Source: https://www.ecfr.gov/cgi-bin/text-idx?mc=true&node=pt31.2.344&rgn=div5
Timestamp: 2020-01-24 18:39:00
Document Index: 647739779

Matched Legal Cases: ['art 344', '§344', '§344', '§344', '§344', '§344', '§344', '§344', '§344', '§344', '§344', '§344', '§344', '§344', 'art 370', 'art 370', '§344', '§344', 'art 306', '§344', '§344', '§344', '§344', '§344', '§344', '§344', '§344', '§344']

Title 31 → Subtitle B → Chapter II → Subchapter A → Part 344
§344.0 What does this part cover?
§344.1 What special terms do I need to know to understand this part?
§344.2 What general provisions apply to SLGS securities?
§344.3 What provisions apply to the SLGSafe Service?
Subpart B—Time Deposit Securities
§344.4 What are Time Deposit securities?
§344.5 What other provisions apply to subscriptions for Time Deposit securities?
§344.6 How do I redeem a Time Deposit security before maturity?
Subpart C—Demand Deposit Securities
§344.7 What are Demand Deposit securities?
§344.8 What other provisions apply to subscriptions for Demand Deposit securities?
§344.9 How do I redeem a Demand Deposit security?
Subpart D—Special Zero Interest Securities
§344.10 What are Special Zero Interest securities?
§344.11 How do I redeem a Special Zero Interest Security before maturity?
Source: 65 FR 55405, Sept. 13, 2000, unless otherwise noted.
Source: 70 FR 37911, June 30, 2005, unless otherwise noted.
(a) What is the purpose of the SLGS securities offering? The Secretary of the Treasury (the Secretary) offers for sale non-marketable State and Local Government Series (SLGS) securities to provide issuers of tax-exempt securities with investments from any eligible source of funds (as defined in §344.1).
(1) Time Deposit securities—may be issued as:
(2) Demand Deposit securities—may be issued as certificates of indebtedness.
(3) Special Zero Interest securities. Special Zero Interest securities, which were discontinued on October 28, 1996, were issued as:
(1) Time Deposit securities—a minimum amount of $1,000, or in any larger whole dollar amount; and
(2) Demand Deposit securities—a minimum amount of $1,000, or in any larger amount, in any increment.
(d) How long is the offering in effect? The offering continues until terminated by the Secretary.
Fiscal Service's Web site refers to http://www.slgs.gov.
Current Treasury borrowing rate means the prevailing market rate, as determined by Treasury, for a Treasury security with the specified period to maturity. In the case where SLGS rates are needed for maturities currently not issued by Treasury, at our discretion, suitable proxies for Treasury securities and/or a rate setting methodology, as determined by the Secretary, may be used to derive a current Treasury borrowing rate. At any time that the Secretary establishes such proxies or a rate-setting method or determines that the methodology should be revised, we will make an announcement.
Eligible source of funds means:
(1) Any amounts that constitute gross proceeds of a tax-exempt bond issue or are reasonably expected to become gross proceeds of a tax-exempt bond issue;
(2) Any amounts that formerly were gross proceeds of a tax-exempt bond issue, but no longer are treated as gross proceeds of such issue as a result of the operation of the universal cap on the maximum amount treated as gross proceeds under 26 CFR 1.148-6(b)(2);
(3) Amounts held or to be held together with gross proceeds of one or more tax-exempt bond issues in a refunding escrow, defeasance escrow, parity debt service reserve fund, or commingled fund (as defined in 26 CFR 1.148-1(b));
(4) Proceeds of a taxable bond issue that refunds a tax-exempt bond issue or is refunded by a tax-exempt bond issue; or
(5) Any other amounts that are subject to yield limitations under the rules applicable to tax-exempt bonds under the Internal Revenue Code.
Issuer refers to the Government body or other entity that issues state or local government bonds described in section 103 of the Internal Revenue Code.
