The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Treas.
HJ
10
.A13
P4
v.398
Department of the Treasury
PRESS RELEASES
The following numbers were not used:
KD-3749 and 3750
DEPARTl\'IENT
OF
THE
NEWS
TREASURY
OII'I! 1',01 I"
III II
TREASURY
UI·\lIt-; .I~(HII'I·'\"'\ 1.\ \'1 \ \\ I·" I. \.1\ .• \\ \~III\t; 10'. 11.( .• ~41!!1I.,11J!: 1111 1'H,1I
EMBARGOED UNTIL 11:00 A.M.
January 2, 2003
CONTACT:
Office of Financing
202/691-3550
TREASURY OFFERS 13-WEEK AND 26-WEEK BILLS
The Treasury will auction 13-week and 26-week Treasury bills totaling $30,000
million to refund an estimated $30,240 million of publicly held 13-week and 26-week
Treasury bills maturing January 9, 2003, and to pay down approximately $240 million.
Also maturing is an estimated $16,001 million of publicly held 4-week Treasury bills,
the disposition of which will be announced January 6, 2003.
The Federal Reserve System holds $13,572 million of the Treasury bills maturing
on January 9, 2003, in the System Open Market Account (SOMA).
This amount may be
refunded at the highest discount rate of accepted competitive tenders either in these
auctions or the 4-week Treasury bill auction to be held January 7, 2003. Amounts
awarded to SOMA will be in addition to the offering amount.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FIMA) accounts bidding through the Federal Reserve Bank of New
York will be included within the offering amount of each auction.
These
noncompetitive bids will have a limit of $100 million per account and will be accepted
in the order of smallest to largest, up to the aggregate award limit of $1,000
million.
TreasuryDirect customers have requested that we reinvest their maturing holdings
of approximately $1,134 million into the 13-week bill and $693 million into the 26week bill.
The allocation percentage applied to bids awarded at the highest discount rate
will be rounded up to the next hundredth of a whole percentage point, e.g., 17.13%.
This offering of Treasury securities is governed by the terms and conditions set
forth in the Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about each of the new securities are given in the attached offering
highlights.
000
Attachment
HIGHLIGHTS OF TREASURY OFFERINGS OF BILLS
TO BE ISSUED JANUARY 9, 2003
January 2, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Award (35% of Offering Amount) ....
Maximum Recognized Bid at a Single Rate ...
NLP Reporting Threshold . . . . . . . . . . . . . . . . . . .
NLP Exclusion Amount . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
Description of Offering:
Term and type of security . . . . . . . . . . . . . . . . . .
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auction date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturi ty date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issue date . . . . . . . . . . . . . . . . . . . . . . . .
Currently outstanding . . . . . . . . . . . . . . . . . . . . . .
Minimum bid amount and multiples
$15,000
$ 5,250
$ 5,250
$ 5,250
$ 4,900
million
million
million
million
million
91-day bill
912795 MG 3
January 6, 2003
January 9, 2003
April 10, 2003
October 10, 2002
$19,143 million
$1,000
$15,000
$ 5,250
$ 5,250
$ 5,250
None
million
million
million
million
182-day bill
912795 NC 1
January 6, 2003
January 9, 2003
July 10, 2003
January 9, 2003
$1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids: Accepted in full up to $1 million at the highest discount rate of accepted competitive bids.
Foreign and International Monetary Authority (FIMA) bids: Noncompetitive bids submitted through the Federal Reserve
Banks as agents for FIMA accounts. Accepted in order of size from smallest to largest with no more than $100
million awarded per account.
The total noncompetitive amount awarded to Federal Reserve Banks as agents for FIMA
accounts will not exceed $1,000 million. A single bid that would cause the limit to be exceeded will
be partially accepted in the amount that brings the aggregate award total to the $1,000 million limit.
However,
if there are two or more bids of equal amounts that would cause the limit to be exceeded, each will be prorated
to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a discount rate with three decimals in increments of .005%, e.g., 7.100%, 7.105%.
(2) Net long position (NLP) for each bidder must be reported when the sum of the total bid amount, at all
discount rates, and the net long position equals or exceeds the NLP reporting threshold stated above.
(3) Net long position must be determined as of one half-hour prior to the closing time for receipt of
competitive tenders.
Receipt of Tenders:
Noncompetitive tenders ..... Prior to 12:00 noon eastern standard time on auction day
Competitive tenders ........ Prior to 1:00 p.m. eastern standard time on auction day
Payment Terms: By charge to a funds account at a Federal Reserve Bank on issue date, or payment of full par amount
with tender.
TreasuryDirect customers can use the Pay Direct feature, which authorizes a charge to their account of
record at their financial institution on issue date.
PO-3730: MedIa AdvISory President's Commission on U.S. Postal Service Holds First M...
Page 1 of 1
f-' f-: L S S f-: C, C, r ."
FROM THE OFFICE OF PUBLIC AFFAIRS
January 6, 2003
PO-3730
Media Advisory
President's Commission on U.S. Postal Service Holds
First Meeting on Wednesday
The President's Commission on the US Postal Service this week will hold its first
mp"?tino ,mri 'Nill henr testimony from senior officials from the Treasury Department
Clnu the Postal Service
The meeting, which is open to the public and media, will be held at 8:30 a.m.-12:00
p.m. EST on Wednesday, January 8,2003 at the Hotel WaShington, 15th Street
and Pennsylvania Ave., N.W., Washington, DC.
Those speaking before the Commission include Treasury Under Secretary for
Domestic Finance Peter R. Fisher, Postmaster General John E. Potter, and Chief
Financial Officer and Executive Vice President of the Postal Service Richard
Strasser.
The nll1e-member bipartisan Commission, established by President Bush on
December 11, 2002, will identify the operational, structural, and financial challenges
facing the Postal Service; examine potential solutions; and recommend legislative
and administrative steps to ensure the long-term viability of postal service in the
United States. The Commission is co-chaired by James A. Johnson, Vice Chairman
of Perseus, L L.C., and Harry Pearce, Chairman of Hughes Electronics Corporation.
Tile Culnll1lssio:l will submit its report to the President by July 31, 2003.
http://www.treas.gov/press/releases/p03730.htm
1113/2003
DEPARTMENT
OF
THE
TREASURY <'~J~
TREASURY
NEW S
--
{ r .. q
EMBARGOED UNTIL 11:00 A.M.
January 6, 2003
Contact:
Office of Financing
202/691-3550
TREASURY OFFERS 4-WEEK BILLS
The Treasury will auction 4-week Treasury bills totaling $13,000 million to
refund an estimated $16,001 million of publicly held 4-week Treasury bills maturing
January 9, 2003, and to pay down approximately $3,001 million.
Tenders for 4-week Treasury bills to be held on the book-entry records of
TreasuryDirect will not be accepted.
The Federal Reserve System holds $13,572 million of the Treasury bills maturing
on January 9, 2003, in the System Open Market Account (SOMA). This amount may be
refunded at the highest discount rate of accepted competitive tenders in this auction
up to the balance of the amount not awarded in today's 13-week and 26-week Treasury
bill auctions. Amounts awarded to SOMA will be in addition to the offering amount.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FIMA) accounts bidding through the Federal Reserve Bank of New York
will be included within the offering amount of the auction.
These noncompetitive bids
will have a limit of $100 million per account and will be accepted in the order of
smallest to largest, up to the aggregate award limit of $1,000 million.
The allocation percentage applied to bids awarded at the highest discount rate
will be rounded up to the next hundredth of a whole percentage point, e.g., 17.13%.
This offering of Treasury securities is governed by the terms and conditions
set forth in the Uniform Offering Circular for the Sale and Issue of Marketable BookEntry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about the new security are given in the attached offering highlights.
000
Attachment
HIGHLIGHTS OF TREASURY OFFERING
OF 4-WEEK BILLS TO BE ISSUED JANUARY 9, 2003
January 6, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Award (35% of Offering Amount) ...
Maximum Recognized Bid at a Single Rate ..
NLP Reporting Threshold . . . . . . . . . . . . . . . . . .
NLP Exclusion Amount . . . . . . . . . . . . . . . . . . . . .
$13,000
$ 4,550
$ 4,550
$ 4,550
$11,500
million
million
million
million
million
Description of Offering:
Term and type of security ........... 28-day bill
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . 912795 LX 7
Auction date . . . . . . . . . . . . . . . . . . . . . . . . January 7,2003
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . January 9,2003
Maturity date . . . . . . . . . . . . . . . . . . . . . . . February 6,2003
Original issue date . . . . . . . . . . . . . . . . . August 8,2002
Currently outstanding ............... $44,680 million
Minimum bid amount and multiples .... $1,000
Submission of Bids:
Noncompetitive bids: Accepted in full up to $1 million at the highest
discount rate of accepted competitive bids.
Foreign and International Monetary Authority (FIMA) bids: Noncompetitive bids submitted through the Federal Reserve Banks as agents for
FIMA accounts. Accepted in order of size from smallest to largest
with no more than $100 million awarded per account.
The total noncompetitive amount awarded to Federal Reserve Banks as agents for
FIMA accounts will not exceed $1,000 million. A single bid that
would cause the limit to be exceeded will be partially accepted in
the amount that brings the aggregate award total to the $1,000
million limit.
However, if there are two or more bids of equal
amounts that would cause the limit to be exceeded, each will be
prorated to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a discount rate with three decimals in
increments of .005%, e.g., 4.215%.
(2) Net long position (NLP) for each bidder must be reported when
the sum of the total bid amount, at all discount rates, and the
net long position equals or exceeds the NLP reporting threshold
stated above.
(3) Net long position must be determined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Receipt of Tenders:
Noncompetitive tenders:
Prior to 12:00 noon eastern standard time on auction day
Competitive tenders:
Prior to 1:00 p.m. eastern standard time on auction day
Payment Terms: By charge to a funds account at a Federal Reserve Bank
on issue date.
DEPARTMENT
OF
THE
TREASURY <~:r:
-.. -
EMBARGOED UNTIL 11:00 A.M.
January 6, 2003
."
TREASURY
NEW S
CONTACT:
Office of Financing
202/691-3550
TREASURY OFFERS 9-1/2-YEAR 3% INFLATION-INDEXED NOTES
The Treasury will auction $6,000 million of 9-1/2-year 3% inflationindexed notes to raise new cash.
Amounts bid by Federal Reserve Banks for their own accounts will be added
to the offering.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FIMA) accounts bidding through the Federal Reserve Bank of New
York will be included within the offering amount of the auction.
These noncompetitive
bids will have a limit of $100 million per account and will be accepted in the order
of smallest to largest, up to the aggregate award limit of $1,000 million.
The auction will be conducted in the single-price auction format. All
competitive and noncompetitive awards will be at the highest yield of accepted
competitive tenders.
The allocation percentage applied to bids awarded at the
highest yield will be rounded up to the next hundredth of a whole percentage
point, e.g., 17.13%.
The notes being offered today are eligible for the STRIPS program.
This offering of Treasury securities is governed by the terms and
conditions set forth in the Uniform Offering Circular for the Sale and Issue of
Marketable Book-Entry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as
amended) .
For original issue discount (OID), IRS regulations permit reopenings of
inflation-indexed securities without regard to OID rules, provided that the
reopenings occur not more than one year after the original securities were first
issued to the public.
Therefore, the OID limit does not apply to this auction.
Details about the security are given in the attached offering highlights.
000
Attachment
fO -
HIGHLIGHTS OF TREASURY OFFERING TO THE PUBLIC OF
9-1/2-YEAR INFLATION-INDEXED NOTES TO BE ISSUED JANUARY 15, 2003
January 6, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Award (35% of Offering Amount) . . . . . . . . . . . . . . . . . . . .
Maximum Recognized Bid at a Single Rate . . . . . . . . . . . . . . . . . . .
NLP Reporting Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NLP Exclusion Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,000
$2,100
$2,100
$2,100
$5,600
million
million
million
million
million
Description of Offering:
Term and type of security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-1/2-year inflationindexed notes (reopening)
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-2012
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 912828 AF 7
Auction date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 8, 2003
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 15, 2003
Dated date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 15, 2002
Maturi ty date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 15, 2012
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%
Amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,014 million
Adjusted amount currently outstanding . . . . . . . . . . . . . . . . . . . . . $17,156 million
Real yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Determined at auction
Interest payment dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 15 and January 15
Minimum bid amount and multiples . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Premium or discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Determined at auction
STRIPS Information:
Minimum amount required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000
Corpus CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 912820 HC 4
TIIN conversion factor per $1,000 . . . . . . . . . . . . . . . . . . . . . . . . . 8.342602892
Submission of Bids:
Noncompetitive bids:
Accepted in full up to $5 million at the highest accepted yield.
Foreign and International Monetary Authority (FIMA) bids: Noncompetitive bids
submitted through the Federal Reserve Banks as agents for FIMA accounts.
Accepted in order of size from smallest to largest with no more than $100
million awarded per account.
The total noncompetitive amount awarded to Federal
Reserve Banks as agents for FIMA accounts will not exceed $1,000 million. A
single bid that would cause the limit to be exceeded will be partially accepted
in the amount that brings the aggregate award total to the $1,000 million limit.
However, if there are two or more bids of equal amounts that would cause the
limit to be exceeded, each will be prorated to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a real yield with three decimals, e.g., 3.123%.
(2) Net long position for each bidder must be reported when the sum of the total bid amount, at all
yields, and the net long position equals or exceeds the NLP reporting threshold stated above.
(3) Net long position must be determined as of one half-hour prior to the closing time for receipt of
competitive tenders.
Receipt of Tenders:
Noncompetitive tenders: Prior to 12:00 noon eastern standard time on auction day.
Competitive tenders: Prior to 1:00 p.m. eastern standard time on auction day.
Payment Terms: By charge to a funds account at a Federal Reserve Bank on issue date, or payment of
full par amount with tender.
Treasu~Direct customers can use the Pay Direct feature which
authorizes a charge to their account of record at their financial institution on issue date.
Indexing Information:
CPI Base Reference Period .........
Ref CPI 07/15/2002 ................
Ref CPI 01/15/2003 . . . . . . . . . . . . . . . .
Index Ratio 01/15/2003 ............
1982-1984
179.80000
181.30000
1.00834
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt· Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE
January 06, 2003
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
January 09, 2003
April 10, 2003
9127 95MG3
Term:
Issue Date:
Maturity Date:
CUSIP Number:
1.185%
High Rate:
Investment Rate 1/:
Price:
1.207%
99.700
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 63.42%.
All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
FIMA (noncompetitive)
$
41,938,413
1,558,831
170,000
SUBTOTAL
43,667,244
Federal Reserve
5,576,377
TOTAL
Accepted
Tendered
Tender Type
$
49,243,621
$
13,271,423
1,558,831
170,000
15,000,254 2/
5,576,377
$
20,576,631
Median rate
1.180%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.160%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 43,667,244 / 15,000,254 = 2.91
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $1,246,935,000
http://www.publicdebt.treas.gov
po
PUBLIC DEBT NEWS
Department of the Treasury· Bureau of the Public Debt· Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE
January 06, 2003
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
January 09, 2003
July 10, 2003
912795NC1
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
1.240%
Investment Rate 1/:
Price:
1.265%
99.373
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 69.77%.
All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
FIMA (noncompetitive)
$
34,610,012
974,846
175,000
SUBTOTAL
35,759,858
Federal Reserve
5,541,487
TOTAL
Accepted
Tendered
Tender Type
$
41,301,345
$
13,850,280
974,846
175,000
15,000,126 2/
5,541,487
$
20,541,613
Median rate
1.230%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.190%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 35,759,858 / 15,000,126 = 2.38
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $752,415,000
http://www . pu blicdebt. treas.gov
PO-37J5: MeQla Advisory: Background Briefing on the President's Jobs & Growth Packa ... Page 1 of 1
IJ
;~'~-~'-'r"
- .
~
;,.
f-' H L S S f-; I.) (\ M
..... -.~
FROM THE OFFICE OF PUBLIC AFFAIRS
January 7, 2003
PO-3735
Media Advisory:
Background Briefing on the President's Jobs & Growth Package
Treasury Assistant Secretary for Tax Policy Pam Olson and Treasury Assistant
Secretary for EconomiC Policy Richard Clarida will hold a background briefing on
the Presidents Jobs & Growth package today, Tuesday, January 7, 2003 at 2:30
pm In the DiplomatiC Reception room (room 3311). This session will provide a
synopsis of the proposals and will also allow for a question and answer session. No
cameras will be admitted-- this is a "pen and pad" only briefing.
Media without Treasury or White House press credentials planning to attend
should contact Treasury's Office of Public Affairs at (202) 622-2960 with the
following information: name, social security number and date of birth. This
information may also be faxed to (202) 622-1999.
http://www.treas.gov/press/releases/po3735.htm
1113/2003
Bureau of the Public Debt: Public Debt Announces Activity for Securities In The STRIPS Program For ... Page 1 of 1
Public Debt Announces Activity for Securities in the STRIPS Program for
December 2002
FOR IMMEDIATE RELEASE
January 7, 2003
The Bureau of the Public Debt announced activity for the month of December 2002, of securities within the Separate Trading of
registered Interest and Principal of Securities program (STRIPS).
In Thousands
Principal Outstanding (Eligible Securities)
$2,227,572,302
Held in Unstripped Form
$2,058,293,884
Held in Stripped Form
$169,278,418
Reconstituted in December
$11,549,149
The accompanying table, gives a breakdown of STRIPS activity by individual loan description. The balances in this table are subject to
udit and subsequent revision. These monthly figures are included in Table V of the Monthly Statement of the Public Debt, entitled
Holdings of Treasury Securities in Stripped Form."
The STRIPS table, along with the new Monthly Statement of the Public Debt, is available on Public Debt's Internet site at:
www.publicdebt.treas.gov.Awide range of information about the public debt and Treasury securities is also available at the site.
Intellectual Property
I Privacy
& Security Notices
I Terms
& Conditions
I Accessibility I
Data Quality
u.S. Department of the Treasury, Bureau of the Public Debt
Last Updated September 27, 2004
ttp://www.pubJicdebttreas.~ov/com/comOl03s.htm
5/19/2005
KD-3737: Statement b~ Acting Treasury Secretary Kenneth W. Dam on President Bush's... Page 1 of 1
~'HLSS
HI')OM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 7, 2003
KD-3737
Statement by Acting Treasury Secretary Kenneth W. Dam
on the Announcement
of President Bush's Jobs and Growth Package
Today President Bush announced a legislative package that will encourage
continued consumer spending to boost the economic recovery, promote investment
by individuals and businesses to grow the economy and create jobs, and deliver
critical help to unemployed citizens.
This initiative will spur real overall economic growth, yet it is disciplined and tailored
to address specific challenges. The American economy is strong, but it must be
stronger. The President's plan is a focused effort designed to remove the obstacles
standing in the way of faster growth and greater progress.
President Bush will not be satisfied until every American who wants a job can find
one; until every business has a chance to grow; and until we turn our economic
recovery into lasting prosperity that reaches every corner of America.
We have been through a recession, a terrorist attack, a breach of corporate
confidence, and yet the economy has demonstrated its resilience by growing. It
appears we have Just completed our fifth consecutive quarter of growth.
Many economists agree that President Bush's 2001 tax cut was the right policy at
the right time and helped to make the recession one of the shortest and shallowest
In modern history ThiS new package will build on the success of the 2001 tax cut
oy n lakln~ the taX rate leductions effective now when they can do the most for
individuals and the economy. This is the right plan at the right time.
http://www.treas.gov/press/releases/kd3737.htm
1113/2003
Taking Action to Strengthen America's Economy
Today's Presidential Action
~
President Bush today announced a growth and jobs plan to strengthen the American economy, and called on
Congress to act swiftly to pass it.
~
The President's economic agenda has three main goals:
o Encourage consumer spending that will continue to boost the economic recovery.
o Promote investment by individuals and businesses that will lead to economic growth and job creation.
o Deliver critical help to unemployed citizens.
~
The President's new proposal would:
o Speed up the 2001 tax cuts to increase the pace of the recovery and job creation.
o Encourage job-creating investment in America's businesses by ending the double taxation of dividends and
giving small businesses incentives to grow.
o Provide help for unemployed Americans, including extending unemployment benefits and creating new reemployment accounts to help displaced workers get back on the job.
~
Who benefits under the President's plan?
o Everyone who pays taxes---especially middle-income Americans-as tax rate reductions passed by
Congress in 2001 are made effective immediately. Middle-income families will receive additional relief from
accelerated reduction of the marriage penalty, a faster increase in the child tax credit, and immediate
implementation of the new, lower 10 percent tax bracket.
o Everyone who invests in the stock market and receives dividend income---especially seniors-will benefit
from elimination of the double taxation on dividends. About half of all dividend income goes to America's
seniors, who often rely on those checks for a steady source of retirement income.
o Every small business owner who purchases equipment to grow and expand will get assistance through an
increase in the expensing limits from $25,000 to $75,000.
o Every worker who has lost his or her job and qualifies for unemployment benefits will get more help, and
many will qualify for new, more fiexible Personal Re-employment Accounts, which provide a bonus if they
find work quickly.
~
Under the President's proposal to speed up tax relief, 92 million taxpayers would receive, on average, a tax
cut of $1,083 in 2003.
o 46 million married couples would receive an average tax cut of $1,716.
o
34 million families with children would benefit from an average tax cut of $1,473.
o
6 million single women with children would receive an average tax cut of $541.
o
13 million elderly taxpayers would receive an average tax cut of $1 ,384.
o
23 million small business owners would receive tax cuts averaging $2,042.
Example:
A typical family of four with two earners making a combined $39,000 in income will receive a total of $1,100 in
tax relief under the President's plan.
~
According to a projection by the Council of Economic Advisers, the President's plan will help the economy
to create 2.1 million jobs over the next three years.
Making Progress: From Recession to Recovery
~
Since the beginning of his Administration, the President has acted decisively to promote economic growth
and job creation.
o In 2001, he fulfilled his promise to reduce the tax burden on the American people. This tax relief gave the
economy a boost at just the right time-ensuring that the recession was one of the shortest and shallowest
in modern American history. These tax cuts worked, and the President will continue to press the Congress
to make the cuts-including the end of the death tax-permanent.
o In 2002, he proposed and signed into law an economic stimulus bill, tough new corporate accountability
standards, terrorism insurance legislation to put construction projects back on track, and an historic trade
act. All these measures will help our economy as it recovers from the shocks of recession, the attacks of
September 11 th, and serious abuses of trust by some corporate officials.
~
Today, America's economy is recovering and showing signs of growth.
o The country is now in its second year of economic growth.
o Nationwide, incomes are rising faster than inflation.
o Interest rates are the lowest in 37 years, and low interest rates have allowed Americans to refinance their
homes, adding more than $100 billion to their pocketbooks and to the economy.
o The homeownership rate-a central part of the American dream-is 68 percent, close to the highest ever.
o Productivity of American workers-the most important indicator of our economic strength-went up 5.6
percent over the last four measured quarters, the best since 1973.
o Our trade with other nations is expanding -bringing the lower prices that come from imports, and the better
jobs that come from exports.
More to Do: The President's Agenda to Strengthen America's Economy
~
America has the strongest, most resilient economy in the world, yet this economy is not creating enough jobs. We
have made great progress, but there is still more work to do.
~
The President today proposed a specific agenda to increase the momentum of our economic recovery. The
President's proposal would:
Speed up Tax Relief to Speed up the Recovery: The President's proposal builds on the success of the 2001 tax
cut. As a result of this law, Americans are due to receive additional tax relief in 2004, and again in 2006.
Republicans and Democrats in Congress have already enacted these cuts. The President believes the time to
deliver this relief is now - when it can do the most good for families, businesses, and the economy - not years from
now.
The President's plan would:
o Make all the tax rate reductions from the 2001 tax law effective this year-and retroactive to January 1,
2003.
o Upon passage, the President will order the Treasury Department to immediately adjust the amount of
money withheld for income taxes, so that Americans will keep more of their paychecks right away.
o For income earned after January 1, 2003, the following tax rates would be in effect:
10%
15%
25%
28%
33%
35%
2
The President's plan would also bring middle-income families additional relief by speeding up three other tax
reductions promised in 2001. It would:
o Reduce the marriage penalty this year, instead of waiting until 2009. An estimated 46 million married
couples would benefit under the President's plan.
o Raise the child tax credit from $600 to $1,000 per child this year, instead of in 2010. That would
amount to a $400 increase per child, and checks would be issued in that amount this year to help
parents across America. An estimated 34 million families with children would benefit under the
President's plan.
o Move several million working Americans into the lowest tax bracket of 10 percent now instead of
waiting until 2008.
[Note: The plan will hold harmless any taxpayer that may be affected by the Alternative Minimum Tax].
Encourage Job·Creating Investment in America's Economy - The President proposed two new steps to
encourage individuals and businesses to invest in America's economy.
End the double taxation of dividends
o Roughly 35 million American households receive dividend income that is taxable and will directly
benefit under the President's plan. More than half of these dividends go to America's seniors, many of
whom rely on these checks for a steady source of income in their retirement.
o Yet seniors and other investors are not getting the full benefit of their investments because those
investments are taxed twice. The IRS taxes a company on its profits, then it taxes the investors who
receive the profits as dividends. The result is that for every dollar of profit a company could payout in
dividends, as little as 40 cents can actually reach shareholders.
o In practice, double taxation of dividends means that even an investor of modest means is paying a
higher tax rate on dividends than wealthy taxpayers pay on their income.
o It is fair to tax a company's profits, and under the President's plan, company profits will still be taxed but only once. It is not fair to tax this income twice by taxing the shareholder on those same profits.
Double taxation is wrong-and it falls hardest on seniors.
o Almost half of all savings from the dividend exclusion under the President's plan would go to taxpayers
65 and older. The average tax savings for the 9.8 million seniors receiving divid ends would be $936.
o The President's plan would eliminate the double taxation of dividends for millions of stockholders allowing taxpayers to exclude dividend payments from their taxable income - and returning about $20
billion this year to the economy.
Increase incentives for small businesses to grow
o Small businesses create the majority of new jobs and account for half the output of the economy.
o Current tax laws permit them to write off as expenses up to $25,000 worth of equipment purchases.
The President's plan would increase that limit to $75,000 and index it to inflation - encouraging them to
buy technology, machinery, and other equipment they need to expand.
3
Help Unemployed Americans Find Work -As we work to encourage long -term growth in the economy, we must
not forget men and women struggling today. The President's plan would help the unemployed on two fronts,
providing both short-term benefits and long -term opportunity:
Extend unemployment benefits
o Close to 70,000 workers exhaust their unempbyment benefits each week and need our help.
o The President's plan calls on Congress to extend unemployment benefits that expired on December
28th and make them retroactive so people who lost benefits in December will receive them in full. The
President is calling upon Congress to make helping unemployed Americans a first order of business
this year.
Create new Personal Re-employment Accounts
o The President's plan would create Personal Re~mployment Accounts, a new, innovative approach to
help unemployed Americans find a job.
o These accounts would provide unemployed workers with up to $3,000 to use for job training, child care,
transportation, moving costs, or other expenses associated with finding a new job. A person who gets
a job within 13 weeks will be cble to keep the leftover funds from their account as are-employment
bonus. This will help them when they are looking for work and give them an incentive to find work
faster.
o President Bush proposes giving states $3.6 billion to fund these accounts. The program would be
administered through the One Stop Career Center system and would work through existing state
unemployment systems to ensure speedy delivery of benefits.
o Under the President's plan, these accounts would be available to at least 1.2 million Americans.
o Workers would receive these Personal Re-employment Accounts in addition to their regular
unemployment benefits.
Turning Recovery into Prosperity
~ The President's jobs and growth package will provide $98 billion of total tax relief over the next 16 months and $670
billion over the next decade. It will spur real overall economic growth, yet it is disciplined and tailored to address
specific challenges.
~
The American economy is strong, but it must be stronger. The President's plan is a focused effort designed to
remove the obstacles standing in the way of faster growth and greater progress.
~
President Bush will not be satisfied until every American who wants a job can find one; until every business has a
chance to grow; and until we turn our economic recovery into lasting prosperity that reaches every corner of
America.
4
KD-3739: Tax Provisions of The President's Growth Package
Page 1 of2
u~
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l-'f-iLSS HOOM
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FROM THE OFFICE OF PUBLIC AFFAIRS
January 7, 2003
KD-3739
Tax Provisions of The President's Growth Package
Accelerated 1O-Percent Bracket Expansion The expansion of the 10-percent
bracket scheduled for 2008 IS accelerated to 2003, and is indexed for Inflation
beginning in 2004. The endpoint of the 1O-percent tax bracket increases from
$12,000 of taxable income to $14,000 for married couples (and from $6,000 to
$7,000 for single taxpayers). This expanSion benefits married taxpayers with
taxable income over $12,000 and single taxpayers with taxable income over
$6,000. Tax Relief CY 2003: $5 billion; FY 2003-2013: $48 billion
Accelerated Reduction in Income Tax Rates: The reductions in income tax rates in
excess of 15-percent scheduled for 2004 and 2006 are accelerated to 2003,
resulting in new rates of 25%, 28%, 33% and 35% (from 27%, 30%, 35% and
38.6%). These reductions benefit married couples with taxable income greater than
$47,450 and single taxpayers with taxable income greater than $28,400. Tax Relief:
CY 2003: $29 billion; FY 2003-2013: $64 billion
Accelerated Reduction of Marriage Penalty: The standard deduction for married
couples is increased to double the amount of the standard deduction for single
taxpayers in 2003. The width of the 15-percent tax bracket for married couples is
increased to twice the width for single taxpayers in 2003. These provisions were
scheduled to phase-in over the period between 2005 and 2009. These reductions
benefit married couples who claim the standard deduction or who have taxable
income greater than $47,450. Tax Relief: CY 2003: $19 billion; FY 2003-2013: $58
billion
Accelerated Increase In Child Tax Credit: The amount of the child tax credit is
increased to $1,000 in 2003 (from $600), accelerating a scheduled phase-in over
the period between 2005 and 2010. In 2003, the increased amount of the child tax
credit will be paid in advance beginning in July 2003 on the basis of information on
the taxpayer's 2002 tax return filed in 2003. Advanced payments will be made in a
manner similar to the advance payment checks that were issued in 2001 to reflect
the new 1O-percent tax bracket. Tax Relief CY 2003: $16 billion; FY 2003-2013:
$91 billion
Exclusion of Dividends from Individual Taxable Income: Dividends paid by
corporations to individuals are excluded from taxable income when paid out of
previously taxed corporate income beginnmg in 2003. Dividends paid by
corporations in excess of previously taxed corporate income are included in taxable
income. This provision eliminates the double taxation of corporate dividends. Tax
Relief: CY 2003 $20 billion; FY 2003-2013: $364 billion
Increase in Small Business Expensing for New Investment: The amount of
investment that may be immediately deducted by small businesses is increased
from $25,000 to $75,000 beginning in 2003. The amount of investment qualifying
for this immediate deduction begins to phase out for small businesses with
investment in excess of $325,000 (mcreased from $200,000). Both parameters are
indexed for inflation beginning in 2004 Tax Relief: CY 2003: $2 billion; FY 20032013 $16 billion
AMT Hold-Harmless Relief To ensure that the benefits from the acceleration of the
tax reductions are not reduced by the AMT, the AMT exemption amount is
http://www.treas.gov/press/releases/kd3739.htm
111312003
KD-3739: Tax Provisions oT The President's Growth Package
Page 2 of2
increased by $8,000 for married taxpayers and by $4,000 for single taxpayers in
2003 through 2005. Tax Relief: CY 2003: $8 billion; FY 2003-2013: $29 billion
Total Tax Relief: CY 2003 $98 billion; FY 2003-2013 $670 billion
http://www.treas.gov/press/releases/kd3739.htm
1Il3/2003
KD-3740: DIstribution of the President's Growth Package
f-' f-: L ~; S H C"
Page 1 of 1
L' r'."
FROM THE OFFICE OF PUBLIC AFFAIRS
January 7, 2003
KD-3740
Distribution of the President's Growth Package
Attached is a table prepared by the Department of the Treasury that shows the
distributional effects of the major individual Income tax provisions in the President's
proposal. The effects are shown for the proposal In 2003.
The average income tax reduction ranges from about 17 percent for taxpayers with
income under $30,000 to just over 11 percent for taxpayers with income over
$100,000 The average income tax reduction across all income groups is slightly
more than 12 percent.
Because the percentage reduction in income taxes is greatest for families with
incomes under $50,000, these families will pay a smaller share of the total income
tax burden under the President's proposal than they do under current law (compare
the distribution of total individual income taxes under 2003 law and under the
proposal).
Conversely, families with income of $100,000 or more receive a smaller than
average percentage reduction in income taxes so they will pay a larger share of the
total income tax burden under the President's proposal than they do under current
law. Under the proposal, the share of income taxes paid by families with income of
$100,000 or more will rise to 73.3 percent.
The table also presents the average individual income taxes paid for the
representative income groups under the President's plan. Under the proposal,
those in the lowest income group (under $30,000) will on average receive
refundable credits in excess of tax payments of $416 and those in the second
lowest income group will pay an average of $1 ,002 in income tax. Those earning
over $200,000 will on average pay approximately $99,000 in income taxes.
January 5, 2003
http://www.treas.goy/press/reieases/kd3740.htm
111312003
1
President's Growth Package
(Relative to Major Individual Income Tax Provisions in Effect in 2003)
(2000 Income Levels)
Average
Distribution of
Distribution of Total
Changes in
Individual Income Taxes
3
Cash
Individual
2003
Income
Income Taxes
Class'
(%)
Individual
Percent Change
Income Taxes
in Individual
With
Income
Law
With
Proposal'
Proposal
Taxes
(%)
(%)
($)
(%)
0-30
2.7
-2.0
-2.6
-416
-17.0
30 - 40
3.4
2.1
1.9
1,002
-20.1
-14.5
40 - 50
4.4
3.7
3.6
2,243
50 - 75
10.8
11.6
11.7
4,295
-11.4
75 - 100
12.7
12.1
12.0
7,562
-13.0
100 - 200
25.5
27.6
27.9
15,836
-11.4
200 & over
40.5
44.8
45.4
99,072
-11.2
TotalS
100.0
100.0
100.0
6,099
-12.3
Department of the Treasury
January 3, 2003
Office of Tax Analysis
, The provisions of the Growth Package included are: i) accelerate to 2003 the reductions in income tax rates above 15% scheduled for 2004 and
2006; ii) accelerate to 2003 the increase in the width of the 10% bracket for single and joint filers scheduled for 2008; iii) accelerate to 2003 the
increase in the standard deduction and the width of the 15% bracket for joint filers scheduled to phase in between 2005 and 2009; iv) accelerate to
2003 the increase in the child credit from $600 to $1,000 scheduled to phase in between 2005 and 2010; vl a 100% exclusion for diVidends
received (with EDAs and DRIPS) effective beQinninQ in 2003; and vi) a temporary increase in the AMT exemption amount for 2003 throuqh 2005.
, Cash Income consists of wages and salaries, net income from a business or farm, taxable and tax-exempt interest, dividends, rental income,
realized capital gains, cash transfers from the government, and retirement benefits. Employer contributions for payroll taxes and the federal
corporate income tax are added to place cash on a pre-tax basis. Cash income is shown on a family rather than on a tax return basis. The cash
incomes of all members of a family are added to arrive at a family's cash income used in the distributions.
3 The refundable portions of the earned income tax credit (EITCl and the child credit are included in the individual income tax. Individual income
taxes are estimated at 2000 income levels under 2003 law as if it were fully phased in law, so exclude provisions that expire prior to the end of the
Budget period (ignoring the sunset of EGTRRA in 2011) and are adjusted for the effects of unindexed parameters .
• The change in individual income taxes under the proposal is estimated at 2000 income levels as if the change represented fully phased in law
(ignoring the sunset of EGTRRA in 2011).
5
Families with negative incomes are excluded from the lowest income class but included in the total line.
KD-3741: Effect of Major Individual Income Tax Relief Provisions of the President's Gro... Page 1 of 2
f-'HLSS f-:C'uM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 7, 2003
KO-3741
Effects of Major Individual Income Tax Relief Provisions
of the President's Growth
In 2003, 92 million taxpayers would receive, on average, a tax cut of $1,083 under
the economic growth plan.
·69 million women would see their taxes decline, on average, by $1,289.
·46 million married couples would receive average tax cuts of $1,716.
• 34 million families with children would benefit from an average tax cut of $1,473.
• 6 million single women with children would receive an average tax cut of $541.
• 13 million elderly taxpayers would receive an average tax cut of $1,384.
• 23 million small business owners would receive tax cuts averaging $2,042.
• 3 million individuals and families would have their income tax liability completely
ellJllInated by the Act
Each of the provision In the economic growth plan will benefit millions of taxpayers.
• Accelerating the 2004 and 2006 rate cuts in 2003 would provide 28 million
taxpayers with an average tax cut of $1 ,100.
• Accelerating the expansion of the 10 percent rate bracket would reduce taxes for
69 million taxpayers, on average, by $75.
• Enacting marriage penalty relief in 2003 would reduce taxes for 35 million marned
couples by an average of $574.
• Increasing the child tax credit to $1,000 in 2003 would provide 26 million families
wltn an average tax cut of $623.
• If the tax on dividend Income was eliminated, 26 million taxpayers with dividend
income would receive an average tax cut of $704. Among those with tax cuts
would be 7 million elderly taxpayers whose taxes would decline, on average, by
$1,252.
Accelerating the reduction in the top marginal rate scheduled to take effect in 2006
(to 35%) to 2003 would help small businesses.
• Owners of flow-through entities, including small business owners and
entrepreneurs, comprise more than two-thirds (about 500,000) of the 750,000 tax
returns that would benefit from accelerating the reduction in the top tax bracket
SCheduled for 2006 to 2003.
• These small business owners would receive 79% (about $10.4 billion) of the $13.3
billion in tax relief from accelerating the reduction In the top tax bracket to 35% from
2006 to 2003.
Background
This analysis is based on the follOWing prOVisions
• Acceleration of the 2004 and 2006 rate cuts to 2003.
• Reduclion In marnage penalties through acceleration of increases In standard
deduction from 2009 to 2003 and width of 15 percent rate bracket for JOint filers
from 2008 to 2003
• Acceleration of the increase in the width of 10 percent rate bracket for single and
JOint filers from 2008 to 2003.
• Acceleration of the Increase to $1,000 in the child tax credit from 2010 to 2003
(except for advanced rebate).
• 100 percent dividend exclUSion
http://www.treas.gov/press/releases/kd3741.htm
111312003
KD-3741: Effect of Major Individual Income Tax Relief Provisions of the President's Oro... Page 2 of 2
• An increase in the alternative minimum tax (AMT) exemption level.
Office of Tax Policy
January 6, 2003
http://www.treas.gov/press/releases/kd3741.htm
111312003
KD-3742: Examples of Tax Relief in 2003 Under the President's Growth Package
~'I-\
LSS H
Page 1 of 1
c· (:\ M
FROM THE OFFICE OF PUBLIC AFFAIRS
Jell1uary ,'. ::!OO:3
KO-3742
Examples of Tax Relief in 2003 Under the President's Growth Package
Example 1. A married couple with one child and income of $40.000 will see their
taxes decline under the President's Growth Package by $732 (from $2.235 to
$1.503) in 2003. a decline of 33 percent.
Example 2. A married couple with two children and income of $40,000 will see their
taxes decline under the President's Growth Package by $1,133 (from $1,178 to
$45) in 2003. a decline of 96 percent.
Example 3: A married couple with two children and income of $60.000 will see their
taxes decline under the President's Growth Package by $900 (from $3,750 to
$2,850) in 2003, a decline of 24 percent.
Example 4. A married couple with two children and income of $75,000 will see their
taxes decline under the President's Growth Package by $1.122 (from $5,817 to
$4.695) in 2003. a decline of 19 percent.
Example 5 A married couple, both aged 65. with income of $40,000 (of which
$2.000 is dividends and $15.000 is Social Security benefits) will see their taxes
decline under the President's Growth Package by $380 (from $930 to $550) in
2003. a decline of 41 percent.
Example 6. A married couple. both aged 65. with income of $80,000 (of which
$4,500 is dividends and $20,000 is Social Security benefits) will see their taxes
decline under the President's Growth Package by $1,926 (from $9,107 to $7,181) in
2003, a decline of 21 percent.
http://www.treas.gov/press/releases/kd3742.htm
1113/2003
Tax Relief in 2003 Under the President's Growth Package
Example 1: Married Couple with One Child and Income of $40,000
Current
Law
Total Income (= AGI)
Less: Deductions (Larger of Standard or Itemized I)
Less: Personal Exemptions (3 @ $3,050)
Taxable Income
Federal Income Tax Before Credits
Less: Child Tax Credit
Federal Income Tax After Credits
40,000
40,000
7,950
9,150
9,500
9,150
22,900
21,350
2,835
2,503
600
1,000
2,235
1,503
Tax Change: Amount
Percent
Department of the Treasury
Office of Tax Analysis
I
Growth
Package
Itemized deductions are assumed to be 18 percent of AGI under current law.
-732
-33%
January 5, 2003
Tax Relief in 2003 Under the President's Growth Package
Example 2: Married Couple with Two Children and Income of $40,000
Current
Law
Growth
Package
Total Income (= AGI)
40,000
40,000
Less: Deductions (Larger of Standard or Itemized I)
Less: Personal Exemptions (4 @ $3,050)
7,950
12,200
9,500
12,200
Taxable Income
19,850
18,300
Federal Income Tax Before Credits
2,378
2,045
Less: Child Tax Credit
1,200
2,000
Federal Income Tax After Credits
1,178
45
Tax Change: Amount
-1,133
Percent
-96%
Department of the Treasury
Office of Tax Analysis
I
Itemized deductions are assumed to be 18 percent of AGI under current law.
January 5, 2003
Tax Relief in 2003 Under the President's Growth Package
Example 3: Married Couple with Two Children and Income of $60,000
Current
Law
Growth
Package
Total Income (= AGI)
60,000
60,000
Less: Deductions (Larger of Standard or Itemized I)
Less: Personal Exemptions (4 @ $3,050)
10,800
12,200
10,800
12,200
Taxable Income
37,000
37,000
Federal Income Tax Before Credits
4,950
4,850
Less: Child Tax Credit
1,200
2,000
Federal Income Tax After Credits
3,750
2,850
Tax Change: Amount
-900
Percent
-24%
Department of the Treasury
Office of Tax Analysis
I
Itemized deductions are assumed to be 18 percent of AGI under current law.
January 5, 2003
Tax Relief in 2003 Under the President's Growth Package
Example 4: Married Couple with Two Children and Income of $75,000
Current
Law
Total Income (= AGI)
Growth
Package
75,000
75,000
13,500
12,200
13,500
12,200
49,300
49,300
Federal Income Tax Before Credits
7,017
6,695
Less: Child Tax Credit
1,200
2,000
Federal Income Tax After Credits
5,817
4,695
Less: Deductions (Larger of Standard or Itemized
Less: Personal Exemptions (4 @ $3,050)
Taxable Income
l
)
Tax Change: Amount
Percent
Department of the Treasury
Office of Tax Analysis
Itemized deductions are assumed to be 18 percent of AGI under current law.
-1,122
-19%
January 5, 2003
Tax Relief in 2003 Under the President's Growth Package
Example 5: Married Couple, Both Aged 65, with Income of $40,000
Current
Law
Growth
Package
Taxable Pensions and Interest
Dividends
Social Security Benefits
23,000
2,000
15,000
23,000
2,000
15,000
Total Income
40,000
40,000
Less: Nontaxable Social Security benefits
Less: Dividend Exclusion
14,750
0
15,000
2,000
AGI
25,250
23,000
9,850
6,100
11 AOO
6,100
9,300
5,500
930
550
Less: Deductions (Larger of Standard or Itemized
Less: Personal Exemptions (2 @ $3,050)
Taxable Income
Federal Income Tax
1
)
Tax Change: Amount
Percent
Department of the Treasury
Office of Tax Analysis
Itemized deductions are assumed to be 18 percent of AGI under current law.
-380
-41%
January 5, 2003
Tax Relief in 2003 Under the President's Growth Package
Example 6: Married Couple, Both Aged 65, with Income of $80,000
Current
Law
Growth
Package
Taxable Pensions and Interest
Dividends
Social Security Benefits
55,500
4,500
20,000
55,500
4,500
20,000
Total Income
80,000
80,000
3,000
0
3,000
4,500
AGI
77,000
72,500
Less: Deductions (Larger of Standard or Itemized 1)
Less: Personal Exemptions (2 @ $3,050)
13,860
6,100
13,860
6,100
Taxable Income
57,040
52,540
9,107
7,181
Less: Nontaxable Social Security benefits
Less: Dividend Exclusion
Federal Income Tax
Tax Change: Amount
Percent
Department of the Treasury
Office of Tax Analysis
Itemized deductions are assumed to be 18 percent of AGI under current law.
-1,926
-21%
January 5, 2003
KD-3743: State-By-State Breakdown of the President's Growth Package
Page 1 of 1
f-'HLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 7.2003
KD-]743
State-By-State Breakdown of the President's Growth Package
The table attached estimates the number of taxpayers that would benefit from the
President's Growth Package.
The proposals will:
• Reduce Taxes
• Accelerate 10-Percent Bracket Expansion
• Accelerate Reduction in Income Taxes
• Accelerate Reduction in Marriage Penalty
• Accelerate Increase in Child Tax Credit
• Provide Exclusion for Corporate Dividends
Attachments:
PreSIC1PIlrS (.3row1I, P;lCKage
http://www.treas.gov/press/releases/kd3743.htm
111312003
President's Growth Package
Number of Returns Filed in 2001 That Would Have Benefited from the Package
(in thousands)
Addendum;
Returns with
Business
l
Incorne
Sllecific Provisions of Packal!c
Accelerate
Accelerate
Entire
Growth
Package'
Accelerate
Accelerate
Reduction in
Tax Rat~s
10'% Bra4.:ket
Expansion
Redudion of
Marriage
Penalty
Increase in
Exclusion for
Corporate
Di.vidends
C1.ildTax
Credit
8enefitjng
from P.cka2<
United State,
89,218
68,149
26,879
34.412
24,839
32,064
22,697
Alaba ...
Alaska
Arizona
Arkansas
California
1,208
217
1,512
705
10.434
871
171
1.148
498
84
591
302
3,843
402
7.819
277
74
429
135
3,613
229
2,735
398
82
528
226
3.946
301
55
381
177
2.7)5
Colondo
1,5 \3
1,231
271
5.026
2.449
1.202
970
507
584
475
386
306
75
1,394
742
567
496
98
1,740
863
393
487
106
115
1,122
578
274
140
Cunnc~ticut
Delaware
Florid.
Georgia
Hawaii
400
Idaho
Illinois
Indiana
Iowa
376
4,050
1.958
940
Kansas
846
1.155
1,145
Kentucky
Louisiana
Maioc
Maryland
Massachusetts
Michigan
Minnesuhl
Montana
Mississippi
Missouri
North Carolina
North Dakota
416
1,869
2.314
3.235
1.732
265
510
3,758
1,815
89
1,)49
725
314
287
3,115
1.539
749
115
81
1,363
516
217
153
171
1.544
812
662
879
222
364
493
447
169
687
211
813
326
I A33
1,857
2.533
1,405
259
266
93
702
103
1,855
932
402
540
905
1.190
635
77
248
88
216
605
835
449
67
165
507
598
843
66
189
236
439
620
50
141
168
703
113
135
269
1.737
1,334
446
2.474
636
39
131
195
709
988
554
Ne.ada
694
463
2.938
443
375
150
187
2.250
319
1.166
97
1.121
171
5.861
3,90&
4,353
3.113
2,029
1.123
20.
103
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washinglon
Wisconsin
West Vir~jnia
Wyoming
DC
Other Areas
704
857
4.004
3.134
276
870
348
1.175
1.135
106
276
85
232
246
173
122
790
2.013
1.348
1,176
144
2.)81
408
444
1,595
130
451
292
303
1.106
91
369
315
385
1.420
124
386
68
524
1.779
197
181
1.265
4,354
390
1,687
502
152
98
685
2.365
292
166
52
82
2,406
2,027
806
955
651
~II
512
9}
754
215
157
1.883
1.615
1.497
361
123
37
68
198
567
146
409
80
157
174
Notes and footnotes appear on following page.
45
757
57
158
192
121
757
137
1.562
987
232
1,698
5,948
646
208
1.845
482
316
139
710
221
294
279
104
478
902
461
696
947
387
845
52
1,094
297
99
99
1,042
497
240
1.311
Nebr9ls~
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
509
677
318
68
1.241
614
876
1,863
158
438
536
New Hampshire
New Jersey
New Mexi(:o
New Vork
Ohio
248
342
383
117
127
1,504
334
1.050
547
201
479
20U
57
431
34
1.336
106
1,472
923
242
280
1,016
86
283
77
59
423
55
564
2,104
224
72
1.517
171
52
646
545
510
145
46
901
744
648
158
54
630
527
468
123
41
41
108
73
43
222
152
The tigures in the table are based on tabulations of all individual income tax returns tiled and processed through the IRS Individual Master File (1M F) during calendar year 2001.
Most returns tiled in 200 I were for tax year 2000
Classification by state was bas!:d on the address uSl,;.,d on the return. Usually this address is the taxpayer's hom~ address. However. somt: taxpayers may have used the address of
a tax attorn~y or accountant. or a place ofhusines..;. and that address could he in a differen1 state than the taxpayer's home
I The number ofretums benefitting from each of.he specific provisions shown may not add to the number benfi1ting from the entire package becau!)e some returns will benefit
trom more than one provision. In addition to the provisions shown separately, the package includes an increase in exemption levels for the alternative minimum tax (AMT).
Returns with business incoIH.c are thuse that rcpor1 at least one dollar of income or loss fmm a sole proprietorship, farm proprietorship, partnership, S corporation, and/or
rental income.
2
THE PRESIDENT'S GROWTH PACKAGE WILL
PROVIDE BENEFITS TO 1,200,000 ALABAMA TAXPAYERS
REDUCING TAXES
•
1,200,000 taxpayers in Alabama will have lower income tax bills in 2003 under
the President's growth package.
•
300,000 business taxpayers can use their tax savings to invest in new equipment,
hire additional workers, and increase pay.
ACCELERATE IO-PERCENT BRACKET EXPANSION
•
870,000 married couples and single filers will benefit from the acceleration to
2003 of the expansion of the IO-percent bracket scheduled for 2008.
ACCELERATE REDUCTION IN INCOME TAX RATES
•
Nearly 280,000 taxpayers in Alabama will benefit from the acceleration to 2003
of the reductions in income tax rates in excess of IS-percent scheduled for 2004
and 2006.
ACCELERATE REDUCTION IN MARRIAGE PENALTY
•
Just under 500,000 married couples in Alabama will benefit from the acceleration
to 2003 of provisions that increase the standard deduction for joint filers to double
the amount for single filers and increase the width of the IS-percent bracket to
twice the width for single filers. These two provisions were scheduled to phase in
between 2005 and 2009.
ACCELERATE INCREASE IN CHILD TAX CREDIT
•
Over 400,000 married couples and single parents in Alabama will benefit from
the acceleration to 2003 of the increase in the child tax credit from $600 to $1,000
that was scheduled to phase in between 2005 and 20 I O.
EXCLUSION FOR CORPORATE DIVIDENDS
•
Nearly 400,000 taxpayers in Alabama will benefit from the exclusion of dividends
paid from previously-taxed corporate income.
SOURCE: Counts are for the number of returns filed in 200 1 that would have benefited from the package.
These estimates are based on tabulations from all individual income tax returns processed by the Internal
Revenue Service in 2001. Most of these returns covered tax year 2000.
KD-3744: What Economists are saying about the President's Growth Package
Page 1 of 4
I--'HLSS H()(:oM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 7, 2003
KD-3744
Whate Economists are saying about the President's Growth Package
Here is what prominent economists and industry leaders are saying about the
President's economic growth proposal:
• "I heartily approve of making the 2001 tax cuts effective immediately; eliminating
the unfair double taxation of dividends, which is essentially just a tax on new
investment; and strengthening the reemployment of displaced workers. I would
urge Congress to quickly pass this eminently reasonable legislation that Democrats,
Republicans and Independents can support" (Vernon L. Smith, Nobel Laureate in
Economics)
• "My lifelong dream as a Finance professor is about to come true. The 'beginning
of the end' of the double taxation of corporate income. Not only will this stimulate
the stock market, but will return our capital markets to their proper function of
allocating capital to its most efficient use, whereby return is maximized and risk is
minimized. No longer will Microsoft set upon 40 billion in cash (a very inefficient
and low return asset), and not pay a dividend. This is a 'Godsend' to capital
formation." (Dr. Richard E. La Near, The J.R. Kuhn Professor of Finance, Missouri
Southern State College)
• 'The President has done It agam. He is leading boldly on tax and fiscal reform
and job creation. He is sending a clear message to the liberal big spenders that the
'class warfare' strategy IS a political Edse\." (Lew Uhler, President, National Tax
Limitation Committee)
• "President Bush's economic stimulus package is a sensible solution to
accelerating the recovering U.S. economy and providing relief to all Americans"
(Louisiana Rep Donald Ray Kennard, National Chairman, American Legislative
Exchange Council (ALEC))
• "President Bush hits a homerun for American taxpayers. In the near term, his
plan will bring much needed tax relief to spur economic growth and job creation.
But his plan is also a strategiC step towards fundamental tax reform, because
repealing the dividend tax and accelerating the Income tax rate cuts moves us
towards a tax code that is more simple, fair, and honest." (Paul Beckner, President,
Citizens for a Sound Economy)
• "The stimulus package not only boosts short term- and long-term growth, but it
allows additional investments of all businesses. The President's efforts are a
significant milestone in restoring confidence to the entire economy." (Duane I'arde,
Executive Director, American Legislative Exchange Council (ALEC))
• "President Bush's fiscal stimulus package is desirable not only to deal with the
current sluggishness in the economy, but also with the longer term problems ariSing
from disincentives to save, invest and work in America." (Richard Vedder,
Distinguished Professor of Economics, Ohio University)
• "The President's economic growth package is a very positive step forward for
investors, workers, and taxpayers. For the sake of the economy, we hope that
Congress will speedily enact the President's tax relief proposals and NTU will be
working toward that goal." (John Berthoud, President, National Taxpayers Union)
http://www.treas_gov/presslreleases/kd3744.htm
1113/2003
KD-3744: What Economists are saying about the President's Growth Package
Page 2 of 4
• "The package is a great New Year's surprise. We'll be raising our economic and
equity outlooks and lowering our unemployment rate expectations." (David
Malpass, Bear Stearns & Co. Inc.)
• "A brilliant, double-barreled tax cut that will increase the income of every American
worker and create millions of new and better jobs." (Martin Anderson, Keith and
Jan Hurlbut Fellow, Hoover Institution, Stanford University)
• ··President Bush's proposed growth plan is not just a bunch of random tax cuts, it
is a plan that really pushes the 'growth buttons' by improving incentives to work,
save and invest, and is a step toward real tax reform. This package, along with
recent improvements in the tax treatment of business investment, will give a real lift
to jobs and GOP" (Stephen J. Entin, President and Executive Director. Institute for
Research on the Economics of Taxation (IRET»)
• "By accelerating tax rate reductions and eliminating the double-taxation of
dividends. President Bush's tax package would significantly increase the economy's
performance But the proposal also represents mUCh-need tax reform and is a
significant step toward a simple and fair system like the flat tax." (Dan Mitchell, The
Heritage Foundation)
• "President Bush's proposal on dividends ameliorates the dOUble-taxation of
corporate profits, ending the incentives in our tax code #1 to over-leverage
business, with the consequence of too much debt and vulnerability to the business
cycle, and #2 to over-rely on accounting numbers rather than the pay-out of cash.
His proposal on expensing of capital expenditures will help invigorate our economic
recovery." (Clifford F. Thies, Professor of Economics and Finance at Shenandoah
University, and member of the Board of Directors of the American Association of
Small Property Owners (AASPO))
• "The double taxation of dividends has never made sense and this is a perfect time
to remove this crazy form of taxation. It not only harms economic growth in the
obvious ways. but also in subtle ways. Given the wave of recent corporate
scandals, this is the perfect time to introduce a policy change that will
simultaneously increase investor confidence while creating greater accountability
for managers." (Brian J. Hall, Associate Professor, Harvard Business School)
• "Taxpayers at all income levels should cheer President Bush's call for greater tax
relief. These pro-growth and pro-family tax cuts are well-timed to provide stimUlUS
for the U.S. economy." (Russell Lamb, North Carolina State University)
• "The President's proposal eliminates unfairness in the tax code, distributes the
gains widely to Americans who pay income taxes, and creates incentives for
growth. What more can we ask?" (Don Booth, Professor of Economies, Chapman
University)
• "The President Economic Growth Package is a solid and aggressive plan to
further boost economic growth and job creation in 2003 and beyond. The cuts in
marginal tax rates will allow all individuals to better spend, save, and invest, and
they are especially beneficial to the ongoing viability of the small businesses that
pay taxes at the individual level such as Subchapter S Corporations." (Paul Merski,
Chief Economist & Director of Federal Tax Policy, Independent Community Bankers
of America)
• "I think this is a bold economic package that both provides much-needed nearterm economic stimulus and boosts after-lax incentives for growth and investment.
The current double-taxation of dividends is unjustifiable on economic effiCiency
grounds and Its elimination should provide a welcome lift to the equity market by
increaSing after-tax returns on stocks and further improve corporate governance by
encouraging firms to mcrease diVidend payouts. The acceleration of the marginal
tax rate cuts from 2006 into 2003 should eliminate incentives to defer income and
economic activity, which in turn should further boost economic growth in 2003. This
is the most significant proposal to roll back tax disincentives to growth and stimulate
the economy since the Reagan tax cuts." (John Ryding, Chief Market Economist,
http://www.treas.gov/press/releases/kd3744.htm
1/1312003
KD-3744: What Economists are saying about the President's Growth Package
Page 3 of 4
Bear Stearns & Co. Inc.}
• "This is the type of bold action needed to jump start the stagnant U.S. economy.
When these measures go into effect, the US industrial sector will resume its role of
innovating and creating jobs to provide an engine for growth in the global
economy." (Thomas J. Oueslerberg, President and Chief Executive Officer of the
Manufacturers Alliance/MAPI, a public policy and business research organization in
Arlington VA)
• "The president's plan is directly targeting consumer spending and investment
incentives The reduction of marriage penalty, the increase in child tax credit, the
extension of unemployment benefit and speeding up tax relief will help revive
consumer spending. increase confidence and boost aggregate demand in the shortrun. The end of double taxation of dividends and increasing incentives for small
businesses should help sustain momentum in favor of job creation and long-term
growth." (Magda Kandil, International Monetary Fund)
• "Once again, President Bush is demonstrating his strong leadership ability This
stimulus package is Just the type of measure this economy needs to get back on
tlacK Jusl LlIJOtl It8dllflg about It the markets have reacted wildly in response.
Imagine how it'll be when it's enacted." (Horace Cooper, Centre for New Black
Leadership)
• "Business investment is key to fostering healthy levels of economic growth.
President Bush's plan offers much needed capital and incentives to the sector of
the economy shouldering the bulk of Job creation, economic growth and innovation - small businesses and entrepreneurs. We are also encouraged by the President's
proposal to eliminate the double taxation of dividends. With the strength of the
economy becoming increasingly dependent on the health of the equity markets, this
measure will help restore both certainty and investor confidence. The overall
package is good for small business, which means it's good for America." (Karen
Kerrigan, Chair, Small Business Survival Committee)
• "The Pres:dent's plan alleviates one of the most economically destructive
distortions In the tax law and also provides welcome relief to small businesses."
(David R Burton, The Argus Group)
• "President Bush's 'Tal<.ing Action to Strengthen America's Economy' plan is a
sound and well thought out policy package. The plan offers not only short-term
stimulus for the American economy but it also lays the foundation for long-term,
non-inflationary, economic growth for the decades ahead. By extending
unemployment benefits, the plan reaches out to those workers who, through no
fault of their own, find themselves out of work. In addition, the creation of the new
Personal Reemployment Accounts will help to ensure that America has the most
dynamic labor markets the world has ever seen. One of the most impressive things
about the plan is that it is not limited to only short-term stimulus. President Bush
obviously understands the importance of long-term economic growth for America's
future. By eliminating the double taxation of dividend income President Bush's plan
will allow Americans to save for effectively for their retirements and to save money
for their children's future. In addition, by encouraging small businesses to invest
and invent the plan will help to ensure the rapid advancement of American
productivity, These productivity increases will help to insure that America's children
of today will enjoy a higher standard of living than their parents and their
grandparents. The positive effects of the President's plan will be felt for decades
into the future." (Michael W. Brandl, Ph.D., The University of Texas at Austin,
McCombs School of Business, Department of Finance)
• "A far-reaching reform of the U.S. tax system to reduce the large distortions
Implied by the existing structure of taxes on capital income is long overdue. Studies
published in leadmg economics journals show that the welfare of U.S. households
improves by an amount equivalent to an increase of between 1.5 to 3 percent per
quarter forever because of the tremendous effiCiency gains that the economy
stands to make from lower taxes on dividends and other forms of capital income.
These findings are not drtven by glossy budgetary arithmetics. In fact, they follow
from economic models that impose though assumptions keeping current levels of
http://www.treas.gov/press/releases/kd3744.htm
111312003
KD-3744: What Economists are saying about the President's Growth Package
Page 4 of 4
government expenditures and transfer payments covered and making the long-run
rate of economic growth independent of the tax cuts." (Enrique Mendoza,
University of Maryland)
http://www.treas.gov/press/releases/kd3744.htm
111312003
KD-3745: Remarks of Treasury Under Secretary Fisher To the President's Commission 0... Page 1 of 3
PHlSS
H()O~."
FROM THE OFFICE OF PUBLIC AFFAIRS
January 8, 2003
KD-3745
Remarks of
Treasury Under Secretary Peter R. Fisher
To the President's Commission on the U.S. Postal Service
Washington, DC
Good morning. On behalf of President Bush, I would like to thank each of you for
serving on this Commission The task that you have is large but the importance of
the Postal Service to our nation is worthy of the commitment that each of you has
made.
The Postal Service is the linchpin of our $900 billion mailing industry. As a whole,
this industry represents eight percent of our Gross Domestic Product and nine
million workers. The American people and American businesses rely on the Postal
Service to deliver mail in a secure, reliable and efficient manner. It is vital to have a
vibrant Postal Service that delivers on its mission.
This Commission is about the future of the Postal Service, addressing the
challenges that it faces. Competition from the private sector in electronic
substitutes and non-monopoly services present a fundamental challenge to the
Postal Service. New technology has resulted in declining volumes. The increasing
use by businesses of electronic communications for bills and payments has put
downward pressure on fIrst-class mail volumes. This pressure on mail volumes is
also seen in business-to-business and business-to-consumer marketing that
increasingly relies on more narrowly focused mailings. At the same time, the Postal
Service adds more than 1.7 million new delivery points annually.
New technology, declining volume, and continued expansion of the delivery cost
base, combined with competition from the private sector, pose a fundamental
challenge to the Postal Service. You need to help us identify a new business model
that will create the Postal Service for the 21st century.
The President's Executive Order spells out the six issues that we think you should
consider. Simply put, the President has put everything on the table for this
Commission to review so that the Postal Service has a path toward a productive
and financially secure future.
In thinking about these issues, you will need to strike a number of balances
between competing considerations. With everything on the table, there are no
predetermined outcomes. In the process of your examination you will need to
reflect upon the many possible alternative approaches to the management of this
large, complex and important institution, bearing in mind its public functions.
Two hundred years ago, the Postal Service was our communications system.
Today, much of our domestic and international communication needs are met by
telecommunication networks, computers, radio, and television. However, the Postal
Service plays a much more important role today in our commerce by delivering
products and services to consumers and businesses alike. You will need to think
about the appropriate 21 st century role of the Postal Service in communications
and commerce, considering how to redefine its fundamental mission.
Another issue that you will need to address is how we should think about the
http://www.treas.goy/press/reieases/kd3745.htm
1113/2003
KD-3745: Remarks of Treasury Under Secretary Fisher To the President's Commission 0... Page 2 of3
universal service obligation. Universal service means different things to different
people. For some, it is universal access and uniform pricing. For others, the
concept of universal service is really thought of as being about maintaining the
status quo. To develop a new business model we know we need to move beyond
the status quo.
I like to think of Ule Postal Service as the ultimate network business, and an
important value of any network is the scope of its reach. One question that the
Commission might consider is how the network could be leveraged to ensure that it
is operated in the most efficient manner possible and at the lowest possible cost.
