31 C.F.R. PART 359—OFFERING OF UNITED STATES SAVINGS BONDS, SERIES I
Title 31 - Money and Finance: Treasury
Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.
Source: 67 FR 64278, Oct. 17, 2002, unless otherwise noted.
This part is the offering of United States Savings Bonds of Series I (referred to as Series I bonds or bonds) for sale to the people of the United States by the Secretary of the Treasury (Secretary). This offer was effective September 1, 1998, and will continue until terminated by the Secretary. (a) The regulations in 31 CFR part 360 apply to definitive (paper) Series I savings bonds that have not been converted to book-entry bonds through New Treasury Direct. (b) The regulations in 31 CFR part 363 apply to: (1) book-entry Series I savings bonds that were originally issued as book-entry bonds in New Treasury Direct; and (2) definitive Series I savings bonds that have been converted to book-entry bonds through New Treasury Direct. (c) We expressly disclaim any representations or warranties regarding Series I savings bonds that in any way conflict with these regulations and other applicable law. [67 FR 64278, Oct. 17, 2002, as amended at 70 FR 14942, Mar. 23, 2005] Accrual date is the first day of any month on which earnings on a Series I bond accrue. The redemption value of a bond does not change between these accrual dates. Automated Clearing House (ACH) means a funds transfer system governed by the Rules of the National Automated Clearing House Association (NACHA). NACHA provides for the interbank clearing of electronic entries for participating financial institutions. Bank account means your account at a United States depository financial institution (whether a bank or other financial institution) to which you have directed that ACH debits and payments be made. Beneficiary refers to the second individual named in the registration of a security held in definitive form registered “John Doe SSN 123–45–6789 POD (payable on death to) Joseph Doe.” In the New Treasury Direct system, beneficiary refers to the second individual named in the registration of a security registered “John Doe SSN 123–45–6789 POD (payable on death to) Joseph Doe SSN 987–65–4321.” In these examples, Joseph Doe is the beneficiary. Book-entry bond means a Series I savings bonds maintained by Treasury solely as a computer record. Composite annual rate means an annual interest rate that combines an annual fixed rate of return and a semiannual inflation rate. Converted bond means a savings bond originally issued as a definitive bond that has been surrendered to us and converted to a book-entry savings bond to be maintained by Treasury solely as a computer record. Coowner means either the first or the second individual named in the registration of a definitive Series I savings bonds registered “John Doe SSN 123–45–6789 or Joseph Doe.” In this example, John Doe and Joseph Doe are coowners. CPI-U, or U.S. City Average All Items Consumer Price Index for All Urban Consumers (non seasonally adjusted) is a monthly index of the prices paid by consumers for consumer goods and services, maintained by the Bureau of Labor Statistics of the U.S. Department of Labor. Definitive bond means a Series I savings bonds issued in paper form. Deflation means a decrease in the CPI-U from one month to another. Face amount refers to the amount inscribed on the front of a definitive Series I savings bonds. Fiduciary means the court-appointed or otherwise qualified person, regardless of title, who is legally authorized to act for another. Fixed rate or fixed rate of return is a component of the composite annual rate for a Series I savings bonds that is established by the Secretary of the Treasury for the life of the bond. Individual means a natural person. Individual does not mean an organization, representative, or fiduciary. Inflation means an increase in the CPI-U from one month to another. Inscription means the information that is printed on the face of the bond. Interest, as used in this part, is the difference between the principal amount and the redemption value of the bond. Issue date is the first day of the month in which an authorized issuing agent receives payment of the issue price of the bond. Issuing agent means an organization that has been qualified under part 317. New Treasury Direct system (New Treasury Direct) is an online account system in which you may hold and conduct transactions in eligible book-entry Treasury securities. Owner is either a single owner, the first individual named in the registration of a bond held in the owner with beneficiary form of registration, or the primary owner of a book-entry bond held in the primary owner with secondary owner form of registration. Par means the principal amount of a Series I savings bond; for definitive bonds, par is the same as the face amount. Paying agent means a financial institution that has been qualified under part 321. Person means an entity including an individual, trust, estate, corporation, government entity, association, partnership, and any other similar organization. Person does not mean a Federal Reserve Bank. Primary owner means the first individual named in the registration of a book-entry bond held in New Treasury Direct registered “John Doe SSN 123–45–6789 with Joseph Doe SSN 987–65–4321.” In this example, John Doe is the primary owner. Principal amount means the amount of the original investment. Principal amount does not include any interest earned. Redemption of a book-entry Series I savings bonds refers to payment of principal and accrued interest on the bond at final maturity, or, at the option of the owner, prior to final maturity. The owner of a book-entry savings bonds held in New Treasury Direct may redeem all principal and interest or a portion of the principal and the proportionate amount of interest. Redemption of a definitive Series I savings bonds refers to the payment of principal and accrued interest when the owner presents the bond for payment. Redemption value means principal plus accrued interest of a