SLGS rate means the current Treasury borrowing rate, less one basis point, as released daily by Treasury in a SLGS rate table. If the current Treasury borrowing rate, together with the one basis point adjustment, results in a negative rate, such corresponding SLGS rate will be set at zero.
“We,” “us,” or “the Secretary” refers to the Secretary and the Secretary's delegates at the Department of the Treasury (Treasury), Bureau of the Fiscal Service (Fiscal Service). The term also extends to any fiscal or financial agent acting on behalf of the United States when designated to act by the Secretary or the Secretary's delegates.
Yield on an investment means “yield” as computed under 26 CFR 1.148-5.
You or your refers to a SLGS program user or a potential SLGS program user.
(1) The electronic transactions and funds transfers provisions for United States securities, part 370 of this subchapter, “Electronic Transactions and Funds Transfers Related to U.S. Securities'; and
(e) What certifications must the issuer or its agent provide?—(1) Agent certification. When a commercial bank or other agent submits a subscription, or performs any other transaction, on behalf of the issuer, it must certify that it is acting under the issuer's specific authorization. Ordinarily, evidence of such authority is not required.
(g) When and how do I pay for SLGS securities? You must submit full payment for each subscription to Fiscal Service no later than 4 p.m., Eastern time, on the issue date. Submit payments by the Fedwire funds transfer system with credit directed to the Treasury's General Account. For these transactions, Fiscal Service's ABA Routing Number is 051036476.
(k) How do I contact Fiscal Service? Fiscal Service's contact information is posted on Fiscal Service's Web site.
(a) What is the SLGSafe Service? SLGSafe is a secure Internet site on the World Wide Web through which subscribers submit SLGS securities transactions. SLGSafe Internet transactions constitute electronic messages under 31 CFR part 370.
(b) Is SLGSafe use mandatory? Yes. Except as provided in paragraph (f)(3) or (f)(4) of this section, you must submit all transactions through SLGSafe.
(c) What terms and conditions apply to SLGSafe? The terms and conditions contained in the following documents, which may be downloaded from Fiscal Service's Web site and which may change from time to time, apply to SLGSafe transactions:
(d) Who can apply for SLGSafe access? If you are an owner or a potential owner of SLGS securities, or act as a trustee or other agent of the owner, you can apply to Fiscal Service for SLGSafe access. Other potential users of SLGSafe include, but are not limited to, underwriters, financial advisors, and bond counsel.
(e) How do I apply for SLGSafe access? Submit to Fiscal Service a completed SLGSafe Application for Internet Access. The form is found on Fiscal Service's Web site.
(f) What are the conditions of SLGSafe use? If you are designated as an authorized user, on a SLGSafe application that we've approved, you must:
(1) Assume the sole responsibility and the entire risk of use and operation of your electronic connection;
(2) Agree that we may act on any electronic message to the same extent as if we had received a written instruction bearing the signature of your duly authorized officer;
(3) Submit electronic messages and other transaction requests exclusively through SLGSafe, except to the extent you establish to the satisfaction of Fiscal Service that good cause exists for you to submit such subscriptions and requests by other means; and
(4) Agree to submit transactions manually if we notify you that due to problems with hardware, software, data transmission, or any other reason, we are unable to send or receive electronic messages through SLGSafe.
(g) When is the SLGSafe window open? All SLGSafe subscriptions, requests for early redemption of Time Deposit securities, and requests for redemption of Demand Deposit securities must be received by Fiscal Service on business days no earlier than 10 a.m. and no later than 10 p.m., Eastern time. The official time is the date and time as shown on Fiscal Service's application server. Except as otherwise provided in §§344.5(d) and 344.8(d), all other functions may be performed during the extended SLGSafe hours, from 8 a.m. until 10 p.m., Eastern time.
(a) What are the maturity periods? The issuer must fix the maturity periods for Time Deposit securities, which are issued as follows:
(1) Certificates of indebtedness that do not bear interest. For certificates of indebtedness that do not bear interest, the issuer can fix a maturity period of not less than fifteen days and not more than one year.