You will also need to explore the delicate balance between pricing and cost
flexibilitles In a monopoly business and whether the Postal Service could use
additional flexibility in these areas. I believe that Postmaster General Potter has
done a great job beginning to address the changes that can be made within the
confines of the existing business model and statutory framework. However, freed
from these constraints, we hope that you will be able to suggest innovative
approaches that are not available to today's Postal Service.
The Postal Reorganization Act of 1970 and subsequent legislation require the
Postal Service to operate in certain ways that increase the cost of doing business
and imbed inefficiencies into the operating, cost and governance structure.
Examples include prohibitions, or effective prohibitions, on post office or other
infrastructure realignments, requirements that place financial or structural burdens
that have the effect of increasing the liabilities of the Postal Service as well as a
break-even mandate that eliminated the financial cushion necessary to withstand
economic cycles.
The Postal Service faces a large challenge with respect to human resource
productivity and incentives at all levels of the organization. With over seventy-five
percent of its costs related to human resources, the Commission should explore
how the Postal Service can do an even better job of providing employees the
appropriate incentives for continuous improvement in productivity.
However, it IS not all about costs. The revenue side is driven by a regulated pricing
mechanism that IS time consuming at best. You may want to consider whether
current and future costs can be understood and communicated more clearly in the
pricing of postal services. You could also consider whether it is possible or
beneficial to introduce greater clarity and predictability into the postal rate setting
process with the goal to enhance predictability and public confidence.
Competition with the private sector is also an important issue that this Commission
should examine. This may encompass new and existing postal products and
services or the monopoly status of access to the individual mailbox. You will also
need to explore the issue of cross subsidies.
Finally, the Commission will need to explore the type of financial transparency and
corporate governance that would serve the Postal Service well for the 21 st century.
This should include a your review of the role of the Board of Governors, the role of
the Postal Rate CommiSSion, the role of Congress, the management team of the
Postal Service as well as the reporting of postal finances.
The President has given you a challenging aSSignment and asked you to complete
it promptly. However, there has been an abundance of quality thought and work
that has already been done by Members of Congress and their staffs, by mailers'
and other private sector organizations, by interested individuals, by other agencies
of the federal government and by the Postal Service itself that can be readily drawn
upon. I am confident that your work will not be judged by the number of pages you
produce but, rather, by the quality of your thoughts - by how you help the
Administration and Congress better understand how the Postal Service can best
meet the challenges of the 21 st century
I encourage you to tap the many resources available to you and to keep this
process open and transparent for all Americans. Again, I thank you for your
http://www.treas.gov/press/releases/kd3745.htm
111312003
KD-3745: Remarks of Treasury Under Secretary Fisher To the President's Commission 0... Page 3 of 3
willingness to take on this importance challenge.
http://www.treas.gov/press/releases/kd3745.htm
1113/2003
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE
January 07, 2003
RESULTS OF TREASURY'S AUCTION OF 4-WEEK BILLS
28-Day Bill
January 09, 2003
February 06, 2003
912795LX7
Term:
Issue Date:
Maturity Date:
CUSIP Number:
1.145%
High Rate:
Investment Rate 1/:
Price:
1.161%
99.911
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted
9.85%.
All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
Competitive
Noncompetitive
FIMA (noncompetitive)
$
SUBTOTAL
Federal Reserve
TOTAL
$
39,715,068
42,487
$
12,957,668
42,487
o
o
39,757,555
13,000,155
2,454,402
2,454,402
42,211,957
$
15,454,557
1.130%: 50% of the amount of accepted competitive tenders
Median rate
was tendered at or below that rate.
Low rate
1.120%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio
=
39,757,555 / 13,000,155
~
3.06
1/ Equivalent coupon-issue yield.
http://www.publicdebt.treas.gov
Kb -
37i6
KD-3 747: Treasury Announces Appointment of Secret Service Director
Page 1 of 1
FROM THE OFFICE OF PUBLIC AFFAIRS
January 8, 2003
KD-3747
Treasury Announces Appointment of Secret Service Director
Acting Treasury Secretary Kenneth W. Dam today announced the appointment of
W. Ralph Basham to direct the United States Secret Service. For the past year, Mr.
Basham has served as Chief of Staff for the newly-formed Transportation Security
Administration at the U.S. Department of Transportation. Prior to that position, from
1998-2002, he was the director of the Federal Law Enforcement Training Center
under the U S. Treasury, and from 1970 until 1998, Mr. Basham served in positions
of increasing responsibility within the United States Secret Service. During his 28
year tenure with the United States Secret Service, Basham was a member of senior
management from 1993-1998 as Assistant Director for Administration. Mr. Basham
earned his bachelors degree from Southeastern University, and has been awarded
two Presidential Rank Awards for Meritorious Service.
"Mr. Basham has had a long and distinguished career in federal law enforcement
and I am pleased that he has agreed to take on this challenging assignment,"
Acting Treasury Secretary Dam said in a statement.
The United States Seuel Service is mandated by the U.S. Congress to carry out
two dlstilict and slQflIficant miSSions: protection and criminal Investigations. The
Secret Service is responsible for: protection of the President, the Vice President,
and their families, heads of state, and other designated indiViduals; investigation of
threats against these protectees; protection of the White House, Vice President's
Residence, Foreign Missions, and other buildings within Washington, D.C.; and
security design, planning, and implementation at designated National Special
Security Events. The Secret Service is also responsible for the enforcement of laws
relating to counterfeiting of obligations and securities of the United States,
Investigation of financial crimes including, but not limited to, access device fraud,
financial institution fraud, identity theft, computer fraud, telecommunications fraud,
and computer based attacks on our nation's financial, banking, and
telecommunications infrastructure. The United States Secret Service will be a
bureau within the newly created Department of Homeland Security.
This appointment does not require Senate confirmation.
http://www.treas.gov/press/releases/kd3747.htm
111312003
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt· Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE
January 08, 2003
RESULTS OF TREASURY'S AUCTION OF 9-YR 6-MO INFLATION-INDEXED NOTES
This issue is a reopening of an inflation-indexed note originally issued
July 15, 2002.
Interest Rate:
Series:
CUSIP No:
TIIN Conversion
Issue Date:
Dated Date:
Maturity Date:
8.342602892 1/
3%
C-2012
912828AF7
Factor per $1,000
High Yield:
2.340%
January 15, 2003
January 15, 2003
July 15, 2012
Adjusted Price: 106.474
All noncompetitive and successful competitive bidders were awarded
securities at the high yield.
Te~ders at the high yield were
allotted 99.38%.
All tenders at lower yields were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
Competitive
Noncompetitive
FIMA (noncompetitive)
$
13,101,387
199,065
$
o
o
6,000,109 2/
13,300,452
SUBTOTAL
o
o
Federal Reserve
$
TOTAL
5,801,044
199,065
13,300,452
$
6,000,109
The unadjusted price of $105.593 was adjusted by an index ratio
of
1.00834, for the period from July 15, 2002, through
January 15, 2003.
Median yield
2.300%:
50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low yield
2.220%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio
= 13,300,452 / 6,000,109 = 2.22
1/ This factor is used to calculate the Adjusted Values for any TIIN face
amount and will be maintained to 2-decimals on Book-entry systems.
2/ Awards to TREASURY DIRECT = $51,286,000
http://www.publicdebt.treas.gov
I<)j ~ 37iy
KD-3751: Fact Sheet: Reinvesting Taxed Earnings
Page 1 of 1
-----~.~._i·.:
~
I-'HLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 8, 2003
KD-3751
FACT SHEET:
REINVESTING TAXED EARNINGS
• Under current law, income earned by a corporation is taxed at the corporate level,
generally at the marginal rate of 35 percent. If the corporation distributes earnings
to shareholders in the form of dividends, the income is generally taxed again at the
shareholder level (at rates as high as 38.6 percent).
• In contrast, if a corporation retains earnings (instead of distributing them as
dividends to shareholders), the value of corporate stock generally will increase to
reflect the retained earnings. When shareholders sell their stock, that additional
value will be taxed in the form of capital gains (generally at a maximum rate of 20
percent). Thus, current law is biased in favor of retained earnings and against
dividends_
• The Administration's proposal to exclude 100 percent of dividends from
income requires a parallel tax adjustment for individuals to account for
reinvested earnings of a corporation out of taxed earnings in order not to provide a
bias against retained earnings. A corporation has a legitimate business need to
retain earnings for reasons such as new investment In plant and equipment.
s~areholder
• The Administration's proposal would permit corporations that reinvest their taxed
earnings to make Em adjustment that would flow through to the shareholders' stock
basis reflecting the taxed income the corporation was retaining. (Dividend
reinvestment plans exist under current law for actual dividends paid. Under current
law. however, reinvested dividends are subject to a shareholder level tax even
though a tax has been paid at the corporate level.)
• With this proposal, the decision by a corporation whether to retain earnings or
distribute them in the form of excludable dividends would be more neutral_ The
proposal would allow shareholders to increase their basis in the corporation's stock
by the amount of the retained earnings.
• A simple example will illustrate:
o Assume that a corporation, after being taxed on its profits at 35 percent,
distributes excludable dividends to its shareholders. Under the Administration's
proposal, no further tax is imposed although the value of its stock generally would
decrease by the amount distributed.
o Assume that a different corporation, after being taxed on its profits at 35 percent,
retains its earnings. Also assume that the value of its stock would increase from
$100 to $101 per share to reflect those retained earnings. If a shareholder had
purchased stock for $50 per share, without the adjustment for the retained
earnings, the shareholder would pay tax on an additional $1 of gain ($101-50 51)
when the stock was sold. With the adjustment for retained earnings, the
shareholder would increase basis to $51, thus eliminating the increase in gain
($101-51 =50). The decision to retain earnings by the corporation would not result
in additional tax at the shareholder level.
=
http://www.treas.gov/press/releases/kd3751.htm
1/2112003
KD-3752: Fact Sheet: Excludable Dividend Accounts
Page 1 of 1
!-'HLSS H()OM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 8, 2003
KD-3752
FACT SHEET: EXCLUDABLE DIVIDEND ACCOUNTS
• When a corporation is taxed on its income and later pays dividends that are
taxable to shareholders, this effectively results in the same income being taxed
twice. This double taxation of corporate earnings distorts business decision-making
and is inefficient. To eliminate the distortion and inefficiency, dividends should be
excluded from income if the dividend income has been taxed at the corporate level.
• Not every dollar of what could be paid out in dividends will have been subject to
tax at the corporate level, however. To ensure that dividend income is taxed once,
but only once, either at the corporate or shareholder level, the dividend exclusion
includes a mechanism - an excludable dividend account - for determining whether
the dividend has been subject to tax at the corporate level. (A similar mechanism
exists under current law. Distributions are treated as dividends only to the extent
the corporation has earnings and profits (E&P). Distributions exceeding E&P are
treated first as a return of the taxpayer's investment in the stock and then, to the
extent the distribution exceeds that investment, as capital gain on the stock.)
· An excludable dividend account (EDA) is the mechanism that would determine the
amount of income that has been fully taxed at the corporate level and, thus, the
amount of distributions that would not be taxable to shareholders. If the corporation
made distributions that exceeded the EDA, the excess distributions would be a
taxable dividend to shareholders (or a return of the shareholders' investment).
• Use of EDAs represents a policy decision that income should be taxed once (but
only once) at some level (corporate or individual) and not escape the system
entirely free of tax.
• Particularly because of the attention given to tax shelters, it is important to
understand that only income that has been fully subject to tax is eligible for the
dividend exclusion.
• EDAs are computed using a relatively simple arithmetic formula to compute the
amount of excludable dividends.
http://www.treas.goy/press/releases/kd3752.htm
1/2112003
2003-1-8-18-56-31-1555: Statement of Postmaster General John E. Potter
Page 1 of 5
I--'HLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
To view or print the PDF content on this page, download the free Alir>IJi' A,!(,IJid', RI,:,,!f'/',
January 8, 2003
2003-1-8-18-56-31-1555
Remarks by Postmaster General John E. Potter Presidential Commission on
the U.S. Postal Service Washington, DC
Thank you Chairman Pearce, Chairman Johnson. Commissioners ... thank you all
for agreeing to be on the Commission and for allowing me to participate in this first
meeting of the President's Commission on the Postal Service.
I want to begin by thanking President Bush for putting this panel together. The fact
that the President chose to form the Commission at this time attests to his interest
and concern about the future on the Postal Service. And for that we are grateful.
I also want to thank Treasury Undersecretary Peter Fisher for his comments this
morning, and for understanding the challenges we must overcome to provide
affordable, universal service for everyone in America in the future.
Joining me today is Richard Strasser, our Chief Financial Officer and Executive
Vice President At the conclusion of my remarks, Dick will add some detail and
perspective about our finances and the challenges associated with funding a $67
billion organization.
j want to begin with a brief overview of the size and scope of the Postal Service of
today and the massive mailing industry that has evolved and grown over the past
30 years.
As Secretary Fisher mentioned, ours is a truly national industry today -Interconnected with thousands of American businesses that employ 9 million people
whose work is directly related to or dependent on the nation's mail. Together, it's a
$900 billion industry that relies on the 750,000 men and women of the United
States Postal Service.
It was 35 years ago that a Presidential Commission began examining America's
postal system. Their recommendations were the basis for the Postal Reorganization
Act of 1970 that established the United States Postal Service.
•
The Post Office Department had been receiving up to 20 percent of its
revenue from tax payer subsidies.
• There were limited funds to expand and improve the infrastructure.
• Service had fallen.
• Employees were stuck in a personnel system where politics often
outweighed merit when it came to promotions.
From that flawed system, the Postal Service emerged to act in a more businesslike
manner.
In the years since 1970, we have lived up to our mandate to provide affordable,
universal mail service to every American regardless of where they live, where they
work, and regardless of their economic circumstances.
http://www.treas.gov/press/releases/2003181856311555.htm
112112003
2003- 1-8- I8-56-31-1555: Statement of Postmaster General John E. Potter
Page 2 of5
The United States Postal Service has been successful.
The Postal Service has grown with America and the economy.
•
•
•
The number of addresses served has increased 72 percent since 1970.
Mail volume has grown from 87 billion pieces to 203 billion pieces of mail.
The price of the First-Class stamp, adjusted for inflation, is essentially the
same as it was in 1971.
The Reorganization Act brought about significant changes in the way management
approached the business. We used our increased flexibility to transform from a
primarily manual operation to a highly mechanized operation in the 1970s and '80s
to what IS today a highly automated operation.
Over the past 30 years, we've looked at the entire mail chain from printing to
delivery. When we saw volume increasing dramatically in the late '70s and early
'80s, we had two options: invest in more infrastructure or get our customers
involved.
We chose to engage our customers to help us find equitable ways to share the
work and share the savings. The net result is $15 billion in annual worksharing
discounts for our customers and less investment in buildings and equipment for the
Postal Service.
The point is the Postal Service made a strategic decision not to own everything. We
looked at the least combined costs of alternatives and felt that worksharing and
customer involvement was in the nation's best interest. The postal network is an
open system.
Postal reorganization also changed our approach to service. By the 1980s we were
no longer the only game in town. Competition compelled us to rethink what we had
been doing.
We moved to independent performance testing for First-Class Mail -- and we
publicly reported service results on a quarterly basis. The initial results were not
what the American people deserved.
Today, service performance is at record levels and we continue to publicly report
our First-Class Mail performance scores. Customer satisfaction is also at record
levels.
So with all that good news, you are probably asking yourselves, why are you here.
Ladies and gentlemen, the Postal Service is challenged by changes in the
marketplace - primarily electronic communication.
Our primary source of revenue is First Class letter mail Twenty-five percent of
postal revenue comes from bills and payments - the segment of the mail most
vulnerable to electronic diversion.
The potential significant diversion of letters to electronic medium challenges our
basic business model. That model assumes that mail volume and revenue growth
will finance the Postal Service's growing infrastructure of some 1.7 million additional
delivery paints per year. As new homes, towns and cities are built, the Postal
Service must grow with them.
In addition, GAO raised concerns regarding long-term liabilities and obligations
related to debt repayment, pension costs and health care benefits for retirees.
As a result of all these concerns, in 2001, the Senate requested us to put together a
Transformation Plan. Simply put, they asked us to look ahead and come up with
http://www.treas.gov/press/re1eases/2003181856311555.htm
112112003
2003-1-8-18-56-31-1555: Statement of Postmaster General John E. Potter
Page 3 of5
strategies to assure thai the needs of the American public would continue to be met
in the future.
This past year we seized the initiative to transform the Postal Service - to begin the
process of preparing for the future - to preserve America's trust in our ability to
deliver.
The Transformation Plan has three basIc elements. The first element all centers
around doing a better job with the resources we have under the current legislation.
•
•
•
It lays out specific goals for Improving service and operational efficiency.
It identifies specific ways we will grow our business by enhancing products
and expanding customer access to postal services.
And it details plans and strategies to improve financial performance
This past year, we made great strides in transforming the Postal Service while
maintaining our focus.
Service is at all-time highs. Productivity is up. Employee complement has been
reduced by over 45,000 through attrition in recent years.
We've committed to take $5 billion in expenses out of our operating base over five
years and are well ahead of our plan.
However, bio-terrorism, recession, and electronic diversion have negatively
impacted volumes. Despite productivity gains, we have had to raise rates 15
percent over the two year period. No question, those rate increases have hurt
growth.
Despite stiff competition and a changing marketplace, we are working hard to
encourage growth. For example, we are exploring alternatives such as phased
rates for future rate cases, negotiated service agreements, and adding value to our
existing mail products through information technology.
As the Postal Service looks to the future, we recognize that there is a need to
change the legislation under which we operate. The second portion of the
Transformation Plan addresses short term legislative change.
Recently, OPM completed an extensive review of USPS pension obligations for
employees covered under the Civil Service Retirement System and concluded that
we would find ourselves in an overpayment situation were we to continue payments
on the current schedule as set by a 1974 law.
We are pleased that the Administration has drafted legislation to correct this
situation. If enacted, it would reduce the Postal Service's annual payments to the
CSRS fund by some $2.9 billion in 2003.
The combination of management's efforts to improve productivity, coupled with a
change in pension legislation, could enable us to hold rates stable through 2006. It
would also enable us to lower our debt, something I know Treasury favors. This
stability in rates and debt obligations would foster some growth in the mailing
industry, but would do little to reverse electronic diversion.
The third piece of the Transformation Plan addresses the need for long-term
legislation That's where you come in. We certainly welcome any and all
recommendations by the Commission to improve service and efficiency within the
current legislation, and will actively pursue those recommendations.
However, today, you the members of this Presidential Commission, have an historic
opportunity to offer your findings and recommendations to make the postal system
a viable, efficient and affordable service to all Americans well into the future.
http://www.treas.gov/press/releases/2003181856311555.htm
112112003
2003-1-8-18-56-31-1555: Statement of Postmaster General John E. Potter
Page 4 of5
We urge the Commission to engage in a thorough review of the key public policy
issues related to the Postal Service.
From the early years of our history, the principal defining public policy that has
guided and governed the Postal Service has been the vision of a universal mail
service.
That vision was founded on the notion of equal access to postal services that would
connect the American people for generations to come. Equality demanded that
uniform rates be set, that a single stamp can get your letter from anyplace in
America to its destination anywhere in America ~ whether that's around the block or
around the country.
Equality demanded regular delivery to every mailbox be provided to everyone, not
Just the privileged and well-to-do.
That promise still holds true today. But our society is far removed from the world of
our forefathers. Today, we live in a highly technological environment that has
created a fiercely competitive marketplace ~ one where change is inevitable but
also critical.
Our customers have changed as·well.
Technological advances offer our customers more choices and more options to
communicate across town and across the world. More choices and options signal a
shift in customer behavior that favors the service provider best equipped 10 meet
changing customer needs.
Meeting those changing needs demands that we change. That's what the
Transformation Plan is all about. The question now before us, however, is how to
define the needs of our customers, the American people in the decades ahead.
Since 1994, the Congress and the entire mailing industry has debated public policy
issues ranging •
•
•
•
•
•
from
from
from
from
from
from
strict pricing regulation to pricing flexibility;
binding arbitration with labor to the right to strike;
breakeven \0 retained earnings;
a $15 billion borrowing limit to doubling that amount;
fewer post offices to more post offices;
a stricter monopoly to no monopoly.
In the end it's not about any single issue. It's about universal service to the
American people
The key question is how can we continue to provide the universal service to all
Americans and still make it affordable in the face of potentially declining mail
volume. That is the central public policy issue facing this Commission.
As you may have concluded, the issues related to postal services in this country are
complex. The mailing industry comprises a wide spectrum of varied interests and
conflicting opinions about Postal Service reform and transformation. And everybody
in the country is a customer of the Postal Service.
That's why we welcome this opportunity to work with the members of this
Commission in a thorough and objective assessment of the Postal Service.
Collectively, you represent a wide spectrum of business experience and expertise
that will enable you to bring a new and unbiased perspective to the public policy
issues facing the Postal Service now and, most importantly, in the future.
http://www.treas.gov/press/releasesI2003181856311555.htm
112112003
2003-1-8-18-56-31-1555: Statement of Postmaster General John E. Potter
Page 5 of 5
Thank you Chairman Pearce and Chairman Johnson for this opportunity. I'll now
turn to CFO Strasser who will provide a more in-depth review of our service and
financial positions.
####
Related Documents:
http://www.treas.gov/press/releases/2003181856311555.htm
112112003
03-January Activity
Page 1 of4
i'
, L'
I
1,·'1 L(_--L_~
, ; , I ' 1T
~_:t,
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,,'
",'
Gary Burner, Manager, Federal Financing Bank (FFB) announced the
following activity for the month of January 2003.
FFB holdings of obligations issued, sold or guaranteed by other Federal
agencies totaled $36.0 billion on January 31, 2003, posting a decrease of
$1,024.9 million from the level on December 31, 2002. This net change was the
result of decreases in holdings of agency debt of $776.6 million and in holdings
of agency assets of $375.0 million, and an increase in holdings of governmentguaranteed loans of $126.7 million. The FFB made 50 disbursements and
received 26 prepayments during the month of January. The FFB also priced 14
buy-downs of loans guaranteed by the Rural Utilities Service ("RUS") during
the month of January.
Below are tables presenting FFB January loan activity and FFB holdings as
of January 31, 2003.
I PRINT I
FEDERAL FINANCING BANK
J anuary 2003 ACTIVITY
IDDDD
r
GENERAL SERVICES ADMINISTRATION
DEPARTMENT OF EDUCATION
San Francisco 08
1/03
$132,507.93
8/1/2005
2.172%
Semi-Annually
Barber-Scotia College
1109
$191,369.45
3/1/2030
4.734%
Semi-Annually
1<,'j...-J"'"-'
<? '-;t -','" j
...........:
1p:llwww.treasgovJffbJpress.releases/2003-januaryactivity.html
5/19/2005
003-January Activity
Page 2 of 4
Tuskegee Univ.
1/13
$715,311.25
1/2/2032
4.928%
Semi-Annually
Livingstone College
1/31
$122,965.94
7/1/2031
4.731%
Semi-Annually
@South Miss. Elec. #171
1/02
$2,068,213.94
12/31/2015
3.657%
Quarterly
@South Miss. Elec. #171
1/02
$1,172,536.77
12/31/2015
3.657%
Quarterly
@South Miss. Elec. #171
1/02
$8,004,471.75
12/31/2015
3.657%
Quarterly
@South Miss. Elec. #171
1/02
$1,793,268.48
12/31/2015
3.657%
Quarterly
@South Miss. Elec. #171
1/02
$3,013,130.79
1/3/2017
3.767%
Quarterly
@South Miss. Elec. #171
1/02
$1,421,948.53
1/3/2017
3.767%
Quarterly
@South Miss. Elec. #171
1/02
$1,047,751.69
1/3/2017
3.767%
Quarterly
@South Miss. Elec. #171
1/02
$9,149,115.98
1/3/2017
3.767%
Quarterly
@South Miss. Elec. #171
1/02
$2,076,772.69
1/3/2017
3.767%
Quarterly
@South Miss. Elec. #171
1/02
$3,507,374.23
1/3/2017
3.767%
Quarterly
@South Miss. Elec. #171
1/02
$1,734,024.74
1/2/2018
3.873%
Quarterly
@South Miss. Elec. #171
1/02
$1,840,682.48
1/2/2018
3.873%
Quarterly
@South Miss. Elec. #171
1/02
$1,395,043.70
1/2/2018
3.873%
Quarterly
@South Miss. Elec. #171
1/02
$6,122,052.66
1/2/2018
3.873%
Quarterly
Brazos Electric #844
1/03
$4,614,000.00
6/30/2003
1.251 %
Quarterly
Brazos Electric #844
1/03
$5,000,000.00
6/30/2003
1.251 %
Quarterly
Brazos Electric #844
1/03
$5,000,000.00
6/30/2003
1.251 %
Quarterly
Brazos Electric #844
1/03
$5,000,000.00
6/30/2003
1.251 %
Quarterly
Brazos Electric #844
1/03
$5,000,000.00
6/30/2003
1.251 %
Quarterly
Charles Mix Elec. #630
1/03
$640,738.00
12/31/2030
4.779%
Quarterly
Federal Rural Elec. #728
1/03
$1,000,000.00
6/30/2003
1.251 %
Quarterly
Fleming-Mason Energy #644
1/03
$2,900,000.00
6/30/2003
1.251 %
Quarterly
Farmers Elec Coop Corp #877
1/07
$500,000.00
1/2/2035
4.884%
Quarterly
Kootenai Elec. #752
1/07
$2,300,000.00
12/31/2031
4.814%
Quarterly
Mid-Carolina Elec. #645
1/07
$14,143,000.00
1/2/2035
4.881%
Quarterly
Sangre De Cristo Elec. #732
1/07
$400,000.00
3/31/2010
3.610%
Quarterly
Nolin Rural Elec. #840
1/08
$4,000,000.00
6/30/2003
1.235%
Quarterly
KEM Electric #537
1/09
$540,000.00
1/3/2034
4.794%
Quarterly
Nueces Electric #774
1/09
$538,000.00
12/31/2035
4.663%
Quarterly
South Slope Cooperative #741
1/09
$3,000,000.00
1/2/2018
3.915%
Quarterly
Greystone Power Corp. #875
1/10
$59,744,795.00
12/31/2031
4.922%
Quarterly
Georgia Trans. Corp. #849
1/13
$19,063,143.00
12/31/2025
4.697%
Quarterly
Appalachian Elec. #748
1/14
$4,000,000.00
12/31/2031
4.880%
Quarterly
Bartlett Elec. #535
1/14
$800,000.00
1/3/2034
4.986%
Quarterly
Tri-County EMC #814
1/14
$3,200,000.00
12/31/2036
4.977%
Quarterly
Arkansas Valley Elec. Coop #89
1/15
$8,000,000.00
12/31/2036
4.937%
Quarterly
Aiken Elec. #549
1/16
$9,860,000.00
1/3/2034
4.862%
Quarterly
FTC Communications #709
1/17
$3,318,000.00
6/30/2003
1.211 %
Quarterly
Lorain-Medina Elec. #760
1/17
$925,000.00
12/31/2035
4.891 %
Quarterly
Upsala Coop. Tele. #429
1/17
$282,049.00
6/30/2003
1.336%
Quarterly
RURAL UTILITIES SERVICE
http://www.treasgo\llffbJpressrele.as~s/2003-januaryactivity.html
5/19/2005
J03-January Activity
Page 3 of4
S. Illinois Power #818
1/22
$1,468,000.00
1/3/2034
4.781%
Quarterly
East Kentucky Power #489
1/23
$3,500,000.00
12/31/2024
4.557%
Quarterly
East Kentucky Power #753
1/23
$6,500,000.00
12/31/2030
4.665%
Quarterly
Holmew-Wayne Elec. #707
1/24
$1,000,000.00
7/1/2013
3.937%
Quarterly
S. Illinois Power #819
1/24
$2,411,000.00
12/31/2030
4.698%
Quarterly
Thumb Electric #767
1/24
$450,000.00
6/30/2023
4.757%
Quarterly
Clark Energy Coop. #611
1/27
$2,600,000.00
6/30/2003
1.182%
Quarterly
Thumb Electric #767
1/27
$570,000.00
12/31/2035
4.755%
Quarterly
Blue Ridge Elec. #659
1/28
$10,500,000.00
12/31/2029
4.654%
Quarterly
McLeod Coop. Power #554
1/28
$750,000.00
1/3/2034
4.753%
Quarterly
Midstate Communications #780
1/29
$542,697.00
7/1/2013
3.742%
Quarterly
Rio Grand Electric #615
1/29
$985,000.00
1/3/2034
4.756%
Quarterly
Alabama Electric #508
1/30
$1,031,000.00
1/3/2023
4.520%
Quarterly
Alabama Electric #564
1/30
$1,046,000.00
12/31/2025
4.563%
Quarterly
Alabama Electric #695
1/30
$2,794,000.00
12/31/2025
4.563%
Quarterly
Alabama Electric #695
1/30
$12,544,000.00
12/31/2025
4.563%
Quarterly
Mille Lacs Electric #769
1/30
$1,000,000.00
12/31/2035
4.843%
Quarterly
Pee Dee Elec. #547
1/30
$1,469,000.00
3/31/2006
2.257%
Quarterly
Petit Jean Electric #887
1/31
$6,396,000.00
12/31/2031
4.717%
Quarterly
Sac Osage Electric Coop. #815
1/31
$2,205,000.00
12/31/2036
4.809%
Quarterly
Return To top
FEDERAL FINANCING BANK HOLDINGS
(in millions of dollars)
Program
Agency Debt:
January 31, 2003
December 31,2002
U.S. Postal Service
Subtotal*
~ency Assets:
FmHA-RDIF
FmHA-RHIF
Rural Utilities Service-CBO
Subtotal*
7,473.40
7,473.40
8,250.00
8,250.00
950.00
2,530.00
4,270.20
7,750.20
950.00
2,905.00
4,270.20
8,125.20
Government-Guaranteed Lending:
DOD-Foreign Military Sales
DoEd-HBCU+
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes
General Services Administration+
DOl-Virgin Islands
DON-Ship Lease Financing
1,856.80
74.00
3.90
1,133.20
2,175.70
10.10
705.30
1,869.00
73.30
4.10
1,133.20
2,181.90
11.40
780.80
http://www.treas.e-o v/ffu/pressreleases/2003-januaryactivitY.html
Monthly
Net Change
1/1/03- 1/31/03
( 77() eJ())
(77li [,())
Fiscal Year
Net Change
10/1/02- 1131/03
U ii-ill Iii))
(3 [J4f)
1;( I I
0.00
0.00
(:l75 1)())
(i,75 1 )(,)
0.00
0.00
(J75(Jin
(:l 7~) I):) I
( 12 2IJ)
: [J:'
0.70
I ()
5.40
:l ( ) )
0.00
I Ii 2li)
(1 :)0)
(75·111)
7:) I
I,
i __ )~ , I
' I', ~
~ I
(
"
)(1
L_
J
,I
I I
)
0)
I)
'7'1 II)
I
5/19/2005
Page 4 of 4
003-January Activity
Rural Utilities Service
SBA-State/Local Development Cos.
DOT-Section 511
Subtotal*
Grand total*
14,714.10
92.40
3.20
20,768.80
35,992.40
14,490.60
94.60
3.20
20,642.10
37,017.30
223.50
(~ :::-0)
I
0.00
126.70
0.00
403.60
(1.024.90)
(3.61190)
655.90
1lJ
()I J I
• figures may not total due to roundmg + does not Include capitalized interest
Return To top
Return to 2003 Press Releases
Return to PRESS RELEASES
Last Updated on 3/24/03
http://www.treas.goy/ffb/pressreleases/2003-januaryactivity.html
5/19/2005
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
January 08, 2003
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 9-YR 6-MO INFLATION-INDEXED NOTES
This issue is a reopening of an inflation-indexed note originally issued
July IS, 2002.
Interest Rate:
Series:
CUSIP No:
TIIN Conversion
Issue Date:
Dated Date:
Maturity Date:
8.342602892 1/
3%
C-2012
912828AF7
Factor per $1,000
High Yield:
January 15, 2003
January 15, 2003
July 15, 2012
Adjusted Price: 106.474
2.340%
All noncompetitive and successful competitive bidders were awarded
securities at the high yield.
Tenders at the high yield were
allotted 99.38%.
All tenders at lower yields were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
FIMA (noncompetitive)
$
13,101,387
199,065
$
5,801,044
199,065
o
o
6,000,109 2/
13,300,452
SUBTOTAL
o
o
Federal Reserve
TOTAL
Accepted
Tendered
Tender Type
$
13,300,452
$
6,000,109
The unadjusted price of $105.593 was adjusted by an index ratio
of
1.00834, for the period from July 15, 2002, through
January 15, 2003.
Median yield
2.300%:
50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low yield
2.220%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 13,300,452 / 6,000,109
=
2.22
1/ This factor is used to calculate the Adjusted Values for any TIIN face
amount and will be maintained to 2-decimals on Book-entry systems.
2/ Awards to TREASURY DIRECT = $51,286,000
http://www.publicdebt.treas.gov
DEPARTMENT
OF
THE
TREASURY
TREASURY ~:6~'~""'<'Y~"
\
.
Of
NEW
S
••••••••
',I'
/
••••••••••••••••••••~·~·'··7.;,~·,"~,i;',~'~
".
on;l( E or I'!·KI.I(' .,IT\IRS e\"on "I·N,\S\ 1.\.\" \ ,\\T"
EMBARGOED UNTIL 11:00 A.M.
January 9, 2003
..:.
"'.w. e \\'\:0.111'\(:1'0".
CONTACT:
)).I'.e 2412211 e (21121 (,22,2%11
Office of Financing
202/691-3550
TREASURY OFFERS 13-WEEK AND 26-WEEK BILLS
The Treasury will auction 13-week and 26-week Treasury bills totaling $31,000
million to refund an estimated $32,387 million of publicly held 13-week and 26-week
Treasury bills maturing January 16, 2003, and to pay down approximately $1,387
million. Also maturing is an estimated $16,002 million of publicly held 4-week
Treasury bills, the disposition of which will be announced January 13, 2003.
The Federal Reserve System holds $14,181 million of the Treasury bills maturing
on January 16, 2003, in the System Open Market Account (SOMA).
This amount may be
refunded at the highest discount rate of accepted competitive tenders either in these
auctions or the 4-week Treasury bill auction to be held January 14, 2003. Amounts
awarded to SOMA will be in addition to the offering amount.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FIMA) accounts bidding through the Federal Reserve Bank of New
York will be included within the offering amount of each auction. These
noncompetitive bids will have a limit of $100 million per account and will be accepted
in the order of smallest to largest, up to the aggregate award limit of $1,000
million.
TreasuryDirect customers have requested that we reinvest their maturing holdings
of approximately $1,016 million into the 13-week bill and $850 million into the 26week bill.
The allocation percentage applied to bids awarded at the highest discount rate
will be rounded up to the next hundredth of a whole percentage point, e.g., 17.13%.
This offering of Treasury securities is governed by the terms and conditions set
forth in the Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about each of the new securities are given in the attached offering
highlights.
000
Attachment
HIGHLIGHTS OF TREASURY OFFERINGS OF BILLS
TO BE ISSUED JANUARY 16, 2003
January 9, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Award (35% of Offering Amount) .....
Maximum Recognized Bid at a Single Rate ....
NLP Reporting Threshold . . . . . . . . . . . . . . . . . . . .
NLP Exclusion Amount . . . . . . . . . . . . . . . . . . . . . . .
$16,000
$ 5,600
$ 5,600
$ 5,600
$ 5,300
Description of Offering:
Term and type of security . . . . . . . . . . . . . . . . .
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auction date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issue date . . . . . . . . . . . . . . . . . . . . . . .
Currently outstanding . . . . . . . . . . . . . . . . . . . . .
Minimum bid amount and multiples
91-day bill
912795 MH 1
January 13, 2003
January 16, 2003
April 17, 2003
October 17, 2002
$20,305 million
$1,000
.
.
.
.
.
.
.
million
million
million
million
million
$15,000
$ 5,250
$ 5,250
$ 5,250
None
million
million
million
million
182-day bill
912795 NO 9
January 13, 2003
January 16, 2003
July 17, 2003
January 16, 2003
$1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids: Accepted in full up to $1 million at the highest discount rate of accepted competitive bids.
Foreign and International Monetary Authority (FIMA) bids: Noncompetitive bids submitted through the Federal Reserve
Banks as agents for FIMA accounts. Accepted in order of size from smallest to largest with no more than $100
million awarded per account. The total noncompetitive amount awarded to Federal Reserve Banks as agents for FIMA
accounts will not exceed $1,000 million. A single bid that would cause the limit to be exceeded will
be partially accepted in the amount that brings the aggregate award total to the $1,000 million limit. However,
if there are two or more bids of equal amounts that would cause the limit to be exceeded, each will be prorated
to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a discount rate with three decimals in increments of .005%, e.g., 7.100%, 7.105%.
(2) Net long position (NLP) for each bidder must be reported when the sum of the total bid amount, at all
discount rates, and the net long position equals or exceeds the NLP reporting threshold stated above.
(3) Net long position must be determined as of one half-hour prior to the closing time for receipt of
competitive tenders.
Receipt of Tenders:
Noncompetitive tenders ..... Prior to 12:00 noon eastern standard time on auction day
Competitive tenders ........ Prior to 1:00 p.m. eastern standard time on auction day
payment Terms: By charge to a funds account at a Federal Reserve Bank on issue date, or payment of full par amount
with tender.
TreasuryDirect customers can use the Pay Direct feature, which authorizes a charge to their account of
record at their financial institution on issue date.
DEPARTl\'IENT
OF
THE
TREASURY (~3'~\~,
~""~/s;
______
TREASURY
NEW S
....•-------
---~.~.~~
EMBARGOED UNTIL 11:00 A.M.
January 13, 2003
Contact:
Office of Financing
202/691-3550
TREASURY OFFERS 4-WEEK BILLS
The Treasury will auction 4-week Treasury bills totaling $11,000 million to
refund an estimated $16,002 million of publicly held 4-week Treasury bills maturing
January 16, 2003, and to pay down approximately $5,002 million.
Tenders for 4-week Treasury bills to be held on the book-entry records of
TreasuryDirect will not be accepted.
The Federal Reserve System holds $14,181 million of the Treasury bills maturing
on January 16, 2003, in the System Open Market Account (SOMA).
This amount may be
refunded at the highest discount rate of accepted competitive tenders in this auction
up to the balance of the amount not awarded in today's 13-week and 26-week Treasury
bill auctions. Amounts awarded to SOMA will be in addition to the offering amount.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FIMA) accounts bidding through the Federal Reserve Bank of New York
will be included within the offering amount of the auction.
These noncompetitive bids
will have a limit of $100 million per account and will be accepted in the order of
smallest to largest, up to the aggregate award limit of $1,000 million.
The allocation percentage applied to bids awarded at the highest discount rate
will be rounded up to the next hundredth of a whole percentage point, e.g., 17.13%.
This offering of Treasury securities is governed by the terms and conditions
set forth in the Uniform Offering Circular for the Sale and Issue of Marketable BookEntry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about the new security are given in the attached offering highlights.
000
Attachment
HIGHLIGHTS OF TREASURY OFFERING
OF 4-WEEK BILLS TO BE ISSUED JANUARY 16, 2003
January 13, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Award (35% of Offering Amount) ...
Maximum Recognized Bid at a Single Rate ..
NLP Reporting Threshold . . . . . . . . . . . . . . . . . .
NLP Exclusion Amount . . . . . . . . . . . . . . . . . . . . .
$11,000
$ 3,850
$ 3,850
$ 3,850
$10,800
million
million
million
million
million
Description of Offering:
Term and type of security ........... 28-day bill
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . 912795 LY 5
Auction date . . . . . . . . . . . . . . . . . . . . . . . . January 14,2003
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . January 16, 2003
Maturity date . . . . . . . . . . . . . . . . . . . . . . . February 13, 2003
Original issue date . . . . . . . . . . . . . . . . . August 15,2002
Currently outstanding ............... $42,099 million
Minimum bid amount and multiples .... $1,000
Submission of Bids:
Noncompetitive bids: Accepted in full up to $1 million at the highest
discount rate of accepted competitive bids.
Foreign and International Monetary Authority (FIMA) bids: Noncompetitive bids submitted through the Federal Reserve Banks as agents for
FIMA accounts. Accepted in order of size from smallest to largest
with no more than $100 million awarded per account.
The total noncompetitive amount awarded to Federal Reserve Banks as agents for
FIMA accounts will not exceed $1,000 million. A single bid that
would cause the limit to be exceeded will be partially accepted in
the amount that brings the aggregate award total to the $1,000
million limit.
However, if there are two or more bids of equal
amounts that would cause the limit to be exceeded, each will be
prorated to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a discount rate with three decimals in
increments of .005%, e.g., 4.215%.
(2) Net long position (NLP) for each bidder must be reported when
the sum of the total bid amount, at all discount rates, and the
net long position equals or exceeds the NLP reporting threshold
stated above.
(3) Net long position must be determined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Receipt of Tenders:
Noncompetitive tenders:
Prior to 12:00 noon eastern standard time on auction day
Competitive tenders:
Prior to 1:00 p.m. eastern standard time on auction day
Payment Terms: By charge to a funds account at a Federal Reserve Bank
on issue date.
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
January 13, 2003
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
January 16, 2003
April 17, 2003
912795MH1
Term:
Issue Date:
Maturity Date:
CUSIP Number:
1.180%
High Rate:
Investment Rate 1/:
Price:
1.199%
99.702
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 35.36%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
FIMA (noncompetitive)
$
39,791,509
1,464,326
200,000
$
6,183,336
6,183,336
Federal Reserve
$
47,639,171
14,335,749
1,464,326
200,000
1-6,000,075 2/
41,455,835
SUBTOTAL
TOTAL
Accepted
Tendered
Tender Type
$
22,183,411
Median rate
1.170%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.150%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 41,455,835 / 16,000,075 = 2.59
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $1,128,228,000
http://www.publicdebt.treas.gov
)<JJ
31 57
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE
January 13, 2003
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
IB2-Day Bill
January 16, 2003
July 17, 2003
912795ND9
Term:
Issue Date:
Maturity Date:
CUSIP Number:
1. 230%
High Rate:
Investment Rate 1/:
Price:
1. 255%
99.378
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 23.43%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
FIMA (noncompetitive)
$
36,024,457
1,197,709
125,000
$
5,555,437
5,555,437
Federal Reserve
$
42,902,603
13,677,372
1,197,709
125,000
1S,000,OB1 2/
37,347,166
SUBTOTAL
TOTAL
Accepted
Tendered
Tender Type
$
20,555,51B
Median rate
1.220%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate. Low rate
1.190%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 37,347,166 / 15,000,OB1 = 2.49
1/ Equivalent coupon-issue yield.
2/ Awards to TREA~URY DIRECT = $912,918,000
http://www.pubIicdebt.treas.gov
KD-3759: White House Announces Mark W. Everson Tapped to Serve as New IRS Com...
Page 1 of 1
PHLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 13, 2003
KD-3759
White House Announces Mark W. Everson Tapped to Serve as New IRS
Commissioner
Today the Bush Administration announced that Mark W. Everson has been
nominated to serve as the Commissioner of the Internal Revenue Service.
"Mark Everson is the right candidate with the perfect combination of public and
private experience and a vision to lead the IRS," stated Acting Treasury Secretary
Kenneth W. Dam. "The time taken to find such a candidate has been time well
spent."
Most recently, Everson served as Deputy Director of the Office of Management and
Budget, the President's chief management officer, with responsibility for
establishing management policies for all executive agencies in the areas of finance,
human capital, procurement, and information technology. His office oversees the
federal government's information and technology agendas, and coordinates all IT
spending within the government, including the IRS. Prior to that, he was Controller
of the Office of Federal Financial Management.
Prior to joining the Bush Administration in August 2001, Mr. Everson served as
Group Vice President - Finance of SC International Services, Inc., a $2.2 billion
privately owned, Dallas based, food services company. For ten years, from 1988
until 1998, Mr. Everson was an executive with the Pechiney Group, the world's
fourth largest producer and converter of aluminum. While with Pechiney, he held
financial and operating positions in Chicago, Illinois; Manisa, Turkey; Marion,
Indiana; and Paris, France.
Mr. Everson served in the Reagan Administration from 1982 until 1988. For three
years, he was at the U.S. Information Agency, the public diplomacy arm of the
government. In 1985, he moved to the Department of Justice where he served as a
Special Assistant to the Attorney General. He was subsequently Executive
Associate Commissioner and then Deputy Commissioner of the Immigration and
Naturalization Service. While at INS, he oversaw implementation of the Immigration
Reform and Control Act of 1986. Mr. Everson began his career with Arthur
Andersen & Co. in New York. He received his B.A. in History from Yale University
and has a Masters of Science in Accounting from the New York University Business
School. He is 48 years old and is married to the former Nanette Rutka. They live in
Arlington, Virginia and have two children, Leonard and Emma.
The Internal Revenue Service is the nation's tax collection agency and administers
the Internal Revenue Code. Its mission: to provide America's taxpayers with top
quality service by helping them understand and meet their tax responsibilities and
by applying the tax law with integrity and fairness to all.
http://www.treas.gov/press/releases/kd3759.htm
112112003
KD-3760: Statement by Assistant Secretary Olson on the IRS Offshore Disclosure Initiative Page 1 of 1
PH[SS H00M
FROM THE OFFICE OF PUBLIC AFFAIRS
January 14,2003
KD-3760
Statement by Assistant Secretary Olson on the IRS Offshore Disclosure
Initiative
Today the Treasury Department and Internal Revenue Service announced an
initiative to encourage the voluntary disclosure of unreported income hidden by
taxpayers in offshore accounts and accessed through credit cards or other financial
arrangements.
Under the initiative, eligible taxpayers have to pay back taxes, interest and certain
accuracy and delinquency penalties, but will not face civil fraud and information
return penalties. To obtain the benefits of the initiative, taxpayers must disclose
information about who promoted or solicited their participation in the offshore
financial arrangement.
"Treasury and the IRS are working to ensure that the IRS has the information
needed to identify taxpayers who participated in these schemes. The initiative is an
important step to bringing taxpayers back into compliance with the law, to stopping
the promotion of these abusive schemes, and to getting the IRS information on
promoters and other participants," stated Pamela Olson, Treasury Assistant
Secretary for Tax Policy. "Taxpayers who do not come forward now will be pursued
by the IRS and will be subject to more significant penalties and possible criminal
sanctions."
"Treasury and the IRS must ensure that the IRS has the information necessary for it
to fully and fairly enforce the tax laws," Olson continued. "The voluntary compliance
initiative announced today will be an important source of information. The John
Doe summons initiatives are another. Treasury will continue its efforts to improve
and expand the U.S.'s broad network of bilateral tax treaties and tax information
exchange agreements. Better tax information exchange relationships will permit
the IRS to obtain the information it needs from other countries so it can pursue
taxpayers attempting to hide income offshore to avoid their tax obligations."
Attached:
IRS Press Release IR-2003-5
IRS Chronology on Credit Cards and John Doe Summons
The text of Revenue Procedure 2003-11
Grassley Statement
Baucus Statement
http://www.treas.gov/press/releases/kd3760.htm
112112003
KD-'3 761: Fact Sheet: Ending the Double Tax on Corporate Earnings
Page 1 of3
U
,-r-·'·"
~:
.
...
....' -
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 14, 2003
KD-3761
Fact Sheet: Ending the Double Tax on Corporate Earnings
Background
Under current law, corporate earnings may be subject to two levels of tax: one at
the corporate level and one at the shareholder level. Income earned by a
corporation is taxed at the corporate level, generally at the rate of 35 percent. If the
corporation distributes earnings to shareholders in the form of dividends, the
income generally is taxed again at the shareholder level (at rates as high as 38.6
percent). If a corporation instead retains earnings, the value of corporate stock
generally will increase to reflect the retained earnings. When shareholders sell their
stock, that additional value will be taxed in the form of capital gains (generally at a
maximum rate of 20 percent). The resulting rate of tax on corporate income can be
as high as 60 percent, far in excess of tax imposed on other types of income.
This double taxation of corporate profits creates severe economic distortions.
• First, it creates a bias in favor of debt as compared to equity, because payments
of interest by the corporation are deductible while returns on equity in the form of
dividends are not. Excessive debt increases the risks of bankruptcy during
economic downturns.
• Second, double taxation of corporate profits creates a bias in favor of
unincorporated entities (such as partnerships and LLCs) that are not subject to the
double tax.
• Third, double taxation of corporate profits encourages a corporation to retain its
earnings rather than distribute the earnings in the form of dividends, distorting
investment returns and decisions by lessening the pressure on corporate managers
to undertake only the most productive investments.
• Fourth, double taxation encourages corporations to engage in transactions such
as share repurchases rather than paying dividends because they permit the
corporation to distribute earnings at reduced capital gains rates.
• Fifth, double taxation creates incentives for corporations to engage in transactions
for the sole purpose of minimizing their tax liability.
The Administration's Proposal
The Administration's proposal would permit a corporation, public or private, to
distribute tax-free dividends to its shareholders to the extent that those dividends
are paid out of previously taxed income. That is, shareholders would be able to
exclude the dividends from income tax. The proposal generally would be effective
for dividends paid on or after January 1, 2003, with respect to corporate earnings
after 2001.
Computing the Excludable Dividend Amount
To compute the dividends that can be paid to shareholders without tax, a
corporation would calculate an excludable dividend amount (EDA). The Excludable
Dividend Amount reflects income of the corporation that has been fully taxed. The
Excludable Dividend Amount is calculated for each calendar year as follows:
(US taxes + foreign tax credits used to offset US tax liability)
http://www.treas.gov/press/releaseslkd3761.htm
112112003
KD-3761: Fact Sheet: Ending the Double Tax on Corporate Earnings
Page 20f3
.35
- (US taxes + foreign tax credits used to offset US tax liability)
=excludable dividend income.
A corporation's US taxes include the total tax amount reflected on its US federal
income tax return filed during the calendar year.
The proposal also includes a mechanism to ensure that dividends and retained
earnings are treated alike. If a corporation's excludable dividend amount exceeds
the dividend it pays, each shareholder's basis in its stock would be increased on
December 31 st by the amount retained per share.
Corporations paying excludable dividends or that retain a portion of their
Excludable Dividend Amount would report to shareholders the amount of
Excludable Dividends and basis adjustments annually on IRS Form 1099.
Characterization of Distributions
If an amount is a dividend under current law, it would be treated as an excludable
dividend to the extent of the Excludable Dividend Amount. If a corporation's
dividends during a calendar year exceed its Excludable Dividend Amount, only a
proportionate amount would be treated as an excludable dividend. Distributions in
excess of the Excludable Dividend Amount generally will reduce basis, constitute a
taxable dividend, and/or constitute a capital gain.
US withholding tax would apply to dividends paid by a US corporation to its foreign
shareholders.
Refunds of Taxes
If a corporation is entitled to a refund of taxes as a result of an audit adjustment, a
net operating loss, a foreign tax credit, a claim for refund, or for other reasons, the
refund would be permitted based on the corporation's undistributed Excludable
Dividend Amount in the year of the refund. Any remaining refund amount would be
carried over to subsequent taxable years.
Corporations Permitted to Distribute Excludable Dividends
Under the Administration's proposal any corporation with income subject to US tax
could pay excludable dividends. Foreign corporations that have income that is
effectively connected with a US trade or business or that receive excludable
dividends also could pay excludable dividends.
Sales of Stock
Capital gains on the sale of stock would continue to be taxed as under current law.
Shareholders of a corporation that retains some or all of its Excludable Dividend
Amount would be permitted to increase their stock bases. This adjustment would
reduce capital gains recognized on the sale of stock, equalizing the treatment of
dividends and retained earnings.
Special Entities
Under current law, the income of S corporations typically is not subject to corporate
tax. Consequently, the general rules for S corporations would not change.
http://www.treas.gov/press/releases/kd3761.htm
1/2112003
KD-3761: Fact Sheet: Ending the Double Tax on Corporate Earnings
Page 3 of3
The Administration's proposal would permit a mutual fund or a real estate
investment trust that receives excludable dividends to pass those excludable
dividends through tax free to its shareholders. Special rules would be provided for
excludable dividends received and paid by insurance companies.
Under current law, a corporation is allowed to deduct certain dividends paid with
respect to shares held by an Employee Stock Ownership Plan (ESOP) that it
sponsors. Under the Administration's proposal, special rules would be provided to
ensure that a corporation could pay excludable dividends to an ESOP or claim a
deduction for the dividends, but not both.
Excludable Dividends Received by Pension Plans, 401(k) Plans, and Individual
Retirement Accounts (Retirement Plans)
The Administration's treatment of Retirement Plans would not change.
Generally, under current law, amounts contributed to a Retirement Plan are not
subject to tax when contributed. Income earned by the Retirement Plan is not
subject to tax when earned. Instead, contributions and earnings are subject to tax
when distributed. In contrast, contributions to a Roth-IRA are made with after-tax
dollars. However, both the after-tax contributions and income earned on those
contributions are free from tax when distributed.
All investment income, including dividend income, earned by a Roth-IRA is free
from tax. The tax treatment of other retirement plans is economically the same as
Roth-IRA treatment. A plan with tax-free contributions and no tax until withdrawal
produces the same after-tax benefit for an individual as a plan with after-tax
contributions and tax-free investment returns. Thus, in a Retirement Plan, all
investment income, including all dividend income, is effectively free from tax.
Rules to Prevent Gaming
Current law contains rules that prevent taxpayers from avoiding taxes, double
dipping, and creating unintended losses. Similar rules would be provided for
excludable dividends.
http://www.treas.gov/press/releases/kd3761.htm
1/2112003
KD-3762: Fact Sheet: The President's Proposal to end the Double Tax on Corporate Earn... Page 1 of2
PH[SS FWOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 14, 2003
KD-3762
Fact Sheet: The President's Proposal to end the Double Tax on Corporate
Earnings
The President has proposed a bold plan to end the double tax on corporate profits.
THE PROBLEM.
When a corporation earns a profit it pays tax at rates as high as 35 percent. For
example, a corporation with $100 of taxable income could pay as much as $35 in
corporate income tax. Then, if the corporation pays dividends to its shareholders
out of its remaining after-tax income of $65, the shareholders would pay tax on the
dividends at their own individual tax rates, which range as high as 38.6 percent.
The resulting rate of tax on corporate income can be as high as 60 percent, far in
excess of tax rates imposed on other types of income.
The double tax affects companies' business and investment decisions in ways that
can be harmful. They borrow money instead of issuing stock, because interest is
deductible and doesn't bear the double tax, while dividends are not deductible.
Higher debt burdens leave firms vulnerable during downturns. The double tax
discourages companies from paying dividends - indeed, many companies have
reduced their dividends - or stopped paying dividends altogether - to reduce the
double tax.
The President believes the tax code shouldn't interfere with business decisions.
That is why he has proposed getting rid of the double tax. Once it is gone,
businesses can decide whether they should pay dividends without worrying about
taxes.
HOW WILL IT WORK?
Corporations will compute and pay tax just as they always have. Then, they will do
a simple calculation to compute how much of their income has been fully taxed.
This step will determine how much the corporation can payout in tax-free
dividends. This step is important because the President has only proposed
eliminating the double tax. The fully-taxed amount, less the tax paid by the
corporation, is the amount that can be paid tax free to shareholders. So, in the
example of a $100 profit and $35 tax, the $65 of after-tax profits could be paid to
shareholders in cash without tax.
What happens if the corporation isn't fully taxed? Under the President's proposal,
this will mean that less cash can be paid tax-free to shareholders. The reason - not
all the profits have been fully taxed to the corporation. Consequently, corporations
will have a reduced incentive to engage in transactions just to minimize their taxes.
What if the corporation doesn't want to distribute all its profits as dividends?
Businesses have legitimate reasons for retaining earnings, such as the need to
reinvest in plant and equipment. The President's proposal would allow the
corporation to do so.
Consider a similar example as before but assume these amounts apply on a per
http://www.treas.gov/press/releases/kd3762.htm
112112003
KD-3762: Fact Sheet: The President's Proposal to end the Double Tax on Corporate Earn... Page 2 of2
share basis ($10 of profits per share, $3.50 in taxes per share, and $6.50 in aftertax income per share). Suppose the corporation paid out $4 in tax-free cash
dividends per share and reinvested the remaining $2.50 per share. The proposal
would allow shareholders to add the amount the corporation retained to the amount
they paid for their stock. This treats shareholders the same as if they received a
cash dividend and reinvested the dividend in new shares of the company. The
$2.50 of retained earnings would be tax-free, just as if it had been paid as a cash
dividend. For example. if a shareholder had bought a share of stock for $90 and
sold it for $100. his or her gain would be $7.50 instead of $10 [$100 - ($90 + $2.50)
= $7.50].
HOW WILL SHAREHOLDERS KNOW?
The corporation. mutual fund. or stockbroker will provide shareholders the
information they need on the end-of-year tax statement sent every January. That
statement will tell shareholders: (1) how much of the dividend is tax-free; (2) how
much of the dividend. if any. is taxable; and (3) how much shareholders can add to
what they paid for the stock to determine their tax when they sell their stock.
Shareholders won't have to worry about computing these amounts because it will
be done for them on the end-of-year statement.
WHAT ARE THE ADVANTAGES?
Here are some of the advantages of the President's proposal:
• Roughly 35 million American households currently receive taxable dividends.
Most of them will benefit.
• About one-half of taxable dividends go to senior citizens, many of whom depend
on that income.
• Corporations that previously had a reason not to pay dividends will now have a
good reason to pay them.
• Dividends are frequently considered a good way to judge if a corporation is
healthy. The current tax system disfavors dividend payments. Under the
President's proposal, taxes would not affect the decision to pay dividends or retain
earnings.
• Corporations will have a good reason to pay taxes and not to engage in
aggressive tax planning. A dollar in taxes saved by a corporation no longer
translates into more cash for their shareholders. The less tax paid by a corporation,
the less tax-free cash that can be paid to its shareholders. That is good for the tax
system.
• This puts us on a more equal footing with our biggest trading partners. Most of
them provide some relief from the double tax on corporate earnings, so the U.S is
now at a disadvantage.
CONCLUSION
The President's proposal makes sense for shareholders and corporations. It will
reduce huge distortions and inefficiencies, allowing corporations to make decisions
based on what makes good business sense instead of what makes good tax
sense. It will reduce the incentive for tax shelters. It may improve corporate
governance by making corporate decisions more transparent and subject to
shareholder scrutiny. In short. it changes the math, and that has the potential to
alter the way corporate America operates.
http://www.treas.gov/press/releases/kd3762.htm
112112003
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
January 14, 2003
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 4-WEEK BILLS
28-Day Bill
January 16, 2003
February 13, 2003
912795LY5
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
1.135%
Investment Rate 1/:
1.148%
Price:
99.912
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 38.69%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
FIMA (noncompetitive)
$
SUBTOTAL
Federal Reserve
TOTAL
Accepted
Tendered
Tender Type
$
37,591,800
30,915
$
10,969,185
30,915
o
o
37,622,715
11,000,100
2,442,590
2,442,590
40,065,305
$
13,442,690
Median rate
1.125%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.100%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 37,622,715 / 11,000,100 = 3.42
1/ Equivalent coupon-issue yield.
http://www.pubIicdebt.treas.gov
J<D
KD-3764: Media Advisory: Treasury, OMB and IRS to Announce Free File Initiative on ...
Page 1 of 1
PRess ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 15, 2003
KD-3764
Media Advisory: Treasury, OMB and IRS to Announce Free File Initiative on
Thursday
The Department of Treasury, Office of Management and Budget and Internal
Revenue Service will announce the details of IRS Free File during a news
conference at 10 a.m. Thursday, January 16. The landmark initiative will allow the
majority of Americans to prepare and file taxes online electronically for free.
Acting Treasury Secretary Kenneth W. Dam, OMB Director Mitchell E. Daniels Jr.,
and Acting IRS Commissioner Robert Wenzel, along with a group of taxpayers, will
launch the new web-site and brief reporters. A demonstration of Free File on
IRS.gov also will be conducted. The Free File program is the product of a publicprivate sector pact between the IRS and Free File Alliance, LLC, a consortium of
tax software companies. Representatives of the companies will participate.
The event will be featured in a live Webcast available through www.ustreas.gov .
A live video broadcast of this event will be available on satellite for the free and
unrestricted use by news organizations.
Live broadcast time: 10:00-11 :OOam EASTERN TIME
A Test Signal will be available from 9:45-10:00am EASTERN TIME
Ku-band analog satellite: AMC2 (Ge2)
Transponder: 1 K
Orbital Position: 85 west
Downlink Frequency: 11720 MHz Vertical
Transmission Contact: ConnectLive 202-513-1000
The news conference will be held at the Treasury Department's press room (Room
4121). The room will be available for camera set up beginning at 9:00 a.m. Please
note: seating at the event is limited. Media wishing to attend the event should
contact one of the agencies' press offices as early as possible.
Media without Treasury or White House press credentials should contact Treasury's
Office of Public Affairs at (202) 622-2960 with the following information: name,
Social Security number and date of birth. This information may also be faxed to
(202) 622-1999.
Media contacts for the event are:
Tara Bradshaw at Treasury: 202-622-2960
Megan Mollmann at OMB: 202-395-7254
IRS Media Relations: 202-622-4000
http://www.treas.gov/press/releases/kd3764.htm
112112003
KD-3765: Treasury Proposes Suspicious Activity Reporting for Mutual Funds
Page 1 of 1
U
·-·,-+--..'s
...,_.-
f-' H L S S H L) 0 M
FROM THE OFFICE OF PUBLIC AFFAIRS
January 15, 2003
KD-3765
Treasury Proposes Suspicious Activity Reporting for Mutual Funds
The Department of the Treasury today issued a Notice of Proposed Rulemaking
that would require mutual funds to report suspicious activities to Treasury's
Financial Crimes Enforcement Network (FinCEN).
Existing Treasury regulations impose suspicious activity reporting requirements on
banks and other depository institutions, securities brokerage firms and certain other
financial institutions. This proposal is consistent with these previously issued
regulations. Written comments on the proposed rule may be submitted within 60
days of its publication in the Federal Register, which is expected to occur later this
week.
The proposed rule is part of Treasury's efforts to further enhance anti-money
laundering controls in the securities industry and in the financial services sector
generally. Since passage of the USA PATRIOT Act, Treasury has issued various
regulations applicable to the mutual fund industry. In April of 2002, Treasury issued
a regulation requiring mutual funds to establish an anti-money laundering program.
In July of 2002, Treasury and the Securities and Exchange Commission (SEC)
jointly issued a proposed rule that would require mutual funds to establish customer
identification and verification procedures.
As with the previous regulations, Treasury has worked closely with the SEC in
developing this proposed rule. Additionally, the mutual fund industry itself has
continued to provide valuable assistance and insight in the development of antimoney laundering rules applicable to the industry.
The proposed rule issued today was recommended by the joint report submitted by
Treasury, the SEC, and the Board of Governors of the Federal Reserve System to
the Congress on December 31, 2002, pursuant to section 356 of the USA PATRIOT
Act.
A copy of the proposed rule is attached.
http://www.treas.gov/press/releaseslkd3765.htm
1/2112003
BILLING CODE 4810-02
DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA29
Financial Crimes Enforcement Network; Due Diligence Anti-Money Laundering Programs
for Certain Foreign Accounts
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Notice of Proposed Rulemaking.
SUMMARY: Treasury and FinCEN are issuing a proposed regulation to implement section 312 of
the USA PATRIOT Act of2001, which requires U.S. financial institutions to establish due diligence
policies, procedures, and controls reasonably designed to detect and report money laundering through
correspondent accounts and private banking accounts that U.S. financial institutions establish or
maintain for non-U.S. persons.
DATES: Written comments may be submitted to FinCEN on or before [INSERT DATE THAT IS
30 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER].
ADDRESSES: Submit comments (preferably an original and four copies) to FinCEN, P.O. Box 39,
Vienna, VA 22183, Attn: Section 312 Regulations. Comments may also be submitted by electronic
mail to regcomments@fincen.treas.gov with the caption in the body of the text, "Attention: Section
312 Regulations." Comments may be inspected at FinCEN between 10 a.m. and 4 p.m. in the
FinCEN Reading Room in Washington, D.C. Persons wishing to inspect the comments submitted
must request an appointment by telephoning (202) 354-6400 (not a toll-free number).
1
FOR FURTHER INFORMATION CONTACT: Office of the Assistant General Counsel for
Enforcement (Treasury), (202) 622-1927; the Office ofthe Assistant General Counsel for Banking
and Finance (Treasury), (202) 622-0480; or Office of the Chief Counsel (FinCEN), (703) 905-3590
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
I. Background
On October 26, 2001, President Bush signed into law the USA PATRIOT Act of 2001, Pub.