Series I savings bonds, as of the date of redemption. In the case of book-entry Series I savings bonds, it also refers to a portion of the principal amount plus a proportionate amount of accrued interest of a bond, as of the date of redemption. Registration means that the names of all persons named on the bond and the taxpayer identification number (TIN) of the owner, first-named coowner, or purchaser of a gift bond are maintained on our records. Registration of a book-entry Series I savings bonds means that the name and Taxpayer Identification Number (TIN) of all registrants are maintained on our records for a book-entry bond. Registration of a definitive Series I savings bonds means that the name and TIN of the owner or first-named co-owner are inscribed on the face of the bond. Secondary owner means the second individual named in the registration of a book-entry bond held in New Treasury Direct registered “John Doe SSN 123–45–6789 with Joseph Doe SSN 987–65–4321.” In this example, Joseph Doe is the secondary owner. Semiannual inflation rate means a component of the composite annual rate that is based on the six-month percentage change in the CPI-U. Semiannual rate periods are the six-month periods beginning on the date of issue and on each semiannual anniversary of the date of issue to maturity. Series I savings bond means a savings bonds, whether definitive or book-entry, that is purchased at par and pays interest based on a formula that incorporates both an annual fixed rate and a semiannual inflation rate. Single owner means the person named in the registration of a savings bonds without a coowner, beneficiary or secondary owner. Taxpayer identification number (TIN) means the identifying number required on tax returns and other documents submitted to the Internal Revenue Service; that is, an individual's social security account number (SSN) or an employer identification number (EIN). A SSN is composed of nine digits separated by two hyphens, for example, 123–45–6789. An EIN is composed of nine digits separated by one hyphen, for example, 12–3456789. The hyphens are an essential part of the numbers. We, us, or our refers to the agency, the Bureau of the Public Debt. The term extends to the Secretary of the Treasury and the Secretary's delegates at the Treasury Department and Bureau of the Public Debt. The term also extends to any fiscal or financial agent we designate to act on behalf of the United States. You or your refers to an owner of a Series I savings bonds. [67 FR 64278, Oct. 17, 2002, as amended at 70 FR 14942, Mar. 23, 2005] Series I savings bonds are issued in either book-entry or definitive form. Series I savings bonds have a total maturity period of 30 years from the issue date, consisting of an original maturity period of 20 years and an extension period of 10 years. (a) Bonds issued on December 1, 2002, or earlier. You may redeem your Series I savings bond issued on January 1, 2003, or earlier, at any time after six months from its issue date. (b) Bonds issued on February 1, 2003, or thereafter. You may redeem your Series I savings bond issued on February 1, 2003, or thereafter, at any time after 12 months from its issue date. [68 FR 2667, Jan. 17, 2003, as amended at 68 FR 7427, Feb. 14, 2003] If you redeem a bond less than five years after the issue date, we will reduce the overall earning period by three months. For example, if you redeem a bond issued January 1, 2002, nine months later on October 1, 2002, the redemption value will be determined by applying the value calculation procedures and composite rate for that bond as if the redemption date were three months earlier (July 1, 2002). However, we will not reduce the redemption value of a bond subject to the three-month interest penalty below the issue price (par). This penalty does not apply to bonds redeemed five years or more after the issue date. A bond accrues interest based on both a fixed rate of return and a semiannual inflation rate. A single, annual rate called the composite rate reflects the combined effects of the fixed rate and the semiannual inflation rate. For more information, see Appendix B of part 359. (a) The Secretary will furnish fixed rates, semiannual inflation rates, and composite rates for Series I savings bonds in announcements published each May 1 and November 1. (b) If the regularly scheduled date for the announcement is a day when the Treasury is not open for business, then the Secretary will make the announcement on the next business day. However, the effective date of the rates remains the first day of the month of the announcement. (c) The Secretary may announce rates at any other time. The Secretary, or the Secretary's designee determines the fixed rate of return. The fixed rate is established for the life of the bond.1 1 However, the fixed rate is not a guaranteed minimum rate; the composite rate could possibly be less than the fixed rate in deflationary situations. The index used to determine the semiannual inflation rate is the non-seasonally adjusted CPI-U (the Consumer Price Index for All Urban Consumers for the U.S. City Average for All Items, 1982–84=100) published by the Bureau of Labor Statistics of the U.S. Department of Labor. (For further information on CPI-U considerations, see Appendix C to part 359 at section 1.) The semiannual inflation rate reflects the percentage change, if any, in the CPI-U over a six-month period. We announce this rate twice a year, in May and November. The semiannual inflation rate we announced in May 2002 reflects the percentage change between the CPI-U figures from the preceding March 2002 and September 2001. The rate of change over the six-month period, if any, will be expressed as a percentage, rounded to the nearest one-hundredth of one percent. More specifically, the semiannual inflation rate will be determined by the following formula (the resulting rate will be rounded to the nearest one-hundredth of one percent): Semiannual inflation rate = (CPI − UCurrent − CPI − UPrior) ÷ CPI −UPrior In certain deflationary