PART 203—PAYMENT OF FEDERAL TAXES AND THE TREASURY TAX AND LOAN PROGRAM Authority: 12 U.S.C. 90,265-266, 332, 391, 1452(d), 1464(k), 1767, 1789a, 2013, 2122, and 3102; 26 U.S.C. 6302; 31 U.S.C. 321, 323, and 3301-3304. Source: 72 FR 59181, Oct. 19, 2007, unless otherwise noted. Subpart A—General Information § 203.1 Scope. The regulations in this part govern the processing by financial institutions of electronic and paper-based deposits and payments of Federal taxes; the operation of the Treasury Tax and Loan (TT&L) program; the designation of TT&L depositaries; and the operation of the investment program. A financial institution may participate in the TT&L program by participating in the investment program or by accepting Federal tax payments, or both. A financial institution that accepts Federal tax payments may do so through the paper tax system (PATAX), or Electronic Federal Tax Payment System (EFTPS), or both. However, a financial institution is not designated as a TT&L depositary if it only processes EFTPS payments. § 203.2 Definitions. Advice of credit (AOC) Automated Clearing House (ACH) credit entry ACH debit entry Balance limit Borrower-In-Custody (BIC) collateral Business day Capacity Collector depositary Direct investment Dynamic investment Electronic Federal Tax Payment System (EFTPS) Federal Reserve Bank (FRB) Federal Tax Deposit (FTD) FTD coupon Federal taxes Fedwire 1 Fedwire non-value transaction Fedwire value transfer Financial institution Fiscal agent Investment program Investor depositary Paper Tax System (PATAX) Procedural instructions Recognized insurance coverage Reserve account Retainer depositary Same-day payment Secretary Special Direct Investment (SDI) SDI account balance Tax due date Term Investments Term Investment Option (TIO) TIO account balance Treasury Financial Agent (TFA) Treasury General Account (TGA) Treasury Investment Program (TIP) TIP main account balance Treasury Support Center (TSC) Treasury Tax and Loan (TT&L) account TT&L depositary or depositary TT&L program TT&L rate of interest Federal Register http://www.fiscal.treasury.gov. § 203.3 TT&L depositaries. A financial institution that participates in PATAX and/or the investment program must be a TT&L depositary. There are three kinds of TT&L depositaries. A collector depositary is a TT&L depositary that accepts paper Federal tax payments and also may accept electronic Federal tax payments, but does not accept direct investments or SDIs. A retainer depositary is a TT&L depositary that accepts electronic and/or paper Federal tax payments and retains a portion ofthe tax deposits in its TIP main account balance. An investor depositary is a TT&L depositary that accepts direct investments, SDIs, or dynamic investments and may accept electronic and/or paper Federal tax payments and retain a portion of those tax deposits. Collector, retainer, and investor depositaries may accept term investments. Retainer and investor depositaries do not have to participate in PATAX. § 203.4 Financial institution eligibility for designation as a TT&L depositary. (a) To be designated as a TT&L depositary, a financial institution must be insured as a national banking association, state bank, savings bank, savings association, building and loan, homestead association, Federal home loan bank, credit union, trust company, or a U.S. branch of a foreign banking corporation, the establishment of which has been approved by the Comptroller of the Currency. (b) A financial institution must possess the authority to pledge collateral to secure TT&L account balances, a TIP main account balance, an SDI account balance, or a no account balance as applicable. (c) In order to be designated as a TT&L depositary for the purposes of processing Federal tax deposits through PATAX, a financial institution must possess under its charter either general or specific authority permitting the maintenance of the TT&L account, the balance of which is payable on demand without previous notice of intended withdrawal. In addition, investor depositaries and retainer depositaries must possess either general or specific authority permitting the maintenance of a TIP main account 27 balance or an SDI account balance. Investor, retainer, and collector depositaries that accept term investments must possess either general or specific authority permitting the maintenance of a TIO account balance. In the case of investor and retainer depositaries maintaining a TIP main account balance or an SDI account balance, the authority must perm it the maintenance of a TIP main account balance or an SDI account balance which is payable on demand without previous notice of intended withdrawal. § 203.5 Designation of financial institutions as TT&L depositaries. (a) Parties to the agreement. (b) Application procedures. (i) A collector depositary; (ii) A retainer depositary; (iii) An investor depositary. (2) A financial institution is not authorized to maintain a TT&L account, TIP main account balance, SDI account balance, or TIO account balance until the TSC designates it as a TT&L depository. § 203.6 Obligations of TT&L depositaries. A TT&L depositary must: (a) Administer a TIP main account balance, SDI account balance, or TIO account balance, as applicable, if participating in the investment program. (b) Administer a TT&L account, if participating in PATAX. (c) Comply with the requirements of Section 202 of Executive Order 11246, entitled “Equal Employment Opportunity” (3 CFR, 1964-1965 Comp., p. 339) as amended by Executive Orders 11375 and 12086 (3 CFR, 1966-1970 Comp., p. 684; 3 CFR, 1978 Comp., p. 230), and the regulations issued thereunder at 41 CFR chapter 60. (d) Comply with the requirements of Section 503 of the Rehabilitation Act of 1973, as amended, and the regulations issued thereunder at 41 CFR part 60-741, requiring Federal contractors to take affirmative action to employ and advance in employment qualified individuals with disabilities. (e) Comply with the requirements of Section 