L. 107-56 (the Act). Title III of the Act, captioned AInternational Money Laundering Abatement and
Anti-Terrorist Financing Act of2001,@ includes certain amendments to the Bank Secrecy Act (BSA),
31 U.S.C. 5311 et seq., intended to aid in the prevention, detection, and prosecution of international
money laundering and terrorist financing.
Section 312 of the Act adds new subsection (i) to 31 U.S.c. 5318. This provision requires
each U.S. financial institution that establishes, maintains, administers, or manages a private banking
account or a correspondent account in the United States for a non-U.S. person to take certain antimoney laundering measures with respect to such accounts. In particular, financial institutions must
establish appropriate, specific, and, where necessary, enhanced, due diligence policies, procedures
and controls that are reasonably designed to enable the financial institution to detect and report
instances of money laundering through those accounts.
In addition to this general requirement, which applies to all correspondent and private
banking accounts for non-U.S. persons, section 312 of the Act specifies additional standards for
certain correspondent accounts.
For a correspondent account maintained for a foreign bank
operating under an offshore license or a license granted by a jurisdiction designated as being of
concern for money laundering, a financial institution must take reasonable steps to identify the
2
owners of the foreign bank, to conduct enhanced scrutiny of the correspondent account to guard
against money laundering, and to ascertain whether the foreign bank provides correspondent
accounts to other foreign banks and, if so, to conduct appropriate related due diligence.
Section 312 also sets forth minimum standards for the due diligence requirements for a
private banking account for a non-U.S. person. Specifically, a financial institution must take
reasonable steps to ascertain the identity of the nominal and beneficial owners of, and the source of
funds deposited into, the private banking account, as necessary to guard against money laundering.
The institution must also conduct enhanced scrutiny of private banking accounts requested or
maintained by or on behalf of senior foreign political figures (or their family members or close
associates). Enhanced scrutiny must be reasonably designed to detect and report transactions that
may involve the proceeds of foreign corruption.
Section 312(b )(2) provides that subsection 5318(i) takes effect on July 23, 2002, and applies
with respect to accounts covered by the requirement, regardless of when they were opened.
II. The Proposed Rule
The proposed rule, which was developed by Treasury in consultation with the staffs of the
Federal functional regulators, requires covered financial institutions (which for purposes of this
provision includes all U.S. financial institutions required under Treasury regulations to establish an
anti-money laundering program) to implement programs to ensure that the due diligence
requirements of the Act are met. The proposed regulation sets forth certain minimum requirements
and otherwise adopts a risk-based approach, permitting covered financial institutions to tailor their
programs to their own lines of business, financial products and services offered, size, customer base,
and location. The proposed rule contemplates that covered financial institutions will pay close
attention to the risks presented by different foreign financial institution and private banking
3
customers, the jurisdictions in which they operate, and the types of transactions for which the
accounts are used. A covered financial institution=s program under the proposed rule should include
evaluation and consideration of any risks associated with these and other relevant factors. Covered
financial institutions are expected to exercise sound business judgment in complying with the
proposed rule and in addressing risks presented by foreign financial institution and private banking
customers.
Treasury intends covered financial institutions to incorporate the due diligence programs
required under the proposed rule into their existing programs under the BSA; it is not necessary for
these financial institutions to establish separate programs for correspondent and private banking
account due diligence. All federally insured depository institutions and credit unions are currently
subject to regulations requiring them to maintain BSA compliance programs, I as are casinos. 2 In
addition, effective April 24, 2002, securities broker-dealers, futures commission merchants and
introducing brokers were required by section 352 of the Act and by rules of their respective selfregulatory organization to develop and implement anti-money laundering programs? Also, on April
23,2002, FinCEN issued interim final regulations under section 352 requiring mutual funds, money
services businesses, and operators of credit card systems to establish anti-money laundering
programs. 4 These program requirements include, at a minimum, (1) internal policies, procedures and
controls to ensure ongoing BSA compliance; (2) the designation of a compliance officer; (3) an
ongoing employee training program; and (4) an independent audit function to test programs.
I See 12 CFR 21.21 (Office of the Comptroller of the Currency (OCC)); 12 CFR 208.63 (Board of Governors of
the Federal Reserve System (Federal Reserve)); 12 CFR 326.8 (Federal Deposit Insurance Corporation (FDIC));
12 CFR 563.177 (Office of Thrift Supervision (OTS)); 12 CFR 748.2 (National Credit Union Administration).
231 CFR 103.64.
3 See NASD Regulation Rule 3011and NYSE Rule 445, approved by the Securities and Exchange Commission
(SEC) on April 22, 2002, Release No. 34-45798, 67 FR 20854 (April 26, 2002); National Futures Association
Compliance Rule 2-9(c), approved by the Commodity Futures Trading Commission on April 23, 2002.
4 67 FR 21110 (April 29, 2002).
4
III. Section-by-Section Analysis
1. Overview.
On December 28,2001, Treasury published in the Federal Register a notice of proposed
rulemaking to implement sections 313 and 3 19(b) of the Act (the Section 313/319 NPRM). 5 This
proposed rule concerned provisions that: prohibit certain financial institutions from providing
correspondent accounts to foreign shell banks; require such financial institutions to take reasonable
steps to ensure that correspondent accounts provided to foreign banks are not being used to indirectly
provide banking services to foreign shell banks; require certain financial institutions that provide
correspondent accounts to foreign banks to maintain records of the ownership of such foreign banks
and their agents in the United States designated for service of legal process for records regarding the
correspondent account; and require the termination of correspondent accounts of foreign banks that
fail to tum over their account records in response to a lawful request ofthe Secretary of the Treasury
(Secretary) or the Attorney General.
The Section 313/319 NPRM proposed to codify these
requirements in a new Part 104 of title 31 of the Code of Federal Regulations.
The interim final rules published by Treasury on April 29, 2002, concerning anti-money
laundering programs under section 352 of the Act, were codified in a new Subpart I of Part 103 of
title 31 of the Code of Federal Regulations.
For clarity and convenience concerning the obligations of financial institutions with respect
to the related requirements of sections 312, 313, 319(b), and 352 of the Act, Treasury intends to
codify all of the regulations implementing these sections in Subpart I of Part 103. Accordingly, the
Areserved@ definitions in proposed section 103.175 are for terms used in the Section 313/319 NPRM
5
66 FR 67460 (Dec. 28. 2001).
5
that are not relevant for purposes of this proposed rule under Act section 312. In addition, Areserved@
sections 103.177,103.185, and 103.190 correspond to the three sections proposed in the Section
313/319 NPRM.
2. Section 103.175 B Definitions.
The proposed rule defines beneficial ownership interest to mean any noncontingent legal
authority to fund, direct, or manage an account, or noncontingent legal entitlement to all or any part
of the corpus or income of the account (other than an interest ofless than the lesser of $1 ,000,000
or five percent of either the corpus or income of the account). Thus, the holder of any current right
to any assets in a private banking account whose interest exceeds the minimum threshold would need
to be identified; however, a financial institution would not be obliged to identify holders of
contingent rights in an account, such as inheritance or similar interests.
The proposed rule:s definition of correspondent account is the definition in 31 U.S.C.
5318A(e) (as added by section 311 of the Act) and is statutorily applicable for purposes of 31 U.S.C.
5318(i) with respect to banks. The proposal defines the term to mean an account established to
receive deposits from, make payments on behalf of a foreign financial institution, or handle other
financial transactions related to such institution. In the case of a U.S. bank, this broad definition
would include most types of banking relationships between a U.S. bank and a foreign financial
institution. In the case of securities broker-dealers, futures commission merchants, and introducing
brokers, a correspondent account would include any account that permits the foreign financial
institution to engage in securities or futures transactions, funds transfers, or other types of financial
transactions. With respect to the other types of covered financial institutions, a correspondent
account would include any account such financial institution maintains for a foreign financial
institution that falls within the definition: an account for receiving deposits from, making payments
6
on behalf of, or handling other transactions related to such foreign financial institution. Treasury
received many comments in connection with the Section 313/319 NPRM regarding the breadth of
the definition of the term correspondent account for depository institutions and securities brokerdealers, and is continuing to consider those comments. Treasury is using the same definition as in
the Section 313/319 NPRM for purposes of the proposed rule, except that the term applies to such
accounts maintained by any covered financial institution, and applies to such accounts maintained
for any foreign financial institution.
The proposed definition of covered financial institution is broader than the definition of
Acovered financial institution@ in the Section 313/319 NPRM. 6 Unlike sections 313 and 319(b) of
the Act, which impose certain restrictions and requirements on correspondent accounts for foreign
banks, section 312 does not limit its application to Acovered financial institutions@ as defined in
section 313 (primarily depository institutions and securities broker-dealers).
Based upon the
meaning of the term correspondent account and the requirements of section 312, Treasury is
proposing to define covered financial institution to include, in addition to most of the financial
institutions subject to the Section 313/319 NPRM, the other financial institutions that are subject to
an anti-money laundering program requirement. This includes futures commission merchants and
introducing brokers, casinos, mutual funds, money services businesses, and operators of credit card
systems.
Treasury and FinCEN are engaged currently in the process of reviewing all categories of
U.S. financial institutions to craft regulations requiring the development of anti-money
laundering programs tailored to the risks presented by the products and services offered by these
31 U.S.C. 53180). For the Section 313/319 NPRM. "covered financial institutions" are those described in
BSA section 5312(a)(2)(A) through (G) (insured depository institutions, trust companies. private bankers, U.S.
branches of foreign banks. credit unions. and securities broker-dealers).
6
7
industries. Implicit in Congress' direction to Treasury to engage in this process is the recognition
that all financial institutions may well pose risks that their products and services can be used
unwittingly to launder money or finance terrorism. If the same functions are performed by
foreign based financial institutions, similar risks are posed. When those foreign based financial
institutions interface with a U.S. financial institution-any financial institution-through a
correspondent account, section 312 requires appropriate due diligence to minimize the risk of
money laundering or terrorist financing.
It may well be that many types of U.S. financial institutions simply do not offer and do
not establish "correspondent accounts," but section 312 will capture any such account if it is
subsequently established. Moreover, the statutory definition of a correspondent account is not
limited to a traditional banking account. Treasury and FinCEN are specifically requesting
comment concerning how the definition mayor may not apply to the covered financial
institutions. Treasury anticipates that, as additional U.S. financial institutions are required to
establish anti-money laundering programs, they will also become subject to the requirements of
this provision as well, to the extent they may maintain correspondent accounts for foreign
financial institutions.
As in the case of the Section 313/319 NPRM, the definition includes foreign branches of
insured depository institutions within the term covered financial institution. This means that any
correspondent or private banking account established, maintained, administered, or managed at a
foreign branch of an insured depository institution would be subject to the regulation. This issue was
also the subject of substantial comment in the previous rulemaking, and Treasury is continuing to
consider this issue in connection with both rulemakings.
8
The proposed definition of foreign bank is identical to the definition proposed in Treasury=s
Section 313/319 NPRM. For these purposes, a foreign bank is any organization that (1) is organized
under the laws of a foreign country, (2) engages in the business of banking, (3) is recognized as a
bank by the bank supervisory or monetary authority of the country of its organization or principal
banking operations, and (4) receives deposits in the course of its business. A foreign bank also
includes a branch of a foreign bank located in a territory of the United States, Puerto Rico, Guam,
American Samoa, or the U.S. Virgin Islands. A foreign bank does not include an agency or branch
of a foreign bank located in the United States or an insured bank organized in a territory of the
United States, Puerto Rico, Guam, American Samoa, or the U.S. Virgin Islands. In addition, a
foreign central bank or foreign monetary authority that functions as a central bank is not a foreign
bank, nor are certain international financial institutions of which the U.S. is a member, or which
Treasury otherwise designates.
The proposed definition of foreign financial institution is based upon the definition of
"covered financial institution" in this proposed rule. It includes any foreign bank (as defined in the
proposed rule). It also includes other entities organized under foreign (non-U.S.) law (other than
branches or offices of such entities in the United States) that, if they were organized in the U.S.,
would fall within the proposed definition of covered financial institution; i.e., financial institutions
that are required pursuant to Treasury's regulations implementing section 352 of the Act to have an
anti-money laundering program. At the date of this proposal, this would include federally insured
depository institutions and credit unions, securities broker-dealers, futures commission merchants
and introducing brokers, casinos, mutual funds, money services businesses and operators of credit
card systems. Over the coming months Treasury will be requiring additional financial institutions
to adopt anti-money laundering programs, at which time the corresponding foreign entities would
9
be included within the definition of foreign financial institution.
The proposal defines non-u.s. person as an individual that is neither a U.S. citizen nor a
lawful permanent resident as defined in 26 U.S.c. 7701 (b)(6).
The proposed rule adopts, with one change, the language of section 312 of the Act that
defines offshore banking license as a license to conduct banking activities which, as a condition of
the license, prohibits the licensed entity from conducting banking activities with the citizens of, or
with the local currency of, the country which issued the license. The proposed regulation uses the
term Ajurisdiction@ rather than Acountry,@ as there may be political subdivisions of certain countries
that issue offshore banking licenses.
The proposed rule defines person by reference to 31 CFR 103.11(z).
The proposed rule adopts the definition of private banking account in section 312 of the Act,
which defines the term to mean an account that requires a minimum deposit of at least $1,000,000,
that is established for one or more individuals, and that is assigned to or administered or managed
by, in whole or in part, an officer, employee, or agent of a financial institution acting as a liaison
between the financial institution and the direct or beneficial owner of the account.
The proposal defines the term senior foreign political figure to include a current or former
senior official in the executive, legislative, administrative, military, or judicial branches of a foreign
government (whether elected or not), a senior official of a major foreign political party, or a senior
executive of a foreign government-owned commercial enterprise; a corporation, business, or other
entity formed by or for the benefit of any such individual; an immediate family member of such an
individual; or any individual publicly known (or actually known by the relevant financial institution)
to be a close personal or professional associate of such an individual. Unless the financial institution
has actual knowledge of the association, it must be public in some degree; an individual will not be
10
brought within the definition if there is no readily available infonnation about his or her ties to
foreign officials. For this purpose, (I) an immediate family member means an individual=s spouse,
parents, siblings, children, and spouse=s parents or siblings, and (2) senior official or senior executive
means an individual with substantial authority over policy, operations, or the use of governmentowned resources. The proposed definition is similar to the definition of "Covered Person" in the
Guidance on Enhanced Scrutiny issued in 2001 by Treasury, the bank regulators, and the Department
of State, 7 and includes both current and fonner senior foreign political figures.
3. Section 103.176 -- Due Diligence Programs for Correspondent Accounts for Foreign
Financial Institutions.
The proposed rule adds to the BSA regulations new section 103.176, which sets forth the due
diligence requirements for correspondent accounts maintained by covered financial institutions for
foreign financial institutions. It should be noted that the statute takes effect on July 23, 2002 and
applies to all correspondent accounts for foreign financial institutions subject to the requirement,
regardless of when they were opened.
Section 103.176(a) requires every covered financial institution to maintain a due diligence
program that includes policies, procedures, and controls that are reasonably designed to enable the
financial institution to detect and report any known or suspected money laundering conducted
through or involving any correspondent account maintained by such financial institution for a foreign
financial institution. This provision contains five specific elements that must be included in all due
diligence programs.
7 Guidance on Enhanced Scrutiny for Transactions that May Involve the Proceeds of Foreign Official Corruption,
issued by Treasury, the Federal Reserve, OCC, FDIC, OTS, and the Department of State, January 2001 ("2001
Guidance").
11
The first element is a determination whether the correspondent account is subject to the
enhanced due diligence requirements of section 103.176(b). This requires the financial institution
to determine, when the correspondent account is maintained for a foreign bank, whether the foreign
bank operates under any of certain offshore banking licenses or under a banking license issued by
any of certain jurisdictions (as provided in section 103.17 6(c)).
The second required element is a risk assessment to determine whether the correspondent
account poses a significant risk of money laundering activity. The covered financial institution may
consider any relevant factors in making this assessment, including the foreign financial institution=s
line or lines of business, size, customer base, location, products and services offered, the nature of
the correspondent account, and the type of transaction activity for which it will be used.
The third required element is consideration of any publicly available information from U.S.
governmental agencies and multinational organizations with respect to regulation and supervision,
if any, applicable to the foreign financial institution. Covered financial institutions should take steps
to avail themselves of public information about jurisdictions in which their foreign financial
institution customers are organized or licensed, to assist in determining whether particular
correspondent accounts pose significant risks.
The fourth required element of the due diligence program requires a covered financial
institution to consider any guidance issued by Treasury or the covered financial institution=s
functional regulator regarding money laundering risks associated with particular foreign financial
institutions and types of correspondent accounts. Again, covered financial institutions should be
familiar with any information disseminated by Treasury and other federal regulators that may assist
financial institutions in making informed risk assessments with respect to correspondent accounts.
12
Finally, the due diligence program requires a covered financial institution to review public
information to ascertain whether the foreign financial institution has been the subject of any criminal
action of any nature, or of any regulatory action relating to money laundering, to determine whether
the circumstances of such action may reflect an increased risk of money laundering through the
correspondent account.
This list of required elements is intended as a minimum standard for an effective due
diligence program. Programs should be risk-focused to ensure that all correspondent accounts
receive appropriate due diligence and that correspondent accounts presenting more significant risks
of money laundering activity receive scrutiny reasonably designed to detect and report such activity.
Programs may include policies and procedures that are more detailed than the basic required
elements. Policies and procedures should be tailored to the covered financial institution=s business
and operations and the types of financial services it offers through correspondent accounts.
Section 103.17 6(b) imposes three additional due diligence requirements for correspondent
accounts for foreign banks operating under certain types of licenses (as provided in section
103.17 6(c)). For each such correspondent account, a covered financial institution=s program must
include the three additional elements of (1) enhanced scrutiny, (2) a determination whether the
foreign bank maintains its own correspondent accounts for other foreign banks, and (3) identification
of certain owners of the foreign bank.
First, section 103. 176(b)(1) requires a covered financial institution to take reasonable steps
to conduct enhanced scrutiny of such correspondent accounts, to guard against money laundering and
to detect and report known or suspected illegal activity occurring through the correspondent account.
Enhanced scrutiny shall include obtaining and reviewing documentation from the foreign bank about
its own anti-money laundering program and considering the extent to which such program is
l3
reasonably designed to detect and prevent money laundering. This is a required element of the
program, and the program must include it for all correspondent accounts subject to enhanced
scrutiny.
In addition, enhanced scrutiny shall, when appropriate, also include (l) monitoring
transactions through the correspondent account reasonably designed to detect money laundering; and
(2) obtaining information about the sources and beneficial ownership of funds in the correspondent
account, as well as information about the identity of any persons who will have authority to direct
transaction activity of the correspondent account. While these two components of enhanced scrutiny
are not required in every instance, they may be a necessary element of enhanced scrutiny in some
cases based on the financial institution=s risk assessment of the correspondent account. These
elements are also not a comprehensive list of the components of enhanced scrutiny, and the program
may provide for additional steps when appropriate in light of the risk assessment of an account. A
financial institution=s due diligence program should provide for when these and other measures are
necessary to ensure that the financial institution has taken reasonable steps, on a risk-based analysis,
to guard against money laundering through foreign correspondent accounts.
The second additional requirement, set forth in section 103.176(b)(2), is that for any
correspondent account for a foreign bank described in section 103.17 6( c), a covered financial
institution must take reasonable steps to determine whether the foreign bank itself maintains
correspondent accounts for other foreign banks. Each covered financial institution=s program should
include policies and procedures for assessing and minimizing risks associated with doing business
with foreign banks that have further correspondent relationships. The due diligence program
required by the proposed rule must include procedures for the financial institution to follow in these
circumstances, including determining the identity of the other foreign banks and, where appropriate
14
in light of the risks involved, identifying the measures in place at the foreign correspondent bank to
prevent money laundering through the financial institution=s correspondent account.
Finally, section I 03. I 76(b)(3) requires a covered financial institution to take reasonable steps
to determine the ownership of any foreign bank described in section I 03.176(c) whose shares are not
publicly traded. For purposes of this requirement, an owner is defined as any person who directly
or indirectly owns, controls, or has power to vote 5 percent or more of any class of securities of a
foreign bank. A reasonable step would be to obtain from the foreign bank a statement as to whether
its shares are publicly traded, and if not, a list of its owners (as defined), including the percentage
of shares held by each and nature of interest (e.g., direct or indirect). Also for purposes of this
requirement, publicly traded means shares that are traded on an exchange or an organized over-thecounter market that is regulated by a foreign securities authority as defined in section 3(a)(50) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(50».
Section 103 .176( c) lists the categories offoreign banks for which the additional requirements
of paragraph 103.176(b) apply. Under section 312 of the Act, these additional requirements apply
to a correspondent account for any foreign bank operating under (l) an offshore banking license; (2)
a banking license issued by a foreign country that is designated as noncooperative with international
anti-money laundering principles or procedures by an intergovernmental group or organization of
which the United States is a member,8 with which designation the United States representative to the
group or organization concurs; or (3) a banking license issued by a foreign country that has been
designated by Treasury as warranting special measures due to money laundering concerns.
8 The only intergovernmental organization that currently designates countries as noncooperative with international
anti-money laundering standards is the Financial Action Task Force on Money Laundering (FATF), an
intergovernmental body whose purpose is the development of policies, at both the national and international levels,
15
Section 103.176( c) incorporates the requirements of section 312, with some clarification.
Correspondent accounts for a branch of a foreign bank operating under an offshore branch license
would not be subject to the additional requirements of section I 03.176(b) if the foreign bank has
been found, or is chartered in a jurisdiction where one or more foreign banks have been found, by
the Federal Reserve to be subject to comprehensive supervision or regulation on a consolidated basis
by the relevant supervisors in that jurisdiction,9 and such foreign bank does not fall within either of
the other two categories of foreign banks for which the additional requirements apply. A covered
financial institution=s due diligence program should nevertheless include consideration of the
location of the foreign bank=s branch in the due diligence program required by section 103. 176(a).
In identifying the jurisdictions referred to in section 103.176( c )(2) and (3), covered financial
institutions should refer to Treasury guidance available on the FinCEN website, or guidance
available on the FATF website (www.oecd.org/fatO.
Section 103.176( d) states that a covered financial institution=s due diligence program for
foreign correspondent accounts must also include procedures to be followed when due diligence
cannot be adequately performed. That is, if the financial institution is unable to take reasonable steps
to detect and report possible instances of money laundering, or to obtain adequate information
regarding correspondent accounts for banks described in section 103.176( c), the due diligence
program should provide for steps to be taken, including, as appropriate, refusing to open the account,
suspending transaction activity, filing suspicious activity reports, or closing the account.
to combat money laundering. The U.S. has concurred in all designations made to date.
9 As of May 10, 2002, the Federal Reserve has made such a finding with respect to one or more foreign banks
chartered in the following jurisdictions: Austria, Belgium, France, Germany, Greece, Italy, Ireland, the
Netherlands, Portugal, Spain, Switzerland, the United Kingdom, Canada, Mexico, Argentina, Brazil, Chile,
Australia, Hong Kong Special Administrative Region, Israel, Japan, Korea, Taiwan, and Turkey.
16
4. Section 103.178 B Due Diligence Programs for Private Banking Accounts for NonU.S. Persons.
The proposed rule adds to the BSA regulations new section 103.178, which sets forth the due
diligence requirements applicable to private banking accounts for non-U.S. persons. It should be
noted that, as with correspondent accounts, the statute takes effect on July 23, 2002 and applies to
all private banking accounts for non-U.S. persons subject to the requirement, regardless of when they
were opened.
Section 103.178(a) requires each financial institution to maintain a due diligence program
that includes policies, procedures, and controls that are reasonably designed to detect and report any
known or suspected money laundering conducted through or involving any private banking account
that the financial institution maintains for or on behalf of a non-U.S. person.
Section 103.178(b) sets forth minimum due diligence requirements for such accounts. Under
paragraphs (b)(1)-(3), a covered financial institution=s due diligence program must include
reasonable steps to ascertain the identity of all nominal holders and holders of any beneficial
ownership interest in the private banking account, including the lines of business and source of
wealth of such persons, source of funds deposited into the account, and whether any such holder may
be a senior foreign political figure. Reasonable steps may include various means of ascertaining
identity and source of funds, including confirming information provided by accountholders or their
agents, and contacting beneficial owners, as appropriate, to confirm their ownership interests and
source of funds. The level of confirmation necessary to ascertain all nominal and beneficial owners
may vary depending upon the particular customer, and an effective due diligence program will
provide for consideration of the various risk factors that may be involved. Reasonable steps to
ascertain whether any holder may be a senior foreign political figure should generally include some
17
review of public information, including information available on databases on the Internet. Financial
institutions should carefully consider the best methods of discharging their due diligence obligations
in this regard, giving consideration to the characteristics of the various foreign jurisdictions and types
of senior political figures that are relevant, and the availability of databases that are useful in making
this determination. Should a financial institution learn at any time that an account holder is a senior
foreign political figure, it would be required to apply enhanced scrutiny as required by section
103.178(c)(2).
Section 103 .178(b)( 4) requires the due di ligence program to include procedures ensuring that
the covered financial institution will take reasonable steps to detect and report any known or
suspected violation oflaw conducted through or involving a private banking account for a non-U.S.
person.
Section 103.178( c)( 1) specifies that if a financial institution=s due diligence program reveals
information indicating that a particular individual may be a senior foreign political figure, it should
exercise reasonable diligence in seeking to determine whether the individual is, in fact, a senior
foreign political figure. 1O The paragraph provides further that if the institution does not learn of any
information indicating that an individual may be a former senior foreign political figure (which by
definition includes an immediate family member or close associate of such a person), and the
individual states that he or she is not a former senior foreign political figure, the institution may rely
on such statement, in addition to the results of their due diligence, in determining whether the
account is subject to the enhanced due diligence requirements of section 103.178( c )(2).
Section 103.178( c )(2) specifies that the covered financial institution=s due diligence program
must include enhanced scrutiny of private banking accounts held by or on behalf of senior foreign
10
See 2001 Guidance. Part II.C.
18
political figures that is reasonably designed to detect and report transactions that may involve the
proceeds of foreign corruption. At the outset, the decision to open such an account should generally
be approved by senior management. The appropriate level of enhanced scrutiny will vary according
to the circumstances and risk factors presented. For example, if a private banking customer is from
a jurisdiction where it is well known through publicly available sources that current or former
political figures have been implicated in large-scale corruption, it may be appropriate to probe
regarding employment history and sources of funds to a greater extent than for a customer from a
jurisdiction with no such history. The length of time since a former senior political figure has been
in office could influence the degree of scrutiny applied to the source of their funds. The enhanced
scrutiny required by section 103.178( c)(2) should take all risk factors into consideration, including
but not limited to the purpose and use of the private banking account, location of the account
holder(s), source of funds in the account, the type of transactions engaged in through the account,
and the jurisdictions involved in such transactions. Although the rule does not specify the extent,
if any, that transaction monitoring must take place, an effective due diligence program should dictate
when risk factors will require transaction monitoring, and to what extent, as necessary to detect and
'
. II
report procee ds 0 ffiorelgn corruptIon.
For purposes of section 103 .178(c), proceeds offoreign corruption means assets or property
that are acquired by, through, or on behalf of a senior foreign political figure through
misappropriation, theft, or embezzlement of public funds, or the unlawful conversion of property of
a foreign government, or through acts of bribery or extortion, and shall include other property into
which such assets have been transferred.
II
For an enumeration of some risk factors that may warrant further scrutiny, see 2001 Guidance, Part II. D.
19
Section 103.178(d) states that a financial institution:s due diligence program for private
banking accounts must also include procedures to be followed when due diligence cannot be
adequately performed. That is, if the financial institution is unable to take reasonable steps to detect
and report possible instances of money laundering, the due diligence program should provide for
steps to be taken, including, as appropriate, not opening the account, suspending transaction activity,
filing suspicious activity reports, or closing the account.
IV. Request for Comments
Treasury invites comment on all aspects of the proposed regulation, and specifically seeks
comment on the following issues:
I. Is the definition of correspondent account appropriate for the purposes of this proposal?
Should Treasury modify the definition of the term "correspondent account" for certain covered
financial institutions?
2. Is the application of the proposed rule to covered financial institutions (as defined)
appropriate? Do all of these U.S. financial institutions maintain correspondent accounts for foreign
financial institutions?
3. Is the inclusion of foreign branches of U.S. depository institutions within the covered
financial institution definition appropriate? Do other covered financial institutions have foreign
branches that maintain correspondent accounts for foreign financial institutions?
4. Is the definition of foreign financial institution appropriate? Are there foreign financial
institutions that should not be included within the definition? Alternatively, should the regulation
apply to correspondent accounts maintained for other types of foreign financial institutions as well?
5. Is the definition of beneficial ownership interest sufficiently clear? Should it be further
narrowed or clarified?
20
6. Does the definition of private banking account require clarification, for banks,
securities or futures finns? Are there other covered financial institutions that maintain private
banking accounts? Is the limitation in the statutory definition to accounts that require a
minimum deposit of$I,OOO,OOO consistent with the purposes of this provision?
7. Does the definition of senior foreign political figure require further clarification? If so,
how might this be achieved?
8. Is the exclusion contained in section 103.176( c)(1) from the enhanced due diligence
requirements for certain foreign banks operating under offshore banking licenses appropriate? For
example, should correspondent accounts for offshore-licensed branches of foreign banks affiliated
with covered financial institutions also be excluded from the enhanced due diligence requirement?
9. Should the rule generally adopt a more risk-based approach to the due diligence program
and include fewer prescriptive and detailed provisions? Alternatively, should it include more
prescriptive provisions in order to ensure that financial institutions will take additional steps to detect
and report suspicious activity?
V. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.c. 610 et seq.), it is hereby certified that
this proposed rule will not have a significant economic impact on a substantial number of small
entities. The proposed rule provides guidance to financial institutions concerning the mandated due
diligence requirements in section 312. Moreover, the financial institutions covered by the rule tend
to be larger institutions. Accordingly, a regulatory flexibility analysis is not required.
VI. Executive Order 12866
This interim final rule is not a "significant regulatory action" as defined in Executive Order
12866. Accordingly, a regulatory assessment is not required.
21
List of Subjects in 31 CFR Part 103
Banks, banking, Brokers, Counter money laundering, Counter-terrorism, Currency, Foreign
banking, Reporting and recordkeeping requirements.
Authority and Issuance
For the reasons set forth above, FinCEN is proposing to amend subpart I of 31 CFR Part 103
as follows:
PART 103BFINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for part 103 is revised to read as follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.c. 5311-5331; title III, sees. 312, 313,
314, 319(b), 352, Pub. L. 107-56, 115 Stat. 307.
2.
By adding the undesignated centerheading AANTI-MONEY LAUNDERING
PROGRAMS@ immediately before
I
103.120.
3. Section 103.120 is amended as follows:
a. Paragraph (b) is amended by adding Athe requirements of
I
I
b. Paragraph (c)(1) is amended by adding Athe requirements of
I
103.176 and 103.178 and@
immediately after the words Acomplies with@.
I
103.176 and 103.178 and@
immediately after the words Acomplies with@.
4. Add new undesignated centerheadings and
103.190 to subpart I to read as follows:
22
I
I
103.175 through 103.178, 103.185, and
SPECIAL DUE DILIGENCE FOR CORRESPONDENT ACCOUNTS
AND PRIVATE BANKING ACCOUNTS
103.175 Definitions.
103.176 Due diligence programs for correspondent accounts for foreign financial institutions.
103.177 Records concerning owners of foreign banks and agents designated to receive
service of legal process; prohibition on correspondent accounts for foreign shell
banks. [Reserved]
103.178 Due diligence programs for private banking accounts for non-U.S. persons.
LAW ENFORCEMENT ACCESS TO FOREIGN BANK RECORDS
103.185 Summons or subpoena of foreign bank records. [Reserved]
103.190 Termination of correspondent relationship. [Reserved]
SPECIAL DUE DILIGENCE FOR CORRESPONDENT ACCOUNTS
AND PRIVATE BANKING ACCOUNTS
103.175 Definitions.
Except as otherwise provided, the following definitions apply for purposes of
I
I
103.176
through 103.190:
(a) [Reserved]
(b) Beneficial ownership interest in an account means:
(1) A noncontingent legal authority to fund, direct, or manage the account (including, without
limitation, the power to direct payments into or out of the account); provided, that a legal authority
to fund or to direct payments into an account shall mean a specific contractual or judicial authority
to do so; or
23
(2) A non contingent legal entitlement to all or any part of the corpus or income of the
account, but shall not include any interest of less than the lesser of $1 ,000,000 or five percent of
either the corpus or income of the account.
(c) Correspondent account means:
(1) For purposes of § 103.176, an account established to receive deposits from, make
payments on behalf of a foreign financial institution, or handle other financial transactions related
to such institution; and
(2) [Reserved]
(d) Covered financial institution means:
(1) For purposes of §§ 103.176 and 103.178:
(i) An insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act (12
U.S.c. 1813(h») and any foreign branch of an insured bank;
(ii) A commercial bank;
(iii) An agency or branch of a foreign bank in the United States;
(iv) A federally insured credit union;
(v) A thrift institution;
(vi) A corporation acting under section 25A of the Federal Reserve Act (12 U.S.C. 611 et
seq.);
(vii) A broker or dealer registered, or required to register, with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
(viii) A futures commission merchant registered, or required to register, under, and an
introducing broker as defined in § la23 of, the Commodity Exchange Act (7 U.S.c. 1 et seq.);
(ix) A casino (as defined in § 103.ll(n)(5»;
(x) A mutual fund (as defined in § 103.130);
24
(xi) A money services business (as defined in § 103.II(uu)); and
(xii) An operator of a credit card system (as defined in § 103.135).
(2) [Reserved].
(e ) Foreign bank. (I) The term foreign bank means any organization that:
(i) Is organized under the laws of a foreign country;
(ii) Engages in the business of banking;
(iii) Is recognized as a bank by the bank supervisory or monetary authority of the country of
its organization or principal banking operations; and
(iv) Receives deposits in the regular course of its business.
(2) For purposes of this definition:
(i) The term foreign bank includes a branch of a foreign bank in a territory of the United
States, Puerto Rico, Guam, American Samoa, or the U.S. Virgin Islands.
(ii) The term foreign bank does not include:
(A) An agency or branch of a foreign bank in the United States, other than in a territory of
the United States, Puerto Rico, Guam, American Samoa, or the U.S. Virgin Islands;
(B) An insured bank organized under the laws of a territory ofthe United States, Puerto Rico,
Guam, American Samoa, or the U.S. Virgin Islands;
(C) A foreign central bank or foreign monetary authority that functions as a central bank; and
(D) The African Development Bank, African Development Fund, Asian Development Bank;
Bank for International Settlements, European Bank for Reconstruction and Development, InterAmerican Development Bank, International Bank for Reconstruction and Development (the World
Bank), International Finance Corporation, International Monetary Fund, North American
Development Bank, International Development Association, Multilateral Investment Guarantee
25
Agency, and similar international financial institutions of which the United States is a member or
as otherwise designated by the Secretary.
(f) Foreign financial institution means a foreign bank and any other person organized under
foreign law (other than a branch or office of such person in the United States) which, if organized
in the United States, would be required to establish an anti-money laundering program pursuant to
§§ 103.120 through 103.169 of this part. For purposes of this definition:
(1) The dollar limitations in §§ 103.11 (uu)(1) through (4) ofthis part shall not be taken into
account when determining whether a person organized under foreign law would, if organized in the
United States, be a money services business required to establish an anti-money laundering program
pursuant to § 103.125 of this part; and
(2) No person organized under foreign law shall be deemed to be a foreign financial
institution by virtue of § 103.11 (uu)( 6).
(g) [Reserved]
(h) [Reserved]
(i) Non-United States person or non-US. person means an individual who is neither a United
States citizen nor a lawful permanent resident as defined in 26 U.S.C. 7701(b)(6).
(j) Offshore banking license means a license to conduct banking activities that prohibits the
licensed entity from conducting banking activities with the citizens of, or in the local currency of,
the jurisdiction that issued the license.
(k) [Reserved]
(I) Person has the same meaning as provided in § 103.11 (z).
(m) [Reserved]
(n) Private banking account means an account (or any combination of accounts) that:
26
(1) Requires a minImum aggregate amount of funds or other assets of not less than
$1,000,000;
(2) Is established on behalf of or for the benefit of I or more individuals who have a direct
or beneficial ownership interest in the account; and
(3) Is assigned to, or is administered or managed by, in whole or in part, an officer,
employee, or agent of a covered financial institution acting as a liaison between the covered financial
institution and the direct or beneficial owner of the account.
(0) Senior foreign political figure. (I) The term senior foreign political figure means:
(i) A current or former senior official in the executive, legislative, administrative, military,
or judicial branches of a foreign government (whether elected or not), a senior official of a major
foreign political party, or a senior executive of a foreign government-owned commercial enterprise;
(ii) A corporation, business or other entity that has been formed by, or for the benefit of, any
such individual;
(iii) An immediate family member of any such individual; and
(iv) A person who is widely and publicly known (or is actually known by the relevant
covered financial institution) to maintain a close personal or professional relationship with any such
individual.
(2) For purposes of this definition:
(i) Senior official or executive means an individual with substantial authority over policy,
operations, or the use of government-owned resources; and
(ii) Immediate family member means a spouse, parents, siblings, children, and a spouse=s
parents or siblings.
(p) [Reserved]
27
103.176 Due diligence programs for correspondent accounts for foreign financial
institutions.
(a) In general. A covered financial institution shalI maintain a due diligence program that
includes policies, procedures, and controls that are reasonably designed to enable the financial
institution to detect and report any known or suspected money laundering activity conducted through
or involving any correspondent account maintained by such financial institution for a foreign
financial institution. Such procedures shalI include:
(1) Determining whether the correspondent account is subject to paragraph (b) of this
section;
(2) Assessing whether the foreign financial institution presents a significant risk of money
laundering, based on any relevant factors;
(3) Considering information available from U.S. governmental agencies and multinational
organizations with respect to supervision and regulation, if any, applicable to the foreign financial
institution;
(4) Reviewing guidance issued by Treasury or its Federal functional regulator regarding
money laundering risks associated with particular foreign financial institutions and correspondent
accounts for foreign financial institutions generalIy; and
(5) Reviewing public information to ascertain whether the foreign financial institution has
been the subject of criminal action of any nature, or regulatory action relating to money laundering.
(b) Enhanced due diligence for certain foreign banks. In the case of a correspondent account
maintained for a foreign bank described in paragraph (c) of this section, the due diligence program
required by paragraph (a) of this section shalI also include, at a minimum, the folIowing elements:
(1) Enhanced scrutiny of such correspondent account to guard against money laundering and
to ensure detection and reporting of known or suspected ilIegal activity. Enhanced scrutiny shalI also
28
include obtaining and reviewing documentation relating to the foreign bank=s anti-money laundering
program and considering the extent to which such program is reasonably designed to detect and
prevent money laundering, and when appropriate shall also include:
(i) Monitoring of transactions through the correspondent account reasonably designed to
detect money laundering; and
(ii) Obtaining information from the foreign bank about the identity of any persons that will
have authority to direct transactions through the correspondent account, and the sources and
beneficial ownership of funds or other assets of such persons in the correspondent account.
(2) A determination whether the foreign bank holding the account maintains correspondent
accounts for other foreign banks. If the foreign bank does maintain correspondent accounts for other
foreign banks, the due diligence program required by paragraph (a) of this section shall provide for:
(i) Documentation of the identity of the other foreign banks for which the foreign bank
maintains correspondent accounts; and
(ii) Policies and procedures for assessing and minimizing risks associated with the foreign
bank=s correspondent accounts for other foreign banks.
(3)(i) For any foreign bank whose shares are not publicly traded, the identification of each
owner of the foreign bank and the nature and extent of each owner=s ownership interest.
(ii) For purposes of paragraph (b)(3)(i) of this section:
(A) Owner means any person who directly or indirectly owns, controls, or has voting power
over 5 percent or more of any class of securities of a foreign bank; and
(B) Publicly traded means shares that are traded on an exchange or an organized over-thecounter market that is regulated by a foreign securities authority as defined in section 3(a)(50) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(50».
29
(c) Foreign banks to be accorded enhanced due diligence. The due diligence program
elements of paragraph (b) of this section are required for any correspondent account maintained for
a foreign bank that operates under:
(1) An offshore banking license, other than a branch of a foreign bank if such foreign bank:
(i) Does not fall within paragraph (c)(2) or (3) of this section; and
(ii) Has been found, or is chartered in a jurisdiction where one or more foreign banks have
been found, by the Board of Governors of the Federal Reserve System under the Bank Holding
Company Act or the International Banking Act, to be subject to comprehensive supervision or
regulation on a consolidated basis by the relevant supervisors in that jurisdiction;
(2) A license issued by a foreign country that has been designated by an intergovernmental
group or organization to which the United States belongs as noncooperative with international antimoney laundering principles or procedures and with which designation the U.S. representative
concurs; or
(3) A license issued by a foreign country that Treasury has identified (by regulation or other
public issuance) as warranting special measures due to money laundering concerns.
(d) Special procedures when due diligence cannot be perfOrmed. The due diligence program
required by paragraph (a) of this section shall include procedures to be followed in circumstances
in which a covered financial institution cannot perform appropriate due diligence with respect to a
correspondent account, including when the institution should refuse to open the account, suspend
transaction activity, file a suspicious activity report, or close the account.
, 103.177 Records concerning owners of foreign banks and agents designated to receive
service of legal process; prohibition on correspondent accounts for foreign shell
banks. [Reserved I
30
103.178 Due diligence programs for private banking accounts for non-U.S. persons.
(a) In general. A covered financial institution shall maintain a due diligence program that
includes policies, procedures, and controls that are reasonably designed to detect and report any
known or suspected money laundering conducted through or involving any private banking account
maintained by such financial institution in the United States by or on behalf of a non-U.S. person.
(b) Minimum requirements. The due diligence program required by paragraph (a) of this
section shall, at a minimum, ensure that the financial institution takes reasonable steps to:
(1) Ascertain the identity of all nominal holders and holders of any beneficial ownership
interest in the private banking account, including information on those holders: lines of business and
source of wealth;
(2) Ascertain the source of funds deposited into the private banking account;
(3) Ascertain whether any such holder may be a senior foreign political figure; and
(4) Report, in accordance with applicable law and regulation, any known or suspected
violation of law conducted through or involving the private banking account.
(c) Special requirements {or senior foreign political figures. (1) In performing the due
diligence program required by paragraph (a) of this section:
(i) If a covered financial institution learns of information indicating that a particular
individual may be a senior foreign political figure, it should exercise reasonable diligence in seeking
to determine whether the individual is, in fact, a senior foreign political figure.
(ii) If a covered financial institution does not learn of any information indicating that an
individual may be a former senior foreign political figure, and the individual states that he or she is
not a former senior foreign political figure, the financial institution may rely on such statement in
determining whether the account is subject to the due diligence requirements of paragraph (c)(2) of
this section.
31
(2) In the case of any private banking account for which a senior foreign political figure is
a nominal holder or holds a beneficial ownership interest, the due diligence program required by
paragraph (a) of this section shall include policies and procedures reasonably designed to detect and
report transactions that may involve the proceeds of foreign corruption.
(3) For purposes of this paragraph (c), the term proceeds offoreign corruption means assets
or property that are acquired by, through, or on behalf of a senior foreign political figure through
misappropriation, theft or embezzlement of public funds, or the unlawful conversion of property of
a foreign government, or through acts of bribery or extortion, and shall include other property into
which such assets have been transformed or converted.
(d) Special procedures when due diligence cannot be performed. The due diligence program
required by paragraph (a) of this section shall include procedures to be followed in circumstances
in which a covered financial institution cannot perform appropriate due diligence with respect to a
private banking account, including when the institution should refuse to open the account, suspend
transaction activity, file a suspicious activity report, or close the account.
LAW ENFORCEMENT ACCESS TO FOREIGN BANK RECORDS
, 103.185 Summons or subpoena of foreign bank records. [Reserved]
, 103.190 Termination of correspondent relationship. [Reserved]
DATED: __~M=a~y~2=2~,2=O~O=2~__
lsi
James F. Sloan
Director, Financial Crimes Enforcement Network
32
KD-3766: U.S. Treasury and Singapore Reach Agreement on Investment Protections in F...
Page 1 of 1
FROM THE OFFICE OF PUBLIC AFFAIRS
To view
01
print tile Microsoft Wore/ content on tillS page.
January 15, 2003
KD-3766
U.S. Treasury and Singapore Reach Agreement on Investment Protections in
Free Trade Talks
On Wednesday, January 15,2003, the U.S. Treasury and the Monetary Authority of
Singapore reached agreement on issues affecting transfers in the investment
chapter of the U.S-Singapore Free Trade Agreement.
This agreement was concluded between Singaporean Managing Director Koh Yong
Guan and Treasury Under Secretary for International Affairs John Taylor. The
transfers provision In the U.S.-Singapore FTA investment chapter is based upon the
framework that is used in the U.S.-Chile FTA.
The agreement reflects the shared commitment by the United States and Singapore
to the free transfer of capital and the avoidance of capital controls. The agreement
was not Intended to determine whether capital controls are or are not a legitimate
macro-economic policy tool, but rather to provide legal protections for US investors
if restrictions are imposed. Any restrictions that "substantially impede transfers" are
subject to claims for damages, and even those that do not substantially impede can
be subject to claims for damages if they are imposed for longer than one year.
Therefore, thiS agreement does not prevent a country from imposing controls but
does require compensation for US Investors in the circumstances described above.
The agreement provides for the free transfers of funds related to an investment into
and out of a country. Thus, the United States has maintained its long-standing
policy of assuring that investment flows may move unimpeded by controls.
The free transfer provisions of the U.S.-Singapore FTA meet an important Trade
Promotion Authority (TPA) objective - 'freeing the transfer of funds related to
investments.' These provisions provide U.S investors with substantially
strengthened transfer rights over those available under the General Agreement on
Trade in Services (GATS) and the General Agreement on Trade and Tariffs
(GATT). Unlike those other agreements, the U.S.-Singapore FTA provides for
effective Investor-State and State-State arbitration provisions to enforce free
transfer rights.
Related Documents:
http://www.treas.gov/press/releases/kd3766.htm
112112003
FACT SHEET
Agreement on US-Singapore Free Transfers
On Wednesday, January 15,2003, the U.S. Treasury and the Monetary Authority of Singapore
reached agreement on important provisions in the Investment Chapter of the U.S.-Singapore Free
Trade Agreement. The agreement is a "win-win" for both countries.
Point 1: The investment chapter maintains the principle of free transfers.
This approach is consistent with the shared economic philosophy and policy perspective of both
the United State and Singapore. Retaining the principle of free transfers sends a strong signal to
the markets that the U.S. and Singapore support the free flow of capital and recognize its
importance in economic development. Free transfers permit the efficient allocation of resources
and provide investors with a transparent regime for doing business free of political obstacles.
Both countries recognize that a strong reserve position, a flexible exchange rate regime, sound
fiscal and monetary policies, and effective prudential measures for the financial sector are the
preferred policy tools for both avoiding a balance of payments crisis and for dealing with one.
The FTA transfers provision complements this approach.
The free transfers provision of the Singapore FT A meets an important Trade Promotion
Authority (TPA) objective - "freeing the transfer of funds related to investments." This
provision provides U.S. investors with substantially strengthened transfer rights over those
available under the General Agreement on Trade in Services (GATS) and General Agreement on
Trade and Tariffs (GATT). In addition, unlike these other agreements, the FTA provides for
effective investor-state and State-State arbitration provisions to enforce free transfer rights.
Point 2: The investment chapter ensures that U.S. investors' maintain their rights under dispute
settlement in the case of restrictions on free transfers.
The U.S. and Singapore agreed that, instead of creating exceptions to the investment provisions
allowing free transfers, all issues would be handled in the dispute resolution chapter. This avoids
the need to discuss if and when countries agree that capital flow restrictions would be necessary.
All current account transactions, including profits and dividends; foreign direct investment;
proceeds from the sale of an investment; and payments pursuant to bonds and most loans are
covered by the standard dispute provisions of the Agreement. The usual cooling off period
before a claim may be taken to dispute resolution is six months.
On other capital flows, there will be cooling off period of one year. If the restrictions
substantially impede a transfer, then damages accrue from the date of imposition of controls. If
the restrictions do not substantially impede a transfer, then Singapore has a period of 364 days
without liability.
U
"~·~~r·
- .
~
w-
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 15. 2003
PO-3767
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table. U.S. reserve assets
totaled $78.635 million as of the end of that week. compared to $77.263 million as of the end of the prior week.
l. Official U.S. Reserve Assets (in US
December 20, 2002
December 27,2002
77,263
78,635
TOTAL
1. Foreign Currency Reserves
I
a. Securities
mi/lion.~)
Euro
Yen
TOTAL
EUfO
Yen
TOTAL
6,660
13,052
19,712
6,766
13,118
19,884
o
o
Of\t:hich. isslIer headquartered in the US.
b. Total deposits with:
10,956
b.i. Other celllral hanks and SIS
2,620
13,576
11,115
2,634
13,749
Us.
0
0
b.ii. Of which, banks located abroad
0
0
0
0
0
0
20,890
21,866
12,042
12,093
11,043
11,043
0
0
b.ii. Banks headquartered in the
b.iii. Sanks headquartered outside the
Us.
b.iii. Of which, banks located in the U.S.
2. IMF Reserve Position
2
3. Special Drawing Rights (SDRs)
4. Gold Stock
2
3
5. Other Reserve Assets
II. Predetermined Short-Term Drains on Foreign Currency Assets
December 20, 2002
Euro
1. Foreign currency loans and securities
Yen
TOTAL
December 27, 2002
Euro
o
2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:
Yen
TOTAL
o
J.a. Shorl positions
0
0
2.b. Long positiolls
0
0
3. Other
0
0
III. Contingent Short-Term Net Drains on Foreign Currency Assets
December 20, 2002
Euro
1. Contingent liabilities in foreign currency
Yen
TOTAL
December 27, 2002
Euro
Yen
TOTAL
o
o
o
o
o
o
o
o
l.a. Collateral guarantees on debt due within 1
year
I.b. Other contingent liabilities
2. Foreign cun-ency securities with embedded
options
3. Undrawn, unconditional credit lines
3.a. With other central ballks
3.b. With banks alld otherfinancial institutions
Headquartered in the
Us.
3.c. With banks and otherfil1allcial illstitutiollS
Headquartered olltside the
us.
4. Aggregate short and long positions of
options in foreign
Currencies vis-a.-vis the U.S. dollar
4.a. Short positions
4.a.l. Bought puts
4.a.2. Written calls
4.h. Long positiolls
4.b.1. Bought calls
4.b.2. Written puts
Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
(SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values, and
deposits reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision. Foreign Currency
Reserves for the prior week are final.
21 The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDRldoliar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U.S. Treasury to the prior week's IMF data. IMF data for the latest week may be
subject to revision. IMF data for the prior week are final.
31 Gold stock is valued monthly at $42.2222 per fine troy ounce.
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 15, 2003
PO-3768
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $78,642 million as of the end of that week, compared to $78,635 million as of the end of the prior week.
I. Official U.S. Reserve Assets (in US millions)
December 27, 2002
January 3, 2003
78,635
78,642
TOTAL
1. Foreign Currency Reserves
I
a. Securities
Euro
Yen
TOTAL
Euro
Yen
TOTAL
6,766
13,118
19,884
6,766
13,127
19,892
o
o
Of which, issuer headquartered in the Us.
b. Total deposits with:
11,115
b. i. Other central banks and BIS
2,634
13,749
11,129
2,635
13,764
b.ii. Banks headquartered in the Us.
0
0
b.ii. Of which, banks located abroad
0
0
b.iii. Banks headquartered outside the Us.
0
0
b.iii. Of which, banks located in the U.S.
0
0
21,866
21,853
12,093
12,090
11,043
11,043
0
0
2. IMF Reserve Position 2
3. Special Drawing Rights (SDRs)
2
4. Gold Stock 3
5. Other Reserve Assets
II. Predetermined Short-Term Drains on Foreign Currency Assets
December 27, 2002
January 3, 2003
Euro
1. Foreign currency loans and securities
Yen
TOTAL
Euro
0
2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:
Yen
TOTAL
0
o
o
o
o
o
o
2.a. Short positions
2.b. Long positions
3. Other
III. Contingent Short-Term Net Drains on Foreign Currency Assets
December 27, 2002
Euro
1. Contingent liabilities in foreign currency
Yen
TOTAL
January 3, 2003
Euro
Yen
TOTAL
0
0
o
o
o
o
o
o
l.a. Collateral guarantees on debt due within I
year
l.b. Other contingent liabilities
2. Foreign cun·ency securities with embedded
options
3. Undrawn, unconditional credit lines
3.a. With other central banks
3.b. With banks and otherfinancial institutions
Headquartered in the
u.s.
3.c. With banks and otherfinancial institutions
Headquartered outside the
u.s.
4. Aggregate short and long positions of
options in foreign
Currencies vis-a.-vis the U.S. dollar
4.a. Short positions
4.a.l. Bought puts
4.a.2. Written calls
4.b. Long positions
4.b.1. Bought calls
4.b.2. Written puts
Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
(SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values, and
deposits reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision. Foreign Currency
Reserves for the prior week are final.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U.S. Treasury to the prior week's IMF data. IMF data for the latest week may be
subject to revision. IMF data for the prior week are final.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 15, 2003
PO-3769
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $79,113 million as of the end of that week, compared to $78,642 million as of the end of the prior week.
I. Official U.S. Reserve Assets (in US mil/ion.'»
Januarv 3, 2003
January 10,2003
78,642
79,113
TOTAL
1. Foreign Currency Reserves
I
a. Securities
Euro
Yen
TOTAL
Euro
Yen
TOTAL
6,766
13,127
19,892
6,855
13,172
20,027
o
o
Or which, issuer headquartered ill the Us.
b. Total deposits with:
11,129
h.i. Other central hanks and SIS
2,635
13,764
11,260
2,644
13,904
h.ii. Banks headquartered in the Us.
0
0
b.ii. Of which, banks located abroad
0
0
b.iii. Banks headquartered outside the US.
0
0
b.iii. Of which, banks located in the U.S.
0
0
21,853
21,978
12,090
12,160
11,043
11,043
0
0
2. IMF Reserve Position
2
3. Special Drawing Rights (SDRs)
4. Gold Stock
2
3
5. Other Reserve Assets
II. Predetermined Short-Term Drains on Foreign Currency Assets
Januarv 3,2003
Euro
1. Foreign currency loans and securities
Yen
Januarv 10,2003
TOTAL
Euro
o
2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:
Yen
TOTAL
o
o
o
o
o
o
o
2.a. Short positions
2.b. Long positions
3. Other
III. Contingent Short-Term Net Drains on Foreign Currency Assets
January 3, 2003
Euro
1. Contingent liabilities in foreign currency
Yen
January 10,2003
TOTAL
Euro
Yen
TOTAL
0
0
o
o
o
o
o
o
l.a. Collateral guarantees on debt due within 1
year
l.b. Other contingent liabilities
2. Foreign cun-ency securities with embedded
options
3. Undrawn, unconditional credit lines
3.a. With other central banks
3.b. With banks and otherfinancial institutions
Headquartered in the
u.s.
3.c. With banks and otherfinancial institutions
Headquartered outside the
u.s.
4. Aggregate short and long positions of
options in foreign
Currencies vis-a.-vis the U.S. dollar
4.a. Short positions
4.a.l. Bought puts
4.a.2. Written calls
4.b. Long positions
4.h.1. Bought calls
4.b.2. Written puts
Notes:
11 Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
(SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values, and
deposits reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision. Foreign Currency
Reserves for the prior week are final.
21 The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDRfdoliar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U.S. Treasury to the prior week's IMF data. IMF data for the latest week may be
subject to revision. IMF data for the prior week are final.
31 Gold stock is valued monthly at $42.2222 per fine troy ounce.
KD-3770: U.S. Acting Treasury Secretary Kenneth W. Dam Remarks on the Inauguration ... Page 1 of 1
FROM THE OFFICE OF PUBLIC AFFAIRS
January 16, 2003
KO-3770
U.S. Acting Treasury Secretary Kenneth W. Dam Remarks on the Inauguration
of IRS Free File System
I would agree that Free File is an exciting development, not only for the IRS and the
Treasury, but for the federal government and -- not least -- every taxpayer. This
inauguration marks a significant step forward in our efforts to make government
more productive, efficient, and taxpayer-friendly. It also marks a new milestone in
public-private coordination.
Taxpaying is one of the most basic obligations of citizenship. But it need not be
slow or mysterious. Free File promises to reduce the needless frustrations of
millions of dutiful citizens as they prepare and file their personal returns.
It also incorporates a variety of features that will reduce filing errors arising from the
complexity of the tax code. In our technologically advanced economy, electronic
transactions are nearly ubiquitous. With Free File, the federal government is finally
catching up to the nation we strive to support.
We recognize that our paying customers, the American people, should enjoy the
same level of service and convenience that they enjoy from the very best private
companies when they deal with their government.
Free File does not entirely close the service gap, but it certainly signifies a dramatic
leap forward, from last-century standards to 21 st century service.On the receiving
side, Free File will allow the IRS to process more returns faster and at lower cost to
the taxpayer, permitting more taxpayer resources to reach the programs they are
intended to fund. Electronic filing will reduce processing errors and speed refunds
as well.
When we talk about increasing the productivity of our government, we are talking
about delivering more and better service for less money. That is exactly what Free
File exemplifies. Congratulations to all at the IRS, and all the businesses involved
in the Free File Alliance, for an important contribution to the future of the United
States Government.
http://www.treas.gov/press/releases/kd3770.htm
1/21/2003
2003-1-16-18-14-41-27752: U.S. Welcomes IMF-Argentina Letter ofIntent for a Transiti ... Page 1 of I
FROM THE OFFICE OF PUBLIC AFFAIRS
January 16. 2003
2003-1-16-18-14-41-27752
United States Welcomes Agreement between the IMF and the Government of
Argentina on a Letter of Intent for a Transitional Program
The United States welcomes the agreement announced by the Argentine
authorities with IMF staff on a Letter of Intent for a transitional IMF program for
Argentina. We look forward to IMF Board consideration of the program in the very
near future. Implementation of an effective transitional program can build on and
strengthen the progress Argentina's authorities are making in stabilizing the
country's economic and financial situation.
http://www.treas.gov!press!releases/200311618144127752.htm
112112003
FROM THE OFFICE OF PUBLIC AFFAIRS
January 16, 2003
KD-3771
Most Americans Now Can Prepare & File Taxes Online for Free Treasury,
OMB, IRS launch New Free File Website
Washington D.C. - Today the Treasury Department, Office of Management and
Budget (OMB) and the Internal Revenue Service (IRS) launched a new Web si~e
featuring private-sector partners that will allow most taxpayers to prepare and file
their taxes online for free. A substantial majority of citizens will be eligible to use
this service at wwwJr~,gQ.v or through ~.flrl>t9.Q\:'.gQV:.
President Bush proposed free online tax filing last February as one of his EGovernment initiatives. Less than one year later, millions of Americans will benefit
from free online tax filing services. Treasury, OMS and IRS have made this possible
through a public-private partnership with a consortium of tax software companies,
the Free File Alliance, LLC.
Free File is an easy, fast and secure way for citizens to file taxes and will also allow
Americans to get refunds in half the time. The efficiency of E-file saves taxpayers
and the IRS money.
"No one likes paying taxes-it's too confusing and time consuming. The launch of
this new website is great news for millions of Americans. Free File makes it easy.
Now they can save time, money and get their refunds in half the time by filing their
taxes online for free," stated Acting Treasury Secretary Kenneth W. Dam.
"Simply paying taxes is burden enough without the extra costs in time and
professional help that too many Americans have endured until now. The advent of
free, fast filing for a substantial majority of taxpayers marks a great breakthrough for
the President's agenda to make the federal government put the needs of the citizen
first," said Director of the OMB Mitchell E. Daniels, Jr.
"Free File puts e-file within reach of more taxpayers than ever. They'll soon
discover what the 47 million taxpayers who e-filed last year already know. E-file is
quicker. E-file is more accurate. E-file is the best way to confirm the IRS received
your return, and it's the fastest route to a refund," said IRS Acting Commissioner
Robert Wenzel.
Each Free File Alliance member company sets taxpayer eligibility requirements for
its own program. These requirements will differ from company to company.
Generally, eligibility will be based on factors such as age, adjusted gross income,
state residency, military status or eligibility to file a Form 1040EZ or for the Earned
Income Tax Credit. The agreement requires the Alliance, as a whole, to provide
free services for at least 60 percent or 78 million of the nation's taxpayers during
each filing season. As of January 16, 2003, the industry has exceeded that
requirement. The number may fluctuate throughout the filing season as Alliance
membership and offers change. The primary candidates for Free File are those
taxpayers who prepare their own taxes and still file paper returns. Last filing
season, the IRS received nearly 85 million paper returns and nearly 47 million efiled returns.
E-government is an integral part of the President's Management Agenda to make it
easier for citizens and businesses to interact with the government, save taxpayer
KD-3772: IRS Details Free File Initiative Millions Eligible for Free Online Preparation a...
Page 1 of 1
FROM THE OFFICE OF PUBLIC AFFAIRS
To view or print the PDF content on this page, download the free Adobe® Acrobat® Reader®.
January 16, 2003
KD-3772
IRS Details Free File Initiative Millions Eligible for Free Online Preparation and
E-Filing
IRS Fact Sheet
Related Documents:
•
IRS Details Free File Initiative Millions Eligible for Free Online Preparation
and E-Filmg
http://www.treas.gov/press/releases/kd3772.htm
112112003
.
INTERNAL REVENUE SERVICE
l,"lVil'v\'.lfS. go V
~FactSheet
Media Relations Office
For Release: January 2003
Washington, D.C.
Tel. 202.622.4000
Release No: FS-2003-8
IRS DETAILS FREE FILE INITIATIVE;
MILLIONS ELIGIBLE FOR FREE ONLINE PREPARATION AND E-FILING
The majority of American taxpayers will be eligible for free online tax preparation and
free electronic filing through a partnership agreement between the Internal Revenue
Service and the Free File Alliance, LLC, a private-sector consortium of tax software
companies.
Each Free File Alliance member sets taxpayer eligibility requirements for its program.
Requirements will differ company to company. Generally, eligibility will be based on
factors such as age, adjusted gross income, state residency, military status or eligibility
to file a Form 1040EZ or for the Earned Income Tax Credit.
The agreement requires the Alliance, as a whole, to provide free services to at least
60 percent or 78 million of the nation's taxpayers through April 15. The primary
candidates for Free File are those taxpayers who prepare their own taxes and still file
paper returns. Last filing season, the IRS received nearly 85 million paper returns and
nearly 47 million e-filed returns.
The IRS neither supports nor endorses any individual Free File Alliance company or
product. As part of the agreement, the IRS provides to taxpayers a listing of the Alliance
members via the Free File web page, which is hosted on IRS.gov. The Free File Alliance
members must comply with all federal laws protecting taxpayer information.
The firms' online preparation and filing services are being provided to eligible
taxpayers at no charge. Taxpayers are under no obligation to purchase any products
such as Refund Anticipation Loans. Taxpayers generally will receive their refund within
10 days if they use both e-file and direct deposit. Refunds from mailed paper returns can
take up to six weeks.
STEPS TO GET STARTED
Taxpayers can locate the Free File Website through IRS.gov and, by following a
few simple steps, be on their way to getting their taxes where they want them - done.
STEP 1: DETERMINE ELIGIBILITY
At the Free File homepage, taxpayers have two options for determining their eligibility for
free services: They may browse the complete listing of Alliance members and their free
services. Or, taxpayers can use a questionnaire application, the Free File Wizard, which
-more-
-2will assist taxpayers in identifying those free services for which they may qualify. Each
Alliance member will identify their company name and will have a simple description of
the criteria for using their free service. Each Alliance member's company or product
name will be linked to additional information about the company and services. Not all
taxpayers will be eligible for these free services.
STEP 2: LINK TO FREE SERVICES
Upon determining eligibility, the taxpayer can link directly to that Alliance member's free
service by clicking on the Alliance member's "Start Now" link. Upon doing so, taxpayers
will be notified they are leaving the IRS.gov web site and are entering an Alliance
member's web site.
STEP 3: PREPARE AND FILE TAX RETURN
At the Alliance member's Web site, taxpayers can prepare their tax returns using the
member's online proprietary software. Completed tax returns will be sent electronically
from the Alliance member to the IRS through existing e-file system using secure
telephone lines. Taxpayers will receive an acknowledgement of receipt or rejection of
their return via an email from the Alliance member.
WHAT ARE THE BENEFITS?