situations, the semiannual inflation rate may be negative. Negative semiannual inflation rates will be used in the same way as positive semiannual inflation rates. However, if the semiannual inflation rate is negative to the extent that it completely offsets the fixed rate of return, the redemption value of a Series I bond for any particular month will not be less than the value for the preceding month. Composite rates are single, annual interest rates that reflect the combined effects of the fixed rate and the semiannual inflation rate. Composite rates are set according to the following formula (See Appendix A to part 359 for examples of calculations involving composite interest rates.): Composite rate = {(Fixed rate ÷ 2) + Semiannual inflation rate + [Semiannual inflation rate × (Fixed rate ÷ 2)]} × 2.2 2 Example for I bonds issued May 2002–October 2002: Fixed rate = 2.00% Inflation rate = 0.28% Composite rate = [0.0200 ÷ 2 + 0.0028 + (0.0028 × 0.0200 ÷ 2)] ×2 Composite rate = [0.0100 + 0.0028 + 0.000028] ×2 Composite rate = 0.012828 × 2 Composite rate = 0.025656 Composite rate = 0.0257 (rounded) Composite rate = 2.57% (rounded) The most recently announced composite rate applies to a bond during its next semiannual rate period. A bond's semiannual rate periods are consecutive six-month periods, the first of which begins with the bond's issue date. This means that there can be a delay of several months from the time of a composite rate announcement to the time that rate determines interest earnings for a bond. For example, if you purchased a bond in April, its semiannual rate periods begin every April and October. At the beginning of the semiannual rate period in April, the most recently announced composite rate would have been the rate we announced the previous November. This rate will determine interest earnings for your bond for the next six months, through the end of September. At the beginning of the semiannual rate period in October, the most recently announced composite rate would be the rate announced the previous May. This rate will determine interest earnings for your bond through the end of the following March. However, if you purchased a bond instead in May, its semiannual rate periods begin in May and November. Therefore, the composite rates announced in May and November will apply immediately to this bond. (See Appendix C to part 359 at §2 for a discussion of rate lag.) (a) Interest, if any, accrues on the first day of each month; that is, we add the interest earned on a bond during any given month to its value at the beginning of the following month. (b) The accrued interest compounds semiannually. Interest earnings are payable upon redemption. The Secretary's determination of fixed rates of return, semiannual inflation rates, composite rates, and savings bonds redemption values is final and conclusive. We base all calculations of interest on a $25 unit. We use the value of this unit to determine the value of bonds in higher denominations. The effect of rounding off the value of the $25 unit increases at higher denominations. This can work to your slight advantage or disadvantage, depending on whether we round the value up or down.3 3 For example: A composite rate of 2.57% will result in a newly purchased $25 unit increasing in value after six months to $25.32, when rounded to the nearest cent. Thus, a $5,000 bond purchased at the same time as the $25 unit will be worth $5,064 after six months ([$5,000 divided by $25] × $25.32 = $5,064.) In contrast, if it applied directly to a $5,000 bond, the rate would render a value of $5,064.25 after six months, a difference of 25 cents. (This example does not include any discussion of the three-month interest penalty that applies if you redeem a bond less than five years after its issue date.) Definitive bonds are issued in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. These bonds are sold at par; that is, the purchase price is the same as the denomination (face value). A definitive bond is validly issued when it is registered as provided in part 360, and when it bears an issue date and the validation indicia of an authorized issuing agent. The issue date of a definitive bond is the first day of the month in which an authorized issuing agent receives payment of the issue price. The registration of a definitive Series I savings bond must include the TIN of the owner or first-named coowner. If the bond is being purchased as a gift or award and the owner's TIN is not known, the TIN of the purchaser must be included in the registration of the bond. [71 FR 46857, Aug. 15, 2006] The principal amount of definitive bonds that may be purchased in the name and TIN of any person, in any calendar year, is limited to $30,000. We compute the purchases of bonds in the name of any person in an individual capacity separately from purchases in a fiduciary capacity (for instance, as representative for the estate of an individual). In computing the purchases for each person, we include the following outstanding definitive bonds purchased in that calendar year: (a) All bonds registered in the name of and bearing the taxpayer identification number (TIN) of that person alone or as co-owner; (b) All bonds registered in the name of the representative of the estate of that person and bearing that person's TIN; and (c) All gift bonds registered in the name of that person but bearing the TIN of the purchaser. In computing the purchases for each person, the following are excluded: (a) Bonds on which that person is named as beneficiary; (b) Bonds to which that person has become entitled upon the death of the registered owner; (c) Bonds to which that person has become entitled by virtue of the termination of a trust or the occurrence of a similar event; and (d) Bonds that are purchased and redeemed within the same calendar year. If you have bonds issued during any one calendar year in excess of the prescribed maximum amount, we reserve the right to take any action we deem necessary to adjust the excess. You should obtain instructions