[Federal Register Volume 65, Number 248 (Tuesday, December 26, 2000)]
[Rules and Regulations]
[Pages 81356-81357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32567]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 8918]
RIN 1545-AY11


Removal of Federal Reserve Banks as Federal Depositaries

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations

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SUMMARY: This document contains temporary regulations relating to the 
deposit of Federal taxes pursuant to section 6302 of the Internal 
Revenue Code. The regulations remove Federal Reserve banks as 
authorized depositaries for Federal tax deposits. The regulations 
affect taxpayers that make Federal tax deposits using paper Federal Tax 
Deposit (FTD) coupons (Form 8109) at Federal Reserve banks.

DATES: Effective Date: These regulations are effective December 26, 
2000.
    Applicability Date: These regulations apply to deposits made after 
December 31, 2000.

FOR FURTHER INFORMATION CONTACT: Brinton T. Warren (202) 622-4940 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    This document contains amendments to the Procedure and 
Administration Regulations (26 CFR part 301) relating to Federal tax 
deposits under section 6302(c) of the Internal Revenue Code (Code). 
Section 6302(c) provides that the Secretary may authorize Federal 
Reserve banks, and incorporated banks, trust companies, domestic 
building and loan associations, or credit unions that are depositaries 
or financial agents of the United States, to receive any tax imposed 
under the internal revenue laws, in such manner, at such times, and 
under such conditions as the Secretary may prescribe. Pursuant to this 
authority, various regulations provide that Federal Reserve banks, as 
well as other authorized financial institutions, may receive certain 
Federal tax deposits.
    In cooperation with the Treasury Department's Financial Management 
Service (FMS), the Federal Reserve System has been streamlining its 
Treasury Tax and Loan (TT&L) Operation to respond to the fact that the 
overwhelming majority of Federal Tax Deposits (FTDs) are now received 
electronically. The widespread adoption of electronic deposits by 
taxpayers is an important aspect of improving the efficiency, 
reliability, and cost-effectiveness of the Treasury Department's 
financial management. In general, compared to the universe of all tax 
deposits, the percentage of FTDs made with paper coupons has 
significantly declined. FTDs made with paper coupons at Federal Reserve 
banks now constitute only a tiny percentage of all tax deposits. For 
example, in Fiscal Year 1999, of the approximately 100 million Federal 
tax deposits, made by paper coupon and electronically, only about 
270,000, or less than one half of one percent, were paper coupons 
presented at Federal Reserve banks. Additionally, the number of paper 
coupons presented at Federal Reserve banks has declined over twenty-
five percent since 1997.
    The Treasury Department has developed an array of other deposit 
options that are more convenient for taxpayers to use, and more 
economical to process, than deposits with Federal Reserve banks. For 
example, taxpayers may use their touch tone telephone or personal 
computer to make deposits 24 hours a day through the Electronic Federal 
Tax Payment System (EFTPS). For those taxpayers who still prefer paper 
coupons over electronic deposits, there are now more than 10,000 
financial institutions nationwide that are designated as TT&L 
depositaries where taxpayers may make FTD deposits using paper coupons.
    In response to the declining number of deposits being made with 
paper coupons at Federal Reserve banks, the Federal Reserve Bank of St. 
Louis was selected, effective May 1, 2000, to serve as the only Federal 
Reserve bank accepting FTDs. Even after this consolidation, however, it 
is no longer cost-effective for the Federal Reserve bank in St. Louis 
to process the small number of paper coupons it receives annually. 
Accordingly, these temporary regulations remove all Federal Reserve 
banks as depositaries for Federal taxes. To mitigate any difficulties 
for those taxpayers who still do not wish to use the deposit 
alternatives discussed above, the Treasury Department has authorized a 
financial agent to receive and process FTD payments through the mail, 
thereby maintaining a mail-in alternative for taxpayers who do not have 
an account with an authorized financial institution and who do not wish 
to use EFTPS. The address for this mail-in alternative is Financial 
Agent, Federal Tax Deposit Processing, P.O. Box 970030, St. Louis, 
Missouri, 63197. The IRS is also issuing proposed regulations that 
remove Federal Reserve banks as depositaries of Federal taxes. See the 
notice of proposed rulemaking on this subject in the Proposed Rules 
section of this issue of the Federal Register.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations, and because the 
regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Internal Revenue Code, these 
regulations will be submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on their impact on small 
business.

Drafting Information

    The principal author of these regulations is Brinton T. Warren of 
the Office of Associate Chief Counsel, Procedure and Administration 
(Administrative Provisions and Judicial Practice Division). However, 
other personnel from the IRS and Treasury Department participated in 
their development.

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR part 301 is amended as follows:
    Paragraph 1. The authority citation for part 301 continues to read 
in part as follows:

    Authority: 26 U.S.C. 7805 * * *


    Par. 2. Section 301.6302-1T is added to read as follows:

[[Page 81357]]

Sec. 301.6302-1T  Use of Federal Reserve banks after December 31, 2000

    Federal Reserve banks are not authorized depositaries for Federal 
tax deposits made after December 31, 2000.

    Dated: December 6, 2000.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: December 6, 2000.
Jonathan Talisman,
Acting Assistant Secretary for Tax Policy.
[FR Doc. 00-32567 Filed 12-22-00; 8:45 am]
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