposited a benefit payment into an account during the lookback period;


(2) The balance in the account on the date of account review was above zero dollars and the financial institution established a protected amount; and


(3) There are funds in the account in excess of the protected amount.


(b) Notice content. The financial institution shall notify the account holder named in the garnishment order of the following facts and events in readily understandable language.


(1) The financial institution’s receipt of an order against the account holder.


(2) The date on which the order was served.


(3) A succinct explanation of garnishment.


(4) The financial institution’s requirement under Federal regulation to ensure that account balances up to the protected amount specified in § 212.3 are protected and made available to the account holder if a benefit agency deposited a benefit payment into the account in the last two months.


(5) The account subject to the order and the protected amount established by the financial institution.


(6) The financial institution’s requirement pursuant to State law to freeze other funds in the account to satisfy the order and the amount frozen, if applicable.


(7) The amount of any garnishment fee charged to the account, consistent with § 212.6.


(8) A list of the Federal benefit payments subject to this part, as identified in § 212.2(b).


(9) The account holder’s right to assert against the creditor that initiated the order a further garnishment exemption for amounts above the protected amount, by completing exemption claim forms, contacting the court of jurisdiction, or contacting the creditor, as customarily applicable for a given jurisdiction.


(10) The account holder’s right to consult an attorney or legal aid service in asserting against the creditor that initiated the order a further garnishment exemption for amounts above the protected amount.


(11) The name of the creditor, and, if contact information is included in the order, means of contacting the creditor.


(c) Optional notice content. The financial institution may notify the account holder named in the garnishment order of the following facts and events in readily understandable language.


(1) Means of contacting a local free attorney or legal aid service.


(2) Means of contacting the financial institution,


(3) By issuing the notice required by this part, the financial institution is not providing legal advice.


(d) Amending notice content. The financial institution may amend the content of the notice to integrate information about a State’s garnishment rules and protections, for the purposes of avoiding potential confusion or harmonizing the notice with State requirements, or providing more complete information about an account.


(e) Notice delivery. The financial institution shall issue the notice directly to the account holder, or to a fiduciary who administers the account and receives communications on behalf of the account holder, and only information and documents pertaining to the garnishment order, including other notices or forms that may be required under State or local government law, may be included in the communication.


(f) Notice timing. The financial institution shall send the notice to the account holder within 3 business days from the date of account review.


(g) One notice for multiple accounts. The financial institution may issue one notice with information related to multiple accounts of an account holder.


(h) Not legal advice. By issuing a notice required by this part, a financial institution creates no obligation to provide, and shall not be deemed to be offering, legal advice.


[76 FR 9955, Feb. 23, 2011, as amended at 78 FR 32109, May 29, 2013]


§ 212.8 Other rights and authorities.

(a) Exempt status. Nothing in this part shall be construed to limit an individual’s right under Federal law to assert against a creditor a further exemption from garnishment for funds in excess of the protected amount, or to alter the exempt status of funds that may be protected from garnishment under Federal law.


(b) Account agreements. Nothing in this part shall be construed to invalidate any term or condition of an account agreement between a financial institution and an account holder that is not inconsistent with this part.


§ 212.9 Preemption of State law.

(a) Inconsistent law preempted. Any State or local government law or regulation that is inconsistent with a provision of this part is preempted to the extent of the inconsistency. A State law or regulation is inconsistent with this part if it requires a financial institution to take actions or make disclosures that contradict or conflict with the requirements of this part or if a financial institution cannot comply with the State law or regulation without violating this part.


(b) Consistent law not preempted. This regulation does not annul, alter, affect, or exempt any financial institution from complying with the laws of any State with respect to garnishment practices, except to the extent of an inconsistency. A requirement under State law to protect benefit payments in an account from freezing or garnishment at a higher protected amount than is required under this part is not inconsistent with this part if the financial institution can comply with both this part and the State law requirement.


§ 212.10 Safe harbor.

(a) Protection during examination and pending review. A financial institution that complies in good faith with this part shall not be liable to a creditor that initiates a garnishment order, or for any penalties under State law, contempt of court, civil procedure, or other law for failing to honor a garnishment order, for account activity during:


(1) The two business days following the financial institution’s receipt of a garnishment order during which the financial institution must determine if the United States or a State child support enforcement agency has attached or included a Notice of Right to Garnish Federal Benefits, as set forth in § 212.4; or


(2) The time between the financial institution’s receipt of the garnishment order and the date by which the financial institution must perform the account review, as set forth in § 212.5.


(b) Protection when protecting or freezing funds. A financial institution that complies in good faith with this part shall not be liable to a creditor that initiates a garnishment order for any protected amounts, to an account holder for any frozen amounts, or for any penalties under State law, contempt of court, civil procedure, or other law for failing to honor a garnishment order in cases where:


(1) A benefit agency has deposited a benefit payment into an account during the lookback period, or


(2) The financial institution has determined that the order was obtained by the United States or issued by a State child support enforcement agency by following the procedures in § 212.4.


(c) Protection for providing additional information to account holder. A financial institution shall not be liable for providing in good faith any optional information in the notice to the account holder, as set forth in § 212.7(c) and (d).


(d) Protection for financial institutions from other potential liabilities. A financial institution that complies in good faith with this part shall not be liable for:


(1) Bona fide errors that occur despite reasonable procedures maintained by the financial institution to prevent such errors in complying with the provisions of this part;


(2) Customary clearing and settlement adjustments that affect the balance in an account, including a protected amount, such as deposit reversals caused by the return of unpaid items, or debit card transactions settled for amounts higher than the amounts originally authorized; or


(3) Honoring an account holder’s express written instruction, that is both dated and provided by the account holder to the financial institution following the date on which it has been served a particular garnishment order, to use an otherwise protected amount to satisfy the order.


§ 212.11 Compliance and record retention.

(a) Enforcement. Federal banking agencies will enforce compliance with this part.


(b) Record retention. A financial institution shall maintain records of account activity and actions taken in response to a garnishment order, sufficient to demonstrate compliance with this part, for a period of not less than two years from the date on which the financial institution receives the garnishment order.


§ 212.12 Amendment of this part.

This part may be amended only by a rulemaking issued jointly by Treasury and all of the benefit agencies as defined in § 212.3.


Appendix A to Part 212 – Model Notice to Account Holder

A financial institution may use the following model notice to meet the requirements of § 212.7. Although use of the model notice is not required, a financial institution using it properly is deemed to be in compliance with § 212.7.


Information in brackets should be completed by the financial institution. Where the bracketed information indicates a choice of words, as indicated by a slash, the financial institution should either select the appropriate words or provide substitute words suitable to the garnishment process in a given jurisdiction.


Parenthetical wording in italics represents instructions to the financial institution and should not be printed with the notice. In most cases, this wording indicates that the model language either is optional for the financial institution, or should only be included if some condition is met.


MODEL NOTICE:

[Financial institution name, city, and State, shown as letterhead or otherwise printed at the beginning of the notice]


IMPORTANT INFORMATION ABOUT YOUR ACCOUNT

Date:


Notice to:


Account Number:


Why am I receiving this notice?

On [date on which garnishment order was served], [Name of financial institution] received a garnishment order from a court to [freeze/remove] funds in your account. The amount of the garnishment order was for $[amount of garnishment order]. We are sending you this notice to let you know what we have done in response to the garnishment order.


What is garnishment?

Garnishment is a legal process that allows a creditor to remove funds from your [bank]/[credit union] account to satisfy a debt that you have not paid. In other words, if you owe money to a person or company, they can obtain a court order directing your [bank]/[credit union] to take money out of your account to pay off your debt. If this happens, you cannot use that money in your account.


What has happened to my account?

On [date of account review], we researched your account and identified one or more Federal benefit payments deposited in the last 2 months. In most cases, Federal benefit payments are protected from garnishment. As required by Federal regulations, therefore, we have established a “protected amount” of funds that will remain available to you and that will not be [frozen/removed] from your account in response to the garnishment order.


(Conditional paragraph if funds have been frozen) Your account contained additional money that may not be protected from garnishment. As required by law, we have [placed a hold on/removed] these funds in the amount of $[amount frozen] and may have to turn these funds over to your creditor as directed by the garnishment order.


The chart below summarizes this information about your account(s):


Account Summary as of [date of account review]

Account number
Amount in

account
Amount protected
Amount subject to garnishment (now [frozen/removed])
Garnishment fee charged

(If the account holder has multiple accounts, add a row for each account.)


Please note that these amount(s) may be affected by deposits or withdrawals after the protected amount was calculated on [date of account review].


Do I need to do anything to access my protected funds?

You may use the “protected amount” of money in your account as you normally would. There is nothing else that you need to do to make sure that the “protected amount” is safe.


Who garnished my account?

The creditor who obtained a garnishment order against you is [name of creditor].


What types of Federal benefit payments are protected from garnishment?

In most cases, you have protections from garnishment if the funds in your account include one or more of the following Federal benefit payments:


• Social Security benefits

• Supplemental Security Income benefits

• Veterans benefits

• Railroad retirement benefits

• Railroad Unemployment Insurance benefits

• Civil Service Retirement System benefits

• Federal Employees Retirement System benefits

(Conditional section if funds have been frozen) What should I do if I think that additional funds in my account are from Federal benefit payments?


If you believe that additional funds in your account(s) are from Federal benefit payments and should not have been [frozen/removed], there are several things you can do.


(Conditional sentence if applicable for the jurisdiction) You can fill out a garnishment exemption form and submit it to the court.


You may contact the creditor that garnished your account and explain that additional funds are from Federal benefit payments and should be released back to you. (Conditional sentence if contact information is in the garnishment order) The creditor may be contacted at [contact information included in the garnishment order].


You may also consult an attorney (lawyer) to help you prove to the creditor who garnished your account that additional funds are from Federal benefit payments and cannot be taken. If you cannot afford an attorney, you can seek assistance from a free attorney or a legal aid society. (Optional sentences) [Name of State, local, or independent legal aid service] is an organization that provides free legal aid and can be reached at [contact information]. You can find information about other free legal aid programs at [insert “http://www.lawhelp.org” or other legal aid programs website].


(Optional section) How to contact [name of financial institution].


This notice contains all the information that we have about the garnishment order. However, if you have a question about your account, you may contact us at [contact number].


Appendix B to Part 212 – Form of Notice of Right to Garnish Federal Benefits

The United States, or a State child support enforcement agency, certifying its right to garnish Federal benefits shall attach or include with a garnishment order the following Notice, on official organizational letterhead.


Information in brackets should be completed by the United States or a State child support enforcement agency, as applicable. Where the bracketed information indicates a choice of words, as indicated by a slash, the appropriate words should be selected from the options.


Notice of Right to Garnish Federal Benefits

Date:

[Garnishment Order Number]/[State Case ID]: ______

The attached garnishment order was [obtained by the United States, pursuant to the Federal Debt Collection Procedures Act, 28 U.S.C. § 3205, or the Mandatory Victims Restitution Act, 18 U.S.C. § 3613, or other Federal statute]/[issued by (name of the State child support enforcement agency), pursuant to authority to attach or seize assets of noncustodial parents in financial institutions in the State of (name of State), 42 U.S.C. § 666].


Accordingly, the garnishee is hereby notified that the procedures established under 31 CFR part 212 for identifying and protecting Federal benefits deposited to accounts at financial institutions do not apply to this garnishment order.


The garnishee should comply with the terms of this order, including instructions for withholding and retaining any funds deposited to any account(s) covered by this order, pending further order of [name of the court]/[the name of the State child support enforcement agency].


Appendix C to Part 212 – Examples of the Lookback Period and Protected Amount

The following examples illustrate this definition of lookback period.



Example 1: Account review performed same day garnishment order is served.A financial institution receives garnishment order on Wednesday, March 17. The financial institution performs account review the same day on Wednesday, March 17. The lookback period begins on Tuesday, March 16, the date preceding the date of account review. The lookback period ends on Saturday, January 16, the corresponding date two months earlier.


Example 2: Account review performed the day after garnishment order is served.A financial institution receives garnishment order on Wednesday, November 17. The financial institution performs account review next business day on Thursday, November 18. The lookback period begins on Wednesday, November 17, the date preceding the date of account review. The lookback period ends on Friday, September 17, the corresponding date two months earlier.


Example 3: No corresponding date two months earlier.A financial institution receives garnishment order on Tuesday, August 30. The financial institution performs the account review two business days later on Thursday, September 1. The lookback period begins on Wednesday, August 31, the date preceding the date of account review. The lookback period ends on Wednesday, June 30, the last date of the month two months earlier, since June 31 does not exist to correspond with August 31.


Example 4: Weekend between receipt of garnishment order and account review.A financial institution receives garnishment order on Friday, December 10. The financial institution performs the account review two business days later on Tuesday, December 14. The lookback period begins on Monday, December 13, the date preceding the date of account review. The lookback period ends on Wednesday, October 13, the corresponding date two months earlier.

The following examples illustrate the definition of protected amount.



Example 1: Account balance less than sum of benefit payments.A financial institution receives a garnishment order against an account holder for $2,000 on May 20. The date of account review is the same day, May 20, and the balance in the account when the review is performed is $1,000. The lookback period begins on May 19, the date preceding the date of account review, and ends on March 19, the corresponding date two months earlier. The account review shows that two Federal benefit payments were deposited to the account during the lookback period totaling $2,500, one for $1,250 on Friday, April 30 and one for $1,250 on Tuesday, April 1. Since the $1,000 balance in the account when the account review is performed is less than the $2,500 sum of benefit payments posted to the account during the lookback period, the financial institution establishes the protected amount at $1,000. The financial institution is not required to send a notice to the account holder.


Example 2: Three benefit payments during lookback period.A financial institution receives a garnishment order against an account holder for $8,000 on December 2. The date of account review is the same day, December 2, and the balance in the account when the account review is performed is $5,000. The lookback period begins on December 1, the date preceding the date of account review, and ends on October 1, the corresponding date two months earlier. The account review shows that three Federal benefit payments were deposited to the account during the lookback period totaling $4,500, one for $1,500 on December 1, another for $1,500 on November 1, and a third for $1,500 on October 1. Since the $4,500 sum of the three benefit payments posted to the account during the lookback period is less than the $5,000 balance in the account when the account review is performed, the financial institution establishes the protected amount at $4,500 and seizes the remaining $500 in the account consistent with State law. The financial institution is required to send a notice to the account holder.


Example 3: Intraday transactions.A financial institution receives a garnishment order against an account holder for $4,000 on Friday, September 10. The date of account review is Monday, September 13, when the opening balance in the account is $6,000. A cash withdrawal for $1,000 is processed after the open of business on September 13, but before the financial institution has performed the account review, so that the balance in the account is $5,000 when the financial institution initiates an automated program to conduct the account review. The lookback period begins on Sunday, September 12, the date preceding the date of account review, and ends on Monday, July 12, the corresponding date two months earlier. The account review shows that two Federal benefit payments were deposited to the account during the lookback period totaling $3,000, one for $1,500 on Wednesday, July 21, and the other for $1,500 on Wednesday, August 18. Since the $3,000 sum of the two benefit payments posted to the account during the lookback period is less than the $5,000 balance in the account when the account review is performed, the financial institution establishes the protected amount at $3,000 and, consistent with State law, freezes the $2,000 remaining in the account after the cash withdrawal. The financial institution is required to send a notice to the account holder.


Example 4: Benefit payment on date of account review.A financial institution receives a garnishment order against an account holder for $5,000 on Thursday, July 1. The date of account review is the same day, July 1, when the opening balance in the account is $3,000, and reflects a Federal benefit payment of $1,000 posted that day. The lookback period begins on Wednesday, June 30, the date preceding the date of account review, and ends on Friday, April 30, the corresponding date two months earlier. The account review shows that two Federal benefit payments were deposited to the account during the lookback period totaling $2,000, one for $1,000 on Friday, April 30 and one for $1,000 on Tuesday, June 1. Since the $2,000 sum of the two benefit payments posted to the account during the lookback period is less than the $3,000 balance in the account when the account review is performed, the financial institution establishes the protected amount at $2,000 and places a hold on the remaining $1,000 in the account in accordance with State law. The financial institution is required to send a notice to the account holder.


Example 5: Account co-owners with benefit payments.A financial institution receives a garnishment order against an account holder for $3,800 on March 22. The date of account review is the same day, March 22, and the balance in the account is $7,000. The lookback period begins on March 21, the date preceding the date of account review, and ends on January 21, the corresponding date two months earlier. The account review shows that four Federal benefit payments were deposited to the account during the lookback period totaling $7,000. Two of these benefit payments, totaling $3,000, were made to the account holder against whom the garnishment order was issued. The other two payments, totaling $4,000, were made to a co-owner of the account. Since the financial institution must perform the account review based only on the presence of benefit payments, without regard to the existence of co-owners on the account or payments to multiple beneficiaries or under multiple programs, the financial institution establishes the protected amount at $7,000, equal to the sum of the four benefit payments posted to the account during the lookback period. Since $7,000 is also the balance in the account at the time of the account review, there are no additional funds in the account which can be frozen. The financial institution is not required to send a notice to the account holder.

[76 FR 9955, Feb. 23, 2011, as amended at 78 FR 32109, May 29, 2013]


PART 215 – WITHHOLDING OF DISTRICT OF COLUMBIA, STATE, CITY AND COUNTY INCOME OR EMPLOYMENT TAXES BY FEDERAL AGENCIES


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


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

Subpart A – General Information

§ 215.1 Scope of part.

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


[71 FR 2150, Jan. 13, 2006]


§ 215.2 Definitions.

As used in this part:


(a) Agency means each of the executive agencies and military departments (as defined in 5 U.S.C. 105 and 102, respectively) and the United States Postal Service; and in addition, for city or county withholding purposes only, all elements of the judicial branch.


(b) City means any unit of general local government.


(1) Which:


(A) Is classified as a municipality by the United States Bureau of the Census, or


(B) Is a town or township which, in the determination of the Secretary of the Treasury,


(i) Possesses powers and performs functions comparable to those associated with municipalities,


(ii) Is closely settled, and


(iii) Contains within its boundaries no incorporated places as defined by the United States Bureau of the Census; and


(2) Within the political boundaries of which five hundred or more persons are regularly employed by all agencies of the Federal Government.


(c) City income or employment taxes means any form of tax for which, under a city ordinance:


(1) Collection is provided by imposing on employers generally the duty of withholding sums from the pay of employees and making returns of the sums to a designated city officer, department, or instrumentality; and


(2) The duty to withhold generally is imposed on the payment of compensation earned within the jurisdiction of the city in the case of employees whose regular place of employment is within such jurisdiction. Whether the tax is described as an income, wage, payroll, earnings, occupational license, or otherwise, is immaterial.


(d) Compensation as applied to employees of an agency and members of the Armed Forces means wages as defined in 26 U.S.C. 3401(a) and regulations issued thereunder.


(e) County means any unit of local general Government which is classified as a county by the Bureau of the Census and within the political boundaries of which 500 or more persons are regularly employed by all agencies of the Federal Government.


(f) County income or employment taxes means any form of tax for which, under a county ordinance:


(1) Collection is provided by imposing on employers generally the duty of withholding sums from the pay of employees and making returns of the sums to a designated county officer, department, or instrumentality; and


(2) The duty to withhold generally is imposed on the payment of compensation earned within the jurisdiction of the country in the case of employees whose regular place of employment is within such jurisdiction. Whether the tax is described as an income, wage, payroll, earnings, occupational license, or otherwise, is immaterial.


(g) District of Columbia income tax means the income tax imposed under 47 District of Columbia Code, chapter 15, subchapter II.


(h)(1) Employees for the purpose of State income tax withholding, means all employees of an agency, other than members of the armed forces. For city and county income or employment tax withholding, it means:


(i) Employees of an agency;


(ii) Members of the National Guard, participating in exercises or performing duty under 32 U.S.C. 502; or


(iii) Members of the Ready Reserve, participating in scheduled drills or training periods, or serving on active duty for training under 10 U.S.C. 270(a).


The term does not include retired personnel, pensioners, annuitants, or similar beneficiaries of the Federal Government, who are not performing active civilian service or persons receiving remuneration for services on a contract-fee basis.

(2) Employees for purposes of District of Columbia income tax withholding, means employees as defined in 47 District of Columbia Code 1551c(z).


(i) Members of the Armed Forces means (1) individuals in active duty status (as defined in 10 U.S.C. 101(d)(1)) in regular and reserve components of the Army, Navy, Air Force, Marine Corps, and Coast Guard, and (2) members of the National Guard while participating in exercises or performing duty under 32 U.S.C. 502 and members of the Ready Reserve while participating in scheduled drills or training periods or serving on active duty for training under 10 U.S.C. 10147.


(j) Ordinance means an ordinance, order, resolution, or similar instrument which is duly adopted and approved by a city or county in accordance with the constitution and statutes of the state in which it is located and which has the force of law within such city or county.


(k) Regular place of Federal employment means the official duty station, or other place, where an employee actually and normally (i.e. , other than in a travel or temporary duty status) performs services, irrespective of residence.


(l) Secretary means Secretary of the Treasury or his designee.


(m) State means a State, territory, possession, or commonwealth of the United States, or the District of Columbia.


(n) State income tax means any form of tax for which, under a State status:


(1) Collection is provided, either by imposing on employers generally the duty of withholding sums from the compensation of employees and making returns of such sums to the State or by granting to employers generally the authority to withhold sums from the compensation of employees, if any employee voluntarily elects to have such sums withheld; and


(2) The duty to withhold generally is imposed, or the authority to withhold generally is granted, with respect to the compensation of employees who are residents of such State.


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


Subpart B – Procedures

§ 215.3 Procedures for entering into a Withholding Agreement.

(a) Subpart C of this part is the Withholding Agreement which the Secretary will enter into with a State, city or county. A State, city or county which does not have an existing withholding agreement with the Secretary and wishes to enter into such an agreement shall indicate in a letter its consent to be bound by the provisions of subpart C. The letter shall be sent to the Secretary by addressing the request to: Assistant Commissioner, Payment Management, Bureau of the Fiscal Service, Department of the Treasury, 401 14th Street, SW., Washington, DC 20227. The letter shall be signed by an officer authorized to bind contractually the State, city or county. Copies of all applicable State laws, city or county ordinances and implementing regulations, instructions, and forms shall be enclosed. The letter shall also indicate the title and address of the official whom Federal agencies may contact to obtain forms and other information necessary to implement withholding.


(b) Within 120 days of the receipt of the letter from the State, city or county official, the Secretary will, by letter, notify the State, city or county:


(1) That a Withholding Agreement has been entered into as of the date of the Secretary’s letter, or


(2) That a Withholding Agreement cannot be entered into with the State, city or county and the reason for that determination.


(c) The withholding of the State, city or county income or employment tax shall commence within 90 days after the effective date of the agreement.


[71 FR 2150, Jan. 13, 2006, as amended at 75 FR 51374, Aug. 20, 2010]


§ 215.4 Relationship of Withholding Agreement to prior agreements.

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


[71 FR 2150, Jan. 13, 2006]


Subpart C – Withholding Agreement

§ 215.5 In general.

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


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


§ 215.6 Parties.

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


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


§ 215.7 Compliance by agencies.

(a) In the case of an agreement with a State, the head of each agency is required to withhold State income taxes from the compensation of:


(1) Employees of such agency who are subject to such taxes and whose regular place of Federal employment is within the State, and


(2) Members of the Armed Forces who are subject to such taxes and who are legal residents of the State.


The foregoing is also applicable with respect to a State whose statutes permit but do not require withholding by employers, provided the employee voluntarily elects to have such tax withheld.

(b) In the case of an agreement with a city or county, the head of each agency is required to withhold city or county income or employment taxes from the compensation of any employee of the agency who is subject to the tax, and


(1) Whose regular place of Federal employment is within the city or county, or


(2) Is a resident of the city or county.


(c) In withholding taxes, the head of each agency, except as otherwise provided in this agreement, shall comply with the withholding provisions of the State, city or county income or employment tax statute, regulations, procedural instructions and reciprocal agreements related thereto.


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

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


§ 215.8 Withholding certificates.

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


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


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

(a) In determining the legal residence of a member of the Armed Forces for tax withholding purposes, the head of an agency at all times may rely on the agency’s current records, which may include a certificate of legal residence. The form of the certificate of legal residence shall be approved by the Department of the Treasury. A change of legal residence of a member of the Armed Forces shall become effective for tax withholding purposes only after a member of the Armed Forces completes a certificate indicating a new legal residence and delivers it to the agency.


(b) Heads of agencies shall notify the State of prior legal residence of the member of the Armed Forces involved on a monthly basis concerning the change of the member’s legal residence. The notification shall include the name, social security number, current mailing address and the new legal residence of such member of the Armed Forces. The effective date of the change in legal residence shall also be included in the notification.


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


§ 215.10 Agency withholding procedures.

(a) State income tax shall be withheld only on the entire compensation of Federal employees and members of the Armed Forces. Nonresident employees, who under the State income tax law are required to allocate at least three-fourths of their compensation to the State, shall be subject to withholding on their entire compensation. Nonresident employees, who under the State income tax law are required to allocate less than three-fourths of their compensation to the State, may elect to:


(1) Have State income tax withheld on their entire compensation, or


(2) Have no income tax withheld on their compensation.


(b) In calculating the amount to be withheld from an employee’s or a member’s compensation, each agency shall use the method prescribed by the State income tax statute or city or county ordinance or a method which produces approximately the tax required to be withheld:


(1) By the State income tax statute from the compensation of each employee or member of the Armed Forces subject to such income tax, or


(2) By the city or county ordinance from the compensation of each employee subject to such income or employment tax.


(c) Where it is the practice of a Federal agency under Federal tax withholding procedure to make returns and payment of the tax on an estimated basis, subject to later adjustment based on audited figures, this practice may be applied with respect to the State, city of county income or employment tax where the agency has made appropriate arrangements with the State, city or county income tax authorities.


(d) Copies of Federal Form W-2, “Wage and Tax Statement”, may be used for reporting withheld taxes to the State, city or county.


(e) Withholding shall not be required on wages earned but unpaid at the date of an employee’s or member’s death.


(f) Withholding of District of Columbia income tax shall not apply to pay of employees who are not residents of the District of Columbia as defined in 47 District of Columbia Code, chapter 15, subchapter II.


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


§ 215.11 Miscellaneous provisions.

Nothing in this agreement shall be deemed:


(a) To require collection by agencies of the United States of delinquent tax liabilities of Federal employees or members of the Armed Forces, or


(b) To consent to the application of any provision of law of the State, city or county which has the effect of:


(1) Imposing more burdensome requirements upon the United States than it imposes on other employers, or


(2) Subjecting the United States or any of its officers or employees to any penalty or liability, or


(c) To consent to procedures for withholding, filing of returns, and payment of the withheld taxes to a State, city or county that do not conform to the usual fiscal practices of agencies, or


(d) To permit withholding of a city or county tax from the pay of a Federal employee who is not a resident of, or whose regular place of Federal employment is not within, the State in which the city or county is located, unless the employee consents to the withholding, or


(e) To permit the withholding of city or county income or employment taxes from the pay of members of the Armed Forces of the United States, or


(f) To allow agencies to accept compensation from a State, city or county for services performed in withholding of State or city or county income or employment taxes.


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

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


§ 215.12 Supersession, amendment and termination provisions.

(a) This agreement supersedes any prior agreement between the Secretary of the Treasury and a State or city pursuant to 5 U.S.C. 5516, 5517, or 5520.


(b) This agreement shall be subject to any amendment of 5 U.S.C. 5516, 5517, 5520 or Executive Order 11997, and any rules and regulations issued prusuant to them and amendments thereto.


(c) This agreement may be terminated as to a specific State or city or county which is a party to this agreement by providing written notice to that effect to the Secretary at least 90 days prior to the proposed termination.


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


PART 223 – SURETY COMPANIES DOING BUSINESS WITH THE UNITED STATES


Authority:5 U.S.C. 301; 31 U.S.C. 9304-9308.

§ 223.1 Certificate of authority.

The regulations in this part will govern the issuance by the Secretary of the Treasury, acting through the U.S. Department of the Treasury, Bureau of the Fiscal Service (Treasury), of certificates of authority to bonding companies to do business with the United States as sureties on, or reinsurers of, Federal surety bonds (hereinafter “bonds” or “obligations”) under the authority of 31 U.S.C. 9304-9308 and this part, and the acceptance of such obligations. The regulations in this part also govern the revocation of certificates.


[79 FR 61999, Oct. 16, 2014]


§ 223.2 Application for certificate of authority.

Every company wishing to apply for a certificate of authority shall submit an application to the Bureau of the Fiscal Service, U.S. Department of the Treasury, c/o Surety Bond Branch, to the location, and in the manner, specified online at http://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/surety_home.htm, as amended from time to time. In accordance with 31 U.S.C. 9305(a), the application will include a copy of the applicant’s charter or articles of incorporation and a financial statement, signed and sworn to by its president and secretary, showing its assets and liabilities. A fee shall be transmitted with the application in accordance with the provisions of § 223.22(a)(i).


[79 FR 61999, Oct. 16, 2014]


§ 223.3 Issuance of certificates of authority.

(a)(1)(i) A company submitting an application to be issued a certificate of authority by Treasury to underwrite and reinsure Federal surety bonds must include all required data and information, as determined by Treasury in its discretion, for the application to be complete and ready for review. Upon receipt of a complete application, Treasury will evaluate the submission to determine whether the applicant company:


(A) Is duly authorized under its charter or articles of incorporation to conduct the business referenced under 31 U.S.C. 9304(a)(2);


(B) Has paid-up capital of at least $250,000 in cash or its equivalent;


(C) Is solvent and financially and otherwise qualified to conduct the business referenced under 31 U.S.C. 9304(a)(2); and


(D) Is able and willing to carry out its contracts.


(ii) In making the determination whether a company meets these requirements, Treasury will evaluate the application as a whole, the required financial statement(s) submitted by the company, the company’s charter or articles of incorporation, the past history of the company, and any further evidence or information that Treasury may require the company to submit (at the company’s expense).


(2) If Treasury determines, in its discretion, that the applicant company meets all of these requirements, Treasury will issue a certificate of authority to the company authorizing it to underwrite and reinsure Federal bonds. The certificate of authority will be effective for a term that expires on the last day of the next June. All such statutory requirements and regulatory requirements under this part are continuing obligations, and any certificate is issued expressly subject to continuing compliance with such requirements. The certificate of authority will be renewed annually on the first day of July, provided the company remains qualified under the law, the regulations in this part, and other pertinent Treasury requirements, and the company submits the fee required under § 223.22 by March 1st of each year to the address and/or account specified by Treasury.


(b) If a company meets the requirements for a certificate of authority as an acceptable surety on Federal bonds in all respects except that it is a United States branch of a company not incorporated under the laws of the United States or of any State, or it is limited by its articles of incorporation or corporate charter to reinsure business only, it may be issued a certificate of authority as a reinsuring company on Federal bonds. The fees for initial application and renewal of a certificate as a reinsuring company shall be the same as the fees for a certificate of authority as an acceptable surety on Federal bonds.


[33 FR 8390, June 6, 1968, as amended at 34 FR 20188, Dec. 24, 1969; 37 FR 1232, Jan. 27, 1972; 40 FR 6499 Feb. 12, 1975; 40 FR 8335, Feb. 27, 1975; 42 FR 8637, Feb. 11, 1977; 43 FR 12678, Mar. 27, 1978; 43 FR 39089, Sept. 1, 1978; 49 FR 47002, Nov. 30, 1984; 79 FR 62000, Oct. 16, 2014]


§ 223.4 Deposits.

No such company will be granted authority to do business under the provisions of the act referred to in § 223.1 unless it shall have and maintain on deposit with the Insurance Commissioner. or other proper financial officer, of the State in which it is incorporated, or of any other State of the United States, for the protection of claimants, including all its policyholders in the United States, legal investments having a current market value of not less than $100,000. The company shall submit to Treasury with its initial application for a certificate of authority, and annually thereafter, a written statement signed by such State official attesting to the current market value of the deposit (not less than $100,000) and that the legal investments remain on deposit with the State under the terms specified.


[36 FR 9630, May 27, 1971, as amended at 79 FR 62000, Oct. 16, 2014]


§ 223.5 Business.

(a) The company must engage in the business of suretyship whether or not also making contracts in other classes of insurance, but shall not be engaged in any type or class of business not authorized by its charter or the laws of the State in which the company is incorporated. It must be the intention of the company to engage actively in the execution of surety bonds in favor of the United States.


(b) No bond is acceptable if it has been executed (signed and/or otherwise validated) by a company or its agent in a State where it has not obtained that State’s license to do surety business. Although a company must be licensed in the State or other area in which it executes a bond, it need not be licensed in the State or other area in which the principal resides or where the contract is to be performed. The term other area includes the Canal Zone, District of Columbia, Guam, Puerto Rico, and the Virgin Islands.


[40 FR 6499, Feb. 12, 1975]


§ 223.6 Requirements applicable to surety companies.

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


[38 FR 22779, Aug. 24, 1973]


§ 223.7 Investment of capital and assets.

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


[42 FR 8637, Feb. 11, 1977]


§ 223.8 Financial reports.

(a) Every company certified under this part will be required to file with the designated Treasury official annual and quarterly statements of its financial condition using the annual and quarterly statement form blanks adopted by the National Association of Insurance Commissioners. The annual and quarterly statements will be signed and sworn to by the company president and secretary. The timeframes and process for submitting the required annual and quarterly statements to Treasury are provided in Treasury’s current Annual Letter to Executive Heads of Surety Companies.


(b) Every such company shall furnish such other exhibits or information, and in such manner as the Secretary of the Treasury may at any time require.


[10 FR 2348, Mar. 1, 1945, as amended at 42 FR 8637, Feb. 11, 1977; 49 FR 47002, Nov. 30, 1984; 79 FR 62000, Oct. 16, 2014]


§ 223.9 Valuation of assets and liabilities.

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


[42 FR 8637, Feb. 11, 1977, as amended at 79 FR 62000, Oct. 16, 2014]


§ 223.10 Limitation of risk.

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


[34 FR 20188, Dec. 24, 1969]


§ 223.11 Limitation of risk: Protective methods.

The limitation of risk prescribed in § 223.10 may be complied with by the following methods:


(a) Coinsurance. Two or more companies may underwrite a risk on any bond or policy, the amount of which does not exceed their aggregate underwriting limitations. Each company shall limit its liability upon the face of the bond or policy, to a definite specified amount which shall be within its underwriting limitation.


(b) Reinsurance. (1) In respect to bonds running to the United States, liability in excess of the underwriting limitation shall be reinsured within 45 days from the date of execution and delivery of the bond with one or more companies holding a certificate of authority from the Secretary of the Treasury. Such reinsurance shall not be in excess of the underwriting limitation of the reinsuring company. Where reinsurance is contemplated, Federal agencies may accept a bond from the direct writing company in satisfaction of the total bond requirement even though it may exceed the direct writing company’s underwriting limitation. Within the 45 day period, the direct writing company shall furnish to the Federal agency any necessary reinsurance agreements. However, a Federal agency may, at its discretion, require that reinsurance be obtained within a lesser period than 45 days, and may require completely executed reinsurance agreements to be provided before making a final determination that any bond is acceptable. Reinsurance may protect bonds required to be furnished to the United States by the Miller Act (40 U.S.C. 3131, as amended) covering contracts for the construction, alteration, or repair of any public building or public work of the United States, as well as other types of Federal bonds. Use of reinsurance or coinsurance to protect such bonds is at the discretion of the direct writing company. Reinsurance shall be executed on reinsurance agreement forms: Standard Form 273 (Reinsurance Agreement for a Miller Act Performance Bond), Standard Form 274 (Reinsurance Agreement for a Miller Act Payment Bond), and Standard Form 275 (Reinsurance Agreement in Favor of the United States for other types of Federal bonds). These Standard Forms are available on the General Services Administration Web site at www.gsa.gov.


(2) In respect to risks covered by bonds or policies not running to the United States, liability in excess of the underwriting limitation shall be reinsured within 45 days from the date of execution and delivery of the bond or policy with:


(i) One or more companies holding a certificate of authority from the Secretary of the Treasury as an acceptable surety on Federal bonds or one or more companies holding a certificate of authority as an acceptable reinsuring company on such bonds, or


(ii) One or more companies recognized as an admitted reinsurer in accord with § 223.12, or


(iii) A pool, association, etc., to the extent that it is composed of such companies, or


(iv) An instrumentality or agency of the United States which is permitted by Federal law or regulation to execute reinsurance contracts.


(3) No certificate-holding company may cede to a reinsuring company recognized under § 223.12 any risk in excess of 10 percent of the latter company’s paid-up capital and surplus.


(c) Other methods. In respect to all risks other than Miller Act performance and payment bonds running to the United States, which must be coinsured or reinsured in accord with paragraph (a) or (b)(1) of this section respectively, the excess liability may otherwise be protected:


(1) By the deposit with the company in pledge, or by conveyance to it in trust for its protection, of assets admitted by the Treasury the current market value of which is at least equal to the liability in excess of its underwriting limitation, or


(2) If such obligation was incurred on behalf of or on account of a fiduciary holding property in a trust capacity, by a joint control agreement which provides that the whole or a sufficient portion of the property so held may not be disposed of or pledged in any way without the consent of the insuring company.


[34 FR 20188, Dec. 24, 1969, as amended at 40 FR 6499, Feb. 12, 1975; 41 FR 10605, Mar. 12, 1976; 42 FR 8637, Feb. 11, 1977; 43 FR 39089, Sept. 1, 1978; 79 FR 62000, Oct. 16, 2014]


§ 223.12 Recognition as reinsurer.

