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1891 Minutes of actions taken by the Board of Governors of the ?eclerea Reserve System on Monday, December 12, PRESENT: Mr. Mr. Mr. Mr. 1949. Eccles, Chairman pro tem. Szymczak Draper Vardaman Mr. Mr. Mr. Mr. Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Minutes of actions taken by the Board of Governors of the ?ecier.al Reserve System on December Memorandum dated December 9, 1949, were approved unanimously. 9, 1949, from Mr. Bethea, Director "the Division of Administrative Services, recommending that the api tient of Mrs. Frances T. Kurtz as an operator (key punch) in that 810/1 be extended on a permanent basis with no change in her prebasic salary of $2,620 per annum, effective December 14, 1949. Approved unanimously. Letter to Mr. McLarin, President of the Federal Reserve Bank °t Atlanta, reading as follows: "As requested in your letter of November 22, 19149, the Board of Governors authorizes your Bank to Proceed with the preparation of final plans for a 11% , building for the Jacksonville branch on the °asis of the revised preliminary plans dated November 10, 1949. "This authorization is given with the understand18 that, as is the usual course in such cases, the plans for specifications will be submitted to the 'Ile Board for consideration prior to asking for bids. P Approved unanimously. 192 12/12/49 -2- Letter to the Presidents of all Federal Reserve Banks, l'eeding as follows: "There have been forwarded to you today under separate cover copies of form F. R. 107 to be used by State member banks in submitting their reports of earnings and dividends for the calendar Year 1949, and copies of the revised form P. R. 107a, Instructions for the Preparation of RePorts of Earnings and Dividends. "The earnings report form is the same as the °Ile used for the first half of 1949. "The revisions in the instructions pamphlet, t°rM F. R. 107a, have been made to clarify various Portions of existing instructions and to make them Consistent with changes in the report forms. As indicated in the attachment, they do not effect any substantive changes." Approved unanimously, with the understanding that the letter would be sent when the forms referred to therein were printed and ready for distribution. Letter to Mr. Leach, President of the Federal Reserve Bank °1' RichMond, reading as follows: "Reference is made to your Bank's letter of November 23, 1949, in which you advise that it apears expenses for certain functions at the Charlotte Ilanoh will exceed the 1949 estimates as follows: Amount Function Pr() vision of Space (includes $8,000 $6,000 previously advised) zurniture 17,00o and Equipment "The Board accepts the revised figures as sub!itted, and appropriate notations are being made on ' L Ile Board's records." t Approved unanimously. 1.893 12h2/49 -3- Letter to Mr. Earhart, President of the Federal Reserve Bank Of San Francisco, reading as follows: "Reference is made to your Bank's letter of November 22, 1949, in which you advise that it appears expenses for certain functions at your head office and branches will exceed the 1949 estimates as follows: Salt Los PortLake Head cion land City Office Angeles vision of Space $23,000 $13,000 $5,800 V7,100 '1'°Iiision of Personnel 12,000 GI,ellere.1. Service 6,400 61700 12,000 1.°8t 3,500 3,300 ? .1 ( age and Expressage Ekrance 1,500 500 uplseollnt and Credit 600 900 141 ' elloY and Coin 25,000 14,100 10,200 75,000 150 and 1,100 1,600 AWatirig Public Relations tam. 3,400 1,300 JA, 10,000 taxamination ; er'41 Reserve Note Issues 52,000 700 >oo 4:earch and Statistical 800 —eel- Agency 14,000 "The Board accepts the revised figures as subMitted, and appropriate notations are being made in the Board's records." Seattle $13,000 1,000 Approved unanimously. 4%4 0 Letter to Mr. Dearmont, Chairman of the Conference of Chairthe Federal Reserve Banks, Federal Reserve Bank of St. Louis, tetttii as follows: "You will recall that the Conference of Chairmen (3131. May 29, 1949, requested that the Board, after a 2 8 114 of the legal problems involved, authorize an ar1:angement (either within or outside the Retirement Sys.?111 of the Federal Reserve Banks) under which a minimum 84-10vance of $10,000 would be assured to any President 894 12/12/49 -4- "of a Federal Reserve Bank who retired after attaining )and completing at least 10 years of service. age 6 "In examining the legal problems involved in making additional payments to the Presidents, informal discussions have been had with the Bureau of Internal Revenue and it is probable that if a plan were set up under which such payments were made as a part of the Retirement System its present tax exempt status might be brought into question. It is our understanding that this difficulty with respect to the Retirement System would not arise if the supplemental payments were made by the Reserve Banks themselves and kept separate and apart from the Retirement System. "However, serious questions arise as to how such additional payments would be taxed to a President who received them. There appears to be a very real danger that, in the absence of a prior ruling from the Bureau of Internal Revenue, a revenue agent might attempt to tax the President in the year he retired on the total ?resent value of all the additional payments he would be expected to receive in the future. We are not in Position to say definitely whether it would be possible to get a favorable advance ruling on the point but in view of the unique features involved there appears to be ?°me possibility of obtaining such a ruling which would i101d that the payments would be taxable only year-byrear as they are received. In any event it would seem 0 be unwise to proceed with any such arrangement witholzt seeking such a ruling. "In the circumstances, the Board proposes to present the matter to the Bureau of Internal Revenue for a rUling and at the same time to request confirmation of °I.Ir understanding that the payments proposed would not &Pair the tax exempt status of the Retirement System. *Ille status of our negotiations with the Bureau of InterRevenue is such as to make it desirable to go forward Pl'omptly if we are to proceed with the matter. Accordingly, !fe are writing the Chairmen of each of the Federal Reserve tanks whose President would receive a regular retirement allowance of less than $10,000 per annum if he retired after reaching age 6, and asking them to let us know lf they see any objection to this procedure. We will elso appreciate it if you will let us know if you see , 13t117 objection to the procedure. As we are advising those ,dilairmen, unless some objection is indicated on or before 4Jecember 22, we will understand that there is none. IH9h 2/12/49 ' -5- "In considering the various phases of the matter) the Board has concluded that it would not be desirable to attempt to work out or adopt a general Procedure to be applied in all future cases, and that any question of additional payments to a President should be considered in the light of all the circumstances in the particular case. On that basis, the Board has given individual consideration to the case of each of the Presidents now in office who 140111d receive a regular retirement allowance of less than $10,000 per annum if he retired after reaching )and serving at least 10 years as President. 6 "6 are advising the Chairmen of those Reserve Banks ose Presidents would have a regular retirement al4-01dance below that figure, that in the event a favorable ruling is obtained from the Bureau of Internal Revenue on how such additional payments would be taxed, the Board would be willing to approve agreeMerits for additional payments to each such President along the lines proposed by the Conference of ChairMen if the directors of the respective banks should wish to make such an agreement with him. Such apPoval by the Board would be entirely on an individual basis and would not in any way be considered a 1°recedent for any other case. "We are writing to you as Chairman of the ChairConference and to Mr. Brainard as Chairman of he Committee appointed by the Conference to study ,he Retirement System, and we are sending a copy to he Chairmen of each of the Reserve Banks." n t Approved unanimously, with a similar letter to Mr. Brainard, Chairman of the Committee appointed by the Conference of Chairmen to study the Retirement System, with the understanding that copies of these letters would be sent to the Chairmen of all Federal Reserve Banks, and that separate letters would be written to the Chairmen of the Federal Reserve Banks of Boston, Philadelphia, St. Louis, and Minneapolis with respect to the Presidents -6now in service who might rereceive supplemental retirement allowances under the proposed procedure.
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