for adjustment of the excess from the Bureau of the Public Debt, Parkersburg, WV 26106–1328, or e-mail at [email protected]. You may purchase definitive bonds over-the-counter through any participating issuing agent.4 4 However, an organization serving as an issuing agent because of its status as an employer or an organization operating an employer's payroll savings plan under §317.2(c) may sell bonds only through payroll savings plans. You may purchase definitive bonds through deductions from your pay if your employer maintains a payroll savings plan. An authorized issuing agent must issue the bonds. You may purchase bonds registered in the names of employee plans in authorized denominations through a designated Federal Reserve Bank, as provided in part 360 of this chapter. We deliver definitive bonds by mail to your address. If your address is within the United States, its territories or possessions, or the Commonwealth of Puerto Rico, we will deliver bonds at our risk. Bonds delivered elsewhere will be delivered at your risk; however, at our discretion, we may require delivery to an address within the United States, or refuse delivery to addresses in countries referred to in part 211 of this chapter. A financial institution qualified as a paying agent under the provisions of part 321 will pay the current redemption value of a definitive Series I bond presented for payment. The bond must meet the requirements for payment specified in part 360. You must establish your identity and entitlement to redemption to the satisfaction of the agent, in accordance with our instructions and identification guidelines, and must sign and complete the request for payment. We determine the redemption value of a definitive savings bonds for the accrual date (the first day of each month) by first determining the composite rate as defined in §359.13. If the result of the composite rate calculation is a negative value, zero will be the assumed composite rate in the redemption value calculation. Redemption values are calculated using the following formula (For examples of the calculation, see Appendix A to part 359): FV = PV × {[1 + (CR ÷ 2)] (m÷6)}
Where: FV (future value) = redemption value on the accrual date rounded to the nearest cent without consideration of penalty. PV (present value) = redemption value at the beginning of the semiannual rate period calculated without consideration of penalty. For bonds that are older than five years, PV will equal the redemption value at the start of the semiannual rate period. CR = composite rate converted to decimal form by dividing by 100. m = number of full calendar months elapsed during the semiannual rate period. (a) Redemption values. Redemption values are available for definitive bonds in various formats and media. (1) You may determine the redemption value for definitive bonds on the Internet at www.savingsbonds.gov. (2) You may download savings bonds calculators from the Internet at www.savingsbonds.gov. (3) You may obtain paper tables from the Bureau of the Public Debt, Parkersburg, West Virginia 26106–1328. We reserve the right to cease making paper tables of redemption values available. (b) Redemption penalty. Redemption values published in the tables reflect the three-month interest penalty applied to bonds redeemed prior to five years from the date of issue. Book-entry bonds must be purchased and held online through your New Treasury Direct account. We provide instructions for opening an account online at http://www.publicdebt.treas.gov. Book-entry bonds are issued in a minimum amount of $25, with additional increments of one cent. Book-entry bonds are sold at par value. You may only purchase book-entry Series I savings bonds online through your New Treasury Direct account. You may pay for your securities through a debit to your designated account at a United States depository financial institution, or by applying the redemption proceeds of a certificate of indebtedness held in your New Treasury Direct account. [69 FR 50308, Aug. 16, 2004] We will make payments electronically by direct deposit, using the ACH method, to your designated account at a United States depository financial institution. You may also direct that a payment be used to purchase a certificate of indebtedness to be held in your New Treasury Direct account. [69 FR 50308, Aug. 16, 2004] The issue date of a book-entry Series I savings bond is the first day of the month in which the security posts to the current holdings of the account owner. [69 FR 50308, Aug. 16, 2004] The principal amount of book-entry bonds that you may acquire in any calendar year is limited to $30,000. [68 FR 24806, May 8, 2003] (a) We include all bonds that you purchased in that calendar year. (b) Bonds purchased as gifts or in a fiduciary capacity are not included in the computation for the purchaser. (c) Bonds transferred or delivered from one New Treasury Direct account to another New Treasury Direct account are included in the computation for the recipient, unless you have become entitled to the transferred bonds due to the death of the registered owner. [68 FR 24806, May 8, 2003] We reserve the right to take any action we deem necessary to adjust the excess, including the right to remove the excess bonds from your New Treasury Direct account and refund the payment price to your bank account of record using the ACH method of payment. The TIN of each person named in the registration is required to purchase a book-entry bond. A book-entry bond is validly issued when it is posted to your New Treasury Direct account. We base current redemption values (CRV) for book-entry Series I savings bonds on the definitive savings bonds CRV. To calculate the book-entry values, we use the CRV for the $100 denomination Series I savings bonds and calculate a CRV prorated to the book-entry par investment amount for the corresponding issue and redemption dates. Calculated book-entry CRV will be rounded to the nearest one cent.5 5 Example: Calculated value of $25.044 rounds to $25.04; calculated value