(2) Certificates of indebtedness that bear interest. For certificates of indebtedness that bear interest, the issuer can fix a maturity period of not less than thirty days and not more than one year.
(3) Notes. For notes, the issuer can fix a maturity period of not less than one year and one day, and not more than ten years.
(4) Bonds. For bonds, the issuer can fix a maturity period of not less than ten years and one day, and not more than forty years.
(b) How do I select the SLGS rate? For each security, the issuer shall designate an interest rate that does not exceed the maximum interest rate shown in the daily SLGS rate table as defined in §344.1.
(1) When is the SLGS rate table released? We release the SLGS rate table to the public by 10 a.m., Eastern time, each business day. If the SLGS rate table is not available at that time on any given business day, the SLGS rate table for the preceding business day applies.
(2) How do I lock-in a SLGS rate? The applicable daily SLGS rate table for a SLGSafe subscription is the one in effect on the business day that you start the subscription process. This table is shown on Fiscal Service's Application server.
(3) Where can I find the SLGS rate table? The SLGS rate table can be obtained at Fiscal Service's Web site.
(c) How are interest computation and payment dates determined? Interest on a certificate of indebtedness is computed on an annual basis and is paid at maturity with the principal. Interest on a note or bond is paid semi-annually. The issuer specifies the first interest payment date, which must be at least thirty days and less than or equal to one year from the date of issue. The final interest payment date must coincide with the maturity date of the security. Interest for other than a full interest period is computed on the basis of a 365-day or 366-day year (for certificates of indebtedness) and on the basis of the exact number of days in the half-year (for notes and bonds). See the appendix to subpart E to part 306 of this subchapter for rules regarding computation of interest.
(a) When is my subscription due? The subscriber must fix the issue date of each security in the subscription. The issue date must be a business day. The issue date cannot be more than sixty days after the date Fiscal Service receives the subscription. If the subscription is for $10 million or less, Fiscal Service must receive a subscription at least five days before the issue date. If the subscription is for over $10 million, Fiscal Service must receive the subscription at least seven days before the issue date.
Example to paragraph (a): If SLGS securities totaling $10 million or less will be issued on November 16th, Fiscal Service must receive the subscription no later than November 11th. If SLGS securities totaling more than $10 million will be issued on November 16th, Fiscal Service must receive the subscription no later than November 9th. In all cases, if SLGS securities will be issued on November 16th, Fiscal Service will not accept the subscription before September 17th.
(b) How do I start the subscription process? A subscriber starts the subscription process by entering into SLGSafe the following information:
(4) The title of an official authorized to purchase SLGS securities; ]
(5) A description of the tax-exempt bond issue; and ]
(6) The certification required by §344.2(e)(1), if the subscription is submitted by an agent of the issuer.
(c) Under what circumstances can I cancel a subscription? You cannot cancel a subscription unless you establish, to the satisfaction of Treasury, that the cancellation is required for reasons unrelated to the use of the SLGS program to create a cost-free option.
(d) How do I change a subscription? You can change a subscription on or before 3 p.m., Eastern time, on the issue date. Changes to a subscription are acceptable with the following exceptions:
(1) You cannot change the issue date to require issuance earlier or later than the issue date originally specified; provided, however, you may change the issue date up to seven days after the original issue date if you establish to the satisfaction of Treasury that such change is required as a result of circumstances that were unforeseen at the time of the subscription and are beyond the issuer's control (for example, a natural disaster);
(2) You cannot change the aggregate principal amount originally specified in the subscription by more than ten percent; and
(3) You cannot change an interest rate to exceed the maximum interest rate in the SLGS rate table that was in effect for a security of comparable maturity on the business day that you began the subscription process.