The intent of IRS Free File is to reduce the burden on individual taxpayers, make tax
preparation easier and expand the benefits of electronic filing to a majority of Americans.
The benefits of using these free services are identical to those of e-filing, which include:
•
•
•
•
Reduced tax return preparation time;
Faster refunds;
Accuracy of return;
Acknowledgement of return receipt.
Alliance members' proprietary software will assist taxpayers in completing their
returns and help ensure taxpayers are aware of tax credits and deductions for which they
may be eligible. The tax preparation software has been tested for compatibility with the
IRS. Accurate online preparation and filing vastly reduces errors. Common mistakes,
such as math errors or transposing Social Security numbers, can require the IRS to
delay refunds while resolving the problem.
Also, e-file users can file now and pay later if they owe taxes. E-filers can pay taxes
electronically by authorizing an electronic funds withdrawal from a checking or savings
account or by using a credit card. Or, they can mail a check to the IRS by April 15.
IRS's electronic filing program has been in existence since 1986. In 2002, 47 million
returns were filed electronically. IRS e-file consistently has a high satisfaction rate
among its users.
-more-
-3-
FREE FILE ALLIANCE MEMBERSHIP
On October 30,2002, the IRS and the Free File Alliance, LLC, signed an agreement
that created a public-private partnership to provide free services to the majority of
taxpayers. The agreement stemmed from an e-government initiative by the Bush
Administration. The partnership will support IRS's goal of having 80 percent of all tax
returns filed electronically by 2007. The Free File agreement is for three years with a
series of two-year renewal options.
The IRS does not determine Free File Alliance membership, but members must meet
certain IRS standards. The Alliance membership may change periodically. As part of the
e-file application and testing process, the IRS must approve the Free File Alliance
members' proprietary tax preparation software. Each Alliance member must obtain thirdparty privacy and security certification. And, Alliance members must adhere to all federal
laws regarding taxpayer privacy. Each Alliance member is free to set its own eligibility
requirements for its free services. The Alliance will be managed by the Council for the
Electronic Revenue Communication Advancement (CERCA).
Previously, some software and tax preparation companies provided some free
services to low-income taxpayers. The free services, however, were not consistently
available or widely publicized. The agreement brings all the free services to a single
location, IRS's Free File homepage, and allows taxpayers to compare the free services
available.
(See attached list of Free File Alliance members)
Free File Alliance Members
As of January 16, 2003
~mDan¥;'"
"
"',
' . . "".'
.' .Eligibility Criteria
[',".;:',0;'::".
.....
CCH Inc. (Complete Tax)
Taxpayers with an AGI of $33,000 or less
TaxSlayer
Taxpayers with an AGI of $30,000 or less or all active
military personnel.
H&R Block
Taxpayers with an AGI of $28,000 or less
Tax$imple
Taxpayers with an AGI of $28,000 or less
Free 1040 Tax Returns, Inc.
IT~pa~s with an AGI of $25,000 or less
Free Tax Returns.Com, Inc.
#1 Discount Tax Return
Service
Taxpayers with an AGI of $28,000 or less
Taxpayers with an AGI of $27,500 or less
Efile Tax Returns, Inc.
Taxpayers with an AGI of $28,000 or less
TaxEngine.com
Taxpayers with an AGI of $9,200 or less
Intuit, Inc. (TurboTax)
2nd Story Software, Inc.
(TaxACT.com)
ezTaxReturn.com
my1040EZ.com,lnc.
(FreeTaxUSA)
'
,;':.'
Taxpayers with an AGI of $27,000 or less and taxpayers
who qualify for the Earned Income Credit (EIC) regardless 01
their income level
Taxpayers eligible to file a Form 1040EZ or taxpayers with
an AGI of $100,000 or more.
Taxpayers who are eligible to file Form 1040EZ and have an
AGI of $25,000 or less.
Taxpayers who are age 20 or younger or age 45 or older.
TaxBrain
Taxpayers age 50 or older or Taxpayers with an AGI of
$12,000 or less.
FileYourTaxes.com
Residents of WI, MI, AZ and GA
Online Taxes, Inc.
C&S Technologies
(eSmartTax)
ITa~payers age 20 or younger.
Residents of IL and NY
###
FROM THE OFFICE OF PUBLIC AFFAIRS
January 16, 2003
KD-3773
Free File FAQS
What is Free File?
Free File is an Internet-based tax preparation and electronic filing program. The
online service is free for eligible taxpayers. Free File is offered through an
agreement between the Internal Revenue Service and the Free File Alliance LLC
a private-sector consortium of tax software companies. Eligible taxpayers wiil be '
able to prepare and file their federal income tax returns using online software
provided by the Free File Alliance members - not the IRS.
Who is eligible for free services?
Each partiCipating software company sets its own eligibility requirements. The
requirements will differ company to company. Generally, eligibility will be based on
factors such as age, adjusted gross income, state residency, military status or
eligibility to file a Form 1040EZ or for the Earned Income Tax Credit.
How many taxpayers will be eligible for Free File?
The agreement requires the Alliance, as a whole, to provide free services to at least
60 percent or 78 million of the nation's taxpayers through April 15. The primary
candidates for Free File are those taxpayers who prepare their own taxes and still
file paper returns. Last filing season, the IRS received nearly 85 million paper
returns and nearly 47 million e-filed returns.
How do taxpayers determine if they are eligible for Free File?
Taxpayers can access the Free File homepage through IRS.gov. On Free File
pages, they can browse the summary of each company's offering or use the Free
File Wizard, a questionnaire which helps match their circumstances with
companies' services.
What is the Free File Wizard?
Taxpayers will find a questionnaire application on the Free File homepage. After a
few questions, the Wizard will seek to match the taxpayers to those Free File
Alliance members' for whose services they may qualify. The accuracy of results is
dependent on the accuracy of the information provided by the taxpayers.
When will Free File be available?
These free services, accessible through IRS.gov, will be available throughout the
2003 filing season to eligible taxpayers starting January 16, 2003.
How does Free File work?
It takes just a few steps once taxpayers reach the Free File Website through
IRS.gov. The Free File pages provide a list of Alliance members and their free
services.
STEP 1: DETERMINE ELIGIBILITY
At the Free File homepage, taxpayers have two options for determining their
eligibility for free services. They may browse the complete listing of Alliance
members and their free services. Or, taxpayers can use the Free File Wizard, which
will identify those free services for which they may qualify. Each Alliance member
will identify their company name and will have a simple description of the criteria for
using their free service. Each Alliance member's company or product name will be
linked to additional information about the company and services. Not all taxpayers
will be eligible for these free services.
STEP 2: LINK TO FREE SERVICES
Upon determining eligibility, the taxpayer can link directly to that Alliance member's
free service by clicking on the Alliance member's "Start Now" link. Upon doing so,
taxpayers will be notified they are leaving the IRS.gov web site and are entering an
Alliance member's web site.
STEP 3: PREPARE AND FILE TAX RETURN
At the Alliance member's Web site, taxpayers can prepare their tax returns using
the member's online proprietary software. Completed tax returns will be sent
electronically from the Alliance member to the IRS through existing e-file system
using secure telephone lines. Taxpayers will receive an acknowledgement of
receipt or rejection of their return via an email from the Alliance member.
How will taxpayers' security and privacy be protected?
Free File Alliance members must comply with all federal rules and regulations on
taxpayer privacy for both Free File and paying customers. Those rules prohibit use
of tax return data for purposes not specifically authorized by the taxpayer. Tax
return preparation will be accomplished using proprietary software approved by the
IRS; transmittal will be through the established IRS e-file system. Each Alliance
member must attain a third party privacy and security certification.
What information will the IRS collect or retain from taxpayers as a result of
using Free File?
The information you provide through the Free File Wizard will be used to help you
select a free service only; thereafter it will be deleted. The only information retained
by the IRS is the tax return information that is officially filed with the IRS.
Can Free File Alliance members share taxpayer data with anyone besides the
IRS?
No. As part of the agreement, the Alliance members must adhere to the strict
privacy standards of the IRS.
What oversight of the program will the IRS provide?
The IRS will monitor the progress of each of the Alliance members. If any problems
should develop, the members are required to alert the IRS. If appropriate, the IRS
will remove the company from the on-line listing until the problem is resolved.
What type of Customer Service Support will be provided to taxpayers?
Alliance members must provide appropriate customer service to their clients as part
of the agreement. Taxpayers who have service questions or who are experiencing
problems should contact the customer service function of that particular company.
In the event taxpayers contact the IRS first, the IRS Customer Service
Representatives will have contact information for each Alliance member and, if
necessary, will refer accordingly.
What benefits will taxpayers receive from Free File?
The intent of IRS Free File is to reduce the burden on individual taxpayers, make
tax preparation easier and expand the benefits of electronic filing to a majority of
Americans. The benefits of using these free services are identical to those of efiling, which include:
• Reduced tax return preparation time;
• Faster refunds;
• Accuracy of return;
• Acknowledgement of return receipt.
Alliance members' proprietary software will assist taxpayers in completing their
returns and help ensure taxpayers are aware of tax credits and deductions for
which they may be eligible. The tax preparation software has been tested for
compatibility with the IRS. Accurate online preparation and filing vastly reduces
errors. Common mistakes. such as math errors or transposing Social Security
numbers. can prompt refund delays.
Also, e-file users can file now and pay later if they owe taxes. E-filers can pay
taxes electronically by authorizing an electronic funds withdrawal from a checking
or savings account or by using a credit card. Or. they can mail a check to the IRS
by April 15.
Is this Internet filing?
Yes. The free services will be provided via the Internet; taxpayers will enter data
with calculations performed online.
What happens to the taxpayer who does not qualify for Free File?
For those taxpayers who do not meet the eligibility requirements, Free File Alliance
members will explain how much they will charge should the taxpayer want the
preparation and e-filing service. In addition. the private sector provides numerous
options for taxpayers to purchase online or software products. Taxpayers may also
choose a tax professional for online preparation. The private sector may also
charge a fee to electronically transmit tax returns through IRS e-file. IRS e-file
consistently has a high satisfaction rate among users.
How many taxpayers e-filed their returns during the 2002 filing season?
Nearly 47 million taxpayers chose IRS e-file in 2002 - 16 percent more than the
previous year. The IRS anticipates 54 million e-filers for the 2003 filing season.
(There are approximately 132 million tax returns filed by individuals.)
How will eligible taxpayers who lack computer access make use of Free File?
The IRS hopes to work with existing coalitions, churches and community
associations to expand computer access to taxpayers without home computers.
Also, Free File is only one option for low-income taxpayers. The IRS also supports
many volunteers during the filing season through Volunteer Income Tax Assistance
(VITA) and Tax Counseling for the Elderly (TCE). In addition. the Taxpayer
Assistance Centers at most local IRS offices can aid low-income taxpayers.
Why was the Free File Alliance formed?
In November of 2001. OMB's Quicksilver Task Force established 24 e-government
initiatives that are part of the President's Management Agenda. These initiatives
were designed to improve Government to Government, Government to Business.
and Government to Citizen electronic capabilities.
One initiative instructed the IRS to provide free online tax return preparation and
filing services to taxpayers. In accordance with this OMB directive. the IRS began
working in partnership with the tax software industry to develop a solution. The
result was the formation of the Free File Alliance, LLC. a group of tax software
companies. managed by the Council for the Electronic Revenue Communication
Advancement (CERCA). who will provide free online tax preparation and electronic
filing services.
Why is the government doing this through a partnership with private industry
rather than providing its own software free to the public?
The government believes that private industry. given its established expertise and
experience in the field of electronic tax preparation. has a proven track record in
providing the best technology and services available. The Government believes that
a partnership with private industry will: provide taxpayers with higher quality
services by using the existing expertise of the private sector; maximize consumer
choice; promote competition within the marketplace and meet these objectives in
the least costly manner to taxpayers.
Some private sector firms have offered free e-filing to select taxpayer groups for
several years; how is this approach different?
This approach offers a multi-year agreement between the IRS and the Free File
Alliance to provide these free service(s) to more taxpayers. Previously. free
offerings were not consistently available.
Taxpayers will have easier access to the Free File web page (hosted on IRS.gov).
which will provide a listing of all free offerings in a single location.
Alliance members will offer both free preparation and e-filing services. There will be
no cost to the taxpayer. Previously. some companies charged for preparation
(filling of forms and tax calculations) while offering the transmission free, or
provided the preparation free while charging for transmission, or some variation
thereof. Under the Agreement, both are free to eligible taxpayers.
How do taxpayers decide which service to choose?
Taxpayers should explore all their options among the free services. The IRS does
not endorse any specific company.
Does this process encourage taxpayers to use Refund Anticipation Loans?
No. Taxpayers are under no obligation to use Refund Anticipation Loans or to
purchase any product from the software company. The tax preparation and
electronic filing service are free to eligible taxpayers. Obtaining a fee-based product
is a decision left to the individual taxpayer. The IRS reminds taxpayers that using
e-file with direct deposit can result in receiving a refund in 10 days or less.
TREASURY
O ..... HT Ill' "l'III.I( ,\n:\IRS .I~IIO I'I'N~S\ I.\A"I \ ,\\10:1\1.:":. N.W.' W,\:o.III\(;T()!I\. 11.('.10 241!2l1e(1I1!, 622.2%11
EMBARGOED UNTIL 11:00 A.M.
January 16, 2003
CONTACT:
Office of Financing
202/691-3550
TREASURY OFFERS 13-WEEK AND 26-WEEK BILLS
The Treasury will auction 13-week and 26-week Treasury bills totaling $32,000
million to refund an estimated $33,950 million of publicly held 13-week and 26-week
Treasury bills maturing January 23, 2003, and to pay down approximately $1,950
million. Also maturing is an estimated $16,001 million of publicly held 4-week
Treasury bills, the disposition of which will be announced January 21, 2003.
The Federal Reserve System holds $14,685 million of the Treasury bills maturing
on January 23, 2003, in the System Open Market Account (SOMA). This amount may be
refunded at the highest discount rate of accepted competitive tenders either in these
auctions or the 4-week Treasury bill auction to be held January 22, 2003. Amounts
awarded to SOMA will be in addition to the offering amount.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FlMA) accounts bidding through the Federal Reserve Bank of New
York will be included within the offering amount of each auction. These
noncompetitive bids will have a limit of $100 million per account and will be accepted
in the order of smallest to largest, up to the aggregate award limit of $1,000
million.
TreasuryDirect customers have requested that we reinvest their maturing holdings
of approximately $1,094 million into the 13-week bill and $665 million into the 26week bill.
The allocation percentage applied to bids awarded at the highest discount rate
will be rounded up to the next hundredth of a whole percentage point, e.g., 17.13%.
This offering of Treasury securities is governed by the terms and conditions set
forth in the Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about each of the new securities are given in the attached offering
highlights.
000
Attachment
HIGHLIGHTS OF TREASURY OFFERINGS OF BILLS
TO BE ISSUED JANUARY 23, 2003
January 16, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Award (35% of Offering Amount) .....
Maximum Recognized Bid at a Single Rate ....
NLP Reporting Threshold . . . . . . . . . . . . . . . . . . . .
NLP Exclusion Amount . . . . . . . . . . . . . . . . . . . . . . .
$17,000
$ 5,950
$ 5,950
$ 5,950
$ 5,600
million
million
million
million
million
Description of Offering:
Term and type of security . . . . . . . . . . . . . . . . . .
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auction date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issue date . . . . . . . . . . . . . . . . . . . . . . . .
Currently outstanding . . . . . . . . . . . . . . . . . . . . . .
Minimum bid amount and multiples ...........
91-day bill
912795 MJ 7
January 21, 2003
January 23, 2003
April 24, 2003
October 24,2002
$21,599 million
$1,000
$15,000
$ 5,250
$ 5,250
$ 5,250
None
million
million
million
million
182-day bill
912795 NE 7
January 21, 2003
January 23, 2003
July 24, 2003
January 23, 2003
$1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids: Accepted in full up to $1 million at the highest discount rate of accepted competitive bids.
Foreign and International Monetary Authority (FIMA) bids: Noncompetitive bids submitted through the Federal Reserve
Banks as agents for FIMA accounts. Accepted in order of size from smallest to largest with no more than $100
million awarded per account.
The total noncompetitive amount awarded to Federal Reserve Banks as agents for FIMA
accounts will not exceed $1,000 million. A single bid that would cause the limit to be exceeded will
be partially accepted in the amount that brings the aggregate award total to the $1,000 million limit. However,
if there are two or more bids of equal amounts that would cause the limit to be exceeded, each will be prorated
to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a discount rate with three decimals in increments of .005%, e.g., 7.100%, 7.105%.
(2) Net long position (NLP) for each bidder must be reported when the sum of the total bid amount, at all
discount rates, and the net long position equals or exceeds the NLP reporting threshold stated above.
(3) Net long position must be determined as of one half-hour prior to the closing time for receipt of
competitive tenders.
Receipt of Tenders:
Noncompetitive tenders ..... Prior to 12:00 noon eastern standard time on auction day
Competitive tenders ........ Prior to 1:00 p.m. eastern standard time on auction day
Payment Terms: By charge to a funds account at a Federal Reserve Bank on issue date, or payment of full. par amount
with tender.
TreasuryDirect customers can use the Pay Direct feature, which authorizes a charge to their account of
record at their financial institution on issue date.
Bureau of the Public Debt: Treasury's Inflation-Indexed Securities Reference CPI Numbers and Daily In... Page 1 of 1
-P-U-B-L-I-C-O-E-B-r-N-E-W-S-(~/~~-'·I-c·~.~iDepartment of th~ Treasury· !\'Htau
FOR IMMEDIATE RELEASE
January 16, 2003
(,f
th. PublIC. I>cbt • W"shl"~t.,n. DC 2C>"1'i
,~"'/
Contact: Office of Financing
(202) 691-3550
TREASURY'S INFLATION-INDEXED SECURITIES
FEBRUARY REFERENCE CPI NUMBERS AND DAILY INDEX RATIOS
Public Debt announced today the reference Consumer
Price Index (CPI) numbers and daily index ratios
for the month of February for the following
Treasury inflation-indexed securities:
(1) 3-3/8% la-year notes due January IS, 2007
(2) 3-5/8% 10-year notes due January 15, 2008
(3) 3-5/8% 30-year bonds due April 15, 2C28
(4) 3-7/8% lO-year notes due January IS, 2009
(5) 3-7/8% 30-year bonds due April 15, 2029
(6) 4-1/4% lO-year notes due Jan~ary 15, 2010
(7) 3-1/2% 10-year notes due January 15, 2011
(8) 3-3/8% 30-l/2-year bonds due April 15, 2032
(9) 3-3/8% lO-year notes due January 15, 2012
(10) 3% lO-year notes due July 15, 2012
This information is based on the non-seasonally
adjusted U.S. City Average All Items Consumer Price
Index for All Urban Consumers (CPI-U) published by
the Bureau of Labor Statistics of the U.S. Department
of Labor.
In addition to the publication of the reference CPI's
(Ref CPI) and index ratios, this release provides the
non-seasonally adjusted CPI-U for the prior threemonth period.
The information for March is expected to be
released on February 21, 2003.
000
:;'ebruary Reference CPI Numbers and Daily Index Ratios Table PDF format (file size-16KB, uploaded-Ol/16/03)
Intellectual Property
I Privacy
& Security Notices
I Terms
& Conditions
I Accessibility I Data Quality
U.S_ Department of the Treasury, Bureau of the PubliC Debt
Last Updated January 12, 2005
http://www.publicdebt.treas.gov/of/ofcpi022003pr.htm
5119/200~
Bureauofthe Public Debt: 3-7/8% TREASURY IO-YEAR INFLATION-INDEXED NOTES
Page 10f2
3-7/8% TREASURY 10-YEAR INFLATION-INDEXED NOTES
Due January 15,2009
Ref CPI and Index Ratios for February 2003
Contact: Office of Financing
202-691-3550
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
Series A-2009
9128274Y5
January 15, 1999
January 15, 1999
July 15, 1999
January 15, 2009
164.00000
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181. 3
181. 3
180.9
Calendar Day
Month
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181.28571
181. 27143
181. 25714
181.24286
181.22857
181.21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181.07143
181.05714
181.04286
181.02857
181.01429
181.00000
180.98571
180.97143
180.95714
180.94286
180.92857
180.91429
I Privacy
& Security Notices
tlttp:llwww.publicdebt.treas.gov/of/oflOc022003.htm
I Terms
Index Ratio
1.10549
1.10540
1.10531
1.10523
1.10514
1.10505
1.10497
1.10488
1.10479
1.10470
1.10462
1.10453
1.10444
1.10436
1.10427
1.10418
1.10409
1.10401
1.10392
1.10383
1.10375
1.10366
1.10357
1.10348
1.10340
1.10331
1.10322
1.10314
& Conditions
I Accessibility I Data
Quality
511912005
Bureau of the Public Debt: 3-5/8% TREASURY lO-YEAR INFLATION-INDEXED NOTES
Page 1 of2
3-5/8% TREASURY 10-YEAR INFLATION-INDEXED NOTES
Due January 15, 2008
Ref CPI and Index Ratios for February 2003
contact: Office of Financing
202-691-3550
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
Series A-2008
9128273T7
January 15, 1998
January 15, 1998
October 15, 1998
January 15, 2008
161.55484
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181.3
181.3
180.9
Month
Calendar Day
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181.28571
181.27143
181.25714
181.24286
181.22857
181. 21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181.07143
181.05714
181.04286
181.02857
181. 01429
181.00000
180.98571
180.97143
180.95714
180.94286
180.92857
180.91429
I Privacy
& Security Notices
I Terms
Index Ratio
1.12222
1.12213
1.12204
1.12195
1.12187
1.12178
1.12169
1.12160
1.12151
1.12142
1.12134
1.12125
1.12116
1.12107
1.12098
1.12089
1.12080
1.12072
1.12063
1.12054
1.12045
1.12036
1.12027
1.12019
1.12010
1.12001
1.11992
1.11983
& Conditions
I Accessibility I Data
Quality
U.s. Department of the Treasury, Bureau of the Public Debt
http://www.publicdebt.treas.gov/of!of]Ob022003.htm
5119/2005
Bureau of the Public Debt: 3-5/8% TREASURY 30-YEAR INFLATION-INDEXED BONDS
Page 10f2
3-5/80/0 TREASURY 30-YEAR INFLATION-INDEXED BONDS
Due April 15, 2028
Ref CPI and Index Ratios for February 2003
Contact: Office of Financing
202-691-3550
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
Bonds of April 2028
912810FD5
April 15, 1998
April 15, 1998
July 15, 1998
April 15, 2028
161.74000
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181. 3
181.3
180.9
Month
Calendar Day
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181. 30000
181.28571
181. 27143
181.25714
181.24286
181.22857
181.21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181.07143
181.05714
181.04286
181.02857
181. 01429
181.00000
180.9857l
180.97143
180.95714
180.94286
180.92857
180.91429
I Privacy
& Security Notices
I Terms
Index Ratio
1.12093
1.12085
1.12076
1.12067
1.12058
1.12049
1.12040
1.12032
1.12023
1.12014
1.12005
1.11996
1.11987
1.11979
1.11970
1.11961
1.11952
1.11943
1.11934
1.11926
1.11917
1.11908
1.11399
1.11390
1.11382
1.11373
1.11864
1.11855
& Conditions
I Accessibility I
Data Quality
U.S. Department of the Treasury, Bureau of the Public Debt
http://www.publicdebt.treas.gov/of/oDOa022003.htm
5/1912005
Bureau of the Public Debt: 3-7/8% TREASURY lO-YEAR INFLATION-INDEXED NOTES
Page lof2
3-7/80/0 TREASURY 10-YEAR INFLATION-INDEXED NOTES
Due January 15,2009
Ref CPI and Index Ratios for February 2003
contact: Office of Financing
202-691-3550
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
January 15, 1999
January 15, 1999
July 15, 1999
January 15, 2009
164.00000
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181. 3
181. 3
180.9
Month
Calendar Day
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
I
Series A-2009
9128274Y5
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181. 28571
181.27143
181.25714
181.24286
181.22857
181.21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181. 07143
181.05714
181. 04286
181.02857
181.01429
181. 00000
180.98571
180.97143
180.95714
180.94286
180.92857
180.91429
Privacy & Security Notices
lttp:llwww.publicdebt.treas.gov/of/oflOc022003.htm
I Terms
Index Ratio
1.10549
1.10540
1.10531
1.10523
1.10514
1.10505
1.10497
1.10488
1.10479
1.10470
1.10462
1.10453
1.10444
1.10436
1.10427
1.10418
1.10409
1.10401
1.10392
1.10383
1.10375
1.10366
1.10357
1.10348
1.10340
1.10331
1.10322
1.10314
& Conditions
I Accessibility I Data
Quality
5/19/2005
Bureau of the Public Debt: 3-7/8% TREASURY 30-YEAR INFLATION-INDEXED BONDS
Page 1 of2
3-7/80/0 TREASURY 30-YEAR INFLATION-INDEXED BONDS
Due April 15, 2029
Ref CPI and Index Ratios for February 2003
contact: Office of Financing
202-691-3550
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
Bonds of April 2029
912810FH6
April 15, 1999
April 15, 1999
October 15, 1999
October 15, 2000
April 15, 2029
164.39333
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181.3
181.3
180.9
Calendar Day
Month
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181.28571
181.27143
181.25714
181.24286
181.22857
181.21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181.07143
181.05714
181. 04286
181.02857
181.01429
181.00000
180.9857l
180.97143
180.95714
180.94286
180.92857
180.91429
I Privacy
& Security Notices
I1t1p://www.puhlicdebt.treas.gov/of/of30b022003.htm
I Terms
Index Ratio
1.10284
1.10276
1.10267
1.10258
1.10250
1.10241
1.10232
1.10223
1.10215
1.10206
1.10197
1.10189
1.10180
1.10171
1.10163
1.10154
1.10145
1.10137
1.10128
1.10119
1.10110
1.10102
1.10093
1.10084
1.10076
1.10067
1.10058
1.10050
& Conditions
I Accessibility I Data
Quality
5/19/2005
Bureau of the Public Debt: 4-114% TREASURY IO-YEAR INFLATION-INDEXED NOTES
Page I of2
4-1/4% TREASURY 10-YEAR INFLATION-INDEXED NOTES
Due January 15, 2010
Ref CPI and Index Ratios for February 2003
contact: Office of Financing
202-691-3550
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
Series A-2010
9128275W8
January 15, 2000
January 18, 2000
July 17, 2000
January 15, 2010
168.24516
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181. 3
181. 3
180.9
Month
Calendar Day
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181.28571
181.27143
181.25714
181.24286
181.22857
181. 21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181.07143
181.05714
181.04286
181. 02857
181.01429
181.00000
180.98571
180.97143
180.95714
180.94286
180.92857
180.91429
I Privacy
& Security Notices
I Terms
Index Ratio
1.07759
1.07751
1.07742
1.07734
1. 07725
1.07717
1.07708
1.07700
1.07691
1. 07683
1.07675
1.07666
1. 07658
1.07649
1.07641
1.07632
1. 07624
1.07615
1. 07607
1. 07598
1.07590
1.07581
1. 07573
1. 07564
1. 07556
1.07547
1.07539
1. 07530
& Conditions
I Accessibility I Data
Quality
U.S. Department of the Treasury, Bureau of the Public Debt
http://www.Duhlicdebt.treas.gov/of/oflOd022003.htm
5/1912005
Bureau of the Public Debt: 3-112% TREASURY 10-YEAR INFLATION-INDEXED NOTES
Page I of2
3-1/2% TREASURY 10-YEAR INFLATION-INDEXED NOTES
Due January 15, 2011
Ref CPI and Index Ratios for February 2003
contact: Office of Financing
202-691-3550
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
Series A-2011
9128276R8
January 15, 2001
January 16, 2001
July 16, 2001
January 15, 2011
174.04516
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181. 3
181. 3
180.9
Month
Calendar Day
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181. 28571
181. 27143
181. 25714
181.24286
181.22857
181.21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181. 08571
181.07143
181.05714
181.04286
181.02857
181.01429
181.00000
180.98571
180.97143
180.95714
180.94286
I Privacy
180.9~857
180.91429
& Security Notices
I Terms
Index Ratio
1. 04168
1.04160
1.04152
1. 04144
1.04136
1.04127
1. 04119
1.04111
1.04103
1. 04094
1. 04086
1.04078
1.04070
1.04062
1.04053
1. 04045
1.04037
1.04029
1.04021
1.04012
1.04004
1.03996
1.03988
1.03980
1.03971
1.03963
1.03955
1.03947
& Conditions
I Accessibility I Data
Quality
U.S. Department of the Treasury, Bureau of the Public Debt
http://www.publicdebt.treas.gov/of/oflOe022003.htm
511912005
Bureau of the Public Debt: 3-3/8% TREASURY 30-1/2-YEAR INFLATION-INDEXED BONDS
Page 1 of2
3-3/80/0 TREASURY 30-1/2-YEAR INFLATION-INDEXED BONDS
Due April IS, 2032
Ref CPI and Index Ratios for February 2003
Contact: Office of Financing
202-691-3550
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
April 15, 2032
177.50000
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181. 3
181. 3
180.9
Calendar Day
Month
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
Bonds of April 2032
912810FQ6
October 15, 2001
October 15, 2001
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181. 28571
181.27143
181.25714
181.24286
181.22857
181. 21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181.07143
181.05714
181. 04286
181.02857
181.01429
181.00000
180.98571
180.97143
180.95714
180.94286
180.92857
180.91429
I Privacy
& Security Notices
I Terms
Index Ratio
1.02141
1.02133
1. 02125
1. 02117
1.02109
1.02101
1. 02093
1.02085
1.02076
1.02068
1. 02060
1.02052
1. 02044
1. 02036
1. 02028
1. 02020
1. 02012
1.02004
1. 01996
1.01988
1. 01980
1.01972
1.01964
1. 01956
1. 01948
1. 01940
1.01932
1.01924
& Conditions
I Accessibility I Data
Quality
U.s. Department of the Treasury, Bureau of the Public Debt
http://www.publicdebt.treas.gov/of/oDOc022003.htm
5/19/2005
Bureau of the Public Debt: 3-3/8% TREASURY 10-YEAR INFLATION-INDEXED NOTES
Page 1 of2
3-3/8% TREASURY 10-YEAR INFLATION-INDEXED NOTES
Due January 15, 2012
Ref CPI and Index Ratios for February 2003
202-691-3550
Contact: Office of Financing
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
Series A-2012
9128277J5
January 15, 2002
January 15, 2002
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181. 3
181. 3
180.9
Calendar Day
Month
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
January 15, 2012
177.56452
February 2003
28
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181.28571
181.27143
181.25714
181.24286
181.22857
181. 21429
181.20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181.07143
181.05714
181.04286
181.02857
181.01429
181.00000
180.98571
180.97143
180.95714
180.94286
180.92857
180.91429
I Privacy
& Security Notices
I Terms
Index Ratio
1. 02104
1.02096
1.02088
1.02080
1.02072
1.02064
1.02055
1.02047
1.02039
1.02031
1. 02023
1.02015
1. 02007
1. 01999
1. 01991
1. 01983
1.01975
1.01967
1. 01959
1.01951
1. 01943
1.01935
1.01927
1.01919
1.01911
1. 01903
1.01895
1. 01887
& Conditions
I Accessibility I Data
Quality
U.S. Department of the Treasury, Bureau of the Public Debt
http://www.puhlicdebt.treas.gov/of/ofl Of022003 .htrn
5/19/2005
Page 1 of2
Bureau of the Public Debt: 3% TREASURY 10-YEAR INFLATION-INDEXED NOTES
3% TREASURY 10-YEAR INFLATION-INDEXED NOTES
Due July 15, 2012
Ref CPI and Index Ratios for February 2003
202-691-3550
Contact: Office of Financing
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
Series C-2012
912828AF7
July 15, 2002
July 15, 2002
October 15, 2002
January 15, 2003
July 15, 2012
179.80000
February 2003
28
CPI-U (NSA) October 2002
CPI-U (NSA) November 2002
CPI-U (NSA) December 2002
181. 3
181. 3
180.9
DESCRIPTION:
CUSIP NUMBER:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
Month
Calendar Day
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Intellectual Property
Year
Ref CPI
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
2003
181.30000
181. 28571
181. 27143
181.25714
181.24286
181.22857
181.21429
181. 20000
181.18571
181.17143
181.15714
181.14286
181.12857
181.11429
181.10000
181.08571
181.07143
181.05714
181.04286
181.02857
181.01429
181.00000
180.98571
180.97143
180.95714
180.94286
180.92857
180.91429
I Privacy
& Security Notices
http://www.publicdebttreas.gov/of/oflOg022003.htm
I Terms
Index Ratio
1.00834
1.00826
1. 00818
1. 00810
1.00802
1. 00795
1.00787
1.00779
1.00771
1. 00763
1. 00755
1.00747
1. 00739
1.00731
1. 00723
1. 00715
1.00707
1.00699
1.00691
1.00683
1.00675
1.00667
1.00659
1.00652
1.00644
1.00636
1.00628
1.00620
& Conditions
I Accessibility I Data
Quality
5/19/2005
FACT SHEET
Agreement on US-Singapore Free Transfers
On Wednesday, January 15,2003, the U.S. Treasury and the Monetary Authority of Singapore
reached agreement on important provisions in the Investment Chapter of the U.S.-Singapore Free
Trade Agreement. The agreement is a "win-win" for both countries.
Point 1: The investment chapter maintains the principle of free transfers.
This approach is consistent with the shared economic philosophy and policy perspective of both
the United State and Singapore. Retaining the principle of free transfers sends a strong signal to
the markets that the U.S. and Singapore support the free flow of capital and recognize its
importance in economic development. Free transfers permit the efficient allocation of resources
and provide investors with a transparent regime for doing business free of political obstacles.
Both countries recognize that a strong reserve position, a flexible exchange rate regime, sound
fiscal and monetary policies, and effective prudential measures for the financial sector are the
preferred policy tools for both avoiding a balance of payments crisis and for dealing with one.
The FTA transfers provision complements this approach.
The free transfers provision of the Singapore FTA meets an important Trade Promotion
Authority (TPA) objective - "freeing the transfer of funds related to investments." This
provision provides U.S. investors with substantially strengthened transfer rights over those
available under the General Agreement on Trade in Services (GATS) and General Agreement on
Trade and Tariffs (GATT). In addition, unlike these other agreements, the FTA provides for
effective investor-state and State-State arbitration provisions to enforce free transfer rights.
Point 2: The investment chapter ensures that U.S. investors' maintain their rights under dispute
settlement in the case of restrictions on free transfers.
The U.S. and Singapore agreed that, instead of creating exceptions to the investment provisions
allowing free transfers, all issues would be handled in the dispute resolution chapter. This avoids
the need to discuss if and when countries agree that capital flow restrictions would be necessary.
All current account transactions, including profits and dividends; foreign direct investment;
proceeds from the sale of an investment; and payments pursuant to bonds and most loans are
covered by the standard dispute provisions of the Agreement. The usual cooling off period
before a claim may be taken to dispute resolution is six months.
On other capital flows, there will be cooling off period of one year. If the restrictions
substantially impede a transfer, then damages accrue from the date of imposition of controls. If
the restrictions do not substantially impede a transfer, then Singapore has a period of 364 days
without liability.
/<D -- 3716
1
KD-3777: Treasury, IRS Amend Effective Date of Disclosure and List Maintenance Regu ... Page 1 of 1
PRess ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 17, 2003
KD-3777
Treasury, IRS Amend Effective Date of Disclosure and List Maintenance
Regulations
Today the Treasury Department and the IRS issued a notice amending the effective
date for the revised taxpayer disclosure and promoter list maintenance regulations
issued in October 2002. The amended effective date will reduce taxpayer burden
and permit Treasury and the IRS to clarify these regulations before they must be
applied to ensure that they focus on the information needed to combat abusive tax
avoidance transactions.
"Those who engage in or promote abusive transactions cannot be allowed to hide
these transactions from scrutiny. At the same time, the requirements to disclose
transactions and maintain lists of customers must be as clear and as administrable
as possible. Requiring disclosure unnecessarily is burdensome to taxpayers and
the IRS and will detract from the usefulness of the rules to the IRS' pursuit of
potentially abusive transactions," stated Treasury Assistant Secretary for Tax Policy
Pam Olson.
Treasury and the IRS are considering clarifications of the types of transactions that
must be disclosed by taxpayers to the IRS. Taxpayers will be able to rely on these
new definitions, or the existing definitions, for the period prior to when the new rules
are issued in February. Further, the list maintenance rules issued in October 2002
will not be effective until they are finalized in February. This delayed effective date,
however, will not apply to designated tax avoidance transactions or to transactions
that promoters must register with the IRS.
The (ext of the
I~ollce
IS atlached.
http://www.treas.gov/press/releases/kd3777.htm
112112003
Page 1 of3
Part III - Administrative, Procedural, and Miscellaneous
Effective Date of Regulations Under Sections 6011 and 6112
Notice 2003-11
SECTION 1. BACKGROUND
In Treasury Decisions 9017 and 9018, as published in the Federal Register on October
22,2002 (67 Fed. Reg. 64799; 67 Fed. Reg. 64807) (October 2002 temporary regulations), the
Department of the Treasury (Treasury) and the Internal Revenue Service (Service) issued
comprehensive amendments to the rules under § 1.6011-4T of the temporary Income Tax
Regulations and § 301.6112-1T of the temporary Procedure and Administrative Regulations,
and mad~ corresponding amendments to § 301.6111-2T. See 2002-45 I.R.B. 815 and 823.
These amendments related primarily to the disclosure of reportable transactions under § 6011
of the Internal Revenue Code and the list maintenance requirements for potentially abusive tax
shelters under § 6112. Specifically, Treasury and the Service revised and clarified the
definition of "reportable transaction" and the definition of "organizer and seller" to ensure that
the Service receives the information needed to evaluate certain types of potentially abusive
transactions and to improve compliance.
The October 2002 temporary regulations generally are effective for transactions entered
into on or after January 1, 2003. Taxpayers are not required to disclose reportable
transactions as defined under the October 2002 temporary disclosure regulations until the time
they file their tax return reporting those transactions. However, under the October 2002
temporary list maintenance regulations, material advisors have an immediate obligation to
http://www.trcas.gov/prcss/releases/noticeIJ.htm
412212005
Page 2 of3
maintain lists with respect to reportable transactions.
Treasury and the Service have received numerous comments relating to the October
2002 temporary disclosure regulations and the October 2002 temporary list maintenance
regulations. Treasury and the Service are currently reviewing these comments. In particular,
Treasury and the Service are reviewing the comments that provide suggested clarifications to
the rules pertaining to who must disclose transactions. In addition, Treasury and the Service
are considering clarifications as to the persons required to maintain lists and the persons who
must be included on lists.
Treasury and the Service also are reviewing the comments relating to the reportable
transaction categories of loss transactions and transactions with a significant book-tax
difference. More generally, Treasury and the Service are considering how the rules in the
October 2002 temporary regulations can be revised to exclude transactions for which
disclosure and maintenance of information under §§ 6011 and 6112 may be unnecessary,
while preserving the ability of Treasury and the Service to obtain information about potentially
abusive transactions. Treasury and the Service intend to publish final regulations in February
2003.
SECTION 2. EFFECTIVE DATE FOR THE DISCLOSURE REGULATIONS UNDER § 6011
Treasury and the Service intend to revise the disclosure regulations under § 6011 to
reflect the consideration of the comments received. Although the October 2002 temporary
disclosure regulations under § 6011 will continue to apply to transactions entered into on or
after January 1, 2003, the revised regulations under § 6011 will permit taxpayers who entered
into transactions on or after January 1, 2003, and before the filing date of the revised
regulations, to elect to apply the revised regulations instead of the October 2002 temporary
disclosure regulations.
SECTION 3. EFFECTIVE DATE FOR THE LIST MAINTENANCE REGULATIONS UNDER §
6112
In order to provide necessary clarification to the October 2002 temporary list
httn://www.treas.gov/press/releases/notice13.htm
4/22/2005
rage
j
or
j
maintenance regulations, Treasury and the Service will change the effective date of the
October 2002 temporary list maintenance regulations under § 6112 to the date the revised
regulations under § 6112 are filed. Except as provided below, the list maintenance
requirements under § 6112 will not apply to transactions entered into on or after January 1,
2003, and before the filing date of the revised regulations under § 6112. The delayed effective
date, however, will not apply to listed transactions or transactions that are § 6111 shelters as defined in
§ 301.6112-1 T(b)(l) of the October 2002 temporary regulations.
SECTION 4. CONTACT INFORMATION
The principal author of this notice is Tara P. Volungis of the Office of Associate Chief
Counsel (Passthroughs and Special Industries). For further information regarding this notice,
contact Ms. Volungis at (202) 622-3080 (not a toll-free call).
http://www.treas.gov/press/releases/noticeI3.htm
4/2212005
DEPARTMENT
OF
THE
TREASURY
TREASURY (i:·~.>"'<..I~ , NEW S
- - - - - - - -__y~'~....··.t__________•
4) I I II I· 4) t I"
II I I (
\ I I \ III.., • 1" III) 1'1, , \ .., \ I. \ \ ' I \
\\ I· 'I I . ,
EMBARGOED UNTIL 11:00 A.M.
January 21, 2003
\ \ .• \I \.., II I \ (. I (". I ~. ( .• ,41!!" • , 21.!
Contact:
4,22
,'II, II
Office of Financing
202/691-3550
TREASURY OFFERS 4-WEEK BILLS
The Treasury will auction 4-week Treasury bills totaling $14,000 million to
refund an estimated $16,001 million of publicly held 4-week Treasury bills maturing
January 23, 2003, and to pay down approximately $2,001 million.
Tenders for 4-week Treasury bills to be held on the book-entry records of
TreasuryDirect will not be accepted.
The Federal Reserve System holds $14,685 million of the Treasury bills maturing
on January 23, 2003, in the System Open Market Account (SOMA).
This amount may be
refunded at the highest discount rate of accepted competitive tenders in this auction
up to the balance of the amount not awarded in today's 13-week and 26-week Treasury
bill auctions.
Amounts awarded to SOMA will be in addition to the offering amount.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FIMA) accounts bidding through the Federal Reserve Bank of New York
will be included within the offering amount of the auction.
These noncompetitive bids
will have a limit of $100 million per account and will be accepted in the order of
smallest to largest, up to the aggregate award limit of $1,000 million.
The allocation percentage applied to bids awarded at the highest discount rate
will be rounded up to the next hundredth of a whole percentage point, e.g., 17.13%.
This offering of Treasury securities is governed by the terms and conditions
set forth in the Uniform Offering Circular for the Sale and Issue of Marketable BookEntry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about the new security are given in the attached offering highlights.
000
Attachment
HIGHLIGHTS OF TREASURY OFFERING
OF 4-WEEK BILLS TO BE ISSUED JANUARY 23, 2003
January 21, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Award (35% of Offering Amount) ...
Maximum Recognized Bid at a Single Rate ..
NLP Reporting Threshold . . . . . . . . . . . . . . . . . .
NLP Exclusion Amount . . . . . . . . . . . . . . . . . . . . .
$14,000
$ 4,900
$ 4,900
$ 4,900
$10,100
million
million
million
million
million
Description of Offering:
Term and type of security ........... 28-day bill
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . 912795 LZ 2
Auction date . . . . . . . . . . . . . . . . . . . . . . . . January 22, 2003
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . January 23, 2003
Maturity date . . . . . . . . . . . . . . . . . . . . . . . February 20, 2003
Original issue date . . . . . . . . . . . . . . . . . August 22, 2002
Currently outstanding . . . . . . . . . . . . . . . $39,519 million
Minimum bid amount and multiples .... $1,000
Submission of Bids:
Noncompetitive bids: Accepted in full up to $1 million at the highest
discount rate of accepted competitive bids.
Foreign and International Monetary Authority (FIMA) bids:
Noncompetitive bids submitted through the Federal Reserve Banks as agents for
FIMA accounts. Accepted in order of size from smallest to largest
with no more than $100 million awarded per account.
The total noncompetitive amount awarded to Federal Reserve Banks as agents for
FIMA accounts will not exceed $1,000 million. A single bid that
would cause the limit to be exceeded will be partially accepted in
the amount that brings the aggregate award total to the $1,000
million limit.
However, if there are two or more bids of equal
amounts that would cause the limit to be exceeded, each will be
prorated to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a discount rate with three decimals in
increments of .005%, e.g., 4.215%.
(2) Net long position (NLP) for each bidder must be reported when
the sum of the total bid amount, at all discount rates, and the
net long position equals or exceeds the NLP reporting threshold
stated above.
(3) Net long position must be determined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Receipt of Tenders:
Noncompetitive tenders:
Prior to 12:00 noon eastern standard time on auction day
Competitive tenders:
Prior to 1:00 p.m. eastern standard time on auction day
Payment Terms:
By charge to a funds account at a Federal Reserve Bank
on issue date.
PUBLIC DEBT NEWS
Department of the Treasury· Bureau of the Puhlic Deht • Washington, DC 20239
TREASURY SECURITY AUCTION R~SULTS
BUREAU Of THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
January ~ 1, 2003
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Cll-Day Bill
January 23, 2003
Aprll 24, 2003
912795MJ7
Term:
Issue Date:
Maturity Date:
CUSIP Number:
1. 160
High Rate:
Investment Rate 1/:
1. 179,
Price:
99.707
All noncompetltive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 28.82~.
All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED
(in thousands)
Accepted
Tendered
Tender Type
Competitive
Noncompetitive
FIMA (noncompetitive)
$
35,756,709
1,516,600
220,000
$
17,000,6032/
37,493,309
SUBTOTAL
6,699,163
6,699,163
Federal Reserve
$
TOTAL
44,192,472
15,264,003
1,516,600
220,000
$
23,699,766
Median rate
1.145~: 50~ of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.125':
5~ of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio
=
37,493,309 /
17,000,603
=
2.21
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $1,196,755,000
http://www.publicdebt.treas.gov
PUBLIC DEBT NEWS
Department (If the Treasury· Bureau (If the Public Debt· Washingt()n, DC 20239
TRLI\SUPY c~ECUI<lTY FdKT ION F<F.,;lJLTc;
BlIPF.AU OF THE: PlHlLTC [lr:wr - WI\,3H TW;Tm,
L)(;
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE:
January .:'1, .:'003
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
18:'-Day Bill
January 23, 2003
July 24, 2003
91::'795NE7
Term:
Issue Date:
Maturity Date:
CUSIP Number:
1. 190,
High Rate:
Investment Rate 1/:
1. 215
Price:
99.398
All noncompetltive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 31.13
All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED
$
32,771,062
966,645
$
14,033,437
966,645
°
°
15,000,082 2/
33,737,707
SUBTOTAL
5,588,507
5,588,507
Federal Reserve
TOTAL
Accepted
Tendered
Tender Type
Competitive
Noncompetitlve
FIMA (noncompetitive)
(in thousands)
$
39,326,214
$
20,588,589
Medlan rate
1.180\: 50\ of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.160~:
5~ of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 33,737,707 /
15,000,082 = 2.25
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $727,100,000
http://www.publicdebt.treas.gov
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 21,2003
KD-3781
Treasury Releases Details of the President's Dividend Exclusion Proposal
To view or print the PDF content on this page, download the free AdobeCiD Acrobaf(fi) Reade/i.E)
Today the Treasury Department released the details of the President's Dividend
Exclusion Proposal from the Jobs and Growth Package announced earlier this
month. The attached document describes in detail the President's proposal to end
the double tax on investor earnings from corporate stock.
With the release of the President's Budget each year, the Treasury Department
releases a detailed explanation of all the tax proposals in the Budget. This
document will be included in the Treasury Department's explanation of the Budget
proposals, which will be released on February 3, 2003.
On account of the significance of the President's proposal, the Treasury
Department is releasing this description in advance of the Budget.
This detailed explanation differs in certain ways from summaries the Treasury
Department released previously. Since the President announced this proposal on
January 7, Treasury has met with many taxpayer groups, practitioners, and
academics. They provided many constructive suggestions that are reflected in this
description, including changes to details of the proposal. Treasury appreciates
these thoughtful ideas and looks forward to working with the public as the
President's proposal advances. The Treasury Department welcomes additional
comments.
If you have trouble accessing the following document, please contact the Office of
Public Affairs at (202) 622-2910.
The detailed description of the President's Dividend Exclusion Proposal is attached.
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 22, 2003
KD-3782
Treasury Department Announces Additional Interim Guidance
on Terrorism Insurance for Insurance Industry
The Treasury Department today announced additional interim guidance for the
insurance industry in meeting certain requirements under the Terrorism Risk
Insurance Act of 2002, which was signed into law by President Bush on November
26,2002.
Today's interim guidance is designed to assist insurers in determining how they
may comply with certain immediately applicable provisions of the Terrorism Risk
Insurance Act prior to the issuance of final regulations by the Treasury.
"This is the third issuance of interim guidance to assist insurers in working with a
number of time sensitive issues," said Treasury Assistant Secretary for Financial
Institutions Wayne Abernathy, who oversees the Terrorism Risk Insurance
Program. "At the same time, we have been working overtime in developing formal
regulations to address implementation issues in the Terrorism Risk Insurance Act.
"Our goal is to implement the Program in a manner that is fair and easily
understood, maximizes reliance upon the existing state regulatory structure, and
allows insurers to participate in the Program as part of their normal course of
business," he said. "We hope to meet that goal while emphasizing the expectation
and need for insurers to develop aggressively their own resources and mechanisms
for terrorism risk coverage when the Program expires. None of our progress to
date could have been possible without the close cooperation of the National
Association of Insurance Commissioners."
Today's interim guidance, along with interim guidance issued by the Treasury on
December 3, 2002 and December 18, 2002, can be used by insurers in complying
with the statutory requirements prior to the issuance of regulations. The interim
guidance remains in effect until superceded by regulations or subsequent notice.
Both interim guidance notices and other information related to the Terrorism Risk
Insurance Program can be found at www.treasury.gov/trip.Prior to issuance of
final regulations, insurers and other interested parties will have an opportunity to
submit comments on regulations.
Today's notice provides interim guidance concerning specific provisions associated
with the disclosure provisions of the Act, non-U.S insurer participation in the
Program, and the scope of insured loss under the Program.
Related Documents:
•
Interim Guidance
Insurers
Page I of4
Billing Code 481 0-2S-M
DEPARTMENT OF THE TREASURY
Departmental Offices
Interim Guidance Concerning Certain Conditions for Federal Payment, Non-U.S. Insurers, and Scope of
Insurance Coverage in the Terrorism Risk Insurance Act of 2002
AGENCY: Department of the Treasury, Departmental Offices.
ACTION: Notice.
SUMMARY: This notice provides additional interim guidance certain conditions for federal payment in Title I of the
Terrorism Risk Insurance Act of2002 as implemented in Department of Treasury's Terrorism Risk Insurance Program.
DATES: This notice is effective immediately and will remain in effect until superceded by regulations or by
subsequent notice.
FOR FURTHER INFORMATION CONTACT: Mario Ugoletti, Deputy Director, Office of Financial Institutions
and GSE Policy 202-622-2730; Martha Ellett, Attorney-Advisor, Office of the Assistant General Counsel (Banking and
Finance) 202-622-0480.
I
SUPPLEMENTARY INFORMATION: This notice provides additional interim guidance to assist insurers in
ascertaining how they may comply with certain immediately applicable provisions of Title I of the Terrorism Risk
Insurance Act of 2002 (Pub.L.1 07-297) (the Act) prior to the issuance of regulations by the Department of the Treasury
(Treasury). This notice provides interim guidance concerning the timing and certification of disclosures that Treasury
expects to require from an insurer that is making a claim for federal payment under the Terrorism Risk Insurance
Program. In addition, this interim guidance addresses the "separate line item" disclosure requirement in section 103(b)
(2)(C), non-U.S. insurer participation in the Program, and the scope of "insured loss." The interim guidance contained
in this notice, along with interim guidance issued previously by Treasury, may be relied upon by insurers in complying
with these statutory requirements prior to the issuance of regulations on these issues. This interim guidance remains in
effect until superceded by regulations or subsequent notice.
I. Background
On November 26, 2002, the President signed into law the Terrorism Risk Insurance Act of 2002. The Act became
effective immediately. It establishes a temporary federal program of shared public and private compensation for
insured commercial property and casualty losses resulting from an "act of terrorism," as defined in the Act. The
Terrorism Risk Insurance Program is administered and implemented by Treasury and will sunset on December 31,
2005.
II. Interim Guidance
Treasury will be issuing regulations to administer and implement certain elements of the Terrorism Risk Insurance
Program (Program). To assist insurers in complying with certain statutory requirements prior to the issuance of
regulations, Treasury has previously issued interim guidance, located at 67 FR 76206 (December 11,2002) and at 67
FR 78864 (December 26,2002) (also located on Treasury's Terrorism Risk Insurance Program website at
http://www.treas.gov/press/reieases/reports/interimguidance.htm
5/19/2005
Insurers
Page 2 of4
www.treasury.gov/trip).This notice contains additional interim guidance concerning disclosures as conditions for
federal payment in section 103(b)(2) of the Act. non-U.S. insurer participation in the Program, and the scope of
"insured loss."
How Mayan Insurer Comply with the Section t03(b)(2) Requirements for Disclosure at the Time of Offer,
Purchase and Renewal of the Policy'?"
As conditions for federal payment under the Program, subparagraph I 03(b )(2) requires that an insurer provide clear and
conspicuous disclosure to the policyholder, for existing policies and for new policies, of the premium charged for
insured losses covered by the Program and the federal share of compensation for insured losses under the Program. For
policies issued after the date of enactment (November 26,2002), Subparagraphs 103(b)(2)(B) and (C) require these
disclosures to be made to the policyholder "at the time of offer, purchase and renewal of the policy." For purposes of
interim guidance, Treasury deems an insurer to be in compliance with these disclosure requirements "at the time of
offer, purchase and renewal" if the insurer makes the required clear and conspicuous disclosures to the policyholder or
applicant no later than at the time that the insurer first fornlally offers to provide insurance coverage or renew a policy
for a current policyholder, and makes clear and conspicuous reference back to that disclosure as well as the final terms
of terrorism insurance coverage at the time the transaction is completed. The required disclosures can be
communicated by the use of channels, methods and forms of communication nornlally used to communicate similar
policyholder information. This interim guidance is provided as a safe harbor to assist insurers in complying with
conditions for federal payment prior to the issuance of regulations. It is not the exclusive means by which an insurer
may comply with the section 103(b)(2) (B) and (C) requirements.
How Mayan Insurer Comply with the "Separate Line Item" Requirement for Policies Issued More than 90 days
After Date of Enactment'?
Section I 03(b )(2)(C) requires that an insurer make the required clear and conspicuous disclosures on a "separate line
item" in the policy for any policy issued more than 90 days after the date of enactment of the Act (November 26,
2002). In previous interim guidance, published at 67 FR 76206 (December II, 2002), Treasury indicated that
additional interim guidance, as appropriate, as well as regulations would be issued on the "separate line item"
requirement. For purposes of interim guidance, Treasury deems an insurer to be in compliance with the separate line
item requirement of Section I 03(b )(2)(C) if it makes the required "clear and conspicuous" disclosure: i) on the
declarations page of the policy; ii) elsewhere within the policy itself; or iii) in any rider or endorsement that is made a
part of the policy, as long as the disclosure is clear and conspicuous and otherwise meets the requirements of section
103(b )(2) and previous interim guidance. This interim guidance is provided as a safe harbor to assist insurers in
complying with conditions for federal payment prior to the issuance of regulations; however, it is not the exclusive
means by which an insurer may comply with the section I 03(b )(2)(C) "separate line item" requirement.
How Mayan Insurer Certify its Compliance with Required Disclosures as a Condition for Payment in Section
103(b) of the Act'?
Section I 03(b) of the Act sets forth conditions for federal payments for an insured loss that is covered by an insurer,
including provision of clear and conspicuous disclosure to the policyholder of the premium charged for insured losses
covered by the Program and the federal share of compensation for insured losses under the Program. The Act also
requires as a condition for payment that an insurer process a claim for an insured loss and submit a claim to Treasury
for payment of the federal share of compensation for the insured loss, along with certain written certifications,
including certification of the insurer's compliance with the provisions of subsection I 03(b) of the Act. In previous
interim guidance, Treasury has addressed the statutory terms "insurer" and "insured losses" under the Program, 67 FR
78864 (December 26,2002), and Treasury intends to issue regulations establishing claims procedures for federal
payments under the Program. With regard to an insurer's certification of its compliance with the disclosure
requirements in subsection 103(b )(2), Treasury expects to propose regulations that will require an insurer to certify that
it complied with the required disclosure(s) to the policyholder on the underlying claim or claims submitted by the
http://www.treas.gov/press/releases/reports/interimguidance.htm
5/19/2005
Insurers
Page 3 of 4
insurer for federal payment under the Program.
How Do the Nullification Requirement of Section 105 and Other Provisions of the Act Apply to Non-U.S.
Insurers?
For the purposes of this interim guidance, Treasury views the nullification requirement of Section 105 and other
provisions of the Act as they apply to non-U.S. insurers in the context of such insurers' required participation under the
Act. The provisions of the Act apply to entities that meet the definition of "insurer" under Section I 02( 6) of the Act
and with the respect to an "insured loss" covered by the Program. Included among the other requirements of the Act
are: the "make available" requirements of Section I 03( c); the disclosure requirements as a condition for Federal
payment contained in Section 103(b)(2); and the policy surcharge (recoupment) provisions of Section 103(e)(8). For
non-U.S. insurers that are required to participate in the Program, participation requirements for existing policies that
provide coverage for "insured losses" include the "make available" and other requirements in the Act, such as those
listed above, even in the absence of nullification under Section 105. The disclosure standards referenced in this and
other interim guidance also would apply.
For the Purpose of Determining the Scope of '"Insured Loss," how is Section 102(5)(8) Interpreted as it Relates
to U.S. Air carriers and U.S. Flag Vessels?
Section 102(5)(8) defines an "insured loss" to include losses that occur "to an air carrier (as defined in section 40102 of
Title 49, United States Code), to a United States flag vessel (or vessel based principally in the United States, on which
United States income tax is paid and whose insurance coverage is subject to regulation in the United States) regardless
of where the loss occurs." Section 40102 defines an "air carrier" generally as a United States citizen (individual,
partnership, or corporation) that provides foreign or interstate "air transportation."
For the purposes of interim guidance, Treasury is providing further clarification that insured losses under Section 102
(5)(8) are only those losses that are incurred by the air carrier or the United States flag vessel. Insured losses under
Section 102(5)(8) would not include losses incurred by third parties that are associated with losses incurred by a
United States air carrier or a United States flag vessel, unless the cause of the loss originated within the United States.
Dated: January 22,2003
Wayne A. Abernathy
Assistant Secretary of the Treasury
http://www.treas.gov/press/releases/reports/interimguidance.htm
5/19/2005
Insurers
Page 4 of4
http://www.treas.goy/press/releases/reports/interimguidance.htm
5119/2005
KD-37R3: Commission on Postal Service Announces Members of Subcommittees
Page I of2
FROM THE OFFICE OF PUBLIC AFFAIRS
January 22, 2003
KD-3783
President's Commission on U,S, Postal Service Announces
Subcommittee Members
Tile President's COlllmlsslon on tile United States Postal Service today announced
tile members of Its four subcommittees, which were estaiJllshed dUring the
Commission's Jan 8, 2003 publiC meeting III Wasillngton, DC
The subcommittees are comprised of members of tile Commission. Commission
Co-Cilalrs James Joilnson and Harry Pearce are ex-officIo members of each
subcolllmittee.
The Business Model Subcommittee members Include Chairman Richard Levin, Don
Cogman, Carolyn Gallagiler, Norman Seabrook, and Robert Walker. The
Subcommittee Will be responSible for assesslllg the Postal Service's current
'government corporation" business model. As part of tillS assessment, the
Subcommittee Will study tile Postal Service's universal service obligation, the mall
delivery infrastructul'e, the current rate regulation system, and pricing fleXibility
TillS Subcommittee Will also assess the "Commercial Government Enterprise"
business model proposed by the Postal Service In its own Transformation Plan.
The Private-Sector Partnership Subcommittee members Include Chairman Joseph
Wright, Don Cogman and Norman Seabrook. The Subcommittee Will be responSible
for analyzing tile current role of the private sector in the mall delivery system,
including negotiated service agreements, outsourcing, and worksharlng. It Will also
attempt to Identify opportunities for the Postal Service to enter Into partnerS/lips With
the private sector as It seeks to become more efficient and effective.
The Technology Challenges and Opportunities Subcommittee members Include
Chairman Robert Walker, Dlonel Aviles and Joseph Wright. Tile Subcommittee will
be responSible for assessing the impact of new technologles--such online bill
payment and presentment, e-mail, and electronic funds transfer--on tile Postal
Service's business and attempt to determille whether tilese tecilnologles will
continue to erode the Postal Service's market silare. The Subcommittee Will also
assess the Postal Service's own technology Initiatives and tilelr Impact on
productiVity and finanCial performance
The Workforce Subcommittee members Include Chairwoman Carolyn Gallagher,
Dlonel AViles and Ricilard Levill. The Subcommittee will be responsible for
assessing tile Postal Service's current collective bargaining and dispute resolution
procedures as well as reviewing alternative models. It Will review employee pay
and other associated labor costs; productiVity; employee recruitment, traliling and
development; and workers' compensation claims. The Workforce Subcommittee Will
also review tile status of tile Postal Service's unfunded pension and retiree healtil
care liabilities.
Tile nine-member bipartisan Commission, established by President Busil on
December 11, 2002, seeks to Identify tile operational, structural, and financial
challenges facing the Postal Service; examille potential solutions; and recommend
legislative and administrative steps to ensure the long-term Viability of postal
service in the United States. The Commission Will submit ItS report to the President
by July 31,2003.
http://www.treas.gov/press/releases/kd3783.htm
4/2212005
PUBLIC DEBT NEWS
Departlllent of the Treasury· Bureau of tht' Puhlit' Deht • Washington, 1)(' 20239
TfH:A~; U R Y
FlUREl\U
ew
c~
E( 'lIld T'{ 1\1 WT
THE I'UP)' Il' L'EHT -
r I >II
1<1-::; I J LT:;
W/\:;II j IJI;TlJt:
FOR IMMEDIATE RELEASE
~'o 0 3
CCJtITN~T
j)r:
f i,-'c~ ,~f FIf,df"=in'j
2 !J 2 - G!J 1 -3 S S IJ
:
()t
RESULTS OF TREI\SURY'S AUCTION Of 4-WEEK BILLS
2t3-[Jay Bill
January 23, 2003
February 2Cl, 2Cl03
912795LZ2
Issue Date:
HaturIty Date:
CUSIP '1umber:
High Rate:
1. 135
Investment Rate 1/:
1. 148
Price:
9!J. 912
All noncompetItive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted
53.42
All tenders at lower rates were accepted in full.
AMOUKTS TENDERED AND ACCEPTED
Tender Type
(in thousands)
Accepted
Tendered
Competitive
Noncompetitive
FIMA (noncompetitive)
$
40,016,753
33,664
$
13,966,741
33,664
o
o
SUBTOTAL
federal Resecie
$
TOTAL
40,050,417
14,000,405
2,397,687
2,397,687
42,448,lCl4
$
16,398,Cl92
t1edian rate
1.130': 501 of the amount of accepted competitive tenders
Low rate
1.120<
5: of the amount
was tendered at or below that rate.
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 40,050,417
/
14,000,405 = 2.86
1/ Equivalent coupon-Issue yield.
http://www.publicdebt.treas.gov
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 22, 2003
KD-3785
TREASURY ISSUES GUIDANCE ON INVENTORY ACCOUNTING METHODS
FOR BEBUILDABLE MOTOR VEHICLE PARTS
Today the Treasury Department and the Internal Revenue Service issued guidance
that provides a safe harbor method of accounting for the valuation of a taxpayer's
inventory of rebuildable motor vehicle parts under the lower of cost or market (LCM)
inventory valuation method. In the remanufacturing industry rebuildable used or
worn parts that will be remanufactured are referred to as "cores."
The guidance provides taxpayers:
• A safe harbor method of determining the cost for cores in ending inventory.
• A safe harbor method of determining the market value of cores in ending
inventory.
• A procedure for taxpayers currently using the LCM method to obtain automatic
consent to change to the safe harbor method.
• A procedure for qualifying remanufacturers and resellers not currently using the
LCM method to obtain automatic consent to change to the LCM method in
conjunction with a change to the safe harbor method.
The guidance was released as part of the Industry Issue Resolution (IIR) program.
It reduces long-standing controversy between the IRS and taxpayers in the motor
vehicle remanufacturing industry.
The text of Revenue Procedure 2003-20 is attached.