of $25.045 rounds to $25.05. [Book-entry par investment ÷ 100] × [CRV value for $100 bond]. (a) Redemption values. You may access redemption values for your book-entry bonds through your New Treasury Direct account. (b) Redemption penalty. Redemption values shown in your New Treasury Direct account reflect the three-month interest penalty applied to bonds redeemed prior to five years from the date of issue. You may be able to exclude from income for Federal income tax purposes all or part of the interest received on the redemption of qualified bonds during the year. To qualify for the program, you or the co-owner (in the case of definitive savings bonds) must have paid qualified higher education expenses during the same year. You also must have satisfied certain other conditions. This exclusion is known as the Education Savings Bonds Program. Information about the program can be found in Internal Revenue Service Publications. (For example, see Publication 17, “Your Federal Income Tax,” Publication 550, “Investment Income and Expenses,” and Publication 970, “Tax Benefits of Higher Education.”) We do not permit bonds to be issued in a chain letter or pyramid scheme. We authorize an issuing agent to refuse to issue a bond or accept a purchase order if there is reason to believe that a purchase is connected with a chain letter. The agent's decision is final. We reserve the right to issue bonds only in book-entry form. We may reject any application for Series I bonds, in whole or in part. We may refuse to issue, or permit to be issued, any bonds in any case or class of cases, if we deem the action to be in the public interest. Our action in any such respect is final. We may waive or modify any provision of this part in any particular case or class of cases for the convenience of the United States or in order to relieve any person or persons of unnecessary hardship: (a) If such action would not be inconsistent with law or equity; (b) If it does not impair any material existing rights; and (c) If we are satisfied that such action would not subject the United States to any substantial expense or liability. (a) Federal Reserve Banks and Branches are fiscal agents of the United States. They are authorized to perform such services as we may request of them, in connection with the issue, servicing and redemption of Series I bonds. (b) We have currently designated the following Federal Reserve Offices to provide savings bonds services: We may supplement or amend the terms of this offering of Series I bonds at any time. 1. What are some general tax considerations? Interest on savings bonds is subject to taxes imposed under the Internal Revenue Code of 1986, as amended. The bonds are exempt from taxation by any State or political subdivision of a State, except for estate or inheritance taxes. (See 31 U.S.C. 3124.) 2. What is an example of a book-entry Series I savings bonds redemption value calculation? Assume a New Treasury Direct par investment amount in a book-entry Series I savings bonds of $34.59, with an issue date of May, 2001, and a redemption date of December, 2001. The published CRV for a definitive $100 Series I savings bonds issued May, 2001 and redeemed December, 2001 = $101.96. Calculation: [(Book-entry par investment) ÷ (100)] × CRV value for $100 bond [(34.59 ÷ 100)] × 101.96 [0.3459] × 101.96 35.267964 = $35.27 1. What months make up the composite semiannual rate period? You may use the following table to find when a bond's semiannual rate period begins and when we'll announce the rate that applies during each period. 1. What are some index contingencies? (a) If a previously reported CPI-U is revised, we will continue to use the previously reported CPI-U in calculating redemption values. (b) If the CPI-U is rebased to a different year, we will continue to use the CPI-U based on the base reference period in effect when the security was first issued, as long as that CPI-U continues to be published. (c) If, while an inflation-indexed savings bonds is outstanding, the applicable CPI-U is discontinued or, in the judgment of the Secretary, fundamentally altered in a manner materially adverse to the interests of an investor in the security, or, in the judgment of the Secretary, altered by legislation or Executive Order in a manner materially adverse to the interests of an investor in the security, Treasury, after consulting with the Bureau of Labor Statistics or any successor agency, will substitute an appropriate alternative index. Treasury will then notify the public of the substitute index and how it will be applied. The Secretary's determinations in this regard will be final. (d) If the CPI-U for a particular month is not reported by the last day of the following month, we will announce an index number based on the last 12-month change in the CPI-U available. Any calculations of our payment obligations on the inflation-indexed savings bonds that rely on that month's CPI-U will be based on the index number that we have announced. 2. How will inflation lag affect my Series I savings bonds? The inflation rate component of investor earnings will be determined twice each year. This rate will be the percentage change in the CPI-U for the six months ending each March and September. The rate will be included in the composite rate that is announced each May and November. For Series I bonds offered from September 1, 1998, through October 31, 1998, the inflation rate component of investor earnings will be the percentage change in the CPI-U for the six months ending March 31, 1998. This rate will be included in the composite rate that is announced for Series I bonds offered effective from September 1, 1998, through October 31, 1998. In the event the Secretary, or the Secretary's designee, announces a composite rate at an effective date other than May 1 or November 1, the announcement will specify the period to be used to calculate the semiannual inflation rate. Each composite rate will be effective for the entirety of the applicable rate period that begins while the rate is