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FEDERAL RESERVE BANK OF DALLAS F I S 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, May 26, 1953 SPECIAL HANDLING OF LARGE INCOME TAX PAYMENTS AND TREASURY BILLS, TAX ANTICIPATION SERIES To All Banking Institutions, and Others Concerned, in the Eleventh Federal Reserve District: The Treasury Department has announced that the procedure which prevailed during the quarterly tax payment periods of 1952 and the first quarter of 1953, with respect to the handling of large payments of individual and corporate income taxes, will be effec tive also for June 1953 tax collections, to the extent of 50% of the amount of tax pay ments of $10,000 or over. During the period from June 1, 1953 through July 3, 1953, (1) Directors of Interna] Revenue will deposit directly with the several Federal Reserve Banks checks representing tax remittances of $10,000 or over covering payments of individual and corporate income and excess profits taxes, (2) Federal Reserve Banks will prepare daily a “ Special Draft for Credit in Treasury Tax and Loan Account” in an amount not to exceed 50% of the aggregate amount of such checks, subject to the usual reservations, drawn on each Spe cial Depositary, and (3) in accordance with the conditions set forth on the face of the Special Draft, Special Depositaries may exercise their option to accept for deposit in their Treasury Tax and Loan Accounts funds in an amount equal to the amount of the Special Draft. With respect to the reestablishment of this procedure for June 1953 payments, the attention of Special Depositaries is directed to the enclosed circular letter signed by the Fiscal Assistant Secretary of the Treasury and dated May 25, 1953, relating to the redemption of Treasury Bills, Tax Anticipation Series maturing June 19, 1953, and accept able in payment of Federal income taxes due June 15, 1953, and Treasury Savings Notes. Accordingly, in preparing the special drafts, the Treasury has instructed the Federal Reserve Banks to reduce the amount proportionately which a depositary may accept for credit in its Treasury Tax and Loan Account by the amount of Treasury Bills, Tax Antici pation Series, maturing June 19, 1953, which such depositary presents for cash redemp tion for its own account, unless the bills are accompanied by the depositary’s certifica tion that the bills were acquired for its account by purchase prior to June 1, 1953, and were held continuously until date of maturity, or that they were acquired on or after June 1, 1953, and payment of the purchase price was not credited in a oustomer’s deposit account on its books. A certification in essentially the above form will be acceptable. Similar proportionate reduction in the amounts of the special drafts will also be made for Treasury Bills, Tax Anticipation Series and Treasury Savings Notes which are presented by banks for cash redemption for the account of their customers, or directly by the customers, the proceeds of which are disbursed as tax payments. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) It is not the purpose to invoke the above described restrictions against Special Depositaries for bona fide redemptions but only to reduce Treasury Tax and Loan Deposits in those cases where depositaries have acquired the Tax Anticipation Series bills other than as specified above, and where proceeds of redemption of the bills or Treasury Sav ings Notes have been credited to customers’ accounts and have been subsequently dis bursed as tax payments. Depositaries presenting Treasury Bills, Tax Anticipation Series, maturing June 19, 1953, for the account of their customers, should indicate the names of the customers and amounts submitted for each account. Treasury Bills, Tax Anticipation Series, to be handled in accordance with the letter of May 25 from the Fiscal Assistant Secretary of the Treasury, should be presented to this bank or appropriate branch with complete information as to the name and address of the taxpayer involved and as to the Director of Internal Revenue to whom the taxes are payable. Banks which desire that this series of bills held by this bank or one of its branches in safekeeping or as collateral be withdrawn and applied in payment of their income taxes should furnish appropriate instructions to the office where the bills are held. The bills or instructions relating to bills held in safekeeping or as collateral by this bank and branches should be received in sufficient time to permit the return of the copies of the receipts to be attached to the income tax returns. Withdrawals of balances in Treasury Tax and Loan Accounts arising from deposits under this special procedure, will be made in the light of the Department’s financing needs. This bank will be glad to furnish any additional information in this connection that may be desired. Yours very truly, R. R. GILBERT President TR EASU R Y DEPARTM ENT fisc a l Assistant Secretary F is c a l S e r v ic e W ASH IN G TO N 25 May 25 , 1953 TO TREASURY TAX AND LOAN D E P O S IT A R IE S , AND OTHERS CONCERNED: Treasury B i l l s , Tax A n ticip ation S e r ie s , dated November 21 , 1952, maturing June 19 , 1953, are outstanding in the amount of $ 2 ,0 0 2 ,6 6 6 ,0 0 0 . These Treasury b i l l s are acceptable in payment of Federal income taxes due June 15, 1953, and were issued to enable taxpayers to in v est th e ir accumulated tax reserves in an in t e r e s t bearing se c u rity which w i l l be received in payment o f Federal income ta x e s . In order to f a c i l i t a t e the use o f Treasury B i l l s , Tax A n ticip ation S e r ie s , by taxpayers in payment o f th e ir income ta x e s, the Treasury has authorized Federal Reserve Banks and Branches, as f i s c a l agents o f the United S ta te s , to accept such se c u r itie s on or before the income tax instalm ent d ate, from or fo r account o f Federal taxpayers, and to issue re c e ip ts to D irectors o f In tern al Revenue showing that such Treasury b i l l s are held fo r the purpose of applying the proceeds of redemption to the payment o f income taxes o f the taxpayer named in the r e c e ip ts . Two copies o f each receip t w i l l be d elivered to the taxpayer con cerned, who w i l l attach one copy to h is income tax return f i l e d with the D irector o f In tern al Revenue. D irectors o f Internal Revenue have been in stru cted (in te r n a l Revenue Mimeograph No. 122, C o ll. No. 2k, dated February 2 , 1953) to accept tax returns to which are attached copies o f re c e ip ts addressed to them by Federal Reserve Banks and Branches that Treasury b i l l s due June 19, 1953 are being held fo r ap p lication o f the proceeds o f redemption to the payment o f income taxes due on June IS , 1953 , o f the taxnayer named in the r e c e ip t. The continuing p o lic y of the Treasury is not to look with favor upon e f f o r t s by banks which are sp e cia l d ep ositaries fo 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 n ticip a tio n S e r ie s , maturing June 19, 1953, end to accept payment fo r the Treasury b i l l s by a deposit cred it in th e ir checking accounts, or to present Treasury Savings notes fo r cash redemp t io n , with the proceeds being deposited in th e ir checking accounts, and to pay t h e ir taxes by checks drawn on the taxpayers’ accounts with the banks. D epositaries follow in g th is p ractice apparently do so in expecta tio n that under arrangements which have been in e f f e c t fo r quarterly tax payments since March, 1951, they may obtain a deposit In th e ir Treasury tax and loan accounts fo r an amount equal to the taxpayers1 checks ( f o r - 2 - checks over $ 1 0 ,0 0 0 in amount) drawn on th e ir accounts with the banks, and in regular course they can present the Treasury b i l l s to the Treasury fo r cash redemption at m aturity. These p ra ctices by d ep ositaries w i l l increase the amount o f such b i l l s or Savings notes presented fo r cash redemption in advance of the a v a i la b ilit y o f Treasury receip ts from the income tax instalment due on June 1 5 , 1953> and w i l l 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 June in a manner that w i l l maintain s t a b i l i t y in the money market. Accordingly, the Treasury w i l l fo llo w the same procedure as was adopted in connection with the March 15, 1952 and June 15, 1952 income ta x instalm en ts. D epositaries having Treasury tax and loan accounts are advised that to the extent they present Treasury b i l l s maturing June 19, 1953 f o r cash redemption fo r th e ir own account, or i f taxpayers present t h e ir Treasury Savings notes fo r cash redemption, and use the proceeds o f redemption through deposit with and withdrawal from d ep ositaries by checks in payment of th e ir June 15, 1953 income ta x es, an equal amount of income tax checks o f $ 1 0 ,0 0 0 and over drawn on such banks in payment of income taxes due June. 15, 1953 w i l l be withheld from deposit in th e ir tax and loan accounts. However, i f a depositary presenting Treasury B i l l s , Tax A nticipation S e r ie s , due June 19* 1953, fo r cash redemption fo r i t s own account, can c e r t i f y that they were acquired by purchase prior to June 1 , 1953, and were held continuously u n til date o f m aturity, or that they were acquired on and a fte r June 1 s t , and payment of the purchase price was not credited in a customer's deposit account on i t s books, such b i l l s w ill not be included in arrivin g at the amount o f income tax checks of $10,000 and over to be withheld from deposit in th e ir tax and loan accounts Very tr u ly yours, E . F . B a r te lt F is c a l A ssistan t S ecretary o f the Treasury