(a) Application by U.S. company. Any company organized under the laws of the United States or of any State thereof, wishing to apply for recognition as an admitted reinsurer (except on excess risks running to the United States) of surety companies doing business with the United States, shall file the following data with the designated Treasury official, and shall transmit therewith the fee in accordance with the provisions of § 223.22:


(1) A certified copy of its charter or articles of incorporation, and


(2) A certified copy of a license from any State in which it has been authorized to do business, and


(3) A copy of the latest available report of its examination by a State Insurance Department, and


(4) A statement of its financial condition, as of the close of the preceding calendar year, on the annual statement form of the National Association of Insurance Commissioners, signed and sworn to by two qualified officers of the company, showing that it has a capital stock paid up in cash of not less than $250,000, in the case of a stock insurance company, or has net assets of not less than $500,000 over and above all liabilities, in the case of a mutual insurance company, and


(5) Such other evidence as Treasury may determine is necessary to establish that the company is solvent and able to meet the continuing obligation to carry out its contracts.


(b) Application by a U.S. branch. A U.S. branch of an alien company applying for such recognition shall file the following data with the designated Treasury official, and shall transmit therewith the fee in accordance with the provisions of § 223.22:


(1) The submissions listed in paragraphs (a) (1) through (5) of this section, except that the financial statement of such branch shall show that it has net assets of not less than $250,000 over and above all liabilities, and


(2) Evidence satisfactory to the Secretary of the Treasury to establish that it has on deposit in the United States not less than $250,000 available to its policyholders and creditors in the United States.


(c) Financial reports. Each company recognized as an admitted reinsurer shall file with the designated Treasury official, on or before the first day of March of each year, its financial statement and such additional evidence as the Secretary of the Treasury determines necessary to establish that the requirements of this section are being met. A fee shall be transmitted with the foregoing data, in accordance with the provisions of § 223.22.


[34 FR 20189, Dec. 24, 1969, as amended at 37 FR 1232, Jan. 27, 1972; 40 FR 6499, Feb. 12, 1975; 43 FR 12678, Mar. 27, 1978; 49 FR 47002, Nov. 30, 1984; 79 FR 62000, Oct. 16, 2014]


§ 223.13 Full penalty of the obligation regarded as the liability; exceptions.

In determining the limitation prescribed in this part, the full penalty of the obligation will be regarded as the liability, and no offset will be allowed on account of any estimate of risk which is less than such full penalty, except in the following cases:


(a) Appeal bonds; in which case the liability will be regarded as the amount of the judgment appealed from, plus 10 percent of said amount to cover interest and costs.


(b) Bonds of executors, administrators, trustees, guardians, and other fiduciaries, where the penalty of the bond or other obligation is fixed in excess of the estimated value of the estate; in which cases the estimated value of the estate, upon which the penalty of the bond was fixed, will be regarded as the liability.


(c) Credit will also be allowed for indemnifying agreements executed by sole heirs or beneficiaries of an estate releasing the surety from liability.


(d) Contract bonds given in excess of the amount of the contract; in which cases the amount of the contract will be regarded as the liability.


(e) Bonds for banks or trust companies as principals, conditioned to repay moneys on deposit, whereby any law or decree of a court, the amount to be deposited shall be less than the penalty of the bond; in which cases the maximum amount on deposit at any one time will be regarded as the liability.


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


§ 223.14 Schedules of single risks.

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


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


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

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


[42 FR 8637, Feb. 11, 1977]


§ 223.16 List of certificate holding companies.

A list of qualified companies is published annually as of July 1 in Department Circular No. 570, Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies, with information as to underwriting limitations, areas in which listed sureties are licensed to transact surety business and other details. If the Secretary of the Treasury shall take any exceptions to the financial statements submitted by a company, he or she shall, before issuing Department Circular 570, give a company due notice of such exceptions. Copies of the Circular are available at http://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm, or from the designated Treasury official, upon request. Bonds underwritten by certified companies on the Department Circular No. 570 list may be presented to an agency bond-approving official for acceptance. Selection of a particular qualified company from among all companies holding certificates of authority is discretionary with the principal required to furnish the bond, but the acceptance of a bond by an agency bond-approving official is subject to § 223.17.


[79 FR 62001, Oct. 16, 2014]


§ 223.17 Acceptance and non-acceptance of bonds.

(a) Acceptance of bonds. A bond underwritten by a certified company on the § 223.16 Department Circular No. 570 list may be presented to any agency-bond approving official for acceptance, and such agency bond-approving official may accept such bonds.


(b) Non-acceptance of bonds. (1) An agency bond-approving official may decline to accept bonds underwritten by a certified company for cause, but only if the company has been given advance written notice by such agency. The advance written notice shall:


(i) State the intention of the agency to decline bonds underwritten by the company;


(ii) State the reasons for or cause of the proposed declination of such bonds;


(iii) Provide the opportunity for the company to rebut the stated reasons or cause; and


(iv) Provide the company the opportunity to cure the stated reasons or cause.


(2) The agency may decline to accept bonds underwritten by the company if, after consideration of any submission by the company or failure of the company to respond to the agency’s notice, the agency issues a written determination that the bonds should not be accepted, consistent with agency authorities.


(3) The agency shall articulate its procedures and for cause standards for declining to accept bonds in an agency regulation prior to declining any bonds in specific cases. The agency regulation should be subject to notice and comment rulemaking. “For cause” includes, but is not limited to, circumstances when a surety has not paid or satisfied an administratively final bond obligation due the agency. The agency regulation should define when a bond obligation becomes administratively final under the agency’s procedures. Existing agency rules or regulations that substantially comply with, or that are consistent with, the requirement to articulate procedures and standards in advance meet the requirements of this paragraph.


(4) Agencies that decline bonds under this section are encouraged to use best efforts to ensure that persons conducting business with the agency are aware that bonds underwritten by the particular certified company will not be accepted.


(5) The agency’s authority to decline bonds under this section does not apply:


(i) When the underlying obligation or other for cause reason that forms the basis for the agency’s written determination to decline bonds under paragraph (b)(2) of this section, or the agency written determination to decline bonds, has been stayed or enjoined by a court of competent jurisdiction, or


(ii) To otherwise acceptable payment and performance contract bonds, when the agency has already accepted a project bid bond on a contract before making the written determination under paragraph (b)(2) of this section.


(6) Notwithstanding any provision of this section, an agency bond-approving official may decline a bond from a Treasury-certified surety without advance notice if the bond is not executed in proper form, or is not in the correct penal sum amount, or is otherwise technically deficient on its face.


[79 FR 62001, Oct. 16, 2014]


§ 223.18 Revocation.

(a) A revocation proceeding against a Treasury-certified company can be initiated by Treasury in either of two ways:


(1) Treasury, of its own accord, under § 223.19, may initiate revocation proceedings against the company when it has reason to believe that the company is not complying with 31 U.S.C. 9304-9308 and/or the regulations under this part, or


(2) Treasury, under § 223.20, may initiate revocation proceedings against the company upon receipt of a complaint from an agency that the company has not paid or satisfied one or more administratively final bond obligations due the agency.


(b) A revocation of a company’s certificate of authority under § 223.19 or § 223.20 precludes the company from underwriting or reinsuring additional bonds for any agency, and therefore revokes the company’s opportunity to have its bonds presented to any agency bond-approving official for acceptance.


[79 FR 62001, Oct. 16, 2014]


§ 223.19 Treasury-initiated revocation proceedings.

Whenever Treasury has reason to believe that a company is not complying with the requirements of 31 U.S.C. 9304-9308 and/or the regulations under this part, including but not limited to a failure to satisfy corporate and financial standards, Treasury shall:


(a) Notify the company of the facts or conduct which indicate such non-compliance, and provide the company an opportunity to respond, and


(b) Revoke a company’s certificate of authority after providing notice to the company if:


(1) The company does not respond satisfactorily to Treasury’s notification of non-compliance, or


(2) The company, provided an opportunity to demonstrate or achieve compliance, fails to do so.


[79 FR 62001, Oct. 16, 2014]


§ 223.20 Revocation proceedings initiated by Treasury upon receipt of an agency complaint.

(a) Agency complaint. If an agency determines that a company has not promptly made full payment or fully satisfied one or more bond obligations naming the agency as obligee, the head of the agency, or his or her designee, may submit a written complaint to the designated Treasury official (with executive oversight over the Treasury surety program, at the Assistant Commissioner level or equivalent), requesting that the company’s certificate of authority be revoked for nonperformance. Under such complaint, the agency shall certify that:


(1) The bond obligations that are the subject of the complaint are administratively final under the agency’s regulations or other authorities;


(2) The company has not paid or satisfied those bond obligations; and


(3) The company’s obligation to pay or satisfy the bond obligations has not been stayed or enjoined by a court of competent jurisdiction.


(b) Documentation of complaint. The agency shall include in its complaint copies of the bonds, and documentation indicating that, for each such bond provided:


(1) The agency has determined the principal is in default on the obligation covered by the bond, consistent with agency authorities, or if the default has been litigated, documentation indicating a court of competent jurisdiction has determined the principal is in default;


(2) The agency made a written demand with the company on the bond requesting payment or satisfaction on its own behalf, consistent with agency authorities, or on behalf of laborers, materialmen, or suppliers (on payment bonds), based on the default status of the principal;


(3) The agency afforded the company the opportunity to request administrative review within the agency contesting the agency’s demand on the bond;


(4) The agency made a final administrative determination that the bond obligation was due after the completion of such administrative review, or after the time period for the company to request administrative review within the agency has expired;


(5) The agency provided the company the opportunity to enter into a written agreement to pay or satisfy the bond; and


(6) The company has not made full payment or fully satisfied the demand, and the claim on the bond is past due.


(c) Notice to company. On receipt of a complaint meeting the requirements of paragraphs (a) and (b) of this section, Treasury will notify the company of the agency complaint. The notice will require the company to submit a written explanatory response to Treasury within 20 business days of the date of the notice. The notice will advise the company of the facts and conduct referenced in the complaint. Treasury will attach a copy of the incoming complaint to the notice. The notice will afford the company the opportunity to address the complaint and demonstrate its qualifications to retain its certificate of authority.


(d) Reviewing official and deciding official. The designated Treasury official (with executive oversight over the Treasury surety program, at the Assistant Commissioner level or equivalent) will appoint a Treasury Reviewing Official to conduct a review of the agency complaint referenced in paragraphs (a) and (b) of this section, and the company response referenced in paragraph (c) of this section, to determine whether revocation of the company’s certificate of authority is warranted. To ensure appropriate consideration of relevant factual or legal issues, the Reviewing Official is authorized to require the submission of additional documentation from the complaining agency and the company. Upon completion of such review, the Reviewing Official shall prepare a written Recommendation Memorandum addressed to the designated Treasury official setting forth findings and a recommended disposition. The designated Treasury official will be the Deciding Official who will make the final decision whether the company’s certificate of authority to write and reinsure bonds should be revoked based on the administrative record. The administrative record consists of the agency complaint referenced in paragraphs (a) and (b) of this section, the company response referenced in paragraph (c) of this section, any other documentation submitted to, or considered by, the Reviewing Official, and the Reviewing Official’s Recommendation Memorandum.


(e) Final decision. (1) If the Deciding Official’s final decision is that revocation is not warranted, the company and the agency will be notified of the basis of this decision and the complaint against the company will be dismissed.


(2) If the Deciding Official’s final decision is that the company’s certificate of authority shall be revoked, the Deciding Official will notify the company and the agency of the revocation decision and the basis for such decision. Except as provided in paragraph (g) of this section, the notice will afford the company an opportunity to cure its noncompliance by paying or satisfying the bonds (including payment of any interest, penalties, and fees) forming the basis of the final decision within 20 business days. If the company cures its noncompliance within 20 business days, the complaint against the company will be deemed moot and the company will retain its certificate of authority to write Federal bonds. If the company does not cure its noncompliance within 20 business days, the company’s certificate of authority shall be revoked by Treasury without further notice.


(f) Standard of review. In reviewing whether the revocation of the company’s certificate of authority is warranted under this section, the Reviewing Official will recommend, and the Deciding Official will determine, whether the default is clear and whether the company’s failure to pay or satisfy the bonds is based on inadequate grounds.


(g) Consideration of willful conduct. The company is not entitled to an opportunity to cure its noncompliance if its conduct in failing to carry out its contracts is willful. For purposes of this regulation, “willful” means a careless or reckless disregard of a known legal obligation to satisfy an administratively final bond obligation. In considering whether a company’s conduct is willful, the Deciding Official may consider whether:


(1) An agency has filed a prior complaint with Treasury requesting that the company’s certificate be revoked for a substantially similar bond obligation;


(2) The company asserted substantially similar defenses to such bond obligation;


(3) Such defenses were considered by the agency under pertinent authorities and dismissed;


(4) Treasury made a final decision that revocation of the company’s certificate was justified; and


(5) Other pertinent factors.


(h) Informal hearing. (1) If a company that is the subject of a complaint under paragraph (a) and (b) of this section believes the opportunity to make known its views, as provided for under paragraph (c) of this section, is inadequate, it may, within 20 business days of the date of the notice required by paragraph (c), request, in writing, that an informal hearing be convened.


(2) As soon as possible after a written request for an informal hearing is received, the Reviewing Official shall convene an informal hearing, at such time and place as he or she deems appropriate, for the purpose of determining whether the company’s certificate of authority should be revoked.


(3) The company shall be advised, in writing, of the time and place of the informal hearing and shall be directed to bring all documents, records and other information as it may find necessary and relevant to support its position.


(4) The company may be represented by counsel and shall have a fair opportunity to present any relevant material and to examine the administrative record.


(5) The complaining agency may be requested by the Reviewing Official to send a representative to the hearing to present any relevant material, and the agency representative may examine the administrative record.


(6) The Reviewing Official is authorized to require the submission of additional documentation from the complaining agency and the company to ensure appropriate consideration of relevant factual or legal issues.


(7) Formal rules of evidence will not apply at the informal hearing.


(8) The formal adjudication standards under the Administrative Procedure Act, 5 U.S.C. 554, 556, 557 do not apply to the informal hearing or adjudication process.


(9) Treasury may promulgate additional procedural guidance governing the conduct of informal hearings. This additional procedural guidance may be contained in the Annual Letter to Executive Heads of Surety Companies referenced in § 223.9, the Treasury Financial Manual, or other Treasury publication or correspondence.


(10) Upon completion of the informal hearing, the Reviewing Official shall prepare a written Recommendation Memorandum addressed to the Deciding Official setting forth findings and a recommended disposition. The Deciding Official will make the final decision whether the company’s certificate of authority to write and reinsure Federal bonds should be revoked based on the administrative record. The administrative record consists of the Federal agency complaint referenced in paragraphs (a) and (b) of this section, the company response referenced in paragraph (c), any other documentation submitted to, considered by, or entered into the administrative record by the Reviewing Official, the hearing transcript, and the Reviewing Official’s Recommendation Memorandum.


(11) The provisions of paragraphs (e), (f), and (g) of this section shall apply to the adjudication of the agency complaint when an informal hearing is conducted.


[79 FR 62002, Oct. 16, 2014]


§ 223.21 Reinstatement.

If, after one year from the date of the non-renewal or the revocation of its certificate of authority under this part, a company can demonstrate that the basis for the non-renewal or revocation has been cured, as determined by Treasury in its discretion, and that it can comply with, and does meet, all continuing requirements for certification under 31 U.S.C. 9304-9308 and this part, the company may submit an application to Treasury for reinstatement or reissuance of a certificate of authority, which will be granted without prejudice, provided all such requirements are met.


[79 FR 62003, Oct. 16, 2014]


§ 223.22 Fees for services of the Treasury Department.

(a) Fees shall be imposed and collected, for the services listed in paragraphs (a) (1) through (4) of this section which are performed by the Treasury Department, regardless of whether the action requested is granted or denied. The payee of the check or other instrument shall be the Bureau of the Fiscal Service, Treasury Department. The amount of the fee will be based on which of the following categories of service is requested:


(1) Examination of a company’s application for a certificate of authority as an acceptable surety on Federal bonds or for a certificate of authority as an acceptable reinsuring company on such bonds (see § 223.2);


(2) Examination of a company’s application for recognition as an admitted reinsurer (except on excess risks running to the United States) of surety companies doing business with the United States (see § 223.12(a) and (b));


(3) Determination of a company’s continuing qualifications for annual renewal of its certificate of authority (see § 223.3); or


(4) Determination of a company’s continuing qualifications for annual renewal of its authority as an admitted reinsurer (see § 223.12(c)).


(b) In a given year a uniform fee will be collected from every company requesting a particular category of service, e.g., determination of a company’s continuing qualifications for annual renewal of its certificate of authority. However, the Treasury Department reserves the right to redetermine the amounts of fees annually. Fees are determined in accordance with Office of Management and Budget Circular A-25, as amended.


(c) Specific fee information may be obtained from the designated Treasury official, or online at http://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/surety_home.htm. In addition, a notice of the amount of a fee referred to in paragraphs (a)(1) through (4) of this section will be published in the Federal Register as each change in such fee is made.


[43 FR 12678, Mar. 27, 1978, as amended at 49 FR 47001, 47002, Nov. 30, 1984; 79 FR 62003, Oct. 16, 2014]


PART 224 – FEDERAL PROCESS AGENTS OF SURETY CORPORATIONS


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


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

§ 224.1 What does this part cover?

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


§ 224.2 Definitions.

For purposes of this regulation:


(a) Principal means the person or entity required to provide a surety bond.


(b) Process agent means a resident agent for service of process.


(c) State means a State, the District of Columbia, or a territory or possession of the United States.


§ 224.3 When may a surety corporation provide a bond without appointing a process agent?

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


§ 224.4 When must a surety corporation appoint a process agent?

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


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

A surety corporation may appoint either of the following as process agent – (a) An official of the State who is authorized or appointed under the law of that jurisdiction to receive service of process on the surety corporation; or


(b) An individual who resides in the jurisdiction of the district court for the district in which a surety bond is filed and who is appointed by the surety corporation by means of a power of attorney. A certified copy of the power of attorney must be filed with the clerk of the district court for the district in which a surety bond is to be provided. In addition, the surety corporation must provide the clerk of the United States District Court at the main office in each judicial district with the required number of authenticated copies of the power of attorney for each divisional office of the court within that judicial district.


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

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


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

A list of the divisional offices of the court in each judicial district may be obtained from the Federal Judiciary, U.S. Courts Web page at http://www.uscourts.gov, or by mail by writing to: Office of Public Affairs, Administrative Office of the U.S. Courts, Washington, DC 20544.


§ 224.8 When must a surety corporation appoint a new process agent?

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


PART 225 – ACCEPTANCE OF BONDS SECURED BY GOVERNMENT OBLIGATIONS IN LIEU OF BONDS WITH SURETIES


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


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

§ 225.1 Scope.

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


§ 225.2 Definitions.

For purposes of this part:


Agency means a department, agency, or instrumentality of the United States Government.


Authenticate instructions means to verify that the instructions received are from a bond official.


Bearer means that ownership of a Government obligation is not recorded. Title to such an obligation passes by delivery without endorsement and without notice. A bearer obligation is payable on its face to the holder at either maturity or call.


Bond means an executed written instrument, which guarantees the fulfillment of an obligation to the United States and sets forth the terms, conditions, and stipulations of the obligation.


Bond official means an agency official having authority under Federal law or regulation to approve a bond with surety or sureties and to approve a bond secured by Government obligations.


Book-entry means that the issuance and maintenance of a Government obligation is represented by an accounting entry or electronic record and not by a certificate.


Custodian means a Federal Reserve Bank or an entity within the United States designated by such Federal Reserve Bank under terms and conditions prescribed by such Federal Reserve Bank, a depositary specifically designated by the Secretary of the Treasury for purposes of this part, or such other entities as the Secretary of the Treasury may designate for purposes of this part.


Definitive means that a Government obligation is issued in engraved or printed form.


Depositary includes, but is not limited to:


(1) Any insured bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(2) Any mutual savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(3) Any savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(4) Any insured credit union as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is eligible to make application to become an insured credit union under section 201 of such Act (12 U.S.C. 1781);


(5) Any savings association as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) which is an insured depository institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is eligible to apply to become an insured depository institution under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and


(6) Any agency or branch of a foreign bank as defined in section 1(b) of the International Banking Act, as amended (12 U.S.C. 3101).


Federal Reserve means a Federal Reserve Bank and its branches.


Government obligation means a public debt obligation of the United States Government and an obligation whose principal and interest is unconditionally guaranteed by the United States Government.


Obligor includes, but is not limited to, an individual, a trust, an estate, a partnership, a corporation, and a sole proprietor.


Officer authorized to certify assignment means the individual identified as a certifying individual at part 306, subpart F of this title.


Person means an individual, a trust, an estate, a partnership, and a corporation.


Pledge means a transfer of security interest in a Government obligation to a bond official’s agency as collateral in lieu of a bond with a surety or sureties.


Procedural instructions means the Treasury Financial Manual, as amended, published by the Bureau of the Fiscal Service.


Registered means that ownership of a definitive Government obligation is listed in the issuer’s records, and that the obligation is payable at maturity or call to the person in whose name the obligation is inscribed or to that person’s assignee.


Secretary means the Secretary of the Treasury.


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

(a) General. An obligor required by Federal law or regulation to furnish a bond with surety or sureties may give in lieu thereof to a bond official any security acceptable under 31 U.S.C. 9301, as amended. The Secretary will designate classes of Government obligations acceptable under this part.


(b) Bond. The bond, at a minimum, shall irrevocably authorize the bond official to collect, sell, assign, or transfer such Government obligations and any interest retained therefrom in the event of the obligor’s default in performing any of the terms, conditions, or stipulations of such bond. Unless otherwise provided by law, the bond shall authorize the bond official to apply the proceeds from the sale, assignment, or transfer of such Government obligations, in whole or in part, to satisfy any costs incurred by the United States related to the default, and to apply any excess proceeds to satisfy any other claim of the United States against the obligor. The bond shall not include any obligations on custodians which are inconsistent with, or in addition to, the obligations in this part. The bond will provide that the bond official may retain any interest accruing upon any Government obligations, or direct that such interest be retained by the custodian.


(c) Amount of Government obligations. The obligor shall pledge to the bond official Government obligations valued as required by 31 U.S.C. 9303, as amended.


(d) Avoiding frequent substitutions. To avoid the frequent substitution of Government obligations, the bond official may reject Government obligations which mature, or are redeemable, within one year from the date they are pledged to the bond official.


(e) Acceptable Government obligations. Types and valuations of acceptable collateral security are addressed in 31 CFR part 380. For a current list of acceptable classes of securities and instruments described in 31 CFR part 380 and their valuations, see the Bureau of the Fiscal Service’s web site at www.publicdebt.treas.gov.


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


§ 225.4 Pledge of book-entry Government obligations.

(a) General. Except as otherwise provided by the Secretary in procedural instructions, an obligor, or a depositary acting as agent or sub-agent for the obligor, or the bond official, shall arrange a pledge pursuant to the prior agreement and approval of the bond official, of book-entry Government obligations. The Government obligations must be transferred to an account for the benefit of the bond official. The custodian holding the Government obligations is not required to establish that the agreement and approval of the bond official has been obtained prior to such a transfer.


(b) Receipt. Upon the transfer of Government obligations to an account for the benefit of the bond official, the custodian will promptly issue a receipt or an activity statement, or both, to the bond official and to the obligor or a depositary acting as agent or sub-agent for the obligor.


(c) Effect of the transfer. Book-entry Government obligations credited to an account for the benefit of the bond official shall have the effect as provided in part 357 of this title, or in other applicable regulations.


§ 225.5 Pledge of definitive Government obligations.

(a) Type and assignment. Definitive Government obligations may be in bearer or registered form, and shall be owned by the obligor.


(1) Bearer Government obligations. The obligor shall pledge bearer Government obligations to the bond official with all unmatured interest coupons attached.


(2) Registered Government obligations; assignment. The obligor shall pledge registered Government obligations in the obligor’s name to the bond official by assignment in accordance with subpart F of part 306 of this title and other codified procedures for issuers that apply to assignment of the registered Government obligations, except that, when so authorized under such procedures, all assignments shall be made in blank.


(b) Delivery to bond official; receipt. All deliveries of definitive Government obligations from the obligor to the bond official under this part shall be made at the risk and expense of the obligor. Upon receipt of definitive Government obligations, the bond official will issue the obligor a receipt.


(c) Risk of loss; safekeeping. All definitive Government obligations held by the bond official will be held at the risk of the bond official. The bond official will keep safe all definitive Government obligations and may place them with a custodian.


(d) Delivery to custodian; receipt. If the bond official is in receipt of definitive Government obligations, and then places those obligations with a custodian, the expense and risk of loss in delivery will rest with the bond official. Upon the placement of definitive Government obligations with a custodian, the custodian will issue the bond official a receipt. All definitive Government obligations held by the custodian will be held at the risk of the custodian.


(e) Conversion to book-entry. (1) Treasury bonds, notes, certificates of indebtedness, or bills deposited with a Federal Reserve Bank under this part may be converted into book-entry Treasury obligations in accordance with part 306 of this title, and the pertinent provisions of that part shall apply to such Treasury obligations.


(2) When converting definitive Government obligations to book-entry form, a Federal Reserve Bank will act pursuant to, and in accordance with, book-entry procedures for issuers that apply to the definitive Government obligations pledged to the bond official’s agency, including those set forth in part 306 of this title.


§ 225.6 Payment of interest.

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


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


§ 225.7 Custodian duties and responsibilities.

(a) General. A custodian shall authenticate instructions received from a bond official and shall act in accordance with such authenticated instructions. The custodian assumes no liability and is without liability of any kind for acting in accordance with such authenticated instructions, except for the custodian’s failure to exercise ordinary care. By providing a bond secured by Government obligations in lieu of a bond with surety or sureties, an obligor agrees not to hold either the custodian or the Secretary liable or responsible for the actions or inactions of a bond official or for carrying out a bond official’s authenticated instructions.


(b) Interest. Absent authenticated instructions from the bond official to retain interest, interest received by the custodian on Government obligations pledged to the bond official’s agency in accordance with this part will be remitted in the regular course of business to the obligor or to a depositary acting as agent or sub-agent for the obligor.


(c) Principal. Absent authenticated instructions from the bond official to retain the proceeds of matured Government obligations, a custodian will release to the obligor proceeds from matured Government obligations only if the obligor has deposited Government obligations acceptable under 31 U.S.C. 9301, as amended, in substitution for those which have matured.


(d) Liquidation of Government obligations. A custodian will collect, sell, assign, or transfer Government obligations, including any interest therefrom, only in accordance with a bond official’s authenticated instructions.


(e) Application of proceeds of liquidated Government obligations. A custodian will apply the proceeds from the collection, sale, assignment, or transfer of Government obligations only in accordance with a bond official’s authenticated instructions.


§ 225.8 Bond official duties and responsibilities.

The bond official’s duties and responsibilities are as follows:


(a) Approving the bond secured by Government obligations after determining its sufficiency;


(b) Verifying ownership of any registered definitive Government obligations given, and ensuring that those Government obligations are properly assigned;


(c) Approving establishment of a book-entry account for the benefit of the bond official;


(d) Providing the custodian, when appropriate, with clear and concise instructions;


(e) Taking all reasonable and appropriate steps to ensure that all procedures or transactions conform with the provisions of this part; and


(f) Notifying the Secretary of the Treasury, or his designee, upon an obligor’s default, and, unless otherwise provided by law, applying any part of the proceeds in excess of the amount required to assure payment of any costs incurred by the United States related to the default to satisfy any claim of the United States against the obligor.


§ 225.9 Return of Government obligations to obligor.

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


(b) Miller Act payment bonds. The bond official will not return Government obligations to an obligor who has furnished to the bond official a payment bond if:


(1) A person, who supplied the obligor with labor or materials and whom the obligor has not paid, files with the United States Government the application and affidavit provided for in the Miller Act (Act), as amended (40 U.S.C. 270a-270d), and the time provided in the Act for the person to commence suit against the obligor on the payment bond has not expired; or


(2) A person commences a suit against the obligor within the time provided for in the Act, in which case the bond official will hold the Government obligations subject to the order of the court having jurisdiction of the suit; or


(3) The bond official has actual knowledge of a claim against the obligor on the basis of the payment bond, in which case the bond official may return the Government obligations to the obligor when the bond official deems it appropriate.


(c) Claim of the United States unaffected. Nothing in this section shall affect or impair the priority of any claim of the United States against Government obligations, or any right or remedy granted by the Miller Act or by this part to the United States in the event of an obligor’s default on any term, condition, or stipulation of a bond.


(d) Return of definitive Government obligations; risk of loss. Definitive Government obligations to be returned to the obligor will be forwarded at the obligor’s risk and expense, either by the bond official, or by a custodian upon receipt of a bond official’s authenticated instructions.


§ 225.10 Other agency practices and authorities.

(a) Agency practices. Nothing in this part shall be construed as modifying the existing practices or duties of agencies in handling bonds, except to the extent made necessary under the terms of this part by reason of the acceptance of bonds secured by Government obligations.


(b) Agency authorities. Nothing contained in this part shall affect the authority of agencies to receive Government obligations for security in cases authorized by other provisions of law.


§ 225.11 Courts.

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


PART 226 – RECOGNITION OF INSURANCE COVERING TREASURY TAX AND LOAN DEPOSITARIES


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


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

§ 226.1 Scope.

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


§ 226.2 General.

(a) Deposit or account insurance provided by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, and the National Credit Union Share Insurance Fund, is hereby recognized. Deposits or accounts which are insured by a State or agency thereof, or by a corporation chartered by a State for the sole purpose of insuring deposits or accounts of financial institutions eligible to be Treasury tax and loan depositaries (hereinafter referred to as Insurance Arrangement), shall be approved as provided herein. Such approval constitutes recognition for the purpose of reducing the amount of collateral required of a tax and loan depositary by the amount of recognized insurance coverage pursuant to 31 CFR 203.15.


(b) Generally, these regulations and their associated guidelines require that an organization providing insurance maintain a corpus of sufficient value and liquidity, and/or that it have sufficient State borrowing authority, in relation to its liabilities and total insured savings (or deposits) to provide adequate security to the Government’s deposits and that adequate monitoring of the financial condition of the insured institutions is conducted.


§ 226.3 Application – termination.

(a) Every Insurance Organization applying for recognition as a qualified insurer of financial institutions designated as Treasury tax and loan depositaries shall address a written request to the Assistant Commissioner, Comptroller, Bureau of the Fiscal Service, Department of the Treasury, Washington, DC 20226, who will notify the applicant of the data which is necessary to make application. If the Secretary of the Treasury is satisfied that:


(1) One or more institutions insured by the applicant otherwise meet the Secretary’s requirements for designation as a Treasury tax and loan depositary or Federal tax depositary,


(2) The insurance provided by the applicant covers public money of the United States, and


(3) The insurance coverage provided affords adequate security to the Government’s deposits, the Secretary shall recognize the applicant as a qualified insurer of financial institutions designated as Treasury tax and loan depositaries.


(b) If and when the Secretary of the Treasury determines that a qualified insurance organization’s financial condition is such that it no longer provides adequate security or that it is not complying with the regulations of this part, the Secretary will notify the Insurance Organization of the facts or conduct which cause him to make such determination, and in those cases where the safety of the Government’s funds allows, provide the Insurance Organization with an opportunity to correct the deficiency. When any deficiency has not been corrected to his satisfaction or, where the safety of Government funds makes immediate revocation imperative, the Secretary will revoke the recognition previously granted.



Note:

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


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


§ 226.4 Adequacy of security – how computed.

(a) In qualifying Insurance Organizations, the Treasury will use a ratio (equity (net worth) of the insurance organization divided by insured accounts or deposits) to determine if the security is adequate. The ratio will be computed as determined by the Treasury, and is required to equal 0.0045 or greater for an Insurance Organization to be recognized (i.e., net worth is required to equal 0.45 of 1 percent of insured accounts or deposits).


(b) If, in the judgment of the Secretary of the Treasury, any of the Insurance Organization’s assets which cannot be liquidated promptly or are subject to restriction, encumbrance, or discredit, all or part of the value of such assets may be deducted from equity in making the computation. The Secretary of the Treasury may value the assets and liabilities in his discretion.


(c) An Insurance Organization’s unqualified borrowing authority from its sponsoring State will be added to its equity in making the computation because such authority is equivalent to additional capitalization. An Insurance Organization’s commercial borrowing authority and its reinsurance will be disregarded in making the computation, because these are not adequate substitutes for undercapitalization.



Note:

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


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


§ 226.5 Examinations.

(a) Examinations by State regulatory authorities or audits by CPA firms of Insurance Organizations shall be performed in accordance with, and at intervals prescribed by, State regulatory procedures. Copies of the reports shall be submitted to the Treasury.


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


§ 226.6 Financial reports.

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


§ 226.7 Effective date.

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


[43 FR 47506, Oct. 16, 1978]


PART 235 – ISSUANCE OF SETTLEMENT CHECKS FOR FORGED CHECKS DRAWN ON DESIGNATED DEPOSITARIES


Authority:31 U.S.C. 3343.


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

§ 235.1 Scope of regulations.

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


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


§ 235.2 Definition.

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


§ 235.3 Settlement of claims.

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


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


§ 235.4 Check Forgery Insurance Fund.

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


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


§ 235.5 Reclamation amounts.

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


§ 235.6 Implementing instructions.

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


[54 FR 35642, Aug. 29, 1989]


PART 240 – INDORSEMENT AND PAYMENT OF CHECKS DRAWN ON THE UNITED STATES TREASURY


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


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

General Provisions

§ 240.1 Scope of regulations.

(a) The regulations in this part prescribe the requirements for indorsement and the conditions for payment of checks drawn on the United States Treasury. These regulations also establish procedures for collection of amounts due the United States Treasury based on claims arising from the breach of presentment guarantees by presenting banks and other indorsers of Treasury checks when checks bearing material defects or alterations or forged disbursing officer (drawer) signatures are presented for payment and are paid.


(b) Standards contained in this regulation supersede existing Federal common law to the extent that they are inconsistent with Federal common law rules relating to counterfeit checks. Under the provisions of this regulation, the risk of loss on certain counterfeit checks is placed on presenting banks and other indorsers unless Treasury fails to timely reclaim on a check payment in accordance with 31 U.S.C. 3712(a) and § 240.8 of this regulation. Treasury will reclaim on counterfeit checks that are deemed paid under § 240.6(d) of this regulation when a presenting bank or other indorser fails to make all reasonable efforts to ensure that a check is an authentic Treasury check.


(c) Nothing in this regulation supercedes the rights or obligations of Treasury or any other person that are set forth in Regulation CC, 12 CFR part 229, with respect to substitute checks, as defined therein.


(d) A financial institution’s indorsement or presentment of a U.S. Treasury check shall constitute its agreement to this part. The financial institution hereby authorizes its servicing Federal Reserve Bank to debit the financial institution’s Federal Reserve Master Account for the amount of the reclamation and any accrued interest, penalties and/or administrative costs in accordance with the provisions of § 240.9.


[69 FR 61568, Oct. 19, 2004, as amended at 76 FR 57909, Sept. 19, 2011]


§ 240.2 Definitions.

(a) Administrative offset or offset, for purposes of this section, has the same meaning as defined in 31 U.S.C. 3701(a)(1) and 31 CFR part 285.


(b) Agency means any agency, department, instrumentality, office, commission, board, service, or other establishment of the United States authorized to issue Treasury checks or for which checks drawn on the United States Treasury are issued.


(c) Certifying agency means an agency authorizing the issuance of a payment by a disbursing official in accordance with 31 U.S.C. 3325.


(d) Check or checks means an original check or checks; an electronic check or checks; or a substitute check or checks.


(e) Check payment means the amount paid to a presenting bank by a Federal Reserve Bank.


(f) Counterfeit check means a document that purports to be an authentic check drawn on the United States Treasury, but in fact is not an authentic check.


(g) Days means calendar days. For purposes of computation, the last day of the period will be included unless it is a Saturday, Sunday, or Federal holiday; the first day is not included. For example, if a reclamation was issued on July 1, the 90 day protest period under § 240.9(b) would begin on July 2. If the 90th day fell on a Saturday, Sunday or Federal holiday, the protest would be accepted if received on the next business day.


(h) Declination means the process by which Treasury refuses to make final payment on a check, i.e., declines payment, by instructing a Federal Reserve Bank to reverse its provisional credit to a presenting bank.


(i) Declination date means the date on which the declination is issued by Treasury.


(j) Disbursing official means an official, including an official of the Department of the Treasury, the Department of Defense, any Government corporation (as defined in 31 U.S.C. 9101), or any official of the United States designated by the Secretary of the Treasury, authorized to disburse public money pursuant to 31 U.S.C. 3321 or another law.


(k) Drawer’s signature means the signature of a disbursing official placed on the front of a Treasury check as the drawer of the check.


(l) Electronic check means an electronic image of a check drawn on the United States Treasury, together with information describing that check, that meets the technical requirements for sending electronic items to a Federal Reserve Bank as set forth in the Federal Reserve Banks’ operating circulars.


(m) Federal Reserve Bank means a Federal Reserve Bank (FRB) or a branch of a Federal Reserve Bank.


(n) Federal Reserve Processing Center means a Federal Reserve Bank center that images Treasury checks for archiving check information and transmitting such information to Treasury.


(o) Financial institution means:


(1) Any insured bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(2) Any mutual savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(3) Any savings bank as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make application to become an insured bank under section 5 of such Act (12 U.S.C. 1815);


(4) Any insured credit union as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is eligible to make application to become an insured credit union under section 201 of such Act (12 U.S.C. 1781);


(5) Any savings association as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) which is an insured depositary institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is eligible to apply to become an insured depositary institution under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and


(6) Any financial institution outside of the United States if it has been designated by the Secretary of the Treasury as a depositary of public money and has been permitted to charge checks to the General Account of the United States Treasury.


(p) First examination means Treasury’s initial review of a check that has been presented for payment. The initial review procedures, which establish the authenticity and integrity of a check presented to Treasury for payment, may include reconciliation; retrieval and inspection of the check or the best available image thereof; and other procedures Treasury deems appropriate to specific circumstances.


(q) Forged or unauthorized drawer’s signature means a drawer’s signature that has been placed on the front of a Treasury check by a person other than:


(1) A disbursing official; or


(2) A person authorized to sign on behalf of a disbursing official.


(r) Forged or unauthorized indorsement means:


(1) An indorsement of the payee’s name by another person who is not authorized to sign for the payee; or


(2) An indorsement of the payee’s name made by another person who has been authorized by the payee, but who has not indorsed the check in accordance with §§ 240.4 and 240.13 through 240.17; or


(3) An indorsement added by a financial institution where the financial institution had no authority to supply the indorsement; or


(4) A check bearing an altered payee name that is indorsed using the payee name as altered.


(s) Guarantor means a financial institution that presents a check for payment and any prior indorser(s) of a check.


(t) Master Account means the record of financial rights and obligations of an account holder and the Federal Reserve Bank with respect to each other, where opening, intraday, and closing balances are determined.


(u) Material defect or alteration means:


(1) The counterfeiting of a check; or


(2) Any physical change on a check, including, but not limited to, a change in the amount, date, payee name, or other identifying information printed on the front or back of the check (but not including a forged or unauthorized drawer’s signature); or


(3) Any forged or unauthorized indorsement appearing on the back of the check.


(v) Minor means the term minor as defined under applicable State law.


(w) Monthly statement means a statement prepared by Treasury which includes the following information regarding each outstanding reclamation:


(1) The reclamation date;


(2) The reclamation number;


(3) Check identifying information; and


(4) The balance due, including interest, penalties, and administrative costs.


(x) Original check means the first paper check drawn on the United States Treasury with respect to a particular payment transaction.


(y) Payee means the person that the certifying agency designated to receive payment pursuant to 31 U.S.C. 3528.


(z) Person means an individual, institution, including a financial institution, or any other type of entity; the singular includes the plural.


(aa) Presenting bank means:


(1) A financial institution which, either directly or through a correspondent banking relationship, presents checks to and receives provisional credit from a Federal Reserve Bank; or


(2) A depositary which is authorized to charge checks directly to Treasury’s General Account and present them to Treasury for payment through a designated Federal Reserve Bank.


(bb) Provisional credit means the initial credit provided to a presenting bank by a Federal Reserve Bank. Provisional credit may be reversed by Treasury until the completion of first examination or final payment is deemed made pursuant to § 240.6(d).


(cc) Reasonable efforts means, at a minimum, verifying the existence of the Treasury watermark on an original check. Based upon the facts at hand, including whether a check is an original check, a substitute check or an electronic check, reasonable efforts may require the verification of other security features.


(dd) Reclamation means a demand for the amount of a check for which Treasury has requested an immediate refund.


(ee) Reclamation date means the date on which a reclamation is issued by Treasury. Normally, demands are sent to presenting banks or other indorsers within two business days of the reclamation date.


(ff) Reclamation debt means the amount owed as a result of Treasury’s demand for refund of a check payment, and includes interest, penalties and administrative costs assessed in accordance with § 240.8.


(gg) Reclamation debtor means a presenting bank or other indorser of a check from whom Treasury has demanded a refund in accordance with §§ 240.8 and 240.9. The reclamation debtor does not include a presenting bank or other indorser who may be liable for a reclamation debt, but from which Treasury has not demanded a refund.


(hh) Recurring benefit payment includes but is not limited to a payment of money for any Federal Government entitlement program or annuity.


(ii) Substitute check means a paper reproduction of a check drawn on the United States Treasury that meets the definitional requirements set forth at 12 CFR 229.2(aaa).


(jj) Treasury means the United States Department of the Treasury, or when authorized, an agent designated by the Secretary of the Treasury or his delegee.


(kk) Treasury Check Offset means the collection of an amount owed by a presenting bank in accordance with 31 U.S.C. 3712(e).


(ll) Truncate means to remove a paper check from the forward collection or return process and send to a recipient, in lieu of such paper check, a substitute check or an electronic check.


(mm) U.S. securities means securities of the United States and securities of Federal agencies and Government corporations for which Treasury acts as the transfer agent.


(nn) Writing includes electronic communications when specifically authorized by Treasury in implementing instructions.


[69 FR 61568, Oct. 19, 2004, as amended at 76 FR 57909, Sept. 19, 2011]


§ 240.3 Electronic checks and substitute checks.

(a) Legal equivalence of electronic checks. An electronic check for which a presenting bank has provided the guarantees described in § 240.4 is the legal equivalent of an original or substitute check for purposes of this part if the electronic check accurately represents all of the information on the front and back of the check that the presenting bank truncated. If a financial institution presents an electronic check for payment and the check is subject to return, Treasury may effect the return using an electronic check, but this part does not create any right for the presenting bank to return the check to the payee or any other person using an electronic check.


(b) Safekeeping of original checks. Any financial institution that creates a substitute check or electronic check shall prevent unauthorized access to the original or substitute check that was truncated by storing the check, until it is destroyed, in a manner consistent with federal banking agency guidelines for safeguarding customer information.


§ 240.4 Presentment guarantees.

The guarantors of a check presented to the Treasury for payment are deemed to guarantee to the Treasury all of the following:


(a) Indorsements. That all prior indorsements are genuine, whether or not an express guarantee is placed on the check. When the first indorsement has been made by one other than the payee personally, the presenting bank and the indorsers are deemed to guarantee to the Treasury, in addition to other guarantees, that the person who so indorsed had unqualified capacity and authority to indorse the check on behalf of the payee.


(b) Alterations. That the check has not been materially altered.


(c) Drawer’s signature. That the guarantors have no knowledge that the signature of the drawer is forged or unauthorized.


(d) Authenticity. That the guarantors have made all reasonable efforts to ensure that a check is an authentic Treasury check, not a counterfeit check.


(e) Electronic check. If the check is an electronic check, that –


(1) The check accurately represents all of the information on the front and back of the original or substitute check that was truncated and meets the technical requirements for sending electronic items to a Federal Reserve Bank as set forth in the Federal Reserve Banks’ operating circulars;


(2) Treasury will not receive presentment of, or otherwise be charged for, the electronic check, the original check, or a substitute check (or a paper or electronic reproduction of any of the foregoing) such that Treasury will be asked to make payment based on a check it already has paid; and


(3) Treasury’s receipt of the electronic check instead of the original or substitute check will not result in the loss of Treasury’s ability to determine whether the check contains a material defect or alteration.


(f) Substitute check. If the check is a substitute check, that the guarantors make the warranties set forth at 12 CFR 229.52(a)(1) and (2) and the indemnity set forth at 12 CFR 229.53.


§ 240.5 Limitations on payment; cancellation and distribution of proceeds of checks.

(a) Limitations on payment. (1) Treasury shall not be required to pay any check that is not negotiated to a financial institution within 12 months after the date on which the check was issued.


(2) All checks shall bear a legend, stating “Void After One Year.” The legend is notice to payees and indorsers of a general limitation on the payment of checks. The legend, or the inadvertent lack thereof, does not limit, or otherwise affect, the rights of Treasury under the law.


(b) Cancellation and distribution of proceeds of checks. (1) Any check that has not been paid and remains outstanding for more than 12 months after the issue date will be canceled by Treasury.


(2) The proceeds from checks canceled pursuant to paragraph (b)(1) of this section will be returned to the payment certifying or authorizing agency for ultimate credit to the appropriation or fund account initially charged for the payment.


(3) On a monthly basis, Treasury will provide to each agency that authorizes the issuance of checks a list of those checks issued for such agency which were canceled during the preceding month pursuant to paragraph (b)(1) of this section.


§ 240.6 Provisional credit; first examination; declination; final payment.

(a) Any credit issued by a Federal Reserve Bank to a financial institution shall be a provisional credit until Treasury completes first examination of the check, or as provided in paragraph (d) of this section.


(b) Treasury shall have the right as a drawee to complete first examination of checks presented for payment, to reconcile checks, and, when appropriate, to make a declination on any check.


(c) Treasury will decline payment on a check when first examination by Treasury establishes that:


(1) The check has a material defect or alteration;


(2) The check bears a forged or unauthorized drawer’s signature;


(3) Treasury has already received presentment of, and made payment on, a substitute check, electronic check or original check relating to the check being presented, such that Treasury is being requested to make payment on a check it has already paid;


(4) In the case of an electronic check, Treasury cannot determine whether the check contains a material defect or alteration without examining the original check or a better quality image of the check and Treasury is on notice of a question of law or fact about whether the check is properly payable; or


(5) In the case of a substitute check, Treasury has a warranty or indemnity claim arising under 12 CFR 229.52 or 229.53.


(d) Treasury shall have a reasonable amount of time to complete first examination. However, except as provided in paragraph (e) of this section, if Treasury has not declined payment on a check within 60 days after the check is presented to a Federal Reserve Processing Center for payment, Treasury will be deemed to have made final payment on the check.


(e) Notwithstanding the provisions of paragraph (d) of this section, in accordance with 31 U.S.C. 3328(a)(2), if, upon presentment for payment, Treasury is on notice of a question of law or fact about whether a check is properly payable, Treasury may defer final payment until the question is settled.


(f) If a Federal Reserve Bank debits a financial institution’s reserve account as a result of an erroneous declination, Treasury will promptly refund the amount of the payment.


§ 240.7 Declination protest.

(a) Who may protest. Only a presenting bank may protest the declination of a check that it has presented to a Federal Reserve Bank for payment.


(b) Basis for protest. Where Treasury, in accordance with § 240.6, has made a declination of a check presented for payment and a Federal Reserve Bank has reversed its provisional credit to the presenting bank, the presenting bank may file a protest challenging the factual basis for such declination. Protests may be filed challenging the following determinations:


(1) Counterfeit checks. The presenting bank may offer evidence that the check is not a counterfeit.


(2) Altered checks. The presenting bank may offer evidence that the check is not altered.


(3) Checks bearing forged or unauthorized drawer’s signatures. The presenting bank may offer evidence that the drawer’s signature was authentic or was authorized.


(4) Checks bearing a forged or unauthorized indorsement. The presenting bank may offer evidence that an indorsement on the back of the check was not forged or was otherwise authorized in accordance with the requirements of §§ 240.13 through 240.17.


(5) Prior presentment. The presenting bank may offer evidence that the check or a paper or electronic representation thereof has not already been presented to, and paid by, Treasury.


(6) Adequacy of substitute check or electronic check. The presenting bank may offer an original check or a copy of the check that is sufficient to support a determination that the check does not contain a material defect or alteration.


(c) Procedures for filing a protest. A declination protest must be in writing, and must be sent to: Department of the Treasury, Bureau of the Fiscal Service, Branch Manager, Financial Processing Division, Check Reconciliation Branch, Room 700-A, 3700 East-West Highway, Hyattsville, MD 20782, or to such other address as Treasury may publish in the Treasury Financial Manual, which can be found at http://www.fiscal.treasury.gov. Treasury will not consider any protest unless it is received within 90 days from the declination date.


(d) Review of a declination protest. The responsible Fiscal Service Director, or an authorized designee, will make every effort to decide any protest properly submitted under this section within 60 days, and will notify the presenting bank of Treasury’s decision. In those cases where it is not possible to render a decision within 60 days, the responsible Fiscal Service Director, or an authorized designee, will notify the presenting bank of the delay. Neither the responsible Fiscal Service Director, nor an authorized designee, will have any involvement in the decision to deny payment of a check under § 240.6 of this part.


(1) If, based on the evidence provided, the responsible Fiscal Service Director, or an authorized designee, finds that the presenting bank has met, by a preponderance of the evidence, the criteria in paragraph (b) of this section, Treasury will reverse its decision to decline payment on the check by directing a Federal Reserve Bank to provide credit in the amount of the check to the presenting bank.


(2) If, based on the evidence provided, the responsible Fiscal Service Director, or an authorized designee, finds that the presenting bank has failed to meet, by a preponderance of the evidence, the criteria in paragraph (b) of this section, the declination will not be reversed.


[69 FR 61568, Oct. 19, 2004, as amended at 76 FR 57909, Sept. 19, 2011]


§ 240.8 Reclamation of amounts of paid checks.

(a) If, after making final payment in accordance with § 240.6, Treasury determines that any guarantor has breached a presentment guarantee listed in § 240.4, the guarantor shall be liable to Treasury for the full amount of the check payment. Treasury may reclaim the amount of the check payment from any such guarantor prior to:


(1) The end of the 1-year period beginning on the date that a check is processed for payment by a Federal Reserve Processing Center; or


(2) The expiration of the 180-day period beginning on the close of the period described in paragraph (a)(1) of this section if a timely claim under 31 U.S.C. 3702 is presented to the certifying agency.


(b) Treasury will not reclaim on a check that bears a forged or unauthorized drawer’s signature unless it has evidence that the reclamation debtor had knowledge of the forged or unauthorized drawer’s signature.


(c) Treasury will not reclaim on a counterfeit check unless the reclamation debtor has failed to make all reasonable efforts to ensure that a check is an authentic check and not a counterfeit check. Guidance on the key security features found on U.S. Treasury checks is available on the Fiscal Service website at: http://www.fiscal.treasury.gov/checkclaims/check_security_new.pdf. Institutions may contact the Fiscal Service Questioned Documents Branch at (202) 874-7640 for additional information about these security features or to request training.


(d) Reclamation debts are due to be paid upon receipt of the reclamation by the reclamation debtor. Interest, penalties, and administrative costs associated with unpaid balances will accrue as follows:


(1) Interest. Treasury will assess interest on the unpaid principal of the reclamation debt beginning on the 61st day following the reclamation date, and will calculate interest based on the rate published annually by Treasury in accordance with 31 U.S.C. 3717. Interest will continue to accrue until the full amount of the reclamation is paid or Treasury determines that payment is not required.


(2) Penalties. Treasury will assess a penalty beginning on the 91st day following the reclamation date. The penalty will be assessed in accordance with 31 U.S.C. 3717 on the unpaid principal of the reclamation debt, and will continue to accrue until the full amount of the reclamation debt is paid or Treasury determines that payment is not required.


(3) Administrative costs. Treasury will assess administrative costs associated with the unpaid reclamation debt beginning on the 61st day following the reclamation date. Administrative costs will continue to accrue until the full amount of the reclamation debt is paid or Treasury determines that payment is not required.


(e) If Treasury is unable to fully collect a reclamation debt from a reclamation debtor, after pursuing all appropriate means of collection (including, but not limited to, administrative offset in accordance with § 240.10 and Treasury Check Offset in accordance with § 240.11), Treasury will discharge the unpaid reclamation debt. See 31 CFR 903.5 (Discharge of indebtedness; reporting requirements). Treasury or the certifying agency will report the amount of the unpaid reclamation debt to the Internal Revenue Service in accordance with the requirements of 26 U.S.C. 6050P and 26 CFR 1.6050P-1.


§ 240.9 Reclamation procedures; reclamation protests.

(a) Reclamation procedures. (1) Treasury will send a “NOTICE OF DIRECT DEBIT (RECLAMATION)” to the reclamation debtor in accordance with § 240.8(a). This notice will advise the reclamation debtor of the amount demanded and the reason for the demand. Treasury will provide notice to the reclamation debtor that:


(i) If the reclamation debt is not paid within 30 days after the reclamation date, Treasury intends to collect the amount outstanding by instructing the appropriate Federal Reserve Bank to debit on the 31st day the Master Account used by the reclamation debtor. The Federal Reserve Bank will provide advice of the debit to the reclamation debtor;


(ii) The reclamation debtor has an opportunity to inspect and copy Treasury’s records with respect to the reclamation debt;


(iii) The reclamation debtor may, by filing a protest in accordance with § 240.9(b), request Treasury to review its decision that the reclamation debtor is liable for the reclamation debt. If such a protest is filed within 30 days after the reclamation date, Treasury will not instruct the appropriate Federal Reserve Bank to debit the Master Account used by the reclamation debtor while the protest is still pending; and


(iv) The reclamation debtor has an opportunity to enter into a written agreement with Treasury for the repayment of the reclamation debt. A request for a repayment agreement must be accompanied by documentary proof that satisfies Treasury that the reclamation debtor is unable to repay the entire amount owed when due.


(2) Requests by a reclamation debtor for an appointment to inspect and copy Treasury’s records with respect to a reclamation debt and requests to enter into repayment agreements must be sent in writing to the address provided on the Check Claims Web site at http://www.fiscal.treasury.gov/checkclaims or to such other address as Treasury may publish in the Goldbook: The Check Reclamation Guide, which can be found at http://www.fiscal.treasury.gov.


(3) If Treasury determines a reclamation debt is due and the Federal Reserve Bank is unable to debit the financial institution’s Master Account, Fiscal Service will assess interest, penalties, and administrative costs in accordance with § 240.8. Additionally, Treasury will proceed to collect the reclamation debt through offset in accordance with § 240.10 and Treasury Check Offset in accordance with § 240.11.


(4) If Treasury determines a reclamation has been made in error, Treasury will abandon the reclamation. If Treasury already has collected the amount of the reclamation from the reclamation debtor, Treasury will promptly refund to the reclamation debtor the amount of its payment.


(b) Reclamation protests – (1) Who may protest. Only a reclamation debtor may protest a reclamation.


(2) Basis for protest. Where Treasury, in accordance with § 240.8 and paragraph (a) of this section, reclaims the amount of a check payment, the reclamation debtor may file a protest challenging such reclamation. Protests may be filed challenging the following determinations:


(i) Counterfeit checks. The reclamation debtor may offer evidence that it made all reasonable efforts to ensure that a check is authentic. The reclamation debtor must include evidence that the check was examined for a watermark as required under §§ 240.2(bb) and 240.4. Depending on the circumstances, Fiscal Service may require evidence that the reclamation debtor also examined the check for evidence of additional security features as described in guidance provided by Treasury or on Treasury’s behalf.


(ii) Altered checks. The reclamation debtor may offer evidence that the check is not altered.


(iii) Checks bearing forged or unauthorized drawer’s signatures. The reclamation debtor may offer evidence that the reclamation debtor did not have knowledge of the forged or unauthorized drawer’s signature.


(iv) Checks bearing a forged or unauthorized indorsement. The reclamation debtor may offer evidence that the indorsement was not forged or was otherwise authorized in accordance with the requirements of §§ 240.13 through 240.17.


(v) Prior presentment. The presenting bank may offer evidence that the check or a paper or electronic representation thereof has not already been presented to, and paid by, Treasury.


(vi) Adequacy of substitute check or electronic check. The presenting bank may offer an original check or a copy of the check that is sufficient to support a determination that the check does not contain a material defect or alteration.


(3) Procedures for filing a protest. A reclamation protest must be sent in writing to the address provided on the Check Claims Web site at http://www.fiscal.treasury.gov/checkclaims or to such other address as Treasury may publish in the Goldbook: The Check Reclamation Guide, which can be found at http://www.fiscal.treasury.gov.


(i) The reclamation protest must include supporting documentation (including, but not limited to, affidavits, account agreements, and signature cards) for the purpose of establishing that the reclamation debtor is not liable for the reclamation debt.


(ii) Treasury will not consider reclamation protests received more than 60 days after the reclamation date.


(iii) Treasury may, at its discretion, consider information received from a guarantor other than the reclamation debtor. However, in so doing, Treasury does not waive any of its rights under this part, nor does Treasury grant rights to any guarantor that are not otherwise provided in this part.


(4) Review of a reclamation protest. The responsible Fiscal Service Director, or an authorized designee, will make every effort to decide any protest properly submitted under this section within 60 days, and will notify the reclamation debtor of Treasury’s decision. In those cases where it is not possible to render a decision within 60 days, the responsible Fiscal Service Director, or an authorized designee, will notify the reclamation debtor of the delay. Neither the responsible Fiscal Service Director, nor an authorized designee, will have any involvement in the process of making determinations under § 240.8(a) of this part or sending a “REQUEST FOR REFUND (CHECK RECLAMATION)” under § 240.9(a) of this part.


(i) Treasury will refrain from the collection activities identified in §§ 240.10 and 240.11 while a timely protest is being considered. However, interest, penalties, and administrative costs will continue to accrue and will be added to the reclamation debt until a final determination on the protest has been made.


(ii) If, based on the evidence provided, the responsible Fiscal Service Director, or an authorized designee, finds that the reclamation debtor has met, by a preponderance of the evidence, the criteria in paragraph (b)(2) of this section, Treasury will notify the reclamation debtor, in writing, of his or her decision to terminate collection and will refund any amounts previously collected for the reclamation debt. Treasury may refund the amount either by applying the amount to another reclamation debt owed by the reclamation debtor in accordance with this part or other applicable law, or by returning the amount to the reclamation debtor.


(iii) If the responsible Fiscal Service Director, or an authorized designee, finds, by a preponderance of the evidence, the reclamation debtor is liable for the reclamation debt, Treasury will notify the reclamation debtor of his or her decision in writing. If the reclamation debtor has not paid the reclamation in full, Treasury will direct the Federal Reserve Bank to debit the financial institution’s Master Account immediately, provided at least 30 days have passed after the date of the NOTICE OF DIRECT DEBIT (RECLAMATION). If at least 30 days have not yet passed after the date of the NOTICE OF DIRECT DEBIT (RECLAMATION), Treasury will direct the Federal Reserve Bank to debit the financial institution’s Master Account on the 31st day after the date of the NOTICE OF DIRECT DEBIT (RECLAMATION). The Federal Reserve Bank will provide advice of the debit to the reclamation debtor. If the appropriate Federal Reserve Bank is unable to debit a reclamation debtor’s Master Account, Treasury will proceed to collect the reclamation debt through offset in accordance with § 240.10 and § 240.11.


(5) Effect of protest decision. The notice provided to the reclamation debtor under paragraph (b)(4)(iii) of this section shall serve as the final agency determination under the Administrative Procedure Act (5 U.S.C. 701, et seq.). No civil suit may be filed until the reclamation debtor has filed a protest under this section, and Treasury has provided notice of its final determination.


[69 FR 61568, Oct. 19, 2004, as amended at 76 FR 57909, Sept. 19, 2011]


§ 240.10 Offset.

(a) If a reclamation debt remains unpaid for 120 days after the reclamation date, Treasury will refer the reclamation debt, if eligible, to Treasury’s centralized offset program (see 31 CFR part 285) or another Federal agency for offset in accordance with 31 U.S.C. 3716. Prior to making a referral for offset, Treasury, in accordance with § 240.9(a)(3), will send at least one monthly statement to the reclamation debtor informing the reclamation debtor that Treasury intends to collect the reclamation debt by administrative offset and Treasury Check Offset.


(b) If a reclamation debtor wishes to make payment on a reclamation debt referred for offset, the reclamation debtor should contact Treasury at the address listed in § 240.9(b) to resolve the debt and avoid offset.


(c) If Treasury is unable to collect a reclamation debt by use of the offset described in paragraph (a) of this section, Treasury shall take such action against the reclamation debtor as may be necessary to protect the interests of the United States, including, but not limited to, Treasury Check Offset in accordance with § 240.11, or referral to the Department of Justice.


(d) If Treasury effects offset under this section and it is later determined that the reclamation debtor already had paid the amount of the reclamation debt, or that a reclamation debtor which had timely filed a protest was not liable for the amount of the reclamation, Treasury will promptly refund to the reclamation debtor the amount of its payment. Treasury may refund the amount either by applying the amount to another reclamation debt owed by the reclamation debtor in accordance with this part or other applicable law, or by returning the amount to the reclamation debtor.


§ 240.11 Treasury Check Offset.

(a) If Treasury is unable to effect collection pursuant to § 240.8, § 240.9, or § 240.10, of this part, Treasury will collect the amount of the reclamation debt through Treasury Check Offset. Treasury Check Offset occurs when, at the direction of the Treasury, a Federal Reserve Bank withholds, that is, offsets, credit from a presenting bank. The amount of credit offset is applied to the reclamation debt owed by the presenting bank. By presenting Treasury checks for payment, the presenting bank is deemed to authorize Treasury Check Offset.


(b) If Treasury effects offset under this section and it is later determined that the presenting bank paid the reclamation debt in full, or that a presenting bank was not liable for the amount of the reclamation debt, Treasury will promptly refund to the presenting bank the amount of its overpayment. Treasury may refund the amount either by applying the amount to another reclamation debt in accordance with this part or other applicable law, or by returning the amount to the presenting bank.


(c) Treasury Check Offset is used for the purpose of collecting debt owed by a presenting bank to the Federal Government. As a consequence, presenting banks shall not be able to use the fact that Treasury checks have not been paid as the basis for a claim against Treasury, a Federal Reserve Bank, or other persons or entities, including payees or other indorsers of checks, for the amount of the credit offset pursuant to 31 U.S.C. 3712(e) and this section.


(d) This section does not apply to a claim based upon a reclamation that has been outstanding for more than 10 years from the date of delinquency.


§ 240.12 Processing of checks.

(a) Federal Reserve Banks. (1) Federal Reserve Banks must cash checks for Government disbursing officials when such checks are drawn by the disbursing officials to their own order, except that payment of such checks must be refused if:


(i) A check bears a material defect or alteration;


(ii) A check was issued more than one year prior to the date of presentment; or


(iii) The Federal Reserve Bank has been notified by Treasury, in accordance with § 240.15(c), that a check was issued to a deceased payee.


(2) Federal Reserve Banks are not required to cash checks presented directly to them by the general public.


(3) As a depositary of public funds, each Federal Reserve Bank shall:


(i) Receive checks from its member banks, nonmember clearing banks, or other depositors, when indorsed by such banks or depositors who guarantee all prior indorsements thereon;


(ii) Give immediate provisional credit therefore in accordance with their current Time Schedules and charge the amount of the checks cashed or otherwise received to the General Account of the United States Treasury, subject to first examination and payment by Treasury;


(iii) Forward payment records and requested checks to Treasury; and


(iv) Release the original checks and substitute checks to a designated Regional Records Services Facility upon notification from Treasury.


(4) If a check is to be declined under § 240.6, Treasury will provide the Federal Reserve Bank with notice of declination upon the completion of first examination. Federal Reserve Banks must give immediate credit therefor to Treasury’s General Account, thereby reversing the previous charge to the General Account for such check.


(5) Treasury authorizes each Federal Reserve Bank to release a copy of the check to the presenting bank when payment is declined.


(b) Treasury General Account (TGA) designated depositaries outside the United States. (1) Financial institutions outside the United States designated by Treasury as depositaries of public money in accordance with 31 U.S.C. 3303 and permitted to charge checks to the General Account of the United States Treasury in accordance with Treasury implementing instructions shall be governed by the operating instructions contained in the letter of authorization to them from Treasury and are, as presenting banks, subject to the provisions of §§ 240.4, 240.8, and 240.9.


(2) If a check is to be declined under § 240.6, Treasury will provide the presenting bank with notice of declination upon the completion of first examination and will provide the presenting bank with a copy or image of the check. Such presenting bank must give immediate credit therefore to the General Account of the United States Treasury, thereby reversing the previous charge to the Account for such check. Treasury authorizes the designated Federal Reserve Bank to return to such presenting bank the original check when payment is declined in accordance with § 240.5(a) or § 240.15(c).


(3) To ensure complete recovery of the amount due, reclamation refunds require payment in United States dollars with checks drawn on or payable through United States financial institutions located in the United States. Reclamation refunds initiated by financial institutions outside of the United States must be sent through their headquarters or U.S. correspondent financial institution only. The payments should be accompanied by documentation identifying the check that was the subject of the reclamation (such as a copy of the reclamation notice or the current monthly statement). Reclamation refunds shall not be deposited to Treasury’s General Account.


(4) Additional information relating to designated depositaries outside the United States may be found in Volume VI, Chapter 2000, of the Treasury Financial Manual, which can be found at http://www.fiscal.treasury.gov.


Indorsement of Checks

§ 240.13 Indorsement by payees.

(a) General requirements. Checks shall be indorsed by the named payee or by another on behalf of such named payee as set forth in this part.


(b) Acceptable indorsements. (1) A check is properly indorsed when:


(i) The check is indorsed by the payee in a form recognized by general principles of law and commercial usage for negotiation, transfer or collection of negotiable instruments.


(ii) The check is indorsed by another on behalf of the named payee, and sufficiently indicates that the indorser has indorsed the check on behalf of the payee pursuant to authority expressly conferred by or under law or other regulation. An example would be: “John Jones by Mary Jones.” This example states the minimum indication acceptable. However, §§ 240.14, 240.15, and 240.17(f) specify the addition of an indication in specified situations of the actual capacity in which the person other than the named payee is indorsing.


(iii) Absent a signature, the check is indorsed “for collection” or “for deposit only to the credit of the within named payee or payees.” The presenting bank shall be deemed to guarantee good title to checks without signatures to all subsequent indorsers and to Treasury.


(iv) The check is indorsed by a financial institution under the payee’s authorization.


(2) Indorsement of checks by a duly authorized fiduciary or representative. The individual or institution accepting a check from a person other than the named payee is responsible for determining whether such person is authorized and has the capacity to indorse and negotiate the check. Evidence of the basis for such a determination may be required by Treasury in the event of a dispute.


(3) Indorsement of checks by a financial institution under the payee’s authorization. When a check is credited by a financial institution to the payee’s account under the payee’s authorization, the financial institution may use an indorsement substantially as follows: “Credit to the account of the within-named payee in accordance with the payee’s instructions. XYZ [Name of financial institution].” A financial institution using this form of indorsement will be deemed to guarantee to all subsequent indorsers and to the Treasury that it is acting as an attorney-in-fact for the payee, under the payee’s authorization, and that this authority is currently in force and has neither lapsed nor been revoked either in fact or by the death or incapacity of the payee.


(4) Indorsement of checks drawn in favor of financial institutions. All checks drawn in favor of a financial institution, for credit to the account of a person designating payment so to be made, must be indorsed in the name of the financial institution as payee in the usual manner. However, no check drawn in favor of a financial institution for credit to the account of a payee may be negotiated by the financial institution after the death of the payee.


(c) Unacceptable indorsements. (1) A check is not properly indorsed when the check is signed or otherwise is indorsed by a person without the payee’s consent or authorization.


(2) Failure to include the signature of the person signing the check as required by paragraph (b)(1)(ii) of this section will create a rebuttable presumption that the indorsement is a forgery and is unacceptable.


(3) Failure to include sufficient indication of the indorser’s authority to act on behalf of the payee as required by paragraph (b)(1)(ii) of this section will create a rebuttable presumption that the indorsing person is not authorized to indorse a check for the payee.


§ 240.14 Checks issued to incompetent payees.

(a) Handling of checks when a guardian or other fiduciary has been appointed. (1) A guardian appointed in accordance with applicable State law, or a fiduciary appointed in accordance with other applicable law, may indorse checks issued for the following classes of payments the right to which under law does not terminate with the death of the payee: payments for the redemption of currencies or for principal and/or interest on U.S. securities; payments for tax refunds; and payments for goods and services.


(i) A guardian or other fiduciary indorsing any such check on behalf of an incompetent payee, must include, as part of the indorsement, an indication of the capacity in which the guardian or fiduciary is indorsing. An example would be: “John Jones by Mary Jones, guardian of John Jones.”


(ii) When a check indorsed in this fashion is presented for payment by a financial institution, it will be paid by Treasury without submission of documentary proof of the authority of the guardian or other fiduciary, with the understanding that evidence of such claimed authority to indorse may be required by Treasury in the event of a dispute.


(2) A guardian or other fiduciary may not indorse a check issued for any class of payment other than one specified in paragraph (a)(1) of this section. When a check other than one specified in paragraph (a)(1) of this section is received by a guardian or other fiduciary, the check must be returned to the certifying agency with information as to the incompetence of the payee and documentary evidence showing the appointment of the guardian or other fiduciary in order that a replacement check, and future checks, may be drawn in favor of the guardian or other fiduciary.


(b) Handling of checks when a guardian or other fiduciary has not been appointed. If a guardian or other fiduciary has not been appointed, all checks issued to an incompetent payee must be returned to the certifying agency for determination as to whether, under applicable law, payment is due and to whom it may be made.


(c) Handling of certain checks by an attorney-in-fact. Notwithstanding paragraph (a)(2) of this section, if a check was issued for a class of payments the right to which under law terminates upon the death of the beneficiary, such as a recurring benefit payment or annuity, the check may be negotiated under a durable special power of attorney or springing durable special power of attorney subject to the restrictions enumerated in § 240.17. After the end of the six-month period provided in §§ 240.17(d) and (e), such checks must be handled in accordance with paragraph (a)(2) of this section.


§ 240.15 Checks issued to deceased payees.

(a) Handling of checks when an executor or administrator has been appointed. (1) An executor or administrator of an estate that has been appointed in accordance with applicable State law may indorse checks issued for the following classes of payments the right to which under law does not terminate with the death of the payee: payments for the redemption of currencies or for principal and/or interest on U.S. securities; payments for tax refunds; and payments for goods and services.


(i) An executor or administrator indorsing any such check must include, as part of the indorsement, an indication of the capacity in which the executor or administrator is indorsing. An example would be: “John Jones by Mary Jones, executor of the estate of John Jones.”


(ii) When a check indorsed in this fashion is presented for payment by a financial institution, it will be paid by Treasury without the submission of documentary proof of the authority of the executor or administrator, with the understanding that evidence of such claimed authority to indorse may be required by Treasury in the event of a dispute.


(2) An executor or administrator of an estate may not indorse a check issued for any class of payment other than one specified in paragraph (a)(1) of this section. Other checks, such as recurring benefit payments and annuity payments, may not be negotiated after the death of the payee. Such checks must be returned to the certifying agency for determination as to whether, under applicable law, payment is due and to whom it may be made.


(b) Handling of checks when an executor or administrator has not been appointed. If an executor or administrator has not been appointed, all checks issued to a deceased payee must be returned to the certifying agency for determination as to whether, under applicable law, payment is due and to whom it may be made.


(c) Handling of checks when a certifying agency learns, after the issuance of a recurring benefit payment check, that the payee died prior to the date of issuance. (1) A recurring benefit payment check, issued after a payee’s death, is not payable. As a consequence, when a certifying agency learns that a payee has died, the certifying agency must give immediate notice to Treasury, as prescribed at Volume I, Part 4, Chapter 7000 of the Treasury Financial Manual, which can be found at http://www.fiscal.treasury.gov. Upon receipt of such notice from a certifying agency, Treasury will instruct the Federal Reserve Bank to refuse payment of the check upon presentment. Upon receipt of such instruction from Treasury, the Federal Reserve Bank will make every appropriate effort to intercept the check. If the check is successfully intercepted, the Federal Reserve Bank will refuse payment, and will return the check unpaid to the presenting bank with an annotation that the payee is deceased. If a financial institution learns that a date of death triggering action under this section is erroneous, the financial institution must advise the payee to contact the payment certifying agency.


(2) Nothing in this section shall limit the right of Treasury to institute reclamation proceedings under the provisions of §§ 240.8 and 240.9 with respect to a check issued to a deceased payee that has been negotiated and paid over a forged or unauthorized indorsement.


§ 240.16 Checks issued to minor payees.

(a) Checks in payment of principal and/or interest on U.S. securities that are issued to minors may be indorsed by:


(1) Either parent with whom the minor resides; or


(2) If the minor does not reside with either parent, by the person who furnishes the minor’s chief support.


(b) The parent or other person indorsing on behalf of the minor must present with the check the indorser’s signed statement giving the minor’s age, and stating that the payee either resides with the parent or receives his or her chief support from the person indorsing on the minor’s behalf and that the proceeds of the check will be used for the minor’s benefit.


§ 240.17 Powers of attorney.

(a) Specific powers of attorney. Any check may be negotiated under a specific power of attorney executed in accordance with applicable State or Federal law after the issuance of the check and describing the check in full (check serial and symbol numbers, date of issue, amount, and name of payee).


(b) General powers of attorney. Checks may be negotiated under a general power of attorney executed, in accordance with applicable State or Federal law, in favor of a person for the following classes of payments:


(1) Payments for the redemption of currencies or for principal and/or interest on U.S. securities;


(2) Payments for tax refunds, but subject to the limitations concerning the mailing of Internal Revenue refund checks contained in 26 CFR 601.506(c); and


(3) Payments for goods and services.


(c) Special powers of attorney. Checks issued for classes of payments other than those specified in paragraph (b) of this section, such as a recurring benefit payment, may be negotiated under a special power of attorney executed in accordance with applicable State or Federal law, which describes the purpose for which the checks are issued, names a person as attorney-in-fact, and recites that the special power of attorney is not given to carry into effect an assignment of the right to receive such payment, either to the attorney-in-fact or to any other person.


(d) Durable special powers of attorney. A durable special power of attorney is a special power of attorney that continues despite the principal’s later incompetency, and is created by the principal’s use of words explicitly stating such intent. Classes of checks other than those specified in paragraph (b) of this section may be negotiated under a durable special power of attorney executed in accordance with applicable State or Federal law, which describes the purpose for which the checks are issued, names a person as attorney-in-fact, and recites that the special power of attorney is not given to carry into effect an assignment of the right to receive such payment, either to the attorney-in-fact or to any other person. For the purpose of negotiating Treasury checks, durable special powers of attorney are effective only during the six-month period following a determination that the named payee is incompetent.


(e) Springing durable special powers of attorney. A springing durable special power of attorney is similar to a durable power of attorney except that its terms do not become effective until the principal’s subsequent incompetence. As with a durable special power of attorney, a springing durable special power of attorney is created by the principal’s use of language explicitly stating that its terms become effective at such time as the principal is determined to be incompetent. Classes of checks other than those specified in paragraph (b) of this section may be negotiated under a springing durable special power of attorney executed in accordance with applicable State or Federal law, which describes the purpose for which the checks are issued, names a person as attorney-in-fact, and recites that the springing durable special power of attorney is not given to carry into effect an assignment of the right to receive payment, either to the attorney-in-fact or to any other person. For the purpose of negotiating Treasury checks, springing durable special powers of attorney are effective only during the six-month period following a determination that the named payee is incompetent.


(f) Proof of authority. Checks indorsed by an attorney-in-fact must include, as part of the indorsement, an indication of the capacity in which the attorney-in-fact is indorsing. An example would be: “John Jones by Paul Smith, attorney-in-fact for John Jones.” Such checks when presented for payment by a financial institution, will be paid by Treasury without the submission of documentary proof of the claimed authority, with the understanding that evidence of such claimed authority to indorse may be required by Treasury in the event of a dispute.


(g) Revocation of powers of attorney. Notwithstanding any other law, for purposes of negotiating Treasury checks, all powers of attorney are deemed revoked by the death of the principal and may also be deemed revoked by notice from the principal to the parties known, or reasonably expected, to be acting on the power of attorney.


(h) Optional use forms. Optional use power of attorney forms are listed in the appendix to this part. These forms are available on the Fiscal Service website at: http://www.fiscal.treasury.gov/ checkclaims/ regulations.html.


§ 240.18 Lack of authority to shift liability.

(a) This part neither authorizes nor directs a financial institution to debit the account of any person or to deposit any funds from any account into a suspense account or escrow account or the equivalent. Nothing in this part shall be construed to affect a financial institution’s contract with its depositor(s) under authority of state law.


(b) A financial institution’s liability under this part is not affected by any action taken by it to recover from any person the amount of the financial institution’s liability to the Treasury.


§ 240.19 Reservation of rights.

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


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

Fiscal Service Form 231 – General Power of Attorney (Individual). This general power of attorney form may be executed by an individual, unincorporated partnership, or sole owner, for checks drawn on the United States Treasury, in payment: (1) For redemption of currencies or for principal or interest on U.S. securities; (2) for tax refunds; and (3) for goods and services.


Fiscal Service Form 232 – Specific Power of Attorney (Individual). This specific power of attorney form may be executed by an individual, unincorporated partnership, or sole owner to authorize the indorsement of any class of check drawn on the United States Treasury. To be valid, the form must be executed after the issuance of the check and must describe the check in full, including the check serial and symbol numbers, date of issue, amount, and name of the payee.


Fiscal Service Form 233 – Special Power of Attorney (Individual). This special power of attorney form may be executed by an individual, unincorporated partnership, or sole owner, to authorize the indorsement of payments other than those listed under Fiscal Service Form 231, such as recurring benefit payments. It may name any person (as the term person is defined in 31 CFR part 240) as attorney-in-fact, but must describe the purpose for which the checks are issued and recite that it is not given to carry into effect an assignment of the right to receive payment, either to the attorney-in-fact or to any other person. A special power of attorney is not effective for purposes of negotiating checks issued after the payee is determined to be incompetent, unless the payee has indicated that the special power of attorney is to: (1) Remain effective following a determination that the principal is incompetent (a durable special power of attorney); or (2) become effective following a determination that the principal is incompetent (a springing durable special power of attorney). In no instance may a special power of attorney be used as the basis for negotiation of a check drawn on the United States Treasury more than six months after a determination that the principal is incompetent.


Fiscal Service Form 234 – Specific Power of Attorney (Corporation). This general power of attorney form may be executed by a corporation to authorize the indorsement by an attorney-in-fact for the classes of payments listed under Fiscal Service Form 231. When authority is given to an officer of the corporation to execute a power of attorney authorizing a third person to indorse and collect checks drawn on the United States Treasury in the name of the corporation, the power of attorney on Fiscal Service Form 234 should be accompanied by Fiscal Service Form 235 (Resolution by Corporation Conferring Authority Upon an Officer to Execute a Power of Attorney for the Collection of Checks Drawn on the Treasurer of the United States), executed by the officer authorized herein to execute such a power.


Fiscal Service Form 236 – Specific Power of Attorney (Corporation). This specific power of attorney form may be executed by a corporation to authorize the indorsement by an attorney-in-fact of any class of check drawn on the United States Treasury. To be valid, the form must be executed after the issuance of the check and must describe the check in full, including the check serial and symbol numbers, date of issue, amount, and name of the payee. When authority is given to an officer of the corporation to execute a power of attorney authorizing a third person to indorse and collect checks drawn on the United States Treasury in the name of the corporation, the power of attorney on Fiscal Service Form 236 should be accompanied by Fiscal Service Form 235 (Resolution by Corporation Conferring Authority Upon an Officer to Execute a Power of Attorney for the Collection of Checks Drawn on the Treasurer of the United States), executed by the officer authorized herein to execute such a power.


PART 245 – CLAIMS ON ACCOUNT OF TREASURY CHECKS


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


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

§ 245.1 Introductory.

This part governs the issuance of replacement checks for checks drawn on the United States Treasury, when


(a) The original check has been lost, stolen, destroyed or mutilated or defaced to such an extent that it is rendered non-negotiable;


(b) The original check has been negotiated and paid on a forged or unauthorized indorsement, and


(c) The original check has been cancelled pursuant to § 204.4 of this chapter.


§ 245.2 Definitions.

For purposes of this part:


(a) Agency means each authority of the United States for which the Treasury of the United States issues checks or for which checks drawn on the Treasury of the United States are issued.


(b) Check means a check drawn on the United States Treasury.


(c) Certifying Agency means an agency for whom a Treasury disbursing officer or a non-Treasury disbursing officer makes payment in accordance with 31 U.S.C. 3325. The responsibilities of a certifying official are set forth at 31 U.S.C. 3528.


(d) Commissioner means the Commissioner of the Bureau of the Fiscal Service, Department of the Treasury, 401 14th Street, SW., Washington, DC 20227.


(e) Person means an individual, a partnership, a corporation, a labor organization, a government or a subdivision or instrumentality thereof, and any other entity to which a check may be issued.


(f) Replacement check means a check issued pursuant to the recertification of payment by a certifying official.


(g) Secretary means the Secretary of the Treasury.


§ 245.3 Time limit for check claims.

(a) Any claim on account of a Treasury check must be presented to the agency that authorized the issuance of such check within one year after the date of issuance of the check or within one year after October 1, 1989, whichever is later.


(b) Any claim by an indorser under § 245.6 will be considered timely if presented to the Commissioner within one year after the date of issuance of the check or within one year after October 1, 1989, whichever is later.


(c) Nothing in this subsection affects the underlying obligation of the United States, or any agency thereof, for which a Treasury check was issued.


§ 245.4 Advice of nonreceipt or loss.

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


(b) In cases involving mutiliated or defaced checks, the claimant should enclose the mutilated or defaced check with his communication to the agency.


§ 245.5 Recertification of payment.

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


§ 245.6 Claim by an indorser.

When one or more Treasury checks are lost, stolen or destroyed in a single incident while in the possession of a person to whom the checks have been negotiated by the payee, and if the checks have not been paid, the Commissioner may issue a replacement check to the person to whom the checks had been negotiated.


§ 245.7 Check status inquiry.

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


§ 245.8 Receipt or recovery of original check.

(a) If the original check is received or recovered by the claimant after he has requested the agency to issue a replacement check, but before a replacement check has been received, he should immediately advise the agency and hold such check until receipt of instructions with respect to the negotiability of such check.


(b) If the original check is received or recovered by the claimant after a replacement check has been received by him, the original shall not be cashed, but shall be forwarded immediately to the agency that authorized the issuance of such check. Under no circumstances should both the original and replacement checks be cashed.


§ 245.9 Procedural instructions.

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


§ 245.10 Performance of functions of the Commissioner.

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


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


PART 248 – ISSUE OF SUBSTITUTES OF LOST, STOLEN, DESTROYED, MUTILATED AND DEFACED CHECKS OF THE UNITED STATES DRAWN ON ACCOUNTS MAINTAINED IN DEPOSITARY BANKS IN FOREIGN COUNTRIES OR UNITED STATES TERRITORIES OR POSSESSIONS


Authority:31 U.S.C. 3331.


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

§ 248.1 Introductory.

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


[54 FR 35647, Aug. 29, 1989]


Delegation of Authority

§ 248.2 Delegation of authority to issue substitute checks.

Pursuant to authority contained in section 3646 of the Revised Statutes, as amended, and subject to such procedural requirements as may be prescribed by the Treasury Department, there is hereby delegated to heads of departments and agencies whose disbursing officers issue depositary checks, authority to authorize officers or employees of their respective departments or agencies to issue substitutes of such checks, prior to the close of the fiscal year next following the fiscal year in which the checks are issued, and to receive and approve undertakings to indemnify the United States in such cases. The Commissioner of the Bureau of the Fiscal Service, Treasury Department, is hereby delegated authority to issue substitutes of depositary checks drawn by the Director, Operations Group, Treasury Department, or by officers disbursing under delegation from the Director, Operations Group, and to receive and approve undertakings of indemnity in such cases. The authority delegated to the Commissioner of the Bureau of the Fiscal Service may be redelegated by him to such disbursing officers.


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


Action To Be Taken by Claimants

§ 248.3 Advice of nonreceipt or loss.

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


§ 248.4 Undertaking of indemnity.

(a) If the check is found to be outstanding and unpaid and it appears that the proceeds are due the claimant, the disbursing officer will request the claimant to execute an undertaking of indemnity, Form 2244, in a penal sum equal to the amount of the check (or checks).


(b) Except in the circumstances set forth below, a corporate surety authorized by the Secretary of the Treasury to act as an acceptable surety on bonds in favor of the United States or two responsible individual sureties will be required on the undertaking of indemnity. It will be the responsibility of the claimant in a foreign country to secure a certification as to the financial sufficiency of the individual sureties executed by one of the persons listed in, and in the manner prescribed by, the instruction appearing under the Certificate as to Sureties on the face of Form 2244.


(c) Where the amount of the original check (or checks) is $200 or less, or the equivalent in foreign currency, one financially responsible individual surety may be accepted.


(d) Unless it is determined that the requirement of sureties is essential in the public interest, sureties will not be required under the following circumstances:


(1) If the officer authorized to issue a substitute check is satisfied that the loss, theft, destruction, mutilation or defacement of the original check occurred without fault of the owner or holder and while the check was in the custody or control of the United States or of a person duly authorized as an agent of the United States when performing services in connection with an official function of the United States;


(2) If substantially the entire check is presented and surrendered by the owner or holder and the disbursing officer is satisfied as to the identity of the check presented and that any missing portions are not sufficient to form the basis of a valid claim against the United States;


(3) If the owner or holder is the United States or an officer or employee thereof in his official capacity, a State, the District of Columbia, a territory or possession of the United States, a municipal corporation or political subdivision of any of the foregoing, a corporation the entire capital of which is owned by the United States, a foreign government or agency thereof, a foreign central bank, or a Federal Reserve Bank.


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

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



In consideration of the issuance of a substitute check in lieu of

(Check description)

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

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

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


§ 248.6 Recovery of original check.

(a) If the claimant recovers an original check after he has furnished advice of non-receipt but before receipt of a substitute check, he should immediately notify the disbursing officer or agency concerned and hold the check until receipt of advice from the disbursing officer or agency concerned regarding the negotiability of such original check.


(b) In the event the substitute check has been received prior to the recovery of the original check, the original check should be returned immediately to the disbursing officer.


(c) Under no circumstances should the claimant attempt to cash both the original and substitute check.


§ 248.7 Claims requiring settlement action.

There are certain types of claims on which the disbursing officer will not be authorized to take final action. These include:


(a) Claims on original checks which have been outstanding more than one full fiscal year following the fiscal year in which the checks were issued, and


(b) Claims involving doubtful questions of law and fact.


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


§ 248.8 Inquiries.

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


§ 248.9 Amendments and waivers.

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


PART 250 – PAYMENT ON ACCOUNT OF AWARDS OF THE FOREIGN CLAIMS SETTLEMENT COMMISSION OF THE UNITED STATES


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

§ 250.1 Scope of regulations.

The regulations in this part govern payment by the Department of the Treasury on awards made and certified to the Secretary of the Treasury by the Foreign Claims Settlement Commission under the International Claims Settlement Act of 1949, as amended (22 U.S.C. 1621 et seq.), and Title II of the War Claims Act of 1948 (50 U.S.C. App. 2017 et seq.).


[34 FR 1897, Feb. 8, 1969]


§ 250.2 Forms.

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


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


§ 250.3 Voucher applications.

(a) Execution of voucher by person named. No payment of any part of the amount due on account of an award will be made unless a voucher application therefor properly executed (preferably in ink or indelible pencil) is received by the Treasury Department. A voucher application for each payment on account of an award must be signed by each person whose name appears on such voucher application as payee exactly as his name appears thereon, with the following two exceptions:


(1) If only the name of the payee, and not his identity, has changed, the payee shall sign the voucher application with his changed name and return it to the Bureau of the Fiscal Service, Treasury Department, Hyattsville, MD 20782; the voucher application shall be accompanied by an explanatory affidavit and appropriate supporting documents, e.g., a copy of a marriage certificate or court order of change of name.


(2) If the identity of the payee has changed, paragraph (b) of this section shall apply. A signature by mark (X) must be witnessed by two persons; the signature and address of each must appear on the voucher application. In the case of a corporation the voucher application must be signed by an appropriate officer thereof having authority to do so, whose authority to sign on behalf of the corporation must be duly certified to thereon over the seal of the corporation.


(b) Execution of voucher by other person. If the person named in the voucher application as payee is no longer the proper person to receive the payment by reason of assignment, incompetency or death, or of termination of a partnership or corporation named, the voucher shall be executed by the person entitled to payment as provided in 250.4 and returned to the Credit Accounting Branch with the relevant information and the appropriate supporting documents required by that section.


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


§ 250.4 Payment on awards.

Payment will be made only to the person or persons on behalf of whom the award is made, except in the following circumstances:


(a) If such person is incompetent, payment will be made to his guardian, committee, or other equivalent legal representative. The law of the residence of the incompetent will determine whether the legal representative must be court appointed. If court appointment is required, the legal representative shall submit a certificate of the clerk of the appointing court, under its seal, dated within 6 months of the date of the voucher application for payment, showing that his appointment is in full force and effect. If court appointment is not required, the legal representative shall submit a notarized statement showing:


(1) His relationship to the incompetent;


(2) The name and address of the person having care and custody of the incompetent;


(3) That any money received will be applied to the use and benefit of the incompetent, and


(4) That there was no appointment of a guardian or committee.


(b) If such person is deceased, payment will be made to his legal representative.


(1) If any payment to be made is not over $1,000 and there is no qualified executor or administrator, the legal representative will be the person found by the Comptroller General to be entitled thereto, without the necessity of compliance with the requirements of law with respect to the administration of estates, upon execution and submission of Standard Form No. 1055 to the Bureau of the Fiscal Service for transmittal to the Comptroller General. That form is available from the Credit Accounting Branch.


(2) In all other cases, the term legal representative shall include court-appointed or statutory administrators or executors, and successors in interest of the decedent, e.g., his legatees or heirs as determined by an appropriate court or by the law of his residence. If administration of the decedent’s estate is closed, the legal representative shall submit a copy of the appropriate court’s final order of distribution or other pertinent order, identifying the distributees and their addresses. If administration continues and the legal representative is court-appointed, he shall submit a certificate of the clerk of the appointing court, under its seal, dated within 6 months of the date of the voucher application for payment, showing that such appointment is in full force and effect. If the legal representative is not court-appointed, he shall submit evidence sufficient to prove his interest and authority to apply for payment. If that evidence is a copy of the decedent’s will, it shall show on its face or by attachments thereto that it has been offered for probate, and that the appropriate court has affixed its seal and attached its certification of authenticity that the will is in fact the decedent’s last will and testament.


(c)-(d) [Reserved]


(e) In the case of a partnership or corporation, the existence of which has been terminated, if a receiver or trustee has been duly appointed by a court of competent jurisdiction in the United States and has not been discharged prior to the date of payment, payment will be made to such receiver or trustee in accordance with the order of the court. In the event a receiver or trustee duly appointed by a court of competent jurisdiction in the United States makes an assignment of the claim or any part thereof with respect to which an award is made, or makes an assignment of such award or any part thereof, payment will be made to the assignee as his interest may appear. In the latter circumstance, certified copies of the court orders showing the authority of the receiver or trustee to make the assignment shall be submitted with the assignment. No particular form of assignment is prescribed, but the original assignment must be submitted to, and will be retained by the Treasury Department.


(f) In the case of a partnership or corporation, the existence of which has been terminated, if no receiver or trustee has been duly appointed by a court of competent jurisdiction in the United States, or if such a receiver or trustee has been discharged prior to the date of payment without having made an assignment, payment may be made to the person or persons found by the Comptroller General of the United States to be entitled thereto. In this circumstance, the person or persons claiming payment shall submit to the Bureau of the Fiscal Service, Treasury Department, Hyattsville, MD 20782, such documentary evidence as is appropriate to show his or their right to the payment.


(g) In the case of an assignment of an award or any part thereof which is made in writing and duly acknowledged and filed after such award is certified to the Secretary of the Treasury, payment may in the discretion of the Secretary of the Treasury be made to the assignee as his interest may appear. No particular form of assignment is prescribed, but the original assignment must be submitted to, and will be retained by the Treasury Department.


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


§ 250.5 Manner of payment.

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


[31 FR 9418, July 9, 1966]


§ 250.6 Powers of attorney.

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


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


§ 250.7 Additional evidence.

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


[31 FR 9418, July 9, 1966]


PART 256 – OBTAINING PAYMENTS FROM THE JUDGMENT FUND AND UNDER PRIVATE RELIEF BILLS


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


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

Subpart A – General Information

§ 256.0 What does this part cover?

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


§ 256.1 What is Treasury’s role in paying awards and settlements from the Judgment Fund?

(a) The Judgment Fund is a permanent, indefinite appropriation which is available to pay many judicially and administratively ordered monetary awards against the United States. In addition, amounts owed under compromise agreements negotiated by the U.S. Department of Justice in settlement of claims arising under actual or imminent litigation are normally paid from the Judgment Fund, if a judgment on the merits would be payable from the Judgment Fund. Treasury’s Bureau of the Fiscal Service (Fiscal Service) certifies payments from the Judgment Fund when the following four tests have been met:


(1) Awards or settlements are final;


(2) Awards or settlements are monetary;


(3) One of the authorities specified in 31 U.S.C. 1304(a)(3) provides for payment of the award or settlement; and


(4) Payment may not legally be made from any other source of funds.


(b) Additionally, Fiscal Service requires that requests for payment identify the statute that forms the basis of the underlying claim. The award or settlement must comply with the statutory and regulatory requirements that authorize the award or settlement. For example, interest is payable on Judgment Fund awards only if there is an express statutory provision, contractual agreement or constitutional waiver of sovereign immunity authorizing the assessment of interest against the United States. Also, a tort under the Federal Tort Claims Act (FTCA) is payable from the Judgment Fund only when the award amount exceeds $2,500 (for administrative awards) and is in compliance with the regulatory requirements at 28 CFR part 14.


§ 256.2 Where can I find more information about, and forms for, Judgment Fund payments?

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


Subpart B – Requesting Payments

§ 256.10 Who may request payment from the Judgment Fund?

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


(b) Administrative awards. The program agency that is authorized to approve the award must submit the request for payment.


§ 256.11 How do agencies request payments?

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


§ 256.12 What supporting documentation must agencies submit to Fiscal Service when requesting a payment from the Judgment Fund?

(a) All payments. The submitting agency must submit a copy of the judgment or settlement agreement, as applicable, in addition to the request for payment from the Judgment Fund. The request for payment must be on the appropriate Judgment Fund payment request forms.


(b) Awards to minors. For awards to claimants that are minors, the submitting agency must include in its submission to Fiscal Service documentation establishing that the payee, if different from the claimant, is legally authorized to act on behalf of the claimant. Documentation of court approvals (Federal, State, or foreign) that are legally required for payment must be submitted along with the request for payment from the Judgment Fund. State law typically specifies when money awards to minors require the appointment of a guardian. Agencies must list the appropriate controlling state law citation on the payment request forms.


(c) Awards of costs. For awards of costs, the submitting agency must include a copy of the “bill of costs” or the Court’s order awarding costs. Only those items expressly enumerated under the cost statute, 28 U.S.C. 1920, or other governing statute specific to the award, are payable from the Judgment Fund.


(d) Payments to multiple claimants/payees in a single award. For awards where multiple payees are to receive separate payments, the submitting agency must complete separate Judgment Fund Vouchers for Payment for each payee. When there are multiple claimants in an administrative tort matter, each claimant’s award must independently exceed the mandatory $2,500 threshold in order for payment to be made from the Judgment Fund. A claimant’s threshold can be satisfied by combining amounts awarded for personal and property damage under the FTCA.


(e) Awards of back pay. For awards of back pay where the judgment does not specifically state the principal amounts to be paid and withholdings to be made, the submitting agency must include a spreadsheet indicating precisely which amounts are allocable to net pay, deductions, and interest.


§ 256.13 Are agencies required to supply a taxpayer identification number (TIN) when submitting a request for payment?

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


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

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


Subpart C – Debt Collection

§ 256.20 How does an agency indicate that a debt is to be offset from a Judgment Fund payment?

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


§ 256.21 Are Judgment Fund payments offset to collect administrative debts?

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


§ 256.22 How does Fiscal Service set off an award under 31 U.S.C. 3728?

The setoff statute establishes a two-step process to collect debts that are owed to the United States. If an agency notifies Fiscal Service of a debt for which a court has issued a judgment against a debtor in favor of the United States, or for which the IRS has issued a tax levy pursuant to 26 U.S.C. 6331, then Fiscal Service will automatically set off the debt from the payment. If the debt owed to the United States has not been judicially determined, then Fiscal Service must notify the claimant of the debt and request the debtor’s consent to a setoff. If the debtor consents, then Fiscal Service will set off the debt. If the debtor does not consent, then Fiscal Service will withhold from payment an amount equal to the debt. Fiscal Service also may withhold an amount sufficient to pay the cost of litigating the debt to judgment. Fiscal Service then will consult with the underlying agency and the Department of Justice regarding the necessity for a civil action to reduce the debt to judgment. If litigation proceeds and is successful, Fiscal Service will set off the debt. If the suit is unsuccessful, Fiscal Service will pay the withheld amount with interest accruing from the date when payment would have been made.


Subpart D – Interest and Litigation Costs

§ 256.30 When does the Judgment Fund pay interest?

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


§ 256.31 How does Fiscal Service compute interest on payments?

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


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

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


§ 256.33 For what period of time is interest computed under 31 U.S.C. 1304(b)?

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


§ 256.34 Does the Judgment Fund pay all litigation costs?

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


Subpart E – Reimbursements to the Judgment Fund

§ 256.40 When must an agency reimburse the Judgment Fund?

Agencies are required to reimburse the Judgment Fund for payments made pursuant to the Contract Disputes Act (CDA), 41 U.S.C. 612, and payments made pursuant to the Notification and Federal Employees Antidiscrimination and Retaliation Act of 2002 (No FEAR), 5 U.S.C. 2301 note. The TFM, available on the Judgment Fund Web site at http://www.fiscal.treasury.gov/judgefund, contains more information about how Fiscal Service bills agencies and collects such reimbursements.


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

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


Subpart F – Additional Provisions

§ 256.50 How does Fiscal Service process back pay awards?

The submitting agency may request one of two methods to process back pay awards.


(a) One method has three parts. The first part is a payment of net back pay (and interest if authorized), which is sent to the plaintiff or to the plaintiff’s attorney, as directed by the submitting agency. The second part is a payment to the agency of deductions from the net back pay. The third part is a payment of attorney fees, which is sent directly to the attorney.


(b) Under the second method, Fiscal Service pays the entire back pay award to the agency out of whose actions the claim arose. The agency then issues amounts representing back pay (and interest if authorized) to the plaintiff and retains amounts representing deductions. Fiscal Service pays the attorney fees directly to the attorney.


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


§ 256.51 Does Fiscal Service report Judgment Fund payments to the IRS as income to the payee on IRS Form 1099?

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


§ 256.52 How does Fiscal Service issue a payment?

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


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

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


§ 256.54 What happens if Fiscal Service denies a request for payment?

Fiscal Service must deny any request for payment that fails to satisfy the requirements of 31 U.S.C. 1304. The submitting agency may request reconsideration of a payment denial. The submitting agency must provide an explanation of how the request for payment meets the four tests contained in section 256.1 of this part. If applicable, requests for reconsideration must contain a reference to the agency’s program authority and include specific funding provisions that pertain to the program activity that resulted in the claim. If, upon reconsideration, Fiscal Service determines that payment from the Judgment Fund is appropriate, and the agency has already made payment to the plaintiff or claimant, Fiscal Service will reimburse the agency from the Judgment Fund.


Subpart G – Private Relief Bills

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

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


PART 270 [RESERVED]

PART 281 – FOREIGN EXCHANGE OPERATIONS


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


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

§ 281.1 Authority.

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


§ 281.2 [Reserved]

§ 281.3 Collections.

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


§ 281.4 Guaranty funds.

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


§ 281.5 Depositaries.

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


(b) Accountable officers may carry foreign exchange as cash outside depositaries only pursuant to authority granted in accordance with Treasury Department Circular No. 1030 dated July 24, 1959, as amended.


(c) Deposits in and withdrawals from foreign exchange accounts maintained with depositaries in the name of the United States Treasury will be made only as directed by the Secretary.


§ 281.6 Withdrawals from Treasury accounts.

Foreign exchange shall be withdrawn from accounts of the Secretary on the books of accountable officers or from the foreign exchange accounts carried with depositaries in the name of the United States Treasury, only for the purpose of sale for dollars or transfer to agencies for authorized purposes, without reimbursement to the Treasury, as provided by or pursuant to law. Such transfers, as well as transfers between foreign exchange accounts of the Secretary and between foreign exchange accounts in the name of the United States Treasury, shall be made only by direction of the Secretary. An agency requiring foreign exchange from the Treasury Department shall make request of the Secretary, indicating the amount of exchange required, in units of foreign currency, and the name and location of the accountable officer to receive the exchange. To the extent practicable and desirable, standing authorizations will be given for withdrawals from accounts of the Secretary. The following conditions apply to the sale of foreign exchange and to the requisition of foreign exchange without dollar payment:


(a) Sales. With respect to the sale of foreign exchange held in accounts of the Secretary, the payment in dollars shall be calculated at the rate of exchange that would otherwise be available to the United States for the acquisition of the foreign exchange for its official disbursements unless otherwise determined by the Treasury Department in consultation with the agencies concerned. When the rate that would otherwise be available to the United States is not readily ascertainable, the Treasury Department shall be consulted. The dollar proceeds realized from the sale of exchange shall be credited to the appropriate receipt, appropriation or refund account on the books of the Treasury. The dollar payment for foreign exchange purchased shall not be charged as an appropriation expenditure until the foreign exchange is disbursed.


(b) Transfers without reimbursement. When foreign exchange is to be obtained from the Treasury Department without payment of dollars, the agency concerned shall furnish written certification that the exchange may be used without reimbursement to the Treasury, citing the relevant legal authority. In cases where international agreements or Bureau of the Budget allocations specify the programs for which foreign exchange may be used, the Secretary may transfer exchange to agencies without requiring a certification.


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


§ 281.7 Limitations.

The following limitations apply to the purchase and holding of foreign exchange:


(a) Unless otherwise authorized by the Secretary, no agency or accountable officer shall purchase, or direct the purchase of, foreign exchange from any source outside the Government of the United States, except when exchange for the purpose intended is not available for purchase from within the Government.


(b) All foreign exchange acquired by agencies by transfer from the Treasury Department, without payment of dollars, for the purpose of making authorized expenditures, shall be placed with accountable officers for account of the agencies concerned.


(c) Unless otherwise authorized by the Secretary, no accountable officer shall purchase foreign exchange which, together with the balance on hand at the time of purchase, would exceed estimated requirements for a thirty-day period.


(d) To the maximum extent possible, foreign exchange accounts which are earmarked for specific programs shall be maintained on an unfunded basis. Each agency responsible for administering international agreements pertaining to the use of foreign exchange held in funded accounts shall review the agreement and other considerations relevant to each such account at least annually to determine if the account can be placed on an unfunded basis, and shall initiate appropriate action to accomplish the objective of minimizing the number of funded program accounts and the amounts therein. The resulting determinations and the status of actions undertaken shall be furnished in writing to the Treasury Department within 60 days from the date of this regulation and each time thereafter that there is a change of status of a particular account, or as requested by the Treasury Department. Exchange which becomes eligible for removal from a funded status either as a result of the foregoing determinations, or because of the expiration of the period of availability for restricted use under the terms of international agreements, or for other reasons, shall be released promptly by the program agency for transfer to a nonrestricted Treasury sales account.


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


§ 281.8 Reporting and accounting.

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


§ 281.9 General provisions.

(a) Nothing contained in this part shall be construed as having the effect of superseding or amending the provisions of any regulations issued or approved by the Secretary pursuant to the Act of December 23, 1944, as amended (67 Stat. 61).


(b) The Secretary may waive, withdraw, or amend at any time or from time to time any or all of the provisions of the regulations of this part.


(c) Implementing regulations within the framework of this circular will be issued by the Fiscal Assistant Secretary of the Treasury. All communications pertaining to the administration of the provisions of this part shall be directed to the Fiscal Assistant Secretary.


PART 285 – DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION IMPROVEMENT ACT OF 1996


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


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

Subpart A – Disbursing Official Offset

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

(a) Definitions. For purposes of this section:


Administrative offset means withholding funds payable by the United States (including funds payable by the United States on behalf of a State government) to, or held by the United States for, a person to satisfy a debt.


Debt as used in this section is synonymous with the term past-due support.


Disbursing official includes an official who has authority to disburse public money pursuant to 31 U.S.C. 3321 or another Federal law.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury. Fiscal Service is the designee of the Secretary of the Treasury for all matters concerning this section, unless otherwise specified.


HHS means the Department of Health and Human Services, Office of Child Support Enforcement.


Past-due support means the amount of support determined under a court order, or an order of an administrative procedure established under State law, for support and maintenance of a child, or of a child and the parent with whom the child is living, which has not been paid. The term child as used in this definition is not limited to minor children.


Past-due support being enforced by the State means there has been an assignment of the support rights to the State, or the State making the request for offset is providing services to individuals pursuant to 42 U.S.C. 654(5) (section 454(5) of the Social Security Act), or the State is enforcing support pursuant to a cooperative agreement with or by an Indian tribal government.


State means the several States of the United States. The term State also includes the District of Columbia, American Samoa, Guam, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Commonwealth of Puerto Rico.


Secretary means the Secretary of the Treasury.


(b) General rule. Fiscal Service may enter into a reciprocal agreement with a State for the collection of past-due support being enforced by the State by administrative offset from certain Federal payments. Upon notification of past-due support either directly from a State which has entered into such an agreement or from HHS, disbursing officials of Fiscal Service or any other disbursing official of the United States shall offset Federal payments which are subject to offset under this section, to collect past-due support. The amount offset, minus the offset fee, shall be forwarded to the State to be distributed in accordance with applicable laws and procedures.


(c) Agreements. Fiscal Service may enter into reciprocal agreements with States for disbursing officials of Fiscal Service and any other Federal disbursing official to offset certain Federal payments to collect past-due support being enforced by the State. The agreement shall contain any requirements which Fiscal Service considers appropriate to facilitate the offset and prevent duplicative efforts and shall require States to prescribe procedures governing the collection of past-due support by Federal administrative offset. For purposes of this section, reciprocal means of mutual benefit. An agreement between Fiscal Service and a State to collect past-due support by offsetting Federal payments will be considered of mutual benefit and it is not required that States conduct administrative offsets to collect debts owed to the Federal Government. States which have entered into an agreement with Fiscal Service pursuant to this section may thereafter request, in the manner prescribed herein, that an offset be performed. Such requests shall be made by the appropriate State disbursing official which, for purposes of this section, means an appropriate official of the State agency which administers or supervises the administration of the State plan under Title IV-D of the Social Security Act.


(d) Notification to Fiscal Service of past-due support. (1) States notifying Fiscal Service of past-due support must do so in the manner and format prescribed by Fiscal Service. States notifying HHS of past-due support must do so in the manner and format prescribed by HHS. HHS shall notify Fiscal Service of all past-due support referred to HHS by States for collection by administrative offset provided that the requirements of paragraphs (d)(3) and (h) of this section have been met.


(2) When a State has knowledge that past-due support is being enforced by more than one State, the State notifying Fiscal Service or HHS of the past-due support must inform any other State involved in enforcing the past-due support when it refers the debt for offset and when it receives the offset amount.


(3) The notification of past-due support must be accompanied by a certification that the debt is past-due, legally enforceable, and that the State has complied with all the requirements as set forth in paragraph (h) of this section and with any requirements imposed by State law or procedure. For debts so certified, the Secretary may waive sections 552a (o) and (p) of Title 5, United States Code, where applicable, in accordance with the Secretary’s authority under 31 U.S.C. 3716(f).


(4) Fiscal Service may reject a notification of past-due support which does not comply with the requirements of this section. The State will be notified of the rejection along with the reason for the rejection.


(e) Minimum amount of past-due support. Fiscal Service will reject a notification of past-due support where the past-due support owed is less than $25.00. This amount may be adjusted from time to time by Fiscal Service to ensure that the cost of collection does not exceed the debt.


(f) Limitations. Debts properly submitted to Fiscal Service for administrative offset will remain subject to collection by administrative offset until withdrawn by the State provided the debt remains past-due and legally enforceable.


(g) Notification of changes in status of debt. The State notifying Fiscal Service or HHS of past-due support shall, in the manner and in the time frames provided by Fiscal Service or HHS, notify Fiscal Service or HHS of deletions or decreases in the amount of a debt referred for collection by administrative offset. The State may notify Fiscal Service or HHS of any increases in the amount of a debt referred for collection by administrative offset provided the State has complied with the requirements of paragraph (h) of this section with regard to those amounts.


(h) Advance notification of intent to collect by administrative offset. (1) The State, or Fiscal Service or HHS on behalf of the State, if the State requests and Fiscal Service or HHS agrees, shall send a written notification, at least 30 days in advance of referral of the debt for offset, to the individual owing past-due support, informing the individual that the State intends to refer the debt for collection by administrative offset against Federal payments. The notice must also inform the individual of:


(i) The nature and amount of the debt; and


(ii) The right to an administrative review by the State referring the debt or, upon the request of the individual, by the State with the order upon which the referral was based, of the determination of the State with respect to the debt and of the procedures and time frames established by the State for such reviews.


(2) Prior to referring a debt to Fiscal Service for collection by administrative offset, States must provide individuals with a reasonable opportunity to exercise the rights enumerated in paragraph (h)(1) of this section in accordance with procedures prescribed by the State.


(i) Payments subject to offset. Federal payments subject to offset under this section include all Federal payments except:


(1) Payments due to an individual under


(i) Title IV of the Higher Education Act of 1965;


(ii) The Social Security Act;


(iii) Part B of the Black Lung Benefits Act;


(iv) Any law administered by the Railroad Retirement Board;


(2) Payments which the Secretary determines are exempt from offset in accordance with paragraph (k) of this section;


(3) Payments from which collection of past-due support by administrative offset is expressly prohibited by law;


(4) Payments made under the Internal Revenue Code of 1986 (except that tax refund payments are subject to offset under separate authority); and


(5) Payments made under the tariff laws of the United States.


(j) Special provisions applicable to Federal salary payments. (1) Unless a lower maximum offset limitation is provided by applicable State law, the maximum part of a Federal salary payment per pay period subject to offset to collect past-due support shall not exceed those amounts set forth at section 1673(b)(2) (A) and (B) of Title 15, United States Code, as follows:


(i) Fifty (50%) percent of the debtor’s aggregate disposable earnings for any pay period, where the debtor asserts by affidavit, or by other acceptable evidence, that he/she is supporting a spouse and/or dependent child, other than the former spouse and/or child for whom support is being collected, except that an additional five (5%) percent will apply if it appears that such earnings are to enforce past-due support for a period which is twelve (12) weeks or more prior to the pay period to which the offset applies. A debtor shall be considered to be supporting a spouse and/or dependent child only if the debtor provides over half of the spouse’s and/or dependent child’s support.


(ii) Sixty (60%) percent of the debtor’s aggregate disposable earnings for any pay period where the debtor fails to assert by affidavit or establish by other acceptable evidence that he/she is supporting a spouse and/or dependent child, other than a former spouse and/or child for whom support is being collected, except that an additional five (5%) percent will apply if it appears that such earnings are to enforce past-due support for a period which is twelve (12) weeks or more prior to the pay period to which the offset applies.


(2) The maximum allowable offset amount shall be reduced by the amount of any deductions in pay resulting from a garnishment order for support. Nothing in this rule is intended to alter rules applicable to processing garnishment orders for child support and/or alimony.


(3) Federal salary payments subject to offset for the collection of past-due support include current basic pay, special pay, incentive pay, retainer pay, overtime, or in the case of an employee not entitled to basic pay, other authorized pay. Aggregate disposable earnings for purposes of determining the maximum amounts which may be offset under paragraph (j)(1) of this section is Federal salary pay remaining after the deduction of:


(i) Any amount required by law to be withheld;


(ii) Amounts properly withheld for Federal, State or local income tax purposes;


(iii) Amounts deducted as health insurance premiums;


(iv) Amounts deducted as normal retirement contributions, not including amounts deducted for supplementary coverage; and


(v) Amounts deducted as normal life insurance premiums not including amounts deducted for supplementary coverage.


(4) At least 30 days in advance of offset, the disbursing official shall send written notice to the debtor of the maximum offset limitations described in paragraph (j)(1) of this section. The notice shall include a request that the debtor submit supporting affidavits or other documentation necessary to determine the applicable offset percentage limitation. The notice shall also inform the debtor of the percentage that will be deducted if he/she fails to submit the requested documentation.


(5) At the time the past-due support debt is submitted for offset, the State shall advise Fiscal Service or HHS if the maximum amount of a Federal salary payment that may be offset is less than the amount described under this paragraph.


(k) Payments exempt from administrative offset to collect past-due support being enforced by a State. The Secretary will exempt from administrative offset under this part payments made under means-tested programs when requested by the head of the Federal agency which administers the program. For purposes of this section, means-tested programs are programs for which eligibility is based on a determination that income and/or assets of the beneficiary are inadequate to provide the beneficiary with an adequate standard of living without program assistance. The Secretary may exempt from administrative offset under this section any other class or type of payment upon the written request of the head of the agency which authorizes the payments. In determining whether or not to grant such exemptions, the Secretary shall give due consideration to whether administrative offset would tend to interfere substantially with or defeat the purposes of the payment agency’s program.


(l) Fees. A fee which Fiscal Service has determined to be sufficient to reimburse Fiscal Service for the full cost of the offset procedure, shall be deducted from each offset amount. Fiscal Service will notify the States, annually and in advance, of the amount of the fee to be charged for each offset.


(m) Offsetting payments – (1) Conducting the offset. Disbursing officials of the Department of the Treasury, the Department of Defense, the United States Postal Service, or any other Government corporation, any disbursing official of the United States designated by the Secretary, or any disbursing official of an executive department or agency that disburses Federal payments shall offset payments subject to offset under this section to satisfy, in whole or part, a debt owed by the payee. Disbursing officials shall compare payment certification records with records of debts submitted to Fiscal Service for collection by administrative offset. A match will occur when the taxpayer identifying number and name control of a payment record are the same as the taxpayer identifying number and name control of a debt record. The taxpayer identifying number for an individual is the individual’s social security number. When a match occurs and all other requirements for offset have been met, the disbursing official shall offset the payment to satisfy, in whole or part, the debt. Any amounts not offset shall be paid to the payee. The amount that can be offset from a single payment is the lesser of the amount of the debt (including interest, penalties, and administrative costs); the amount of the payment; or the amount of the payment available for offset if a statute or regulation prohibits offset of the entire amount. Debts remain subject to collection by offset until paid in full.


(2) Disposition of amounts collected. Fiscal Service will transmit amounts collected for debts, less fees charged under paragraph (l) of this section, to HHS or to the appropriate State. If Fiscal Service learns that an erroneous offset payment has been made to HHS or any State, Fiscal Service will notify HHS or the appropriate State that an erroneous offset payment has been made. Fiscal Service may deduct the amount of the erroneous offset payment from amounts payable to HHS or the State, as the case may be. Alternatively, upon Fiscal Service’ request, the State shall return promptly to the affected payee or Fiscal Service an amount equal to the amount of the erroneous payment (unless the State previously has paid such amounts, or any portion of such amounts, to the affected payee). HHS and States shall notify Fiscal Service any time HHS or a State returns an erroneous offset payment to an affected payee. Fiscal Service and HHS, or the appropriate State, will adjust their debtor records accordingly.


(n) Administrative offset priorities. (1) A levy pursuant to the Internal Revenue Code of 1986 shall take precedence over deductions under this section.


(2) Offsets will be applied first to past-due support being enforced by the State before any other offsets under this part.


(o) Notification of offset. (1) Disbursing officials of Fiscal Service or any other disbursing official which conducts an offset will notify the payee in writing of the occurrence of the offset to satisfy past-due support. The notice shall inform the payee of the type and amount of the payment that was offset; the identity of the State which requested the offset; and a contact point within the State that will handle concerns regarding the offset. Disbursing officials shall not be liable for failure to provide this notice.


(2) Disbursing officials of Fiscal Service or any other disbursing official which conducts an offset under this section will share with HHS, upon request by the Secretary of HHS, information contained in payment certification records of persons who are delinquent in child support obligations that would assist in the collection of such debts. When no offset is conducted, disbursing officials of Fiscal Service or any other disbursing official, will provide such information to HHS to the extent such information is available from offset activities conducted by Fiscal Service and other disbursing officials.


(p) Liability of disbursing officials and payment agencies. Neither the disbursing official nor the agency authorizing the payment shall be liable for the amount of the administrative offset on the basis that the underlying obligation, represented by the payment before the administrative offset was taken, was not satisfied. Disbursing officials will notify the agency authorizing the payment that the offset has occurred so that the agency authorizing the payment may direct any inquiries concerning the offset to the appropriate State.


[62 FR 36210, July 7, 1997, as amended at 63 FR 46145, Aug. 28, 1998; 74 FR 27433, June 10, 2009]


§ 285.2 Offset of tax refund payments to collect past-due, legally enforceable nontax debt.

(a) Definitions. For purposes of this section:


Creditor agency means a Federal agency owed a claim that seeks to collect that claim through tax refund offset.


Debt or claim refers to an amount of money, funds, or property which has been determined by an agency official to be due the United States from any person, organization, or entity, except another Federal agency. For the purposes of this section, the terms “claim” and “debt” are synonymous and interchangeable and includes debt administered by a third party acting as an agent for the Federal Government.


Debtor means a person who owes a debt or claim. The term “person” includes any individual, organization or entity, except another Federal agency.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury.


IRS means the Internal Revenue Service, a bureau of the Department of the Treasury.


Tax refund offset means withholding or reducing a tax refund payment by an amount necessary to satisfy a debt owed by the payee(s) of a tax refund payment.


Tax refund payment means any overpayment of Federal taxes to be refunded to the person making the overpayment after the IRS makes the appropriate credits as provided in 26 U.S.C. 6402(a) and 26 CFR 6402-3(a)(6)(i) for any liabilities for any tax on the part of the person who made the overpayment.


(b) General rule. (1) A Federal agency (as defined in 26 U.S.C. 6402(g)) that is owed by a person a past-due, legally enforceable nontax debt shall notify Fiscal Service of the amount of such debt for collection by tax refund offset. However, any agency subject to section 9 of the Act of May 18, 1933 (16 U.S.C. 831h) owed such a debt may, but is not required to, notify Fiscal Service of the amount of such debt for collection by tax refund offset.


(2) Fiscal Service will compare tax refund payment records, as certified by the IRS, with records of debts submitted to Fiscal Service. A match will occur when the taxpayer identifying number (as that term is used in 26 U.S.C. 6109) and name (or derivation of the name, known as a “name control”) of a payment certification record are the same as the taxpayer identifying number and name control of a debtor record. When a match occurs and all other requirements for tax refund offset have been met, Fiscal Service will reduce the amount of any tax refund payment payable to a debtor by the amount of any past-due, legally enforceable debt owed by the debtor. Any amounts not offset will be paid to the payee(s) listed in the payment certification record.


(3) This section does not apply to any debt or claim arising under the Internal Revenue Code.


(4)(i) This section applies to Federal Old Age, Survivors and Disability Insurance (OASDI) overpayments provided the requirements of 31 U.S.C. 3720A(f)(1) and (2) are met with respect to such overpayments.


(ii) For purposes of this section, OASDI overpayment means any overpayment of benefits made to an individual under title II of the Social Security Act (42 U.S.C. 401 et seq.).


(5) A creditor agency is not precluded from using debt collection procedures, such as wage garnishment, to collect debts that have been submitted to Fiscal Service for purposes of offset under this part. Such debt collection procedures may be used separately or in conjunction with offset collection procedures.


(c) Regulations. Prior to submitting debts to Fiscal Service for collection by tax refund offset, Federal agencies shall promulgate temporary or final regulations under 31 U.S.C. 3716 and 31 U.S.C. 3720A, governing the agencies’ authority to collect debts by administrative offset, in general, and offset of tax refund payments, in particular.


(d) Agency certification and referral of debt – (1) Past-due, legally enforceable debt eligible for tax refund offset. For purposes of this section, when a Federal agency refers a past-due, legally enforceable debt to Fiscal Service for tax refund offset, the agency will certify to Fiscal Service that:


(i) The debt is past-due and legally enforceable in the amount submitted to Fiscal Service and that the agency will ensure that collections are properly credited to the debt;


(ii) The creditor agency has made reasonable efforts to obtain payment of the debt in that the agency has:


(A) Submitted the debt to Fiscal Service for collection by administrative offset and complied with the provisions of 31 U.S.C. 3716(a) and related regulations, to the extent that collection of the debt by administrative offset is not prohibited by statute;


(B) Notified, or has made a reasonable attempt to notify, the debtor that the debt is past-due, and unless repaid within 60 days after the date of the notice, will be referred to Fiscal Service for tax refund offset;


(C) Given the debtor at least 60 days to present evidence that all or part of the debt is not past-due or legally enforceable, considered any evidence presented by the debtor, and determined that the debt is past-due and legally enforceable; and


(D) Provided the debtor with an opportunity to make a written agreement to repay the amount of the debt;


(iii) The debt is at least $25; and


(iv) In the case of an OASDI overpayment –


(A) The individual is not currently entitled to monthly insurance benefits under title II of the Social Security Act (42 U.S.C. 401 et seq.);


(B) The notice describes conditions under which the Commissioner of Social Security is required to waive recovery of the overpayment, as provided under 42 U.S.C. 404(b); and


(C) If the debtor files a request for a waiver under 42 U.S.C. 404(b) within the 60-day notice period, the agency has considered the debtor’s request.


(2) Pre-offset notice and consideration of evidence for past-due, legally enforceable debt. (i) For purposes of paragraph (d)(1)(iii)(B) of this section, a creditor agency has made a reasonable attempt to notify the debtor if the agency uses the current address information contained in the agency’s records related to the debt. Agencies may, but are not required to, obtain address information from the IRS pursuant to 26 U.S.C. 6103(m)(2), (4), or (5).


(ii) For purposes of paragraph (d)(1)(iii)(C) of this section, if the evidence presented by the debtor is considered by an agent of the creditor agency, or other entities or persons acting on the agency’s behalf, the debtor must be accorded at least 30 days from the date the agent or other entity or person determines that all or part of the debt is past-due and legally enforceable to request review by an officer or employee of the agency of any unresolved dispute. The agency must then notify the debtor of its decision.


(3) Referral of past-due, legally enforceable debt. A Federal agency will submit past-due, legally enforceable debt information for tax refund offset to Fiscal Service in the time and manner prescribed by Fiscal Service. For each debt, the creditor agency will include the following information:


(i) The name and taxpayer identifying number (as defined in 26 U.S.C. 6109) of the debtor who is responsible for the debt;


(ii) The amount of such past-due and legally enforceable debt;


(iii) The date on which the debt became past-due;


(iv) The designation of the Federal agency or subagency referring the debt; and


(v) In the case of an OASDI overpayment, a certification by the Commissioner of Social Security designating whether the amount payable to the agency is to be deposited in either the Federal Old-Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund, but not both.


(4) Correcting and updating referral. If, after referring a past-due, legally enforceable debt to Fiscal Service as provided in paragraph (d)(3) of this section, a creditor agency determines that an error has been made with respect to the information transmitted to Fiscal Service, or if an agency receives a payment or credits a payment to the account of a debtor referred to Fiscal Service for offset, or if the debt amount is otherwise incorrect, the agency shall promptly notify Fiscal Service and make the appropriate correction of the agency’s records. Creditor agencies will provide certification as required under paragraph (d)(1) of this section for any increases to amounts owed.


(5) Fiscal Service may reject a certification which does not comply with the requirements of paragraph (d)(1) of this section. Upon notification of the rejection and the reason for the rejection, a creditor agency may resubmit the debt with a corrected certification.


(6)(i) Creditor agencies may submit debts to Fiscal Service for collection by tax refund offset irrespective of the amount of time the debt has been outstanding. Accordingly, all nontax debts, including debts that were delinquent for ten years or longer prior to December 28, 2009 may be collected by tax refund offset.


(ii) For debts outstanding more than ten years on or before December 28, 2009, creditor agencies must certify to Fiscal Service that the notice of intent to offset described in paragraph (d)(1)(ii)(B) of this section was sent to the debtor after the debt became ten years delinquent. This requirement will apply even in a case where notice was also sent prior to the debt becoming ten years delinquent, but does not apply to any debt that could be collected by offset without regard to any time limitation prior to December 28, 2009.


(e) Post-offset notice to the debtor, the creditor agency, and the IRS. (1)(i) Fiscal Service will notify the payee(s) to whom the tax refund payment is due, in writing of:


(A) The amount and date of the offset to satisfy a past-due, legally enforceable nontax debt;


(B) The creditor agency to which this amount has been paid or credited; and


(C) A contact point within the creditor agency that will handle concerns or questions regarding the offset.


(ii) The notice in paragraph (e)(1)(i) of this section will also advise any non-debtor spouse who may have filed a joint tax return with the debtor of the steps which a non-debtor spouse may take in order to secure his or her proper share of the tax refund. See paragraph (f) of this section.


(2) Fiscal Service will advise each creditor agency of the names, mailing addresses, and identifying numbers of the debtors from whom amounts of past-due, legally enforceable debt were collected and of the amounts collected from each debtor for that agency. Fiscal Service will not advise the creditor agency of the source of payment from which such amounts were collected. If a payment from which an amount of past-due, legally enforceable debt is to be withheld is payable to two individual payees, Fiscal Service will notify the creditor agency and furnish the name and address of each payee to whom the payment was payable.


(3) At least weekly, Fiscal Service will notify the IRS of the names and taxpayer identifying numbers of the debtors from whom amounts of past-due, legally enforceable debt were collected and the amounts collected from each debtor.


(f) Offset made with regard to a tax refund payment based upon joint return. If the person filing a joint return with a debtor owing the past-due, legally enforceable debt takes appropriate action to secure his or her proper share of a tax refund from which an offset was made, the IRS will pay the person his or her share of the refund and request that Fiscal Service deduct that amount from amounts payable to the creditor agency. Fiscal Service and the creditor agency will adjust their debtor records accordingly.


(g) Disposition of amounts collected. Fiscal Service will transmit amounts collected for past-due, legally enforceable debts, less fees charged under paragraph (h) of this section, to the creditor agency’s account. If an erroneous payment is made to any agency, Fiscal Service will notify the creditor agency that an erroneous payment has been made. The agency shall pay promptly to Fiscal Service an amount equal to the amount of the erroneous payment (without regard to whether any other amounts payable to such agency have been paid).


(h) Fees. The creditor agency will reimburse Fiscal Service and the IRS for the full cost of administering the tax refund offset program. Fiscal Service will deduct the fees from amounts collected prior to disposition and transmit a portion of the fees deducted to reimburse the IRS for its share of the cost of administering the tax refund offset program. To the extent allowed by law, creditor agencies may add the offset fees to the debt.


(i) Review of tax refund offsets. Any reduction of a taxpayer’s refund made pursuant to 26 U.S.C. 6402(d) shall not be subject to review by any court of the United States or by the Secretary of the Treasury, Fiscal Service or IRS in an administrative proceeding. No action brought against the United States to recover the amount of this reduction shall be considered to be a suit for refund of tax. Any legal, equitable, or administrative action by any person seeking to recover the amount of the reduction of the overpayment must be taken against the Federal creditor agency to which the amount of the reduction was paid. Any action which is otherwise available with respect to recoveries of overpayments of benefits under 42 U.S.C. 404 must be taken against the Commissioner of Social Security.


(j) Access to and use of confidential tax information. Access to and use of confidential tax information in connection with the tax refund offset program are restricted by 26 U.S.C. 6103. Generally, agencies will not receive confidential tax information from Fiscal Service. To the extent such information is received, agencies are subject to the safeguard, recordkeeping, and reporting requirements of 26 U.S.C. 6103(p)(4) and the regulations thereunder. The agency shall inform its officers and employees who access or use confidential tax information of the restrictions and penalties under the Internal Revenue Code for misuse of confidential tax information.


(k) Effective date. This section applies to tax refund payments payable under 26 U.S.C. 6402 after January 1, 1998.


[62 FR 34179, June 25, 1997, as amended at 74 FR 27433, June 10, 2009; 74 FR 68538, Dec. 28, 2009; 75 FR 746, Jan. 4, 2010]


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

(a) Definitions. For purposes of this section:


Debt as used in this section is synonymous with the term past-due support unless otherwise indicated.


Debtor as used in this section means a person who owes past-due support.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury.


HHS means the Department of Health and Human Services, Office of Child Support Enforcement.


IRS means the Internal Revenue Service, a bureau of the Department of the Treasury.


Past-due support means the amount of support, determined under a court order, or an order of an administrative process established under State law, for support and maintenance of a child, or of a child and the parent with whom the child is living, which has not been paid, as defined in 42 U.S.C. 664(c).


State means the several States of the United States. The term “State” also includes the District of Columbia, American Samoa, Guam, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Commonwealth of Puerto Rico.


Tax refund offset means withholding or reducing a tax refund payment by an amount necessary to satisfy a debt owed by the payee(s) of a tax refund payment.


Tax refund payment means any overpayment of Federal taxes to be refunded to the person making the overpayment after the IRS makes the appropriate credits as provided in 26 U.S.C. 6402(a) and 26 CFR 6402-3(a)(6)(i) for any liabilities for any Federal tax on the part of the person who made the overpayment.


(b) General rule. (1) Past-due support will be collected by tax refund offset upon notification to Fiscal Service in accordance with 26 U.S.C. 6402(c), 42 U.S.C. 664 and this section. Collection by offset under 26 U.S.C. 6402(c) is a collection procedure separate from the collection procedures provided by 26 U.S.C. 6305 and 26 CFR 301.6305-1, relating to the assessment and collection of certain child and spousal support liabilities. Tax refund offset may be used separately or in conjunction with the collection procedures provided in 26 U.S.C. 6305, as well as other collection procedures.


(2) Fiscal Service will compare tax refund payment records, as certified by the IRS, with records of debts submitted to Fiscal Service. A match will occur when the taxpayer identifying number (as that term is used in 26 U.S.C. 6109) and name of a payment certification record are the same as the taxpayer identifying number and name of a delinquent debtor record. When a match occurs and all other requirements for tax refund offset have been met, Fiscal Service will reduce the amount of any tax refund payment payable to a debtor by the amount of any past-due support debt owed by the debtor. Any amounts not offset will be paid to the payee(s) listed in the payment certification record.


(c) Notification of past-due support – (1) Past-due support eligible for tax refund offset. Past-due support qualifies for tax refund offset if:


(i)(A) There has been an assignment of the support obligation to a State and the amount of past-due support is not less than $25.00, or such higher amount as HHS rules may allow, whichever is greater; or


(B) A State agency is providing support collection services under 42 U.S.C. 654(4) and the amount of the past-due support is not less than $500.00; and


(ii) A notification of liability for past-due support has been received by Fiscal Service as prescribed by paragraphs (c)(2) or (c)(3) of this section.


(2) Notification of liability for past-due support and transmission of information to Fiscal Service by HHS. States notifying HHS of past-due support shall do so in the manner and format prescribed by HHS. The notification of liability shall be accompanied by a certification that the State has complied with the requirements contained in paragraph (c)(4) of this section and with any requirements applicable to the offset of Federal tax refunds to collect past-due support imposed by State law or procedures. HHS shall consolidate and transmit to Fiscal Service the information contained in the notifications of liability for past-due support submitted by the States provided that the State has certified that the requirements of paragraph (c)(4) of this section have been met.


(3) Notification of liability for past-due support transmitted directly to Fiscal Service by States. States must notify HHS of past-due support in accordance with the provisions of paragraph (c)(2) of this section unless HHS rules authorize notification to Fiscal Service directly. If authorized by HHS rules, States may notify Fiscal Service directly of past-due support. States notifying Fiscal Service directly of past-due support shall do so in the manner and format prescribed by Fiscal Service. The notification of liability shall be accompanied by a certification that the State has complied with the requirements contained in paragraph (c)(4) of this section and with any requirements applicable to the offset of Federal tax refunds to collect past-due support imposed by State law or procedures. Fiscal Service may reject a notification of past-due support which does not comply with the requirements of this section. Upon notification of the rejection and the reason for rejection, the State may resubmit a corrected notification.


(4) Advance notification to debtor of intent to collect by tax refund offset. The State, or HHS if the State requests and HHS agrees, is required to provide a written notification to the debtor, pursuant to the provisions of 42 U.S.C. 664(a)(3) and 45 CFR 303.72(e), informing the debtor that the State intends to refer the debt for collection by tax refund offset. The notice also shall:


(i) Instruct the debtor of the steps which may be taken to contest the State’s determination that past-due support is owed or the amount of the past-due support;


(ii) Advise any non-debtor who may file a joint tax return with the debtor of the steps which a non-debtor spouse may take in order to secure his or her proper share of the tax refund; and


(iii) In cases when a debt is being enforced by more than one State, advise the debtor of his or her opportunities to request a review with the State enforcing collection or the State issuing the support order as prescribed by the provisions of 45 CFR 303.72(g).


(5) Correcting and updating notification. The State shall, in the manner and in the time frames provided by Fiscal Service or HHS, notify Fiscal Service or HHS of any deletion or net decrease in the amount of past-due support referred to Fiscal Service, or HHS as the case may be, for collection by tax refund offset. The State may notify Fiscal Service or HHS of any increases in the amount of the debt referred to Fiscal Service for collection by tax refund offset provided that the State has complied with the requirements of paragraph (c)(4) of this section with regard to those debts.


(6) Collection of past-due support enforced by multiple States. When a State has knowledge that the debt is being enforced by more than one State, the State notifying Fiscal Service, or HHS as the case may be, of the debt shall inform any such other State involved in enforcing the debt when it receives the offset amount.


(d) Priorities for offset. (1) As provided in 26 U.S.C. 6402, a tax refund payment shall be reduced in the following order of priority:


(i) First, by the amount of any past-due support which is to be offset under 26 U.S.C. 6402(c) and 42 U.S.C. 464;


(ii) Second, by the amount of any past-due, legally enforceable debt owed to a Federal agency which is to be offset under 26 U.S.C. 6402(d), 31 U.S.C. 3720A and § 285.2 of this part; and


(iii) Third, by the amount of any past-due, legally enforceable debt owed to States (other than past-due support) which is to be offset under 26 U.S.C. 6402(e) or 26 U.S.C. 6402(f).


(2) Reduction of the tax refund payment pursuant to 26 U.S.C. 6402(a), (c), (d), and (e) shall occur prior to crediting the overpayment to any future liability for an internal revenue tax. Any amount remaining after tax refund offset under 26 U.S.C. 6402(a), (c), (d), and (e) shall be refunded to the taxpayer, or applied to estimated tax, if elected by the taxpayer pursuant to IRS regulations.


(e) Post-offset notice. (1)(i) Fiscal Service shall notify the debtor in writing of:


(A) The amount and date of the offset to satisfy past-due support;


(B) The State to which this amount has been paid or credited; and


(C) A contact point within the State that will handle concerns or questions regarding the offset.


(ii) The notice in paragraph (e)(1)(i) of this section also will advise any non-debtor who may have filed a joint tax return with the debtor of the steps which a non-debtor spouse may take in order to secure his or her proper share of the tax refund. See paragraph (f) of this section.


(2) Fiscal Service will advise HHS of the names, mailing addresses, and identifying numbers of the debtors from whom amounts of past-due support were collected, of the amounts collected from each debtor through tax refund offset, the names of any non-debtor spouses who may have filed a joint return with the debtor, and of the State on whose behalf each collection was made. Alternatively, Fiscal Service will provide such information to each State that refers debts directly to Fiscal Service. Fiscal Service will inform HHS and each State that the payment source is a tax refund payment.


(3) At least weekly, Fiscal Service will notify the IRS of the names and taxpayer identifying numbers of the debtors from whom amounts owed for past-due support were collected from tax refund offsets and the amounts collected from each debtor.


(4) At such time and in such manner as Fiscal Service and HHS agree, but no less than annually, Fiscal Service will advise HHS of the States which have furnished notices of past-due support, the number of cases in each State with respect to which such notices have been furnished, the amount of past-due support sought to be collected by each State, and the amount of such tax refund offset collections actually made in the case of each State. As Fiscal Service and HHS may agree, Fiscal Service may provide additional offset-related information about States which have furnished notices of past-due support.


(f) Offset made with regard to a tax refund payment based upon joint return. If the person filing a joint return with a debtor owing the past-due support takes appropriate action to secure his or her proper share of a tax refund from which an offset was made, the IRS will pay the person his or her share of the refund and request that Fiscal Service deduct that amount from amounts payable to HHS or the State, as the case may be. Fiscal Service and HHS, or the appropriate State, will adjust their debtor records accordingly.


(g) Disposition of amounts collected. Fiscal Service will transmit amounts collected for debts, less fees charged under paragraph (i) of this section, to HHS or to the appropriate State. If IRS notifies Fiscal Service that a tax refund payment that was offset was erroneous or otherwise not due to the taxpayer, Fiscal Service will notify HHS or the appropriate State that the tax refund payment was not eligible for offset. Subject to paragraph (h) of this section, Fiscal Service may deduct the amount of the erroneous offset funds from amounts payable to HHS or the State, as the case may be; or, upon Fiscal Service’s request, the State shall return promptly to the affected taxpayer or Fiscal Service an amount equal to the amount of the erroneous funds (unless the State previously has forwarded such amounts, or any portion of such amounts, to the affected taxpayer). HHS and States shall notify Fiscal Service any time HHS or a State returns an erroneous offset payment to an affected taxpayer. Fiscal Service and HHS, or the appropriate State, will adjust their debtor records accordingly.


(h) Time limitation. If IRS notifies Fiscal Service on or after January 1, 2016, that a tax refund payment that was offset was erroneous or otherwise not due to the taxpayer, Fiscal Service shall not deduct the amount of the erroneous offset funds from amounts due to HHS or the State, or otherwise demand return of the offset funds from the State pursuant to paragraph (g) of this section, if the date of IRS’s notification to Fiscal Service in paragraph (g) is more than six months after the date the tax refund was offset (i.e., the tax refund payment date); and the State has already forwarded the funds as required or authorized by 42 U.S.C. 657. This paragraph does not apply to paragraph (f) of this section.


(i) Fees. The State will pay a fee to Fiscal Service for the full cost of administering the tax refund offset program. The fee (not to exceed $25 per case submitted) will be established annually in such amount as Fiscal Service and HHS agree to be sufficient to reimburse Fiscal Service for the full cost of the offset procedure. Fiscal Service will deduct the fees from amounts collected prior to disposition and transmit a portion of the fees deducted to reimburse the IRS for its share of the cost of administering the tax refund offset program. Fees will be charged only for actual tax refund offsets completed.


(j) Review of tax refund offsets. In accordance with 26 U.S.C. 6402(f), any reduction of a taxpayer’s refund made pursuant to 26 U.S.C. 6402(c), (d), or (e) shall not be subject to review by any court of the United States or by the Secretary of the Treasury, Fiscal Service or IRS in an administrative proceeding. No action brought against the United States to recover the amount of this reduction shall be considered to be a suit for refund of tax.


(k) Access to and use of confidential tax information. Access to and use of confidential tax information in connection with the tax refund offset program is permitted to the extent necessary in establishing appropriate agency records, locating any person with respect to whom a reduction under 26 U.S.C. 6402(c) is sought for purposes of collecting the debt, and in the defense of any litigation or administrative procedure ensuing from a reduction made under section 6402(c).


(l) Effective date. This section applies to tax refund payments payable under 26 U.S.C. 6402 after January 1, 1999.


[63 FR 72094, Dec. 30, 1998, as amended at 72 FR 59480, Oct. 22, 2007; 74 FR 27433, June 10, 2009; 80 FR 81465, Dec. 30, 2015]


§ 285.4 Offset of Federal benefit payments to collect past-due, legally enforceable nontax debt.

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


(2) As used in this section, benefit payments “due to” an individual, “payable to” an individual, and/or benefit payments “received by” an individual, refer to those benefit payments expected to be paid to an individual before any amounts are offset to satisfy the payee’s delinquent debt owed to the United States. Nothing in these phrases, similar phrases, or this section is intended to imply or confer any new or additional rights or benefits on an individual with respect to his or her entitlement to benefit payments. The Bureau of the Fiscal Service (Fiscal Service), the Social Security Administration, the Railroad Retirement Board, and other payment agencies are not liable for the amount offset from an individual’s benefit payment on the basis that the underlying obligation, represented by the payment before the offset was taken, was not satisfied. See 31 U.S.C. 3716(c)(2)(A).


(b) Definitions. As used in this section:


Administrative offset or offset means withholding funds payable by the United States (including funds payable by the United States on behalf of a State government) to, or held by the United States for, a person to satisfy a debt.


Agency or Federal agency means a department, agency, court, court administrative office, or instrumentality in the executive, judicial, or legislative branch of the Federal Government, including government corporations.


Covered benefit payment means a Federal benefit payment payable to an individual under the Social Security Act (other than SSI payments), part B of the Black Lung Benefits Act, or any law administered by the Railroad Retirement Board (other than payments that such Board determines to be tier 2 benefits). The amount of the covered benefit payment payable to a debtor for purposes of this section will be the amount after reduction or deduction required under the laws authorizing the program. Reductions to recover benefit overpayments are excluded from the covered benefit payment when calculating amounts available for offset.


Creditor agency means a Federal agency owed a debt that seeks to collect that debt through administrative offset.


Debt or claim means an amount of money, funds, or property which has been determined by an agency official to be due the United States from any person, organization, or entity except another Federal agency. Debt or claim does not include a debt or claim arising under the Internal Revenue Code of 1986 or the tariff laws of the United States.


Debtor means a person who owes a debt. The term “person” includes any individual, organization or entity, except another Federal agency.


Disbursing official means an official who has authority to disburse public money pursuant to 31 U.S.C. 3321 or another law, including an official of the Department of the Treasury, the Department of Defense, the United States Postal Service, or any other government corporation, or any official of the United States designated by the Secretary of the Treasury to disburse public money.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury.


Monthly covered benefit payment means a covered benefit payment payable to a payee on a recurring basis at monthly intervals that is not expressly limited in duration, at the time the first payment is made, to a period of less than 12 months.


Payee means a person who is due a payment from a disbursing official. For purposes of this section, a “payee” is a person who is entitled to the benefit of all or part of a payment from a disbursing official.


Taxpayer identifying number means the identifying number described under section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109). For an individual, the taxpayer identifying number generally is the individual’s social security number.


(c) Administrative offset, generally. Disbursing officials shall offset payments to satisfy, in whole or in part, debts owed by the payee. Disbursing officials shall compare payment records with records of debts submitted to Fiscal Service for collection by administrative offset. A match will occur when the taxpayer identifying number and name of the payee (as defined in paragraph (b) of this section) on a payment record are the same as the taxpayer identifying number and name of the debtor on a debt record. When a match occurs and all other requirements for offset have been met, the disbursing official shall offset the payment to satisfy, in whole or in part, the debt. Any amounts not offset shall be paid to the payee. Covered benefit payments, i.e., payments made to individuals under the Social Security Act (other than Supplemental Security Income (SSI) payments), part B of the Black Lung Benefits Act, or any law administered by the Railroad Retirement Board (RRB) (other than tier 2 benefit payments) are among the types of payments which may be offset to collect debts owed to the United States. Offset of covered benefit payments are subject to the limitations contained in this section. Offsets of covered benefit payments will occur only if the name and taxpayer identifying number of the person who is entitled to the benefit of all or a part of the payment matches the name and taxpayer identifying number of the debtor.


(d) Submission of debts to Fiscal Service for collection by administrative offset. Creditor agencies must notify Fiscal Service of all past-due, legally enforceable debt delinquent for more than 120 days for purposes of collection by administrative offset. Creditor agencies may notify Fiscal Service of all debt delinquent for less than 120 days for purposes of collection by administrative offset. Prior to such notification, creditor agencies must certify to Fiscal Service that the debt is past-due, legally enforceable, and that the creditor agency has provided the debtor with notice and an opportunity for a review in accordance with the provisions of 31 U.S.C. 3716(a) and other applicable law.


(e) Offset amount. (1) The amount offset from a monthly covered benefit payment shall be the lesser of:


(i) The amount of the debt, including any interest, penalties and administrative costs;


(ii) An amount equal to 15% of the monthly covered benefit payment; or


(iii) The amount, if any, by which the monthly covered benefit payment exceeds $750.


(2) A debtor shall not receive a refund of any amounts offset if the debtor’s monthly covered benefit payments are reduced, suspended, terminated, or otherwise not received for a period of 12 months.


(3) Examples. (i) A debtor receives monthly Social Security benefits of $850. The amount offset is the lesser of $127.50 (15% of $850) or $100 (the amount by which $850 exceeds $750). In this example, the amount offset is $100 (assuming the debt is $100 or more).


(ii) A debtor receives monthly Social Security benefits of $1250. The amount offset is the lesser of $187.50 (15% of $1250) or $500 (the amount by which $1250 exceeds $750). In this example, the amount offset is $187.50 (assuming the debt is $187.50 or more).


(iii) A debtor receives monthly Social Security payments of $650. No amount will be offset because $650 is less than $750.


(f) Notification of offset. (1) Before offsetting a covered benefit payment, the disbursing official will notify the payee in writing of the date offset will commence. The notice shall inform the payee of the type of payment that will be offset; the identity of the creditor agency which requested the offset; and a contact point within the creditor agency that will handle concerns regarding the offset.


(2) The disbursing official conducting the offset will notify the payee in writing of the occurrence of the offset to satisfy, in whole or in part, a delinquent debt owed to the United States. The notice shall inform the payee of the type and amount of the payment that was offset; the identity of the creditor agency which requested the offset; and a contact point within the creditor agency that will handle concerns regarding the offset.


(3) Non-receipt by the debtor of the notices described in paragraphs (f)(1) and (f)(2) of this section shall not impair the legality of the administrative offset.


(g) Fees. A fee which Fiscal Service has determined to be sufficient to cover the full cost of the offset procedure, shall be deducted from each offset amount. Creditor agencies may add this fee to the debt if not otherwise prohibited by law.


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


[63 FR 44988, Aug. 21, 1998, as amended at 81 FR 1319, Jan. 12, 2016]


§ 285.5 Centralized offset of Federal payments to collect nontax debts owed to the United States.

(a) Scope. (1) This section governs the centralized offset of Federal payments to collect delinquent, nontax debts owed to Federal agencies in accordance with 31 U.S.C. 3716, 3720A and 26 U.S.C. 6402 and applicable regulations. The Department of the Treasury’s Bureau of the Fiscal Service (Fiscal Service) administers centralized offset through the Treasury Offset Program. Offset occurs when the Federal government withholds part or all of a debtor’s Federal payment to satisfy the debtor’s delinquent debt owed to the government.


(2) Special rules apply to the collection of delinquent, nontax debts through the centralized offset of certain types of Federal payments, including tax refunds (31 CFR 285.2), Federal benefit payments (31 CFR 285.4), and Federal salary payments (31 CFR 285.7). While this rule applies to such payments, nothing in this rule is intended to contradict any provision of those more specific sections. To the extent any provision of this rule is inconsistent with a more specific provision of § 285.2, § 285.4 or § 285.7 of this part, the more specific provision shall apply.


(3) The receipt of collections pursuant to this section does not preclude a Federal agency from pursuing other debt collection remedies in conjunction with centralized offset. Nothing in this section precludes an agency from pursuing all available debt collection remedies simultaneously, provided that collections do not exceed the amount of the debt, including any interest, penalties, and administrative costs.


(b) Definitions. As used in this section:


Agency or Federal agency means a department, agency or subagency, court, court administrative office, or instrumentality in the executive, judicial, or legislative branch of the Federal Government, including government corporations.


Centralized offset means the offset of Federal payments through the Treasury Offset Program to collect debts which creditor agencies have certified pursuant to 31 U.S.C. 3716(c), 3720A(a) and applicable regulations. The term “centralized offset” includes the Treasury Offset Program’s processing of offsets of Federal payments disbursed by disbursing officials other than Fiscal Service.


Creditor agency has the same meaning as found at 31 U.S.C. 3701(e)(1) and means any Federal agency that is owed a claim or debt that seeks to collect that claim or debt through offset of Federal payments.


Debt or claim has the meaning contained in 31 U.S.C. 3701(b) and means any amount of money, funds, or property that has been determined by an appropriate official of the Federal government to be owed to the United States by a person, organization, or entity, except another Federal agency. The terms “debt” and “claim” are synonymous and include debt administered by a third party acting as an agent for the Federal Government. For purposes of this section, the term “debt” does not include debts arising under the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.), the tariff laws of the United States, or the Social Security Act (42 U.S.C. 301 et seq.), except to the extent provided in sections 204(f) and 1631(b)(4) of such Act (42 U.S.C. 404(f) and 1383(b)(4)(A), respectively) and 31 U.S.C. 3716(c).


Debt collection center means a Federal agency or a unit or subagency within a Federal agency that has been designated by the Secretary to collect debt owed to the United States.


Debtor means a person who owes a debt to the United States.


Delinquent or past-due refers to the status of a debt and means a debt has not been paid by the date specified in the agency’s initial written demand for payment, or applicable agreement or instrument (including a post-delinquency payment agreement), unless other payment arrangements satisfactory to the creditor agency have been made. Nothing in this section is intended to define whether a debt is delinquent or past-due for purposes other than offset under this section.


Delinquent debt record means information about a past-due, legally enforceable debt submitted by a creditor agency to Fiscal Service for purposes of offset in accordance with the provisions of this section. Information about a past-due, legally enforceable debt includes, but is not limited to, the amount of the debt and the debtor’s name, address, and taxpayer identifying number.


Disbursing official means an official who has authority to disburse public money pursuant to 31 U.S.C. 3321 or another law, including an official of the Department of the Treasury, the Department of Defense, the United States Postal Service, or any other government corporation, or any official of the United States designated by the Secretary of the Treasury to disburse public money.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury and its disbursing office. Fiscal Service is responsible for administering centralized offset.


Legally enforceable refers to a characteristic of a debt and means there has been a final agency determination that the debt, in the amount stated, is due, and there are no legal bars to collection by offset. Debts that are not legally enforceable for purposes of this section include, but are not limited to, debts subject to the automatic stay in bankruptcy proceedings or debts covered by a statute that prohibits collection of such debt by offset. For example, if a delinquent debt is the subject of a pending administrative review process required by statute or regulation, and if collection action during the review process is prohibited, the debt is not considered legally enforceable for purposes of this section. Nothing in this section is intended to define whether a debt is legally enforceable for purposes other than offset under this section.


Match means the taxpayer identifying number and name (or derivative thereof) of the payee on a payment record are the same as the taxpayer identifying number and name of the debtor on a delinquent debt record.


Offset means withholding funds payable by the United States to, or held by the United States for, a person to satisfy a debt owed by the payee.


Past-due has the same meaning as “delinquent”, as defined above.


Payee means a person who is due a payment from a disbursing official as certified by the payment agency. For purposes of this section, a “payee” is a person who is entitled to the benefit of all or part of a payment from a disbursing official.


Payment agency means any agency that transmits payment requests, in the form of certified payment vouchers or other similar forms, to a disbursing official for disbursement.


Payment record means information contained on a payment request, in the form of a certified payment voucher or other similar form, that has been transmitted to a disbursing official for disbursement in accordance with the provisions of 31 U.S.C. 3325 and 3528 or other applicable law. For purposes of matching, “payment record” may include information extracted from a payment request. Such information could include, but is not limited to, the amount and type of payment and the payee’s name, address, and taxpayer identifying number.


Person means an individual, corporation, partnership, association, organization, State or local government, or any other type of entity other than a Federal agency.


Recurring payment means a payment to an individual that is expected to be payable to a payee at regular intervals, at least four times annually. The term “recurring payment” does not include payments made pursuant to a Federal contract, grant or cooperative agreement.


Representative payee means a person named as payee on the payment voucher certified by the payment agency who is acting on behalf of a person entitled to receive the benefit of all or part of the payment.


Secretary means the Secretary of the Treasury.


Taxpayer identifying number means the identifying number described under section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109). For an individual, the taxpayer identifying number is generally the individual’s social security number.


(c) General rule. (1) Creditor agencies shall submit delinquent debts to Fiscal Service for purposes of offset in accordance with paragraph (d) of this section.


(2) Disbursing officials shall compare payment records with delinquent debt records submitted to Fiscal Service for collection by offset. When a match occurs, and all other requirements for offset have been met, the disbursing official shall offset the payment to satisfy, in whole or part, the payee’s debt to the extent allowed by law. The disbursing official shall pay any amounts not offset to the payee. See paragraphs (e), (f), (g), and (h) of this section.


(d) Requirements for creditor agencies – (1) Mandatory notification of delinquent debts. As required by 31 U.S.C. 3716(c)(6), and in accordance with the provisions of this section, a creditor agency shall notify Fiscal Service of all legally enforceable debts over 120 days delinquent that are owed to the creditor agency. By complying with this requirement, creditor agencies will satisfy the requirement of 31 U.S.C. 3720A(a) to notify the Secretary of past due, legally enforceable debt for purposes of tax refund offset. If a debt which is over 120 days delinquent is considered not legally enforceable solely because it is under review as described in paragraph (d)(6)(ii)(C) of this section, the agency must submit the debt to Fiscal Service for collection by offset within 30 days of completing the review.


(2) Discretionary notification of delinquent debts. Creditor agencies may notify Fiscal Service of any debt that is less than 120 days delinquent, so long as the requirements of paragraph (d)(3) of this section are met.


(3) Debt eligibility. (i) A debt submitted to Fiscal Service for collection by centralized offset must be:


(A) Past-due in the amount stated by the creditor agency;


(B) Legally enforceable;


(C) More than $25, or such other amount as Fiscal Service may prescribe; and


(D) Not secured by collateral subject to a pending foreclosure action, unless the creditor agency certifies that offset will not affect the Government’s rights to the secured collateral.


(ii) The creditor agency must certify that the debt is eligible for collection by offset, as required in paragraph (d)(6) of this section.


(iii) Debts owed by foreign sovereigns may be referred to Treasury Offset Program at the discretion of the creditor agency to the extent allowed by law, but are excluded from mandatory referral under paragraph (d)(1) of this section.


(iv) In accordance with 31 U.S.C. 3719 and the procedures promulgated thereunder, creditor agencies must report to Treasury the amount of debt over 120 days delinquent eligible for the Treasury Offset Program. The procedures require that such report include the amount of debt over 120 days delinquent that the creditor agency has determined is not eligible for the Treasury Offset Program and the reasons for such determination.


(v) Creditor agencies may submit nontax debts to Fiscal Service for collection by centralized offset irrespective of the amount of time the debt has been outstanding. Accordingly, all nontax debts, including debts that were outstanding for ten years or longer prior to June 11, 2009 may be collected by centralized offset.


(4) Creditor agency regulations. Prior to submitting a debt to Fiscal Service for purposes of offset, Federal agencies shall prescribe regulations in accordance with the requirements of 31 U.S.C. 3716(b), 31 CFR 901.3(b)(4), 31 U.S.C. 3720A(a), and 31 CFR 285.2(c). Before submitting debts to Fiscal Service for purposes of offsetting Federal salary payments, creditor agencies must also publish regulations pursuant to 5 U.S.C. 5514, 31 CFR 285.7(d)(2), and 5 CFR 550.1104.


(5) Delinquent debt information requirements. For each debt submitted to Fiscal Service for offset, the creditor agency shall provide the following information:


(i) Name and taxpayer identifying number of the person who owes the debt;


(ii) Debtor’s address last known to the creditor agency;


(iii) The amount of the debt (including, as applicable, interest, penalties and administrative costs) and the date on which the debt became delinquent;


(iv) The address and telephone number of the contact point within the creditor agency who will handle questions, concerns or communications regarding the debt;


(v) Written certification as required in paragraph (d)(6) of this section; and


(vi) Other information as may be requested by Fiscal Service.


(6) Creditor agency certification. At the time the creditor agency notifies Fiscal Service of a debt for purposes of collection by offset, the creditor agency shall provide, in the manner required by Fiscal Service, written certification to Fiscal Service that:


(i) The debt meets the requirements described in paragraph (d)(3)(i) of this section;


(ii) In compliance with 31 U.S.C. 3716, 3720A, 26 U.S.C. 6402, and applicable regulations, the creditor agency has made a reasonable attempt to provide each debtor with:


(A) Written notification, at least sixty days prior to submitting the debt and at the debtor’s most current address known to the agency, of the nature and the amount of the debt, the intention of the creditor agency to collect the debt through offset, and an explanation of the rights of the debtor;


(B) An opportunity to inspect and copy the records of the creditor agency with respect to the debt;


(C) An opportunity for a review within the creditor agency of the determination of indebtedness, including the opportunity to present evidence that all or part of the debt is not past-due or legally enforceable;


(D) An opportunity to enter into a written repayment agreement with the creditor agency; and


(E) In the case of Federal employees, an opportunity for a hearing prior to submitting the debt for Federal salary offset. See 5 U.S.C. 5514 and 5 CFR 550.1104. (See 31 CFR 285.7(d), which describes the authority to waive the salary offset certification as a prerequisite to referring the debt for other types of offsets.)


(iii) For debts outstanding more than ten years on or before June 11, 2009, the notice of intent to offset described in paragraph (d)(6)(ii)(A) of this section was sent to the debtor after the debt was outstanding for more than ten years, and that the debtor was afforded the rights described in paragraphs (d)(6)(ii)(B) through (E). This requirement will apply even in a case where notice was also sent prior to the debt being outstanding for ten years but does not apply to any debt that could be collected by offset without regard to any time limitation prior to June 11, 2009.


(iv) The creditor agency has complied with all statutes, regulations, and policies applicable to the creditor agency’s assessment of interest, penalties and administrative costs (including, as applicable, 31 U.S.C. 3717), and that the creditor agency has provided a written notice to debtors explaining the creditor agency’s requirements concerning any such charges assessed against those debtors;


(v) The individual signing the certification has the delegated authority to execute the certification on behalf of the head of the creditor agency; and


(vi) Such additional information that Fiscal Service may from time to time require in compliance with law, regulation or policy.


(7) Updating certification. After a debt has been submitted to Fiscal Service for purposes of collection by offset, the creditor agency shall provide, at least annually, in the manner and time frames required by Fiscal Service, written certification to Fiscal Service that:


(i) The debt continues to meet the requirements described in paragraph (d)(3) of this section; and


(ii) The creditor agency has properly credited all collections to the debt balance (other than collections received through centralized offset).


(8) Fiscal Service instructions to creditor agencies. Agencies will provide the certification in a form and manner prescribed by Fiscal Service. Fiscal Service will instruct agencies as to the form such written certifications will take and how certifications can be delivered to Fiscal Service, including, but not limited to, the use of electronic data transmission.


(9) Agencies which are both creditor and disbursing officials. A creditor agency that also designates disbursing officials pursuant to 31 U.S.C. 3321(c) is not required to certify debts arising out of its operations to Fiscal Service before such agency’s disbursing officials offset to collect such claims. This paragraph (d)(9) does not apply to Fiscal Service when it submits debts which it is servicing pursuant to 31 U.S.C. 3711(g).


(10) Correcting and updating debt information. (i) When submitting debts for offset, the creditor agency must properly credit all collections, other than collections received from centralized offset.


(ii) The creditor agency shall update delinquent debt records, in the manner and time frames required by Fiscal Service, to reflect any amounts credited by the creditor agency to the debtor’s account after submission of the debt to Fiscal Service (other than credits for amounts collected by centralized offset).


(iii) The creditor agency may update delinquent debt records to reflect any increases in the amount of the debt submitted to Fiscal Service for collection by offset provided that the creditor agency has complied with the requirements of paragraph (d)(6) of this section with regard to the increased amounts.


(iv) The creditor agency shall notify Fiscal Service immediately of any change in the status of the legal enforceability of the debt – for example, if the creditor agency receives notice that the debtor has filed for bankruptcy protection.


(v) The creditor agency shall notify Fiscal Service if it has returned any monies to the debtor/payee.


(11) Debts at Fiscal Service, a debt collection center, or the Department of Justice. If a creditor agency has transferred a debt to Fiscal Service or a Treasury-designated debt collection center pursuant to 31 U.S.C. 3711(g) and 31 CFR 285.12, or if a creditor agency has referred a debt to the Department of Justice for enforced collection, then Fiscal Service, the debt collection center, or the Department of Justice, as the case may be, is responsible for submitting the debt information to Fiscal Service to satisfy the creditor agency’s obligations under 31 U.S.C. 3716(c)(6) and this section.


(12) Certification of amount to be offset if different than maximum allowed by law. Generally, the amount of an offset will be calculated as set forth in paragraph (f)(2) of this section. If the creditor agency certifies to Fiscal Service that the creditor agency has determined the offset amount allowed by law would result in financial hardship to the debtor and that a lesser offset amount (specified either in dollar amount or as a percentage of the payment) is reasonable and appropriate based on the debtor’s financial circumstances, then the disbursing official shall offset such lesser amount specified by the creditor agency.


(13) Duplication of notices not required. Nothing in this section requires any creditor agency to duplicate any notice or opportunity for hearing or review provided to the debtor prior to offset.


(e) Payments made by the United States – (1) Payments eligible for offset. Except as set forth in paragraph (e)(2) of this section, all Federal payments are eligible for offset under this section. Eligible Federal payments include, but are not limited to, Federal wage, salary, and retirement payments, vendor and expense reimbursement payments, certain benefit payments, travel advances and reimbursements, grants, fees, refunds, judgments (including those certified for payment pursuant to 31 U.S.C. 1304), tax refunds, and other payments made by Federal agencies.


(2) Payments excluded from offset under this section. This section does not apply to the following payments:


(i) Black Lung Part C benefit payments, or Railroad Retirement tier 2 payments;


(ii) Payments made under the tariff laws of the United States;


(iii) Veterans Affairs benefit payments to the extent such payments are exempt from offset pursuant to 38 U.S.C. 5301;


(iv) Payments made under any program administered by the Secretary of Education under title IV of the Higher Education Act of 1965 for which payments are certified by the Department of Education;


(v) Payments made under any other Federal law if offset is expressly prohibited by Federal statute;


(vi) Payments made under any program for which the Secretary has granted an exemption in accordance with the provisions of 31 U.S.C. 3716(c)(3)(B) and paragraph (e)(7) of this section; and


(vii) Federal loan payments other than travel advances.


(3) Specific rules for certain payment types. (i) Specific rules apply with respect to the offset of the following types of payments:


(A) Social Security benefit payments (excluding Supplemental Security Income payments), Black Lung (part B) payments, and Railroad Retirement (other than tier 2) payments to the extent such payments are subject to offset under 31 U.S.C. 3716(c)(3)(A) (see 31 CFR 285.4);


(B) Federal salary payments (see 31 CFR 285.7; 5 CFR 550.1101 through 550.1108); and


(C) Tax refund payments (see 31 CFR 285.2).


(ii) This section governs the offset of such payments to the extent that this section is not inconsistent with the special rules that apply for a particular type of payment.


(4) Payments made to joint payees. If a payment is certified to more than one payee (i.e. , joint payees), the entire payment (including a tax refund payment) will be subject to offset for a debt of either payee, unless otherwise prohibited by law or regulation. See 31 CFR 285.2(g) regarding offset of joint tax refunds and claims to return offset funds to the non-debtor, joint payee.


(5) Payments made to representative payees. If a payment is made to a person solely in that person’s capacity as a representative payee for another person having the beneficial interest in a payment, the disbursing official shall offset that payment only to collect debts owed by the person having the beneficial interest in the payment. Payment agencies are responsible for identifying representative payees.


(6) Assigned payments. (i) If a person, including a Federal contractor, assigns the right to receive a Federal payment to a third party (the “assignee”), the assigned payment will be subject to offset to collect a delinquent debt owed by the assignee.


(ii) An assigned payment will also be subject to offset to collect delinquent debts owed by the assignor unless:


(A) In accordance with 41 U.S.C. 15(e)-(f), the payment has been properly assigned to a financial institution pursuant to a Federal contract, the contract contains provisions prohibiting the payment from being reduced or offset for debts owed by the contractor, and the debt arose independently of the contract; or


(B) pursuant to 31 U.S.C. 3727, the payment is being made to the assignee as settlement or satisfaction of a claim brought by the assignee against the creditor agency based upon the contract, and the debt of the contractor arises independently of the contract; or


(C) the debtor has properly assigned the right to such payments and the debt arose after the effective date of the assignment.


(7) Payment agency requests for exemptions from centralized offset pursuant to 31 U.S.C. 3716(c)(3)(B) – (i) Means-tested payments. The Secretary will exempt from centralized offset payments made under means-tested programs when requested by the head of the agency making such payments. For purposes of this section “means-tested programs” are those which base eligibility on a determination that the income and/or assets of the beneficiary are inadequate to provide the beneficiary with an adequate standard of living without program assistance.


(ii) Payments made under programs which are not means-tested. Upon written request from the payment agency, the Secretary may exempt classes of payments which are not means-tested. Payment agencies may request that the Secretary exempt 100% of each payment in a payment class or that the Secretary exempt a specific lesser percentage. The Secretary will consider such requests under standards prescribed by the Secretary and published on the Fiscal Service Web site. See www.fiscal.treasury.gov/debt.


(iii) Procedures for requesting exemptions. The head of the payment agency must make a request for exemption in writing. The request must comply with the procedures published by Fiscal Service and made available at its Web site. See www.fiscal.treasury.gov/debt.


(iv) Exemptions apply to classes of payments. The Secretary will only exempt classes of payments. Requests for exemption of individual payments will not be considered.


(8) Payment agency responsibilities. (i) Payment agencies shall prepare and submit payment vouchers in the manner prescribed by the disbursing official to ensure that all payments legally eligible for offset will be offset and all payments not eligible will not be offset. Payment agencies shall notify the disbursing agency, in the manner prescribed by Fiscal Service, that a payment is a recurring payment.


(ii) Payment agencies shall also review the nature of payments the agency certifies and notify Fiscal Service of any legal bars to centralized offset of payments.


(9) Payment and disbursing officials have satisfied the obligation underlying the payment. When an offset occurs, the debtor has received payment in full for the underlying obligation represented by the payment. Pursuant to 31 U.S.C. 3716(c)(2)(A), neither the disbursing official nor the payment agency shall be liable for the amount of the offset on the basis that the underlying obligation was not satisfied. For example, if an agency certifies a payment to a Federal contractor for work completed or services provided, and that payment is offset to collect a delinquent debt that the contractor owes to another Federal agency, the contractor has been paid in full for its services. When the creditor agency credits the offset amount to the contractor’s delinquent debt, the contractor has received full value for the services performed under the contract.


(f) Offset – (1) When offset occurs. When a match occurs and all other requirements for offset under 31 U.S.C. 3716(c), 3720A, and applicable regulations have been met, the disbursing official shall offset the payee’s Federal payment to satisfy, in whole or part, the debt owed by the debtor. Offsets will continue until the debt, including any interest, penalties, and administrative costs, is paid in full or otherwise resolved to the satisfaction of the creditor agency.


(2) Offset amount. (i) Except as otherwise provided in 31 CFR 285.4(e) and 285.7(g) (addressing centralized offset of certain Federal benefit payments and salary payments, respectively), the disbursing official shall offset the lesser of:


(A) The amount of the payment as shown on the payment record; or


(B) The amount of the debt, including any interest, penalties and administrative costs; or


(C) In the case of retirement annuity payments certified by the Office of Personnel Management, up to twenty-five percent of the amount of the payment as shown on the payment record.


(ii) Notwithstanding paragraph (f)(2)(i) of this section, if a creditor agency has specified another amount, either in dollars or as a percentage of the payment, pursuant to paragraph (d)(15) of this section, the disbursing official shall offset the amount specified by the creditor agency.


(3) Priorities for collecting multiple debts owed by the payee. (i) A levy pursuant to the Internal Revenue Code of 1986 shall take precedence over deductions under this section.


(ii) When a payment may be offset to collect more than one debt, amounts offset will be applied:


(A) First, to satisfy any past-due support that that the State is collecting under section 464 of the Social Security Act (see 285.1 and 285.3 of this part);


(B) Second, to satisfy any debts owed to Federal agencies, as described in this § 285.5; and


(C) Third, to any debts owed to States for debts other than past-due support (see §§ 285.6 and 285.8 of this part).


(g) Notices – (1) Warning notice by disbursing official to payee/debtor. Before offsetting a recurring payment, the disbursing official, or Fiscal Service on behalf of the disbursing official, will notify the payee in writing when offsets will begin (which may be stated as a number of days or number of payments from the time of the notice) and the anticipated amount of such offset (which may be stated as a percentage of the payment). Such notice shall also provide the information contained in paragraph (g)(3) of this section. Failure to send such notice does not affect the validity of the offset.


(2) No additional warning notice when collections are suspended and resumed. As described in paragraph (f)(3)(iii) of this section, Fiscal Service may suspend or reduce the application of collections from a recurring payment for one debt when another debt, which is owed by the same debtor and has a higher legal priority, is submitted to Fiscal Service for collection. The disbursing official is not required to send additional warning notices when collections for the lower priority debt resume; however, pursuant to paragraph (g)(3) of this section, each offset will be accompanied by an offset notice, which explains how the offset amounts were applied.


(3) Offset notice. When an offset occurs under this section, the disbursing official, or Fiscal Service on behalf of the disbursing official, shall notify the payee in writing that an offset has occurred including:


(i) A description of the payment and the amount of offset taken;


(ii) The identity of the creditor agency requesting the offset; and


(iii) The address and telephone number of the contact point within the creditor agency who will handle concerns regarding the offset.


(h) Notification to creditor and payment agencies. (1) Fiscal Service will notify the creditor agency of all offsets made to collect the creditor agency’s debts. Such notification shall include the complete name and taxpayer identifying number of each debtor/payee, the total amounts collected from each debtor/payee’s payment, and the amount of any fees charged by Fiscal Service and any other disbursing official conducting offsets. Fiscal Service will not advise the creditor agency of the source of payment from which such amounts were collected.


(2) When a non-Treasury disbursing official conducts the offset, that disbursing official will transmit to Fiscal Service all of the information necessary for Fiscal Service to send notification under paragraph (h)(1) of this section, including the amount of any fees that the creditor agency is responsible for paying.


(3) Fiscal Service will make available to the payment agency the information contained in the notification of offset, so that the payment agency may direct any questions concerning the claim to the appropriate contact person in the creditor agency.


(i) Disposition of amounts collected. (1) Fiscal Service will transmit amounts collected for debts, less fees charged pursuant to paragraph (j) of this section, to the appropriate creditor agency or agencies. Alternatively, Fiscal Service may bill the creditor agency for any fees charged pursuant to paragraph (j) of this section.


(2) If Fiscal Service learns from a paying agency that a payment should not have been made, and thus not offset, Fiscal Service will notify the creditor agency. Fiscal Service may deduct the offset amount from future amounts payable to the creditor agency. Alternatively, upon Fiscal Service’s request, the creditor agency shall return promptly to the disbursing official an amount equal to the amount of the offset (without regard to whether any other amounts payable to such disbursing official have been paid).


(3) Generally, the disbursing official is not responsible for refunding money to debtors. The creditor agency shall notify Fiscal Service any time the creditor agency returns all or any part of an offset payment to an affected payee. See paragraph (d)(10)(v) of this section. Fiscal Service and the creditor agency shall adjust the debtor records appropriately.


(j) Fees. Fiscal Service may charge a fee sufficient to cover the full cost of implementing the centralized offset program, including the amount of any fees charged by other disbursing officials conducting an offset under this section. Fiscal Service may deduct the fees from amounts collected by offset or may bill the creditor agencies. Fiscal Service will charge fees only for actual offsets collected.


(k) Waiver of certain provisions under the Computer Matching Privacy and Protection Act of 1988. As authorized by 31 U.S.C. 3716(f), Fiscal Service, under a delegation of authority from the Secretary, has waived certain requirements of the Computer Matching and Privacy Protection Act of 1988, Pub. L. No. 100-503, as amended, for matches between delinquent debt records and payment records for offset purposes upon written certification by the head of the creditor agency that the requirements of 31 U.S.C. 3716(a) have been met. Specifically, for administrative offset of Federal payments other than tax refunds, Fiscal Service has waived the requirements for a computer matching agreement contained in 5 U.S.C. 552a(o) and for post-match notice and verification contained in 5 U.S.C. 552a(p) so long as the creditor agency provides certification to Fiscal Service in accordance with the provisions of paragraph (d)(6) of this section. Such waiver is not necessary for offset of Federal tax refunds, pursuant to 5 U.S.C. 552a(a)(8)(B). The Data Integrity Board of the Department of the Treasury shall review and include in reports under 5 U.S.C. 552a(u)(3)(D) a description of the matching activities conducted for centralized offset under this section. No other Data Integrity Board is required to take any action under 5 U.S.C. 552a(u) concerning these computerized comparisons.


[67 FR 78942, Dec. 26, 2002, as amended at 70 FR 7135, Jan. 21, 2005; 74 FR 27433, June 10, 2009; 74 FR 27708, June 11, 2009; 81 FR 1319, Jan. 12, 2016]


§ 285.6 Administrative offset under reciprocal agreements with states.

(a) Scope. (1) This section sets forth the rules that apply to the administrative offset of Federal nontax payments to collect delinquent debts owed to States. As set forth in 31 U.S.C. 3716(h), States may participate in administrative offset so long as they meet certain requirements, including entering into reciprocal agreements with the Secretary of the Treasury. Such reciprocal agreements may contain any requirements that the Secretary considers appropriate to facilitate offset. Participation in offset under this section is voluntary for both Fiscal Service and the States. This section prescribes the minimum requirements for such reciprocal agreements, including provisions applicable to the offset of State payments, pursuant to State law, to collect delinquent Federal debts. Such offsets are defined in this section as “State payment offsets.”


(2) This section does not apply to the offset of Federal salary payments, Federal tax refunds (see 31 CFR 285.8), or the collection of past-due support debts (see 31 CFR 285.1 and 285.3).


(b) Definitions. (1) Unless otherwise defined in paragraph § 285.5(b) of this subpart.


(2) For purposes of this section:


Administrative offset has the meaning set forth in 31 U.S.C. 3701(a) and means withholding funds payable by the United States to, or held by the United States for, a person to satisfy a debt owed by the payee. The term debt in this definition means a State debt.


Debtor means a person who owes a debt to the United States or a State.


Federal debt means any amount of money, funds or property that has been determined by an appropriate official of the Federal government to be owed to the United States by a person, organization, or entity, except another Federal agency. The term includes debt administered by a third party acting as an agent for the Federal Government. For purposes of this section, the term “Federal debt” does not include debts arising under the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.), the tariff laws of the United States, or the Social Security Act (42 U.S.C. 301 et seq.), except to the extent provided in sections 204(f) and 1631(b)(4) of such Act (42 U.S.C. 404(f) and 1383(b)(4)(A), respectively) and 31 U.S.C. 3716(c).


Offset means withholding funds payable to a person to satisfy a debt owed by the payee.


Participating State means a State that has entered into a reciprocal agreement under this section.


Reciprocal agreement means a written agreement between Fiscal Service and a State, entered into pursuant to 31 U.S.C. 3716(h), which provides for administrative offset and State payment offset.


State has the meaning set forth in 31 U.S.C. 3701(b)(2) and includes the several states of the United States, the District of Columbia, American Samoa, Guam, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Commonwealth of Puerto Rico.


State debt means any amount of money, funds or property that has been determined by an appropriate State official to be owed to that State by a person, organization, or entity, except the United States, a foreign sovereign, or another State (including local governments within a State). For purposes of this rule, the term includes debt administered by a third party acting as an agent for the State.


State payment offset means withholding funds payable by a State to, or held by a State for, a person to satisfy a debt owed by the payee to the United States.


(c) General rule. Fiscal Service and other disbursing officials of the Federal Government will conduct administrative offset to collect past-due State debts certified to Fiscal Service, and participating States will conduct State payment offset to collect delinquent Federal debts in accordance with the terms of reciprocal agreements entered into between the States and Fiscal Service, acting on behalf of the Secretary. Upon notification of a delinquent State debt from a participating State to Fiscal Service, disbursing officials of the United States shall offset the Federal payments specified in the reciprocal agreement to collect the State debt. The amount offset, minus an offset fee, shall be forwarded to the State to be distributed in accordance with applicable laws and procedures. Upon notification of a delinquent Federal debt from Fiscal Service to a participating State, authorized officials of the participating State shall conduct State payment offset as specified in the applicable reciprocal agreement to collect the Federal debt.


(d) Reciprocal agreements. (1) Fiscal Service may enter into reciprocal agreements with States for administrative offset and State payment offset. The agreements shall contain any requirements which Fiscal Service considers appropriate to facilitate the offset and prevent duplicative efforts, and shall require States to prescribe procedures governing the collection of delinquent State debts which are substantially similar to requirements imposed on Federal agencies pursuant to 31 U.S.C. 3716(b). States may prescribe such procedures through legislation or regulations, as deemed appropriate by State officials. States which have entered into a reciprocal agreement with Fiscal Service pursuant to this section may thereafter request, in the manner prescribed in the reciprocal agreement, that administrative offsets be performed. Such requests shall be made by the appropriate State disbursing official, which, for purposes of this section, means an appropriate official of the State agency that is responsible for collecting the State debt. Reciprocal agreements must be signed by a State official authorized to enter into such agreements.


(2) Once Fiscal Service has entered into a reciprocal agreement with a State pursuant to this section, Fiscal Service may request that the State perform State payment offsets to collect delinquent Federal debts in accordance with the terms of the reciprocal agreement.


(3) A duly executed reciprocal agreement is required before a State may request an administrative offset pursuant to 31 U.S.C. 3716(h).


(e) Requirements for submitting State debts for administrative offset – (1) Debt eligibility. A State debt submitted to Fiscal Service for collection by administrative offset must meet the debt eligibility requirements of 31 CFR 285.5(d)(3)(i).


(2) Certification. At the time a participating State notifies Fiscal Service of a State debt for purposes of collection by administrative offset under this section, the State shall comply with the certification requirements set forth in paragraph 31 CFR 285.5(d)(6) with the following two exceptions:


(i) Paragraph (d)(6)(ii)(E) – Federal salary offset; and


(ii) Paragraph (d)(6)(iii) – Federal requirements for the assessment of interest and penalties to Federal debts. Additionally, with respect to paragraph (d)(6)(ii) of § 285.5, States shall only be required to certify that they have complied with the requirements of 31 U.S.C. 3716 (not 31 U.S.C. 3720A or 26 U.S.C. 6402) and this section 285.6. States shall also certify that they have complied with any requirements imposed by State law or procedure that may be applicable to administrative offset.


(f) State debts submitted to Fiscal Service for tax refund offset. A State shall be deemed to have complied with the requirements of paragraph (e)(2) of this section with respect to any State debt that the State certified to Treasury for collection pursuant to § 285.8 of this part.


(g) Federal Payments subject to administrative offset under this section. (1) The Federal payments that will be offset to collect a participating State’s debts shall be set forth in the reciprocal agreement. Federal payments that are excluded from administrative offset under this section include:


(i) Any payments described in 31 CFR 285.5(e)(2) “Payments excluded from offset”;


(ii) Payments due to an individual under the Social Security Act;


(iii) Payments due an individual pursuant to part B of the Black Lung Benefits Act;


(iv) Payments due an individual pursuant to any law administered by the Railroad Retirement Board;


(v) Federal tax refunds; and


(vi) Federal salary payments.


(h) Conducting the administrative offset. (1) Disbursing officials shall conduct administrative offset under this section in the same manner as set forth in 31 CFR 285.5(f) through (i).


(2) When a payee owes more than one delinquent State debt which has been referred to Fiscal Service for collection, amounts will be applied to delinquent State debts under this section after any amounts offset pursuant to any other section of this subpart A and any amounts levied pursuant 26 U.S.C. 6331.


(i) Liability of disbursing officials and payment agencies. Neither the Federal disbursing official nor the agency authorizing the Federal payment shall be liable to a debtor for the amount of the administrative offset on the basis that the underlying obligation, represented by the payment before the administrative offset was taken, was not satisfied.


(j) Notification to a State of Federal debt. (1) A State may set forth in the reciprocal agreement the requirements for Fiscal Service to follow when submitting a Federal debt for collection by State payment offset. Such agreements shall set forth all requirements contained in State law for the State payment offset. Such requirements, however, may not exceed the requirements for collecting Federal debts by administrative offset as set forth in § 285.5(d) of this subpart.


(2) Fiscal Service shall certify to a participating State that each debt Fiscal Service submits for State payment offset has been certified by the Federal creditor agency to be delinquent, valid, and legally enforceable in the amount stated, and that the Federal creditor agency owed the debt has complied with the requirements of 31 U.S.C. 3716(a) prior to submitting the debt for offset.


(k) Conducting State payment offset. (1) An official of a participating State shall conduct State payment offset pursuant to the laws and regulations of the participating State; provided that:


(i) If a payment is owed jointly to more than one payee, the entire payment shall be offset for a debt of either payee, unless otherwise prohibited by law or regulation; and


(ii) If a payment is made to a person solely in that person’s capacity as a representative payee for another person having the beneficial interest in the payment, the disbursing official shall offset that payment only to collect debts owed by the person having the beneficial interest in the payment.


(2) Any prohibitions on offsetting a joint payment described in paragraph (k)(1)(i) of this section shall be set forth in the reciprocal agreement.


(3) An official of the participating State shall notify the payee of the State payment offset. The reciprocal agreement may contain detailed guidance and procedures regarding sending such notice, but shall, at a minimum require that the notice inform the payee of:


(i) The type and amount of the payment that was offset;


(ii) The identity of the Federal agency that requested the offset; and


(iii) A contact point within the Federal agency that will handle concerns regarding the offset.


(l) Limitations. A debt properly submitted to Fiscal Service or the State for administrative offset or State payment offset shall remain subject to collection until withdrawn by the entity that submitted the debt for collection, provided the debt remains past-due and legally enforceable for purposes of administrative offset or State payment offset, as applicable. A debt which has been reduced to a judgment shall remain legally enforceable for purposes of administrative offset and State payment offset for as long as the judgment remains enforceable against the debtor.


(m) Fees. Fiscal Service shall deduct a fee from each administrative offset and State payment offset amount before transferring the balance of the offset funds to the State or Federal agency owed the debt. Pursuant to 31 U.S.C. 3716(c)(4), the fee will be in an amount that Fiscal Service has determined to be sufficient to reimburse Fiscal Service for the full cost of the offset procedure. Fiscal Service will notify the States and creditor agencies, annually and in advance, of the amount of the fee Fiscal Service will charge for each offset.


[72 FR 1286, Jan. 11, 2007, as amended at 74 FR 56721, Nov. 3, 2009]


§ 285.7 Salary offset.

(a) Purpose and scope. (1) This section establishes Fiscal Service’s procedures for the centralized offset of Federal salary payments to collect delinquent nontax debts owed to the United States. This process is known as centralized salary offset. Rules issued by the Office of Personnel Management contain the requirements Federal agencies must follow prior to conducting centralized or non-centralized salary offset and the procedures for requesting offsets directly from a paying agency, rather than through TOP. See 5 CFR 550.1101 through 550.1108.


(2) This section implements the requirement under 5 U.S.C. 5514(a)(1) that all Federal agencies, using a process known as centralized salary offset computer matching, identify Federal employees who owe delinquent nontax debt to the United States. Centralized salary offset computer matching is the computerized comparison of delinquent debt records with records of Federal employees. The purpose of centralized salary offset computer matching is to identify those debtors whose Federal salaries should be offset to collect delinquent debts owed to the Federal Government.


(3) This section specifies the delinquent debt records and Federal employee records that must be included in the salary offset matching process. For purposes of this section, delinquent debt records consist of the debt information submitted to the Bureau of the Fiscal Service for purposes of administrative offset as required under 31 U.S.C. 3716(c)(6). Agencies that submit their debt to Fiscal Service for purposes of administrative offset are not required to submit duplicate information for purposes of centralized salary offset computer matching under 5 U.S.C. 5514 and this section.


(4) This section establishes an interagency consortium to implement centralized salary offset computer matching on a government-wide basis as required under 5 U.S.C. 5514(a)(1).


(5) The receipt of collections from salary offsets does not preclude a creditor agency from pursuing other debt collection remedies, including the offset of other Federal payments to satisfy delinquent nontax debt owed to the United States. A creditor agency should pursue, when deemed appropriate by such agency, such debt collection remedies separately or in conjunction with salary offset.


(6) This section does not govern the centralized offset of final salary payments or lump-sum payments made to employees who have left an agency’s employ. The centralized offset of such payments is governed by § 285.5 of this part.


(b) Definitions. For purposes of this section:


Administrative offset means withholding funds payable by the United States to, or held by the United States for, a person to satisfy a debt owed by the payee.


Agency means a department, agency or subagency, court, court administrative office, or instrumentality in the executive, judicial, or legislative branch of the Federal government, including government corporations.


Centralized salary offset computer matching means the computerized comparison of Federal employee records with delinquent debt records to identify Federal employees who owe such debts.


Creditor agency means any agency that is owed a debt.


Debt means any amount of money, funds, or property that has been determined by an appropriate official of the Federal government to be owed to the United States by a person, including debt administered by a third party acting as an agent for the Federal Government. For purposes of this section, the term “debt” does not include debts arising under the Internal Revenue Code of 1986 (26 U.S.C.).


Delinquent debt record means information about a past-due, legally enforceable debt, submitted by a creditor agency to Fiscal Service for purposes of administrative offset (including salary offset) in accordance with the provisions of 31 U.S.C. 3716 and applicable regulations. Debt information includes the amount and type of debt and the debtor’s name, address, and taxpayer identifying number.


Disbursing official means an officer or employee designated to disburse Federal salary payments. This section applies to all disbursing officials of Federal salary payments, including but not limited to, disbursing officials of the Department of the Treasury, the Department of Defense, the United States Postal Service, any government corporation, and any disbursing official of the United States designated by the Secretary.


Disposable pay has the same meaning as that term is defined in 5 CFR 550.1103.


Federal employee means a current employee of an agency, including a current member of the Armed Forces or a Reserve of the Armed Forces (Reserves), employees of the United States Postal Service, and seasonal and temporary employees.


Federal employee records means records of Federal salary payments that a paying agency has certified to a disbursing official for disbursement.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury.


Paying agency means the agency that employs the Federal employee who owes the debt and authorizes the payment of his or her current pay. A paying agency also includes an agency that performs payroll services on behalf of the employing agency.


Salary offset means administrative offset to collect a debt owed by a Federal employee from the current pay account of the employee.


Secretary means the Secretary of the Treasury or his or her delegate.


Taxpayer identifying number means the identifying number described under section 6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109). For an individual, the taxpayer identifying number is the individual’s social security number.


(c) Establishment of the consortium. As required by the provisions of 5 U.S.C. 5514(a)(1), by issuance of this section, the Secretary establishes an interagency consortium to implement centralized salary offset computer matching. The consortium initially includes all agencies that disburse Federal salary payments, including but not limited to, Fiscal Service, the Department of Defense, the United States Postal Service, government corporations, and agencies with Treasury-designated disbursing officials. The membership of the consortium may be changed at the discretion of the Secretary, and the Secretary will be responsible for the ongoing coordination of the activities of the consortium.


(d) Creditor agency participation. (1) As required under 5 U.S.C. 5514(a)(1), creditor agencies shall participate at least annually in centralized salary offset computer matching. By notifying Fiscal Service of all past-due, legally enforceable debts delinquent for more than 120 days for purposes of 31 U.S.C. 3716(c)(6), creditor agencies shall have met the requirement set forth in 5 U.S.C. 5514(a)(1). Additionally, creditor agencies may notify Fiscal Service of past-due, legally enforceable debts delinquent for less than 120 days for purposes of centralized offset.


(2) Prior to submitting debts to Fiscal Service for purposes of administrative offset (including salary offset) and centralized salary offset computer matching, Federal agencies shall prescribe regulations in accordance with the requirements of 31 U.S.C. 3716 (administrative offset) and 5 U.S.C. 5514 (salary offset).


(3) Prior to submitting a debt to Fiscal Service for purposes of collection by administrative offset, including salary offset, creditor agencies shall provide written certification to Fiscal Service that:


(i) The debt is past-due and legally enforceable in the amount submitted to Fiscal Service and that the creditor agency will ensure that collections (other than collections through offset) are properly credited to the debt;


(ii) The creditor agency has complied with the provisions of 31 U.S.C. 3716 (administrative offset) and related regulations including, but not limited to, the provisions requiring that the creditor agency provide the debtor with applicable notices and opportunities for a review of the debt; and


(iii) The creditor agency has complied with the provisions of 5 U.S.C. 5514 (salary offset) and related regulations including, but not limited to, the provisions requiring that the creditor agency provide the debtor with applicable notices and opportunities for a hearing.


(4) The creditor agency is not required to submit the certification set forth in paragraph (d)(3)(iii) of this section prior to submitting a debt to Fiscal Service. However, if the creditor agency does not provide such certification initially, the creditor agency shall provide the Federal employee with the notices and opportunity for a hearing, as required by 5 U.S.C. 5514 and applicable regulations, and shall make the necessary certification before the disbursing official offsets a salary payment pursuant to this section. A creditor agency may submit a debt without the requirement set forth in paragraph (d)(3)(iii) of this section, only if the creditor agency intends to complete the certification after complying with the provisions of 5 U.S.C. 5514 and applicable regulations.


(5) The creditor agency shall notify Fiscal Service immediately of any payments credited by the creditor agency to the debtor’s account, other than credits for amounts collected by offset, after submission of the debt to Fiscal Service. The creditor agency also shall notify Fiscal Service immediately of any change in the status of the legal enforceability of the debt, for example, if the creditor agency receives notice that the debtor has filed for bankruptcy protection.


(6) Creditor agencies may submit nontax debts to Fiscal Service for collection by centralized salary offset irrespective of the amount of time the debt has been outstanding. Accordingly, all nontax debts, including debts that were outstanding for ten years or longer prior to June 11, 2009, may be collected by centralized salary offset.


(7) For debts that were outstanding more than ten years on or before June 11, 2009, creditor agencies must certify to Fiscal Service that the notice described in paragraph (d)(3)(ii) of this section was sent to the debtor after the debt was outstanding for ten years. This requirement will apply even in a case where notice was also sent prior to the debt being outstanding for ten years but does not apply to any debt that could be collected by offset without regard to any time limitation prior to June 11, 2009.


(e) Centralized salary offset computer match. (1) Delinquent debt records will be compared with Federal employee records maintained by members of the consortium or paying agencies. The records will be compared to identify Federal employees who owe delinquent debts for purposes of collecting the debt by administrative offset. A match will occur when the taxpayer identifying number and name of a Federal employee are the same as the taxpayer identifying number and name of a debtor.


(2) As authorized by the provisions of 31 U.S.C. 3716(f), Fiscal Service, under a delegation of authority from the Secretary, has waived certain requirements of the Computer Matching and Privacy Protection Act of 1988, 5 U.S.C. 552a, as amended, for administrative offset, including salary offset, upon written certification by the head of the creditor agency that the requirements of 31 U.S.C. 3716(a) have been met. Specifically, Fiscal Service has waived the requirements for a computer matching agreement contained in 5 U.S.C. 552a(o) and for post-match notice and verification contained in 5 U.S.C. 552a(p). The creditor agency will provide certification in accordance with the provisions of paragraph (d)(3)(iii) of this section.


(f) Salary offset. When a match occurs and all other requirements for offset have been met, as required by the provisions of 31 U.S.C. 3716(c) the disbursing official shall offset the Federal employee’s salary payment to satisfy, in whole or part, the debt owed by the employee. Alternatively, the paying agency, on behalf of the disbursing official, may deduct the amount of the offset from an employee’s disposable pay before the employee’s salary payment is certified to a disbursing official for disbursement. The salary paying agency shall use such records as it deems necessary to accurately calculate disposable pay in accordance with 5 CFR 550.1103.


(g) Offset amount. (1) The amount offset from a salary payment under this section shall be the lesser of:


(i) The amount of the debt, including any interest, penalties and administrative costs; or


(ii) An amount up to 15% of the debtor’s disposable pay.


(2) Alternatively, the amount offset may be an amount agreed upon, in writing, by the debtor and the creditor agency.


(3) Offsets will continue until the debt, including any interest, penalties, and costs, is paid in full or otherwise resolved to the satisfaction of the creditor agency.


(h) Priorities. (1) A levy pursuant to the Internal Revenue Code of 1986 shall take precedence over other deductions under this section.


(2) When a salary payment may be reduced to collect more than one debt, amounts offset under this section will be applied to a debt only after amounts have been applied to satisfy past-due support debts being collected by the State pursuant to Section 464 of the Social Security Act.


(i) Notice. (1) Before offsetting a salary payment, the disbursing official, or the paying agency on behalf of the disbursing official, shall notify the Federal employee in writing of the date deductions from salary will commence and of the amount of such deductions.


(2)(i) When an offset occurs under this section, the disbursing official, or the paying agency on behalf of the disbursing official, shall notify the Federal employee in writing that an offset has occurred including:


(A) A description of the payment and the amount of offset taken;


(B) The identity of the creditor agency requesting the offset; and,


(C) A contact point within the creditor agency that will handle concerns regarding the offset.


(ii) The information described in paragraphs (i)(2)(i)(B) and (i)(2)(i)(C) of this section does not need to be provided to the Federal employee when the offset occurs if such information was included in a prior notice from the disbursing official or paying agency.


(3) The disbursing official will advise each creditor agency of the names, mailing addresses, and taxpayer identifying numbers of the debtors from whom amounts of past-due, legally enforceable debt were collected and of the amounts collected from each debtor for that agency. The disbursing official will not advise the creditor agency of the source of payment from which such amounts were collected.


(j) Fees. Agencies that perform centralized salary offset computer matching services may charge a fee sufficient to cover the full cost for such services. In addition, Fiscal Service, or a paying agency acting on behalf of Fiscal Service, may charge a fee sufficient to cover the full cost of implementing the administrative offset program. Fiscal Service may deduct the fees from amounts collected by offset or may bill the creditor agencies. Fees charged for offset shall be based on actual administrative offsets completed.


(k) Disposition of amounts collected. The disbursing official conducting the offset will transmit amounts collected for debts, less fees charged under paragraph (j) of this section, to the appropriate creditor agency. If an erroneous offset payment is made to a creditor agency, the disbursing official will notify the creditor agency that an erroneous offset payment has been made. The disbursing official may deduct the amount of the erroneous offset payment from future amounts payable to the creditor agency. Alternatively, upon the disbursing official’s request, the creditor agency shall return promptly to the disbursing official or the affected payee an amount equal to the amount of the erroneous payment (without regard to whether any other amounts payable to such agency have been paid). The disbursing official and the creditor agency shall adjust the debtor records appropriately.


[63 FR 23357, Apr. 28, 1998, as amended at 70 FR 22789, May 3, 2005; 74 FR 27433, June 10, 2009; 74 FR 27708, June 11, 2009; 81 FR 1319, Jan. 12, 2016]


§ 285.8 Offset of tax refund payments to collect certain debts owed to States.

(a) Definitions. For purposes of this section:


Debt means past-due, legally enforceable State income tax obligation or unemployment compensation debt unless otherwise indicated.


Debtor means a person who owes a debt.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury.


IRS means the Internal Revenue Service, a bureau of the Department of the Treasury.


Past-due, legally enforceable State income tax obligation means a debt which resulted from:


(1) A judgment rendered by a court of competent jurisdiction which has determined an amount of State income tax to be due,


(2) A determination after an administrative hearing which has determined an amount of state income tax to be due and which is no longer subject to judicial review, or


(3) A State income tax assessment (including self-assessments) which has become final in accordance with State law but not collected and which has not been delinquent for more than 10 years.


State means the several States of the United States. The term “State” also includes the District of Columbia, American Samoa, Guam, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Commonwealth of Puerto Rico.


State income tax obligation means State income tax obligations as determined under State law. For purposes of this section, State income tax obligation includes any local income tax administered by the chief tax administration agency of the State.


Tax refund offset means withholding or reducing a tax refund overpayment by an amount necessary to satisfy a debt owed by the payee(s).


Tax refund payment means any overpayment of Federal taxes to be refunded to the person making the overpayment after the IRS makes the appropriate credits as provided in 26 U.S.C. 6402(a) and 26 CFR 6402-3(a)(6)(i) for any liabilities for any Federal tax on the part of the person who made the overpayment.


Unemployment compensation debt has the same meaning as the term “covered unemployment debt” as defined in 26 U.S.C. 6402(f)(4), and means –


(1) A past-due debt for erroneous payment of unemployment compensation due to fraud or the person’s failure to report earnings which has become final under the law of a State certified by the Secretary of Labor pursuant to 26 U.S.C. 3304 and which remains uncollected;


(2) Contributions due to the unemployment fund of a State for which the State has determined the person to be liable and which remain uncollected; and


(3) Any penalties and interest assessed on such debt.


(b) General rule. (1) Fiscal Service will offset tax refunds to collect debt under this section in accordance with 26 U.S.C. 6402(e) and (f) and this section.


(2) Fiscal Service will compare tax refund payment records, as certified by the IRS, with records of debts submitted to Fiscal Service. A match will occur when the taxpayer identifying number (as that term is used in 26 U.S.C. 6109) and name on a payment certification record are the same as the taxpayer identifying number and name (or derivative of the name) on a delinquent debt record. When a match occurs and all other requirements for tax refund offset have been met, Fiscal Service will reduce the amount of any tax refund payment payable to a debtor by the amount of any past-due, legally enforceable State income tax obligation or unemployment compensation debt owed by the debtor. Any amounts not offset will be paid to the payee(s) listed in the payment certification record.


(3) Fiscal Service will only offset a tax refund payment for a State income tax obligation if the address shown on the Federal tax return for the taxable year of the overpayment is an address within the State seeking the offset.


(c) Notification of past-due, legally enforceable State income tax obligations or unemployment compensation debts – (1) Notification. States shall notify Fiscal Service of debts in the manner and format prescribed by Fiscal Service. The notification of liability must be accompanied by a certification that the debt is past due and legally enforceable and that the State has complied with the requirements contained in paragraph (c)(3) of this section and with all Federal or State requirements applicable to the collection of debts under this section. With respect to State income tax obligations only, the certification must specifically state that none of the debts submitted for collection by offset are debts owed by an individual who has claimed immunity from State taxation by reason of being an enrolled member of an Indian tribe who lives on a reservation and derives all of his or her income from that reservation unless such claim has been adjudicated de novo on its merits in accordance with paragraph (c)(3). Fiscal Service may reject a notification that does not comply with the requirements of this section. Upon notification of the rejection and the reason for rejection, the State may resubmit a corrected notification.


(2) Minimum amount of past-due, legally enforceable State income tax obligations that may be submitted. Fiscal Service only will accept notification of past-due, legally enforceable State income tax obligations of $25 or more or such higher amounts as determined by Fiscal Service. States will be notified annually of any changes in the minimum debt amount.


(3)(i) Advance notification to the debtor of the State’s intent to collect by Federal tax refund offset. The State is required to provide a written notification to the debtor informing the debtor that the State intends to refer the debt for collection by tax refund offset. The notice must give the debtor at least 60 days to present evidence, in accordance with procedures established by the State, that all or part of the debt is not past due or not legally enforceable, or, in the case of a covered unemployment compensation debt, the debt is not due to fraud or the debtor’s failure to report earnings. In the case of a State income tax obligation, the notice must be sent certified mail, return receipt requested.


(ii) Determination. The State must, in accordance with procedures established by the State, consider any evidence presented by a debtor in response to the notice described in paragraph (c)(3)(i) of this section and determine whether an amount of such debt is past due and legally enforceable and, in the case of a covered unemployment compensation debt, the debt is due to fraud or the debtor’s failure to report earnings. With respect to State income tax obligations only, where the debtor claims that he or she is immune from State taxation by reason of being an enrolled member of an Indian tribe who lives on a reservation and derives all of his or her income from that reservation, State procedures shall include de novo review on the merits, unless such claims have been previously adjudicated by a court of competent jurisdiction. States shall, upon request from the Secretary of the Treasury, make such procedures available to the Secretary of the Treasury for review.


(iii) Reasonable efforts. Prior to submitting a debt to Fiscal Service for collection by tax refund offset the State must make reasonable efforts to collect the debt. Reasonable efforts include making written demand on the debtor for payment and complying with any other prerequisites to offset established by the State.


(4) Correcting and updating notification. The State shall, in the manner and in the time frames provided by Fiscal Service, notify Fiscal Service of any deletion or decrease in the amount of past-due, legally enforceable State income tax obligation or unemployment compensation debt referred to Fiscal Service for collection by tax refund offset. The State may notify Fiscal Service of any increases in the amount of the debt referred to Fiscal Service for collection by tax refund offset provided that the State has complied with the requirements of paragraph (c)(3) of this section with regard to those debts.


(d) Priorities for offset. (1) As provided in 26 U.S.C. 6402, a tax refund payment shall be reduced first by the amount of any past-due support being enforced under section 464 of the Social Security Act which is to be offset under 26 U.S.C. 6402(c); second by the amount of any past-due, legally enforceable debt owed to a Federal agency which is to be offset under 26 U.S.C. 6402(d); and third by any past-due, legally enforceable debt owed to a State (other than past-due support) which is to be offset under 26 U.S.C. 6402(e) or 26 U.S.C. 6402(f).


(2) Reduction of the tax refund payment pursuant to 26 U.S.C. 6402(a), (c), (d), (e) and (f) shall occur prior to crediting the overpayment to any future liability for an internal revenue tax. Any amount remaining after tax refund offset under 26 U.S.C. 6402(a), (c), (d), (e) and (f) shall be refunded to the taxpayer, or applied to estimated tax, if elected by the taxpayer pursuant to IRS regulations.


(3) If Fiscal Service receives notice from a State of more than one debt subject to this section that is owed by a debtor to the State, any overpayment by the debtor shall be applied against such debts in the order in which such debts accrued.


(e) Post-offset notice. (1) When an offset occurs, Fiscal Service shall notify the debtor in writing of:


(i) The amount and date of the offset and that the purpose of the offset was to satisfy a past-due, legally enforceable State income tax obligation or unemployment compensation debt;


(ii) The State to which this amount has been paid or credited; and


(iii) A contact point within the State that will handle concerns or questions regarding the offset.


(2) The notice in paragraph (e)(1) of this section also will advise any non-debtor spouse who may have filed a joint return with the debtor of the steps which the non-debtor spouse may take in order to secure his or her proper share of the tax refund. See paragraph (f) of this section.


(3) Fiscal Service will advise States of the names, mailing addresses, and taxpayer identifying numbers of the debtors from whom amounts of State income tax obligations or unemployment compensation debts were collected, and of the amounts collected from each debtor through tax refund offset.


(4) At least weekly, Fiscal Service will notify the IRS of the names and taxpayer identifying numbers of the debtors from whom amounts owed for past-due, legally enforceable State income tax obligations or unemployment compensation debts were collected from tax refund offsets and the amounts collected from each debtor.


(f) Offset made with regard to a tax refund payment based upon joint return. If the person filing a joint return with a debtor owing the past-due, legally enforceable State income tax obligation or unemployment compensation debt takes appropriate action to secure his or her proper share of a tax refund from which an offset was made, the IRS will pay the person his or her share of the refund and request that Fiscal Service deduct that amount from future amounts payable to the State or that Fiscal Service otherwise obtain the funds back from the State. Fiscal Service, or the appropriate State, will adjust their debtor records accordingly.


(g) Disposition of amounts collected. Fiscal Service will transmit amounts collected for debts, less fees charged under paragraph (h) of this section, to the appropriate State. If Fiscal Service learns that an erroneous offset payment is made to any State, Fiscal Service will notify the appropriate State that an erroneous offset payment has been made. Fiscal Service may deduct the amount of the erroneous offset payment from future amounts payable to the State. Alternatively, upon Fiscal Service’ request, the State shall return promptly to the affected taxpayer or Fiscal Service an amount equal to the amount of the erroneous payment (unless the State previously has paid such amounts, or any portion of such amounts, to the affected taxpayer). States shall notify Fiscal Service any time a State returns an erroneous offset payment to an affected taxpayer. Fiscal Service, or the appropriate State, will adjust their debtor records accordingly.


(h) Fees. The State will pay a fee to Fiscal Service to cover the full cost of offsets taken. The fee will be established annually in such amount as Fiscal Service determines to be sufficient to reimburse Fiscal Service for the full cost of the offset procedure. Fiscal Service will deduct the fees from amounts collected prior to disposition and transmit a portion of the fees deducted to reimburse the IRS for its share of the cost of administering the tax refund offset program for purposes of collecting past-due, legally enforceable State income tax obligations or unemployment compensation debts reported to Fiscal Service by the States. Fees will be charged only for actual tax refund offsets completed.


(i) Review of tax refund offsets. In accordance with 26 U.S.C. 6402(g), any reduction of a taxpayer’s refund made pursuant to 26 U.S.C. 6402(e) or (f) shall not be subject to review by any court of the United States or by the Secretary of the Treasury, Fiscal Service or IRS in an administrative proceeding. No action brought against the United States to recover the amount of this reduction shall be considered to be a suit for refund of tax. This subsection does not preclude any legal, equitable, or administrative action against the State to which the amount of such reduction was paid.


(j) Access to and use of confidential tax information. Access to and use of confidential tax information in connection with the tax refund offset program is permitted to the extent necessary in establishing appropriate agency records, locating any person with respect to whom a reduction under 26 U.S.C. 6402(e) or (f) is sought for purposes of collecting the debt, and in the defense of any litigation or administrative procedure ensuing from a reduction made under section 6402(e) or (f).


[64 FR 71231, Dec. 20, 1999, as amended at 74 FR 27433, June 10, 2009; 76 FR 5071, Jan. 28, 2011]


Subpart B – Authorities Other Than Offset

§ 285.11 Administrative wage garnishment.

(a) Purpose. This section provides procedures for Federal agencies to collect money from a debtor’s disposable pay by means of administrative wage garnishment to satisfy delinquent nontax debt owed to the United States.


(b) Scope. (1) This section applies to any Federal agency that administers a program that gives rise to a delinquent nontax debt owed to the United States and to any agency that pursues recovery of such debt.


(2) This section shall apply notwithstanding any provision of State law.


(3) Nothing in this section precludes the compromise of a debt or the suspension or termination of collection action in accordance with applicable law. See, for example, the Federal Claims Collection Standards (FCCS), 31 CFR parts 900-904.


(4) The receipt of payments pursuant to this section does not preclude a Federal agency from pursuing other debt collection remedies, including the offset of Federal payments to satisfy delinquent nontax debt owed to the United States. A Federal agency may pursue such debt collection remedies separately or in conjunction with administrative wage garnishment.


(5) This section does not apply to the collection of delinquent nontax debt owed to the United States from the wages of Federal employees from their Federal employment. Federal pay is subject to the Federal salary offset procedures set forth in 5 U.S.C. 5514 and other applicable laws.


(6) Nothing in this section requires agencies to duplicate notices or administrative proceedings required by contract or other laws or regulations.


(c) Definitions. As used in this section the following definitions shall apply:


Agency means a department, agency, court, court administrative office, or instrumentality in the executive, judicial, or legislative branch of the Federal Government, including government corporations. For purposes of this section, agency means either the agency that administers the program that gave rise to the debt or the agency that pursues recovery of the debt.


Business day means Monday through Friday. For purposes of computation, the last day of the period will be included unless it is a Federal legal holiday.


Day means calendar day. For purposes of computation, the last day of the period will be included unless it is a Saturday, a Sunday, or a Federal legal holiday.


Debt or claim means any amount of money, funds or property that has been determined by an appropriate official of the Federal Government to be owed to the United States by an individual, including debt administered by a third party as an agent for the Federal Government.


Debtor means an individual who owes a delinquent nontax debt to the United States.


Delinquent nontax debt means any nontax debt that has not been paid by the date specified in the agency’s initial written demand for payment, or applicable agreement, unless other satisfactory payment arrangements have been made. For purposes of this section, the terms “debt” and “claim” are synonymous and refer to delinquent nontax debt.


Disposable pay means that part of the debtor’s compensation (including, but not limited to, salary, bonuses, commissions, and vacation pay) from an employer remaining after the deduction of health insurance premiums and any amounts required by law to be withheld. For purposes of this section, “amounts required by law to be withheld” include amounts for deductions such as social security taxes and withholding taxes, but do not include any amount withheld pursuant to a court order.


Employer means a person or entity that employs the services of others and that pays their wages or salaries. The term employer includes, but is not limited to, State and local Governments, but does not include an agency of the Federal Government.


Evidence of service means information retained by the agency indicating the nature of the document to which it pertains, the date of mailing of the document, and to whom the document is being sent. Evidence of service may be retained electronically so long as the manner of retention is sufficient for evidentiary purposes.


Garnishment means the process of withholding amounts from an employee’s disposable pay and the paying of those amounts to a creditor in satisfaction of a withholding order.


Withholding order means any order for withholding or garnishment of pay issued by an agency, or judicial or administrative body. For purposes of this section, the terms “wage garnishment order” and “garnishment order” have the same meaning as “withholding order.”


(d) General rule. Whenever an agency determines that a delinquent debt is owed by an individual, the agency may initiate proceedings administratively to garnish the wages of the delinquent debtor.


(e) Notice requirements. (1) At least 30 days before the initiation of garnishment proceedings, the agency shall mail, by first class mail, to the debtor’s last known address a written notice informing the debtor of:


(i) The nature and amount of the debt;


(ii) The intention of the agency to initiate proceedings to collect the debt through deductions from pay until the debt and all accumulated interest, penalties and administrative costs are paid in full; and


(iii) An explanation of the debtor’s rights, including those set forth in paragraph (e)(2) of this section, and the time frame within which the debtor may exercise his or her rights.


(2) The debtor shall be afforded the opportunity:


(i) To inspect and copy agency records related to the debt;


(ii) To enter into a written repayment agreement with the agency under terms agreeable to the agency; and


(iii) For a hearing in accordance with paragraph (f) of this section concerning the existence or the amount of the debt or the terms of the proposed repayment schedule under the garnishment order. However, the debtor is not entitled to a hearing concerning the terms of the proposed repayment schedule if these terms have been established by written agreement under paragraph (e)(2)(ii) of this section.


(3) The agency will retain evidence of service indicating the date of mailing of the notice.


(f) Hearing – (1) In general. Agencies shall prescribe regulations for the conduct of administrative wage garnishment hearings consistent with this section or shall adopt this section without change by reference.


(2) Request for hearing. The agency shall provide a hearing, which at the agency’s option may be oral or written, if the debtor submits a written request for a hearing concerning the existence or amount of the debt or the terms of the repayment schedule (for repayment schedules established other than by written agreement under paragraph (e)(2)(ii)) of this section.


(3) Type of hearing or review. (i) For purposes of this section, whenever an agency is required to afford a debtor a hearing, the agency shall provide the debtor with a reasonable opportunity for an oral hearing when the agency determines that the issues in dispute cannot be resolved by review of the documentary evidence, for example, when the validity of the claim turns on the issue of credibility or veracity.


(ii) If the agency determines that an oral hearing is appropriate, the time and location of the hearing shall be established by the agency. An oral hearing may, at the debtor’s option, be conducted either in-person or by telephone conference. All travel expenses incurred by the debtor in connection with an in-person hearing will be borne by the debtor. All telephonic charges incurred during the hearing will be the responsibility of the agency.


(iii) In those cases when an oral hearing is not required by this section, an agency shall nevertheless accord the debtor a “paper hearing,” that is, an agency will decide the issues in dispute based upon a review of the written record. The agency will establish a reasonable deadline for the submission of evidence.


(4) Effect of timely request. Subject to paragraph (f)(13) of this section, if the debtor’s written request is received by the agency on or before the 15th business day following the mailing of the notice described in paragraph (e)(1) of this section, the agency shall not issue a withholding order under paragraph (g) of this section until the debtor has been provided the requested hearing and a decision in accordance with paragraphs (f)(10) and (f)(11) of this section has been rendered.


(5) Failure to timely request a hearing. If the debtor’s written request is received by the agency after the 15th business day following the mailing of the notice described in paragraph (e)(1) of this section, the agency shall provide a hearing to the debtor. However, the agency will not delay issuance of a withholding order unless the agency determines that the delay in filing the request was caused by factors over which the debtor had no control, or the agency receives information that the agency believes justifies a delay or cancellation of the withholding order.


(6) Hearing official. A hearing official may be any qualified individual, as determined by the head of the agency, including an administrative law judge.


(7) Procedure. After the debtor requests a hearing, the hearing official shall notify the debtor of:


(i) The date and time of a telephonic hearing;


(ii) The date, time, and location of an in-person oral hearing; or


(iii) The deadline for the submission of evidence for a written hearing.


(8) Burden of proof. (i) The agency will have the burden of going forward to prove the existence or amount of the debt.


(ii) Thereafter, if the debtor disputes the existence or amount of the debt, the debtor must present by a preponderance of the evidence that no debt exists or that the amount of the debt is incorrect. In addition, the debtor may present evidence that the terms of the repayment schedule are unlawful, would cause a financial hardship to the debtor, or that collection of the debt may not be pursued due to operation of law.


(9) Record. The hearing official must maintain a summary record of any hearing provided under this section. A hearing is not required to be a formal evidentiary-type hearing, however, witnesses who testify in oral hearings will do so under oath or affirmation.


(10) Date of decision. The hearing official shall issue a written opinion stating his or her decision, as soon as practicable, but not later than sixty (60) days after the date on which the request for such hearing was received by the agency. If an agency is unable to provide the debtor with a hearing and render a decision within 60 days after the receipt of the request for such hearing:


(i) The agency may not issue a withholding order until the hearing is held and a decision rendered; or


(ii) If the agency had previously issued a withholding order to the debtor’s employer, the agency must suspend the withholding order beginning on the 61st day after the receipt of the hearing request and continuing until a hearing is held and a decision is rendered.


(11) Content of decision. The written decision shall include:


(i) A summary of the facts presented;


(ii) The hearing official’s findings, analysis and conclusions; and


(iii) The terms of any repayment schedules, if applicable.


(12) Final agency action. The hearing official’s decision will be the final agency action for the purposes of judicial review under the Administrative Procedure Act (5 U.S.C. 701 et seq.).


(13) Failure to appear. In the absence of good cause shown, a debtor who fails to appear at a hearing scheduled pursuant to paragraph (f)(4) of this section will be deemed as not having timely filed a request for a hearing.


(g) Wage garnishment order. (1) Unless the agency receives information that the agency believes justifies a delay or cancellation of the withholding order, the agency should send, by first class mail, a withholding order to the debtor’s employer:


(i) Within 30 days after the debtor fails to make a timely request for a hearing (i.e., within 15 business days after the mailing of the notice described in paragraph (e)(1) of this section), or,


(ii) If a timely request for a hearing is made by the debtor, within 30 days after a final decision is made by the agency to proceed with garnishment, or,


(iii) As soon as reasonably possible thereafter.


(2) The withholding order sent to the employer under paragraph (g)(1) of this section shall be in a form prescribed by the Secretary of the Treasury. The withholding order shall contain the signature of, or the image of the signature of, the head of the agency or his/her delegatee. The order shall contain only the information necessary for the employer to comply with the withholding order. Such information includes the debtor’s name, address, and social security number, as well as instructions for withholding and information as to where payments should be sent.


(3) The agency will retain evidence of service indicating the date of mailing of the order.


(h) Certification by employer. Along with the withholding order, the agency shall send to the employer a certification in a form prescribed by the Secretary of the Treasury. The employer shall complete and return the certification to the agency within the time frame prescribed in the instructions to the form. The certification will address matters such as information about the debtor’s employment status and disposable pay available for withholding.


(i) Amounts withheld. (1) After receipt of the garnishment order issued under this section, the employer shall deduct from all disposable pay paid to the applicable debtor during each pay period the amount of garnishment described in paragraph (i)(2) of this section.


(2)(i) Subject to the provisions of paragraphs (i)(3) and (i)(4) of this section, the amount of garnishment shall be the lesser of:


(A) The amount indicated on the garnishment order up to 15% of the debtor’s disposable pay; or


(B) The amount set forth in 15 U.S.C. 1673(a)(2) (Restriction on Garnishment). The amount set forth at 15 U.S.C. 1673(a)(2) is the amount by which a debtor’s disposable pay exceeds an amount equivalent to thirty times the minimum wage. See 29 CFR 870.10.


(3) When a debtor’s pay is subject to withholding orders with priority the following shall apply:


(i) Unless otherwise provided by Federal law, withholding orders issued under this section shall be paid in the amounts set forth under paragraph (i)(2) of this section and shall have priority over other withholding orders which are served later in time. Notwithstanding the foregoing, withholding orders for family support shall have priority over withholding orders issued under this section.


(ii) If amounts are being withheld from a debtor’s pay pursuant to a withholding order served on an employer before a withholding order issued pursuant to this section, or if a withholding order for family support is served on an employer at any time, the amounts withheld pursuant to the withholding order issued under this section shall be the lesser of:


(A) The amount calculated under paragraph (i)(2) of this section, or


(B) An amount equal to 25% of the debtor’s disposable pay less the amount(s) withheld under the withholding order(s) with priority.


(iii) If a debtor owes more than one debt to an agency, the agency may issue multiple withholding orders provided that the total amount garnished from the debtor’s pay for such orders does not exceed the amount set forth in paragraph (i)(2) of this section. For purposes of this paragraph (i)(3)(iii), the term agency refers to the agency that is owed the debt.


(4) An amount greater than that set forth in paragraphs (i)(2) and (i)(3) of this section may be withheld upon the written consent of debtor.


(5) The employer shall promptly pay to the agency all amounts withheld in accordance with the withholding order issued pursuant to this section.


(6) An employer shall not be required to vary its normal pay and disbursement cycles in order to comply with the withholding order.


(7) Any assignment or allotment by an employee of his earnings shall be void to the extent it interferes with or prohibits execution of the withholding order issued under this section, except for any assignment or allotment made pursuant to a family support judgment or order.


(8) The employer shall withhold the appropriate amount from the debtor’s wages for each pay period until the employer receives notification from the agency to discontinue wage withholding. The garnishment order shall indicate a reasonable period of time within which the employer is required to commence wage withholding.


(j) Exclusions from garnishment. The agency may not garnish the wages of a debtor who it knows has been involuntarily separated from employment until the debtor has been reemployed continuously for at least 12 months. The debtor has the burden of informing the agency of the circumstances surrounding an involuntary separation from employment.


(k) Financial hardship. (1) A debtor whose wages are subject to a wage withholding order under this section, may, at any time, request a review by the agency of the amount garnished, based on materially changed circumstances such as disability, divorce, or catastrophic illness which result in financial hardship.


(2) A debtor requesting a review under paragraph (k)(1) of this section shall submit the basis for claiming that the current amount of garnishment results in a financial hardship to the debtor, along with supporting documentation. Agencies shall consider any information submitted in accordance with procedures and standards established by the agency.


(3) If a financial hardship is found, the agency shall downwardly adjust, by an amount and for a period of time agreeable to the agency, the amount garnished to reflect the debtor’s financial condition. The agency will notify the employer of any adjustments to the amounts to be withheld.


(l) Ending garnishment. (1) Once the agency has fully recovered the amounts owed by the debtor, including interest, penalties, and administrative costs consistent with the FCCS, the agency shall send the debtor’s employer notification to discontinue wage withholding.


(2) At least annually, an agency shall review its debtors’ accounts to ensure that garnishment has been terminated for accounts that have been paid in full.


(m) Actions prohibited by the employer. An employer may not discharge, refuse to employ, or take disciplinary action against the debtor due to the issuance of a withholding order under this section.


(n) Refunds. (1) If a hearing official, at a hearing held pursuant to paragraph (f)(3) of this section, determines that a debt is not legally due and owing to the United States, the agency shall promptly refund any amount collected by means of administrative wage garnishment.


(2) Unless required by Federal law or contract, refunds under this section shall not bear interest.


(o) Right of action. The agency may sue any employer for any amount that the employer fails to withhold from wages owed and payable to an employee in accordance with paragraphs (g) and (i) of this section. However, a suit may not be filed before the termination of the collection action involving a particular debtor, unless earlier filing is necessary to avoid expiration of any applicable statute of limitations period. For purposes of this section, “termination of the collection action” occurs when the agency has terminated collection action in accordance with the FCCS or other applicable standards. In any event, termination of the collection action will have been deemed to occur if the agency has not received any payments to satisfy the debt from the particular debtor whose wages were subject to garnishment, in whole or in part, for a period of one (1) year.


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


§ 285.12 Transfer of debts to Treasury for collection.

(a) Definitions. For purposes of this section:


Agency means a department, agency, court, court administrative office, or instrumentality in the executive, judicial, or legislative branch of the Federal Government, including government corporations.


Creditor agency means any Federal agency that is owed a debt.


Debt means any amount of money, funds or property that has been determined by an appropriate official of the Federal government to be owed to the United States by a person. As used in this section, the term “debt” does not include debts arising under the Internal Revenue Code of 1986.


Debt collection center means an agency or a unit or subagency within an agency that has been designated by the Secretary of the Treasury to collect debt owed to the United States. Fiscal Service is a debt collection center.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury.


Person means an individual, corporation, partnership, association, organization, State or local government, or any other type of entity other than a Federal agency.


Secretary means the Secretary of the Treasury.


(b) In general. Cross-servicing means that Fiscal Service or another debt collection center is taking appropriate debt collection action on behalf of one or more Federal agencies or a unit or subagency thereof.


(c) Mandatory transfer of debts to Fiscal Service. (1) Except as set forth in paragraph (d) of this section, a creditor agency shall transfer any debt that is more than 180 days delinquent to Fiscal Service for debt collection services. Agencies that transfer delinquent debts to Fiscal Service for the purposes of debt collection and that rely on Fiscal Service to submit the transferred debts for administrative offset on the agency’s behalf must transfer the debts to Fiscal Service no later than 120 days after the debts become delinquent in order to satisfy the 120-day notice requirement for purposes of administrative offset. For accounting and reporting purposes, the debt remains on the books and records of the agency which transferred the debt.


(2) On behalf of the creditor agency, Fiscal Service will take appropriate action to collect or compromise the transferred debt, or to suspend or terminate collection action thereon, in accordance with the statutory and regulatory requirements and authorities applicable to the debt and the action. Appropriate action to collect a debt may include referral to another debt collection center, a private collection contractor, or the Department of Justice for litigation. The creditor agency shall advise Fiscal Service, in writing, of any specific statutory or regulatory requirements pertaining to their debt and will agree, in writing, to a collection strategy which includes parameters for entering into compromise and repayments agreements with debtors.


(3)(i) A debt is considered delinquent for purposes of this section if it is past due and is legally enforceable. A debt is past-due if it has not been paid by the date specified in the agency’s initial written demand for payment or applicable agreement or instrument (including a post-delinquency payment agreement) unless other satisfactory payment arrangements have been made. A debt is legally enforceable if there has been a final agency determination that the debt, in the amount stated, is due and there are no legal bars to collection action. Where, for example, a debt is the subject of a pending administrative review process required by statute or regulation and collection action during the review process is prohibited, the debt is not considered legally enforceable for purposes of mandatory transfer to Fiscal Service and is not to be transferred even if the debt is more than 180 days past-due.


(ii) When a final agency determination is made after an administrative appeal or review process, the creditor agency must transfer such debt to Fiscal Service, if more than 180 days delinquent, within 30 days after the date of the final decision.


(iii) Nothing in this section is intended to impact the date of delinquency of a debt for other purposes such as for purposes of accruing interest and penalties.


(4) Agencies are not required to transfer to Fiscal Service debts which are less than $25 (including interest, penalties, and administrative costs), or such other amount as Fiscal Service may determine. Agencies may transfer debts less than $25 to Fiscal Service if the creditor agency, in consultation with Fiscal Service, determines that transfer is important to ensure compliance with the agency’s policies or programs. Agencies may combine individual debts of less than $25 owed by the same debtor for purposes of meeting the $25 threshold.


(d) Exceptions to mandatory transfer. (1) A creditor agency is not required to transfer a debt to Fiscal Service pursuant to paragraph (c)(1) of this section only during such period of time that the debt:


(i) Is in litigation or foreclosure as described in paragraph (d)(2) of this section;


(ii) Is scheduled for sale as described in paragraph (d)(3) of this section;


(iii) Is at a private collection contractor if the debt has been referred to a private collection contractor in accordance with paragraph (e) of this section;


(iv) Is at a debt collection center if the debt has been referred to a Treasury-designated debt collection center in accordance with paragraph (f) of this section;


(v) Is being collected by internal offset as described in paragraph (d)(4) of this section; or


(vi) Is covered by an exemption granted by the Secretary as described in paragraph (d)(5) of this section.


(2)(i) A debt is in litigation if:


(A) The debt has been referred to the Attorney General for litigation by the creditor agency; or


(B) The debt is the subject of proceedings pending in a court of competent jurisdiction, including bankruptcy proceedings, whether initiated by the creditor agency, the debtor, or any other party.


(ii) A debt is in foreclosure if:


(A)(1) Collateral securing the debt is the subject of judicial foreclosure proceedings in a court of competent jurisdiction; or


(2) Notice has been issued that collateral securing the debt will be foreclosed upon, liquidated, sold, or otherwise transferred pursuant to applicable law in a nonjudicial proceeding; and


(B) The creditor agency anticipates that proceeds will be available from the liquidation of the collateral for application to the debt.


(3) A debt is scheduled for sale if:


(i) The debt will be disposed of under an asset sales program within one (1) year after becoming eligible for sale; or


(ii) The debt will be disposed of under an asset sales program and a schedule established by the creditor agency and approved by the Director of the Office of Management and Budget.


(4) A debt is being collected by internal offset if a creditor agency expects the debt to be collected in full within three (3) years from the date of delinquency through internal offset. A debt is being collected by internal offset if the creditor agency is withholding funds payable to the debtor by the creditor agency, or if the creditor agency has issued notice to the debtor of the creditor agency’s intent to offset such funds.


(5)(i) Upon the written request of the head of an agency, or as the Secretary may determine on his/her own initiative, the Secretary may exempt any class of debts from the application of the requirement described in paragraph (c)(1) of this section. In determining whether to exempt a class of debts, the Secretary will determine whether exemption is in the best interests of the Government after considering the following factors:


(A) Whether an exemption is the best means to protect the government’s financial interest, taking into consideration the number, dollar amount, age and collection rates of the debts for which exemption is requested;


(B) Whether the nature of the program under which the delinquencies have arisen is such that the transfer of such debts would interfere with program goals; and


(C) Whether an exemption would be consistent with the purposes of the Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-134, 110 Stat. 1321-358 (April 26, 1996).


(ii) Requests for exemptions must clearly identify the class of debts for which an exemption is sought and must explain how application of the factors listed above to that class of debts warrants an exemption.


(iii) Requests for exemption must be made by the head of the agency requesting the exemption, the Chief Financial Officer of the agency, or the Deputy Chief Financial Officer of the agency. For purposes of this section, the head of an agency does not include the head of a subordinate organization within a department or agency.


(6) In accordance with paragraph (d)(5)(i) of this section, debts being serviced and/or collected in accordance with applicable statutes and/or regulations by third parties, such as private lenders or guaranty agencies are exempt from the requirements in paragraph (c)(1) of this section.


(e) Schedule of private collection contractors. Fiscal Service will maintain a schedule of private collection contractors eligible for referral of debts from Fiscal Service, other debt collection centers, and creditor agencies for collection action. An agency with debt which has not been transferred to Fiscal Service or referred to another debt collection center, for example, debt that is less than 180 days delinquent, may refer such debt to a private collection contractor listed on Fiscal Service’ schedule of private collection contractors provided they do so in accordance with procedures established by Fiscal Service. Alternatively, an agency may refer debt that is less than 180 days delinquent to a private collection contractor pursuant to a contract between the creditor agency and the private collection contractor, as authorized by law.


(f) Debt collection centers. A creditor agency may transfer debt that has not been transferred to Fiscal Service, such as debt less than 180 days delinquent, to a Treasury-designated debt collection center, with the consent of, and in accordance with procedures established by Fiscal Service. Debt collection centers will take action upon a debt in accordance with the statutory or regulatory requirements and other authorities that apply to the debt or to the particular action being taken. Debt collection centers may, on behalf of the creditor agency and subject to the terms under which the debt collection center has been designated as such by the Secretary, take any action to collect, compromise, suspend or terminate collection action on debts, in accordance with terms and conditions agreed upon in writing by the creditor agency and the debt collection center or Fiscal Service. Debt collection centers may charge fees for the debt collection services in accordance with the provisions of paragraph (j) of this section.


(g) Administrative offset. As described in paragraph (c) of this section, under the DCIA, agencies are required to transfer all debts over 180 days delinquent to Fiscal Service for purposes of debt collection (i.e., cross-servicing). Agencies are also required, under the DCIA, to notify the Secretary of all debts over 120 days delinquent for purposes of administrative offset. Administrative offset is one type of collection tool used by Fiscal Service and Treasury-designated debt collection centers to collect debts transferred under this section. Thus, by transferring debt to Fiscal Service or to a Treasury-designated debt collection center under this section, Federal agencies will satisfy the requirement to notify the Secretary of debts for purposes of administrative offset and duplicate referrals are not required. Agencies relying on Fiscal Service to submit debts for administrative offset on the agency’s behalf must transfer the debts to Fiscal Service no later than 120 days after the debts become delinquent in order to satisfy the 120-day notice requirement for purposes of administrative offset. A debt which is not transferred to Fiscal Service for purposes of debt collection, however, such as a debt which falls within one of the exempt categories listed in paragraph (d) of this section, nevertheless may be subject to the DCIA requirement of notification to the Secretary for purposes of administrative offset.


(h) Voluntary referral of debts less than 180 days delinquent. A creditor agency may refer any debt that is less than 180 days delinquent to Fiscal Service or, with the consent of Fiscal Service, to a Treasury-designated debt collection center for debt collection services.


(i) Certification. Before a debt may be transferred to Fiscal Service or another debt collection center, the head of the creditor agency or his or her delegatee must certify, in writing, that the debts being transferred are valid, legally enforceable, and that there are no legal bars to collection. Creditor agencies must also certify that they have complied with all prerequisites to a particular collection action under the laws, regulations or policies applicable to the agency unless the creditor agency has requested, and Fiscal Service has agreed, to do so on the creditor agency’s behalf. The creditor agency shall notify Fiscal Service immediately of any change in the status of the legal enforceability of the debt, for example, if the creditor agency receives notice that the debtor has filed for bankruptcy protection.


(j) Fees. Fiscal Service and other debt collection centers (as defined in paragraph (a) of this section) may charge fees sufficient to cover the full cost of providing debt collection services authorized by this section. Fees paid to recover amounts owed may not exceed amounts collected. Nothing in this rule precludes a creditor agency from agreeing to pay fees for debt collection services which are not based on amounts collected. Fiscal Service and debt collection centers are authorized to retain fees from amounts collected and may deposit and use such fees in accordance with 31 U.S.C. 3711(g). Fees charged by Fiscal Service and other debt collection centers may be added to the debt as an administrative cost if authorized under 31 U.S.C. 3717(e).


[63 FR 16356, Apr. 2, 1998, as amended at 64 FR 22908, Apr. 28, 1999; 81 FR 1319, Jan. 12, 2016]


§ 285.13 Barring delinquent debtors from obtaining Federal loans or loan insurance or guarantees.

(a) Definitions. For purposes of this section:


Agency means a department, agency, court, court administrative office, or instrumentality in the executive, judicial, or legislative branch of the Federal Government, including government corporations.


Creditor agency means any Federal agency that is owed a debt.


Debt means any amount of money, funds or property that has been determined by an appropriate official of the Federal Government to be owed to the United States or an agency thereof by a person, including debt administered by a third party as an agent for the Federal Government.


Federal financial assistance or financial assistance means any Federal loan (other than a disaster loan), loan insurance, or loan guarantee.


Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury.


Nontax debt means any debt other than a debt under the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.).


Person means an individual, corporation, partnership, association, organization, State or local government, or any other type of entity other than a Federal agency.


Secretary means the Secretary of the Treasury.


(b) Purpose and scope. (1) This section prescribes standards for determining whether an outstanding nontax debt owed to the Federal Government is in delinquent status and whether such delinquency is resolved for the purpose of denying Federal financial assistance to a debtor. In addition, this section prescribes the circumstances under which the Secretary may exempt a class of debts from affecting a debtor’s loan eligibility. This section also outlines the factors an agency should consider when determining whether waiver of the general rule in paragraph (c) of this section is appropriate.


(2) Additional guidance concerning debt collection and debt management is provided in “Managing Federal Receivables” and other Fiscal Service publications.


(3) Nothing in this section requires an agency to grant Federal financial assistance if denial otherwise is authorized by statute, regulation, or agency policies and procedures. For example, if an agency requires borrowers to have a satisfactory credit history, the agency may deny financial assistance even if a delinquent debt has been resolved.


(4) This section does not confer any new rights or benefits on persons seeking Federal financial assistance.


(5) This section applies to any person owing delinquent nontax debt and to any agency that administers a program that grants Federal financial assistance.


(c) General rule. (1) As required by the provisions of 31 U.S.C. 3720B, a person owing an outstanding nontax debt that is in delinquent status shall not be eligible for Federal financial assistance. This eligibility requirement applies to all persons seeking Federal financial assistance and owing an outstanding nontax debt in delinquent status, including, but not limited to, guarantors. This eligibility requirement applies to all Federal financial assistance even if creditworthiness or credit history is not otherwise a factor for eligibility purposes, e.g., student loans. A person may be eligible for Federal financial assistance only after the delinquency is resolved in accordance with this section. An agency may waive this eligibility requirement in accordance with paragraph (g) of this section.


(2) An agency from which a person seeks Federal financial assistance may determine, under standards issued by the agency, that a person is ineligible for Federal financial assistance under this section if:


(i) The person is controlled by a person owing an outstanding nontax debt that is in delinquent status (e.g., a corporation is controlled by an officer, director, or shareholder who owes a debt); or


(ii) The person controls a person owing an outstanding nontax debt that is in delinquent status (e.g., a corporation controls a wholly-owned or partially-owned subsidiary which owes a debt).


(3) A creditor agency may obtain information concerning whether or not a person seeking Federal financial assistance owes a delinquent debt from, among other sources, credit reports, information contained on credit applications, and the Department of Housing and Urban Development’s Credit Alert Interactive Voice Response System (CAIVRS). For information about participating in the CAIVRS program, agencies should contact the Director of Information Resources Management, Policy and Management Division, Office of Information Technology, Department of Housing and Urban Development, 451 7th Street, S.W., Washington, DC 20410.


(d) Delinquent status. (1) Except as otherwise provided in paragraph (d)(2) of this section, a debt is in “delinquent status” for purposes of this section if the debt has not been paid within 90 days of the payment due date. The payment due date is the date specified in the creditor agency’s initial written demand for payment or applicable agreement or instrument (including a post-delinquency repayment agreement).


(2) For purposes of this section, a debt is not in delinquent status if:


(i) The person seeking Federal financial assistance has been released by the creditor agency from any obligation to pay the debt, or there has been an adjudication or determination that such person does not owe or does not have to pay the debt;


(ii) The debtor is the subject of, or has been discharged in, a bankruptcy proceeding, and if applicable, the person seeking Federal financial assistance is current on any court authorized repayment plan; or


(iii) The existence of the debt or the agency’s determination that the debt is delinquent is being challenged under an ongoing administrative appeal or contested judicial proceeding and the appeal was filed by the debtor in a timely manner. Unless otherwise prohibited, an agency may defer making a determination as to whether or not to extend credit until the appeal process is completed.


(3) Unless the provisions of paragraph (d)(2) apply, a debt is in delinquent status even if the creditor agency has suspended or terminated collection activity with respect to such debt. For example, a delinquent nontax debt that has been written off the books of the creditor agency or reported to the Internal Revenue Service as discharged (i.e., canceled) is in delinquent status for purposes of this section.


(4) Nothing in this section defines the terms “delinquent” or “delinquent status” for any purposes other than those described in this section.


(e) Delinquency resolution. (1) For purposes of this section, a person’s delinquent debt is resolved only if the person:


(i) Pays or otherwise satisfies the delinquent debt in full;


(ii) Pays the delinquent debt in part if the creditor agency accepts such part payment as a compromise in lieu of payment in full;


(iii) Cures the delinquency under terms acceptable to the creditor agency in that the person pays any overdue payments, plus all interest, penalties, late charges, and administrative charges assessed by the creditor agency as a result of the delinquency; or


(iv) Enters into a written repayment agreement with the creditor agency to pay the debt, in whole or in part, under terms and conditions acceptable to the creditor agency.


(2) Unless the provisions of paragraph (e)(1) of this section apply, a delinquent debt is not resolved even if the creditor agency has suspended or terminated collection activity with respect to such debt. For example, a delinquent nontax debt that has been written off the books of the creditor agency or reported to the Internal Revenue Service as discharged (i.e. , canceled) would not be “resolved.” If the provisions of paragraph (e)(1) of this section do apply, a delinquent debt is considered resolved. For example, if a portion of a debt has been written off after the person has paid the debt in part where the creditor agency accepts such part payment as a compromise in lieu of payment in full, the entire debt would be deemed “resolved” for purposes of this section in accordance with paragraph (e)(1)(ii) of this section.


(f) Exemptions by the Secretary. (1) Upon the written request and recommendation of the head of the creditor agency to which a class of debts is owed, the Secretary may exempt any class of debts from affecting a debtor’s eligibility for Federal financial assistance based on the provisions of 31 U.S.C. 3720B and this section.


(2) The creditor agency recommending an exemption for a class of debts will provide the Secretary with information about:


(i) The nature of the program under which the delinquencies have arisen;


(ii) The number, dollar amount, and age of the debts in the program for which exemption is recommended;


(iii) The reasons why an exemption is justified, including why the granting of financial assistance to persons owing the type of debt for which exemption is requested would not be contrary to the Government’s goal to reduce losses by requiring proper screening of potential borrowers; and,


(iv) Other information the Secretary deems necessary to consider the exemption request.


(3) The Secretary may exempt a class of debts if exemption is in the best interests of the Federal Government.


(g) Waivers by the agency. (1) The head of an agency from which a person seeks to obtain Federal financial assistance may waive the eligibility requirement described in paragraph (c) of this section. Waivers shall be granted only on a person by person basis. The head of the agency may delegate the waiver authority only to the Chief Financial Officer of the agency. The Chief Financial Officer may redelegate the authority only to the Deputy Chief Financial Officer of the agency.


(2) The authorized agency official should balance the following factors when deciding whether to grant a waiver under paragraph (g)(1) of this section:


(i) Whether the denial of the financial assistance to the person would tend to interfere substantially with or defeat the purposes of the financial assistance program or otherwise would not be in the best interests of the Federal Government; and


(ii) Whether the agency’s granting of the financial assistance to the person is contrary to the Government’s goal to reduce losses from debt management activities by requiring proper screening of potential borrowers.


(3) When balancing the factors described in paragraph (d)(2) of this section, the authorized agency official should consider:


(i) The age, amount, and cause(s) of the delinquency and the likelihood that the person will resolve the delinquent debt; and


(ii) The amount of total debt, delinquent or otherwise, owed by the person and the person’s credit history with respect to repayment of debt.


(4) Each agency shall retain a centralized record of the number and type of waivers granted under this section.


(h) Effect of denial of Federal financial assistance. Nothing contained in this section precludes a person who has been denied Federal financial assistance from obtaining such assistance after that person’s delinquent debt has been resolved in accordance with paragraph (e)(1) of this section.


[63 FR 67756, Dec. 8, 1998]


PART 306 – GENERAL REGULATIONS GOVERNING U.S. SECURITIES


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


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

Subpart A – General Information

§ 306.0 Applicability of regulations.

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




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


§ 306.1 Official agencies.

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


[64 FR 38125, July 15, 1999]


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

(a) Advance refunding offer is an offer to a holder of a security, usually a year or more in advance of its call or maturity date, to exchange it for another security.


(b) A bearer security is payable on its face at maturity or call for redemption before maturity in accordance with its terms to bearer. The ownership is not recorded. Title to such a security may pass by delivery without endorsement and without notice. A coupon security is a bearer security with interest coupons attached.


(c) Bureau refers to the Bureau of the Fiscal Service, Division of Customer Service, Parkersburg, WV 26102.


(d) Call date or date of call is the date fixed in the official notice of call published in the Federal Register as the date on which the obligor will make payment of the security before maturity in accordance with its terms.


(e) Court means one which has jurisdiction over the parties and the subject matter.


(f) Department refers to the Department of the Treasury.


(g) Depository institution means an entity described in section 19(b)(1)(A)(i)-(vi) of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)-(vi)). Under section 19(b) of the Federal Reserve Act, the term depository institution includes:


(1) Any insured bank as defined in 12 U.S.C. 1813 or any bank which is eligible to make application to become an insured bank under 12 U.S.C. 1815;


(2) Any mutual savings bank as defined in 12 U.S.C. 1813 or any bank which is eligible to make application to become an insured bank under 12 U.S.C. 1815;


(3) Any savings bank as defined in 12 U.S.C. 1813 or any bank which is eligible to make application to become an insured bank under 12 U.S.C. 1815;


(4) Any insured credit union as defined in 12 U.S.C. 1752 or any credit union which is eligible to make application to become an insured credit union under 12 U.S.C. 1781;


(5) Any member as defined in 12 U.S.C. 1422; and


(6) Any savings association (as defined in 12 U.S.C. 1813) which is an insured depository institution, as defined in the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., or is eligible to apply to become an insured depository institution under such Act.


(h) Face maturity date is the payment date specified in the text of a security.


(i) Incompetent refers to a person under any legal disability except minority.


(j) Joint owner and joint ownership refer to any permitted form of ownership by two or more persons.


(k) Nontransferable securities are those issued only in registered form which according to their terms are payable only to the registered owners or recognized successors in title to the extent and in the manner provided in the offering circulars or special applicable regulations.


(l) Payment and redemption, unless otherwise indicated by the context, are used interchangeably for payment at maturity or payment before maturity pursuant to a call for redemption in accordance with the terms of the securities.


(m) Prerefunding offer is an offer to a holder of a security, usually within the year preceding its call or maturity date, to exchange it for another security.


(n) Redemption-exchange is any authorized redemption of securities for the purpose of applying the proceeds in payment for other securities offered in exchange.


(o) A registered security refers to a security the ownership of which is registered on the books of the Department. It is payable at maturity or call for redemption before maturity in accordance with its terms to the person in whose name it is inscribed, or his assignee.


(p) Securities assigned in blank or securities so assigned as to become in effect payable to bearer refers to registered securities which are assigned by the owner or his authorized representative without designating the assignee. Registered securities assigned simply to The Secretary of the Treasury or in the case of Treasury Bonds, Investment Series B – 1975-80, to The Secretary of the Treasury for exchange for the current Series EA or EO Treasury notes are considered to be so assigned as to become in effect payable to bearer.


(q) Signature guarantee program means a signature guarantee program established in response to Rule 17 Ad-15 (17 CFR 240.17Ad-15), issued under authority of the Securities Exchange Act of 1934. For the purpose of the regulations, in this part, the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchanges Medallion Program (SEMP), and the New York Stock Exchange, Inc. Medallion Signature Program (MSP) are recognized by Treasury as such signature guarantee programs.


(r) Taxpayer identifying number means the appropriate identifying number as required on tax returns and other documents submitted to the Internal Revenue Service, i.e., an individual’s social security account number or an employer identification number. A social security account number is composed of nine digits separated by two hyphens, for example, 123-45-6789; an employer identification number is composed of nine digits separated by one hyphen, for example, 12-3456789. The hyphens are an essential part of the numbers and must be included.


(s) Transferable securities, which may be in either registered or bearer form, refers to securities which may be sold on the market and transfer of title accomplished by assignment and delivery if in registered form, or by delivery only if in bearer form.


(t) Treasury securities, Treasury bonds, Treasury notes, Treasury certificates of indebtedness, and Treasury bills, or simply securities, bonds, notes, certificates, and bills, unless otherwise indicated by the context, refer only to transferable securities.


(u) Voluntary representative means the person qualified by the Department of the Treasury to request payment or make an assignment of a decedent’s securities pursuant to § 306.65.


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


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

The following guidelines apply to the transportation of reissued securities or securities presented for authorized transactions:


(a) The securities may be presented in person by the owner or the owner’s agent.


(b) If securities are not presented in person, shipment of the securities is at the owner’s risk and expense.


(c) Reissued securities will be delivered by certified mail or by other means, at the risk of the registered owner and at the expense of the Department.


[64 FR 38125, July 15, 1999]


Subpart B – Registration

§ 306.10 General.

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




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


§ 306.11 Forms of registration for transferable securities.

The forms of registration described below are authorized for transferable securities:


(a) Natural persons in their own right. In the names of natural persons who are not under any legal disability, in their own right, substantially as follows:


(1) One person. In the name of one individual. Examples:



John A. Doe (123-45-6789).

Mrs. Mary C. Doe. (123-45-6789).

Miss Elizabeth Jane Doe (123-45-6789).

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


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

or

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

(2) Two or more persons – general. Securities will not be registered in the name of one person payable on death to another, or in any form which purports to authorize transfer by less than all the persons named in the registration (or all the survivors).
3
Securities will not be registered in the forms John A. Doe and Mrs. Mary C. Doe, or either of them or William C. Doe or Henry J. Doe, or either of them and securities so assigned will be treated as though the words or either of them do not appear in the assignments. The taxpayer identifying number of any of the joint owners may be shown on securities registered in joint ownership form.




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



4-6 [Reserved]


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



John A. Doe (123-45-6789) or Mrs. Mary C. Doe or the survivor.

John A. Doe (123-45-6789) or Mrs. Mary C. Doe or Miss Mary Ann Doe or the survivors or survivor.

John A. Doe (123-45-6789) or Mrs. Mary C. Doe.

John A. Doe (123-45-6789) and Mrs. Mary C. Doe.

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

Limited to husband and wife:


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

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



John A. Doe (123-45-6789) and William B. Doe as tenants in common.

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

Limited to husband and wife:


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

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



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

Either parent with whom the minor resides, or if he does not reside with either parent, the person who furnishes his chief support, will be recognized as his natural guardian and will be considered a fiduciary. Registration in the name of a minor in his own right as owner or as joint owner is not authorized. Securities so registered, upon qualification of the natural guardian, will be treated as though registered in the name of the natural guardian in that capacity.

(2) Custodian under statute authorizing gifts to minors. A security may be purchased as a gift to a minor under a gifts to minors statute in effect in the State in which either the donor or the minor resides. The security should be registered as provided in the statute, with an identifying reference to the statute if the registration does not clearly identify it. Examples:



William C. Jones, as custodian for John A. Smith, a minor (123-45-6789), under the California Uniform Gifts to Minors Act.

Robert C. Smith, as custodian for Henry L. Brown, a minor (123-45-6789), under the laws of Georgia; Chapter 48-3, Code of Ga. Anno.

(3) Incompetents not under guardianship. Registration in the form John A. Brown, an incompetent (123-45-6789), under voluntary guardianship, is permitted only on reissue after a voluntary guardian has qualified for the purpose of collecting interest. (See §§ 306.37(c)(2) and 306.57(c)(2)). Otherwise, registration in the name of an incompetent not under legal guardianship is not authorized.


(c) Executors, administrators, guardians, and similar representatives or fiduciaries. A security may be registered in the names of legally qualified executors, administrators, guardians, conservators, or similar representatives or fiduciaries of a single estate. The names and capacities of all the representatives or fiduciaries, as shown in their letters of appointment, must be included in the registration and must be followed by an adequate identifying reference to the estate. Examples:



John Smith, executor of will (or administrator of estate) of Henry J. Jones, deceased (12-3456789).

William C. Jones, guardian (or conservator, etc.) of estate of James D. Brown, a minor (or an incompetent) (123-45-6789).

(d) Life tenant under will. A security may be registered in the name of a life tenant followed by an adequate identifying reference to the will. Example:



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

The life tenant will be considered a fiduciary.

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



John Jones and Blank Trust Co., Albany, NY, trustees under will of Sarah Jones, deceased (12-3456789).

John Doe and Richard Roe, trustees under agreement with Henry Jones dated February 9, 1970 (12-3456789).

The names of all trustees, in the form used in the trust instrument, must be included in the registration, except as follows:

(1) If there are several trustees designated as a board or authorized to act as a unit, their names should be omitted and the words Board of Trustees substituted for the word trustees. Example:



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

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



John Smith, Henry Jones, et al., trustees under will of Henry J. Smith, deceased (12-3456789).

Trustees under will of Henry J. Smith, deceased (12-3456789).

Trustees of Retirement Fund of Industrial Manufacturing Co., under directors’ resolution of June 30, 1950 (12-3456789).

(f) Private organizations (corporations, unincorporated associations and partnerships). A security may be registered in the name of any private corporation, unincorporated association, or partnership, including a nominee, which for purposes of these regulations is treated as the owner. The full legal name of the organization, as set forth in its charter, articles of incorporation, constitution, partnership agreement, or other authority from which its powers are derived, must be included in the registration and may be followed, if desired, by a reference to a particular account or fund, other than a trust fund, in accordance with the rules and examples given below:


(1) A corporation. The name of a business, fraternal, religious, or other private corporation must be followed by descriptive words indicating the corporate status unless the term corporation or the abbreviation Inc. is part of the name or the name is that of a corporation or association organized under Federal law, such as a national bank or Federal savings and loan association. Examples:



Smith Manufacturing Co., a corporation (12-3456789).

The Standard Manufacturing Corp. (12-3456789).

Jones & Brown, Inc. – Depreciation Acct. (12-3456789).

First National Bank of Albemarle (12-3456789).

Abco & Co., Inc., a nominee corporation (12-3456789).

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



American Legion Post No. __, Department of the D.C., an unincorporated association (12-3456789).

Local Union No. 100, Brotherhood of Locomotive Engineers, an unincorporated association (12-3456789).

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

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



Smith & Brown, a partnership (12-3456789).

Acme Novelty Co., a limited partnership (12-3456789).

Abco & Co., a nominee partnership (12-3456789).

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



State of Maine.

Town of Rye, NY.

Maryland State Highway Administration.

Treasurer, City of Springfield, IL.

Treasurer of Rhode Island – State Forestry Fund.

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



Insurance Commissioner of Pennsylvania, trustee for benefit of policyholders of Blank Insurance Co. (12-3456789), under Sec. __, Pa. Stats.

Rhode Island Investment Commission, trustee of General Sinking Fund under Ch. 35, Gen. Laws of RI.

State of Colorado in trust for Colorado Surplus Property Agency.

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


§ 306.12 Errors in registration.

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


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


§ 306.13 Nontransferable securities.

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


Subpart C – Transfers, Exchanges and Reissues

§ 306.15 Transfers and exchanges of securities – closed periods.

(a) General. The transfer of registered securities should be made by assignment in accordance with subpart F of this part. Transferable registered securities are eligible for denominational exchange. Specific instructions for issuance and delivery of the new securities, signed by the owner or his authorized representative, must accompany the securities presented. (Form PD 3905 or PD 1827, as appropriate, may be used.) Denominational exchanges may be made at any time. Securities presented for transfer must be received by the Bureau not less than 1 full month before the date on which the securities mature or become redeemable pursuant to a call for redemption before maturity. Any security so presented which is received too late to comply with this provision will be accepted for payment only.


(b) Closing of transfer books. The transfer books are closed for one full month preceding interest payment dates and call or maturity dates. If the date set for closing of the transfer books falls on Saturday, Sunday, or a legal holiday, the books will be closed as of the close of business on the last business day preceding that date. The books are reopened on the first business day following the date on which interest falls due. Registered securities which have not matured or been called, submitted for transfer, reissue, and coupon securities which have not matured or been called, submitted for exchange for registered securities, which are received during the period the books for that loan are closed, will be processed on or after the date such books are reopened. If registered securities are received for transfer, or coupon securities are received for exchange for registered securities, during the time the books are closed for payment of final interest at maturity or call, unless otherwise provided in the offering circular or notice of call, the following action will be taken:


(1) Payment of final interest will be made to the registered owner of record on the date the books were closed.


(2) Payment of principal will be made to the assignee under a proper assignment of the securities.


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


§ 306.16 Exchanges of registered securities.

No assignments will be required for:


(a) Authorized denominational exchanges of registered securities for like securities in the same names and forms of registration and


(b) Redemption-exchanges, or prefundings, or advance refundings in the same names and forms as appear in the registration or assignments of the securities surrendered.


§ 306.17 Exchanges of registered securities for coupon securities.

Exchanges of registered securities for bearer securities are not permitted.


[64 FR 38126, July 15, 1999]


§ 306.18 Exchanges of coupon securities for registered securities.

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


§ 306.19 Denominational exchanges of coupon securities.

Denominational exchanges of bearer securities are not permitted.


[64 FR 38126, July 15, 1999]


§ 306.20 Reissue of registered transferable securities.

Assignments are not required for reissue of registered transferable securities in the name(s) of:


(a) The surviving joint owner(s) of securities registered in the names of or assigned to two or more persons, unless the registration or assignment includes words which preclude the right of survivorship,


(b) A succeeding fiduciary or other lawful successor,


(c) A remainderman, upon termination of a life estate,


(d) An individual, corporation or unincorporated association whose name has been legally changed,


(e) A corporation or unincorporated association which is the lawful successor to another corporation or unincorporated association, and


(f) A successor in title to a public officer or body.


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


§ 306.21 Reissue of nontransferable securities.

Treasury Bonds, Investment Series B – 1975-80, may be reissued only in the names of:


(a) Lawful successors in title,


(b) The legal representatives or distributees of a deceased owner’s estate, or the distributees of a trust estate, and


(c) State supervisory authorities in pursuance of any pledge required of the owner under State law, or upon termination of the pledge in the names of the pledgors or their successors.


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


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

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


§ 306.23 Securities eligible to be held in the Legacy Treasury Direct® Book-entry Securities System.

(a) Eligible issues. The Secretary has published in the Federal Register notices describing Treasury issues of bonds and notes issued before August 1, 1986, that are eligible for conversion to the Legacy Treasury Direct book-entry securities system.


(b) Conversion of Registered Security to book-entry form to be held in Legacy Treasury Direct. To convert a registered security to book-entry form to be held in Legacy Treasury Direct, the owner must contact the Bureau of the Fiscal Service, P.O. Box 426, Parkersburg, West Virginia 26106-0426, for instructions. A security that has been converted to book-entry form in Legacy Treasury Direct shall be subject to subpart C and other applicable portions of 31 CFR part 357, and the provisions of 31 CFR part 306 shall no longer apply.


(c) Securities held under subpart O of this part may not be transferred to Legacy Treasury Direct.


[76 FR 18063, Apr. 1, 2011]


§ 306.24 Collection of fees on definitive securities.

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


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


Subpart D – Redemption or Payment

§ 306.25 Presentation and surrender.

(a) General. Securities, whether in registered or bearer form, are payable in regular course of business at maturity unless called for redemption before maturity in accordance with their terms, in which case they will be payable in regular course of business on the date of call. The Secretary of the Treasury may provide for the exchange of maturing or called securities, or in advance of call or maturity, may afford owners the opportunity of exchanging a security for another security pursuant to a prerefunding or an advance refunding offer. Registered and bearer securities should be presented and surrendered for redemption to the Bureau. No assignments or evidence in support of assignments will be required by or on behalf of the registered owner or assignee for redemption for his or its account, or for redemption-exchange, or exchange pursuant to a prerefunding or an advance refunding offer, if the new securities are to be registered in exactly the same names and forms as appear in the registrations or assignments of the securities surrendered. To the extent appropriate, these rules also apply to securities registered in the title of public officers who are official custodians of public funds.


(b) “Overdue” securities. If a bearer security or a registered security assigned in blank, or to bearer, or so assigned as to become in effect payable to bearer, is presented and surrendered for redemption after it has become overdue, the Secretary of the Treasury will ordinarily require satisfactory proof of ownership. (Form PD 1071 may be used.) A security shall be considered to be overdue after the lapse of the following periods of time from its face maturity:


(1) One month for securities issued for a term of 1 year or less.


(2) Three months for securities issued for a term of more than 1 year but not in excess of 7 years.


(3) Six months for securities issued for a term of more than 7 years.


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


§ 306.26 Redemption of registered securities at maturity, upon prior call, or for prerefunding or advance refunding.

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


[64 FR 38126, July 15, 1999]


§ 306.27 Redemption of bearer securities at maturity, upon prior call, or for advance refunding or prerefunding.

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


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


Subpart E – Interest

§ 306.35 Computation of interest.

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




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


§ 306.36 Termination of interest.

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


§ 306.37 Interest on registered securities.

(a) Method of payment. The interest on registered securities is payable by checks drawn on the United States Treasury to the order of the registered owners, except as otherwise provided herein. Interest checks are prepared by the Department in advance of the interest payment data and are ordinarily mailed in time to reach the addresses on that date. Interest on a registered security which has not matured or been called and which is presented for any transaction during the period the books for that loan are closed will be paid by check drawn to the order of the registered owner of record. Upon receipt of notice of the death or incompetency of an individual named as registered owner, a change in the name or in the status of a partnership, corporation, or unincorporated association, the removal, resignation, succession, or death of a fiduciary or trustee, delivery of interest checks will be withheld pending receipt and approval of evidence showing who is entitled to receive the interest checks. If the inscriptions on securities do not clearly identify the owners, delivery of interest checks will be withheld pending reissue of the securities in the correct registration. The final installment of interest, unless otherwise provided in the offering circular or notice of call, will be paid by check drawn to the order of the registered owner of record and mailed in advance of the interest payment date in time to reach the addressee on or about that date. Interest on securities presented for prerefunding or advance refunding will be adjusted as provided in the prerefunding or advance refunding offer.


(b) Change of address. To assure timely delivery of interest checks, owners should promptly notify the Bureau of any change of address. (Form PD 345 may be used.) The notification must be signed by the registered owner or a joint owner or an authorized representative, and should show the owner’s taxpayer identifying number, the old and new addresses, the serial number and denomination of each security, the titles of the securities (for example: 4
1/4 percent Treasury Bonds of 1987-92, dated August 15, 1962), and the registration of each security. Notifications by attorneys in fact, trustees, or by the legal representatives of the estates of deceased, incompetent, or minor owners should be supported by proof of their authority, unless, in the case of trustees or legal representatives, they are named in the registration.


(c) Collection of interest checks – (1) General. Interest checks may be collected in accordance with the regulations governing the endorsement and payment of Government warrants and checks, which are contained in the current revision of Department Circular No. 21 (part 240 of this chapter).


(2) By voluntary guardians of incompetents. Interest checks drawn to the order of a person who has become incompetent and for whose estate no legal guardian or similar representative has been appointed should be returned to the Bureau with a full explanation of the circumstances. For collection of interest, the Department will recognize the relative responsible for the incompetent’s care and support or some other person as voluntary guardian for the incompetent. (Application may be made on Form PD 1461.)


(d) Nonreceipt, loss, theft, or destruction of interest checks. If an interest check is not received within a reasonable period after an interest payment date, or if a check is lost, stolen, or destroyed after receipt, notification should be sent to the Bureau of the Fiscal Service, Division of Customer Service, Parkersburg, WV 26102. Notification should include the name and address of the owner, his taxpayer identifying number, and the serial number, denomination, and title of the security upon which the interest was payable. If the check is subsequently received or recovered, the Bureau should be notified.


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


§ 306.38 Interest on bearer securities.

Unless the offering circular and notice of call provide otherwise, interest on coupon securities is payable in regular course of business upon presentation and surrender of the interest coupons as they mature. Such coupons are payable at participating Federal Reserve banks or by the Bureau.
8
Interest on Treasury bills, and any other bearer securities which may be sold and issued on a discount basis and which are payable at par at maturity, is represented by the difference between the purchase price and the par value, and no coupons are attached.




8 Banking institutions will usually cash the coupons withou