in effect. Thus, an inflation rate may affect interest accruals from 3 to 13 months from the date that the CPI-U is measured. Example 1. The inflation rate determined from the CPI-U for the six-month period from October, 2003, through March, 2004, will be included in the composite rate announced in May, 2004. For a bond purchased in May 1999, this rate would go into effect immediately, since a new semiannual rate period for this bond will begin in May, 2004. Series I bonds issued in May begin new semiannual rate periods in the months of May and November. In this example, the inflation rate will have its earliest impact in June 2004, when interest from May accrues, three months after the end of the six-month CPI-U period that ends in March, 2004. Example 2. The May 1, 2004, rate will apply similarly to a bond purchased in October 1999. Series I bonds issued in October begin new semiannual rate periods in the months of April and October. Thus, for this bond, the May 1, 2004, composite rate (which includes the inflation rate) will not go into effect until a new semiannual rate period begins on October 1, 2004. This rate, therefore, will determine the inflation-indexed portion of each interest accrual from November, 2004, through April, 2005. In this example, the inflation rate will have its latest impact in April 2005, 13 months following the six-month CPI-U period that ended March 31, 2004. 1. What are some general tax considerations? General. Interest is subject to all taxes imposed under the Internal Revenue Code of 1986, as amended. The bonds are also subject to Federal and State estate, inheritance, gift, or other excise taxes. The bonds are exempt from all other taxation by any State or local taxing authority. 2. What reporting methods are available for savings bonds? (a) Reporting methods. You may use either of the following two methods for reporting the increase in the redemption value of the bond for Federal income tax purposes: (1) Cash basis method. You may defer reporting the increase to the year of final maturity, redemption, or other disposition, whichever is earliest; or (2) Accrual basis method. You may elect to report the increase each year, in which case the election applies to all Series I bonds that you then own, those subsequently acquired, and to any other obligations purchased on a discount basis, such as savings bonds of Series E or EE. (b) Changing methods. If you use the cash basis method, you may change to the accrual basis method without obtaining permission from the Internal Revenue Service. However, once you elect to use the accrual basis method in paragraph (a)(2), you may change the method of reporting the increase only by following the specific procedures prescribed by the Internal Revenue Service for making an automatic method change. For further information, you may contact the Internal Revenue Service director for your area, or the Internal Revenue Service, Washington, DC 20224. 3. What transactions have potential tax consequences? The following types of transactions, among others, may have potential tax consequences: (a) A reissue that affects the rights of any of the persons named on a definitive Series I savings bonds may have tax consequences for the owner. (b) The transfer of a book-entry Series I savings bonds from one owner to another may have tax consequences for the purchaser. (c) The redemption of a book-entry Series I savings bonds by the secondary owner may have tax consequences for the primary owner. (d) The purchase of a Series I savings bonds as a gift may have gift tax consequences for the purchaser. [67 FR 64278, Oct. 17, 2002, as amended at 68 FR 24806, May 8, 2003]
Title 31: Money and Finance: Treasury
PART 359—OFFERING OF UNITED STATES SAVINGS BONDS, SERIES I
Section Contents
§ 359.0 What does this part cover?
§ 359.1 What regulations govern Series I savings bonds?
§ 359.2 [Reserved]
§ 359.3 What special terms do I need to know to understand this part?
§ 359.4 In what form are Series I savings bonds issued?
§ 359.5 What is the maturity period of a Series I savings bonds?
§ 359.6 When may I redeem my Series I bond?
§ 359.7 If I redeem a Series I savings bonds before five years after the issue date, is there an interest penalty?
§ 359.8 How does interest accrue on Series I savings bonds?
§ 359.9 When are interest rates for Series I savings bonds announced?
§ 359.10 What is the fixed rate of return?
§ 359.11 What is the semiannual inflation rate?
§ 359.12 What happens in deflationary conditions?
§ 359.13 What are composite rates?
§ 359.14 How are composite rates determined?
§ 359.15 When is the composite rate applied to Series I savings bonds?
§ 359.16 When does interest accrue on Series I savings bonds?
§ 359.17 When is interest payable on Series I savings bonds?
§ 359.18 Is the determination of the Secretary on rates and values final?
§ 359.19 How is interest calculated?
§§ 359.20-359.24 [Reserved]
§ 359.25 What are the denominations and prices of definitive Series I savings bonds?
§ 359.26 When are definitive Series I savings bonds validly issued?
§ 359.27 What is the issue date of a definitive Series I savings bonds?
§ 359.28 Are taxpayer identification numbers (TINs) required for the registration of definitive Series I savings bonds?
§ 359.29 What amount of definitive Series I savings bonds may I purchase per year?
§ 359.30 Are definitive Series I savings bonds purchased in the name of an individual computed separately from bonds purchased in a fiduciary capacity?
§ 359.31 What definitive Series I savings bonds are included in the computation?
§ 359.32 What definitive Series I savings bonds are excluded from the computation?
§ 359.33 What happens if I purchase definitive Series I savings bonds in excess of the maximum amount?
§ 359.34 May I purchase definitive Series I savings bonds over-the-counter?
§ 359.35 May I purchase definitive Series I savings bonds through a payroll savings plan?
§ 359.36 May I purchase definitive Series I savings bonds through employee thrift, savings, vacation, and similar plans?