Part III
Administrative, Procedural, and Miscellaneous
26 CFR 601.204: Changes in accounting periods and in methods of accounting.
(Also Part 1, §§ 263A, 446, 471,472,481,7121; 1.263A-1, 1.446-1,1.471-2,1.471-4,
1.472-2,1.481-1)
Rev. Proc. 2003-20
SECTION 1. PURPOSE
This revenue procedure provides a safe harbor method of accounting (the "Core
Alternative Valuation" (CAV) method) for remanufacturers and rebuilders of motor
vehicle parts ("remanufacturers") and resellers of remanufactured and rebuilt motor
vehicle parts ("resellers") that use the lower of cost or market (LCM) inventory valuation
method to value their inventory of cores held for remanufacturing or sale. The CAV
method is provided by the Commissioner pursuant to his authority under § 446 of the
Internal Revenue Code in order to minimize disputes, provide certainty, and simplify
inventory computations. This revenue procedure also provides a procedure for
qualifying remanufacturers and resellers currently using an LCM method to obtain
automatic consent of the Commissioner to change to the CAV method. In addition, this
revenue procedure provides a procedure for qualifying remanufacturers and resellers
not currently using an LCM method to obtain automatic consent to change to an LCM
method in conjunction with a change to the CAV method.
SECTION 2. BACKGROUND
:2
.01 In General.
(1) Remanufacturers acquire inventories of used motor vehicle parts (e.g., wiper
motors, engines, transmissions, and alternators for automobiles, trucks, buses, etc.) for
use in remanufacturing. These used parts are frequently referred to within the
remanufacturing industry as "cores." Remanufacturers rebuild motor vehicle parts from
cores through use of new and used component parts and sell the resulting products as
remanufactured replacement parts. Resellers acquire cores in conjunction with their
resale activity and sell the cores to a remanufacturer or another reseller in the
distribution chain.
(2) Remanufacturers and resellers acquire cores from customers ("customer cores")
who purchase remanufactured replacement parts. To encourage a customer to return
the core, remanufacturers and resellers generally offer the customer a credit (offset
against the purchase price). Remanufacturers and resellers also acquire cores from
third-party suppliers of cores (businesses that specialize in supplying cores to meet
specific needs, referred to within the industry as "core suppliers" or "core brokers") and
occasionally acquire cores directly from other sources.
(3) Controversy exists as to the proper market valuation of cores under the LCM
method. See Consolidated Manufacturing, Inc. v. Commissioner, 249 F.3d 1231 (10 th
Cir. 2001), rev'g in part, 111 T.C. 1 (1998). In order to reduce controversy and minimize
disputes, the Service has determined that it is appropriate to provide a safe harbor
procedure for the LCM valuation of cores in inventory .
.02 Section 471 of the Internal Revenue Code, which governs the treatment of
inventories, provides two tests to which each inventory must conform: (1) it must
conform as nearly as may be to the best accounting practice in the trade or business;
and (2) it must clearly reflect income. Section 1.4 71-2(c) of the Income Tax Regulations
provides that the bases of valuation most commonly used by business concerns and
which meet the requirements of § 471 are (1) cost and (2) cost or market, whichever is
lower. Section 1.471-2(c) also provides that any goods in an inventory that are
unsalable at normal prices or unusable in the normal way because of damage,
imperfections, shop wear, changes of style, odd or broken lots, or other similar causes,
including second -hand goods taken in exchange, should be valued, if such goods
consist of raw materials held for use or consumption, upon a reasonable basis taking
into consideration the usability and condition of the goods, but in no case shall such
value be less than the scrap value .
.03 Section 1.471-3(b) defines the cost of merchandise purchased since the beginning
of the taxable year as the invoice price less trade or other discounts, except strictly cash
discounts approximating a fair interest rate, which may be deducted, or not, at the
option of the taxpayer, provided the taxpayer follows a consistent course. To this net
invoice price should be added transportation or other necessary charges incurred in
acquiring possession of the goods. In the case of merchandise produced by the
taxpayer, § 1.471-3(c) defines cost as (1) the cost of raw materials and supplies
entering into or consumed in connection with the product, (2) expenditures for direct
labor, and (3) indirect production costs incident to, and necessary for, the production of
the particular article, including in such indirect production costs an appropriate portion of
management expenses, but not including any cost of selling or return on capital,
whether by way of interest or profit. See §§ 1.263A-1 and 1.263A-2 for more specific
4
rules regarding the treatment of production costs .
.04 Section 1.4 71-4(a) provides that, under ordinary circumstances and for normal
goods in inventory, "market" means the aggregate of the current bid prices prevailing at
the date of the inventory of the basic elements of cost reflected in inventories of goods
purchased and on hand, goods in process of manufacture, and finished manufactured
goods on hand. The basic elements of cost include direct materials, direct labor, and
indirect costs required to be included in inventories by the taxpayer (e.g., under § 263A
and its underlying regulations for taxpayers subject to that section). For taxpayers to
which § 263A applies, for example, the basic elements of cost must reflect all direct
costs and all indirect costs properly allocable to goods on hand at the inventory date at
the current bid price of those costs, including but not limited to the cost of purchasing,
handling, and storage activities conducted by the taxpayer, both prior to and
subsequent to acquisition or production of the goods .
.05 Section 1.471-4(c) provides that if inventory is valued upon the basis of cost or
market, whichever is lower, the market value of each article on hand at the inventory
date shall be compared with the cost of the article, and the lower of such values shall be
taken as the inventory value of the article .
.06 Section 1.4 71-2(f) provides deducting from inventory a reserve for price changes,
or an estimated depreciation in the value of the inventory, is not in accord with the
regulations underlying § 471 .
.07 Section 472(b) and § 1.472-2 require taxpayers using the last-in, first-out (LIFO)
method to inventory their goods at cost.
.08 Section 446(e) and § 1.446-1 (e)(2)(i) require that, except as otherwise expressly
5
provided, a taxpayer must secure the consent of the Commissioner before changing a
method of accounting for federal income tax purposes. Section 1.446-1 (e)(3)(ii)
authorizes the Commissioner to prescribe administrative procedures setting forth the
terms and conditions deemed necessary to permit a taxpayer to obtain consent to
change a method of accounting in accordance with § 446(e).
SECTION 3. SCOPE
.01 Applicability. This revenue procedure applies to remanufacturers and resellers
that want to change to the CAV method described in section 4 of this revenue
procedure to value inventories of cores. For purposes of this revenue procedure,
"cores" include electrical, mechanical, hydraulic, and other operating motor vehicle
parts, including parts of automobiles, trucks, buses, motorcycles, boats, construction
equipment, farm machinery, and other o~ and off-road motorized equipment. The CAV
method applies only to cores held in inventory for remanufacturing or, in the case of a
reseller, held for sale to a remanufacturer or another entity in the distribution chain. The
CAV method only applies to cores valued under the LCM method .
.02 Inapplicability. This revenue procedure does not apply to a taxpayer that values
its inventory of cores at cost (including a taxpayer using the LIFO method) unless the
taxpayer concurrently changes (under section 6.02 of this revenue procedure) from cost
to the LCM method for its cores (including labor and overhead related to the cores in
raw materials, work-i n-process and finished goods). A taxpayer that wants to
concurrently change from cost to the LCM method must: (a) not be otherwise prohibited
from using the LCM method; (b) comply with the general rules relating to inventories
under § 471 and the regulations thereunder; and (c) in the case of taxpayers using the
LlF 0 method, use the LCM method and a permitted method for identification as
determined and defined in section 10.01 (1 )(b) of the APPENDIX of Rev. Proc. 2002-9,
2002-3 I.R.B. 327, 368-69.
SECTION 4. THE CORE ALTERNATIVE VALUATION METHOD
.01 In General.
(1) A taxpayer using the CAV method values its inventory of cores at LCM,
determines cost in accordance with section 4.02 of this revenue procedure, and
determines market in accordance with section 4.03 of this revenue procedure.
(2) The CAV method will be a permissible method of accounting provided the
taxpayer follows the rules and computational methodology described in sections 4.02
through 4.05 of this revenue procedure and, if the taxpayer is changing from another
method to the CAV method, the provisions of section 6 of this revenue procedure
regarding changes in method of accounting. All computations under the CAV method,
however, are subject to verification upon examination of the taxpayer's income tax
returns .
.02 Determination of Cost.
(1) In general. Under the CAV method, the taxpayer is required to use as the cost
of each core in ending inventory the invoice price adjusted, as appropriate, for
discounts, freight costs, and other direct and indirect costs properly allocable to the
cores as described in §§ 1.471-3 and 1.263A-1. If the core was acquired from a core
supplier or broker, the invoice price is the amount paid to the core supplier or broker. If
the core was acquired from a customer, the invoice price is the sum of any credit
allowed to the customer and any amount paid to the customer. Consolidated
7
Manufacturing, Inc. v. Commissioner, 249 F.3d 1231 (10th Cir. 2001), aff'd on this
issue, 111 T.C. 1 (1998).
(2) Service may redetermine appropriate cost. As a general rule, the taxpayer must
follow the form that the taxpayer used for the transaction. See, for example, In re
Steen, 509 F.2d 1398, 1402 n. 4 (9th Cir. 1975) and Commissionerv. Danielson, 378
F.2d 771, 775 (3d Cir. 1967). If the Service determines, however, that the taxpayer's
use of the credit amount as the invoice price does not clearly reflect income (for
example, because the taxpayer artificially inflated both the price of the remanufactured
core and the credit amount solely to manipulate gross receipts for tax avoidance). the
Service may examine the substance of the transaction to determine the appropriate cost
for a core. See, for example, Gregory V. Helvering, 293 U.S. 465,55 S. Ct. 266, 79 L.
Ed. 596 (1935) .
.03 Determination of Market Value.
(1) In general. Under the CAV method, the market value under § 1.471-4 of each
core in ending inventory is the "allowable supplier price" adjusted, as appropriate, for
other direct and indirect costs properly allocable to the core as described in §§ 1.471-4
and 1.263A-1. The allowable supplier price will be considered to be the replacement
cost for purposes of §§ 1.471-4 and 1.263A-1.
(2) Allowable supplier price. For purposes of this revenue procedure the "allowable
supplier price" is the amount the taxpayer would pay in an arm's length transaction to
acquire a particular core from a core supplier or core broker, plus the related
transportation cost that would be incurred to acquire possession of the core from the
core broker or supplier at year-end. If the taxpayer has purchased a particular type of
core from several core suppliers or core brokers during the tax year, the allowable
supplier price for that core type will be deemed to be the weighted-average price,
including transportation cost, the taxpayer would have to pay in an arm's length
transaction to acquire the particular core type at year-end from the core suppliers or
core brokers from whom the cores were purchased during the tax year. If the taxpayer
has not purchased a particular core type from a core supplier or core broker during the
tax year, the taxpayer must identify its largest (in dollar terms) supplier of cores during
the current tax year that also sells the particular core type in the ordinary course of its
business; the allowable supplier price will be the arm's length price from that supplier for
the core type at year-end plus the transportation cost that would be incurred to acquire
the core type from that supplier. If none of the taxpayer's suppliers sell the particular
core type, the taxpayer must reasonably determine the allowable supplier price based
on the arm's length price for the core type at year-end, plus the transportation cost, in
the geographical area or market in which the taxpayer regularly participates. In any
case, no further adjustments will be allowed in determination of allowable supplier price.
(3) Example of allowable supplier price calculation using weighted-average price.
Taxpayer, a remanufacturer, had 4 units of Part X customer cores in inventory at yearend. Taxpayer acquired these customer cores from customers in transactions in which
taxpayer sold to the customers remanufactured parts and received cores from the
customers in exchange for credits toward the purchase price of the remanufactured
parts. During the tax year, Taxpayer purchased 8 units of Part X cores from suppliers
(2 units of Part X from Core Supplier A and 6 units of Part X from Core Supplier 8).
Therefore, Taxpayer purchased 25% (2 of 8 units) of the total number of Part X
acquired for the year from Core Supplier A and 75% (6 of 8 units) of the total number of
Part X acquired for the year from Core Supplier B. At the end of the taxable year, the
price Taxpayer would have to pay in an arm's length transaction to acquire Part X,
including transportation cost, was $20 from Core Supplier A and $16 from Core Supplier
B. Taxpayer would determine the allowable supplier price for Part X customer cores
under the CAV method as follows:
# of Units
Core Supplier A
Core Supplier B
Total
Purchased
During Year
2
6
% of Total Units
Purchased
During Year
25%
75%
End of Year
Price
$20
$16
~
CAV Core Supplier Price for Part X Customer Cores
=(25% x $20) + (75% x 16) =$17 .
.04 Comparison of Cost and Market. Under the CAV method, the market value of
each core in ending inventory, as determined under section 4.03 of this revenue
procedure, shall be compared with the cost of each core in ending inventory, as
determined under section 4.02 of this revenue procedure, and the lower of such values
shall be the inventory value of the core. This analysis must be performed on a part-bypart basis .
.05 Write-down of Defective Cores. Under the CAV method, a taxpayer may not
reduce the value of a defective core under § 1.471-2(c) until the taxpayer discovers that
the core is subnormal and scraps the core or offers the core for sale at a bona fide
selling price that is less than cost. In no case maya taxpayer value a core at less than
the scrap value. A taxpayer may not reduce the value of cores based on anticipated
defect percentages or historical defect experience rates. If a taxpayer complies with the
requirements of this revenue procedure, the Service will not disallow a write-down of a
10
defective core in the year it is scrapped on the grounds that the decline in the value of
the core actually occurred in a preceding taxable year.
SECTION 5. AUDIT PROTECTION FOR TAXPAYERS CURRENTLY USING THE
SAFE HARBOR METHOD
If a taxpayer within the scope of this revenue procedure was consistently using
the CAV method provided in section 4 of this revenue procedure before February 10,
2003, the taxpayer's use of the CAV method will not be raised by the Service as an
issue in a taxable year that ends before February 10, 2003. Moreover, if such
taxpayer's use of the CAV method has already been raised as an issue in examination,
appeals, or before the Tax Court in a taxable year that ends before February 10, 2003,
the issue will not be further pursued by the Service.
SECTION 6. CHANGES IN METHOD OF ACCOUNTING
.01 In General. A change in the treatment of customer cores in inventory to the CAV
method provided by this revenue procedure is a change in method of accounting to
which the provisions of §§ 446 and 481 and the regulations thereunder apply.
Therefore, a taxpayer within the scope of this revenue procedure that wishes to change
to the CAV method for a taxable year ending on or after December 31, 2002, must file a
Form 3115, Application for Change in Accounting Method .
.02 Automatic Change for Taxpayers Within the Scope of this Revenue Procedure.
(1) Automatic change to the CAV method. A taxpayer within the scope of this
revenue procedure that wants to change to the CAV method must follow the automatic
change in accounting method provisions of Rev. Proc. 2002-9, as modified by Rev.
Proc. 2002-19, 2002-13 I.R.B. 696, Announcement 2002-17,2002-8 I.R.B. 561, and
II
Rev. Proc. 2002-54, 2002-35 I.R.B. 432, with the following modifications:
(a) The scope limitations in section 4.02 of Rev. Proc. 2002-9 do not apply to a
taxpayer that wants to change to the CAV method for its first taxable year ending on or
after December 31, 2002, provided the taxpayer's method of accounting for cores is not
an issue under consideration in examination (within the meaning of section 3.09 of Rev.
Proc. 2002-9) at the time the Form 3115 is filed with the national office;
(b) In lieu of the label required by section 6.02(4) of Rev. Proc. 2002-9, taxpayers
are instructed to write "Filed under Rev. Proc. 2003-20" at the top of the form; and
(c) Taxpayers making concurrent changes under subsections (2) or (3) of this
section should include the concurrent change with the change to the CAV method in a
single application.
(2) Change from cost to LCM. An automatic change in method of accounting to the
CAV method under this revenue procedure also includes, where applicable, a
concurrent change from the cost method to the LCM method.
(3) Change from LIFO. An automatic change in method of accounting to the CAV
method under this revenue procedure also includes a concurrent change from the LIFO
method to a permitted method for identification as determined and defined in section
10.01(1)(b) of the APPENDIX of Rev. Proc. 2002-9. A taxpayer that desires to
discontinue LIFO to use the CAV method must make a concurrent change from its cost
method to the LCM method.
SECTION 7. RECORD KEEPING
Section 6001 provides that every person liable for any tax imposed by the Code,
or for the collection thereof, must keep such records, render such statements, make
12
such returns, and comply with such rules and regulations as the Secretary may from
time to time prescribe. The books or records required by § 6001 must be kept at all
times available for inspection by authorized internal revenue officers or employees, and
must be retained so long as the contents thereof may become material in the
administration of any internal revenue law. § 1.6001-1(e). In order to satisfy the record
keeping requirements of § 6001 and the regulations thereunder, a taxpayer that uses
the CAV method should maintain records supporting all aspects of its inventory
valuation including but not limited to cost of supplier cores.
SECTION 8. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2002-9 is modified and amplified to include this automatic change in
section 9 of the APPENDIX.
SECTION 9. EFFECTIVE DATE
This revenue procedure is effective for taxable years ending on or after
December 31,2002.
SECTION 10. DRAFTING INFORMATION
The principal authors of this revenue procedure are Willie E. Armstrong, Jr. and
W. Thomas McElroy, Jr. of the Office of the Associate Chief Counsel (Income Tax and
Accounting). For further information regarding this revenue procedure contact Mr.
Armstrong or Mr. McElroy at (202) 622-4970 (not a toll free call).
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
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January 23, 2003
KD-3786
TREASURY ISSUES INTERIM GUIDANCE ON THE
NONACCRUAL EXPERIENCE METHOD OF ACCOUNTING
Today the Treasury Department and the Internal Revenue Service issued interim
guidance, pending final regulations, on the nonaccrual experience method of
accounting (NAE).
The nonaccrual experience method is a method of accounting under which certain
service-providers are not required to accrue income earned for the performance of
services if, based on the taxpayer's experience, the income will not be collected.
For example, a hospital may know, based on its experience, that it will not collect a
portion of an amount billed for hospital services.
The guidance provides two safe harbor NAE methods and a procedure for selftesting alternative NAE methods. In addition the guidance provides procedures for
taxpayers to obtain automatic consent to change to a safe harbor or alternative
NAE method. Finally, the guidance provides procedures to change from an NAE
method if a taxpayer is no longer eligible to use an NAE method as a result of
recent statutory changes.
Until final regulations are issued to implement the recent statutory changes related
to NAE methods, this interim guidance gives taxpayers the certainty they need to
be able to determine the uncollectible amounts to be excluded from income under
the nonaccrual experience method of accounting.
The text of Notice 2003-12 is attached.
Related Documents:
•
Text of Notice 2003-12
"
DEPARTMENT OF THE TREASURY
OFFICE OF PUBLIC AFFAIRS
Part III - Administrative, Procedural, and Miscellaneous
Nonaccrual Experience Method of Accounting
Notice 2003-12
SECTION 1. PURPOSE
The Internal Revenue Service is currently working on regulations under
§ 448(d)(5) of the Internal Revenue Code as amended by § 403 of the Job Creation and
Worker Assistance Act of 2002, Pu b. L. No. 107-147, § 403, 116 Stat. 21 (the Act),
regarding the nonaccrual experience ("NAE") method. Until such regulations are issued
in final form, this notice provides interim guidance on which taxpayers may rely. The
Service expects that the final regulations will incorporate the rules set forth in this Notice
and will be effective for taxable years ending after March 9, 2002. This interim guidance
includes: (1) for taxpayers who no longer qualify to use a NAE method, procedures to
change their method of accounting; (2) for taxpayers who qualify to use a NAE method,
two safe harbor NAE methods that will be presumed to clearly reflect the taxpayer's
2
NAE; (3) for taxpayers who qualify to use a NAE method but wish to compute their NAE
using a formula other than the two safe harbors provided, the requirements that must be
met in order to use an alternative formula to compute their NAE; and (4) for taxpayers
who wish to change to a different NAE method, the procedures necessary to obtain
automatic consent of the Commissioner to change to one of the safe harbor NAE
methods or to an alternative NAE method that clearly reflects their experience.
SECTION 2. BACKGROUND
.01 Under § 448(d)(5), prior to its amendment by the Act, taxpayers using an
accrual method of accounting and performing services were not required to accrue any
portion of their service-related income that, on the basis of their experience, would not
be collected. The Act modifies § 448(d)(5) to provide that a NAE method is now
available only for taxpayers using an accrual method who either provide services in
fields described in § 448(d)(2)(A) (i.e., health, law, engineering, architecture,
accounting, actuarial science, performing arts, or consulting), or who meet the $5 million
annual gross receipts test of § 448(c). As under prior law, a NAE method is available
only to taxpayers not charging interest or penalties for failure to timely pay the amount
charged .
.02 The Act also provides that the Service and the Treasury Department will
issue regulations to permit ta xpayers to determine the uncollectible amounts using
alternative computations or formulas, including safe harbors, that, based on experience,
accurately reflect the amount of income that the taxpayers will not collect. The
amendments by the Act are effective for taxable years ending after March 9, 2002.
3
SECTION 3. NONACCRUAL EXPERIENCE METHODS
.01 In General. Pending the issuance of final regulations under § 448(d)(5), as
amended, a taxpayer eligible to use a NAE method under § 448(d)(5), as amended,
may use one of two safe harbor NAE methods of accounting provided in section 3.02 of
this notice. Alternatively, a taxpayer eligible to use a NAE method under § 448(d)(5),
as amended, may use any other NAE method (an "alternative NAE method") that clearly
reflects the taxpayer's NAE, subject to the requirements of section 3.03 of this notice.
See section 5 of this notice for procedures to obtain automatic consent to change to one
of the safe harbor NAE methods or to an alternative NAE method .
.02 Safe Harbor Methods. The safe harbor NAE methods provided in this section
3.02 will be presumed to clearly reflect a taxpayer's NAE.
(1) Section 1.44B-2T(e)(2) method. A taxpayer may use the NAE method
provided in § 1.448-2T(e)(2) of the temporary income tax regulations.
(2) Actual experience method. (i) Option A: Three-year moving average.
A taxpayer may use a NAE method under which the taxpayer determines the
uncollectible amount ("actual NAE amount") by multiplying its year-end accounts
receivable balance by a percentage ("three-year moving average NAE percentage")
reflecting its actual NAE with respect to its accounts receivable balance at the beginning
of the current taxable year and the two immediately preceding taxable years. Under the
actual experience method, a taxpayer is allowed to increase its actual NAE amount by
5% ("adjusted NAE amount"). The taxpayer's three-year moving average NAE
percentage, actual NAE amount, and adjusted NAE amount are determined according
4
to the following steps:
STEP 1 . Track the receivables in the taxpayer's accounts
receivable balance at the beginning of the current year to determine the dollar amount
of the accounts receivable actually determined to be uncollectible and charged off and
not recovered or determined to be collectible by the date selected by the taxpayer (the
"determination date") for the year. The determination date may not be later than the
earlier of the due date (including extensions) for filing the taxpayer's federal income tax
return for that year or the date on which the taxpayer files such return for that year.
STEP 2. Repeat STEP 1 for the taxpayer's accounts receivable
balance at the beginning of each of the two immediately preceding taxable years.
STEP 3. To determine the taxpayer's three-year moving average
NAE percentage, (i) divide the sum of the net uncollectible amounts from STEP 1 and 2,
by (ii) the sum of the accounts receivable balance at the beginning of the current
taxable year and the accounts receivable balance at the beginning of each of the two
preceding taxable years.
STEP 4. Multiply the percentage computed in STEP 3 by the
taxpayer's accounts receivable balance at the end of the current taxable year. The
product is the taxpayer's actual NAE amount for the current taxable year.
STEP 5. To determine the taxpayer's adjusted NAE amount,
multiply the actual NAE amount from STEP 4 by 1.05.
of this notice.
See Example 1 in section 3.04
5
(ii) Option B: Up to three-year moving average. Alternatively, in computing
its adjusted NAE amount, a taxpayer may use: its current year NAE percentage for the
first year this method is used; a two-year moving average NAE percentage for the
second year this method is used; and a three-year moving average NAE percentage for
the third, and each succeeding, taxable year this method is used. See Examples 2,3
and 4 in section 3.04 of this notice.
(iii) A taxpayer that excludes an amount from income during a taxable year
as a result of the taxpayer's use of the actual experience method cannot deduct in any
subsequent taxable year the amount excluded from income. Thus, the taxpayer cannot
deduct the excluded amount in the next taxable year, which is the taxable year in which
the taxpayer actually determines that the amount is uncollectible and charges the
amount off. If a taxpayer recovers an amount excluded from income, the taxpayer must
include the recovered amount in income. If a calendar year taxpayer using the actual
experience method determines that an amount that was not excluded from income is
uncollectible and should be charged off (e.g., the taxpayer determines on November 1,
2002, that an account receivable that was originated on May 1, 2002, is uncollectible
and should be charged off) the taxpayer may deduct the amount charged off when it is
charged off, but must include any subsequent recoveries in income. The
reasonableness of a taxpayer's determinations that amounts are uncollectible and
should be charged off may be considered on examination. See §§ 1.448-2T(e)(3) and
(e)(4) regarding the mechanics of the NAE method and related examples .
.03 Alternative NAE Methods. A taxpayer may use any alternative NAE method
6
that clearly reflects the taxpayer's actual NAE, provided the taxpayer's alternative NAE
method meets the self-test requirements as described in this section 3.03.
(1) Self-testing. A taxpayer using (or desiring to use) an alternative NAE
method must "self-test" its alternative NAE method for its first taxable year ending after
March 9, 2002, and every third taxable year thereafter by comparing the NAE amount
under the taxpayer's alternative NAE method ("alternative NAE amount") with the
adjusted NAE amount that would have resulted from use of the actual experience
method, as described in Section 3.02(2) of this Notice, for the test period. In no event
will the test period include taxable years ending on or before March 9, 2002, or prior to
the first year in which the taxpayer used its alternative NAE method.
(2) Treated as clearly reflecting NAE. If the total of the alternative NAE
amounts for each year of the test period ("cumulative alternative NAE amount") is less
than or equal to the total of the adjusted NAE amount computed under STEP 5 of
section 3.02(2)(i) of this revenue procedure for each year of the test period ("cumulative
adjusted NAE amount"), then: (i) the taxpayer's alternative NAE method will be treated
as clearly reflecting its NAE for the test period; and (ii) the taxpayer may continue to use
that alternative NAE method, subject to a requirement to self-test again in three taxable
years. See Example 6 in section 3.04 of this notice.
(3) Treated as not clearly reflecting NAE. If the cumulative alternative
NAE amount is more than the cumulative adjusted NAE amount for the test period,
then: (i) the taxpayer's alternative NAE method will be treated as not clearly reflecting
its NAE for the test period; and (ii) the taxpayer must change its NAE method of
7
accounting to a method that will clearly reflect its NAE. See Examples 7 and 8 in
section 3.04 of this notice.
(4) Changes to or from alternative NAE methods. A taxpayer that
voluntarily changes its NAE method of accounting as a result of section 3.03(3) of this
notice should follow the automatic change in method of accounting procedures
described in Section 5.02 of this notice. A taxpayer that must change its NAE method
of accounting as a result of Section 3.03(3) of this Notice, but does not change, will be
subject to being changed by the Service on examination to the actual experience
method. A ta xpayer that does not maintain records of the data necessary to determine
its actual NAE (in accordance with section 3.02(2) of this notice) will be subject to being
changed by the Service on examination to the specific charge-off method. A taxpayer
described in this section that is required by the Service to change its NAE method of
accounting on examination will be subject to such change in the earliest open taxable
year under examination, and will be required to take into account any resulting § 481 (a)
adjustment entirely in the year of change, and may be subject to penalties. See
§ 446(f) .
.04 Examples. In each example, the taxpayer: (1) uses a calendar year for
federal income tax purposes and an accrual method of accounting; (2) is eligible to use
a NAE method under § 448(d)(5), as amended by the Act; and (3) selects an
appropriate determination date for each taxable year. In each of Examples 1-5, the
taxpayer wants to use the actual experience method beginning in 2002.
Example 1. Taxpayer A has the data necessary to track the uncollectible
8
amounts in its beginning-of-year accounts receivable for the current taxable year and
the two immediately preceding taxable years. A determines that its actual accounts
receivable collection experience is as follows:
Year
2000
2001
2002
Total
Beginning AIR Amount
Charged Off by Determination Date
(adjusted for recoveries)
Total AIR Balance
At Beginning of Year
$1,000,000
760,000
1,975,000
$3,735,000
$35,000
75,000
65,000
$175,000
As ending AIR Balance on 12/31/2002 is $880,000.
In 2002, A chooses to compute its NAE amount by using the three-year moving average
under Option A in section 3.02(2)(i) of this notice. Thus, A's three-year moving average
NAE percentage is 4.7%, determined by dividing the sum of the amount of A's
receivables in its account on January 151 of 2000, 2001, and 2002, that were determined
to be uncollectible and charged off (adjusted for recoveries) on or before the
corresponding determination dates, by the sum of the balances of A's accounts
receivable account on January 1 51 of 2000,2001, and 2002 (i.e., $175,0001$3,735,000
or 4.7%). Thus, A's actual NAE amount for 2002 is determined by multiplying this
percentage by the balance of A's accounts receivable account on December 31,2002
(i.e., $880,000 x 4.7%
= $41,360).
A is permitted to exclude from gross income in 2002
an amount equal to 105% of A's actual NAE amount ($41,360 x 105% = $43,428). This
is
As adjusted NAE amount for 2002.
Example 2. The facts are the same as Example 1, except A has not maintained
9
the data necessary to use Option A in section 3.02(2)(i) of this notice. A determines
that, of its 2002 beginning -of-year receivables of $1 ,975,000, $65,000 were determined
to be uncollectible and charged off (adjusted for recoveries) on or before September 15,
2003, the date A timely files its federal income tax return for 2002 (the determination
date). A chooses to use Option B in section 3.02(2)(ii) of this notice to compute its
adjusted NAE amount for 2002. A's current year NAE percentage is 3.3%, determined
by dividing the amount of A 's receivables in its account on January 1, 2002, that were
charged off as uncollectible (adjusted for recoveries) on or before the determination
date, by the balance of A 's accounts receivable account on January 1, 2002 (i. e.,
$65,0001$1,975,000 or 3.3%). Thus, A's actual NAE amount for 2002 is determined by
multiplying this percentage by the balance of A 's accounts receivable account on
December 31,2002 (i.e., $880,000 x 3.3% = $29,040). A is permitted to exclude from
gross income in 2002 an amount equal to 105% of A's actual NAE amount ($29,040 x
105%
=$30,492).
This is A's adjusted NAE amount for 2002.
Example 3. The facts are the same as Example 2. A determines that its
accounts receivable collection experience for 2003 is as follows:
Total AIR Balance
At Beginning of Year
2002
2003
Total
Beginning AIR Amount
Charged Off by Determination Date
(adiusted for recoveries)
$1,975,000
880,000
$2,855,000
$65,000
95,000
$160,000
A's ending AIR Balance on 12/31/2003 is $2,115,000.
In 2003, A must compute its NAE amount using an average of its actual NAE for 2002
10
and 2003 (in accordance with Option B in section 3.02(2)(ii) of this notice). Thus, A's
two-year moving average NAE percentage is 5.6%, determined by dividing the sum of
the amount of A 's receivables in its accounts on January 1 st of 2002 and 2003, that
were determined to be uncollectible and charged off (adjusted for recoveries) on or
before the corresponding determination dates, by the sum of the balances of A 's
accounts receivable account on January 1st of 2002 and 2003 (i.e.,
$160,0001$2,855,000 or 5.6%). Thus, A's actual NAE amount for 2003 is determined by
multiplying this percentage by the balance of A 's accounts receivable account on
December 31, 2003 (i.e., $2,115,000 x 5.6% = $118,440). A is permitted to exclude
from gross income in 2003 an amount equal to 105% of A's actual NAE amount
($118,440 x 105%
=$124,362).
This is A's adjusted NAE amount for 2003.
Example 4. The facts are the same as Example 3. A determines that its
accounts receivable collection experience for 2004 is as follows:
Total AIR Balance
At Beginning of Year
2002
2003
2004
Total
Beginning AIR Amount
Charged Off by Determination Date
(adjusted for recoveries)
$1,975,000
880,000
2,115,000
$4,970,000
$65,000
95,000
105,000
$265,000
A's ending AIR Balance on 12/31/2004 is $1,600,000.
In 2004, A must compute its NAE amount using an average of its actual NAE for 2002,
2003, and 2004 (in accordance with Option B in section 3.02(2)(ii) of this notice). Thus,
A's actual three-year moving average NAE percentage is 5.3%, determined by dividing
the sum of the amount of A 's receivables in its account on January 1 st of 2002, 2003,
11
and 2004, that were determined to be uncollectible and charged off (adjusted for
recoveries) on or before the corresponding determination dates, by the sum of the
balances of A 's accounts receivable account on January 1 st of 2002,2003, and 2004
(i.e., $265,0001$4,970,000 or 5.3%). Thus, A's actual NAE amount for 2004 is
determined by multiplying this percentage by the balance of A 's accounts receivable
account on December 31,2004 (i.e., $1,600,000 x 5.3%
=$84,800).
A is permitted to
exclude from gross income in 2004 an amount equal to 105% of A's actual NAE amount
($84,800 x 105%
=$89,040).
This is A's adjusted NAE amount for 2004. Thereafter, A
must continue to use a 3-year moving average to compute its actual NAE, or obtain
approval of the Commissioner to change its method of accounting.
Example 5. Taxpayer B has not tracked its 2002 beginning-of-year accounts
receivable. Therefore, B may not use the actual experience method for 2002. B may
use this method for 2003 if B tracks its 2003 beginning -of-year receivables.
Example 6. Beginning in 2002, taxpayer C uses an alternative NAE method
similar to the method described in Black Motor Co. v. Comm'r, 41 B.T.A. 300 (1940),
affd, 125 F.2d 977 (6 th Cir. 1942). C must self-test its alternative NAE method for the
first year it is used (2002), and then every three taxable years after 2002 for which C
uses its alternative NAE method. Thus, beginning in 2002, C must begin tracking its
beginning-of-year accounts receivable and computing its actual NAE as provided in
section 3.02(2} of this notice. C's actual NAE amount and alternative NAE amount for
2002 are set forth below:
Total AIR Balance
Beginning AIR Amount
Charged Off by Determination Date
12
Year
2002
At Beginning of Year
$350,000
(adjusted for recoveries)
Alternative NAE Amount
$14,000
$20,700
C's ending AIR Balance on 12/31/2002 is $500,000.
C's actual NAE percentage is 4%, determined by dividing the amount of C's receivables
in its account on January 1, 2002, that were charged off as uncollectible (adjusted for
recoveries) on or before the determination date, by the balance of C's accounts
receivable account on January 1,2002 (i.e., $14,0001$350,000 or 4%). Thus, C's actual
NAE amount for 2002 is determined by multiplying this percentage by the balance of C's
accounts receivable account on December 31,2002 (i.e., $500,000 x 4% = $20,000).
Because C's alternative NAE amount for 2002 ($20,700) is not greater than 105% of its
actual NAE amount for 2002 (i.e., $20,000 x 1.05
=$21,000), C's alternative NAE
method will be treated as clearly reflecting its actual NAE for the test period 2002. C's
next test period would be taxable years 2003 through 2005. C's actual NAE amounts
(computed under Option B of section 3.02(2) of this revenue procedure, because C
lacked the data to use Option A) and alternative NAE amounts for those years are set
forth below:
Year
Total AIR Balance
At Beginning of Year
2003
2004
2005
Total
$440,000
760,000
1,965,000
$3,165,000
Beginning AIR Amount
Charged Off by Determination Date
adjusted for recoveries)
$30,000
65,000
65,000
$160,000
Actual NAE
Amount
$42,329
138,183
101,106
$281,618
Alternative NAE
Amount
$43,050
140,200
110,550
$293,800
Assume that C's ending AIR balance on 12/31/05 is $2,000,000.
Because C's cumulative alternative NAE amount for this period ($293,800) is not
13
greater than 105% of its cumulative actual NAE amount for the same period (i.e.,
$281,618 x 1.05
=$295,699), C s alternative NAE method will be treated as clearly
reflecting its actual NAE for the test period. Accordingly, C may continue to use its
alternative NAE method, subject to the requirement that C self-test again after the next
three taxable years.
Example 7. The facts are the same as Example 6, except that C's alternative
NAE amount for 2002 is $21,700. Because C's alternative NAE amount for 2002 is
more than 105% of its actual NAE amount for 2002 (i.e., $20,000 x 1.05
=$21,000), C's
alternative NAE method will be treated as not clearly reflecting its NAE for the test
period. As a result, C cannot use its alternative NAE method of accounting, but must
use a method that will clearly reflect its NAE for 2002.
Example 8. The facts are the same as Example 7, except that C used its
alternative NAE method in taxable years prior to 2002. Because C's alternative NAE
method will be treated as not clearly reflecting its NAE for the test period, C will be
required to change its NAE method of accounting to a method that will clearly reflect its
NAE for 2002.
SECTION 4. AUDIT PROTECTION FOR TAXPAYERS CURRENTLY USING THE
ACTUAL EXPERIENCE METHOD
If a taxpayer uses the actual experience method described in section 3.02(2) of
this notice to determine its NAE amount, the taxpayer's use of that method will not be
raised as an issue by the Service in a taxable year that ends before January 22, 2003.
If the taxpayer uses the actual experience method described in section 3.02(2) of this
14
notice, and its use of that method is an issue under consideration (within the meaning of
section 3.09 of Rev. Proc. 2002-9) in examination, in appeals, or before the U.S. Tax
Court in a taxable year that ends before January 22, 2003, that issue will not be further
pursued by the Service.
SECTION 5. APPLICATION .
.01 Taxpayers No Longer Qualified Under § 448 to Use a NAE Method. In the
case of a taxpayer that is no longer qualified under § 448(d)(5), as amended by the Act,
to use a NAE method for its first taxable year ending after March 9, 2002, the change
from the taxpayer's NAE method is treated as initiated by the taxpayer, made with the
consent of the Commissioner, and the net amount of the required § 481 (a) adjustment
is to be taken into account over a period of 4 taxable years (or, if less, the number of
taxable years that the taxpayer has used the NAE method). Such a taxpayer is not
required to file Form 3115, Application for Change in Accounting Method, with the
national office, or pay any associated user fee. However, to assist the Service in
processing the taxpayer's change in method of accounting, the taxpayer should attach
Form 3115 to its income tax return for the year of change, and write "Change off of the
nonaccrual experience method under Notice 2003-12" at the top of the form .
.02 Taxpayers Permitted to Use a NAE Method. A change to a NAE method, or
a change from one NAE method to another NAE method, is a change in method of
accounting to which the provisions of §§ 446 and 481, and the regulations thereunder,
apply. Therefore, a taxpayer that wants to use one of the NAE methods provided in this
notice, and that does not currently use that method, must follow the automatic change in
15
method of accounting procedures in Rev. Proc. 2002-9, 2002-3 I.R.B. 327 (as modified
and amplified by Rev. Proc. 2002-19, 2002-13 I.R.B. 696, modified and clarified by
Announcement 2002-17,2002-8 I.R.B. 561, and amplified, clarified, and modified by
Rev. Proc. 2002-54, 2002-35 I.R.B. 432) (or successors), with the following
modifications:
(1) The scope limitations in section 4.02 of Rev. Proc. 2002-9 do not apply
to a taxpayer that wants to change to a NAE method provided in this Notice for either its
first or second taxable year ending after March 9, 2002, provided the taxpayer=s NAE
method is not an issue under consideration for taxable years under examination, within
the meaning of section 3.09 of Rev. Proc. 2002-9, at the time the Form 3115 is filed with
the national office (subject to the exception in Section 4 of this Notice);
(2) A taxpayer that wants to change to a NAE method provided in this
Notice for its first taxable year ending after March 9, 2002, that on or before March 12,
2003, files its original federal income tax return for that year is not required to comply
with the filing requirement in section 6.02(3)(a) of Rev. Proc. 2002-9, provided the
taxpayer complies with the following filing requirements. The taxpayer must complete
and file the Form 3115 in duplicate. The original Form 3115 must be attached to an
amended federal income tax return for the taxpayer=s first taxable year ending after
March 9, 2002. This amended return must be filed no later than August 11, 2003. The
copy of the Form 3115 must be filed with the national office (see section 6.02(6) of Rev.
Proc. 2002-9 for the address) no later than when the taxpayer's amended return is filed;
and
16
(3) When filing the Form 3115, the taxpayer must complete all applicable
parts of the form and, in lieu of the label required by section 6.02(4) of Rev. Proc. 20029, are instructed to write "Change to [identify the requested NAE method] under Notice
2003-12" at the top of the form .
.03 Taxpayers That Must Change After Self- Testing. If a taxpayer required to
change its method of accounting as a result of section 3.03 of this Notice properly
applied its alternative NAE method during the test period and the taxpayer makes the
change for its first taxable year following the last taxable year of the test period, the
taxpayer must follow the automatic change in method of accounting procedures in Rev.
Proc. 2002-9 (or successors) and the scope limitations of section 4.02 of Rev. Proc.
2002-9 will not apply.
SECTION 6. EFFECTIVE DATE AND TRANSITION RULE
.01 In General. This notice is effective for taxable years ending after March 9,
2002 .
.02 Transition Rule. If a taxpayer filed an application or ruling request under the
procedures prescribed in Rev. Proc. 97-27,1997-1 C.B. 680, with the national office to
make a change in its method of accounting under § 448(d)(5), as amended, for a year
of change for which this notice is effective and the application or ruling request is
pending with the national office on January 22, 2003, the taxpayer must notify the
national office in writing (see section 8.06 of Rev. Proc. 97-27 for the address) prior to
March 24, 2003, if the taxpayer wants the national office to continue processing its
application or ruling request under the procedures prescribed in Rev. Proc. 97-27. If the
17
taxpayer does not notify the national office within the time provided in this section, the
taxpayer's Form 3115, and any user fee that was submitted with the Form 3115, will be
returned to the taxpayer. A taxpayer whose Form 3115 is returned under this section
may file a new Form 3115 under the procedures prescribed in section 5.02 of this
notice.
SECTION 7. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2002-9 is modified to include the changes in method of accounting
provided in this notice in section 5.06 of the Appendix.
REQUEST FOR COMMENTS
The Service and the Treasury Department invite comments on the safe harbor
NAE methods described in this notice, suggestions for additional safe harbor NAE
methods, the use of a "self-test" for alternative NAE methods, as well as any other
issues that should be addressed in the forthcoming regulations. Written comments may
be submitted on or before April 23, 2003, to
Internal Revenue Service
P.O. Box 7604
Benjamin Franklin Station
Washington, DC 20224
Attn: CC:ITA:RU (Notice 2002-12), Room 5226
Submissions also may be sent electronically via the Internet to the following &mail
address: notice.comments@m1.irscounse/.treas.gov.
Comments will be available for
public inspection and copying.
DRAFTING INFORMATION
The principal author of this notice is Terrance McWhorter of the Office of
18
Associate Chief Counsel (Income Tax and Accounting). For further information
regarding this notice, contact Mr. McWhorter at 202-622-4970 (not a toll-free call).
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 23, 2003
KD-3787
Remarks of Under Secretary Peter R. Fisher
to the American Enterprise Institute
This conference could not be more timely. The corporate fiascos of the past two
years have created a once-In-a-generation opportunity to improve the performance
of our capital markets and our economy. This will be accomplished when we redirect corporate behavior away from the game of managing quarterly earnings to
focus on what really matters: cash flow - current and expected.
To do this, we need to transform the practice of corporate disclosure, to invent a
new set of best practices that will genuinely inform investors about the risk-reward
prospects of the firms in which they invest. This is not principally a job for
government. Government has a role in catalyzing change, perhaps in creating the
incentives for action, but we need your help to show the private sector how they can
put these ideas into practice.
We all know what needs to be done; we know in outline what corporate disclosures
should look like.
First, we need to explode the idea that the balance sheet remains a useful concept
for measuring a firm's assets and liabilities; we need to move beyond the false
dichotomy between the balance sheet and the off-balance sheet. When this
happens, and investors have a picture of the real, economic leverage employed,
attention will naturally turn to cash flow: to how management expects to pay down
the leverage and still have some income left over for the shareholders. This clarity
will provide the incentive for firms to disclose the key indicators of business
performance that management themselves use to judge expected cash flow.
In recent years, I have often heard it said that "There's too much leverage in the
system." My question is: how would anyone know?
The balance sheet was a wonderful Italian invention that helped move us out of the
dark ages and into the Renaissance. But 500 years later, and after the last 50
years of innovation, we have learned a little bit more about finance. We now know
that the value of a firm is its future unencumbered cash flow. The balance sheet
and last quarter's earning statement are of little help in divining that value.
Investors need to know the real economic leverage being employed, whether
through on- or off-balance sheet devices. We need a measure of all the
contractually-obligated liabilities, whether contingent or fixed, future or current. We
need a parallel measure of all the firm's contractually obligated revenues.
Tying them together will give the firm's contractually-obligated net present value - a
true indicator of the firm's leverage. This is not an untested or novel Idea. The
concept of NPV appears everywhere in modern finance except in financial
reporting. This kind of disclosure is critical to the performance of our capital
markets.
Exposing true leverage is the only way that shareholders and creditors can judge
true performance and can distinguish profit from business operations and from
financial engineering. Leverage is easy. Value creation is not.
Contractually-obligated NPV will in most cases be negative. That's just another
way of saying a firm has taken on risk, as almost all firms do. But disclosing the
true leverage will create the incentive for companies to disclose further how they
plan to close the gap - how they plan to generate the cash flow needed to exceed
net obligations.
I have found that most corporate leaders have a very clear picture of their firm's
prospects. They are proud of their companies' data management systems, which
can readily produce the handful of measures of business value and performance
that reveal the most about their companies' near-term prospects, such as customer
loyalty data, their share of customer wallet, inventory turns, new assets gathered, or
labor hours to finish a car. Armed with the tools of the information revolution, CEOs
expect to see these facts on their desks every morning.
Why don't companies disclose these indicators of business performance to their
shareholders? While some do, too many do not. I think their reluctance stems from
a lack of sufficient incentive. But I am optimistic that if companies did disclose their
real, economic leverage, they would find a way to use these key business indictors
to bring a little more substance to the Management Discussion and Analysis section
of their periodic disclosures.
The challenge for you as policy thinkers and business leaders is to imagine how to
prod and goad the private sector into making these disclosures. Much of your
discussion will center on government's role. In your discussions today, I urge you
to bear in mind the limits of government action and to think about how the business
community could put your ideas to practical use.
I wish that government could accomplish these changes in business and investor
behavior by fiat. I don't think it can. The more important and interesting challenge
for you today is to figure out how the business and investment communities can be
induced to reorder their priorities and focus the capital markets on the importance of
cash flow. I wish you every success.
For further remarks on this subject, please see Under Secretary Fisher's speech to
the Securities Industry Association on November 8, 2002.
http://www.treas.gov/press/releases/p03609.htm
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
To view or print the PDF content on this page, download the free Adobe(0 Acrobai(Ji) Rcadcr®
January 23, 2003
PO-3788
TREASURY ISSUES REVENUE RULING REGARDING
THE NEW MARKETS TAX CREDIT
Today the Treasury Department and the Internal Revenue Service issued a
Revenue Ruling regarding the new markets tax credit (NMTC).
The NMTC provides a tax credit to investors who make "qualified equity
investments" in privately-managed investment vehicles called "community
development entities," or "CDEs." The CDEs are required to invest substantially all
of the proceeds of the qualified equity investments in low-income communities.
The Revenue Ruling clarifies that a partnership may finance the purchase of a
qualified equity investment eligible for the NMTC with proceeds of nonrecourse debt
of the partnership.
The NMTC is designed to encourage investment in low-income communities.
The text of Revenue Ruling 2003-20 is attached.
Related Documents:
• Text of Revenue Ruling 2003-20
'I
DEPARTMENT OF THE TREASURY
OFFICE OF PUBLIC AFFAIRS
Part I
Section 450.--New Markets Tax Credit
26 CFR 1.450-1T: New markets tax credit.
Rev. Rul. 2003-20
ISSUE
For purposes of determining the new markets tax credit allowable under § 450 of
the Internal Revenue Code, does the amount of the qualified equity investment made by
a limited liability company (LLC) classified as a partnership include cash from a
nonrecourse loan to the LLC that the LLC invests as equity in a qualified community
development entity?
FACTS
In Year 1, COE, a qualified community development entity under § 450(c),
receives a new markets tax credit allocation of $2,000~ from the Secretary of the
Treasury. In Year 2, X, a widely-held C corporation, contributes $792~ for a 99-percent
member interest in LLC, a limited liability company that is classified as a partnership for
federal tax purposes. y, a widely-held C corporation, contributes $8~ for a 1 -percent
managing member interest in LLC. LLC borrows $1 ,200~ from Bank, an unrelated third
party. LLC contributes $2,000~ for an equity interest in COE, which is a limited liability
company classified as a partnership for federal tax purposes. COE designates LLC's
equity investment in COE as a qualified equity investment under § 450(b)(1 )(C).
The $1 ,200~ loan from Bank is a nonrecourse liability that is characterized as
indebtedness of LLC for federal tax purposes. The loan is secured only by LLC's
interest in COE. The loan is not secured by any assets of COE. The full amount of the
loan is repayable at the end of Year 9. The loan is not convertible into an equity interest
in LLC.
On April 1 of Year 2, COE lends the $2,0002$. to a qualified active low-income
community business, as defined in § 450(d)(2)(A). This $2,0002$.loan is repayable in
full ~t the end of Year 9. Interest payments received by COE from the qualified active
low-income community business are distributed to LLC. X and Y retain their
membership interests in LLC, and LLC retains its $2,000~ equitYinvestment in COE,
until the end of Year 9. The entire $2,0002$.loan by COE remains outstanding, and the
borrower continues to qualify as a qualified active low-income community business, until
the end of Year 9.
LLC claims its qualified equity investment in COE is $2,0002$. on each credit
allowance date and allocates the new markets tax credit with respect to this amount to
X and 1: in accordance with § 704(b).
LAW
Section 450(a)(1) provides that for purposes of § 38, in the case of a taxpayer
who holds a qualified equity investment on a credit allowance date (as defined in
§ 450(a)(3)) of the investment which occurs during the taxable year, the new markets
tax credit determined under § 450 for the taxable year is an amount equal to the
applicable percentage (as defined in § 450(a)(2)) of the amount paid to the qualified
community development entity for the investment at its original issue. Section
7701(a)(14) defines the term "taxpayer" to mean any person subject to any internal
revenue tax. Section 7701 (a)(1) provides that the term "person" shall be construed to
mean and include an individual, a trust, estate, partnership, association, company or
corporation.
Section 450(b)(1) defines the term "qualified equity investment" as any equity
investment in a qualified community development entity if (A) the investment is acquired
by the taxpayer at its original issue (directly or through an underwriter) solely in
exchange for cash, (8) substantially all of the cash is used by the qualified community
development entity to make qualified low-income community investments, and (C) the
investment is designated for purposes of § 450 by the qualified community
development entity.
Section 450(b )(2) provides that the maximum amount of equity investments
issued by a qualified community development entity ~hich may. b~ d~signated under
§ 450(b)(1 )(C) by the entity shall not exceed the portion of the limitation amount
allocated under § 450(f) to the entity.
Section 450(b )(6) defines the term "equity investmen.t" as (A) .any sto.ck (other
than nonqualified preferred stock as defi ned in § 351 (g)(~)) In an entlt~ that IS a
corporation, and (8) any capital interest in an entity that IS a partnership.
Section 450(c)(1) defines the term "qualified commu~ity. developmen.t e~tity" as
any domestic corporation or partnership if (A) the primary misSion of the entity IS
serving, or providing investment capital for, low-income communities or low-income
persons, (B) the entity maintains accountability to residents of low-income communities
through their representation on any governing board of the entity or on any advisory
board to the entity, and (C) the entity is certified by the Secretary for purposes of § 450
as being a qualified community development entity.
Section 450(d)(1) defines the term "qualified low-income community investment"
as (A) any capital or equity investment in, or loan to, any qualified active low-income
community business, (B) the purchase from another qualified community development
entity of any loan made by the entity which is a qualified low-income community
investment, (C) financial counseling and other services specified in regulations
prescribed by the Secretary to businesses located in, and residents of, low-income
communities, and (D) any equity investment in, or loan to, any qualified community
development entity. Section 450(d)(2)(A) defines the term "qualified active low-income
community business" as any corporation or partnership that satisfies the requirements
of § 450(d)(2)(A)(i) through (v).
ANALYSIS
Section 450(b)( 1)(A) requires that a qualified equity investment be acquired by
the taxpayer solely in exchange for cash. Section 450 does not prohibit a taxpayer
(including any taxpayer who is a person as defined under § 7701 (a)(1)) from using cash
derived from a borrowing, including nonrecourse borrowing, to make a qualified equity
investment in a qualified community development entity. The facts of this revenue
ruling state that the loan from Bank is characterized as indebtedness of LLC for federal
tax purposes. The loan proceeds and the contributions by X and y: to LLC are used by
LLC to make an equity investment of $2,OOO~ in COE. The requirements of
§ 450(b)( 1)(A) are satisfied because LLC acquires its investment in COE at its original
issue solely in exchange for cash. The requirements of § 450(b)(1 )(B) are satisfied
because COE uses the entire equity investment of $2,OOO~ to make a qualified lowincome community investment. The requirements of § 450(b)(1 )(C) are satisfied
because COE designates the equity investment of $2,OOO~ for purposes of § 450.
Accordingly, LLC is treated as having made a qualified equity investment of $2,000~ in
COE when LLC acquires its equity interest in COE. LLC may claim a new markets tax
credit on each credit allowance date in an amount determined under § 450 that is eq ual
to the applicable percentage of the $2,000~ qualified equity investment in COE. LLC
may allocate to X and y: the amount of the new markets tax credit that LLC claims with
respect to the $2,000~ qualified equity investment. This allocation must be made in
accordance with § 704(b) (which provides rules regarding a partnership's allocation of
income, gain, loss, deduction, or credit (or item thereof) among the partners).
HOLDING
Under the facts of this revenue ruling, for purposes of determining the new
markets tax credit allowable under § 450, the amount of the qualified equity investment
made by an LLC classified as a partnership includes cash from a nonrecourse loan to
the LLC that the LLC invests as equity in a qualified community development entity.
DRAFTING INFORMATION
The principal author of this revenue ruling is Michael J. Goldman of the Office of
Associate Chief Counsel (Passthroughs and Special Industries). For further information
regarding this revenue ruling contact Mr. Goldman on (202) 622-3080. For information
regarding issues under § 450 contact Gregory N. Doran of the Office of Associate Chief
Counsel (Passthroughs and Special Industries) on (202) 622-3040. These are not tollfree calls.
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
To view or print the PDF content on this page, download the free Ado/)ce,) Acro/)afl";
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January 23, 2003
KD-3789
TREASURY ISSUES GUIDANCE ON DETERMINATION OF U.S. INCOME OF
FOREIGN LIFE
INSURANCE COMPANIES
Today the Treasury Department and the Internal Revenue Service issued guidance
on a question relating to how a foreign life insurance company with U.S. operations
determines the income that is subject to U.S. tax. Foreign companies with U.S.
operations are subject to U.S. tax on the income attributable to their U.S. operations
(their "effectively connected income").
Life insurance companies generally are required to file annual statements with state
insurance regulators. The revenue ruling provides that the treatment of assets on
these statements will not determine if the assets are to be considered connected
with the foreign insurance company's U.S. business activities for U.S. tax purposes,
but this treatment will be given due regard. Due regard will also be given to the
treatment of the assets on the books and records of the insurance company's U.S.
trade or business.
This guidance addresses an important question for foreign companies with U.S. life
insurance businesses.
The text of Revenue Ruling 2003-17 is attached.
Related Documents:
• Text of Revenue Ruling 2003-17
"
... . i . - - - - _,'J
DEPARTMENT OF THE TREASURY
OFFICE OF PUBLIC AFFAIRS
Part I
Sections 842(a); 864(c)
26 CFR 1,864-4(c): U,S, source income effectively connected with U.S. business
Rev. Rul. 2003-17
ISSUE
Whether a foreign life insurance company carrying on an insurance business in
the United States determines the amount of income effectively connected with its U.S.
business under section 842(a) of the Internal Revenue Code (the "Code") based
exclusively on the amount of income reported by the business on the National
Association of Insurance Commissioner's annual statement ("NAIC statement") filed
with the state insurance commissioner.
FACTS
FC, a Country X corporation, is a foreign life insurance company that issues life
insurance, annuity, and other insurance contracts in Country X and the United States.
FC's activities in connection with its insurance business constitute the conduct of a
trade or business within the United States (the "U.S. branch"). FC conducts its
insurance activities in State Y. Under the law of State Y, FC is required to maintain
trusteed assets and deposits in the United States sufficient to satisfy all potential claims
of its U.S. policyholders. FC also maintains in the United States and uses in its U.S.
business non-trusteed assets consisting of bonds, stocks, and short-term investments
which are managed by individuals located in the United States and accounted for on the
books of the U.S. branch.
FC is required to file a NAIC statement with State Y. Generally, this NAIC
statement is intended to permit the insurance regulatory body to determine whether a
foreign insurance company has sufficient assets to satisfy all potential claims of its U.S.
policyholders. While the trusteed assets held by FC (and corresponding income) are
required to be included on the NAIC statement, the no n-trusteed assets (and
corresponding income) are not reflected in the NAIC statement.
LAW AND ANALYSIS
Section 842(a) provides that if a foreign company carrying on an insurance
business within the United States would qualify under part I of subchapter L for the
taxable year if (without regard to income not effectively connected with the conduct of
any trade or business within the United States) it were a domestic corporation, such
company shall be taxable under such part on its income effectively connected with its
conduct of any trade or business within the United States. Section 842(a) further
provides that with respect to the remainder of income which is from sources within the
United States, such a foreign company shall be taxable as provided in section 881.
Section 864(c)(1) provides that in the case of a foreign corporation engaged in a
trade or business within the United States during the taxable year, the rules set forth in
section 864(c)(2),(3), (4), (6), and (7) shall apply in determining the income, gain or loss
which shall be treated as effectively connected with the conduct of a trade or business
within the United States ("ECI"). Section 864(c)(2) generally provides rules for
determining whether certain fixed or determinable, annual or periodical income from
sources within the United States or gain or loss from sources within the United States
from sale or exchange of capital assets is ECI. In making this determination, the factors
taken into account include whether (a) the income, gain or loss is derived from assets
used in or held for use in the conduct of such trade or business, or (b) the activities of
such trade or business were a material factor in the realization of such income, gain or
loss. Sec. 864(c)(2). Treas. Reg. § 1.864-4(c)(2) sets forth factors to be considered in
determining whether an asset is used in or held for use in the conduct of a U.S. trade or
business for purposes of section 864(c)(2). Under the regulations, an asset is ordinarily
treated as used in, or held for use in, the conduct of a U.S. trade or business if the asset
is: (a) held for the principal purpose of promoting the present conduct of the U.S. trade
or business; (b) acquired and held in the ordinary course of the U.S. trade or business;
or (c) otherwise held in a direct relationship to the U.S. trade or business. Treas. Reg. §
1.864-4(c)(2)(ii). In determining whether an asset is held in a direct relationship to the
U.S. trade or business, principal consideration is given to whether the asset is held to
meet the present needs of the business. Treas. Reg. § 1.864-4(c)(2)(iv)(a). An asset
shall be considered as needed in the U.S. business if, for example, the asset is held to
meet the operating expenses of that business, but not if held for future diversification
into a new trade or business, expansion of trade or business activities outside the
United States, or future business contingencies. Id. The regulations provide for a
presumption of a direct relationship where: (1) the asset was acquired with funds
generated by the trade or business; (2) the income from the asset is retained or
reinvested in the trade or business; and (3) personnel present in the United States and
actively involved in the conduct of that trade or business exercise significant
management and control over the investment of the asset. Treas. Reg. § 1.8644(c)(2)(iv)(b).
In determining whether an asset is used in or held for use in the conduct of a
U.S. trade or business or whether the activities of the trade or business were a material
factor in the realization of the income, gain or loss, due regard is given to whether or not
such asset, or income, gain or loss was accounted for through the trade or business.
Sec. 864(c)(2); Treas. Reg. § 1.864-4(c)(4). However, this accounting test shall not by
itself be controlling. Treas. Reg. § 1.864-4(c)(4).
All other income, gain or loss from sources within the United States is treated as
ECI. Sec. 864(c)(3). Section 864(c)(4)(C) provides that in the case of a foreign
insurance company any income from sources without the U.S. which is attributable to its
U.S. business is treated as ECI. See also Treas. Reg. § 1.864-5(c) (In determining its
life insurance company taxable income from its U.S. business, the foreign corporation
shall include all of its items of income from sources without the United States which
would appropriately be taken into account in determining the life insurance company
taxable income of a domestic corporation).
The Report of the House Committee on Ways & Means (the "House Report")
provides:
Your committee believes that foreign insurance companies-- life insurance
companies and other insurance companies, including both mutual and stock
companies- should, in general, be taxed on their investment income in the same
manner as other foreign corporations. For this reason, the bill provides that a
foreign insurance corporation carrying on an insurance business within the
United States is to be taxable in the same manner as domestic companies
carrying on a similar business with respect to its income which is effectively
connected with the conduct of a trade or business within the United States ....
For purposes of determining whether or not income of a foreign life insurance
company is effectively connected with the conduct of its U.S. life insurance
business, the annual statement of its U.S. business on the form approved by the
National Association of Insurance Commissioners will usually be followed. It is
noted that §!! the income effectively connected with the foreign life insurance
company's U.S. life insurance business, from whatever source derived, comes
within the ambit of this provision. This is a continuation of present law which
subjects to U.S. tax all the income attributable to the U.S. life insurance business
from whatever source derived.
H.R. Rep. No. 1450, 89 th Cong., 2d Sess. 31, 32 (1966) (emphasis added); S. Rep. No.
1707, 89 th Cong., 2d Sess. 38 (1966) (same).
The House Report also states that "[i]n determining for purposes of subchapter L
whether a foreign corporation is carrying on an insurance business in the United States,
and whether income is effectively connected with the conduct of a trade or business
within the United States, section 864(b) and (c), as added by section 2(d) of the bill,
shall apply." House Report at 94. Thus, the legislative history confirms that a foreign
life insurance company applies the standards set forth in section 864(c) to determine
the amount of its effectively connected income.
Accordingly, under section 842(a) and consistent with the accompanying
legislative history, foreign insurance companies are taxed on their ECI. Section 864(c)
does not contain specific rules for foreign insurance companies other than in section
864(c)(4)(C). Similarly, no specific rules were provided for foreign insurance companies
in regulations issued under section 864 other than Treas. Reg. § 1.864-5(c). Neither
section 842 or 864 provides that an insurance company determines its ECI solely based
on its NAIC statements.
While the legislative history states that NAIC statements will usually be followed,
the legislative history makes clear that section 864(c) shall determine whether income is
ECI. Accordingly, income on assets such as the non-trusteed assets of FC are not
necessarily excluded from ECI merely because they do not appear on the NAIC
statement.
Section 864(c)(2) and the regulations thereunder provide that due regard shall be
given to whether or not an asset, income, gain, or loss was accounted for through the
U.S. trade or business. Accordingly, in determining if the income, gain or loss from the
non-trusteed assets is ECI, due regard must be given to the fact that FC has accounted
for such assets on the books of the U.S. branch.
HOLDING(S)
FC is taxable on any income effectively connected with its U.S. trade or
business. For this purpose, ECI is determined under section 864(c) and the
accompanying regulations. While due regard shall be given to the NAIC statement,
such statement shall not be determinative of the amount of ECI. Further, due regard
also must be given to the fact that FC has accounted for the non-trusteed assets on the
books of the U.S. branch.
DRAFTING INFORMATION
The principal author of this revenue ruling is Sheila Ramaswamy of the Office of
Associate Chief Counsel (International). For further information regarding this revenue
ruling contact Ms. Ramaswamy at (202) 622-3870.
PRESS ROOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 23, 2003
PO-3790
Jose A. Fourquet
United States Executive Director of the Inter-American Development Bank
Named as one of the World's 100 Global Leaders For Tomorrow
by the World Economic Forum
The World Economic Forum has released the names of the 100 young leaders
selected for the Global Leaders for Tomorrow Program for 2003. The United States
Department of the Treasury is proud to announce that Mr. Jose A. Fourquet was
selected for this honor. Acting Treasury Secretary Kenneth Dam said: "This
recognition of an outstanding up and coming leader such as Jose is a tribute to the
Department of the Treasury and the Bush Administration's commitment to finding
the best and most qualified candidates to fill positions of great importance in the
United States Government."