(e) How do I complete the subscription process? The completed subscription must:
(2) Separately itemize securities by the various maturities, interest rates, and first interest payment dates (in the case of notes and bonds);
(3) Not be more than ten percent above or below the aggregate principal amount originally specified in the subscription;
(4) Not be paid with proceeds that are derived, directly or indirectly, from the redemption before maturity of SLGS securities subscribed for on or before December 27, 1976;
(5) Include the certifications required by §344.2(e)(2)(i) (relating to yield); and
(6) Include the information required under paragraph (b), if not already provided.
(f) When must I complete the subscription? Fiscal Service must receive a completed subscription on or before 3:00 p.m., Eastern time, on the issue date.
(a) What is the minimum time a security must be held? (1) Zero percent certificates of indebtedness of 16 to 29 days. A zero percent certificate of indebtedness of 16 to 29 days can be redeemed, at the owner's option, no earlier than 15 days after the issue date.
(2) Certificates of indebtedness of 30 days or more. A certificate of indebtedness of 30 days or more can be redeemed, at the owner's option, no earlier than 25 days after the issue date.
(3) Notes or bonds. A note or bond can be redeemed, at the owner's option, no earlier than 30 days after the issue date.
(c) Do I have to submit a request for early redemption? Yes. An official authorized to redeem the securities before maturity must submit an electronic request in SLGSafe. The request must show the Taxpayer Identification Number of the issuer, the security number, and the dollar amount of the securities to be redeemed. Upon submission of a request for redemption before maturity of a security subscribed for on or after August 15, 2005, the request must include a yield certification under §344.2(e)(2)(ii). Fiscal Service must receive the request no less than 14 days and no more than 60 days before the requested redemption date. You cannot submit a request for early redemption for a security which has not yet been issued and you cannot cancel a request once it has been submitted.
(2) Redemption value. The remaining interest and principal payments are discounted by the current Treasury borrowing rate for the remaining term to maturity of the security redeemed. This may result in a premium or discount to the issuer depending on whether the current Treasury borrowing rate is unchanged, lower, or higher than the stated interest rate of the early-redeemed SLGS securities. There is no market charge for the redemption of zero interest Time Deposit securities subscribed for on or after October 28, 1996. Redemption proceeds in the case of a zero-interest security are a return of the principal invested. The formulas for calculating the redemption value under this paragraph, including examples of the determination of premiums and discounts, are set forth in appendix B of this part.
(1) Interest. Interest for the entire period the security was outstanding shall be recalculated if the original interest rate of the security is higher than the interest rate that would have been set at the time of the initial subscription had the term of the security been for the shorter period. If this results in an overpayment of interest, we will deduct from the redemption proceeds the aggregate amount of such overpayments, plus interest, compounded semi-annually thereon, from the date of each overpayment to the date of redemption. The rate used in calculating the interest on the overpayment will be one-eighth of one percent above the maximum rate that would have applied to the initial subscription had the term of the security been for the shorter period. If a bond is redeemed before maturity on a date other than a scheduled interest payment date, no interest is paid for the fractional interest period since the last interest payment date.
(g) How do I calculate the amount of redemption proceeds for subscriptions on or before December 27, 1976? For bonds subscribed for on or before December 27, 1976, the amount of the redemption proceeds is calculated as follows:
(1) Interest. The interest for the entire period the bond was outstanding shall be recalculated if the original interest rate at which the bond was issued is higher than an adjusted interest rate reflecting both the shorter period during which the bond was actually outstanding and a penalty. The adjusted interest rate is the Treasury rate which would have been in effect on the date of issue for a marketable Treasury bond maturing on the semi-annual maturity period before redemption reduced by a penalty which must be the lesser of:
(a) How is the rate for Demand Deposit securities determined? Each security shall bear a rate of interest based on an adjustment of the average yield for 13-week Treasury bills at the most recent auction. A new annualized effective Demand Deposit rate and daily factor for the Demand Deposit rate are effective on the first business day following the regular auction of 13-week Treasury bills and are shown in the SLGS rate table. Interest is accrued and added to the principal daily. Interest is computed on the balance of the principal, plus interest accrued through the preceding day.