§ 359.37 How are definitive Series I savings bonds delivered?
§ 359.38 How is payment made when definitive Series I savings bonds are redeemed?
§ 359.39 How are redemption values calculated for definitive Series I savings bonds?
§ 359.40 How can I find out what my definitive Series I savings bonds are worth?
§ 359.41-359.44 [Reserved]
§ 359.45 How are book-entry Series I savings bonds purchased and held?
§ 359.46 What are the denominations and prices of book-entry Series I savings bonds?
§ 359.47 How is payment made for purchases of book-entry Series I savings bonds?
§ 359.48 How are redemption payments made for my redeemed book-entry Series I savings bonds?
§ 359.49 What is the issue date of a book-entry Series I savings bond?
§ 359.50 What amount of book-entry Series I savings bonds may I acquire per year?
§ 359.51 What book-entry Series I savings bonds are included in the computation?
§ 359.52 What happens if any person purchases book-entry Series I savings bonds in excess of the maximum amount?
§ 359.53 Are taxpayer identification numbers (TINs) required for registration of book-entry Series I savings bonds?
§ 359.54 When is a book-entry Series I savings bonds validly issued?
§ 359.55 How are redemption values calculated for book-entry Series I savings bonds?
§ 359.56 How can I find out what my book-entry Series I savings bonds are worth?
§§ 359.57-359.64 [Reserved]
§ 359.65 [Reserved]
§ 359.66 Is the Education Savings Bonds Program available for Series I savings bonds?
§ 359.67 Does Public Debt prohibit the issuance of Series I savings bonds in a chain letter scheme?
§ 359.68 May Public Debt issue Series I savings bonds only in book-entry form?
§ 359.69 Does Public Debt make any reservations as to issue of Series I savings bonds?
§ 359.70 May Public Debt waive any provision in this part?
§ 359.71 What is the role of Federal Reserve Banks and Branches?
§ 359.72 May the United States supplement or amend the offering of Series I savings bonds?
Appendix A to Part 359—Redemption Value Calculations
Appendix B to Part 359—Composite Semiannual Rate Period Table
Appendix C to Part 359—Investment Considerations
Appendix D to Part 359—Tax Considerations
Subpart A—General Information
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§ 359.0 What does this part cover?
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§ 359.1 What regulations govern Series I savings bonds?
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§ 359.2 [Reserved]
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§ 359.3 What special terms do I need to know to understand this part?
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§ 359.4 In what form are Series I savings bonds issued?
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§ 359.5 What is the maturity period of a Series I savings bonds?
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§ 359.6 When may I redeem my Series I bond?
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§ 359.7 If I redeem a Series I savings bonds before five years after the issue date, is there an interest penalty?
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§ 359.8 How does interest accrue on Series I savings bonds?
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§ 359.9 When are interest rates for Series I savings bonds announced?
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§ 359.10 What is the fixed rate of return?
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§ 359.11 What is the semiannual inflation rate?
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§ 359.12 What happens in deflationary conditions?
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§ 359.13 What are composite rates?
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§ 359.14 How are composite rates determined?
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§ 359.15 When is the composite rate applied to Series I savings bonds?
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§ 359.16 When does interest accrue on Series I savings bonds?
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§ 359.17 When is interest payable on Series I savings bonds?
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§ 359.18 Is the determination of the Secretary on rates and values final?
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§ 359.19 How is interest calculated?
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§§ 359.20-359.24 [Reserved]
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Subpart B—Definitive Series I Savings Bonds
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§ 359.25 What are the denominations and prices of definitive Series I savings bonds?
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§ 359.26 When are definitive Series I savings bonds validly issued?
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§ 359.27 What is the issue date of a definitive Series I savings bonds?
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§ 359.28 Are taxpayer identification numbers (TINs) required for the registration of definitive Series I savings bonds?
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§ 359.29 What amount of definitive Series I savings bonds may I purchase per year?
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§ 359.30 Are definitive Series I savings bonds purchased in the name of an individual computed separately from bonds purchased in a fiduciary capacity?
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§ 359.31 What definitive Series I savings bonds are included in the computation?
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§ 359.32 What definitive Series I savings bonds are excluded from the computation?
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§ 359.33 What happens if I purchase definitive Series I savings bonds in excess of the maximum amount?
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§ 359.34 May I purchase definitive Series I savings bonds over-the-counter?
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§ 359.35 May I purchase definitive Series I savings bonds through a payroll savings plan?
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§ 359.36 May I purchase definitive Series I savings bonds through employee thrift, savings, vacation, and similar plans?
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§ 359.37 How are definitive Series I savings bonds delivered?
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§ 359.38 How is payment made when definitive Series I savings bonds are redeemed?
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§ 359.39 How are redemption values calculated for definitive Series I savings bonds?
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§ 359.40 How can I find out what my definitive Series I savings bonds are worth?