Mr. Fourquet stated his reaction to this honor: "I am sincerely humbled by my
selection as one of this year's Global Leaders for Tomorrow by the prestigious
World Economic Forum. I'm particularly grateful for being the only Bush
administration official to be selected this year. It will be an honor and a privilege to
represent the President and all Americans, particularly Latinos, in Davos."
In 1992, the Switzerland-based World Economic Forum developed a special
community called "Global Leaders for Tomorrow" (GL Ts). Each year, the Forum's
Management Board selects 100 young (under 37 years of age) leaders from
business, politics, the arts and civil society who are dedicated to working together in
areas of social and environmental development and entrepreneurship. The goal of
the GL T community is to engage a global network of outstanding individuals who
"will playa key role in shaping the world and its global agenda in the coming years."
This year's list includes other notable Americans like four time Tour de France
Winner Lance Armstrong, Smith Barney Chairman and CEO Sallie Krawcheck, and
Carlson Hospitality President and CEO Curtis Nelson. Previous winners are British
Prime Minister Tony Blair, Microsoft Founder and CEO Bill Gates, Spanish Prime
Minister Jose Maria Aznar, and Dell Computer Chairman Michael Dell.
Mr. Fourquet is the 12th United States Executive Director of the Inter-American
Development Bank (lOB). A native of Puerto Rico, Mr. Fourquet assumed his
duties on December 14th, 2001, becoming the youngest person ever to hold this
position. He also serves as U.S. Executive Director of the Inter-American
Investment Corporation and represents the U.S. on the Donors Committee of the
Multilateral Investment Fund.
As such, Mr. Fourquet represents the U.S. on the board of the multilateral
development bank that provides the largest amount of development aid to Latin
America and the Caribbean. With a capital base of approximately $100 billion, the
lOB provides $6-8 billion annually in loans and grants to 26 countries in the region.
The U.S. is the largest shareholder of the lOB with approximately 30% of the capital
and voting shares.
KD-3 792: Treasury DepaI1ment Seeks Input From Primary Dealers Prior to Quarterly Refundings
I I' I
I:l
'l~'
Page 1 of 1
I','
FROM THE OFFICE OF PUBLIC AFFAIRS
TCl
View
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pl/Ilt tile
PDF COIl/Ullt
011 /IllS
IlaLJf', (/nWlllodti /lle fme .. ,! !"
JanualY 24, 2003
KD-3792
Treasury Department Seeks Input
From Primary Dealers Prior to Quarterly Refundings
Tile Tre,lsury Dep<'-JrtlJ1ent today Will beglll postlllg to Its web site the agenda for the
meetings Treasury offiCials and staff traditionally 110Id With the Federal Reserve
Bank of New York's primary dealers prior to each Quarterly Refundlllg
The meetings With the primary dealers are arranged by the Federal Reserve Bank
of New York, acting as Treasury's fiscal agent In an effort to promote greater
transparency, the agenda for the primary dealer meetings will be posted on
Treasury's web site (: 11':
,', ,I",',' I'
tlil 'i', :il):]11 ',t: 11I"I'1t I",!d'
) a week prior to the dealer meetings. Market partiCipants
alld observers also are welcome to respond to these questions via email at the
address below.
Also, as mentioned at Treasury's last quarterly refunding press conference, other
iJo1,cj Issues 1I11dei cj'SCUSSIOII Include efforts to
• promote investor Interest In IIlflation-llldexed SeCUrities,
· r(,CluCe till? costs assOCiated wllil sholi-term fluctuations in cash balances.
• study the effects of heightened volatility on debt Issuance,
Please send comments and suggestions on these subjects or others relating to
debt management to I)""i 11,llldUL;I,I" ",'.,;C, il:"',, 'J'"
Related Documents:
http://www.treas.gov/press/releases/kd3792.htm
113112003
Agenda
February 2003 Refunding
Treasury Dealer Meetings - January 30, 2003
Dealer
------------------
To allO\v more time for discussion on Thursday, please e-mail your responses prior to 4:00 p.m. on
Wednesday, JanuaIY 29, to Paul Malvey, Dept. of Treasury, at [l,IIIIIII,II\ 1'\ '.! ti(, Ill',I"_'( 1\ and Richard
Dzina, Federal Reserve Bank of New York, at 11,11,11,1,1/ II!.I '.! II.' ill) (II :'. If you are not scheduled to meet
with TreaslllY officials this guarter, your responses would still be very helpful to us, particularly answers to the
discussion questions. Thank you.
I.
Market Borrowing Estimates
January - March
Ending Cash Balance
April- June
Ending Cash Balance
II.
Budget deficit estimate
FY2003
III. February Refunding
5-year
10-year
CMBs??
IV.
$Billion Maturity
When?- - - - -
Discussion Topics
•
The Administrations' Budget is expected to be released next week showing significantly larger deficits than
contained in last August's Mid-session Review. As part of financing the govemment at the lowest cost,
we want to maintain a flexible issuance calendar that appeals to the broadest range of investors and adapts
to a wide range of budgetary and financing outcomes. Going forward, what changes (increased
frequencies, new securities) would you recommend for dispersing the risk we currently face with existing
auction sizes?
•
Treasury is committed to the Treasury inflation-indexed securities (TIIS) market. Are you active in the
TIIS market? What recommendations would you make to expand the TIIS market and promote investor
interest?
•
We continue to seek ways to improve and measure our perfonnance. Do you have suggestions or ideas
on the factors we should be considering? Can we readily adopt private sector techniques or are there
specific modifications needed to address public sector idiosyncrasies?
KD-3793: Treasury Launches New Alcohol and Tobacco Tax and Trade Bureau Today
Page I of I
FROM THE OFFICE OF PUBLIC AFFAIRS
JZ1Il1lilly 2"*. 2llLl3
KD~37DJ
Treasury Launches New Alcohol and Tobacco Tax and Trade Bureau Today
Arthur J. Libertucci Named as Administrator
Tile Treasury Department today launched its new Alcohol and Tobacco Tax and
Trade Bureau (TTB) and announced that Arthur J lIbertuccl has been named
Administrator
Created by the Homeland Security Bill of 2002, the TTB will be responsible for
admlnisterlllg alcohol and tobacco laws and Implementing regulations previously
administered by Treasury's Bureau of Alcohol, Tobacco and Firearms (ATF). TTB
also will administer the federal excise tax for flrearrns and ammunition. The
r'emaliling part of ATF has been transferred to the Department of Justice as the
Bureau of Alcohol. Tobacco. Firearms and Explosives
As Administrator. Mr LibertUCCI will oversee the approximately 560~person bureau.
consisting mainly of ATF employees who are shifting to the TTB. Mr. lIbertuccl
previously served as Assistant Director of the Office of Alcohol and Tobacco at ATF
since 1997 He Ilas been with the ATF III other executive capacltres since 1970.
'As we make thiS organizational change. our commitment to servlllg the regulated
Industnes will remain fair and profeSSional and will be one of continued
accompllshmerlt. said Mr. lIbertuccl.
The lllaJor functions of TTB Include
• Collecting alcohol and tobacco excise taxes and classifying alcohol and tobacco
procJucts for excise tax pUI'poses. TTB collects approximately $15 billion annually.
• Investigating applications. and issuing permits. for the operation of distilleries,
willenes. breweries, and tobacco manufacturers. importers and exporters;
• Regulating the operations of vanous Industnal users of distilled splnts, including
manufacturers of non-beverage products. tax-free. and denatured alcohols;
• Collectlllg approximately S100 million in occupational taxes annually;
• Regulating the production, packaging, bottling. labeling and storage of alcohol and
tobacco products;
• Ensuring that labeling and advertising of alcohol beverages provide adequate
IIlformatlon to the consumer concerning the identity and quality of the product;
• Preventing misleading labeling or advertlslllg of alcohol beverages;
• Regulating the marketlllg and promotional practices concerning the sale of alcohol
beverages by producers and wllolesalers. ThiS IS done prllnanly through the
Ir1Vcstlgatlon of allegations of Illegal trade practices;
• EnforCing provlslorls of the Alcohol Beverage Labeling Act. which mandates that a
govemrnerlt warning statement appear' on all alcohol beverages for sale and
distribution In the United States.
Additional Information about TTB can be found at its webSite,
http://www.treas.goy/press/releases/kd3793.htm
113112003
PO-3794: U.S. InternatIOnal Reserve Position
Page lof2
"':·1'--··
.:.~ • .:"• .t....
".'
K_
:'~
FROM THE OFFICE OF PUBLIC AFFAIRS
JalluClry 24. 2003
PO-3794
U.S. International Reserve Position
TllP TreJsur\ DepJrtlllellt today released U S resel-ve assets data for the latest week As indicated In this table. US reserve assets
totJled $79.761 1111111011 as of the el1d of that week. compared to $79.085 million as of the end of the prior week.
I. Official U.S. Reserve Assets (Ill US Imllions)
January 10, 2003
January 17, 2003
79,085
79,761
II
TOTALI
I
11 Forelgl1 Currency Reserves
1
a Securities
Of wllich. Issuer headquartered
III
the US.
'~f
I
Yen
I
13.172
II
I
TOTAL
Euro
20.027
6.947
I
Yen
13.345
0
II
II
I
I
I
TOTAL
20.293
0
I b Total deposits With
I)
I
b.1I
O{/JtH
I/)
11.260
the US
II
2.644
13.904
I
I
Ib II Of which. banks located abroad
b.11I
I
I
central tJdllks and BIS
BanAs headqual1ered
I
Banks heaciquar1ered outSIde the US
II
I
Iblil Of which. banks located in the US
I
II
I
12 IrviF Reserve Position 2
II
II
II
3 Special DraWing Rights (SDRs)
1
2
1
15 Orner Reserve Assets
II
1
II
2,679
II
14,079
0
0
0
u
0
0
0
21,951
11,043
0
II
I
0
I
I
I
12,160
1
14 Gold Stock 1
11,400
II
1
II
I
II
22,107
12.241
I
1
1
11,043
0
II. Predetermined Short-Term Drains on Foreign Currency Assets
January 17, 2003
January 10, 2003
I
I
Euro
TO~
Van
1 Foreign currency loans and securities
Euro
0
II
TOTAL
Yen
0
II
2 Aggregate silort arid 10llg posltlorlS In forwards and futures In foreign currencies Vis-a-VIS the U.S. dollar
201 SliuI11Jusitiu/iS
1
I ~ iJ
L')!)"J IJU,'Jlt:
1
If I,,)
3 Other
1
II
I
II
I
II
I
J~
0
0
0
I
II
I
I
II
I
I
Jl
0
0
0
III. Contingent Short-Term Net Drains on Foreign Currency Assets
II
I
http://www.treas.gov/press/releases/p03794.htm
January 10, 2003
II
II
January 17, 2003
II
113112003
PO-3794: U.S. International Reserve Position
Page 2 of2
Euro
TOTAL
Yen
1 Contingent liabilities in foreign currency
1a Collateral guarantees on debt due within 1
year
1 bOther cOlltlngellt liabilities
TOTAL
Yen
0
I
II
I
I
0
I
/I
I
2 Fmelgn currency securities With embedded
options
0
3. Undrawn. unconditional credit lines
0
13 d
Euro
I
I
0
I
0
I
I
Willi uthel ,-"'elltrd/l)dllks
3 b. With banks and other fillanciallllstitutions
1-<",,,r/n·
1rtered
3 (. With
III
I
I
the US.
!Jdll!,:i dllli
cJtlJtH fllldllC/cllllJ:itltutlOllS
Hea(je/lId/lerecll1 uts/cie the U
S
I
I
4. Aggregate short and long positions of options
In fmelgn
ICurrencies Vis-a-VIS the U.S
14 a
dollar
0
0
Short positions
4.a.1 Bougllt puts
~
') 1Airltten calls
14.b Long postllons
I
14b 1 Bought calls
14 b 2 Written puts
I
Notes:
1. Includes holdings of the Treasul'y's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
(SOMA). valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values. and
deposits reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision. Foreign Currency
Reserves for the prror week are final
2/ The Items. "2 IMF Reserve POSition" and "3 Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valJed In dollal' terms at the official SDR'dollar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, Including revaluation. by the U.S. Treasury to the prior week's IMF data. IMF data for the latest week may be
subject to reviSion. IMF data for the prior week are final.
3/ Gold stock IS valued monthly at $42.2222 per fine troy ounce
http://www.treas.gov/press/releases/po3794.htm
1/3112003
DEPARTMENT
OF
THE
TREASURY
~/78~9~. . . . . . . . . . . . . . . . . . . .. .
........................
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C.. 20220. (202) 622.2960
For Immediate Release
January 24, 2003
Contact: Tara Bradshaw
(202) 622-2014
TREASURY ANNOUNCES MUTUAL AGREEMENT WITH SWITZERLAND
REGARDING TAX INFORMATION EXCHANGE
Today the Treasury Department announced that the competent authorities of the United States
and Switzerland have entered into a Mutual Agreement under the current U.S.-Swiss Income Tax
Convention that is intended to facilitate more effective tax information exchange between the
two countries.
Acting Treasury Secretary Kenneth W. Dam and Swiss Finance Minister Kaspar Villiger
exchanged letters today welcoming the agreement as important to the administration and
enforcement of the tax laws of each country. The letters express the intent of the two countries
to maintain a dialogue with a view to monitoring and improving the functioning of the current
Income Tax Convention, and in addition to explore other ways to improve cooperation between
the two countries. The letters note that the renegotiation of the Income Tax Convention could
enhance the relationship between the two countries.
"I am pleased that this Mutual Agreement on tax information exchange has been reached with
Switzerland, a key financial center," stated Acting Treasury Secretary Kenneth W. Dam. "This
Mutual Agreement is a significant step in our efforts to ensure that no safe haven exists
anywhere in the world for the funds associated with illicit activities, including tax evasion. I
look forward to continuing progress with Switzerland and other financial centers in this
important area."
"Access to needed information is vital to our efforts to ensure full and fair enforcement of our
tax laws," stated Treasury Assistant Secretary for Tax Policy Pamela Olson. "This Mutual
Agreement should improve our access to needed information under the current bilateral tax
treaty between the United States and Switzerland. We look forward to working with Switzerland
to further improve this relationship.
"Treasury is committed to continuing its efforts to improve and expand the U.S.'s broad network
of bilateral tax treaties and tax information exchange agreements," Olson added. "Better tax
information exchange relationships will permit the IRS to obtain the information it needs from
other countries so it can pursue taxpayers attempting to hide income offshore to avoid their tax
obligations. "
KD-3795
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
The following documents are attached:
Text of the Mutual Agreement
Text of Letter from Acting Treasury Secretary Kenneth Dam
Text of Letter from Swiss Finance Minister Kaspar Villiger
-30-
Memorandum of Understanding
Page I of9
Mutual Agreement of January 23, 2003,
Regarding the Administration of Article 26 (Exchange of Information)
of the Swiss-U.S. Income Tax Convention of October 2, 1996
Whereas Article 16 (Exchange oflnformation) of the Convention between the United States of America and the Swiss
Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, signed at Washington on
October 1, 1996, ("the Convention"), provides that the competent authorities of the Contracting States shall exchange
such infol111ation as is necessary "for the prevention of tax fraud or the like in relation to the taxes which are the subject
of' the Convention;
Whereas paragraph 10 of the Protocol accompanying and forming an integral part of the Convention ("the Protocol")
provides that "tax fraud" means "fraudulent conduct that causes or is intended to cause an illegal and substantial
reduction in the amount of tax paid to a Contracting State," and provides illustrative descriptions of situations in which
fraudulent conduct is assumed;
Whereas the Contracting States have memorialized cel1ain understandings with respect to Article 26 of the Convention;
Whereas the competent authorities of the Contracting States have had several years of experience in implementing and
administering the Convention, including the information exchange provisions thereof;
Whereas the exchange ofinfonnation for the prevention of tax fraud or the like under Article 26 of the Convention is
very important to the adequate administration and enforcement of the tax laws of each Contracting State;
Now, therefore, the competent authorities of the Contracting States wish to memorialize the following additional
understandings in reference to Article 26 of the Convention and paragraph 10 of the Protocol:
I.
It is understood that Article 26 of the Convention and paragraph 10 of the Protocol will be interpreted to support
the tax administration and enforcement efforts of each Contracting State to the greatest extent possible.
2.
It is understood that, in detel111ining whether infonnation may be provided in response to a request, the
requested State shall apply the statute of limitations applicable under the laws of the requesting State instead of the
statute of limitations of the requested State.
3.
It is understood that, in response to a request, the requested State shall exchange infonnation with respect to
matters that the requesting State is pursuing, or may pursue, on a civil or criminal basis.
4.
It is understood that the following conduct constitutes "tax fraud or the like" under paragraph I of Article 26 of
the Convention, which is also illustrated in paragraph 10 of the Protocol:
a)
Conduct that is established to defraud individuals or companies, even though the aim of the behavior
may not be to commit tax fraud;
b)
Conduct that involves the destruction or non-production of records, or the failure to prepare or maintain
correct and complete records, that a person is under a legal d.uty (tax or otherwise) to prepare a?d keep
as sufficient to establish the amount of gross income, deductIons, credIts, or other matters reqlllred to be
shown by such person in any tax return, if the person has not properly reported such amounts in any
such tax return; or
c)
Conduct by a person subject to tax in the requesting St~te that involves the failure to file. a. tax return that
such person is under a legal duty to file and an affirmative act that has the effect of decelvll1g the tax
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5119/2005
Memorandum of Understanding
Page 2 of9
authorities making it difficult to uncover or pursue the failure to file, including the concealment of assets or
covering up of sources of income or the handling of one's affairs to avoid making the records that are
usual in transactions of the kind.
It is understood that these examples are by way of illustration, and not by way of limitation.
It is understood that, in response to a request, the requested State shall exchange information where the
requesting State has a reasonable suspicion that the conduct would constitute tax fraud or the like. The requesting
State's suspicion of tax fraud or the like may be based on:
5.
a)
Documents, whether authenticated or not, and including but not limited to business records, books of
account, or bank account information;
b)
Testimonial information from the taxpayer;
c)
Information obtained from an informant or other third person that has been independently corroborated
or otherwise is likely to be credible; or
d)
Circumstantial evidence.
It is understood that these examples are by way of illustration, and not by way of limitation.
6.
It is understood that each of the hypothetical examples in the Appendix below involves conduct constituting
"tax fraud or the like" under paragraph I of Article 26 of the Convention and paragraph 10 of the Protocol. It is
understood that these examples are by way of illustration, and not by way of limitation.
Department of Treasury
United States of America
By:
Carol A. Dunahoo
Director, International
Large and Mid-Size Business Division
Internal Revenue Service
Date: - - - - - - -
By: ___________________
Barbara M. Angus
International Tax Counsel
Department of the Treasury
Federal Tax Administration
Swiss Confederation
By:
Robert Waldburger
Vice-Director
Delegate for International Tax Agreements
Date: _ _ _ _ _ _ __
Date:
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5119/2005
Memorandum of Understanding
Page 3 of9
Appendix
HYPOTHETICAL I
An indivi?ual subject to the r~questing State's income tax operates a business with substantial cash sales. He keeps
one set ot books and records 111 which he records all business expenses; however, he causes a substantial portion of the
cash sales of the business to be omitted from this set of books. The individual keeps a second set of books and records
that includes the total amount of cash sales, including the cash sales not recorded on the first set of books and records.
Because the first set of business books and records are used to prepare the indi vidual's income tax return, a substantial
portion of his taxable income is not reported on the tax return. Specifically, the individual's income tax return, and the
component to that return on which the individual reports business receipts, expenses, and other items related to the
business, understates the gross business receipts and other income related entries.
The individual maintains a bank account in the requested State in his own name into which he deposits the portion of
his business income that is not reported on his tax return. Based on information provided by an informant, including a
copy of the second set of books and records that the informant secretively took from the business premises, tax officials
of the requesting State commence an investigation of the individual for possible tax violations under the laws of the
requesting State. The taxpayer provides the first set of books and records to these officials to support the false
information on his tax return.
The requested State would obtain and provide information relating to the bank account in the requested State of the
individual in response to a specific request by the requesting State under Article 26 of the Convention.
HYPOTHETICAL 2
An individual subject to the requesting State's income tax operates a business with substantial cash sales. He keeps
one set of books and records in which he records all business expenses; however, he causes a substantial portion of the
cash sales of the business to be omitted from this set of books. The individual keeps a second set of books and records
that includes the total amount of cash sales, including the cash sales not recorded on the first set of books and records.
Because the first set of business books and records are used to prepare the individual's income tax return, a substantial
portion of his taxable income is not reported on the tax return. Specifically, the individual's income tax return, and the
component to that return on which the individual reports business receipts, expenses, and other items related to the
business, understates the gross business receipts and other income related entries.
The individual maintains a bank account in the requested State in his own name into which he deposits the portion of
his business income that is not reported on his tax return. Based on information provided by an informant, authorities
of the requesting State conduct a search of the business premises and seize both sets of books and records.
The requested State would obtain and provide information relating to the bank account in the requested State of the
individual in response to a speci fie request by the requesting State under Article 26 of the Convention.
HYPOTHETICAL 3
An individual subject to the requesting State's income tax operates a b~siness which ~rovides a ~ervice on a ."cas.h
only" basis. He regularly skims a substantial portion of these cash receipts and deposits these skimmed receipts 111 a
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Memorandum of Understanding
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bank account !n the request~d State maintained in his own name. He deposits the remainder of his cash receipts in a
bank accou.nt m the requestmg S~ate mamtained in his business name. He pays his business expenses by drafting
checks agamst the bank account m the requesting State.
He files an income tax return, understating his gross income, taxable income and tax due to the extent that he
skimn~ed fron? hi.s ?usiness receipts. Specifically, the individual's income ta~ return, and'the component to that return
on whIch .the mdlvl?ual reports business receipts, expenses, and other items related to the business, understates the
gross bus mess receIpts and other income related entries.
An informant .tells the tax officials of the requesting State about the business, including the skimming activities, and the
bank account m the requested State, specifically stating that the individual told him that he skimmed no less than 30 per
cent of his gross receipts every week and deposited these skimmed receipts in an account under his name in the X Bank
located in the requested State. Based on this information tax officials of the requesting State commence an
investigation of the individual for possible tax violations under the laws of the requesting State. In response to a
request by the tax officials of the requesting State for substantiation of the tax return, the individual provides
incomplete books and records that omit the skimmed receipts and therefore support the tax return.
The requested State would obtain and provide information relating to the bank account in the requested State of the
individual in response to a speci fic request by the requesting State under Article 26 of the Convention.
HYPOTHETICAL 4
An individual subject to the requesting State's income tax operates a business which provides a service on a "cash
only" basis. He regularly skims a substantial portion of these cash receipts and deposits these skimmed receipts in a
bank account in the requested State maintained in his own name. He deposits the remainder of his cash receipts in a
bank account in the requesting State maintained in his business name. He pays his business expenses by drafting
checks against the bank account in the requesting State.
He files an income tax return, understating his gross income, taxable income, and tax due, to the extent that he
skimmed from his business receipts. Specifically, the individual's income tax return, and the component to that return
. on which the individual reports business receipts, expenses, and other items related to the business, understates the
gross business receipts and other income related entries.
A former employee of the business tells the tax officials of the requesting State about the business, including the
skimming activities, and the bank account in the requested State, specifically stating that the individual told him that he
skimmed no less than 30 per cent of his gross receipts every week and deposited these skimmed receipts in an account
under his name in the X Bank located in the requested State. Based on this information tax officials of the requesting
State commence an investigation of the individual for possible tax violations under the laws of the requesting State. In
response to a request by the tax officials of the requesting State for the required substantiation of the tax return, the
individual does not provide any books and records.
The requested State would obtain and provide information relating to the bank account in the requested State of the
individual in response to a specific request by the requesting State under Article 26 of the Convention.
HYPOTHETICAL 5
An individual subject to the requesting State's income tax operates a b~siness which ~rovides a service on a ."cas.h
only" basis. He regularly skims a substantial portion of these cash receIpts and deposIts these skImmed receIpts m a
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Memorandum of Understanding
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bank account ~n the request~d State maintained in his own name. He deposits the remainder of his cash receipts in a
bank accou.nt m the requestmg State maintained in his business name. He pays his business expenses by drafting
checks agamst the latter bank account. He keeps no record of business receipts or expenses other than his bank account
records in the requesting and requested State.
He files an income tax return, understating his gross income, taxable income and tax due to the extent that he
skimn:ed fron.1 hi.s ?usiness receipts. Specifically, the individual's income ta~ return, and'the component to that return
on whIch .the II1dIVI?Ual reports business receipts, expenses, and other items related to the business, understates the
gross busmess receIpts and other income related entries.
An inforn1ant .tells tax officials of the requesting State about the business, including the skimming activities, and the
bank acc?unt m the r~quested State, specifically stating that the individual told him that he skimmed no less than 30 per
cent of hIs gross receIpts every week and deposited these skimmed receipts in an account under his name in the X Bank
located in the requested State. The inforn1ant also tells tax officials of the requesting State that the individual has used
proceeds from the bank account in the requested State to purchase assets, formal legal ownership of which has been
placed in the names of other persons.
Based on this information tax officials of the requesting State commence an investigation of the individual. Among
other things, these officials learn that the individual used cash to buy particular assets, and has with documentation
placed legal ownership to these assets in the name of other persons. These officials observe that these assets are always
used by the individual.
The requested State would obtain and provide information relating to the bank account in the requested State of the
individual in response to a specific request by the requesting State under Article 26 of the Convention.
HYPOTHETICAL 6
An individual subject to the requesting State's income tax operates a business. Although the business functions
primarily within the territory of the requesting State, it does have some international sales. The individual forms a
bearer share corporation in a third country and confidentially maintains possession of all the shares. The corporation
maintains a bank account in the requested State in the corporate name with the individual as the sole authorized
signature authority. The business enters into a contract with the corporation under which the corporation agrees to
perform "market research." No market research is performed. The business pays substantial fees for this service which
are deposited into the bank account in the requested State. The business records the fees as expenses on the business
books and records. As a result, business income is substantially reduced. Because the business books and records are
used to prepare the individual's income tax return, his reported gross income, taxable income, and tax due are
substantially understated. Specifically, the individual's income tax return, and the component to that return on which
the individual reports business receipts, expenses, and other items related to the business, understates the gross business
receipts and other income related entries.
Tax officials of the requesting State randomly select the individual for a tax audit. When these officials observe that
substantial payments were made to a foreign corporation and claimed as business expenses on the individual's tax
return these officials ask the individual whether he or someone else owns the foreign corporation. The individual
denied any ownership interest in the foreign corporation and claims that it is owned by a third party who has actually
conducted market research for the business. Tax officials of the requesting State then initiate an investigation of the
individual. Subsequently, an ex-spouse tells these officials that the individual maintains a bank account in the
requested State under the name of the foreign corporation and that the payments to the corporation for market research
were deposited in this bank account.
The requested State would obtain and provide inforn1ation relating to the bank account in the requested State of the
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511912005
Memorandum of Understanding
Page 6 of9
foreign corporation in response to a speci fic request by the requesting State under Article 26 of the Convention.
HYPOTHETICAL 7
An.individ~al control~ a corporation that is subject to the requesting State's income tax and that operates a business
whl~h provides a s~rvlce on a. "cash only" basis. The individual regularly skims a substantial portion of these cash
receipts a~d depo.slts these skimmed receipts in a bank account in the requested State maintained in his own name.
The rem~l1nder of the cash receipts are deposited in a bank account in the requesting State maintained in the
corporatlon'~ naJ~le. The c?rporation pays its business expenses with checks drafted against this latter bank account.
No record of busllless receipts or expenses are kept other than the bank account records in the requesting and requested
State.
A corporate income tax retum is filed, understating gross income, taxable income, and tax due, to the extent of the
skimmed business receipts. Specifically, the corporation's income tax retum, on which the corporation reports gross
receipts, cost of goods sold, dividends, compensation of officers, balance sheet information, and other items related to
the corporation, understates gross receipts and other items mentioned above.
An informant tells the tax officials of the requesting State about the corporate business, including the skimming
activities, and the bank account in the requested State, specifically stating that the individual told him that he skimmed
no less than 30 per cent of the gross receipts every week and deposited these skimmed receipts in an account under his
name in the X Bank located in the requested State. Based on this information tax officials of the requesting State
commence an investigation of the corporation and the individual for possible tax violations under the requesting State's
law.
The requested State would obtain and provide information relating to the bank account in the requested State of the
individual in response to a speci fic request by the requesting State under Article 26 of the Convention.
HYPOTHETICAL 8
An individual subject to the requesting State's income tax is employed as the chief executive officer of a publicly held
corporation of the requesting State that does subcontract work for other corporations of the requesting State. To ensure
that the corporation keeps certain existing contracts and secures new ones, it pays bribes to employees of a major
contractor. The funds from which the bribes are paid come from random diverted corporate gross receipts. The chief
executive officer instructs the corporate accountant (1) not to report diverted receipts on the corporate books and
records and (2) to destroy all documentation of those receipts held by the corporation. The books and records
understating gross receipts are used to prepare the corporate income tax retum, and, thus, the corporate income tax
retum understates the gross receipts and other income related entries. (The same books and records are used to prepare
inaccurate income statements upon which shareholders and potential investors rely.)
The chief executive officer deposits the diverted funds into a bank account in the requested State over which he has
sole signature authority. He periodically authorizes payments from that account to other accounts at the same bank
over which the respective bribe recipients have signature authority. Based on information, which includes all the
details stated above, provided by a staff accountant that works for the corporate accountant, tax officials of the
requesting State initiate an investigation of the chief executive officer and the corpor~te accounta?t.for their ~ole in
assisting in the preparation of a false corporate income tax retum, and the bnbe recIpients for OlTIlttlllg the bnbe
payments from their individual income tax retums.
The requested State would obtain and provide information relating to the bank account in the requested State over
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Memorandum of Understanding
Page 7 of9
which t.he ch~ef exe~u.tive officer .has signature authority and the bank accounts in the requested State over which the
respective bnbe recIpients have signature authority in response to a specific request by the requesting State under
Article 26 of the Convention.
HYPOTHETICAL 9
An.individual s~bj.ect to the requesting State's income tax is a tax shelter promoter. Several tax shelter partnerships in
which .he ~ells llJ11lted partnership interests involve research and development companies incorporated and ostensibly
oper~tl.ng 111. the requested State. The prospectus issued to investors for each shelter offers "investment opportunities by
provld1l1g highly leveraged tax deductions." The investment per limited partnership share required for each shelter is
$50,000, which includes a cash payment of $1 0,000 and a promissory note for $40,000 due in 30 years with interest
accrued and payable at the end of that period.
Tax officials of the requesting State initiate an investigation of the promoter to detern1ine whether he aided and assisted
in the preparation of false individual income tax returns filed by the investors, as well as whether the promoter failed to
report the income he made from the promotion of the tax shelter on his individual income tax return. During the course
of the investigation, these officials interview numerous investors in each shelter who claim the promoter stated that (1)
the only payment ever required from an investor was the $10,000 and (2) the note was only for tax purposes and would
never be collected. During audits of several investors, tax officials of the requesting State discover that all $10,000
payment checks were deposited to an identifiable bank account in the requested State.
The requested State would obtain and provide information relating to the bank account in the requested State into
which the payment checks were deposited in response to a specific request by the requesting State under Article 26 of
the Convention.
HYPOTHETICAL 10
An individual subject to the requesting State's income tax is a tax shelter promoter. He promotes and sells a movie tax
shelter in which a corporation of the requested State ostensibly intends to produce feature films for profit. Limited
partnership shares in movies to be produced are sold to investors in the requesting State for $25,000 per share with
assurances that deductions can be taken against income in the amounts of $1 00,000 per share (a leverage of 4 to I). In
fact, the corporation in the requested State is a shell and the movie shelter scheme is a fraud. All monies received in
the scheme inure to the personal benefit of the promoter. Upon receipt of investors' $25,000 payments, the promoter
deposits the funds into a bank account in the requested State over which he has sole signature authority. The promoter
then prepares documentation based upon complete fabrication which he submits to the investors.
The investors, in reliance on such documentation, prepare and file false individual income tax returns claiming tax
benefits derived from the movie shelter. Upon audit by the tax officials of the requesting State, these benefits are
denied. A tax official of the requesting State initiates an investigation to determine whether the promoter aided and
assisted in the preparation of the investors' false tax returns, as well as whether the promoter failed to report income
made from the tax shelter promotion on his individual income tax return.
The requested State would obtain and provide information relati~g to the bank account in the requested State .over
which the promoter has signature authority in response to a specIfic request by the request1l1g State under ArtIcle 26 of
the Convention.
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Memorandum of Understanding
Page 8 of9
HYPOTHETICAL II
An individual has income .as a salaried employee and earns income by conducting promotional events in which he
enCOl!r~ges taxpayers to vIOlate ~1e requesting State's tax laws. Although the individual is subject to the requesting
State s mcome t<~x, he ~oes not file a tax return. The individual earns income at the promotional events by selling
pamphlets 1~1 \:,hlch he I."ustrates methods of evading income tax that he knows to be unlawful but that he represents to
attendees ot his promotIOnal events to be lawful. He sells numerous pamphlets, each for a significant price.
Tax officials of the requesting State initiate an investigation of the individual to detern1ine whether he aided and
assis~e~ in the preparati.on .ot: the false individual income tax returns of those attending the promotional events, as well
as wllltully evaded his 1I1dlvldual income taxes. These officials interview several promotional event attendees and
purchasers of the pamphlets and discover that numerous checks in payment for the pamphlets were deposited into a
bank account in the requested State.
The requested State would obtain and provide information relating to the bank account in the requested State into
which the checks for payment were deposited in response to a specific request by the requesting State under Article 26
of the Convention.
HYPOTHETICAL 12
An individual maintains a bank account in the requested State into which he deposits income that is subject to the
income tax in the requesting State. He makes substantial withdrawals from this bank account, through the use of a
credit card tied to such account and issued in the name of a corporation, to pay for his living expenses for the year. The
individual does not file an income tax return.
Tax officials of the requesting State commence an investigation of the individual based on information received from a
credit card company related to credit cards tied to bank accounts in the requested State, and from various merchants.
The tax officials determine that a credit card tied to a bank account in the requested State and issued in the name of a
. corporation was used throughout the year to purchase numerous personal items that were delivered to the individual.
When these officials ask the individual whether he owns or controls the bank account, the individual does not
. acknowledge any interest in the corporation or the bank account, and provides no explanation regarding the source of
the funds in the bank account.
The requested State would obtain and provide information relating to the bank account in the requested State in
response to a specific request by the requesting State under Article 26 of the Convention.
HYPOTHETICAL 13
An individual operates a business which provides a service on a "cash only" basis. He regularly deposits a substantial
portion of these cash receipts in a bank account in the requested State maintained in his own name. He deposits the
remainder of his cash receipts in a bank account in the requesting State maintained in his business name. He pays his
business expenses by drafting checks against the latter bank account. He keeps no record of busin~ss .r~ceipt~ or .
expenses other than his bank account records in the requesting and requested State. Although the mdlVldualls subject
to the requesting State's income tax, he does not file a return.
An informant tells tax officials of the requesting State about the business, specifically stating that the individual told
him that he deposited no less than 30 per cent of his gross receipts in an account under his n.am.e !n the X Bank located
in the requested State. The informant also tells tax officials of the request1l1g State that the 1I1dlVldual has used
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Memorandum of Understanding
Page 9 of9
proceeds from the bank account in the requested State to purchase assets, formal legal ownership of which has been
placed in the names of other persons.
Based on this information tax officials of the requesting State commence an investigation of the individual. Among
other things, these officials learn that the individual used cash to buy particular assets, and has with documentation
placed legal ownership to these assets in the name of other persons. These officials observe that these assets are always
used by the individual.
The requested State would obtain and provide information relating to the bank account in the requested State of the
individual in response to a specific request by the requesting State under Article 26 of the Convention.
I
: HYPOTHETICAL 14
An individual instructs his employer to make his salary checks payable to a corporation purporting to provide services
as an independent contractor. The employer does not provide the documentation as required under the requesting
State's tax law in the case of compensation provided to an employee. The individual opens a bank account in the X
Bank located in the requested State in the name of that corporation, and deposits checks from his employer in that
account. Although the individual is subject to the requesting State's income tax, he does not file a tax return.
Based on information provided by an informant, tax officials of the requesting State initiate an investigation of the
individual. The tax officials contact the individual's employer, and obtain cancelled salary checks payable to the
corporation and deposited in the bank account in the X Bank located in the requested State.
The requested State would obtain and provide information relating to the bank account in the requested State in the
name of the corporation in response to a specific request by the requesting State under Article 26 of the Convention.
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511912005
Text of Letter from Acting Treasury Secretary Kenneth Dam
Page 1 of 1
Text of Letter from Acting Treasury Secretary Kenneth Dam
Federal Councillor Kaspar Villiger
Finance Minister
Federal Department of Finance
Bernerhof
3003 Berne
Switzerland
Dear Mr. Federal Councillor:
I am very pleased with the report that the technical discussions held between representatives of the United States Treasury and of
. the Federal Tax Administration, respectively, regarding the application of Article 26 on Exchange of Information of the Income Tax
I Convention between the United States of America and the Swiss Confederation, signed on October 2, 1996, have led to the
. successful conclusion of a mutual agreement, signed on January 23, 2003. This arrangement is important to the administration
and enforcement of the tax laws of each of our countries, and complements the substantial cooperation between our two countries
to combat criminal activities in other fields such as money laundering and terrorism financing.
It is important to build upon this success and we must maintain a dialogue with a view to monitoring and improving the functioning
of the present version of the Convention. In addition we will continue to explore ways to improve the cooperation between our two
countries. Successful renegotiation of the Convention could enhance the economic relationship between our two countries.
We look forward to continuing to work together to improve the cooperation between our two countries.
Sincerely,
Kenneth W. Dam
Acting Secretary and
Deputy Secretary
http://www.tH~a6.gov/press/releases/dam.htm
5/19/2005
SWISS CoNFEDERATION
KASPAR
V ILLIGER
FEDERAL COUNCILLOR
l-'EAD OF THE FEDERAL
DEPARTMENT OF FINANCE
Berne, January 24, 2003
Mr. Kenneth W. Dam
Acting Secretary of the Treasury
Department of the Treasury
1500 Pennsylvania Avenue
Washington, D.C. 20220
USA
Dear Mr. Secretary
I am very pleased with the report that the technical discussions held between representatives of the
Federal Tax Administration and of the United States Treasury, respectively, regarding the application
of Article 26 on Exchange of In formation of the Income Tax Convention between the Swiss
Confederation and the United States of America, signed on October 2, 1996, have led to the
successful conclusion of a mutual agreement, signed on January 23, 2003. This arrangement is
important to he administration and enforcement of the tax laws of each of our countries, and
complements the substantial cooperation between our two countries to combat criminal activities in
other fields such as money laundering and terrorism financing.
It is important to build upon this success and we must maintain a dialogue with a view to monitoring
and improving the functioning of the present version of the Convention. In addition we will continue to
explore ways to improve the cooperation between our two countrie s. Successful renegotiation of the
Convention could enhance the economic relationship between our two countries.
We look forward to continuing to work together to improve the cooperation between our two
countries.
Sincerely,
Kaspar Villiger
KU-J /':Jb: Tocray1l1e ffeasury Department added two individuals to the terrorist financing executive order. Page 1 of 2
·U
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FROM THE OFFICE OF PUBLIC AFFAIRS
January 24, 2003
KD-3796
Statement by the Treasury Department Regarding Today's Designation of
Two
Leaders of Jemaah Islamiyah
Statement of the Case
Jemaah Islamiyah ("J I") is an al-Qaida linked terrorist group with cells operating in
several countries in Southeast Asia. The Jl's stated goal is to create an Islamic
state comprising Malaysia, Singapore, Indonesia, and the southern Philippines.
Members of JI have been trained, funded and directed by the al-Qaida leadership to
pursue al-Qaida's terrorist agenda across the region. In December 2001, Singapore
authorities arrested 13 JI members, eight of whom had trained in al-Qaida camps in
Afghanistan, who planned to bomb the U.S. and Israeli Embassies, British and
Australian diplomatic buildings, and U.S. and Singapore defense targets in
Singapore. Members of the group had conducted videotaped surveillance of the
potential targets, and had already acquired explosives in preparation for the
attacks. Singapore police discovered tampered passports, forged immigration
stamps, bombmaking manuals, and al-Qaida-related material in several suspects'
homes. In addition, a copy of a videotape made by certain members of the group
and showing intended targets in Singapore was found in the wreckage of an alQaida leader's house in Afghanistan in December 2001.
JI was designated as subject to U,S. economic sanctions pursuant to Executive
Order 13224 on October 23, 2002. Today, two leaders of JI are being designated
pursuant to Executive Order 13224,
1, Isamuddin, Nurjaman Riduan
AKAs: Hambali; Isomuddln, Riduan: Nurjaman: Encep Nurjaman
Nationality: Indonesian
POB: Cianjur, West Java, Indonesia.
Nurjaman Riduan Isamuddin, most commonly known as Hambali, is a senior JI
leader with close ties to al-Qaida and a long track record of involvement in terrorist
activities, including the targeting of U,S, interests, Based on information available
to the U,S. Government, there is reason to believe that Hambali was involved in a
1995 plot to bomb 11 US, commercial airliners in Asia, and directed the late-2001
foiled plot to attack U.S. and Western interests in Singapore. Hambali is the head of
JI's regional "shura," the policy making body of the organization, He is also
considered JI's director of operations, oversees JI's financing, and serves as the
primary interface with al-Qaida, He is suspected of being al-Qaida's operations
director for the East Asia region.
Hambali arranged for a courier to take a surveillance videotape to al-Qaida in
Afghanistan proposing a bomb attack on Americans in Singapore, and made
arrangements for JI members to train in al-Qaida camps in Afghanistan, In addition,
he was videotaped in a January 2000 meeting in Malaysia with two of the
September 11, 2001 hijackers of AA Flight 77 - Khalid al-Midhar and Nawaf alHazmi.
Hambali was also involved in planning a series of bombings in Manila, the
http://www.treas.lwv/press/releases/kd3796.htm
1/3112003
KD-37~6: Today the Treasury Department added two individuals to the terrorist financing executive order. Page 2 of 2
Philippines that killed 22 people, and injured more than 100 on December 30, 2000.
One JI member admitted to Philippine investigators that Hambali was also involved
in the bombing of the residence of the Philippine Ambassador to Indonesia on
August 1, 2000. The bombing killed two people and seriously injured the
Ambassador. In addition, Hambali was involved in a series of coordinated bombings
of churches in Jakarta and eight other cities on December 24, 2000 that killed 18
people and injured many others. Indonesian police say they found documents
implicating Hambali in that bombing. Hambali is being sought by authorities in
Malaysia, Singapore, and Indonesia, and is believed to be located in Indonesia,
Pakistan. or the southern Philippines.
2. Abdurrahman, Mohamad Iqbal
AKAs: Abu Jibril; Rahman, Mohamad Iqbal; A Rahman, Mohamad Iqbal; Abu Jibril
Abdurrahman; Fikiruddin Muqti; Fihiruddin Muqti
Nationality: Indonesian
POB: Tirpas-Selong Village, East Lombok, Indonesia,
Mohamad Iqbal Abdurrahman, more commonly known as Abu Jibril, is a close
associate of Hambali. Abu Jibril was Jl's primary recruiter and second in command
- running JI operations and heading its regional "shura" - before his arrest by
Malaysian authorities in June 2001. The International Crisis Group cites Southeast
Asian intelligence sources identifying Abu Jibril as a financial conduit for al-Qaida in
the region.
There are now 257 individuals, organizations and entities on the list. $124.5 assets
have been frozen worldwide since September 11,2001, $36.2m in the U.S.
http://www.treas.gov/press/releases/kd3796.htm
113112003
0
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0)
federal financing
WASHINGTON, DC. 20220
bankNE
FEDERAL FINANCING BANK
N
S
1/27/03
Gary Burner, Manager, Federal Financing Bank (FFB) announced
the following activity for the month of December 2002.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $37.0 billion on December 31,
2002, posting a decrease of $401.2 million from the level on
November 30, 2002. This net change was the result of decreases
in holdings of agency debt of $344.0 million and in holdings of
government-guaranteed loans of $57.2 million. The FFB made 61
disbursements and received 17 prepayments during the month of
December. The FFB also extended the maturities of 182 loans
guaranteed by the Rural Utilities Service ("RUSH) during the
month of December.
Attached to this release are tables presenting FFB December
loan activity and FFB holdings as of December 31, 2002.
KD-3797
0
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N
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Page 2
FEDERAL FINANCING BANK
DECEMBER 2002 ACTIVITY
Borrower
Date
Amount
of Advance
Final
Maturity
Interest
Rate
GOVERNMENT-GUARANTEED LOANS
GENERAL SERVICES ADMINISTRATION
San Francisco OB
Chamblee Office Building
San Francisco Bldg Lease
San Francisco Bldg Lease
San Francisco OB
12/03
12/05
12/26
12/26
12/26
$132,507.93
$84,918.24
$538,182.00
$673,813.00
$15,548.30
8/01/05
10/01/26
8/01/05
8/01/05
8/01/05
2.500%
4.864%
2.071%
2.071%
2.071%
S/A
S/A
S/A
S/A
S/A
12/03
12/03
12/17
12/18
12/31
$769,059.29
$224,835.23
$298,105.53
$584,449.73
$119,177.01
3/01/30
3/01/30
3/01/30
1/02/15
7/01/31
4.901%
4.901%
4.856%
3.759%
4.595%
S/A
S/A
S/A
S/A
S/A
12/02
12/02
12/02
12/02
12/02
12/02
12/05
12/06
12/06
12/06
12/09
12/09
12/09
12/09
12/10
12/11
12/12
12/12
12/12
12/12
12/13
12/13
12/16
12/16
12/17
12/17
12/17
12/17
12/17
$1,107,000.00
$10,000,000.00
$4,300,000.00
$600,000.00
$500,000.00
$1,966,000.00
$4,000,000.00
$486,000.00
$1,500,000.00
$606,539.00
$997,100.00
$1,650,000.00
$8,000,000.00
$590,000.00
$10,000,000.00
$280,000.00
$489,000.00
$1,750,000.00
$1,000,000.00
$4,000,000.00
$1,453,000.00
$1,548,244.00
$3,000,000.00
$7,200,000.00
$344,000.00
$1,000,000.00
$2,934,000.00
$2,000,000.00
$3,250,000.00
12/31/36
12/31/31
12/31/36
1/02/35
12/31/30
1/02/35
1/02/35
12/31/35
12/31/35
12/31/18
1/02/35
12/31/35
12/31/24
1/02/35
12/31/24
3/31/03
1/03/34
4/02/07
3/31/03
12/31/36
12/31/35
12/31/19
3/31/03
1/02/35
12/31/19
1/03/34
1/03/34
3/31/03
12/31/35
5.007%
4.916%
5.007%
4.973%
4.888%
4.973%
4.932%
4.742%
4.905%
4.125%
4.709%
4.893%
4.565%
4.876%
4.519%
1.213%
4.751%
2.721%
1.211%
4.803%
4.796%
3.999%
1.217%
4.855%
4.413%
4.906%
4.906%
1.235%
4.941%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
DEPARTMENT OF EDUCATION
Barber-Scotia College
Barber-Scotia College
Barber-Scotia College
Lincoln University
Livingstone College
RURAL UTILITIES SERVICE
A & N Electric #868
Arkansas Elec. #813
Deep East Texas Electric #872
Goodhue County #672
Lake Region Elec. #737
Lake Region Elec. #712
East Central Energy #660
Coop. Power Assoc. #720
Morgan County Elec. #759
Piedmont Tel. #566
Hawkeye Tri-County Elec. #643
REA Energy Cooperative #772
South Texas Electric #845
San Patricio Elec. #676
East Kentucky Power #828
Darien Telephone Co. #719
KEM Electric #537
Northern Electric Coop. #827
Surry-Yadkin Elec. #852
Wood County Electric #826
Comanche County Elec. #765
Interstate Tele #661
Citizens Elec. #878
Colquitt Elec. #693
Blair Telephone Company #862
Harrison County rural #609
Harrison County #532
Inter-County Energy #850
Southside Electric #786
Page 3
FEDERAL FINANCING BANK
DECEMBER 2002 ACTIVITY
Borrower
Date
12/17
Southern Pine Elec. #790
12/18
Tri-County Elec. Coop. #646
12/18
W. Farmers Elec. #701
12/19
PRTCommunications #798
12/20
Agralite Elec. #543
12/20
Georgia Trans. Corp. #849
White River Valley Elec. #776 12/20
woodruff Electric Coop. #893 12/20
12/23
Central Iowa Power #442
12/23
Central Elec. Power #504
Ironton Telephone Company #88812/23
12/23
S. Illinois Power #819
Adams Rural Electric #706
12/24
D.S. & 0 Rural Elec. #839
12/24
South Slope Cooperative #741 12/24
Freeborn-Mower Coop. #736
12/26
Grundy Elec.Coop. #744
12/26
Central Texas Elec. #520
12/30
Central Texas Elec. #523
12/30
Head Lakes Electric #825
12/30
New Horizon Elec. #791
12/30
United Power Assoc. #432
12/30
*Atlantic Telephone Mem. #805 12/31
*Bailey County Elec. #856
12/31
*Basin Electric #425
12/31
*Big Sand Elec. #540
12/31
*Big Sand Elec. #540
12/31
*Big Sand Elec. #540
12/31
*Big Sand Elec. #540
12/31
*Blue Grass Energy #674
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
*Brazos Electric #917
12/31
Amount
of Advance
Final
Maturity
Interest
Rate
$8,000,000.00
$2,000,000.00
$2,863,000.00
$1,800,000.00
$157,000.00
$12,081,051.00
$8,000,000.00
$6,000,000.00
$3,000,000.00
$5,405,000.00
$3,235,942.00
$5,043,000.00
$750,000.00
$520,000.00
$1,000,000.00
$200,000.00
$1,000,000.00
$185,100.00
$320,900.00
$516,000.00
$2,051,000.00
$1,889,000.00
$5,931,000.00
$1,896,000.00
$13,241,812.28
$774,628.03
$580,971.01
$971,257.38
$2,258,888.73
$1,988,454.80
$2,554,175.51
$1,954,282.40
$1,592,913.96
$1,197,690.18
$1,585,148.40
$203,456.75
$1,820,513.20
$1,702,393.75
$426,060.60
$867,705.64
$14,077.14
$372,221.00
$349,156.31
$2,923,534.24
$774,472.17
$850,054.65
$1,298,510.59
$325,979.86
$751,892.43
$981,738.57
12/31/35
1/02/35
12/31/25
3/31/03
1/03/34
12/31/25
1/02/18
12/31/36
12/31/29
1/03/33
12/31/03
12/31/30
1/03/28
12/31/36
1/02/18
3/31/03
3/31/03
1/03/33
1/03/33
12/31/36
3/31/03
12/31/20
3/31/03
3/31/03
3/31/03
3./31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
4.941%
4.928%
4.652%
1.213%
4.775%
4.515%
4.423%
4.838%
4.665%
4.874%
1.397%
4.698%
4.787%
4.840%
3.901%
1.193%
1.193%
4.752%
4.624%
4.713%
1.161%
3.912%
1.220%
1. 219%
1.345%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 4
FEDERAL FINANCING BANK
DECEMBER 2002 ACTIVITY
Borrower
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
*Brazos
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
Electric
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#917
#437
#437
#437
#437
#437
#437
#561
Date
Amount
of Advance
Final
Maturity
Interest
Rate
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
$653,776.11
$375,886.11
$702,749.59
$853,274.26
$275,154.34
$199,696.18
$344,515.74
$201,915.12
$144,666.56
$126,033.22
$69,050.12
$104,341.11
$33,583.24
$1,115,423.29
$1,785,136.36
$2,078,000.92
$221,781.48
$841,966.53
$2,522,036.24
$1,510,379.12
$905,169.64
$546,519.39
$851,859.90
$462,799.49
$1,335,376.05
$1,608,957.21
$1,894,712.84
$775,134.63
$593,007.75
$1,217,893.40
$962,082.53
$2,038,652.56
$2,299,040.18
$387,750.03
$1,040,337.72
$1,351,739.93
$2,222,328.96
$2,378,759.52
$466,427.16
$15,092.12
$795,738.18
$2,606,947.31
$2,045,004.40
$3,914,052.33
$1,322,689.76
$300,023.34
$2,873,923.45
$1,109,898.26
$466,202.00
$10,412,949.89
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
3/31/03
3/31/03
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
1/03/06
12/31/07
12/31/07
12/31/07
12/31/07
12/31/07
12/31/07
12/31/07
12/31/07
12/31/07
12/31/07
12/31/12
12/31/07
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.920%
1.920%
1.920%
1.920%
1.920%
1.920%
1.920%
1.922%
1.220%
1.220%
1.920%
1.922%
1.922%
1.922%
1.922%
1.922%
1.924%
1.924%
1.924%
1.924%
1.926%
1.926%
1.926%
1.927%
1.927%
1.929%
1.929%
1.922%
1.922%
1.922%
1.922%
1.922%
2.659%
2.659%
2.659%
2.659%
2.784%
2.816%
2.816%
2.816%
2.816%
2.816%
3.777%
2.687%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 5
FEDERAL FINANCING BANK
DECEMBER 2002 ACTIVITY
Borrower
*Brazos Electric #561
*Brazos Electric #561
*Brazos Electric #561
*Brazos Electric #561
*Brazos Electric #561
*Brazos Electric #561
*Brown County Elec. #687
*Brown County Elec. #687
*Brown County Elec. #687
*Brown County Elec. #687
*Coast Elec. Power #787
*Central Georgia Elec. #731
*Central Elec. Power #624
*Citizens Elec. #742
*Clark Energy Coop. #611
*Clark Energy Coop. #611
*Clark Energy Coop. #611
*Clark Energy Coop. #611
*Cumberland Valley #668
*Cooper Valley Tel. #648
*Darien Telephone Co. #719
*Darien Telephone Co. #719
*Darien Telephone Co. #719
*Darien Telephone Co. #719
*Darien Telephone Co. #719
*Darien Telephone Co. #719
*Darien Telephone Co. #719
*Delaware County Elec. #682
*East River Power #453
*East River Power #601
*East River Power #793
*Fairfield Elec. #684
*Farmer's Telephone #459
*Farmer's Telephone #459
*Federal Rural Elec. #728
*Fleming-Mason Energy #644
*Fleming-Mason Energy #644
*Fleming-Mason Energy #644
*Fleming-Mason Energy #644
*Fleming-Mason Energy #644
*Fleming-Mason Energy #644
*Freeborn-Mower Coop. #736
*Freeborn-Mower Coop. #736
*Freeborn-Mower Coop. #736
*Freeborn-Mower Coop. #736
*FTC Communications #709
*Grady Electric #690
*Grady Electric #746
*Grayson Rural Elec. #619
*Grayson Rural Elec. #619
Date
Amount
of Advance
Final
Maturity
Interest
Rate
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
$5,241,078.79
$10,226,788.65
$8,047,641.49
$4,633,489.53
$3,959,287.11
$7,420,351.23
$247,091.70
$593,020.10
$296,557.84
$646,178.98
$6,000,000.00
$1,780,000.00
$5,454,832.82
$2,694,000.00
$2,913,772.11
$1,936,274.98
$4,321,179.03
$3,613,783.73
$4,151,140.68
$999,582.22
$1,894,803.70
$436,490.36
$210,380.49
$248,720.86
$180,887.90
$268,382.59
$221,000.00
$920,195.58
$380,875.74
$3,359,504.60
$637,000.00
$3,196,119.51
$22,060.01
$211,326.45
$500,000.00
$2,525,269.16
$1,359,760.30
$1,456,886.04
$2,136,766.21
$1,359,760.30
$2,946,367.74
$745,591.13
$198,846.10
$99,417.67
$497,075.35
$2,629,575.62
$3,156,630.57
$3,250,000.00
$1,165,508.84
$582,754.43
12/31/07
12/31/12
12/31/12
12/31/12
12/31/12
1/03/23
3/31/03
3/31/03
3/31/03
3/31/03
12/31/03
1/03/05
1/03/05
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
12/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
1/03/06
1/03/06
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
2.687%
3.640%
3.640%
3.640%
3.640%
4.291%
1.220%
1.220%
1.220%
1.220%
1.358%
1.602%
1.601%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.345%
1.220%
1.220%
1.220%
1.345%
1.345%
1.357%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
1.937%
1.937%
1.220%
1.220%
1.220%
1.220%
1.220%
1.220%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 6
FEDERAL FINANCING BANK
DECEMBER 2002 ACTIVITY
Borrower
*Grayson Rural Elec. #619
*Grayson Rural Elec. #619
*Grayson Rural Elec. #619
*Greenbelt Elec. #743
*Greenbelt Elec. #743
*Grundy Elec.Coop. #744
*Harrison County #532
*Harrison County #532
*Harrison County #532
*Harrison County #532
*Harrison County #532
*Hudson Valley Datanet #833
*Hudson Valley Datanet #833
*Inter-County Energy #592
*Inter-County Energy #592
*Inter-County Energy #592
*Inter-County Energy #592
*Inter-County Energy #850
*Jackson Energy #794
*Jackson Energy #794
*Jackson Energy #794
*Jackson Energy #794
*Johnson County Elec. #482
*Licking Valley Elec. #522
*Magnolia Electric #560
*Meade County Elec. #662
*Nolin Rural Elec. #528
*Nolin Rural Elec. #577
*Nolin Rural Elec. #577
*Oglethorpe Power #445
*Oglethorpe Power #445
*Owen Electric #525
*Owen Electric #525
*Owen Electric #525
*Owen Electric #525
*Pennyrile Elec. #513
*PRTCommunications #798
*San Miguel Electric #919
*San Miguel Electric #919
*Stearns Cooperative #733
*Stearns Cooperative #733
*Surry-Yadkin Elec. #534
*Surry-Yadkin Elec. #534
*Surry-Yadkin Elec. #534
*Surry-Yadkin Elec. #534
*Surry-Yadkin Elec. #534
*Surry-Yadkin Elec. #534
*Surry-Yadkin Elec. #534
*Surry-Yadkin Elec. #534
*Thumb Electric #767
Date
Amount
of Advance
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
$971,257.38
$1,258,293.81
$993,922.39
$1,739,000.00
$502,000.00
$1,250,000.00
$967,307.57
$870,576.81
$973,833.66
$1,587,992.09
$1,709,667.26
$5,000,000.00
$2,000,000.00
$1,450,961.34
$1,934,615.12
$2,521,770.81
$214,647.88
$4,000,000.00
$4,000,000.00
$3,000,000.00
$4,700,000.00
$2,000,000.00
$1,554,385.47
$2,659,128.49
$4,841,500.92
$5,386,488.69
$1,831,113.21
$2,498,555.44
$2,498,555.44
$25,627,244.00
$20,953,475.31
$1,937,316.18
$1,933,403.74
$975,437.25
$1,967,079.52
$5,926,307.57
$4,802,000.00
$7,685,716.67
$8,070,092.44
$2,400,000.00
$1,400,000.00
$956,671.55
$956,671.55
$478,335.78
$956,671.55
$956,671.55
$972,356.74
$978,686.78
$2,260,855.53
$900,000.00
Final
Maturity
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
1/02/24
1/02/24
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
3/31/03
12/31/07
Interest
Rate
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1. 220% Qtr.
1.220% Qtr.
1. 220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1. 220% Qtr.
1.219% Qtr.
1.219% Qtr.
1. 220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.219% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.345% Qtr.
1.220% Qtr.
1.345% Qtr.
1.220% Qtr.
1. 220% Qtr.
1. 220% Qtr.
1.220% Qtr.
4.222% Qtr.
4.222% Qtr.
1.220% Qtr.
1. 220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.345% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1. 220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1.220% Qtr.
1. 220% Qtr.
1.220% Qtr.
1.220% Qtr.
2.716% Qtr.
Page 7
FEDERAL FINANCING BANK
DECEMBER 2002 ACTIVITY
Borrower
Date
*Tri-County Electric Ass. #830 12/31
12/31
*United Elec. Coop. #870
12/31
*United Elec. #858
12/31
*Webster Electric #705
*
Amount
of Advance
Final
Maturity
$1,500,000.00
$12,000,000.00
$2,126,000.00
$2,205,847.81
1/03/33
3/31/03
1/03/33
3/31/03
S/A is a Semiannual rate.
Qtr. is a Quarterly rate.
maturity extension or interest rate reset
Interest
Rate
4.609%
1. 219%
4.559%
1. 220%
Qtr.
Qtr.
Qtr.
Qtr.
Page 8
FEDERAL FINANCING BANK HOLDINGS
(in millions of dollars)
Program
December 31, 2002
Agency Debt:
U.S. Postal Service
November 30, 2002
Monthly
Net Change
12/1/02-12/31/02
Fiscal Year
Net Change
10/1/02-12/31/02
Subtotal*
$8,250.0
$8,250.0
$8,594.0
$8,594.0
-$344.0
-$344.0
-$2 864.0
-$2,864.0
Agency Assets:
FmHA-RDIF
FmHA-RHIF
Rural Utilities Service-CBO
Subtotal *
$950.0
$2,905.0
$4 270.2
$8,125.2
$950.0
$2,905.0
$4,270.2
$8,125.2
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
Government-Guaranteed Lending:
DOD-Foreign Military Sales
DoEd-HBCU+
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes
General Services Administration+
DOl-Virgin Islands
DON-Ship Lease Financing
Rural Utilities Service
SBA-State/Local Development Cos.
DOT-Section 511
Subtotal*
$1,869.0
$73.3
$4.1
$1, 133.2
$2,181. 9
$11.4
$780.8
$14,490.6
$94.6
$3.2
$20,642.1
$1,907.1
$71.3
$4.2
$1,133.2
$2,200.4
$11.4
$780.8
$14,489.7
$97.9
$3.2
$20,699.3
-$38.2
$2.0
-$0.2
$0.0
-$18.5
$0.0
$0.0
$0.9
-$3.3
$0.0
-$57.2
=========
---------
-$53.5
$4.7
-$0.9
-$74.1
-$23.6
$0.0
$0.0
$432.3
-$7.8
$0.0
$277.0
$37,017.3
$37,418.5
-$401. 2
-$2,587.0
Grand total*
* figures may not total due to rounding
+ does not include capitalized interest
2
2
I
DEPARTMENT
OF
TREASVI{Y
NEWS
TREASURY
()F"'('I~
THE
0 .. prRtl(' .\FFAIRS eUtO PF.NNS\'I.\'ANI,\ ""t:NUf:. N.\\'. e W.\SHJS(;TON. D.C,e 20220 e (2011,22.2960
EMBARGOED UNTIL 11:00 A.M.
January 27, 2003
Contact:
Office of Financing
202/691-3550
TREASURY OFFERS 4-WEEK BILLS
The Treasury will auction 4-week Treasury bills totaling $16,000 million to
refund an estimated $16,000 million of publicly held 4-week Treasury bills maturing
'January 30, 2003.
Tenders for 4-week Treasury bills to be held on the book-entry records of
TreasuryDirect will not be accepted.
The Federal Reserve System holds $14,764 million of the Treasury bills maturing
on January 30, 2003, in the System Open Market Account (SOMA). This amount may be
refunded at the highest discount rate of accepted competitive tenders in this auction
up to the balance of the amount not awarded in today's 13-week and 26-week Treasury
bill auctions. Amounts awarded to SOMA will be in addition to the offering amount.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FIMA) accounts bidding through the Federal Reserve Bank of New York
will be included within the offering amount of the auction. These noncompetitive bids
will have a limit of $100 million per account and will be accepted in the order of
smallest to largest, up to the aggregate award limit of $1,000 million.
The allocation percentage applied to bids awarded at the highest discount rate
will be rounded up to the next hundredth of a whole percentage point, e.g., 17.13\.
This offering of Treasury securities is governed by the terms and conditions
set forth in the uniform Offering Circular for the Sale and Issue of Marketable BookEntry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about the new security are given in the attached offering highlights.
000
Attachment
KD-3798
HIGHLIGHTS OF TREASURY OFFERING
OF 4-WEEK BILLS TO BE ISSUED JANUARY 30, 2003
January 27, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Award (35\ of Offering Amount) ...
Maximum Recognized Bid at a Single Rate ..
HLP Reporting Threshold . . . . . . . . . . . . . . . . . .
HLP Exclusion Amount . . . . . . . . . . . . . . . . . . . . .
$16,000
$ 5,600
$ 5,600
$ 5,600
$10,100
million
million
million
million
million
Description of Offering:
Term and type of security ........... 28-day bill
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . 912795 MA 6
Auction date . . . . . . . . . . . . . . . . . . . . . . . . January 28, 2003
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . January 30, 2003
Maturity date . . . . . . . . . . . . . . . . . . . . . . . February 27, 2003
Original issue date ................. August 29, 2002
CUrrently outstanding ............... $39,789 million
Minimum bid amount and multiples .... $l,OOO
Submission of Bids:
Noncompetitive bids: Accepted in full up to $1 million at the highest
discount rate of accepted competitive bids.
Foreign and International Monetary Authority (FIMA) bids: Noncompetitive bids submitted through the Federal Reserve Banks as agents for
FIMA accounts. Accepted in order of size from smallest to largest
with no more than $100 million awarded per account. The total noncompetitive amount awarded to Federal Reserve Banks as agents for
FIMA accounts will not exceed $1,000 million. A single bid that
would cause the limit to be exceeded will be partially accepted in
the amount that brings the aggregate award total to the $1,000
million limit. However, if there are two or more bids of equal
amounts that would cause the limit to be exceeded, each will be
prorated to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a discount rate with three decimals in
increments of .005\, e.g., 4.215\.
(2) Net long position (HLP) for each bidder must be reported when
the sum of the total bid amount, at all discount rates, and the
net long position equals or exceeds the HLP reporting threshold
stated above.
(3) Net long position must be determined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Receipt of Tenders:
Noncompetitive tenders:
Prior to 12:00 noon eastern standard time on auction day
Competitive tenders:
Prior to 1:00 p.m. eastern standard time on auction day
Payment Terms: By charge to a funds account at a Federal Reserve Bank
on issue date.
D EPA R T 1\1 E N T
0 F
T II E
T REA SUR Y
NEWS
TREASURY
OHleE ot""UBLIC ,u"UIRS'IS'. Pt:NNSYLV;\1"U AVENUE. N.W"W"SHI~GTON. D.C.. 20220.,2021622.2960
EMBARGOED UNTIL 11:00 A.M.
January 27, 2003
CONTACT:
Office of Pinancing
202/691-3550
TREASURY OFPERS 2-YEAR NOTES
The Treasury will auction $27,000 million of 2-year notes to refund $21,719
million of publicly held notes maturing January 31, 2003, and to raise new cash of
approximately $5,281 million.
In addition to the public holdings, Pederal Reserve Banks hold $6,834 million
of the maturing notes for their own accounts, which may be refunded by issuing
an additional amount of the new security.
Up to $1,000 million in noncompetitive bids from Poreign and International
Monetary Authority (PIMA) accounts bidding through the Federal Reserve Bank of New
York will be included within the offering amount of the auction. These noncompetitive
bids will have a limit of $100 million per account and will be accepted in the order
of smallest to largest, up to the aggregate award limit of $1,000 million.
TreasuryDirect customers requested that we reinvest their maturing holdings
of approximately $596 million into the 2-year note.
The auction will be conducted
tive and noncompetitive awards will
tenders.
The allocation percentage
be rounded up to the next hundredth
in the single-price auction format. All competibe at the highest yield of accepted competitive
applied to bids awarded at the highest yield will
of a whole percentage point, e.g., 17.13\.
The notes being offered today are eligible for the STRIPS program.
This offering of Treasury securities is governed by the terms and conditions
set forth in the Uniform Offering Circular for the Sale and Issue of Marketable BookEntry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about the new security are given in the attached offering highlights.
000
Attachment
KD-3799
HIGHLIGHTS OP TREASURY OFPBRING TO THE PUBLIC OP
2-YBAR NOTBS TO BB ISSUED JANUARY 31, 2003
January 27, 2003
Offering Amount ...............•..•.....•.•.•.. $27,000
Maximum Award (35\ of Offering Amount) ....•.•. $ 9,450
Maximum Recogniz.d Bid at a Single Rate ...••.. $ 9,450
NLP Reporting Threshold ...........•......••... $ 9,450
million
million
million
million
Description of Off.ring:
T.rm and type of s.curity . . . . . . . . . . . . . . . . . . . . .
S.ri.s . . . . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CUSIP numb.r •..............•...•...........••.
Auction date .......•..............•...........
Issu. date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . .
Dat.d date .....................•..•...........
Maturity date ..........•...•......•.......•...
Int.rest rat •.............•........••.....••.•
2-year notes
G-2005
912828 AS 9
January 29, 2003
January 31, 2003
January 31, 2003
January 31, 2005
D.t.rmined bas.d on the highest
acc.pted competitive bid
Yi.ld ....................•......•..••.••..•... D.t.rmin.d at auction
Int.r.st payment dat.s .............••..•.....• July 31 and January 31
Minimum bid amount and multiples ....•.......•• $1,000
Accrued interest payable by inv.stor .•••..••.. Non.
Premium or discount ......•.•.....•..•......••. D.t.rmin.d at auction
STRIPS Information:
Minimum amount required ....•....••.•.....••..• $1,000
Corpus CUSIP number .....•..•....•..•......••. 912820 HP 5
Du. dat.(s) and CUSIP numb.r(s)
for additional TINT(s) ••......•••.••..•...•• January 31, 2005 - - 912833 ZD 5
Submission of Bids:
Noncomp.titive bids:
Acc.pt.d in full up to $5 million at the highest accept.d yi.ld.
Poreign and Int.rnational Mon.tary Authority (PIMA) bids: Noncompetitive bids
submitted through the Pederal R.serve Banks as ag.nts for PIMA accounts.
Accept.d in order of size from smallest to largest with no more than $100
million awarded per account. The total noncompetitive amount awarded to Pederal
R.serve Banks as ag.nts for PIMA accounts will not exce.d $1,000 million. A
single bid that would cause the limit to b. exceed.d will be partially accepted
in the amount that brings the aggregate award total to the $1,000 million limit.
Howev.r, if th.re are two or more bids of equal amounts that would cause the
limit to b. exc •• ded, each will be prorated to avoid exceeding the limit.
Comp.titive bids:
(1) Must b • •xpr •••• d as a yield with three decimals, •• g., 7.123\.
(2) N.t long po.ition for .ach bidd.r must be r.port.d wh.n the sum of the total
bid amount, at all yi.lds, and the net long position .quals or exc.eds the NLP
reporting threshold stated above.
(3) N.t long position must be det.rmin.d as of one half-hour prior to the
closing time for r.c.ipt of competitive tenders.
Receipt of Tenders:
Noncompetitive t.nders:
Prior to 12:00 noon eastern standard tim. on auction day.
Comp.titiv. t.nd.rs:
Prior to 1:00 p.m. east.rn standard tim. on auction day.
Payment Terms: By charg. to a fund. account at a Ped.ral Res.rv. Bank on issu. dat.,
or payment of full par amount with tender.
rr.asuryDirect customers can us. the Pay
Direct feature which authorizes a charg. to their account of record at th.ir
financial institution on issue dat •.
[) E P .\ R T 'I E
~
T
0 F
T 1-1 E
T REA S l: R Y
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASIDNGTON, D.C .• 20220. (202) 622.2960
Embargoed Until 1:00 p.m. EST
Monday, January 27,2003
Contact: Tony Fratto
(202) 622-2960
Remarks before the Brazil-U.S. Business Council
John B. Taylor
Under Secretary for International Affairs
United States Treasury
Washington, D.C.
January 27, 2003
Thank you very much for the opportunity to speak before this distinguished group of
business leaders. Today I would like to talk about economic policy in Brazil and in the United
States, and also about opportunities for cooperation between Brazil and the United States.
The recent electoral victory of Luiz Imicio Lula da Silva provides a valuable opportunity
for a promising new chapter in historically strong relations between our two countries. In this
new era, Brazil and the United States face many common economic challenges, from
strengthening economic growth to combating the financing of terrorism. It is now more
important than ever for the United States and Brazil to continue to strengthen our cooperation.
Weare encouraged by the economic leadership that President Lula and his new economic
team have already shown. We have seen an agenda designed to fight poverty and increase
economic growth and stability. The new economic plan is rightly ambitious in its specific aims
to end hunger, combat corruption, and discourage drug trafficking. And it is responsible in its
emphasis on economic reform in the four key areas: fiscal policy, monetary policy, trade policy,
and structural policy. There are clearly many reasons to be hopeful about Brazil.
We in the United States government are not alone in our optimism about Brazil. A recent
poll indicated that 76 percent of Brazilians believe the current government will be "good" or
"excellent". The financial markets have also rallied with interest rate spreads falling 10
percentage points in four months. The positive market reaction we have seen stems from key
steps Lula has taken-appointing a responsible focused economic team and clarifying a coherent
set of economic priorities. And implementation of the key economic reforms is already
proceeding.
KD-3800
For press releases, speeches, public schedules and official biographies, call our 24.nour fax line at (202) 622-2040
·U.S.
Government Prmt.ng OffICe 1998 - 619-559
In recent years, President Cardoso and his economic team made major progress by
consolidating fiscal policy, eliminating hyperinflation, and strengthening the financial sector.
Finance Minister Antonio Palocci has signaled an interest in traveling further down this road as
well as tackling the next stage of pro-growth economic reforms. As stated in Minister Palocci's
inauguration speech, "We will seek reforms that are necessary for a sound and sustainable
resumption of growth ... The seriousness and responsibility in managing the public issues is an
undeniable inheritance of the conduct of economic policy by Minister Pedro Malan and his
team ... And we will be glad to preserve this heritage and afterwards pass it on even more
consolidated. "
I have argued that economic policy should focus on increasing productivity growth
because productivity growth is the source of rising living standards and reduction in poverty in
any country. The two determinants of productivity growth are the pace at which capital is
accumulated and the effectiveness with which labor and capital are employed. According to
research at the Inter-American Development Bank, both determinants are constrained in Brazil.
Indeed, this is why productivity growth, while improving, is still less much lower in Brazil than
it can be. One cannot easily invest in capital when real lending rates to businesses are 15
percent. And one cannot easily create high productivity jobs when tax rates are high.
The importance that the new government of Brazil places on fiscal policy reform is
therefore most welcome. Again to quote Minister Palocci: "Today we have a government that
spends a lot and spends badly... We can no longer live with a budgetary management that
promises more than public revenues allow."
There is a commitment to "generate the primary surplus that is necessary to undoubtedly
guarantee the sustainability of our public debt." This will reduce the risk premium and thereby
lower interest rates and be a boon to private investment and economic growth. And, over time, a
lower debt burden wi1llessen the dependence on some of the highest tax rates in Latin America.
And we see that elements of this policy are already being implemented with new spending
proposals being offset with reductions in spending elsewhere in the budget.
Indeed one of the main purposes of the planned social security reform is to achieve a
reduction in the annual deficit stemming from pension payments. Another pillar ofthe new
administration's fiscal policy agenda is tax reform. Converting cascading tax rates into a valueadded tax lowers the fiscal burden on producers and improves Brazil's investment climate. This
can attract needed capital for improving productivity.
Regarding monetary policy, the new government has committed itself to maintaining a
monetary policy with a floating exchange rate, an inflation target, and "clear rules and
autonomy" for the central bank to change the instruments of monetary policy to achieve these
targets. In particular, the new government has announced its plans to submit to the Brazilian
congress a Monetary Responsibility Law, which would grant autonomy to the central bank.
Evidence from many countries shows that the trinity of a flexible exchange rate, a low inflation
goal, and a transparent procedure for setting the interest rate instrument will lead to greater
macroeconomic stability and it is important that Brazil has chosen this route. The recent actions
by the Brazilian central bank show that the policy is already being implemented.
2
On the structural front, the new economic team has noted the importance of expanding
the private credit market so as to give small businesses more access to credit. Reform of the
bankruptcy code is an important step because, by improving creditor rights, it will help increase
lending and reduce interest rates. The pledge to reduce corruption, which raises the costs of
economic transactions and is itself a barrier to strong economic growth, is also an important
structural reform.
Regarding international trade policy, it is encouraging that President Lula cited the goal
of opening the economy through trade liberalization in his inauguration address. Lowering
barriers to international trade is an important way to raise productivity growth. The benefits
from greater trade include improved access to needed capital imports and technology to raise
productivity and improve living standards.
This agenda is a model in its aggressive focus on pursuing pro-growth reforms in several
areas of economic policy. It is an agenda that resounds positively in the United States. It mirrors
many of President Bush's own initiatives from lowering tax rates to expanding international
trade.
Soon after coming into office President Bush was successful in implementing a timely
reduction in taxes that helped mitigate the economic recession. And last year he successfully
won back Trade Promotion Authority, the first time since 1994 that a president has had this
essential legislative tool to negotiate trade agreements. And his recently announced program of
tax cuts has the goal of raising economic growth, sustaining the recovery, and creating more jobs
both in the short run and the long run. Small businesses are our main source of new jobs. The
cut in the income tax rates will lower the tax on many small businesses and more generous
expensing provisions for small businesses would encourage them to invest in the technology and
other equipment they need to expand and create jobs. Similarly, the elimination of the double
tax on dividends will lower the cost of capital, encourage investment and job creation, and raise.
productivity. The expansion of the child tax credit and the extension of the 10 percent income
tax to more taxpayers are examples of how the tax cuts apply to all income tax payers.
Weare confident that this tax program will raise economic growth and improve
economic stability in the United States. And because the United States is such a large part ofthe
world economy, raising economic growth here will raise economic growth elsewhere, including
Brazil. Indeed, pursuing a pro-growth economic policy at home is a key principle of our
international economic policy.
Another principle of our international economic policy is to support countries that are
following good economic policies. The United States has supported Brazil consistently in the
International Monetary Fund with the program in August of 200 I and its augmentation in August
of 2002. We would like to encourage the multilateral development banks to provide assistance,
perhaps for the zero hunger plan, or for small business lending, or for trade capacity building.
Weare also anxious to work with Brazil to create a solid Free Trade Agreement for the
Americas.
3
We look forward to advancing many of these initiatives as part of the broader Summit
our Presidents agreed to at their meeting in December. We at the United States Treasury plan
further concrete and constructive discussions with our counterparts in the Brazilian Ministry of
Finance to pursue areas of mutual interest.
Translating economic agendas into reality takes enormous skill in communication and
consensus building, whether in Brazil or the United States. As we have seen in our own country,
implementing economic policy is just as important as designing it. The Lula administration will
have to form the important coalitions necessary for key legislative reform. Of course, the
atmosphere of cooperation and outreach that dominated President Lula's inauguration speech can
provide comfort in this regard
In conclusion, let me emphasize that Brazil is a critical part of Latin America, a region
that holds particular significance to President Bush. Brazil is the world's fifth most populous
country and the ninth largest economy. It has long been a major trade, investment, and financial
partner of many countries in our hemisphere including the United States.
Our efforts to increase economic growth in this hemisphere also include the recently
concluded free trade agreement with Chile, the just-opened negotiations for a Central American
Free Trade Agreement, more assistance to the poorest countries through the Millennium
Challenge Account, the new grants program at the World Bank, increased private sector lending
through the multilateral development banks, and facilitating remittances from the United States
to families in the countries of Latin America.
Higher economic growth throughout this hemisphere is our shared priority.
4
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
January 27, 2003
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Term:
Issue Date:
. Maturity Date:
CUSI? Number:
91-Day Bill
January 30, 2003
May 01, 2003
912795MK4
High Rate:
1.140%
Investment Rate 1/:
1.159%
Price:
99.712
All noncompetitive and successful competitive bidders were awarded
securities at the high rate. Tenders at the high discount rate were
allotted 42.26%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Tendered
Competitive
Noncompetitive
FIMA (noncompetitive)
$
SUBTOTAL
32,452,193
1,647,147
463,400
Accepted
$
34,562,740
Federal Reserve
TOTAL
18,000,060 2/
6,823,654
$
41,386,394
15,889,513
1,647,147
463,400
6,823,654
$
24,823,714
Median rate
1.125%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.105%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio
=
34,562,740 / 18,000,060
=
1.92
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $1,290,632,000
http://www.pubUcdebUreas.gov
KD-3801
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
January 27, 2003
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Term:
Issue Date:
,Maturity Date:
CUSIP Number:
182-Day Bill
January 30, 2003
July 31, 2003
912795NF4
High Rate:
1.160%
Investment Rate 1/:
1.182%
Price:
99.414
All noncompetitive and successful competitive bidders were awarded
securities at the high rate. Tenders at the high discount rate were
allotted 67.34%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Tendered
Competitive
Noncompetitive
FIMA (noncompetitive)
$
32,551,370
1,240,907
566,000
SUBTOTAL
34,358,277
Federal Reserve
5,880,875
TOTAL
$
40,239,152
Accepted
$
14,193,271
1,240,907
566,000
16,000,178 2/
5,880,875
$
21,881,053
Median rate
1.150%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.125%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-cover Ratio
=
34,358,277 / 16,000,178
=
2.15
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $1,001,809,000
http://www.publicdebt.treas.gov
KD-3802
KD-3 ~U3: Olsoh 'R.etnarkS to the American Bar Association Tax Section
Page 1 of6
I..) 1-: L S S H () 0 M
FROM THE OFFICE OF PUBLIC AFFAIRS
January 25, 2003
KO-3803
Remarks by Treasury Assistant Secretary Pam Olson
to the ABA Tax Section on January 25, 2003
When criticized recently for a dissent written in poetry, the author, Justice J.
Michael Eakin of the Pennsylvania Supreme Court, responded, "you have an
obligation as a judge to be right, but you have no obligation to be dulL" As I was
preparing my remarks today, it occurred to me that Justice Eakin's words were
good advice. Then I remembered my subject was tax policy, and since I am not a
poet, I quickly abandoned notions of being anything but dull.
I'm going to cover three topics today that have consumed more than a little time at
Treasury in recent months - compliance - or perhaps that should be noncompliance
- in the offshore sector, the President's economic growth and jobs package, and the
increasing import of globalization for our tax system.
Cleaning Up Offshore Noncompliance
The IRS has long had - on a more or less consistent basis - a policy of not referring
for prosecution taxpayers who turn themselves in. There are several reasons for
the policy. One obvious reason is that knowing one will be prosecuted has a
chilling effect on those who would turn themselves in. But let's cut to the chase people who have turned themselves in just don't make attractive candidates for
prosecution.
To prevent people from waiting until the IRS has them in its sight before turning
themselves in, however, the IRS's voluntary disclosure non-referral policy ends
when the taxpayer's problem has been identified by the IRS. Last month the IRS
announced that it had revised and updated its policy. The key change relates to
reducing uncertainty over what qmstitutes a "timely" disclosure - that is, clarification
of when the IRS has a taxpayer in its sight. The IRS announced that publicity
surrounding an investigation that might lead to the taxpayer did not trigger the loss
of the voluntary disclosure opportunity.
That was followed last week by the IRS's unveiling of an initiative aimed at cleaning
up the offshore sector. Under the new initiative, the IRS is permitting taxpayers
with money hidden in offshore accounts and accessed by credit card or other
financial arrangement until April 15th to come in and get right with the IRS.
Taxpayers who wish to take advantage of the initiative will be spared the possibility
of civil fraud penalties and of referral for criminal prosecution. In exchange, they
must provide the IRS with information on the promoter or advisor who put them into
the offshore arrangement.
We see the change in the voluntary disclosure policy and the initiative launched last
week as important steps in cleaning up the offshore sector. About two years ago,
the IRS began summons enforcement actions against the major U.S. credit card
companies in an effort to identify taxpayers using offshore banks to hide their
income. That effort has borne considerable fruit, but there remains an enormous
amount of work to do to identify and track down all of the account holders. The IRS
became aware that there were a number of taxpayers who would get straight if
given the opportunity. Taxpayers now have that opportunity.
http://www.treas.~ovJDress/releases/kd3803.htm
1/3112003
K.U-j~Uj:
arson Remarks to the American Bar Association Tax Section
Page 2 of6
One of Treasury's roles in cleaning up the offshore sector is to facilitate tax
information exchange with foreign governments that allow the IRS to more readily
identify US taxpayers hiding income offshore. Over the past 18 months, Treasury
has entered into tax information exchange agreements with the offshore financial
centers in which over 50 percent of the offshore companies are located. These
were the first tax information exchange agreements entered into in over a decade.
Yesterday we entered into a Mutual Agreement on tax information exchange with
Switzerland, a key financial center. The Mutual Agreement, which builds on the
information exchange provisions of our bilateral treaty with Switzerland, is a
significant step in our efforts to ensure that no safe haven exists anywhere in the
world for the funds associated with illicit activities, including tax evasion. Access to
information is vital to our efforts to ensure full and fair enforcement of our tax laws.
We look forward to working with Switzerland to further improve this relationship.
The point I want to leave you with is that we are opening the offshore sector to
sunlight. The IRS has taken important steps to help taxpayers and their advisers
understand what must be done to get back into compliance with the tax laws
without fear of prosecution.
If you've got clients with IRS problems they ought to clean up, the time to take care
of the problems is now. With this initiative in place, we expect taxpayers will do the
right thing and voluntarily disclose and pay their outstanding tax liabilities. The
initiative is only a week old, but the early returns are encouraging.
The President's Jobs and Growth Package
On January 7th, the President proposed a package of tax changes aimed at
improving economic growth and providing more jobs. Although there is much
positive to be said about the economy, particularly considering the bursting of the
stock market bubble, the September 11 th attacks, and the accounting and
corporate governance scandals that have beset us, it is clear the economy is not
running on all cylinders.
The Presldent"s jobs and growth proposal is intended to put the economy on a path
to long-term stable growth.
There are three parts to the President's tax proposals - an acceleration of the 2001
Tax Cuts that were delayed until as long as the end of the decade. These include
an expansion of the size of the 10% bracket, a reduction in rates from 27% to
38.6% to 25% to 35%, elimination of the marriage penalty for lower and moderate
income families, and an increase in the child credit from $600 to $1000.
The second part is a tripling of the amount of capital investment that can be
expensed by small businesses.
The third part is the end of the double tax on corporate earnings.
The effect of the double tax on corporate earnings is familiar to most of us in this
room. In fact, it's how a lot of us make a living. And you're familiar with the math.
A tax as high as 60% on earnings paid out as dividends and as high as 48% on
earnings retained. But it's instructive to pause to consider those effects because
they've grown more perverse as the years have passed.
It creates a bias for debt. The result is excessive debt that increases the risk of
bankruptcy during economic downturns.
It creates a bias for unincorporated entities, with the result that businesses make
decisions on organizational form for tax rather than business reasons. That effect
is apparent from the statistics. From 1980 to 1999, net Income of C corporations
fell from 78% to 57% of all business income with the net Income of flow throughs
rising by a corresponding amount. Similarly, th.e gross receipts of C corporations
fell from 87% to 72% of all business receipts with the gross receipts of flow
throughs rising by a corresponding amount.
http://www.treas.gov/press/releases/kd3803.htm
113112003
IKlJ-j~Uj: oman RemarKS To the American Bar Association Tax Section
Page 3 of6
It encourages corporations to retain earnings rather than pay dividends. This too is
illustrated by the statistics. Dividends were paid by 75% of large companies in the
mid-60s. That number dropped to less than 25% by the mid-90s. And during the
90s, the dividend payout of large publicly traded companies fell from 23% of pre-tax
earnings in 1992 to 14% in 1999. The incentive to retain earnings means reduced
scrutiny of and a reduced hurdle for projects financed with retained earnings.
That's a distinct difference from the scrutiny given to projects for which the
company must go to the market for financing.
There are secondary effects It has led corporations to engage in complex and
expensive planning of transactions that result in the distribution of earnings at
capital gains rates instead of just paying dividends. This too can be seen from the
statistics. The most familiar is the share repurchase. In 1999, over 34% of large
publicly traded companies engaged in share repurchases, up from 28% in 1992.
More striking is that fact that by 1999, almost 20% of earnings were paid out by
share repurchase, nearly triple that of 1992.
And here's another secondary effect familiar to all of you. It encourages
corporations to engage in transactions solely to minimize taxes. That has promoted
the acceptability of transaclions serving no purpose other than minimization of tax
liability. TIle President's proposal makes paying taxes an asset to shareholders.
Now that changes the math.
The goal of the President's proposal is to end the double tax. The basic
mechanism is an exclusion for shareholders of dividends paid out of earnings on
which the corporation has paid tax. To avoid a new bias against retaining earnings,
the President's proposal includes an adjustment to shareholders' stock basis that
reflects retained earnings.
The tax free dividend is determined by the company on the basis of the tax liability it
reports on its tax return. The earnings on which the company has paid tax are
determined on the basis of a 35% tax rate. That amount less the tax paid is the
amount that a company can distribute to shareholders tax free, and it is distributed
on a proportionate basis. If the company chooses to retain some of the taxed
earnings, the company will advise shareholders of the amount by which they may
adjust their stock basis.
The calculation of the previously taxed earnings will be based on the most recent
tax return filed by the company before the year begins. Any subsequent
adjustments to the tax return will be reflected in the calculation of taxed earnings at
the time of the adjustment, and not retroactively. This will give companies and
shareholders certainty about the tax free status of the dividends at the time the
dividend is paid.
Globalization
I think the last time the Tax Section covered international taxes in a plenary session
was two years ago. Today, we find ourselves in a position similar to the position we
were in then - the global economy of increasing importance to all Americans and
the World Trade Organization having recently declared a feature of our international
tax regime an export subsidy illegal under the WTO rules. Then it was the foreign
sales corporation rules. Today it is the extraterritorial income exclusion adopted to
replace them. I want to set a backdrop for reconsidering the fundamentals of our
international tax rules.
From the vantage point of an increasingly global marketplace, our tax rules appear
outmoded, at best, and punitive of U.S. economic interests, at worst. Most other
developed countries of the world are concerned with setting a competitiveness
policy that permits their workers to benefit from globalization. As Deputy Secretary
Dam observed recently, however, our international tax policy seems to have been
based on the principle that if we have a competitive advantage, we should tax it!
Our income tax system as a whole dates back to shortly after the turn of the last
century. To put that in perspective, buggy whip makers had just gone out of
http://www.treas.gov/press/releases/kd3803.htm
113112001
KD-3803:·~ Itmlark.s to the American Bar Association Tax Section
Page 4 of6
business A bit has happened since then. Of course, significant changes have
been made to the tax code as well. In the international area, we added the subpart
F rules back in 1962. A lot of those rules haven't aged very well. We also made
fairly significant changes to the International tax rules in 1986.
That would make those rules teenagers now, and they have the characteristics of
the average teenager. They're hard to understand, messy, inconsistent, and
display little regard for the real world.
The global economy looked very different when the subpart F rules were put in
place than it looks today. The same is true of the U.S. role in the global economy.
Forty years ago the U.S. was dominant, accounting for over half of all multinational
investment in the world. We could make decisions about our tax system essentially
on the basis of a closed economy, and we could generally count on our trade
partners to follow our lead in tax poliCY.
Things have changed in 40 years. In fact, a lot has changed in 17 years. When the
rules were first developed, they affected relatively few taxpayers and relatively few
transactions. Today, there is hardly a US.-based company that is not faced with
applying the U.S. international tax rules to some aspect of its business.
Let's pause for a moment to con~ider what globalization means - the growing
interdependence of countries resulting from increasing integration of trade, finance,
investment, people, information and ideas in one global marketplace. Globalization
results in increased cross-border trade, and the establishment of production
facilities and distribution networks around the globe. Technology has accelerated
the pace of globalization. Advances In communications, information technology,
and transport have dramatically reduced the cost and time taken to move goods,
capital, people, and information around the world. Firms in this global marketplace
differentiate themselves by being smarter: applying more cost efficient technologies
or innovating faster than their competitors. The returns to being smarter are much
higher than they once were as the benefits can be marketed worldwide.
The significance of globalization to the U.S. economy since the enactment of
subpart F is apparent from the statistics on international trade and investment. In
1960, trade in goods to and from the U.S. represented just over six percent of
GOP. Today, trade in goods to and from the U.S. represents over 20 percent of
GOP, more than three times larger than in 1960, while trade in goods and services
represents more than 25 percent of GOP today. It is worth noting that numerous
studies confirm a strong link between trade and economic growth. Trade appears
to raise income by spurring the accumulation of physical and human capital and by
increasing output for given levels of capital.
Cross border investment, both inflows and outflows, also has grown dramatically in
the last 40 years. In 1960, cross border investment represented just over one
percent of GOP. In 2000, it was nearly 16% of GOP, representing annual crossborder flows of more than $1.5 trillion. The aggregate cross border ownership of
capital is valued at $15 trillion. In addition, U.S. multinational corporations are now
responsible for more than one-quarter of U.S. output and about 15 percent of U.S.
employment.
At the same time companies are competing for sales, they are also competing for
capital: U.S.-managed firms may have foreign investors, and foreign-managed firms
may have U.S. investors. Portfolio investment accounts for approximately twothirds of US investment abroad and a similar fraction of foreign investment in the
U.S.
The U.S. tax rules have important effects on international competitiveness both
because of the integration of domestic activities of U.S. multinational companies
with their foreign activities and because repatriated foreign earnings of foreign
Investments are subject to U.S. domestic tax. Increasingly, the flow of goods and
services is not through purchases between exporters and importers, but through
transfers between affiliates of mL!ltinational corporations. The rules governing
transfer pricing, interest allocation, withholding rates, foreign tax credits, and the
taxation of actual or deemed dividends impact these flows.
htto://www.treas.gov/press/releases/kd3803.htm
1 1'1 1 !'){\{\')
lUJ-jlSVj: otsun
KeIllark.s to the American Bar Association Tax Section
Page 5 of6
The U.S. tax system should not distort trade or investment relative to what would
occur in a world without taxes. Every country makes sovereign decisions about its
own tax system, so it is impossible for the U.S. to level all playing fields
simultaneously. But we can ensure that our own rules minimize the barriers to the
free flows of capital that globalization necessitates.
The question we must answer is what we can do to increase the competitiveness of
U.S. businesses and workers. Professor Michael Graetz observed in his book The
Decline (and Fall?) of the Income Tax:
'
The internationalization of the world economy has made it far more difficult for the
U.nited States, or any other country for that matter, to enact a tax system radically
different from those In place elsewhere in the world. In today's worldwide economy,
we can no longer look solely to our own navels to answer questions of tax policy.
Professor Graetz's point is right. We must write tax rules that take into account
what other countries are doing. We must also reconsider the extent to which our
rules impede the flow of capital of US businesses, necessitate inefficient business
structures and operations, and leave US companies and workers in a less
competitive position. We must also give appropriate regard for the international
institutions that support free trade, even when we dislike the decisions they hand
down. That result should be obvious because - let's face it - no one has a greater
stake in the WTO and in free trade than the U.S. Despite the WTO decisions
against our foreign sales corporation and extraterritorial income regimes, the WTO
rules serve the economic interests of American businesses and workers by opening
markets and ensuring fair play.
We must consider the ways in which our tax system differs from that of our major
trading partners to identify aspects that may hinder the competitiveness of U.S.
companies and workers and creates barriers to efficient capital flows. About half of
the OEeD countries employ a worldwide tax system as does the U.S. The practical
effect of a worldwide system is a tax on U.S. companies repatriating their earnings
to the extent foreign tax credits are unavailable to offset U.S. taxes. That tax
creates a hurdle to companies bringing profits back to the U.S. It means U.S.
investments face a higher hurdle than investments abroad. That is a hurdle foreign
competitors in territorial systems don't face, and a hurdle foreign competitors
investing in the U.S. don't face.
Even limiting comparison of our system to that of countries using a worldwide tax
system, U.S. multinationals can be disadvantaged when competing abroad. This is
because the U.S. worldwide tax system, unlike other worldwide systems, can tax
active forms of business income earned abroad before it has been repatriated and
more strictly limit the use of the foreign tax credits that prevent double taxation of
income earned abroad.
Let's look at a couple of examples. Under subpart F, a U.S. company that uses a
centralized foreign distribution company to handle sales of its products in foreign
markets is subject to current U.S, tax on the income of that foreign distribution
subsidiary. In contrast, a local competitor is subject only to the tax imposed by that
country. Similarly, a foreign competitor with a centralized distribution company
making sales into the same markets generally will be subject only to the tax
imposed by the local country. The practical effect is U.S. companies seeking the
most efficient operation of their foreign distribution facilities face a tax penalty
relative to their foreign competitors.
The subpart F rules also impose current U.S. taxation on income from certain
services transactions, shipping activities and oil related activities performed
abroad. In contrast, a foreign competitor engaged in the same activities generally
will not be subject to current home-country tax on its income from these activities.
While the purpose of these rules is to differentiate passive or mobile income from
active business income, they operate to currently tax some classes of income
arising from active business operations structured and located in a particular
country for business reasons wholly unrelated to tax considerations. The additional
tax burden necessitates additional efficiencies by the U.S. business to be
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competitive.
We have similar issues with the limitations on foreign tax credits. The rules for
determining and applying the foreign tax credit are detailed and complex and can
have the effect of subjecting U.S.-based companies to double taxation on their
income earned abroad. An example is our interest expense allocation rules that
allocate the interest expense of a U.S. parent to its foreign subsidiaries even where
those subsidiaries are equally or more leveraged than the U.S. parent. The result is
an inappropriate reduction of foreign source income and, consequently, the foreign
tax credit The effect can be to subject U.S. companies to double taxation.
Our double tax on corporate earnings also sets us apart from our foreign
competitors. Of OECD countries, only Ireland and Switzerland afford no relief from
the double tax.
It is time for us to review our rules based on the world we live in today and the world
we imagine for the future. We must design rules that equip us to compete in the
global economy - not fearfully, but hopefully. We all benefit significantly from
vigorous partiCipation in the global economy - from the increased variety of products
available to us as consumers to the increased opportunities for us to sell our
products and services. Over the past 20 years, U.S. companies that invest abroad
exported more (exporting between one-half and three-quarters of all U.S. exports),
paid their workers more, and spent more on R&D and physical capital than
companies not engaged globally. Moreover, foreign investment is not just the
largest companies.
A recent Department of Commerce survey indicated 30 percent of mid-sized
companies had foreign investment.
This isn't just about us. And I wouldn't suggest to you that we should redesign our
rules for the sole purpose of winning the global competition or maintaining a
competitive edge. While 80 percent of U.S. investment abroad is located in highincome countries, our investment in developing countries may be far more
important. U.S. investment is vital to these countries achieving sustainable povertyreducing growth and development.
Too many people see foreign investment as a zero sum game, but the globalization
of the economy is not like a poker game revenue neutral. Healthy foreign
economies mean more markets for our products. They mean more opportunities
for us to profitably invest. But, foreign investment also means sharing our ideas,
our knowledge, our values, and our capital to improve the lives of people around
the world. That is not a zero sum game. I hope you will engage with us in a
discussion of what the future might bring.
Thanks you for your attention.
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f-'HLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 27, 2003
KD-3804
Remarks by Treasury Assistant Secretary Pam Olson to
USC Law School Tax Institute
I'm gOing to cover three topics today that have consumed more than a little time at
Treasury in r~cent months - compliance - or perhaps that should be noncompliance,
the President s economic growth and Jobs package, and the increasing significance
of globalization for our tax system.
Cleaning Up Noncompliance
The IRS has long had .. on a more or less consistent basis - a policy of not referring
for prosecution taxpayers who turn themselves in. There are several reasons for
the policy. One obvious reason is that knowing one will be prosecuted has a
chilling effect on those who would turn themselves in. But let's cut to the chase people who have turned themselves in just don't make attractive candidates for
prosecution.
To prevent people from waiting until the IRS has them in its sights before turning
themselves in, however, the IRS's voluntary disclosure non-referral policy ends
when the taxpayer's problem has been identified by the IRS. Last month the IRS
announced that it had revised and updated its policy. The key change relates to
reducing uncertainty over what constitutes a "timely" disclosure - that is, clarification
of when the IRS has a taxpayer In its sight. The IRS announced that publicity
surrounding an investigation that might lead to the taxpayer did not trigger the loss
of the voluntary disclosure opportunity.
That was followed two weeks ago by the IRS's unveiling of an initiative aimed at
cleaning up the offshore sector. Under the new initiative, the IRS is permitting
taxpayers with money hidden in offshore accounts and accessed by credit card or
other financial arrangement until April 15th to come in and get right with the IRS.
Taxpayers who wish to take advantage of the initiative will be spared the possibility
of civil fraud penalties and of referral for criminal prosecution. In exchange, they
must provide the IRS with information on the promoter or advisor who put them into
the offshore arrangement.
We see the change In the voluntary disclosure policy and the initiative just launched
as important steps in cleaning up the offshore sector. About two years ago, the IRS
began summons enforcement actions against the major U.S. credit card companies
in an effort to identify taxpayers using offshore banks to hide their income. That
effort has borne considerable fruit, but there remains an enormous amount of work
to do to identify and track down all of the account holders. The IRS became aware
that there were a number of taxpayers who would get straight if given the
opportunity. Taxpayers now have that opportunity.
One of Treasury's roles in cleaning up the offshore sector is to facilitate tax
.
information exchange with foreign governments that allow the IRS to more readily
identify US taxpayers hiding income offshore. Over the past 18 months, Treasury
has entered into tax Information exchange agreements with the offshore financial
centers in which over 50 percent of the offshore companies are located. These
were the first tax information exchange agreements entered into in over a decade.
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Last Friday we entered into a Mutual Agreement on tax information exchange with
SWitzerland, a key financial center. The Mutual Agreement, which builds on the
information exchange provisions of our bilateral treaty with Switzerland, is a
significant step in our efforts to ensure that no safe haven exists anywhere in the
world for the funds associated with illicit activities, including tax evasion Access to
information is vital to our efforts to ensure full and fair enforcement of our tax laws.
We look forward to working with SWitzerland to further improve this relationship.
The pOint I want to leave you with is that we are opening the offshore sector to
sunlight. The IRS has taken important steps to help taxpayers and their advisers
understand what must be done to get back into compliance with the tax laws
without fear of prosecution.
If you've got clients with IRS problems they ought to clean up, the time to take care
of the problems is now. With this initiative in place, we expect taxpayers will do the
right thing and voluntarily disclose and pay their outstanding tax liabilities. The
initiative is only a week old, but the early returns are encouraging.
The offshore sector isn't the only place we have problems. For the last few years, it
seems like we've been tuned to radio station NOTAX, broadcasting all shelters, all
the time! With all the attention focused on the topic, with legislative changes,
regulatory changes, and a torrent of anti-shelter words, how is it that the perception
is the problem has grown worse?
In part, it is because the torrent of words was not connected to a torrent of actions.
While the risk to the system was identified, the compliance resource allocation
remained largely unchanged. For example, shelter registrations filed between
1997 and 2000 included a number of listed transactions. However, until the Office
of Tax Shelter Analysis was formed and a strong Treasury commitment to pursuing
the transactions was made clear, those registrations gathered dust.
What happens when promoters register transactions and get no response? Same
thing that happens when children act up and no one tells them to quit it. They do it
again. So promoters told their customers the IRS is "OK" with the transactions.
The IRS knows about the transactions and has done nothing to shut them down so
obviously things are copasetic, right? Wrong. We can argue about whether
promoters should have known the difference between approval and neglect. But,
many did not understand that - or they chose to believe otherwise - and so tax
practice deteriorated without adult supervision.
Well, folks, the parents have arrived at the party. Unfortunately, we have a lot of
cleaning up to do, but the effort is underway. By moving resources from accounting
method nits to transactions promising large permanent tax losses, by supporting
taxpayer disclosure, and by acting promptly to resolve issues, we firmly believe we
can put this problem behind us and begin to restore a measure of confidence in our
tax system. With B. John Williams on board as Chief Counsel and the Justice
Department aiding the effort, I believe the efforts of the IRS operating divisions are
beginning to get traction.
As we work to put this problem behind us, many of you in this room - including
some who have never entered into or promoted an abusive tax avoidance device will have to live through the clean up efforts and our efforts to get our arms around
the problem. I apologize for that. We recognize that the new disclosure a~d list
keeping regulations will impose an additional burden on you. We are conSidering
ways to minimize that burden while preserving our goals of increased transparency
and certainty. As I see this, taxpayers, practitioners, and the government share a
mutual goal here - reducing the burden of complying with and administering the law
while ensuring that the IRS's resources are devoted to productive endeavors. You
have my commitment that we will work with you to produce the least burdensome
rules we possibly can.
Shelter legislation the Treasury Department helped to craft was introduced in both
Houses of Congress last year, but was not enacted. We believe some of the
.
legislative changes are important to further deterring tax shelter activity. Some of It.
we fear, would make tax administration more difficult, thus potentially worsening
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rather than improving tax compliance. The piece of legislation I would most like to
see passed is the change to the registration rules under section 6111. That change
would allow us to conform the definition of a potentially abusive tax shelter across
the board - for return disclosure, registration, and list maintenance purposes.
One thing I have become convinced of since joining Treasury is the importance of
acting even without a legislative mandate. We don't always need laws to tell us the
difference between right and wrong or to tell us what we ought to do.
Consequently, we are exploring what the IRS and Treasury can do to implement
registration on a voluntary basis. Why, you may ask, would anyone voluntarily
register anything? Because doing so illustrates best practices, and it is time for us
as good citizens to adopt best practices without an act of Congress compelling us
to do so. We'll be considering what action we can take to support the voluntary
adoption of best practices. The IRS offering such support is not unheard of. Similar
support was provided for a best practice - disclosure - in the disclosure initiatives
and settlement guidelines that have been released in the past year.
The President's Jobs and Growth Package
On January 7th, the President proposed a package of tax changes aimed at
improving economic growth and providing more jobs. Although there is much
positive to be said about the economy, particularly considering the bursting of the
stock market bubble, the September 11 th attacks, and the accounting and
corporate governance scandals that have beset us, it is clear the economy is not
running on all cylinders. The President's jobs and growth proposal is intended to
put the economy on a path to long-term stable growth.
There are three parts to the President's tax proposals - an acceleration of the 2001
Tax Cuts that were delayed until as long as the end of the decade. These include
an expansion of the size of the 10% bracket, a reduction in rates from 27% to
38.6% to 25% to 35%, elimination of the marriage penalty for lower and moderate
income families, and an increase in the child credit from $600 to $1000.
The second part is a tripling of the amount of capital investment that can be
expensed by small businesses.
The third part is the end of the double tax on corporate earnings.
The effect of the double tax on corporate earnings is familiar to most of us in this
room. In fact, it's how a lot of us make a living. And you're familiar with the math.
A tax as high as 60% on earnings paid out as dividends and as high as 48% on
earnings retained. But it's instructive to pause to consider those effects because
they've grown more perverse as the years have passed.
It creates a bias for debt. The result is excessive debt that increases the risk of
bankruptcy during economic downturns.
It creates a bias for unincorporated entities, with the result that businesses make
decisions on organizational form for tax rather than business reasons. That effect
is apparent from the statistics. From 1980 to 1999, net Income of C corporations
fell from 78% to 57% of all business income with the net income of flow throughs
rising by a corresponding amount. Similarly, the gross receipts ?f C corporations
fell from 87% to 72% of all business receipts with the gross receipts of flow
throughs rising by a corresponding amount.
It encourages corporations to retain earnings rather than pay dividends. This too is
illustrated by the statistics. Dividends were paid by 75% of large companies In the
mid-60s. That number dropped to less than 25% by the ~id-90s. And ~unng the
90s, the dividend payout of large publicly traded companies fell from 23 Yo of pre-tax
earnings in 1992 to 14% in 1999. The incentive to retain earnings means reduced
scrutiny of and a reduced hurdle for projects financed with retained earnings.
That's a distinct difference from the scrutiny given to projects for which the
company must go to the market for financing.
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There are secondary effects. It has led corporations to engage in complex and
expensive planning of transactions that result in the distribution of earnings at
capital gains rates Instead of Just paying dividends. This too can be seen from the
statistics. The most familiar is the share repurchase. In 1999, over 34% of large
publicly traded companies engaged in share repurchases, up from 28% in 1992.
More striking is that fact that by 1999, almost 20% of earnings were paid out by
share repurchase, nearly triple that of 1992.
And here's another secondary effect familiar to all of you. It encourages
corporations to engage in transactions solely to minimize taxes. That has promoted
the acceptability of transactions serving no purpose other than minimization of tax
liability. The President's proposal makes paying taxes an asset to shareholders.
Now that changes the math.
The goal of the President's proposal is to end the double tax. The basic
mechanism is an exclusion for shareholders of dividends paid out of earnings on
which the corporation has paid tax. To avoid a new bias against retaining earnings,
the President's proposal includes an adjustment to shareholders' stock basis that
reflects retained earnings.
The tax free dividend is determined by the company on the basis of the tax liability it
reports on its tax return. The earnings on which the company has paid tax are
determined on the basis of a 35% tax rate. That amount less the tax paid is the
amount that a company can distribute to shareholders tax free, and it is distributed
on a proportionate basis. If the company chooses to retain some of the taxed
earnings, the company will advise shareholders of the amount by which they may
adjust their stock basis.
The calculation of the previously taxed earnings will be based on the most recent
tax return filed by the company before the year begins. Any subsequent
adjustments to the tax return will be reflected in the calculation of taxed earnings at
the time of the adjustment, and not retroactively. This will give companies and
shareholders certainty about the tax free status of the dividends at the time the
dividend is paid.
Globalization
Recent events have conspired to create what was referred to by a panelist at the
ABA Tax Section meeting on Saturday as the perfect storm. With the World Trade
Organization having recently dec.lared a feature of our international tax regime an
export subsidy illegal under the WTO rules and the burst of corporate inversion
transactions in the last couple of years, we find ourselves in a position where
significant change to our international tax rules seems inevitable. If change is
inevitable, the question is what we should do. I'd like to set a backdrop for
reconsidering the fundamentals of our international tax rules.
From the vantage point of an increasingly global marketplace, our tax rules appear
outmoded, at best. and punitive of U.S. economic interests, at worst. Most other
developed countries of the world are concerned with setting a competitiveness
poliCY that permits their workers to benefit from globalization. As Deputy Secretary
Dam observed recently, however, our international tax policy seems to have been
based on the principle that if we have a competitive advantage, we should tax It!
Our income tax system as a whole dates back to shortly after the turn of the last
century. To put that in perspective, buggy whip makers had just gone out of
business. A bit has happened since then. Of course, significant changes have
been made to the tax code as well. In the international area, we added the subpart
F rules back in 1962. A lot of those rules haven't aged very well. We also made
fairly significant changes to the international tax rules in 1986. That would make
those rules teenagers now, and they have the characteristics of the average
teenager. Theyre hard to understand, messy, inconsistent, and display little regard
for the real world.
The global economy looked very different when the subpart F rules were put in
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place than it looks today. The same is true of the U.S. role in the global economy.
Forty years ago the U.S. was dominant, accounting for over half of all multinational
Investment In the world. We could make decisions about our tax system essentially
on the basis of a closed economy, and we could generally count on our trade
partners to follow our lead in tax policy.
Things have changed in 40 years In fact, a lot has changed in 17 years. When the
rules were first developed, they affected relatively few taxpayers and relatively few
transactions. Today, there IS hardly a US.-based company that is not faced with
applying the U.S. international tax rules to some aspect of its business.
Lets pause for a moment to consider what globalization means - the growing
Interdependence of countries resulting from increasing integration of trade, finance,
Investment, people, information and ideas in one global marketplace. Globalization
results in increased cross-border trade, and the establishment of production
facilities and distribution networks around the globe. Technology has accelerated
the pace of globalization. Advances in communications, information technology,
and transport have dramatically reduced the cost and time taken to move goods,
capital, people, and information around the world. Firms in this global marketplace
differentiate themselves by being smarter: applying more cost efficient technologies
or innovating faster than their competitors. The returns to being smarter are much
higher than they once were as the benefits can be marketed worldwide.
The significance of globalization to the U.S. economy since the enactment of
subpart F is apparent from the statistics on international trade and investment. In
1960, trade In goods to and from the U.S. represented just over six percent of
GOP. Today, trade in goods to and from the U.S. represents over 20 percent of
GOP, more than three times larger than in 1960, while trade in goods and services
represents more than 25 percent of GOP today. It is worth noting that numerous
studies confirm a strong link between trade and economic growth.
Trade appears to raise income by spurring the accumulation of physical and
human capital and by increasing output for given levels of capital.
Cross border investment, both inflows and outflows, also has grown dramatically in
the last 40 years. In 1960, cross border investment represented just over one
percent of GOP. In 2000, it was nearly 16% of GOP, representing annual crossborder flows of more than $1.5 trillion. The aggregate cross border ownership of
capital is valued at $15 trillion. In addition, U.S. multinational corporations are now
responSible for more than one-quarter of U.S. output and about 15 percent of U.S.
employment.
At the same time companies are competing for sales, they are also competing for
capital: U.S.-managed firms may have foreign investors, and foreign-managed firms
may have U.S. investors. Portfolio investment accounts for approximately twothirds of US investment abroad and a similar fraction of foreign investment in the
U.S.
The U.S. tax rules have important effects on international competitiveness both
because of the integration of domestic activities of U.S. multinational companies
with their foreign activities and because repatriated foreign earnings of foreign
investments are subject to U.S. domestic tax. Increasingly, the flow of goods and
services is not through purchases between exporters and importers, but through
transfers between affiliates of multinational corporations. The rules governing
transfer pricing, interest allocation, withholding rates, foreign tax credits, and the
taxation of actual or deemed dividends impact these flows.
The U.S. tax system should not distort trade or investment relative to what would
occur in a world without taxes. Every country makes sovereign decisions about ItS
own tax system, so it is impossible for the U.S. to level all playing fields
simultaneously. But we can ensure that our own rules minimize the barriers to the
free flows of capital that globalization necessitates.
The question we must answer is what we can do to increase the competitiveness of
U.S. businesses and workers. Professor Michael Graetz observed in his book, The
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Decline (and Fall?) of the Income Tax:
The internationalization of the world economy has made it far more difficult for the
United States, or any other country for that matter, to enact a tax system radically
different from those in place elsewhere in the world. In today's worldwide economy,
we can no longer look solely to our own navels to answer questions of tax policy.
Professor Graetz's point is right. We must write tax rules that take into account
what other countries are doing. We must also reconsider the extent to which our
rules impede the flow of capital of US businesses, necessitate inefficient business
structures and operations, and leave US companies and workers in a less
competitive position. We must also give appropriate regard for the international
institutions that support free trade, even when we dislike the decisions they hand
down. That result should be obvious because - let's face it - no one has a greater
stake in the WTO and in free trade than the U.S.
Despite the WTO decisions against our foreign sales corporation and extraterritorial
income regimes, the WTO rules serve the economic interests of American
businesses and workers by opening markets and ensuring fair play.
We must consider the ways in which our tax system differs from that of our major
trading partners to identify aspects that may hinder the competitiveness of U.S.
companies and workers and creates barriers to efficient capital flows. About half of
the OEeD countries employ a worldwide tax system as does the U.S. The practical
effect of a worldwide system is a tax on U.S. companies repatriating their earnings
to the extent foreign tax credits are unavailable to offset U.S. taxes. That tax
creates a hurdle to companies bringing profits back to the U.S. It means U.S.
investments face a higher hurdle than investments abroad. That is a hurdle foreign
competitors in territorial systems don't face, and a hurdle foreign competitors
investing in the US don't face. The most important point here is that the system
creates a bias against companies reinvesting in the U.S. That is a result that
disadvantages U.S. workers. Yet rhetoric stands in the way of even fairly
considering reform.
Even limiting comparison of our system to that of countries using a worldwide tax
system, U.S. multinationals can be disadvantaged when competing abroad. This is
because the U.S. worldwide tax system, unlike other worldwide systems, can tax
active forms of business income earned abroad before it has been repatriated and
more strictly limit the use of the foreign tax credits that prevent double taxation of
income earned abroad.
Let's look at a couple of examples. Under subpart F, a U.S. company that uses a
centralized foreign distribution company to handle sales of its products in foreign
markets is subject to current U.S. tax on the income of that foreign distribution
subsidiary. In contrast, a local competitor is subject only to the tax imposed by that
country. Similarly, a foreign competitor with a centralized distribution company
making sales into the same markets generally will be subject only to the tax
imposed by the local country. The practical effect is U.S. companies seeking the
most efficient operation of their foreign distribution facilities face a tax penalty
relative to their foreign competitors.
The subpart F rules also impose current U.S. taxation on income from certain
services transactions, shipping activities and oil related activities performed
abroad. In contrast, a foreign competitor engaged in the same activities ge~erally
will not be subject to current home-country tax on its income from these actiVIties.
While the purpose of these rules is to differentiate passive or mobile income from
active business income, they operate to currently tax some classes of Income
arising from active business operations structured and located in a particular ..
country for business reasons wholly unrelated to tax conSiderations. The additional
tax burden necessitates additional efficiencies by the U.S. business to be
competitive.
We have similar issues with the limitations on foreign tax credits. The rules for
determining and applying the foreign tax credit are detaile~ and complex and can
subject U.S.-based companies to double taxation on their Income earned abroad.
An example is our interest expense allocation rules that allocate the Interest
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expense of a U.S. parent to its foreign subsidiaries even where those subsidiaries
are equally or more leveraged than the U.S. parent. The result is an inappropriate
reduction of foreign source income and, consequently, the foreign tax credit. The
effect can again be double taxation.
Our double tax on corporate earnings also sets us apart from our foreign
competitors. Of OECD countries, only Ireland and Switzerland afford no relief from
the double tax.
It is time for us to review our rules based on the world we live in today and the world
we Imagine for trle future. We must design rules that equip us to compete in the
global economy - not fearfully, but hopefully. We all benefit significantly from
vigorous participation in the global economy - from the increased variety of products
available to us as consumers to the increased opportunities for us to sell our
products and services. Over the past 20 years, U.S. companies that invest abroad
exported more (exporting between one-half and three-quarters of all U.S. exports),
paid their workers more, and spent more on R&D and physical capital than
companies not engaged globally. Foreign investment is not important just to the
largest companies. A recent Department of Commerce survey indicated 30 percent
of mid-sized companies had foreign investment.
This isn't just about us. And I wouldn't suggest to you that we should redesign our
rules for the sole purpose of winning the global competition or maintaining a
competitive edge. While 80 percent of U.S. investment abroad is located in highincome countries, our investment in developing countries may be far more
important. U.S. investment is vital to these countries achieving sustainable povertyreducing growth and development.
Too many people see foreign investment as a zero sum game, but the globalization
of the economy is not - like a poker game - revenue neutral. Healthy foreign
economies mean more markets for our products. They mean more opportunities
for us to profitably invest. But, foreign investment also means sharing our ideas,
our knowledge, our values, and our capital to improve the lives of people around
the world. That is not a zero sum game. I hope you will engage with us in a
diSCUSSion of what the future might bring.
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1/31/2003
omCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. _ 20220 _ (202) 622-2960
For Immediate Release
Thursday, January 28, 2003
Contact: Tony Fratto
(202 622-2960
Strengthening Africa's Financial Sector to Promote Growth
Importance of Financial Sector Development
Financial sector development is one of the keys to economic growth as it facilitates
savings and investment. If Sub-Saharan Africa is to provide its growing population with
sufficient food, productive jobs, and rising incomes, its economies must grow by at least
4-5% a year, ifnot more. To do this, the region must improve productivity, increase
investment, and dramatically raise levels of domestic savings. The level of domestic
savings in sub-Saharan Africa remains below that of all other developing regions,
representing only about 12% of aggregate GDP. Savings rates in Asia, meanwhile, are as
high as 30%, and even in South Asia the savings rate is 17%.
To increase public savings, governments must focus on reducing expenditures. In
addition, much can be done to increase revenues, without raising marginal tax rates, by
eliminating exemptions and broadening the tax base. To encourage private savings,
governments must reform property ownership laws and more broadly promote private
sector development, improve the investment climate, build infrastructure, and increase
access to credit. Strengthening financial sectors is critical to supporting such reforms. In
addition, reforming weak banking sectors can have a direct impact on savings as weak
banks tend to have higher loan-to-deposit spreads and thereby discourage savings and
investment.
A stronger financial sector is also critical to improving income levels. Low-income
families, small-to-medium size enterprises, and rural entrepreneurs in developing
countries have difficulty obtaining financial services. Banking sector penetration in a
typical sub-Saharan African country is around 1% of GDP, far below a more advanced
economy like Brazil, where penetration is approaching 25%, or industrialized countries
where it is near 85%. Women's World Banking estimates that fewer than 2 percent of
low-income entrepreneurs worldwide have access to financial services.
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In Africa's agriculture sector, women receive less than 10% of the credit to small fanners
and less than 1% of the total credit to agriculture.
Developing the financial sector is also necessary for preventing the financing of terrorism
and combating financial crimes. In many African countries, banks are the primary
financial intermediary. They are the key repository for the public's savings and the main
source of credit to firms. Fragile banking systems not only misallocate resources, but also
leave themselves vulnerable to terrorists, money-launderers, and others who would abuse
the financial system.
Challenges for Reform
While several Sub-Saharan African countries have already made substantial progress in
reforming and modernizing their financial sectors, there is still much work to be done:
•
Banking systems often still operate with a substantial degree ofgovernment
ownership or control. During the 1980s, when many African countries faced
external shocks, the primary cause of financial distress of banks was political, in
the form of pressure not to recover debts, or to lend to weak borrowers including
parastatals, politically connected private sector borrowers, and the government
itself.
•
Bank supervision remains weak, enforcement tools inadequate, and management
standards low. Most African financial sectors need reform in the areas of
prudential regulations, banking supervision, bankruptcy laws, and contract
enforcement law. Compliance with international codes and standards is also an
area in need of reform.
•
The depth and breadth of Sub-Saharan Africa's financial markets are inadequate.
The banking industry is highly concentrated (in a study of 11 Sub-Saharan
African countries, 60% of banking sector assets were concentrated in, at most, 4
banks); loan portfolios are not diversified, reflecting national economies; capital
markets are shallow; and insurance and pension systems are not well developed.
Without reforms in these areas, financial systems will continue to experience high levels
of non-performing loans, interest rates that do not adequately reflect the level of risk, and
crowding out of the private sector.
Value of Openness and Competition within the Financial Sector
We at Treasury believe that openness to foreign direct investment in the financial sector
coupled with improved financial supervision and regulation is a clear path to economic
growth and stability. Foreign financial institutions can introduce strong business
practices, technology, products, and risk management systems. And, of course, foreign
financial institutions can bring their own financial resources to bear as well.
Financial sector openness offers two fundamental benefits to those who undertake it.
First, a more open and well-regulated financial sector is more efficient and more robust.
It acts as an "engine of growth" for the entire economy.
The financial sector has an economy-wide effect. All other sectors rely on financial
intermediation for growth. Second, perhaps more than in any other economic sector, a
stronger, deeper financial sector can protect an economy from external as well domestic
shocks. Therefore, financial sector openness can promote stability.
How does financial sector openness lead to growth? Well, we know that the world's best
financial institutions are better able to identify productive investment opportunities and
then more quickly move domestic savings into them-in short, the better they perform
their capital intermediation function, the faster an economy can grow.
Another benefit of a competitive, open system is that it forces all financial firms
operating in an economy to offer the highest returns to savers and the lowest cost of
capital to investors. Under the right conditions, competition from international firms
leads to narrower spreads, and stimulates both savings and investment.
As financial institutions aggregate capital, they must move it into the business and
industry sectors where they can eam the best risk-adjusted returns for their savers. That
means investing in the businesses that can make the best use of their capital-in other
words, those that offer the highest productivity. And rising productivity-output per
worker-is at the root of raising living standards.
There is a particular need for more attention in the areas of finance for small- and
medium-sized enterprises (SMEs) and the prevention of terrorist financing and financial
cnmes.
Improving SME Access to Finance
A necessary ingredient for value creation is a means of providing capital to those who
seek to make new ideas into reality. That is, to entrepreneurs. It doesn't matter if the new
idea is building a satellite-linked data processing center in Accra, or putting a dairy cow
in an empty bam in Kosovo.
As these entrepreneurs succeed, they diversify the local economy. Often businesses such
as restaurants, general stores and clothing-makers are the first non-agricultural employers
in their communities. They are the seeds for local economic independence, specialization,
comparative advantage in trade, and long-term growth. They create jobs that keep young
people at home, where they would otherwise move to over-crowded cities-or other
countries-in search of work. They launch a virtuous cycle of growth and employment.
In most Sub-Saharan countries, SMEs and microenterprises have limited access to
financial services, yet they make up the vast majority of businesses in Sub-Saharan
Africa. In recent years, multilateral development banks, governments, and NGOs have
developed programs to finance microenterprises. SMEs would best be served by the local
banking sector which could provide working capital loans in local currency, but this
sector is underdeveloped in many countries.
The US Treasury and the International Finance Corporation (IFC), the ann of the World
Bank group that invests in private companies, are working to establish an IFC-managed
facility that would develop local private financial institutions in Africa to serve the
financing needs of SMEs. While many multilateral and bilateral donors have in recent
years increased their financing for African micro enterprise development, there are few
programs that target SMEs. This idea has a successful analogue in the US-supported
SME finance facility of the European Bank for Reconstruction and Development
(EBRD). The US hopes that IDA would fund the development of this SME financing
facility for Africa.
Combating Financial Crimes and Terrorist Financing
Well-regulated fmancial sectors that can institute and implement effective asset-freezes,
know-your-customer requirements, and policies that ensure transparency are the first line
of defense against terrorists, money-launderers, and other financial criminals. To combat
the financing of terrorism, governments must first ensure that they have the appropriate
tools to freeze and seize any terrorist-related assets, establish financial intelligence units
to track flows of funds and share infonnation, implement oversight of alternative
remittance systems such as foreign exchange bureaus, and provide adequate protections
against the abuse of charitable institutions by the financiers of terror.
The U.S. Treasury Department and the African Development Bank have been working on
organizing a regional banking conference in Africa to discuss necessary refonns. The
two-day conference would cover developments in the international community to thwart
the flow of funds to terrorists and combat money laundering, and would then delve into
how to build on these developments to strengthen a country's financial system and track
terrorist assets.
The Example of Ghana
Ghana took a very systematic approach to refonning its financial sector in the early 90s.
In the first phase of those refonns, the government placed ceilings on net bank credit to
the government to avoid crowding out the private sector. While administrative controls
on interest rates remained in place, they were gradually relaxed. The second phase of
refonn focused on liberalizing controls on interest rates and bank credit. In the third
phase, there was a gradual shift from a direct system of monetary controls to an indirect
system that utilized market-based policy instruments.
As part of the process, the Bank of Ghana rationalized the minimum reserve requirements
for banks, introduced new financial instruments, and absorbed excess liquidity from open
market operations. These policies were complemented by improving the soundness of the
banking system by improving the regulatory framework, strengthening bank supervision,
and improving the efficiency and profitability of banks, including the replacement of
their non-performing assets. In the final stage of this process, Ghana has embarked on the
privatization of the major publicly owned banks.
Conclusion
Financial sector development is critical to stronger economic growth, improved
productivity, increased investment rates and better savings rates. A competitive and open
financial sector can playa critical role in this process. Also, bilateral and multilateral
development partners must assist African countries to make tangible progress toward
economic and financial sector reform. The IFe SME facility will facilitate that process by
building and strengthening financial institutions which can serve the SME sector, which
typically is the primary engine of job creation in many countries around the world. In
addition, the Treasury Department provides technical assistance in the areas of banking
supervISIon.
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For Immediate Release
Thursday, January 16,2003
Contact: Tony Fratto
(202) 622-2960
Raising Productivity, Improving Standards of Living, and Promoting Job-Creating
Economic Growth in Africa
I. Introduction.
Raising productivity-and ultimately, economic growth-is the only way of achieving
substantial and sustained reductions in poverty. We define productivity as the quantity of
goods and services that a worker produces per unit of time with the skills and tools
available. Bluntly, the more high productivity jobs there are in a country, the richer the
country. However, most African countries do not fare well on this score-there tend to be
only a few high productivity jobs, with the overwhelming majority of jobs characterized
by low productivity, resulting in pervasive poverty.
I would like to focus on two interconnected themes: increasing the number of high
productivity jobs in African countries, thereby promoting economic growth, and
increasing the productivity of African workers generally-thereby improving standards
ofliving. We cannot have one without the other. Quite simply, increasing the number of
high productivity jobs is meaningless if there are no high productivity workers to fill
those jobs, and having a highly productive workforce is equally pointless if there are no
jobs for them to take.
At the same time, we should see rates of productivity growth increasing at a faster rate in
poorer countries than in richer ones. This is what we have seen in East Asia over the past
decades. In Africa this has not been the case. Africa is not catching up, due to three
severe impediments to productivity growth: poor governance, poor education, and the
highly restrictive nature of economic transactions in most African countries.
Poor governance and highly restrictive economic environments create a disincentive for
the necessary investment to increase the number of high productivity jobs and workers.
Poor education also locks the workforce into a low level of productivity.
