PART 321—PAYMENTS BY BANKS AND OTHER FINANCIAL INSTITUTIONS OF DEFINITIVE UNITED STATES SAVINGS BONDS AND UNITED STATES SAVINGS NOTES (FREEDOM SHARES) Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 321; 31 U.S.C. 3105, 3126. Source: 53 FR 37511, Sept. 26, 1988, unless otherwise noted. Subpart A—General Information § 321.0 Purpose. These regulations govern the manner in which financial institutions may qualify and act as paying agents for the redemption of: (a) Definitive United States Savings Bonds of Series A, B, C, D, E, EE, and I, and United States Savings Notes (Freedom Shares), presented for cash payment; and (b) Eligible definitive Series E and Series EE savings bonds and savings notes presented for redemption in exchange for Series HH savings bonds under the provisions of Department of the Treasury Circular, Fiscal Service Series No. 2-80 (31 CFR part 352). [77 FR 16166, Mar. 20, 2012] § 321.1 Definitions. ACH payment ACH Beneficiary Cash payment Definitive security Federal Reserve Operating Circular Federal Reserve Processing Site Federal Reserve Treasury Retail Securities Site TRS Site Legal Representative representative Paying agent agent (1) A financial institution that is qualified under the provisions of this part as originally issued, or any subsequent revision, to make payment of securities, and includes branches located within the United States, its territories and possessions, and the Commonwealth of Puerto Rico; and (2) Any banking facilities of such institutions establishing at military installations overseas, provided the offering of such redemption services has been authorized by the Department of the Treasury. Presenter Redemption payment Redemption-exchange Registrant Security Taxpayer identifying number [53 FR 37511, Sept. 26, 1988; 53 FR 39581, Oct. 7, 1988, as amended at 55 FR 35395, Aug. 29, 1990; 59 FR 10536, Mar. 4, 1994; 63 FR 38042, July 14, 1998; 76 FR 16166, Mar. 20, 2012] Subpart B—Procedures for Qualification § 321.2 Eligible organizations. (a) Organizations eligible to apply for qualification and to serve as paying agents are commercial banks, trust companies, savings banks, savings and loan associations, building and loan associations (including cooperative banks), credit unions, cash depositories, industrial banks, or similar financial institutions which: (1) Are incorporated under Federal law or the laws of a State, territory or possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico; (2) In the usual course of business accept, subject to withdrawal, funds for desposit or the purchase of shares; (3) Are under the supervision of a federal or state regulatory agency or equivalent authority; and (4) Maintain regular offices for the transaction of business. (b) An organization that desires to redeem securities must first qualify as a paying agent. An organization that has qualified and is serving as a paying agent must: (1) Submit redeemed securities directly to a Federal Reserve Processing Site in accordance with the Federal Reserve Operating Circular; and (2) Have the ability to receive payment of applicable fees by ACH, or arrange to obtain one or more of these services from another financial institution. [53 FR 37511, Sept. 26, 1988, as amended at 59 FR 10536, Mar. 4, 1994; 77 FR 16166, Mar. 20, 2012] § 321.3 Procedure for qualifying and serving as paying agent. (a) Execution of application-agreement. (i) The provisions prescribed by section 202 of Executive Order 11246, entitled “Equal Employment Opportunity”, as amended (42 U.S.C. 2000e note); and (ii) The provisions of the Privacy Act of 1974, as amended (5 U.S.C. 552a), and regulations issued pursuant thereto (31 CFR part 1, subpart C). (2) For the purpose of these regulations, all eligible institutions shall make application to a TRS Site. (b) Qualification. (c) Announcement of authority. (d) Adverse action. [53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35395, Aug. 29, 1990; 59 FR 10537, Mar. 4, 1994; 63 FR 38042, July 14, 1998; 77 FR 16166, Mar. 20, 2012] § 321.4 Paying agents previously qualified. Institutions qualified as paying agents under previous revisions of this part are authorized to continue to act in that capacity without requalification. By so acting, they shall be subject to the terms and conditions of their previously executed application-agreements and these regulations in the same manner and to the same extent as though they had requalified hereunder. § 321.5 Termination of qualification. (a) By the Treasury. (b) At request of paying agent. (c) Reservation. [53 FR 37511, Sept. 