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FEDERAL RESERVE BANK O F 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 D allas, Texas, February 20, 1962 SPECIAL HANDLING OF TAX PAYMENTS To All Banking Institutions and Others Concerned in the Eleventh Federal Reserve District: The Treasury D epartm ent has announced th at the procedure customarily in effect during periods of heavy tax payments, with respect to the special handling of large paym ents of income taxes, will be effective for the M arch 1962 corporation income tax collections. This arrangem ent will be applicable only to the extent of 50% o f the am ount of checks of $ 1 0,000 or more, representing paym ents of corporation income taxes. During the period from M arch 1, 1962, through M arch 30, 1962, (1 ) Directors of Internal Revenue will make special deposits with the Federal Reserve banks of checks representing tax rem ittances of $10,000 or over covering paym ents of corporation income taxes, (2 ) Federal Reserve banks will prepare daily a “Special D raft for Credit in Treasury Tax and Loan Account” in an am ount not to exceed 50% of the aggregate am ount of such checks drawn on each Special Depositary, and (3 ) in accordance with conditions set forth on the face of the special draft, Special Depositaries m ay exercise their options to accept for deposit in their Treasury Tax and Loan Accounts funds in an amount equal to the amount of the special draft. The Treasury D epartm ent has indicated th at it m ay be necessary to either increase or decrease the percentage am ount of such checks for credit in the T reasury Tax and Loan Account from tim e to time during the period, if such action is required to prevent undue fluctuations in the account of the Treasurer of the United States with Federal Reserve banks. No distinction will be made between these special credits and other credits to Treasury Tax and Loan Accounts. W ithdrawals of balances in Treasury Tax and Loan Accounts will be m ade as required by the needs of the Treasury. The Treasury D epartm ent has requested all Special Depositaries be notified th at in connection with the M arch income tax installm ent the Treasury will take steps to deny credit of customers’ tax checks which arise out of sales of their tax anticipation securities to the banks. During previous periods of heavy tax paym ents the T reasury learned th at some special depositaries for Treasury Tax and Loan Accounts were encouraging their customers to sell T reasury Bills, Tax Anticipation Series, and to accept paym ent for the Treasury bills by deposit credit in their checking accounts and to pay their taxes by checks drawn on their accounts with the banks. Depositaries were apparently engaging in this practice in expectation th at under the usual arrangements for handling income tax checks of over $10,000, the banks would obtain a deposit in their Treasury Tax and Loan Accounts for one-half the am ount of the taxpayers’ checks drawn on their accounts with the banks and in regular course the banks would present the Treasury bills to the T reasury for cash redem ption a t m aturity. If the Treasury learns th at any depositary follows a similar practice this year, credit will be withheld for tax checks which grow out of such transactions. This bank will be pleased to furnish any additional information in this connection th at m ay be desired. Yours very truly, W atrous H. Irons President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)