Title 31—Money and Finance: Treasury--Volume 1
PART 359—OFFERING OF UNITED STATES SAVINGS BONDS, SERIES I
§ 359.0   What does this part cover?
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.
§ 359.1   What regulations govern Series I savings bonds?
(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.
§ 359.2   [Reserved]
§ 359.3   What special terms do I need to know to understand this part?
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 Fiscal Service. The term extends to the Secretary of the Treasury and the Secretary's delegates at the Treasury Department and Bureau of the Fiscal Service. 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.
§ 359.4   In what form are Series I savings bonds issued?
Series I savings bonds are issued in book-entry form. Effective January 1, 2012, Treasury discontinued the issuance of definitive Series I savings bonds.
§ 359.5   What is the maturity period of a Series I savings bonds?
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.
§ 359.6   When may I redeem my Series I bond?
(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.
§ 359.7   If I redeem a Series I savings bonds before five years after the issue date, is there an interest penalty?
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.
§ 359.8   How does interest accrue on Series I savings bonds?
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.
§ 359.9   When are interest rates for Series I savings bonds announced?
(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.
§ 359.10   What is the fixed rate of return?
The Secretary, or the Secretary's designee, determines the fixed rate of return. The fixed rate is established for the life of the bond. The fixed rate will always be greater than or equal to 0.00%. 1 The most recently announced fixed rate is only for bonds purchased during the six months following the announcement, or for any other period of time announced by the Secretary.
1 However, the fixed rate is not a guaranteed minimum rate. The composite rate is composed of both the fixed rate and a semiannual inflation rate, which could possibly be less than the fixed rate or negative in deflationary situations. In all cases, however, the composite rate will always be greater than or equal to 0.00%.
§ 359.11   What is the semiannual inflation rate?
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):
§ 359.12   What happens in deflationary conditions?
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.
§ 359.13   What are composite rates?
Composite rates are single, annual interest rates that reflect the combined effects of the fixed rate and the semiannual inflation rate. The composite rate will always be greater than or equal to 0.00%.
§ 359.14   How are composite rates determined?
Composite rates are set according to the following formula (See appendix A to part 359 for examples of calculations involving composite interest rates.):
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)
§ 359.15   When is the composite rate applied to Series I savings bonds?
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.)
§ 359.16   When does interest accrue on Series I savings bonds?
(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.
§ 359.17   When is interest payable on Series I savings bonds?
Interest earnings are payable upon redemption.
§ 359.18   Is the determination of the Secretary on rates and values final?
The Secretary's determination of fixed rates of return, semiannual inflation rates, composite rates, and savings bonds redemption values is final and conclusive.
§ 359.19   How is interest calculated?
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.)
§§ 359.20-359.24   [Reserved]
§ 359.25   What were the denominations and prices of definitive Series I savings bonds?
Prior to January 1, 2012, definitive Series I savings bonds were issued in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. These definitive bonds were sold at par; that is, the purchase price was the same as the denomination (face value).
§ 359.26   When are definitive Series I savings bonds validly issued?
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.
§ 359.27   What is the issue date of a definitive Series I savings bond?
The issue date of a definitive bond is the first day of the month in which an authorized issuing agent received payment of the issue price.
§ 359.28   Are taxpayer identification numbers (TINs) required for the registration of definitive Series I savings bonds?
The registration of a definitive Series I savings bond must include the TIN of the owner or first-named coowner. If the bond was 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.
§§ 359.29-359.33   [Reserved]
§ 359.34   May I purchase definitive Series I savings bonds over-the-counter?
Effective January 1, 2012, Treasury discontinued the over-the-counter sale of definitive Series I savings bonds.
§ 359.35   May I purchase definitive Series I savings bonds through a payroll savings plan?
Treasury discontinued the issuance of definitive Series I savings bonds through a payroll savings plan:
(a) Effective October 1, 2010, for United States government employees, and
(b) Effective January 1, 2011, for all other employees.
§ 359.36   May I purchase definitive Series I savings bonds through employee thrift, savings, vacation, and similar plans?
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.
§ 359.37   How are definitive Series I savings bonds delivered?
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.
§ 359.38   How is payment made when definitive Series I savings bonds are redeemed?
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.
§ 359.39   How are redemption values calculated for definitive Series I savings bonds?
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):
§ 359.40   How can I find out what my definitive Series I savings bonds are worth?
(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 Fiscal Service, 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.
§§ 359.41-359.44   [Reserved]
§ 359.45   How are book-entry Series I savings bonds purchased and held?
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.fiscal.treasury.gov.
§ 359.46   What are the denominations and prices of book-entry Series I savings bonds?
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.
§ 359.47   How is payment made for purchases of book-entry Series I savings bonds?
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.
§ 359.48   How are redemption payments made for my redeemed book-entry Series I savings bonds?
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.
§ 359.49   What is the issue date of a book-entry Series I savings bond?
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.
§ 359.50   What amount of book-entry Series I savings bonds may I acquire per year?
The principal amount of book-entry Series I savings bonds that you may acquire in any calendar year is provided at § 363.52.
§§ 359.51-359.52   [Reserved]
§ 359.53   Are taxpayer identification numbers (TINs) required for registration of book-entry Series I savings bonds?
The TIN of each person named in the registration is required to purchase a book-entry bond.
§ 359.54   When is a book-entry Series I savings bonds validly issued?
A book-entry bond is validly issued when it is posted to your New Treasury Direct account.
§ 359.55   How are redemption values calculated for book-entry Series I savings bonds?
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. 4 The formula is as follows (Examples of the calculation are given in appendix A to part 359.):
4 Example: Calculated value of $25.044 rounds to $25.04; calculated value of $25.045 rounds to $25.05.
§ 359.56   How can I find out what my book-entry Series I savings bonds are worth?
(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.
§§ 359.57-359.64   [Reserved]
§ 359.65   [Reserved]
§ 359.66   Is the Education Savings Bonds Program available for Series I savings bonds?
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.”)
§ 359.67   Does Fiscal Service prohibit the issuance of Series I savings bonds in a chain letter scheme?
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.
§ 359.68   [Reserved]
§ 359.69   Does Fiscal Service make any reservations as to issue of Series I savings bonds?
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.
§ 359.70   May Fiscal Service waive any provision in this part?
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.
§ 359.71   What is the role of Federal Reserve Banks and Branches?
(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:
§ 359.72   May the United States supplement or amend the offering of Series I savings bonds?
We may supplement or amend the terms of this offering of Series I bonds at any time.