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Due to these three endemic impediments, neither of our keys to development-a higher
productivity workforce and an increasing number of high productivity jobs-is realized
in most of Africa, and the result is that many Africans are caught in a poverty trap. Let us
now consider ways to get out of the trap.
II. Getting Africa Out of the Poverty Trap by Focusing on Productivity
1. Eliminating the impediment ofpoor governance.
Poor governance is one of the major hindrances to attracting investment. Whether the
goal is to attract more firms with high-productivity jobs, or to spur highly productive
firms to expand, the goal can be frustrated by high levels of corruption, absence of the
rule of law, and lack of enforcement of contracts. Remedial actions can include effective
anti-corruption initiatives, modernizing the code of laws, and strengthening the courts.
Another important step is to reduce opportunities for rent-seeking-such as ad hoc tax
exemptions, trade quotas, and dual exchange rates.
Without such remedial actions, the environment will be perceived as unfriendly to
investment, the number of high productivity jobs will not increase, and firms will have no
incentive to invest further in their workers. Economic growth is likely to stagnate and
standards of living are likely to decline. The long term effects of poor governance are
very hard to overcome, but taking a strong stand and demonstrating that there is a
commitment to improving governance is the first step.
African examples of successful action in this area would include Botswana, South Africa,
and our hosts here in Mauritius. Taking the South African example, the government has
worked since the onset of majority rule to ensure that the benefits of growth are shared
more equitably, fiscal management is more transparent and accountable, and the rule of
law is reinforced. The result has included stronger domestic investment and a resumption
of growth.
2. Eliminating the impediment ofpoor education.
Education is the key to creating a highly productive workforce. We cannot expect
investment in high productivity sectors ifthere is no workforce available to staff such
investment. Similarly, we cannot expect a workforce to adopt new technologies that
would make them more productive if they lack the requisite skills. Thus, a strong
commitment to education in order to create a workforce with high levels of productivity
is a prerequisite for sustainable growth and development.
Mauritius is a good example of the connection between education, productivity, and
growth. Secondary school enrollment ratio for Mauritius is 53% while the average for
Africa is 31 %. The country's relatively educated and skilled manufacturing workforce
has an average wage of $336 per month, while in other parts of Africa productivity levels
have made possible manufacturing wages of only around $54 per month.
Consequently, investing in education is just as important as investing in plant or
equipment. Creating a stronger education system has multiple dimensions, including
stronger pro-education policies by the government, a commitment from firms to train and
invest in their workers, and innovations such as internet-based teaching.
Such initiatives must address both the low enrollment ratios and the gender disparities in
education: in Africa, the secondary school enrollment ratio is 35% for boys and 28% for
girls. In the end, improving the quality of education must be a high priority.
Investing in people also means investing in health, and specifically addressing the crisis
ofHIV/AIDS. In countries with adult prevalence rates of 10%, economic growth could
be reduced by one-third; rates of 20% could reduce productivity and growth by more than
half. There is empirical evidence in some areas that for every 1% decrease in life
expectancy, the rate of GDP growth falls by 0.7% and the rate of investment by 1.2%.
3. Eliminating the impediment of restrictive economic environments.
Perhaps this is the most obvious of my three points, but can low-productivity developing
countries catch up if there are barriers to the very investments which would enable such
catch up? Excessive regulation, state monopolies, and lack of openness to trade will force
the bulk of productivity-enhancing investment to go elsewhere. This results in the
stagnation and further decline of the economic environment, causing both productivity
and growth to dwindle further.
It is apparent that macroeconomic stability and trade liberalization are keys to attracting
productive investment. Keeping inflation levels low, developing domestic financial
markets, limiting the claims of governments on domestic savings, and a rational foreign
exchange rate regime also are among the requirements for a vibrant economy conducive
to private investment. With regard to exchange rates, there are a variety of approaches
being applied in Africa, from currency boards to floating against a basket of currencies.
The important point is to maintain a transparent and consistent system of either fixed or
floating rates, avoiding the "muddled middle" of managed floats, which invite abuse.
A useful step toward an enabling environment for investment is to obtain a sovereign
credit rating. This can be useful for the government being rated, since it provides direct
exposure to market expectations, as well as for investors, since it signals that this is a
country committed to creating an environment where domestic and foreign investors
should be putting their capital. Another important issue is the composition of public
spending, which should be slanted toward investment in people and infrastructure in
preference to unproductive purposes such as military spending. In the end, the qualities
that investors look for above all else are clarity and stability-so that they can foresee
what risks they must plan for ahead of time.
Uganda has made substantial strides in improving its domestic economic environment,
primarily by divesting government holdings in the productive sectors and introducing
regulatory reform. Monetary management has been relatively sound and inflation has
remained in check. There has been significant progress in redirecting spending toward the
social sectors, and devising ways to ensure that funds reach their intended uses in local
schools and clinics, for example.
Looking forward, the challenges for Uganda are likely to include allowing greater
openness to trade and continuing with regulatory refonn, in order to create more space
for private sector activity.
III. Conclusion
Removing the impediments of poor governance, poor education, and restrictive economic
environments is a hugely daunting task. We cannot expect such change overnight, nor for
it to come fully and easily. The US will continue to work with sub-Saharan countries
bilaterally and through the IFls in removing these impediments. Similarly, the conditions
that will underlie the Millennium Challenge Account-ruling justly, investing in people,
and encouraging economic freedom-are precisely the policies that will spur productivity
growth; policies, moreover, which we believe are entirely consistent with the New
Partnership for African Development (NEPAD).
Lastly, the US recognizes that large debt burdens are additional obstacles to improved
productivity for many of the poorest developing countries. This is why we support the
HIPC program, and why we also are encouraging greater use of grants, especially with
productivity-enhancing programs. Both these initiatives will increase support to those
countries that are prepared to move decisively to enhance productivity. Sustainable and
successful economic growth depends on it.
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EMBARGOED UNTIL 9:30 AM
TUESDAY, JANUARY 28, 2003
CONTACT:
Rob Nichols
202-622-2910
OPENING STATEMENT BY JOHN SNOW
NOMINEE TO BE SECRETARY OF THE TREASURY
BEFORE THE SENATE FINANCE COMMITTEE
TUESDAY, JANUARY 28, 2003
Chainnan Grassley, Ranking Member Baucus, and members of the Committee, I very
much appreciate the opportunity to be here today. I am particularly grateful for the warm
introduction by Senators Warner and Allen and the many courtesies they have shown me over
the years.
I come before you today as the President's nominee for Secretary of the Treasury. I have
great admiration for the President and his leadership and I am both humbled and honored that he
would ask me to return to public service at this important time.
The Department has a long and rich history of service to the nation, and it would be an
honor to lead so many talented and dedicated public servants. I hope that when this hearing is
completed, I will have the confidence of this Committee and, at the appropriate time, the full
Senate.
I come before you mindful of the significant role this Committee plays in so many
important issues that our nation faces. Having worked closely with both the legislative and
executive branches of the federal government for the past thirty years, I understand that public
policy issues are complex and that people can have legitimate differences. It is my hope that we
can conduct the public debate on these important issues with a high level of constructive
discourse and also with mutual respect.
These are clearly important and challenging times. We have seen in the last year and a
half the tragic events of 9111, the war on terrorism, the corporate scandals and the falling stock
market. But despite the significant events, the economy is recovering. But as the President has
stated, we can and must do better.
We must build on the proven strengths of our economy. We must continue to move towards
policies that will generate economic growth and more good jobs and rising living standards for
all. As long as there are Americans who want ajob and can't find one, the economy is not
growing fast enough.
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That means rewarding hard work and encouraging savings, investment, and the
entrepreneurial spirit that benefits everyone. Americans also benefit from a growing world
economy and open markets. I am committed to President Bush's initiatives to establish a more
prosperous and stable international economy.
If confirmed, I will not be content until everyone who wants to work can find a good job.
Jobs give people dignity and provide hope. I know what it's like to need ajob and I also know
what it takes to create jobs.
I believe that President Bush's recent economic growth proposal moves the tax system,
and the potential of the U.S. economy, in the right direction. It will create jobs. It is an
investment in the American people and their future.
If confirmed by the Senate, I stand ready to work with this Committee, and indeed all
Members, as the Congress confronts the pressing problems of our times.
Before I take your questions, I have one more comment to make during my opening
statement.
There has been a consistent policy on the dollar going back the better part of a decade, which I
support. I favor a strong dollar. A strong dollar is in the national interest. A strong currency
provides a reliable medium of exchange and serves as a stable store of value that people choose
to hold. Sound, pro-growth economic policies and a commitment to free and open markets are
the foundation for a strong dollar.
Thank you for the opportunity to appear here today and I will be happy to answer any
questions.
-30-
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt· Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE
January 28, 2003
RESULTS OF TREASURY'S AUCTION OF 4-WEEK BILLS
28-Day Bill
January 30, 2003
February 27, 2003
912795MA6
Term:
Issue Date:
Maturity Date:
CUSIP Number:
1.155%
High Rate:
Investment Rate 1/:
Price:
1. 174%
99.910
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted
0.59%.
All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
Competitive
NoncompetitivE:
FIMA (noncompetitive)
$
$
15,960,814
39,530
°
°
SUBTOTAL
Federal Reserve
$
TOTAL
37,931,976
39,530
37,971,506
16,000,344
2,059,848
2,059,848
40,031,354
$
18,060,192
Median rate
1.140%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
1.140%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio
=
37,971,506 / 16,000,344
=
2.37
1/ Equivalent coupon-issue yield.
http://www .publicdebt.treas.gov
KD-3808
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omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C.• 20220. (202) 622-2960
For Immediate Release
Wednesday, January 29, 2003
Contact: Rob Nichols
(202) 622-2910
Outlook on Global Financial Markets
Remarks by
Kenneth W. Dam
Deputy Secretary
Department of the Treasury
Delivered to
The Bankers' Association for Finance and Trade
January 29, 2003
Washington, D.C.
I will make just a few fonnal remarks as I understand that the fonnat for today's session
is an interactive one.
I wish to emphasize two Administration initiatives that will, I believe, have an impact on
the future of global financial markets:
The first initiative that I wish to emphasize is the President's jobs and growth package.
This may seem like an odd place to begin a discussion of global financial markets.
But the most important thing that the United States can do to promote growth in the
global economy and stability in global financial markets is to ensure that the U.S.
economy is growing at its full potential.
I won't rehearse the details of the package for you - I am sure you are all by now wellfamiliar with the most prominent aspects. I would, however, like to emphasize a couple
of points that tend to get lost in the usual debate and that I believe have real potential to
help us grow at our full potential.
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·U.S. Govemment Pnntlng Office 1998 - 619-559
In June of2001, the Congress and the President agreed that implementing across-boardrate cuts was good for the economy. What's changed since then? We know now that the
economic slowdown we were experiencing then started earlier and lasted longer than we
generally supposed at the time. What should we do with that new information? In my
view the answer is obvious. If the slowdown started earlier and lasted longer than we
supposed, we need the benefit of tax cuts sooner - and longer - than we initially agreed.
After acceleration, the next-biggest component of the package is the exclusion of certain
dividends from taxable income. The thrust of this provision will be to integrate the
taxation of corporate and individual income. This is really an important aspect of the
plan - and far overdue. Most economists agree that integration of corporate and
individual taxation is good tax policy. And many advanced industrial economies [getting countries to cite from Tax Policy] - already integrate this taxation - in one way
or another. It is high time the United States implemented what is now understood as a
global best practice. It will help our economy remain competitive - and that will be good
for jobs and growth in the United States.
Let's not overlook the provisions in the President's plan that help small business. We
know that a lot of the new jobs that are created in our economy are created by small
businesses. Most of these businesses pay taxes at individual rates. Acceleration of the
rate cuts will therefore help these businesses and lead to more rapid job growth.
Also, the package increases the expensing provision applicable to small business from
$25,000 to $75,000. That will encourage small business people to invest more in their
business. It will also lead them to hire more people to use the additional capital.
The second initiative that I would like to emphasize is the Administration's effort to
reduce the uncertainty associated with official actions in crises by enunciating a clear
strategy to limit the incidence of crises and facilitate the flow of private capital to
emerging markets. The strategy is focused on four elements:
Preventing crises;
Reducing contagion;
Limiting access and clarifying official sector responses; and
Improving predictability in the sovereign debt restructuring processes.
A key part of this strategy is working to create a more orderly and predictable process for
sovereign debt restructuring in the event such restructurings occur. A more orderly
sovereign debt restructuring process for countries that reach unsustainable debt positions
would help reduce uncertainty, leading to better, more timely decisions and reducing the
frequency and severity of crises.
To that end, many members of the official international community have supported a
decentralized, market-based approach to sovereign debt restructuring that relies upon the
use of clauses - "collective action clauses" - in sovereign external bond issuances.
2
The key objectives of collective action clauses are to foster early dialogue, coordination,
and communication among bondholders and a sovereign, to help ensure agreement on
restructuring terms where one is necessary, and to help deter disruptive litigation brought
by individual bondholders, which can hamper workouts that are underway.
In addition to collective action clauses, the official international community has called for
the IMF to develop a proposal for how a more formal sovereign debt restructuring
mechanism might work. The spring meetings of the IMF and World Bank in April will
provide the opportunity for further examination whether the so-called statutory SDRM
might usefully complement collective action clauses.
Those are two initiatives that I wished to highlight. I look forward to your questions.
3
KD-3810: Ren'mTks by Ttre Honcrrable Peter R. Fisher before the Worldwide Conventions and Business...
Page 1 of 5
f-'HLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 29, 2003
KO-3810
Remarks by
The Honorable Peter R. Fisher
Under Secretary of the Treasury
for Domestic Finance
before the
Worldwide Conventions and Business Forums
Successfully Managing Terrorism Insurance Risk
Westin New York at Times Square
January 29, 2003
Implementing the Terrorism Risk Insurance Act of 2002
Good afternoon and thank you for inviting me to speak today on Treasury's
progress and plans for implementing the Terrorism Risk Insurance Act of 2002.
President Bush worked hard to enact a Federal backstop for terrorism risk
insurance. The market for terrorism risk insurance was severely disrupted by the
events of September 11, 2001. Reinsurers had made clear that they were no
longer going to cover terrorism risk or that the cost of limited terrorism coverage
would be very expensive. Such widespread dislocations in insurance markets had
a negative impact on businesses' ability to finance economic activity, presenting a
combination of higher insurance costs and higher financing costs associated with
inadequate insurance coverage.
On November 26, 2002, the President signed into law the Terrorism Risk Insurance
Act (TRIA) of 2002 TRIA became effective immediately, which meant that
terrorism exclusions on existing insurance policies were removed and all policy
holders had the ability to secure coverage for terrorism risk. TRIA establishes a
temporary Federal Program of shared public and private compensation for insured
commercial property and casualty losses resulting from acts of terrorism. We need
your help to make this Program work, to make terrorism risk insurance available to
all property owners at reasonable rates.
Key Features of TRIA
TRIA effectively places the Federal government temporarily in the terrorism risk
reinsurance business as the Program will sunset on December 31,2005. The
Federal reinsurance backstop for terrorism risk insurance established under TRIA is
based on the concept of an insurance company deductible and excess loss sharing
with Federal government. An insurance company must have suffered insured
losses from acts of terrorism equal to its deductible before a claim with the Treasury
can be filed. Once an insurance company has met its deductible, the Treasury will
cover 90 percent of the losses above an insurance company's deductible.
Requiring insurance companies to retain a portion of terrorism risk - to "have skin in
the game" - is important for maintaining underwriting discipline and allocating risk
appropriately.
An insurance company's deductible will also increase throughout the life of the
Program. More specifically, in Program Year 1 (i.e., calendar year 2003) an
insurance company's deductible would be equal to 7 percent of Its direct earned
premiums for commercial property and casualty insurance in calendar year 2002.
The percentage of direct earned premiums used to calculate an insurance
company's deductible will rise to 10 percent in the second year of the Program, and
http://www.treas.~ov/press/releases/kd3810.htm
113112003
KD-381O: Remam by Ttre Hmmrable Peter R. Fisher before the Worldwide Conventions and Business...
Page 2 of 5
to 15 per~ent in the last year of the Program. This increase in an insurance
company s deductible over the life of the Program is designed to phase out Federal
government Involvement and allow for a build-up of private sector capacity to insure
against terrorism risk
Another key aspect of TRIA is the authority for the Treasury to recoup Federal
payments under the Act via policyholder surcharges. There are both mandatory
and discretionary aspects of the Treasury's recoupment authority. The mandatory
recoupment provIsions are based on the concept of an "insurance marketplace
aggregate retention" amount, which sets forth the amount of losses the insurance
Industry must absor,? in any given year. The maximum "insurance marketplace
aggregate retention Increases In each year of the Program, going from $10 billion
In the first year of the Program to $15 billion in the final year of the Program. The
Treasury also has the discretion to seek further recoupment based on consideration
of speCifiC factors described in TRIA. The maximum amount of any potential
policyholder surcharge that can be imposed is 3 percent per year.
Other key provisions of TRIA:
• Limit the definition of "act of terrorism" to include only acts of terrorism that are
related to foreign sources;
• Requ!re ~andatory participation in the Program for a defined group of insurers;
• ReqUire Insurers to "make available" coverage for acts of terrorism on terms and
~onditions that do not differ materially from the terms, amounts, and other coverage
limitations applicable to losses arising from other events;
• Require as a condition for Federal payments that insurers make certain
disclosures regarding the Program to their policyholders;
• Limit the Program to commercial property and casualty insurance; and
• Provide for specific procedures (e.g., claims consolidation) that are designed to
manage litigation arising from or relating to acts of terrorism.
Implementation Goals
The Treasury has been guided by a number of goals as we have moved forward
with implementing the Program. First, we have strived to implement TRIA in a
manner that is fair and easily understood by all parties. In that regard we have tried
to develop an approach that treats comparably all insurers that are required to
participate in the Program. We have also tried to set forth a structure that provides
the necessary information to policyholders in a useful and efficient manner.
Second, we have relied as much as possible on the state insurance regulatory
structure. Insurance is regulated by the states pursuant to the McCarran-Ferguson
Act and, with the exception of certain programs, there is no Federal insurance
regulatory authority as is the case with other financial institutions. We have been
working closely with the National Association of Insurance Commissioners (NAIC)
in implementing TRIA, and as part of this effort the NAIC has established a special
task force to assist us.
Third, we have sought to allow insurers to participate in the Program as part of their
normal course of business. While TRIA requires insurers to meet certain
requirements as part of participating in the Program - for example providing
disclosures to policyholders and making available terrorism insurance coverage we have tried to stress that insurers should incorporate these requirements into
their normal business operations as much as possible. We have tried to strike what
we believe IS the appropriate balance between implementing TRIA's mandated
requirements on insurance companies in the most efficient way, while at the same
time providing policyholders with the necessary information.
Finally, an overarching goal of TRIA is the need for insurers to develop aggressively
their own resources and mechanisms for terrorism risk coverage when the Program
expires. We will keep that goal especially in mind as we move forward with the
implementation process and the monitoring of the Program's effectiveness.
Implementation Process
http://www.treas.20v/presslreleaseslkd3810.htm
113112003
KD-3810: R.ematks by TIle Honorable Peter R. Fisher before the Worldwide Conventions and Business ...
Page 3 of 5
Interim Guidance
Soon after TRIA was signed into law, the Treasury received numerous
implementation questions from individuals, insurance companies, state regulators,
and various trade groups. In deciding how to address these questions, we
Prioritized our efforts by focusing on the questions that were most common and
most basic to the immediate implementation of the Program. In making these
decIsions we also worked closely with the NAIC.
To assist the insurance industry in complying with TRIA, the Treasury has issued
three Interim GUidance notices. Interim Guidance provides the Treasury the ability
to r~spond promptly to Implementation difficulties and to prevent confusion prior to
the Issuance of formal regulations.
On December 3, we issued our first Interim Guidance, which addressed: first,
disclosures to policyholders under TRIA sections 103(b)(2) and 105(c), and how
Insurers could be deemed to be in compliance; second, how the "make available"
requirement would be interpreted and how insurers could comply; and third, what
lines of insurance are covered by TRIA, and how they can be identified through
current NAIC reporting requirements.
On December 18, we issued our second Interim Guidance, which addressed: first,
what entities must participate in the Program, outlining TRIA's requirements for
such entities, and how their affiliates will be treated under the Program; second, the
scope of geographic coverage under the Program; third, the various categories of
entities that meet TRIA's requirements to participate in the Program and how they
may estimate their deductible under the Program; and fourth, additional guidance
on complying with disclosure requirements.
On January 22, we issued our third Interim Guidance, which addressed: first, the
timing and method of satisfying the required disclosures; second, further
clarification on how entities are to certify compliance with the disclosure
requirements; and third, questions concerning non-U.S. insurer participation in the
Program.
Interim Guidance issued by the Treasury can be used by insurers in complying with
the requirements of TRIA prior to the issuance of regulations, and such guidance
remains in effect until superceded by regulations or subsequent notice.
Regulations
At the same time that we have been working on Interim Guidance, we also have
been hard at work drafting regulations. As part of that process, the Treasury will be
turning previously issued Interim Guidance into regulations and addressing new
issues associated with the implementation of TRIA. Insurers and other interested
parties will have an opportunity to submit formal comments on these regulations.
We plan for the first regulation issued by the Treasury to set forth the structure of
TRIA and clarify definitions used in the Act. Many of these definitions provide the
key parameters for participation under the Program, such as the. definition of
.
insurer, insured loss, and property and casualty Insurance. Again, comments Will
be requested on these and other issues.
The regulations that follow will address other key issues of TRIA:
• Procedures for claims processing (Sections 103(b) and 104), including Treasury's
role in the approval of settlements as directed by President Bush.
.
• The disclosure and make available requirements (Sections 103(b), Section 103(c),
and Section 105).
• Participation of state residual insurance market entities and state workers'
compensation funds in the Program (Section 103(d)).
.' .
• Consideration of how self-insured arrangements and other captives fit Into the
Program (Section 103(f)).
nttp:llwww.treas.gov/press/releases/kd3810.htm
113112003
KD-3810: RemarK'S by Tl'le tlonorable Peter R. Fisher before the Worldwide Conventions and Business ...
Page 4 of 5
• The development of audit, investigative, and enforcement procedures (Section
104)
• The process for implementing policy surcharges and recoupment (Section 103
(e)).
The Treasury has addressed a fair portion of the disclosure and make available
requirements of TRIA through Interim Guidance, which will form the basis for
regulations on these iss.ues. To the extent necessary, the Treasury will also
proVide further clarification on these issues in regulations.
The Treasury has been working hard with the NAIC to address special issues
associated with state residual insurance market entities and state workers'
compensation funds. In the Treasury's second Interim Guidance we provided an
Initial list of what entities were covered under this category of insurer in TRIA. As
part of regulations on this issue, the Treasury will be further refining that list and
addressing how these entities should calculate their deductibles and how their
special arrangements with servicing carriers should be treated.
The Treasury has also been considering the very difficult issue of how self
Insurance arrangements and other captives might be included in the Program. As
part of this effort the Treasury is looking closely at the purpose of TRIA and if such
entities are included in the Program how they could be treated comparably.
Another very important issue that the Treasury has been considering is the
development of claims processing procedures and the necessary infrastructure to
process claims. In that regard, the Treasury, acting in its capacity under the
Program as a reinsurer, will be seeking to rely on best practices of other reinsurers
In the area of claims processing. In addition to the general procedures for
processing claims, those best practices would also include methods for auditing
claims, and an issue that is very important to President Bush, the approval of
settlements involving payments for insured losses under the Program.
Finally, the Treasury will be considering the method and procedures for
implementing any potential surcharges under TRIA. The Treasury will again look to
best practices from the insurance industry and regulatory community as we develop
policies and procedures in this area.
Studies
TRIA requires the Treasury to prepare, on an expedited basis, a study of the impact
of terrorism risk on group life insurers and on the availability of group life insurance
coverage and then to determine, in consultation with NAIC, whether to apply the
Program to group life insurers. A request for public comments to assist this study
was published In the Federal Register on December 11,2002. The Treasury has
been evaluating comments received as part of that request, and we are working
toward completion of that study.
Evaluating the Impact of TRIA
In addition to the Treasury's role in directly implementing TRIA, we also have a
responsibility to evaluate how well TRIA is working in terms of improving the
availability of terrorism insurance coverage.
A key provision of TRIA in this regard is that insurers ':make available" coverage for
acts of terrorism at terms and conditions that do not differ materially from other
insurance coverage. The Treasury will be monitoring the implementation of the
make available requirement closely as it is an especially important aspect of
increasing the options and choices policyholders have for terrorism risk Insurance
coverage.
However, for TRIA to have the intended impact of improving the prospects for
economic activity, insurance coverage for terrorism risk must not onlybe made
available, but it also should be priced in a manner that is consistent with the
underlying risk. The Federal role in absorbing catastrophic losses from acts of
terrorism should make the price of insurance coverage more affordable for all
bttp:llwww.treas.gov/press/re leases/kd3810.htm
113112003
KD-3810:
Rem.am by The Honorable Peter R. Fisher before the Worldwide Conventions and Business ... Page 5 of 5
property owners. Some of the initial reports we have received indicate that prices
have been coming down, and terrorism risk insurance is once again being provided
within standard Insurance policies as opposed to a stand alone basis. We hope to
hear more reports of Improved pricing and availability of terrorism risk insurance in
the coming months.
TRIA also requires the Treasury to "assess the effectiveness of the Program and
the likely capacity of the property and casualty insurance industry to offer insurance
for terrorism risk after termination of the Program, and the availability and
affordability of such insurance for various policyholders, including railroads, trucking
and public transit" The Treasury takes this study requirement very seriously as it
will not only provide a vehicle for evaluating TRIA, but also will provide a sense of
what the state of the terrorism risk insurance market is on a going forward basis.
The Treasury has already begun work on that study, and we hope to establish a
baseline from which to monitor developments in the industry and evaluate the
Program on an ongoing basis over its life.
Conclusion
Presldel)t Bush ll1ade enacting TRIA a very high priority, with the ultimate goal of
Improving the prospects for economic activity in our Nation. For the benefits of
TRIA to materialize, the Treasury, state insurance regulators, the insurance
industry, and other interested parties must work together in implementing the
Program.
While implementing TRIA has proved challenging for the Treasury and the
insurance industry, we have worked quickly in dealing with the immediate effective
date and other time sensitive requirements of TRIA. The Treasury will continue to
place a high prlonty on completing the implementation of TRIA and evaluating how
well TRIA is working. We also expect the insurance industry to work hard to
implement TRIA in a manner consistent with the Act and President Bush's objective
of improving the prospects for economic activity in our Nation. We look forward to
working with the NAIC, state insurance regulators, the insurance industry, and other
interested parties as we move forward.
bttp:l/www.treas.fwv/pressJreJe.aseslkd3810.htm
1/3112003
KD-38 11: "Letter from
~ole to
President Bush"
Page 1 of 1
!-'HLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 29, 2003
KD-3811
"Letter from Gurule to President Bush"
Dear President Bush,
After thoughtful and deliberate consideration, Julia and I have decided to return to
our home In Niles, Michigan, where I will rejoin the law faculty at Notre Dame Law
School, as well as pursue some opportunities in the private sector. I therefore will
be resigning my position as Under Secretary for the Treasury Department's Office
of Enforcement effective February 10, 2003.
I am extremely grateful for the opportunity to serve your Administration, the
Department of the Treasury, and the American people during the difficult and
challenging times following the terrorist attacks of September 11, 2001.
Responding to your strong leadership, I have worked as Under Secretary
(Enforcement) to redirect and coordinate the Treasury Department's extensive
financial investigatory resources and expertise to starve the terrorists of funds. To
that end, the Office of Enforcement, in close coordination with other federal
agencies and the international community, has developed an effective campaign to
identify, disrupt and dismantle terrorist financial networks around the world. As part
of this campaign, the Office of Enforcement has played a prominent role in
implementing Presidential Executive Order 13224, executed under the International
Emergency Economic Powers Act (IEEPA), which has resulted in the deSignation of
257 Specially DeSignated Global Terrorists, and the freezing of over $125 million in
terrorist-related funds. Furthermore, my office has worked tirelessly to implement
the financial regulatory provisions of the U.S.A. PATRIOT Act, necessary to prevent
terrorists from transferring money through banks and other financial institutions.
While I leave my position at the Treasury Department with a sense of
accomplishment and pride, I realize that much work remains in the war against
terrorism. However, I am confident that you, Mr. President, will continue to provide
our nation with outstanding leadership to prevail during these perilous times.
Once again, thank you for the enormous opportunity to serve our country. It has
been a distinct honor and privilege to serve you.
Sincerely,
Jimmy Gurule
Under Secretary (Enforcement)
Ittp:llwww.treas.goy/press/releas e s/kd3811.htm
1/31/2003
KD-3812: Treasury under ~ecrecary Jimmy Gurule to Resign
Page 1 of 1
.
f-'HLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 29. 2003
KD-3812
Treasury Under Secretary Jimmy Gurule to Resign
United States Treasury Under Secretary for Enforcement Jimmy Gurule today
announced hiS decision to resign from the Treasury Department. Mr. Gurule will
teach law at the University of Notre Dame law school, as well as explore additional
Interests In the private sector. His resignation will become effective on February 10
2003.
'
In his letter to President Bush, Mr. Gurule wrote: "I am extremely grateful for the
opportunity to serve your administration, the Department of the Treasury, and the
American people during the difficult and challenging times following the terrorist
attacks of September 11, 2001."
At Treasury, Mr. Gurule was a key leader in the implementation of President Bush's
financial war on terrorism, working to find, disrupt and dismantle terrorist financial
networks around the world. Under Mr. Gurule's leadership, the Treasury Office of
Enforcement designated 257 global terrorists groups and individuals, and blocked
over $125 million in terrorist funds, pursuant to Presidential Executive Order
13224 Treasury also implemented the financial regulatory provisions of the U.S.A.
PATRIOT Act, preventing terrorists from transferring money through banks and
other financial institutions.
"Jimmy Gurule is one of the most distinguished law enforcement officials and law
professors in the country. His talents and leadership proved invaluable for the
Treasury Department and the United States government as he helped shape and
lead our campaign against terrorism. It's been a great privilege to work with him
and this Administration is grateful for the contributions he has made to the nation.
We wish him the best for what I am certain will be a fruitful future," Acting Treasury
Secretary Kenneth Dam said.
The Treasury Under Secretary for Enforcement provides oversight, policy guidance,
and support to the Treasury law enforcement components, including the Bureau of
Alcohol, Tobacco and Firearms; the U.S. Customs Service; the Federal Law
Enforcement Training Center; the Financial Crimes Enforcement Network; the U.S.
Secret Service; the Executive Office for Asset Forfeiture; and the Office of Foreign
Assets Control. The Under Secretary also provides enforcement policy guidance to
the Internal Revenue Service's Criminal Investigation Division.
Mr. Gurule's letter concludes: "While I leave my position at the Treasury
Department with a sense of accomplishment and pride, I realize that much work
remains in the war against terrorism. However, I am confident that you, Mr.
.
President, will continue to provide our nation with outstanding leadership to prevail
during these perilous times ... It has been a distinct honor and privilege to serve
you
Ihttp://www.treas.goy/press/releases/kd3812.htm
1131/2003
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
January 29, 2003
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 2-YEAR NOTES
Interest Rate:
Series:
CUSIP No:
1 5/8%
G-2005
912828AS9
Issue Date:
Dated Date:
Maturity Date:
High Yield:
1.710%
Price:
January 31, 2003
January 31, 2003
January 31, 2005
99.834
All noncompetitive and successful competitive bidders were awarded
securities at the high yield. Tenders at the high yield were
allotted 65.21%. All tenders at lower yields were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
$
Competitive
Noncompetitive
FIMA (noncompetitive)
39,034,450
881,749
$
o
°
27,000,074 1/
39,916,199
SUBTOTAL
6,834,233
6,834,233
Federal Reserve
$
TOTAL
46,750,432
26,118,325
881,749
$
33,834,307
Median yield
1.670%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate. Low yield
1.600%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 39,916,199 / 27,000,074 = 1.48
1/ Awards to TREASURY DIRECT
=
$701,713,000
http://www .publicdebt.treas.gov
KD-3813
1KD-3~ 14:
Treasury Department Statement Regarding the Designation of Lashkar i Jhangvi
Page 1 of 1
f->HLSS HOOM
FROM THE OFFICE OF PUBLIC AFFAIRS
January 30, 2003
KD-3814
Treasury Department Statement Regarding the Designation of Lashkar i
Jhangvi
"Lashkar i Jhangvi" means 'army of Jhang,' a region in Pakistan. Lashkar i Jhangvi
(LJ) is an extremist organization that emerged in 1997. While LJ initially directed
most of its attacks against the Pakistani Shia Muslim community, it also claimed
responsibility for the 1997 killing of four U.S. oil workers in Karachi. Lashkar i
Jhangvi also attempted to assassinate then-Pakistani Prime Minister Nawaz Sharif
in 1999.
LJ is responsible for the January 2002 kidnapping and killing of U.S. journalist
Daniel Pearl. LJ is also responsible for a March 2002 bus bombing that killed 15
people, including 11 French technicians.
Reports have attributed the March 2002 Islamabad Protestant church bombing, in
which two U.S. citizens were killed, to LJ. In July 2002, Pakistani policy arrested
four Lashkar i Jhangvi members for the church attack. The LJ members confessed
to the killings and said the attack was in retaliation for the U.S. attack on
Afghanistan.
LJ also has ties to al Qa'ida and the Taliban. In addition to receiving sanctuary
from the Taliban in Afghanistan for their activity in Pakistan, LJ members also
fought alongside Taliban fighters. Pakistani government investigations in 2002
revealed that al Qa'ida has been involved with training of LJ, and that LJ fighters
also fought alongside the Taliban against the Northern Alliance. The Pakistan
Interior Minister, speaking of LJ members, stated that "They have been sleeping
and eating together, receiving training together, and fighting against the Northern
Alliance together in Afghanistan"
Including today's action there are 258 individuals, entities and organizations .on the
terrorist financing executive order. $124.5 million has been blocked worldWide, of
that amount, $36.2 million has been blocked in the United States.
1/31/200'1.
DEPA[~Tl\1ENT
OF
TREASURY
THE
TREASURY
NEWS
Ol'FIO: OF rrRl.JC "f""'ItS -1510 P.:NNS\'I.\',\II'IA '\\'F-I'llf-, N.\\'. - WASffISC;TON. D.C.- 20220 .(l011 622.2960
BMBARGOBD UNTIL 11:00 A.M.
January 30, 2003
CONTACT:
Office of Financing
202/691-3550
TREASURY OPFBRS 13-WBBK AND 26-WBEK BILLS
The Treasury will auction 13-week and 26-week Treasury bills totaling $36,000
~illion to refund an estimated $32,801 million of publicly held 13-week and 26-week
·Treasury bills maturing Pebruary 6, 2003, and to raise new cash of approximately
$3,199 million. Also maturing is an estimated $13,000 million of publicly held 4-week
Treasury bills, the disposition of which will be announced February 3, 2003.
The Federal Reserve Syst~ holds $14,334 million of the Treasury bills maturing
on Pebruary 6, 2003, in the System Open Market Account (SOMA). This amount may be
refunded at the highest discount rate of accepted competitive tenders either in these
auctions or the 4-week Treasury bill auction to be held Pebruary 4, 2003. Amounts
awarded to SOMA will be in addition to the offering amount.
Up to $1,000 million in noncompetitive bids from Foreign and International
Monetary Authority (FIMA) accounts bidding through the Federal Reserve Bank of New
York will be included within the offering amount of each auction. These
noncompetitive bids will have a limit of $100 million per account and will be accepted
in the order of smallest to largest, up to the aggregate award limit of $1,000
million.
TreasuryDirect customers have requested that we reinvest their maturing holdings
of approximately $1,194 million into the 13-week bill and $713 million into the 26week bill.
The allocation percentage applied to bids awarded at the highest discount rate
will be rounded up to the next hundredth of a whole percentage point, e.g., 17.13\.
This offering of Treasury securities is governed by the terms and conditions set
forth in the Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about each of the new securities are given in the attached offering
highlights.
000
Attacbment
KD-3815
HIGHLIGHTS OF TREASURY OFFERINGS OF BILLS
TO BE ISSUED FEBRUARY 6, 2003
January 30, 2003
Offering Amount . . . . . . . . . . . . . . . . . . . . . • . . . . . .
Maximum Award (35\ of Offering Amount) ..•..
Maximum Recognized Bid at a Single Rate ...•
NLP Reporting Threshold ..•....•.•..•.•.•.•.
NLP Exclusion Amount •.•.......•..........•.
$19,000
$ 6,650
$ 6,650
$ 6,650
$ 6,000
Description of Offering:
Term and type of security •..•....•..•.•.•••
CUSIP number ....•.......••.••.•.••.•.....•.
Auction date ...•...........•.•••....•......
Issue date •...•..•..........•....•..•.•.•..
Maturity date .............•...•....•.....•.
Original issue date .•......•....•.......•..
Currently outstanding ...••..........•...•..
Minimum bid amount and multiples •..•.......
91-day bill
912795 ML 2
February 3, 2003
February 6, 2003
May 8, 2003
November 7, 2002
$23,161 milli6n
$1,000
million
million
million
million
million
$17,000
$ 5,950
$ 5,950
$ 5,950
None
million
million
million
million
182 -day bill
912795 NG 2
February 3, 2003
February 6, 2003
August 7, 2003
February 6, 2003
$1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids: Accepted in full up to $1 million at the highest discount rate of accepted competitive bids.
Foreign and International Monetary Authority (FIMA) bids: Noncompetitive bids submitted through the Federal Reserve
Banks as agents for FIMA accounts. Accepted in order of size from smallest to largest with no more than $100
million awarded per account. The total noncompetitive amount awarded to Federal Reserve Banks as agents for FIMA
accounts will not exceed $1,000 million. A single bid that would cause the limit to be exceeded will
be partially accepted in the amount that brings the aggregate award total to the $1,000 million limit. However,
if there are two or more bids of equal amounts that would cause the limit to be exceeded, each will be prorated
to avoid exceeding the limit.
Competitive bids:
(1) Must be expressed as a discount rate with three decimals in increments of .005\, e.g., 7.100\, 7.105\.
(2) Net long position (NLP) for each bidder must be reported when the sum of the total bid amount, at all
discount rates, and the net long position equals or exceeds the NLP reporting threshold stated above.
(3) Net long position must be determined as of one half-hour prior to the closing time for receipt of
competitive tenders.
Receipt of Tenders:
Noncompetitive tenders ••••• Prior to 12:00 noon eastern standard time on auction day
Competitive tenders .•..•••• Prior to 1:00 p.m. eastern standard time on auction day
Payment Terms: By charge to a funds account at a Federal Reserve Bank on issue date, or payment of full par amount
with tender.
TreasuryDirect customers can use the Pay Direct feature, which authorizes a charge to their account of
record at their financial institution on issue date.
KD-3~16: President's Budget Proposes Bold Tax-Free Savings and Retirement Security Opportunities
·U,-,-,
-
-
,~
!
..... -.-
Page 1 of7
.,~
~
.-,
FROM THE OFFICE OF PUBLIC AFFAIRS
January 31, 2003
KD-3816
President's Budget Proposes Bold Tax-Free Savings and Retirement Security
Opportunities for All Americans
"Americans can help secure their own future by saving, Government must support
policies that promote and protect saving. And saving is the path to independence
for Americans in all phases of life, and we must encourage more Americans to take
that path," -President George W, Bush
Today the Treasury Department announced that the President's Budget will include
two bold new expanded savings proposals covering all Americans.
The first creates two new consolidated savings accounts: Lifetime Savings
Accounts (LSAs) and Retirement Savings Accounts, (RSAs) that will allow
everyone to contribute -- with no limitations based on age or income status.
Individuals will be able to convert existing accounts into these new accounts in
order to consolidate and simplify their savings.
"These bold new accounts will give more hardworking Americans the chance to
save so they can enrich their lives and strengthen their retirement security," stated
Treasury Assistant Secretary for Tax Policy Pam Olson. "They make saving simple
for everyone and for every purpose, No longer will individuals have to worry about
the confusing alphabet soup of six different savings accounts, No longer will people
have to worry about the endless maze of confusing rules. The two simple accounts
will have one powerful goal -- making saving for everyday life and retirement
security easier and more attractive."
The second proposal creates Employer Retirement Savings Accounts (ERSAs)
to promote and vastly simplify employer sponsored retirement plans by
consolidating 401(k), SIMPLE 401(k), 403(b), and 457 employer-based defined
contribution accounts into a single type of plan that can be more easily established
by any employer,
Lifetime Savings Accounts
Lifetime Savings Accounts (LSAs) can be used for any type of saving. LSAs will
help millions of Americans save in one tax favored account for any purpose,
,
including their children's education, a new home, healthcare needs, or to start their
own business. The new LSA win allow an individual, regardless of age or Income,
to contribute $7,500 a year and make penalty free withdrawals at any time -- with
no holding period, Like current law Roth IRAs, contributions will not be deductible
but earnings will accumulate tax-free, and distributions will be tax free as
well. Unlike current education accounts and MSAs, with LSAs, taxpa~ers Will not
need to carefully anticipate future qualified expenses and allocate savings among
tax-preferred accounts, Taxpayers will not be required to document qualified
expenses, financial institutions will not need to explain complicated rules to
participants, and the government will not need to verify the qualifYing expenses.
Prior to January 1, 2004, individuals may convert balances in an Archer Medical
Savings Account (MSA). Coverdell Education Savings Account, and Qualified State
Tuition Plan to LSAs. Balances in these accounts may not be converted to LSAs
after 2003.
nttp:llwww.treas.gov/press/releases/kd3816.htm
1/31/2003
KD-3816: President's Budget Proposes Bold Tax-Free Savings and Retirement Security Opportunities
Page 2 of7
The $7,500 contribution limit will be indexed for inflation in future years.
LSA's are good for average Americans because:
• They can simply save more tax free.
• More low and moderate-income taxpayers will participate. Many do not
participate now because they are more likely to face a penalty if they need the
funds. Knowing they can access the money at anytime for any purpose will
encourage them to set money aside and allow them to receive tax-free earnings
from their first dollar of savings ..
• It takes away the hassle factor. The combination of universal eligibility and
unrestricted tax-free withdrawals greatly simplifies the whole process, making it
more likely that average taxpayers will participate, especially inexperienced savers.
Many low- and moderate-income taxpayers will conveniently be able to put all their
finanCial assets In one place; this will greatly simplify their taxes because they will
no longer receive taxable investment earnings.
Retirement Savings Accounts
Retirement Savings Accounts (RSAs) can be used only for retirement saving. The
new RSA will improve and simplify savings opportunities for all Americans by
consolidating traditional IRAs, nondeductible IRAs and Roth IRAs, each of which
has a confusing and different set of rules regarding eligibility and tax treatment, into
one streamlined type of account with rules similar to current law Roth IRAs. Up to
$7,500 (in addition to amounts contributed to an LSA) could be contributed to an
RSA. Like current law Roth IRAs, contributions will not be deductible but earnings
will accumulate tax free and distributions after age 58 (or death or disability)
will be tax free.
Existing Roth IRAs will be unaffected (except that they will be renamed RSAs).
Existing traditional and nondeductible IRAs may be converted into RSAs; those not
converted to RSAs could not accept any new contributions (other than rollover
contributions); no one would be required to convert.
The $7,500 contribution limit will be indexed for inflation in future years.
Complex eligibility restrictions for IRAs under current law confuse taxpayers and
cause some to avoid contributing to IRAs, even if they are eligible to contribute.
IRA Income limits were imposed in 1986 greatly limiting eligibility. Studies have
shown that participation after 1986 fell among lower-income taxpayers, even
among those still eligible to make deductible contributions.
RSAs are good for average Americans because:
• More Americans will save for retirement. Repeal of the income limits will eliminate
the confusion and complexity associated with determining eligibility and will
encourage participation.
• It makes saving for retirement simple and easy. Individuals will not .be required to
make minimum distributions from the accounts dUring their lifetime, SimplifYing
financial planning in retirement.
• More will be set aside for retirement. Current IRAs allow for withdrawals for many
non-retirement purposes. Each withdrawal from an IRA potentially reduces
retirement funds Having a separate retirement account Will help individuals plan
for both non-retirement and retirement needs.
Employer Retirement Savings Accounts
http://www.treas.gov/press/releases/kd3816.htm
1/31/2003
KD-3~16: President's Budget Proposes Bold Tax-Free Savings and Retirement Security Opportunities
Page 3 of7
There are currently multiple tax-preferred, employer-based retirement savings
accounts with similar goals but different rules regulating eligibility, contribution
limits, tax treatment, and withdrawal restrictions. The Budget proposal will
consolidate 401 (k), thrift, 403(b), and governmental 457 plans as well as SARSEPs
and SIMPLE IRAs into a streamlined and simpler account, Employer Retirement
Savings Accounts (ERSAs), which can be sponsored by any employer.
Assistant Secretary Olson stated, "The overwhelming complexity of current rules
imposes substantial burdens on employers and workers. Because employer
sponsorship of a retirement plan is VOluntary, this complexity discourages many
employers from offering any plan at all. This is especially true of small employers
who together employ about 4 out of every 10 American workers. It's one important
reason why only 50% of working Americans have any pension plan at all. I'm
confident that simpler rules will encourage employers to create new plans for their
employees because creating a qualified plan will be much easier."
ERSAs will follow the existing rules for 401 (k) plans, but these rules will be greatly
simplified For example, both the definition of compensation and the minimum
coverage requirement Will be simplified and the top heavy rules will be repealed.
Nondiscrimination requirements for ERSA contributions will be satisfied by a single
test and many firms may choose to adopt a new designed-based safe harbor to
avoid this test altogether. The proposal simplifies qualification requirements while
maintaining their intent of providing broad-based coverage of employees. By
reducing unnecessary complexity, the proposal significantly reduces employer
compliance costs.
Complexity and the associated compliance costs are often cited as a reason the
coverage rate under an employer retirement plan has not grown above about 50
percent overall, and has remained under 25 percent among employees of small
firms. Firms that are currently not offering retirement plans because of compliance
costs will be more likely to offer such plans under the proposal, increasing coverage
and partiCipation.
ERSAs are good for workers because
• Coverage and partiCipation will increase because firms that are not currently
offering retirement plans because of the complexity and compliance costs will be
more likely to offer such plans under the proposal.
• More small businesses will be able to cover more workers. The reduction in red
tape will remove a barrier that discourages small business owners from offering this
benefit to their employees. Small businesses employ about two-fifths of American
workers, but the pension coverage rate has consistently remained under 25 percent
among employees of small firms.
• Employees will benefit because firms currently offering employer plans will have
reduced compliance costs.
Frequently Asked Questions Regarding the LSAIRSA and ERSA Proposals
LSA/RSA Provisions
I have been contributing to IRAs for years. Willi have to stop?
After 2003, you will no longer be able to contribute to an IRA. However, your ability
to contribute to both an LSA and an RSA will give you much more fleXibility to save
for your future. You will be able to save up to $7,500 (indexed In the future for
inflation) in an LSA plus up to $7,500 (indexed in the future for inflation) In an RSA
for a total of $15,000 in tax-preferred savings. In addition, you will have much more
flexibility to take distributions for what you deem appropriate when you deem it
appropriate.
Will there be any income limitations on making contributions to LSAs or
http://www.treas.gov/press/releases/kd3816.htm
1/31/2003
KD·3~1(): PresIdent's Budget Proposes Bold Tax-Free Savings and Retirement Security Opportunities
Page 4 of7
RSAs?
There are no income limitations on making contributions to LSAs. You can make a
contribution
to an LSA even if you have no wage income. Thus, you can make contributions on
behalf of your children or other family members, in order to help them save for
home ownership, health emergencies, education, retirement, or other future costs.
While there are no maximum income limitations on making contributions to RSAs,
you may not contribute more than your compensation (wages) income to an RSA.
What tax benefits do I receive if contributions are not deductible?
While all contributions to LSAs and RSAs will be nondeductible, all distributions
from LSAs and RSAs (except for RSA distributions prior to age 58, death or
disability) will be excludible from taxable income. As a result, all investment
earnings can be distributed tax free. This is the same tax treatment as current law
Roth-IRAs
Which tax treatment would be better for me: an old-style deductible IRA or a
new Roth-style RSA?
For the vast majority of individuals it doesn't make a difference: After-tax income in
retirement is the same whether contributions are tax free and distributions are taxed
or contributions are taxed and distributions are tax free. The only exceptions to this
rule are individuals who change tax brackets after they retire. If an individual's tax
rate declines in retirement, deductible contributions are better; if an individual's tax
rate increases in retirement. Roth treatment is better.
Will I continue to be able to contribute to Archer medical savings accounts,
Coverdell education savings accounts and qualified state tuition programs?
Yes. The LSAfRSA proposal will not affect your ability to contribute to MSAs,
ESAs, or QSTPs. Many taxpayers may prefer the increased flexibility of the new
LSAs as their tax-preferred savings vehicle.
Can I convert my existing IRAs, MSAs, ESAs, and QSTPs to an LSA or RSA?
You may convert an MSA, ESA, or QSTP to an LSA anytime before January 1,
2004. In the case of a conversion of a QSTP or ESA, no amount would be taxable
in the year of the conversion while a conversion of an MSA to an LSA will result in
taxation of the total amount converted in the year of the conversion.
You may convert a traditional IRA to an RSA at any time. The amount converted
will be taxable except to the extent that you have basis in your IRA. If you convert
prior to January 1, 2004, you will be able to spread the tax on the conversion over a
four-year period. For conversions on or after January 1,2004, the total taxable
amount will be included in your gross income for the year of the conversion.
Will the Saver's Credit still be available after the enactment of the LSA/RSA
proposal?
Yes. The Saver's Credit will be available for elective deferrals and LSAfRSA
contributions made prior to 2007.
What will happen to the new deemed IRA provision? Will employer plans still
be able to offer them?
Deemed IRAs will become deemed RSAs and will be subject to the rules applicable
to RSAs.
Who will be able to become trustees for the LSAs and RSAs?
http://www.treas.gov/press/releases/kd3816.htm
1/3112003
KD-3~lb: PresIdent's Budget Proposes Bold Tax-Free Savings and Retirement Security Opportunities
Page 5 of7
The rules that now apply to IRAs regarding who can be a trustee will apply to LSAs
and RSAs. Thus, the trustee will have to be a bank or another person who
demonstrates to the IRS that the manner in which they will administer the trust will
be consistent with the rules applicable to LSAs and IRAs.
Will LSAs and RSAs be permitted to be held in the form of an annuity?
Yes LSAs and RSAs may be held in the form of a nontransferable annuity contract
Issued by an Insurance company that meets the rules that currently apply to
Individual retirement annuities.
Can I make LSA or RSA contributions on behalf of other persons, such as my
children or spouse?
Yes, you may make LSA or RSA contributions on behalf of any other individual.
However, total contributions made on behalf of an individual may not exceed
$7,500 for LSAs and $7,500 (or compensation income, if less) for RSAs. In the
case of a married couple filing jointly, RSA contributions up to $7,500 can be made
for each spouse (including, for example, a homemaker who does not work outside
the home) if the combined compensation of both spouses is at least equal to the
contributed amount.
Will catch-up contributions be available for LSAs or RSAs?
Catch-up contributions will not be available for LSAs or RSAs, but the limits
applicable to all individuals in LSAs and RSAs will be significantly greater than the
existing IRA limits, even with catch-up.
ERSA Provision
Which types of employer-sponsored plans would be replaced by the new
ERSA?
The ERSA would replace all types of funded plans with employee contributions.
Thus, ERSAs would replace 401 (k) plans, SIMPLE 401 (k) plans, 403(b) plans,
governmental 457 plans, salary reductions simplified employee pensions
(SARSEPs), and SIMPLE IRAs. The ERSA would not replace nongovernmental
457 plans.
Are there any types of employers who would not be able to sponsor an
ERSA?
No. Any employer would be able to sponsor an ERSA.
Will the ERSA proposal have any effect on the amount that an employee will
be able to defer under existing law?
The amount that an employee will be able to defer under an ERSA will be $12,000
(increasing to $15,000 in 2006) plus, once the employee reaches age 50, a catchup contribution of $2,000 (increasing to $5,000 In 2006). ThiS IS the same that an
employee may defer under a regular 401(k) plan, a 403(b) plan, a SARSEP or a
457 plan, but it is greater than the amount permitted under a SIMPLE 401 (k) or
SIMPLE IRA.
Will after-tax contributions be permitted under an ERSA?
Yes After tax contributions will be permitted to an ERSA, and accounts attributable
to such contributions made after 2003 will be treated much like the new RSAs.
Distributions from such accounts will generally be exempt.fror:n taxation and the
accounts will not be subject to th~ required minimum distribution rules until after the
death of the participant.
http://www.treas.gov/press/releases/kd3816.htm
1/31/2003
KD-3~16: President's Budget Proposes Bold Tax-Free Savings and Retirement Security Opportunities
Page 6 of7
Will governme~ts with grandfathered 401 (k) plans and public schools with
403(b) plans stili be able to allow deferrals up to the maximum under a 403(b)
or 401(k) plan as well as the maximum under a 457 plan?
No. Once ERSAs are in place, all covered employees will be able to defer only the
maximum applicable to ERSAs
Will employers have to terminate their existing plans and transfer the assets
to an ERSA?
No. Beginning in 2004, all 401 (k) plans will become ERSAs. SIMPLEs, SARSEPs,
403(b) plans, and governmental 457 plans may continue in existence indefinitely,
but may not accept any future contributions after 2004.
What nondiscrimination tests will apply to ERSAs?
The same simplified nondiscriminatory coverage requirement will apply to ERSAs
(other than those covering only state and local government employees) that will
apply to all other defined contribution plans. (See Q&A below). An ERSA will
satisfy the nondiscriminatory benefit requirements if the average contribution
percentage for nonhighly compensated employees is no greater than 6% and the
average contribution percentage for highly compensated employees does not
exceed 200% of the average contribution percentage for nonhighly compensated
employees. If the average contribution percentage for nonhighly compensated
employees is greater than 6%, then the average contribution percentage for highly
compensated employees may be any amount.
Will state and local governments and charitable organizations be subject to
the nondiscriminatory benefit requirement?
ERSAs covering only employees of state and local governments will be exempt
from the nondiSCriminatory benefit reqUirement. An ERSA covering only employees
of a charitable organization will be subject to the nondiscriminatory benefit
requirement only if it allows after tax contributions. In any event, an ERSA covering
employees of a charitable organization will be subject to a universal availability
requirement regarding the ability of employees to make deferrals under the plan.
That is, all employees of the organization must be permitted to elect to make
deferrals of more than $200.
Is there a safe-harbor design under which an employer will not be required to
apply the general nondiscriminatory benefit rule described above?
Yes. A plan can satisfy the nondiscriminatory benefit rule through anyone of the
following safe harbor employer contribution designs:
. .
.
1. The employer makes a nonelective contribution on behalf of each participant In
the plan equal to 3% of the employee's compensation,
,
2 The employer makes a matching contribution equal to 50% of each employee s
deferrals (up to 6% of compensation), or
.
3. The employer makes a matching contribution that does not Increase based on
the level of an employee's deferrals and the match is equal to the amount that
would be made under a 50% match (up to 6% of compensation), such as a match
of 100% of each employee's deferrals (up to 3% of compensation).
Does the budget proposal related to ERSAs affect any other defined
contribution plans?
Yes The proposal includes the follOWing provisions that would greatly simplify the
administration of all defined contribution plans:
. .' .
1. There would be a single test to show that the plan meets the nondiScriminatIOn
rules with respect to coverage -- ratio-percentage coverage. Under thiS test, the
percentage of an employer'S nonhighly compensated employees cov~red under a
plan would have to be at least 70% of the percentage of the employer s highly
compensated employees covered under the plan. The other coverage testing
nttp:llwww.treas.gov/press/releases/kd3816.htm
1/31/2003
~-3816: President's Budget Proposes Bold Tax-Free Savings and Retirement Security Opportunities
Page 70f7
alternatives would be repealed
2. Permitted disparity and cross-testing would be prohibited for defined contribution
plans.
3. The top heavy rules would be repealed for defined contribution plans.
4 There would be a uniform defmition of compensation for all purposes for defined
contnbution plans - the amount reported on form W-2 for wage withholding, plus
the amount of ERSA deferrals.
5. A simplified definition of highly compensated employee would be adopted under
which all individuals with compensation for the prior year above the Social Security
wage base for that year would be considered to be highly compensated employees,
Does the ERSA proposal have any effect on defined contribution plans that
do not involve employee deferrals or employee after-tax contributions? In
other words, does the proposal affect pure profit sharing plans, stock bonus
plans, and money purchase pension plans?
Other than the simplifications discussed in the preceding question, the ERSA
proposal would not affect the rules applicable to employer contributions to defined
contribution plans, other than safe harbor nonelective contributions or matching
contributions
Does the ERSA proposal have 'any effect on defined benefit plans?
No, the proposal would not affect the rules applicable to defined benefit plans.
1131/2003
o
EPA R T :\1 E N T
0 F
THE
T REA SUR Y
NEWS
omCE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960
FOR IMMEDIATE RELEASE
January 31, 2003
Contact: Public Affairs
(202) 622-2960
MEDIA ADVISORY:
BACKGROUND BRIEFING ON TREASURY'S FY '04 BUDGET
Monday, February jrd, 1:00 p.m.
Acting Treasury Secretary Kenneth W. Dam and Treasury staffwill hold a briefing on
Treasury's FY '04 budget on Monday, February 3,2003 at 1:00 p.m. in room 4121 (the new
media room). This session will provide a synopsis of the President's FY '04 budget and will also
allow for a Question and Answer session. No cameras will be admitted-- this is a "pen and pad"
only briefing.
Media without Treasury or White House press credentials planning to attend should
contact Treasury's Office of Public Affairs at (202) 622-2960 with the following information:
name, social security number and date of birth. This information may also be faxed to (202) 6221999.
-30-
KD-3817
Ffn' press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
·U.S Govemmen, Prln',ng Ottlce 1998· 619.559
D EPA R T :\1 E N T
0 F
THE
T REA SUR Y
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
January 31, 2003
Contact: Public Affairs
(202) 622-2960
MEDIA ADVISORY:
DEPARTMENT OF THE TREASURY "BLUE BOOK" TECHNICAL TAX BRIEFING
Monday, February 3", 2:00p.m.
Treasury Assistant Secretary for Tax Policy Pam Olson will hold the "Blue Book" technical
background briefing on the President's tax proposals on Monday, February 3, 2003 at 2:00 p.m.
in room 4121 (the new media room). This session will provide a synopsis of the tax proposals
and will also allow for a Question and Answer session with Tax Policy staff. No cameras will be
admitted-- this is a "pen and pad" only briefing.
The "Blue Book" will be posted on the Internet Monday, February 3rd at 8:00 a.m. at
http://www.treas.gov/offices/tax-policyilibrary/bluebk03.pdf.
Media without Treasury or White House press credentials planning to attend should contact
Treasury's Office of Public Affairs at (202) 622-2960 with the following infonnation: name,
social security number and date of birth. This infonnation may also be faxed to (202) 622-1999.
KD-3818
Far press releases, speeches, public schedules and official biographies, call our 24.Jr.our fax line at (202) 622·2040
'U S Govemmenl Pnnttng OffICe 1998· 619-559
J)
E P .\ I{ T \1 E :\ T
()...
THE
T R E .\ S
r
R Y
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANlAAVENVE, N.W•• WASIUNGTON, D.C.. 2OZ20. (20Z) 6ZZ-Z960
u.s. Internadonal Reserve Position
1/31/03
The Treasury Department today re1eued U.s. reserve assetS data for the latest w~.. As indicated in this ta~le, U.S. reserve
assetS.totaled $79,198 million at the end of the latest week, compared to $79,761 million at the end of the pnor week.
(III
~ 0Iftda1
u.s. tt.erw Meets
~. Foreign Cunwncy Ran.".. ,
aIIn!!!!! M. 2003
71.1.
aalllo:2L 2003
71.711
JOTAL
r
Euro
6."7
L~
v.,
13,345
Ofwhit:h• ....,.~in". U.s.
b.T. . . . . . . . . wIth:
IJ.L OfMrCMftl _ _ MIl_
U . . . . ,......,..., In .... u.s.
b.t Of which, ..... 1oc*IId .".,.
TOTAL
2O.2S13
EIn
7.070
V.,.
TOTAL
13.353
0
11,.
....... ..........,., ............ u.s.
b:i. or which, ..... IoCIIIId in the U.S.
2.879
14.079
20,42~
C
11.582
2,881
0
0
0
0
14,26:!
(
C
c
(
IZ- .F R.IIW PoeItIon 2
22.107
22.189
j3. Spedal Omring RIghIa (SORa) 2
12,241
11.280
~. Gold Stock J
11.043
11.~
0
(
~ Other buIW AaMta
11 Includes holdings of the T-..y'I Exc:Mnge 5mbIIIzItiCIn Fant (£SF) and the FednI ReIerw's S~ ()pin Market AccDunI (SOMA).
VIIued at CUIWIt nlilJt(et exc:hInge rMII. Fcnign CIIf'I'MCY tadingllIstId _1eQJritiea reIIec:t ~ . . . . . . . dlpDlltlIWllect
carrying . . . FonIign eun.ey R••• VIIS far ....... week may be IUbject til nMIian. Foreign QIINnCy ,.IIIWI far the prior __ ......
2J The items, "2. IMF Reserve PaIiIicn· ... ~. Special [)r.mg Rights (SORa); . . baed on dIItII ~ by . . IMF 8nd . . VIIuId In daIIIr
The entries In the tIbIe above tar the ..... _ _ rwftIc:IMy nee •••• '1
1djuMmenta. induding rwvaIu8Iion, by the U.S. Trwasury to the priOr week', IMF dMa. IMF UtI far the ..... --""Y belUbjeCt tID rwwiIion. IF
. . far the prior week . . finII.
. . . at the CJIIic8I SDRIdaiar excMnge rate far . . rwporting datil.
31 ·CaIclItoc:k II valued rnon1hIy at $42 2222 PI" tine troy ounce.
KD-3819
Offical Reserve Assets Worksheet
(actual US dollar amounts)
Last Week
17-Jan-031
IEnbIr Oabts Here
This Week
24-Jan-03
r
~
Foreign CUmtncy
17..Jan.Q3
2+Jan-03
Yen Securities
$6.947.000.000.00
$13.345.000.000.00
$7.070.000.000.00
$13.353.000.000.00
123.000.000
8.000.000
Sec. Total
Euro DeposiIs
Yen Deposits
$20.293.000.000.00
$11.400.000.000.00
$2,679,000,000.00
$20.423.000.000.00
$11.582,000,000.00
$2,681,000,000.00
130.000.000
CJepo8It Total
Total
EUIORste
Yen Rate
$14,079,000,000.00
$34,371,000,000.00
$1.0660
117.87
$14,263,000,000.00
$34,686,000,000.00
$1.0825
117.80
Euro Securities
IIIF
.-.::
....
..
17-Jan:03
.
~':'.,..
ReseMt Tranche
22, I 06,684,409.60
0.00
NAB
and put new data from fax
into right column
182.000.000
2.000.000
184.000,000
315.000.000
0.0185
.0.07
..
Source: IMF (email)
(pl8lim, with adjust)
GAB
Source: NY Fed (fax)
CODy and paste data into last week
22,189,358,210.32
0.00
0.00
QIa !sual rJ9!./ar ligures in for 1!11. week;
82.673.800.71
0.00
0.00
Total
82.673.800.71
SDR
-960.908.486.89
0.00
as of 11120/02
24-Jan-03
Gold
11,042.866,310.05
17.Ja~1
IOther Res Assets
ITOTAL
79,781,305,746.55
r.Adju~~_t.!'..!.¥!. and
:Prellm. IMF Data
I
:Calculation Section
Reserve Tranche
GAB
NAB
SDRs
24-Ja~J
71,1I1,071,D1O.371
Source: FMS website
000
http://www.fms.treas.gov/goid
0
-563.234.686.18
SqR da~ tranSlated~J_~u,!!nt eXChs.."-fl!_~!!!_____________________________________ ,
IN SORa
SOR rate for
I
I
I
1l·,Jan-03
Adiustments
24.Jan-03
InUSO
I
16,160,920,243
-15,337,879
16.145.582,364
0.727627
$22,189,358,210.32
0
0
$0.00
0
$0.00
~.
16.145,582,364
Total =
$22,189,358,210.32
-740,985,000
8.207.524,059
SDRs=
$11.279,846,540.01
8.948,509.059
Source:
http://www.imf.orgIextemallmap.htm. then go to -Exchange Rates in Terms of SDRs Dally-
III I10117598
III I III1 III1 III
@FedFRASER