503 of the Vietnam Era Veterans' Readjustment Assistance Act of 1972, as amended, 38 U.S.C. 4212, Executive Order 11701 (3 CFR 1971-1975 Comp., p. 752), and the regulations issued thereunder at 41 CFR parts 60-250 and 61-250, requiring Federal contractors to take affirmative action to employ and advance in employment qualified special disabled veterans and Vietnam-era veterans. § 203.7 Termination of agreement or change of election or option. (a) Termination by Treasury. (b) Termination or change of election or option by the depositary. § 203.8 Application of part and procedural instructions. The terms of this part and the procedural instructions issued pursuant to this part will be binding on financial institutions that process Federal tax payments or maintain a TT&L account, TIP main account balance, SDI account balance, or a TIO account balance under this part. By accepting or originating Federal tax payments, the financial institution agrees to be bound by this part and by procedural instructions issued pursuant to this part. Subpart B—Electronic Federal Tax Payments § 203.9 Scope of the subpart. This subpart prescribes the rules that financial institutions must follow when they process electronic Federal tax payment transactions. A financial institution is not required to be designated as a TT&L depositary in order to process electronic Federal tax payments. In addition, a financial institution does not become a TT&L depositary by processing electronic Federal tax payments under this subpart and may not represent itself as a TT&L depositary because it does so. § 203.10 Electronic payment methods. (a) General. (b) Conditions to making an electronic payment. (c) Payment of interest for time value of funds held. § 203.11 Same-day reporting and payment mechanisms. (a) General. (b) Fedwire non-value transaction. (1) For an investor or retainer depositary using a Fedwire ® non-value transaction, the TSC will credit the Federal tax payment amount, up to the depositary's available TIP main account balance capacity, to the depositary's TIP main account balance on the day of the transaction. Throughout the course of the day, the TSC will debit from the depositary's reserve account, and credit to the TGA, any portion of a tax payment amount that would exceed the institution's available TIP main account balance capacity. (2) For a collector depositary or a non-TT&L depositary financial institution using a Fedwire ® non-value transaction, the TSC will debit the financial institution's reserve account for the Federal tax payment amount and credit that amount to the TGA on the day of the transaction. (c) Cancellations and reversals. (1) If the transaction: (i) Is originated by a financial institution after the deadline established by Treasury in the procedural instructions; (ii) Has an unenrolled taxpayer identification number; or (iii) Does not meet the edit and format requirements set forth in the procedural instructions; or (2) At the direction of the IRS, for the following reasons: (i) Incorrect taxpayer name; (ii) Overpayment; or (iii) Unidentified payment; or (3) At the request of the financial institution that sent the same-day transaction, if the request is made prior to the payment day deadline established by Treasury in the procedural instructions. (d) Other than as stated in paragraph (c) of this section, Treasury is not obligated to reverse all or any part of a payment. § 203.12 EFTPS interest assessments. (a) Circumstances subject to interest assessments. (b) Calculation of interest assessment. (c) Authorization to assess interest. (d) Circumstances not resulting in the assessment of interest. (2) Treasury will not assess interest on a financial institution if a taxpayer fails to meet a tax due date because the FRB or the TFA caused a delay and the financial institution did not contribute to the delay. The burden is on the financial institution to establish, pursuant to the procedures in § 203.13, that it did not cause or contribute to the delay. § 203.13 Appeal and dispute resolution. (a) Contest. (b) Appeal. (c) Recoveries. Subpart C—PATAX § 203.14 Scope of the subpart. This subpart applies to all TT&L depositaries that accept FTD coupons and governs the acceptance and processing of those coupons. § 203.15 Tax deposits using FTD coupons. A TT&L depositary processing FTD coupons may choose to be designated as a retainer depositary, an investor depositary, or a collector depositary. A TT&L depositary that accepts FTD coupons through any of its offices that accept demand and/or savings deposits must: (a) Accept from a taxpayer that presents an FTD coupon: cash, a postal money order drawn to the order of the depositary, or a check or draft drawn on and to the order of the depositary, covering an amount to be deposited as Federal taxes. A TT&L depositary may accept, at its discretion, a check drawn on another financial institution, but it does so at its option and absorbs for its own account any float and other costs involved. (b) Place a stamp impression on the face of each FTD coupon in the space provided. The stamp must reflect the date on which the TT&L depositary received the tax deposit and the name and location of the depositary. The IRS will determine whether the tax payment is on time by referring to the date stamped on the FTD coupon. (c) Forward, each day, to the IRS Service Center serving the geographical area in which the TT&L depositary is located, the FTD coupons for all FTD deposits received that day and a copy of the AOC reflecting the total amount of all FTD coupons. (d) Establish an adequate record of all FTD deposits prior to transmitting them to 36 the IRS Service Center so that the TT&L depositary will be able to identify deposits in the event the FTD coupons are lost in shipment. To be adequate, the record must show, at a minimum for each deposit, the date of the deposit, the taxpayer identification number, the amount of the deposit, the tax period ending date, the type of tax deposited, and the employer name. Alternatively, the TT&L depositary may retain a copy of each FTD coupon forwarded to the IRS Service Center. (e) On the business day following receipt of an FTD coupon, submit the AOC information electronically to the TSC. (f) Not accept compensation from taxpayers for accepting FTDs and handling them as required by this section. § 203.16 Retainer and investor depositaries. (a) Credit to TIP main account balance. (b) Late delivery of AOC. § 203.17 Collector depositaries. (a) Debit to reserve account. (b) Late delivery of AOC. Subpart D—Investment Program and Collateral Security Requirements for TT&L Depositaries § 203.18 Scope of the subpart. This subpart governs the operation of the investment program, including the rules that TT&L depositaries must follow in crediting and debiting TIP main account balances, SDI account balances, and TIO account balances, and pledging collateral security. § 203.19 Sources of balances. A financial institution must be a collector depositary that accepts term investments, an investor depositary, or a retainer depositary to participate in the investment program. Depositaries electing to participate in the investment program can receive Treasury's investments in obligations of the depositary from the following sources: (a) FTDs that have been credited to the depositary's TIP main account balance pursuant to subpart C of this part; (b) EFTPS ACH credit and debit transactions, Fedwire ® non-value transactions, and Fedwire ® value transfers pursuant to subpart B of this part; (c) Direct investments, SDIs, dynamic investments, and term investments pursuant to subpart D of this part; and (d) Other excess Treasury operating funds. § 203.20 Investment account requirements. (a) Additions. (1) PATAX. (2) EFTPS ACH debit and ACH credit. (ii) Fedwire value and non-value transactions. (b) Additional offerings. (c) Withdrawals. (d) Interest. (e) Balance limits Retainer and investor depositaries. (2) Direct investments. (3) SDIs. (f) TIO. § 203.21 Collateral security requirements. Financial institutions that process EFTPS tax payments, but that are not TT&L depositaries, have no collateral requirements under this part. Financial institutions that are TT&L depositaries have collateral security requirements, as follows: (a) Investor and retainer depositaries PATAX and EFTPS tax payments. (2) Direct investments. (3) SDIs. (4) TIO. (b) Collector depositaries. (c) Deposits of securities. (2) A depositary pledging collateral security as required under paragraph (a)(3) or paragraph (a)(4) (when permitted) of this section must pledge the collateral under a written security agreement on a form provided by the FRB. The collateral security pledged to satisfy the requirements of paragraphs (a)(3) and (a)(4) (when permitted) of this section may remain in the pledging depositary's possession provided that the pledging is evidenced by advices of custody incorporated by reference in the written security agreement. The depositary must provide the written security agreement and all advices of custody covering collateral security pledged under that agreement to the FRB. Collateral security pledged under the agreement may not be substituted for or released without the advance approval of the FRB, and any collateral security subject to the security agreement will remain so subject until an approved substitution is made. No substitution or release will be approved until an advice of custody containing the description required by the written security agreement is received by the FRB. (3) Treasury's security interest in collateral security pledged by a depositary in accordance with paragraphs (c)(2) of this section to secure SDIs and certain term investments is perfected without Treasury taking possession of the collateral security by filing or, absent filing, for a period not to exceed 20 calendar days from the day of the depositary's receipt of the special direct or term investment. (d) Acceptable collateral. (e) Assignment of securities. (f) Effecting payments of principal and interest on securities or instruments pledged as collateral General. (i) The depositary fails to pay, when due, the whole or any part of the funds received by it for credit to the TT&L account and, if applicable, its TIP main account balance, SDI account balance, or TIO account balance; (ii) The depositary fails to pay when due amounts owed to the United States or the United States Treasury; (iii) The depositary otherwise violates or fails to perform any of the terms of this part or any of the procedural instructions entered into hereunder; or (iv) The depositary is closed for business by regulatory action or by proper corporate action, or a receiver, conservator, liquidator, or any other officer is appointed for the depositary. All principal and interest payments on any security pledged to protect the TIP main account balance, the SDI account balance, the TIO account balance or the TT&L account, as applicable, due as of the date of the insolvency or closure or thereafter becoming due, will be held separate and apart from any other assets and will constitute a part of the pledged security available to satisfy any claim of the United States. (2) Payment procedures. (ii) Subject to the waiver in paragraph (f)(2)(iii) of this section, each obligor on a security pledged by a depositary pursuant to this section, upon notification that Treasury is entitled to any payment associated with that pledged security, must make each payment of principal and/or interest due with respect to such security directly to the FRB, as Fiscal agent of the United States. (iii) The requirements of paragraphs (f)(2)(i) and (ii) of this section are hereby waived for only so long as a pledging depositary avoids both termination from the program under § 203.7 and also those circumstances identified in paragraph (f)(1) which may lead to the collection of the proceeds of collateral or the waiver is otherwise terminated by Treasury.