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FEDERAL RESERVE BANK OF DALLAS F IS C A L A G E N T O F T H E U N IT E D S T A T E S Dallas, Texas, February 23,1952 To Treasury Tax and Loan Depositaries and Others Concerned: There is enclosed a copy of a letter addressed to Treasury Tax and Loan Depositaries and others concerned by the Secretary of the Treasury, which this bank has been requested to transmit to all such depositaries in this district. The letter contains informa tion concerning the use of Treasury Bills, Tax Anticipation Series, maturing March 15, 1952, in payment of Federal income taxes due on that date and other related information. Additional copies of the letter will be forwarded on request. Yours very truly, R. R. GILBERT President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) THE S E C R E T A R Y OF THE T R E A S U R Y W A SH IN G T O N F e b ru a ry 2£, 1952 TO TREASURY TAX AND LOAN DEPOSITARIES, AND OTHERS CONCERNED: T re a su ry B i l l s , Tax A n t ic ip a t io n S e r i e s , d a te d O ctober 23 , 1951* m aturing March 15, 1952, a r e o u tsta n d in g in th e amount o f $ 1 ,2 3 3 *7 8 3 ,0 0 0 * These T re a su ry b i l l s a re a c c e p ta b le in payment o f F e d e r a l income t a x e s due on t h e i r m a tu rity d a t e , and were is s u e d t o e n a b le ta x p a y e r s to i n v e s t t h e i r accu m u lated t a x r e s e r v e s in an in t e r e s t - b e a r i n g s e c u r i t y which w i l l be r e c e iv e d in payment o f F e d e r a l income ta x e s ,, The Treasury has been advised that many o f these b i l l s are held by commercial banks in safekeeping fo r the accounts o f customers who expect to use them in payment o f income taxes* In order to f a c i lit a t e the use o f Treasury B ill s , Tax A nticipation S eries, by taxpayers in payment o f th e ir income taxes, the Treasury has authorized Federal Reserve Banks and branches, as f i s c a l agents o f the United S tates, to accept such se cu ritie s on or before th eir maturity date, from or fo r account o f Federal taxpayers, and to issue receip ts to C ollectors o f Internal Revenue that such Treasury b i l l s are held fo r the purpose o f applying the proceeds o f redemption to the payment o f Income taxes o f the taxpayer named in the receipts* Two copies o f each r e ce ip t w ill be delivered to the taxpayer con cerned, who w ill attach one copy to h is income tax return f i l e d with the C ollector o f Internal Revenue* C ollectors o f Internal Revenue have been instructed (A&C Mimeograph, C oll* No* 6709, Supp* 2, dated December 27, 1951) to accept tax returns to which are attached copies o f receip ts addressed to them by Federal Reserve Banks and branches that Treasury b i l l s due March 15, 1952 are being held fo r application o f the proceeds o f redemption to the payment o f income taxes o f the taxpayer named in the receipt* The Treasury has learned that there has been an e f f o r t made by some banks which are sp ecial depositaries f o r Treasury tax and loan accounts to encourage th e ir customers to s e l l to them th e ir Treasury B i l l s , Tax A nticipation S eries, maturing March 15, 1952, and to accept payment fo r the Treasury b i l l s by a deposit cre d it in th eir checking accounts, or to present Treasury Savings notes fo r cash redemption, with the proceeds being deposited in th eir checking accounts, and to pay th e ir taxes by checks drawn on the taxpayers* accounts with the banks* D epositaries engaging in th is p ra ctice apparently are doing so in expectation that under arrangements which have been in e ff e c t fo r quarterly tax payments 2 since March, 1951, they may obtain a 'deposit in th eir Treasury tax and loan accounts fo r an amount equal to the taxpayers* checks (fo r checks over $10,000 in amount) drawn on th e ir accounts with the banks, and in regular course they can present the Treasury B ills to the Treasury f o r cash redemption at maturity* The Treasury does not look with favor upon transactions o f th is character which in e f f e c t circumvent the purposes underlying the issuance o f the Tax A nticipation Series o f Treasury B i l l s , and Treasury Savings notes* These p ra ctices by depositaries w ill increase the amount o f such b i l l s or Savings notes presented fo r cash redemption in advance o f the a v a ila b ility o f Treasury receip ts from the income tax instalment due on March 15, 1952, and w ill make i t more d i f f i c u l t fo r the Treasury and the Federal Reserve System to handle the large income tax c o lle c tio n s during March in a manner that w ill maintain s ta b ilit y in the money market* Accordingly, depositaries having Treasury tax and loan accounts are advised that to the extent they present Treasury B ills maturing March 15, 1952 fo r cash redemption fo r "their own account or fo r the account o f th eir customers, or i f taxpayers present th e ir b i l l s or Treasury Savings notes fo r cash redemption, and use the proceeds o f redemption through deposit with and withdrawal from depositaries by checks in payment o f th eir March, 1952 income taxes, an equal amount o f income tax checks o f $10,000 and over drawn on such banks in payment o f income taxes due March 15, 1952 w ill be withheld from deposit in th eir tax and loan accounts. However, i f a depositary presenting Treasury B i l l s , Tax A nticipation S eries, due March 15, 1952, fo r cash redemption fo r i t s own account, can c e r t ify that they were acquired by purchase p rio r to February 25, 1952, and were held continuously u n til date o f maturity, or that they were acquired on and a fte r February 25th, and payment o f the purchase p rice was not cred ited in a custom ers deposit account on it s books, such b i l l s w ill not be included in arriving at the amount o f income tax checks o f $10,000 and over to be withheld from deposit in th eir tax and loan accounts*
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