(1) How is the interest rate calculated? (i) First, you calculate the annualized effective Demand Deposit rate in decimals, designated “I” in Equation 1, as follows:
DDR = (1 + I)1/Y −1
(2) Where can I find additional information? Information on the estimated average marginal tax rate and Treasury administrative costs for administering Demand Deposit securities, both to be determined by Treasury from time to time, will be published in the Federal Register.
(b) What happens to Demand Deposit securities during a Debt Limit Contingency? At any time the Secretary determines that issuance of obligations sufficient to conduct the orderly financing operations of the United States cannot be made without exceeding the statutory debt limit, we will invest any unredeemed Demand Deposit securities in special ninety-day certificates of indebtedness. Funds invested in the ninety-day certificates of indebtedness earn simple interest equal to the daily factor in effect at the time Demand Deposit security issuance is suspended, multiplied by the number of days outstanding. When regular Treasury borrowing operations resume, the ninety-day certificates of indebtedness, at the owner's option, are:
(a) When is my subscription due? The subscriber must fix the issue date of each security in the subscription. You cannot change the issue date to require issuance earlier or later than the issue date originally specified; provided, however, you may change the issue date up to seven days after the original issue date if you establish to the satisfaction of Treasury that such change is required as a result of circumstances that were unforeseen at the time of the subscription and are beyond the issuer's control (for example, a natural disaster). The issue date must be a business day. The issue date cannot be more than sixty days after the date Fiscal Service receives the subscription. If the subscription is for $10 million or less, Fiscal Service must receive the subscription at least five days before the issue date. If the subscription is for more than $10 million, Fiscal Service must receive the subscription at least seven days before the issue date.
(d) How do I change a subscription? You can change a subscription on or before 3 p.m., Eastern time, on the issue date. You may change the aggregate principal amount specified in the subscription by no more than ten percent, above or below the amount originally specified in the subscription.
(e) How do I complete the subscription process? The subscription must:
(2) Include the certifications required by §344.2(e)(2)(i) (relating to yield); and
(3) Include the information required under paragraph (b) of this section, if not already provided.
(a) When must I notify Fiscal Service to redeem a security? A Demand Deposit security can be redeemed at the owner's option, if Fiscal Service receives a request for redemption not less than:
(1) One business day before the requested redemption date for redemptions of $10 million or less; and
(2) Three business days before the requested redemption date for redemptions of more than $10 million.
(c) Do I have to submit a request for redemption? Yes. An official authorized to redeem the securities must submit an electronic request through SLGSafe. The request must show the Taxpayer Identification Number of the issuer, the security number, and the dollar amount of the securities to be redeemed. Fiscal Service must receive the request by 3 p.m., Eastern time on the required day. You cannot cancel the request.
Special zero interest securities were issued as certificates of indebtedness and notes. The provisions of subpart B of this part (Time Deposit securities) apply except as specified in subpart D of this part. Special Zero Interest securities were discontinued on October 28, 1996. The only zero interest securities available after October 28, 1996, are zero interest Time Deposit securities that are subject to subpart B of this part.
Follow the provisions of §344.6(a) through (g), except that no market charge or penalty will apply when you redeem a special zero interest security before maturity.
(3) The increased annual borrowing cost is $900. ($50,000) × (11.8%−10%)
(a) This formula results in a premium or discount to the issuer depending on whether the current Treasury borrowing rate at the time of early redemption is lower or higher than the stated interest rate of the early-redeemed SLGS security. The total redemption value for bonds and notes can be determined by the following two steps. First, calculate accrued interest payable in accordance with §344.6(d)(1) using the following formula:
Second, calculate the redemption value per §344.6(d)(2) using the following formula:
(c) The total redemption value for certificates of indebtedness can be determined by the following two steps. First, calculate accrued interest payable in accordance with §344.6(d)(1) using the following formula:
Second, calculate the redemption value per §344.6(d)(2) using the following equation: