[Federal Register Volume 69, Number 127 (Friday, July 2, 2004)]
[Rules and Regulations]
[Pages 40317-40319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13900]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 352


Offering of United States Savings Bonds, Series HH

AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.

[[Page 40318]]


ACTION: Final rule.

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SUMMARY: The offering of Series HH Savings Bonds will terminate at the 
close of business on August 31, 2004.

DATES: Effective August 31, 2004.

ADDRESSES: You can download this final rule at the following Internet 
addresses: http://www.gpoacess.gov or http://www.publicdebt.treas.gov.

FOR FURTHER INFORMATION CONTACT: 

Elisha Whipkey, Director, Division of Program Administration, Office of 
Securities Operations, Bureau of the Public Debt, at (304) 480-6319 or 
[email protected].
Susan Klimas, Attorney-Adviser, Office of the Chief Counsel, Bureau of 
the Public Debt, at (304) 480-8692 or [email protected].
Dean Adams, Assistant Chief Counsel, Office of the Chief Counsel, 
Bureau of the Public Debt, at (304) 480-8692 or 
[email protected].
Edward Gronseth, Deputy Chief Counsel, Bureau of the Public Debt, at 
(304) 480-8692 or [email protected].

SUPPLEMENTARY INFORMATION: After August 31, 2004, owners of Series E or 
EE bonds will no longer be able to exchange them for Series HH bonds, 
and owners of matured Series H or Series HH bonds will not be able to 
reinvest in Series HH bonds. Series HH bonds issued through August 2004 
will continue to earn interest until they reach final maturity 20 years 
after issue. We are terminating the offering due to the high cost of 
exchanges in relation to the relatively low volume of transactions.

Procedural Requirements

    This final rule does not meet the criteria for a ``significant 
regulatory action'' as defined in Executive Order 12866. Therefore, the 
regulatory review procedures contained therein do not apply.
    This final rule relates to matters of public contract and 
procedures for United States securities. The notice and public 
procedures requirements and delayed effective date requirements of the 
Administrative Procedure Act are inapplicable, pursuant to 5 U.S.C. 
553(a)(2).
    As no notice of proposed rulemaking is required, the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) does not apply.
    We ask for no new collections of information in this final rule. 
Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does not apply.

List of Subjects in 31 CFR Part 352

    Bonds, Government securities.

0
Accordingly, for the reasons set out in the preamble, 31 CFR Chapter 
II, Subchapter B, is amended as follows:

PART 352--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES HH

0
1. The authority citation for Part 352 continues to read as follows:

    Authority: 31 U.S.C. 3105, 5 U.S.C. 301.


0
2. Revise Sec.  352.0 to read as follows:


Sec.  352.0  Offering of bonds.

    The Secretary of the Treasury offered to the people of the United 
States, United States Savings Bonds of Series HH in exchange for 
eligible United States Savings Bonds of Series E and EE and United 
States Savings Notes (Freedom Shares). This offering is being withdrawn 
and will terminate at the close of business on August 31, 2004.

0
3. Amend Sec.  352.2 as follows: in the first sentence of paragraph (a) 
remove the words ``are issued'' and add in their place the words ``were 
issued''; in paragraph (b) remove the words ``are issued'' and add in 
their place the words ``were issued'', and remove the words ``and 
are''; in the second sentence of paragraph (c) remove the word ``is'' 
and add the word ``was''.


Sec.  352.4  [Amended]

0
4. Amend Sec.  352.4 by removing the word ``are'' and adding in its 
place the word ``were''.
0
5. Revise Sec.  352.5 to read as follows:


Sec.  352.5  Authorized issuing and paying agents.

    Series HH bonds were issued and may be redeemed only by Federal 
Reserve Banks (see Sec.  352.13) and the Bureau of the Public Debt.

0
6. Revise Sec.  352.7 to read as follows:


Sec.  352.7  Issues on exchange.

    (a) Securities eligible for exchange. Prior to the close of 
business on August 31, 2004, owners were permitted to exchange United 
States Savings Bonds of Series E and EE and United States Savings Notes 
(Freedom Shares) at their current redemption values for Series HH 
bonds. Series E bonds and savings notes remained eligible for exchange 
for a period of one year from the month in which they reached final 
maturity. Series EE bonds issued on January 1, 2003, or earlier, became 
eligible for exchange six months after their issue dates. Series EE 
bonds issued on February 1, 2003, or thereafter, became eligible for 
exchange 12 months after their issue dates.
    (b) Basis for issue. Series HH bonds were issued on exchange by an 
authorized issuing agent upon receipt of a properly executed exchange 
application with eligible securities, and additional cash, if any, and 
any supporting evidence that was required under the regulations. If 
eligible securities were submitted directly to a Federal Reserve Bank 
referred to in Sec.  351.13, each was required to bear a properly 
signed and certified request for payment. Checks in payment of 
additional cash needed to complete a transaction (see paragraph (d) of 
this section) were required to be drawn to the order of the Federal 
Reserve Bank.
    (c) Role of financial institutions. Department of the Treasury 
Circular No. 750, current revision (31 CFR part 321), authorizes 
financial institutions qualified as paying agents for savings bonds and 
notes to redeem eligible securities presented for exchange and to 
forward an exchange application and full payment to a Federal Reserve 
Bank referred to in Sec.  351.13 for the issue of Series HH bonds. The 
securities redeemed on exchange by such an institution were required to 
be securities that it is authorized to redeem for cash.
    (d) Computation of issue price. The total current redemption value 
of the eligible securities submitted for exchange in any one 
transaction was required to be $500 or more. If the current redemption 
value was an even multiple of $500, Series HH bonds were required to be 
issued in that exact amount. If the current redemption value exceeded, 
but was not an even multiple of $500, the owner had the option either:
    (1) To add the cash necessary to bring the amount of the 
application to the next higher multiple of $500, or
    (2) To receive a payment to reduce the amount of the application to 
the next lower multiple of $500.
    (e) Registration. A Series HH bond issued on exchange was permitted 
to be registered in any form authorized in subpart B of Circular No. 3-
80, subject to the following restrictions:
    (1) If the securities submitted for exchange were in single 
ownership form, the owner was required to be named as owner or first-
named coowner on the Series HH bonds. A coowner or beneficiary was 
permitted to be named.
    (2) If the securities submitted for exchange were in coownership 
form, and one coowner was the ``principal coowner'', that person was 
required to be named as owner or first-named coowner on the Series HH 
bonds. A coowner or beneficiary was also permitted to be named. The 
``principal coowner'' was the coowner who

