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FEDERAL RESERVE BANK OF DALLAS F IS C A L A G E N T O F TH E U N IT E D S T A T E S Dallas, Texas, M arch 10, 1960 To All Treasury Tax and Loan Depositaries, and Others Concerned, in the Eleventh Federal Reserve District: There is quoted below a statem ent received today from the Treasury D epartm ent: “T he Treasury has learned that there has been an effort m ade by some banks which are Special Depositaries for T reasury Tax and Loan accounts to encourage their customers to sell their Treasury Bills, T ax Anticipation Series, m aturing M arch 22, 1960, and to accept paym ent for the Treasury bills by a deposit credited in their checking accounts, and to pay their taxes by checks drawn on the taxpayers’ accounts with the banks. Depositaries engaging in this practice are apparently doing so in expectation th at under arrangem ents which are in effect for M arch 15, 1960, income tax installm ent they will obtain a deposit in their Treasury Tax and Loan accounts for an am ount equal to one-half of the taxpayers’ checks (for checks of over $10,000 in am ount) drawn on their accounts with the banks, and in regular course they can present the T reasury bills to the Treasury for cash redem ption at m aturity. A similar situation occurred in February and M ay 1952 and in M ay 1953. In this connection refer to the T reasury notices to Tax and Loan depositaries and others concerned, dated February 25, 1952, M ay 20, 1952, and M ay 25, 1953, in which it was pointed out th at the T reasury does not look with favor upon transactions of this character and would take steps to deny credit to depositaries for customers’ checks which arise out of sales of their T ax Anticipation securities to these banks. “You are authorized and requested to notify depositaries in your district th at the position of the Treasury as outlined in its notices of February 25, 1952, M ay 20, 1952, and M ay 25, 1953, has not changed, and in connection with the current income tax installm ent steps will be taken to withhold credit for tax checks which grow out of transactions of the kind referred to.” T he Treasury notices to Treasury Tax and Loan Depositaries, and Others Concerned, dated February 25, 1952, M ay 20, 1952, and M ay 25, 1953, were similar in content. In order th at the m aterial m ay be available, the M ay 25, 1953, notice has been reproduced and a copy is enclosed. Yours very truly, W atrous H. Irons President This publication publication was digitized and made available by the Federal Reserve BBank Historical Library Library (FedHistory@dal.frb.org). (FedHistory@dal.frb.org) ank ooff DDallas' allas' Historical TREASURY DEPARTMENT Fiscal assistant secretary F is c a l S e r v ic e W A SH IN G TO N May 25, 1953 TO TREASURY TAX AMD LOAN DEPOSITARIES, AND OTHERS CONCERNED: Treasury Bills, Tax Anticipation Series, dated November 21, 1952, maturing June 19, 1953 a are outstanding in the amount of $2,002,666,000. These Treasury bills are acceptable in payment of Federal income taxes due June 15, 1953a and. were issued to enable taxpayers to invest their accumulated tax reserves in an interestbearing security which will be received in payment of Federal income taxes. In order to facilitate the use of Treasury Bills, Tax Anticipation Series, by taxpayers in payment of their income taxes, the Treasury has authorized Federal Reserve Banks and Branches, as fiscal agents of the United States, to accept such securities on or before the income tax instalment date, from or for account of Federal taxpayers, and to issue receipts to Directors of Internal Revenue showing that such Treasury bills are held for the purpose of applying the proceeds of redemption to the payment of income taxes of the taxpayer named in the receipts. Two copies of each receipt will be delivered to the taxpayer con cerned, who will attach one copy to his income tax return filed with the Director of Internal Revenue. Directors of Internal Revenue have been instructed (internal Revenue Mimeograph No. 122, Coll. No. 2k, dated February 2, 1953) to accept tax returns to which are attached copies of receipts addressed to them by Federal Reserve Banks and Branches that Treasury bills due June 19, 1953 are being held for application of the proceeds of redemption to the payment of income taxes due on June 15, 1953a of the taxpayer named in the receipt. The continuing policy of the Treasury is not to look with favor upon efforts by banks which are special depositaries for Treasury tax and loan accounts to encourage their customers to sell to them their Treasury Bills, Tax Anticipation Series, maturing June 19, 1953a end to accept payment for the Treasury bills by a deposit credit in their checking accounts, or to present Treasury Savings notes for cash redemp tion, with the proceeds being deposited in their checking accounts, and to pay their taxes by checks drawn on the taxpayers' accounts with the banks. Depositaries following this practice apparently do so in expecta tion that under arrangements which have been in effect for quarterly tax payments since March, 1951a they may obtain a deposit in their Treasury tax and loan accounts for an amount equal to the taxpayers' cheeks (for 2 - checks over $10,000 in amount) drawn on their accounts with the banks, and in regular course they can present the Treasury bills to the Treasury for cash redemption at maturity. These practices by depositaries will increase the amount of such bills or Savings notes presented for cash redemption in advance of the availability of Treasury receipts from the income tax instalment due on June 15, 1953, and will make it more difficult for the Treasury and the Federal Reserve System to handle the large income tax collections during June in a manner that will maintain stability in the money market. Accordingly, the Treasury will follow the same procedure as was adopted in connection with the March 13, 1932 and June 13, 1932 income tax instalments. Depositaries having Treasury tax and loan accounts are advised that to the extent they present Treasury bills maturing June 19, 1953 for cash redemption for their own account, or if taxpayers present their Treasury Savings notes for cash redemption, and use the proceeds of redemption through deposit with and withdrawal from depositaries by checks in payment of their June 15, 1953 income taxes, an equal amount of income tax checks of $10,000 and over drawn on such banks in payment of income taxes due June 15, 1953 will be withheld from deposit in their tax and loan accounts. However, if a depositary presenting Treasury BillB, Tax Anticipation Series, due June 19> 1953, for cash redemption for its own account, can certify that they were acquired by purchase prior to June 1, 1953; and were held continuously until date of maturity, or that they were acquired on and after June 1st, and payment of the purchase price wan not credited in a customer's deposit account on its books, such bills will not be included in arriving at the amount of income tax checks of $10,000 and over to be withheld from deposit in their tax and loan accounts Very truly yours, E. F. Bartelt Fiscal Assistant Secretary of the Treasury
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