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§ 359.41-359.44 [Reserved]
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Subpart C—Book-Entry Series I Savings Bonds
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§ 359.45 How are book-entry Series I savings bonds purchased and held?
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§ 359.46 What are the denominations and prices of book-entry Series I savings bonds?
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§ 359.47 How is payment made for purchases of book-entry Series I savings bonds?
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§ 359.48 How are redemption payments made for my redeemed book-entry Series I savings bonds?
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§ 359.49 What is the issue date of a book-entry Series I savings bond?
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§ 359.50 What amount of book-entry Series I savings bonds may I acquire per year?
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§ 359.51 What book-entry Series I savings bonds are included in the computation?
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§ 359.52 What happens if any person purchases book-entry Series I savings bonds in excess of the maximum amount?
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§ 359.53 Are taxpayer identification numbers (TINs) required for registration of book-entry Series I savings bonds?
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§ 359.54 When is a book-entry Series I savings bonds validly issued?
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§ 359.55 How are redemption values calculated for book-entry Series I savings bonds?
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§ 359.56 How can I find out what my book-entry Series I savings bonds are worth?
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§§ 359.57-359.64 [Reserved]
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Subpart D—Miscellaneous Provisions
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§ 359.65 [Reserved]
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§ 359.66 Is the Education Savings Bonds Program available for Series I savings bonds?
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§ 359.67 Does Public Debt prohibit the issuance of Series I savings bonds in a chain letter scheme?
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§ 359.68 May Public Debt issue Series I savings bonds only in book-entry form?
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§ 359.69 Does Public Debt make any reservations as to issue of Series I savings bonds?
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§ 359.70 May Public Debt waive any provision in this part?
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§ 359.71 What is the role of Federal Reserve Banks and Branches?
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------------------------------------------------------------------------ Reserve district Geographic area Servicing site served served------------------------------------------------------------------------Federal Reserve Bank, Buffalo New York, Boston.. Connecticut, Branch, 160 Delaware Avenue, Maine, Buffalo, NY 14202. Massachusetts, New Hampshire, New Jersey (Northern half), New York, Rhode Island, Vermont, Puerto Rico, Virgin Islands.Federal Reserve Bank, Pittsburgh Cleveland, Delaware, Kentucky Branch, 717 Grant Street, Philadelphia. (eastern half), Pittsburgh, PA 15219. New Jersey, (southern half), Ohio, Pennsylvania, West Virginia (northern panhandle).Federal Reserve Bank of Richmond, Atlanta. Alabama, District Richmond, 701 East Byrd Street, of Columbia, Richmond, VA 23219. Florida, Georgia, Louisiana (southern half), Maryland, Mississippi (southern half), North Carolina, South Carolina, Tennessee (eastern half), Virginia, West Virginia (except northern panhandle).Federal Reserve Bank of Minneapolis, Illinois (northern Minneapolis, 90 Hennepin Chicago. half), Indiana Avenue, Minneapolis, MN 55401. (northern half), Iowa, Michigan, Minnesota, Montana, North Dakota, South Dakota, Wisconsin.Federal Reserve Bank of Kansas Dallas, San Alaska, Arizona, City, 925 Grand Boulevard, Francisco, Kansas Arkansas, Kansas City, MO 64106. City, St. Louis. California, Colorado, Hawaii, Idaho, Illinois (southern half), Indiana (southern half), Kansas, Kentucky (western half), Louisiana (northern half), Mississippi (northern half), Missouri, Nebraska, Nevada, New Mexico, Oklahoma, Oregon, Tennessee (western half), Texas, Utah, Washington, Wyoming, Guam.------------------------------------------------------------------------
§ 359.72 May the United States supplement or amend the offering of Series I savings bonds?
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Appendix A to Part 359—Redemption Value Calculations
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Appendix B to Part 359—Composite Semiannual Rate Period Table
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---------------------------------------------------------------------------------------------------------------- If your Bond has an issue date Then its semiannual We announce the rate that applies during a rate period of_ rate period begins_ in_----------------------------------------------------------------------------------------------------------------January.......................... January 1.......... November 1 (of the previous year). July 1............. May 1.February......................... February 1......... November 1 (of the previous year). August 1........... May 1.March............................ March 1............ November 1 (of the previous year). September 1........ May 1.April............................ April 1............ November 1 (of the previous year). October 1.......... May 1.May.............................. May 1.............. May 1. November 1......... November 1.June............................. June 1............. May 1. December 1......... November 1.July............................. July 1............. May 1. January 1.......... November 1 (of the previous year).August........................... August 1........... May 1. February 1......... November 1 (of the previous year).September........................ September 1........ May 1 March 1............ November 1 (of the previous year).October.......................... October 1.......... May 1. April 1............ November 1 (of the previous year).November......................... November 1......... November 1. May 1.............. May 1.December......................... December 1......... November 1. June 1............. May 1.----------------------------------------------------------------------------------------------------------------
Appendix C to Part 359—Investment Considerations
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Appendix D to Part 359—Tax Considerations
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