[[Page 40319]]

purchased the securities presented for exchange with his or her own 
funds, or received them as a gift, inheritance or legacy, or as a 
result of judicial proceedings, and had them reissued in coownership 
form, provided he or she had received no contribution in money or 
money's worth for designating the other coowner on the securities.
    (3) If the securities presented for exchange were in coownership 
form, and both coowners shared in their purchase or received them 
jointly as a gift, inheritance, or legacy or as a result of judicial 
proceedings, both persons were required to be named as coowners on the 
Series HH bonds.
    (4) If the securities presented for exchange were in beneficiary 
form, the owner was required to be named on the Series HH bonds as 
owner or first-named coowner. If the owner was deceased, a surviving 
beneficiary was required to be named as owner or first-named coowner. 
In either case, a coowner or beneficiary was permitted to be named.
    (f) Issue date. Series HH bonds issued on exchange were dated as of 
the first day of the month in which the eligible securities presented 
for exchange were redeemed by an authorized paying agent, as evidenced 
in the payment stamp on the securities and the exchange application.
    (g) Tax-deferred exchanges. (1) Continuation of tax deferral. 
Pursuant to the provisions of the Internal Revenue Code of 1954, as 
amended, an owner who had not been reporting the interest on his or her 
Series E or EE bonds and savings notes on an accrual basis for Federal 
income tax purposes, and who exchanged those securities for Series HH 
bonds, was permitted to continue to defer reporting the interest on the 
securities exchanged until the taxable year in which the Series HH 
bonds received in the exchange reach final maturity, are redeemed, or 
are otherwise disposed of, whichever is earlier. A reissue transaction 
that affects any of the persons required to be named on the Series HH 
bonds, as set forth in paragraph (e) of this section, may result in 
termination of the tax deferral privilege.
    (2) Tax deferral legend. Each bond issued in a tax-deferred 
exchange bore a legend showing how much of its issue price represented 
interest on the securities exchanged. This interest must be treated as 
income for Federal income tax purposes and reported in accordance with 
paragraph (g)(1) of this section.
    (3) Reporting of interest paid to owner. To the extent that it 
represented interest earned on the securities presented for exchange, 
an amount paid to an owner in accordance with paragraph (d) of this 
section was reportable as income for Federal income tax purposes for 
the year in which it was paid. Pursuant to 26 CFR 1.6049.4, a paying 
agent was required to report interest income of $10 or more included in 
any amount paid in an exchange transaction to the payee and to the 
Internal Revenue Service on Form 1099-INT or an approved substitute. A 
separate report was permitted to be made for each exchange transaction 
in which interest in the amount of $10 or more was paid, or all 
interest paid in both cash redemption and exchange transactions was 
permitted to be aggregated and reported annually should the total 
amount be $10 or more.
    (h) Exchanges without tax deferral. The rules prescribed for 
exchanges under paragraphs (a) through (f) of this section also applied 
to exchanges by owners who report the interest earned on their bonds of 
Series E and EE and savings notes annually for Federal income tax 
purposes, or elect to report all such interest that was not previously 
reported for the taxable year of the exchange. Series HH bonds issued 
in a nontax-deferred exchange were required to show a ``0'' in the tax-
deferral legend.

0
7. Amend Sec.  352.8 as follows: revise the first sentence of paragraph 
(a) to read as set forth below; in the second sentence of paragraph (a) 
remove the words ``may not'' and add in their place the words ``was not 
permitted to'', remove the word ``reach'' and add in its place the word 
``reached'', and remove the word ``are'' and add in its place the word 
``were''; in paragraph (b) remove the words ``will be'' and add in its 
place the word ``were'' for the words both places that the words 
appear.


Sec.  352.8  Reinvestment of matured Series H bonds.

    (a) General. Prior to the close of business on August 31, 2004, the 
proceeds of matured Series H and HH bonds, whether purchased for cash 
or issued in exchange for other securities, were permitted to be 
reinvested in Series HH bonds. * * *
* * * * *


Sec.  352.9  [Amended]

0
8. Amend Sec.  352.9 as follows: in the first sentence, remove the 
words ``will deliver'' and add in their place the word ``delivered''; 
in the second sentence, remove the words ``will be'' and add in their 
place the word ``were''; in the third sentence, remove the words ``will 
be'' and add in their place the word ``were''.


Sec.  352.11  [Amended]

0
9. Amend Sec.  352.11 as follows: in the first sentence, remove the 
word ``reserves'' and add in its place the word ``reserved'', and 
remove the word ``is'' and add in its place the word ``was''; in the 
final sentence, remove the word ``is'' and add in its place the word 
``was''.

    Dated: June 9, 2004.
Donald V. Hammond,
Fiscal Assistant Secretary.
[FR Doc. 04-13900 Filed 7-1-04; 8:45 am]
BILLING CODE 4810-35-P