26, 1988, as amended at 59 FR 10537, Mar. 4, 1994; 77 FR 16166, Mar. 20, 2012] Subpart C—Scope of Authority § 321.6 General. Securities are issued only in registered form (subject to 31 CFR 359.11), are not transferable, may not be hypothecated or used as collateral for a loan, and, except as otherwise specifically provided in the governing regulations and this part, are payable to the owner or coowner named on the security. The regulations governing Series EE and HH bonds are contained in Department of the Treasury Circular, Fiscal Service Series No. 3-80, current revision (31 CFR part 353); those governing Series I bonds are contained in Department of the Treasury Circular, Fiscal Service Series No. 2-98 (31 CFR part 360); and, those governing all other series of U.S. savings securities are contained in Department of the Treasury Circular No. 530, current revision (31 CFR part 315). [63 FR 38042, July 14, 1998] § 321.7 Authorized cash payments. (a) General. (b) Change of name by marriage. (c) Parent of a minor. I certify that I am the (father or mother) of John C. Jones and the person (with whom he resides) (to whom custody has been granted). He is __ years of age and is not of sufficient competency and understanding to sign the request. (d) Payment to beneficiary. (e) Payment to a legal representative designated on a security by name and title. Henry C. Smith, conservator of the estate of John R. White, an adult, pursuant to Sec. 633.572 of the Iowa Code. Tenth National Bank by Arnold A. Ames, Vice President, guardian of the estate of Barry B. Bryan, a minor. (f) Payment to a legal representative of a decedent's estate not designated on a security. (1) Presents the security; (2) Signs the request for payment on the back of the security, showing the representative's full title adjacent to the signature; and (3) Presents acceptable evidence of the legal representative's appointment and of the dates of death of all persons named in the security's registration, in accordance with this part and the appendix. In the case of a corporate legal representative, the full corporate name, as well as the title, must be shown. Examples: John H. Smith and Charles N. Jones, co-executors of the will of Robert J. Smith, deceased. Tenth National Bank by John F. Green, Trust Officer, executor of the will of George N. Brown, deceased. (g) Interest reporting. [53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35395, Aug. 29, 1990; 63 FR 38042, July 14, 1998] § 321.8 Redemption-exchange of Series E and EE savings bonds and savings notes. (a) General. (1) Series EE bonds bearing issue dates of January 1, 2003, or earlier, presented no earlier than six months from their issue dates; (2) Series EE bonds bearing issue dates of February 1, 2003, or thereafter, presented no earlier than 12 months from their issue dates; and (3) Series E bonds and savings notes presented no later than one year from the month in which they reached final maturity. The total redemption value of the securities presented for exchange must be at least $500. (b) Requirements for redemption-exchange. (1) The securities are accompanied by a completed exchange subscription signed by the presenter; (2) The presenter is the owner, the legal representative (excluding a representative of a decedent's estate), the surviving coowner or beneficiary, or the principal coowner (as defined in § 352.7(e)(2) in 31 CFR part 352 (Circular No. 2-80)) of the securities presented for exchange and is to be named as owner or first-named coowner on the Series HH bonds; and (3) The request for payment on each security is signed by the presenter. A presenter who is a legal representative should show the full title adjacent to each signature and, in the case of a corporate legal representative, should show the full corporate name, as well as the title. If the name of the presenter has been changed by marriage, or if the presenter is named as beneficiary or legal representative on the securities, the agent may process the transaction in accordance with the provisions of § 321.7 (b), (d), or (e) of this part. If the agent is authorized and elects to use the special endorsement procedure, set out in 31 CFR part 330 (Circular No. 888, current revision), the requests for payment do not need to be signed; however, this special endorsement may not be used in lieu of the presenter's signature on the exchange subscription. (c) Interest reporting. (d) Completion of transaction. [53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35396, Aug. 29, 1990; 59 FR 10537, Mar. 4, 1994; 68 FR 2666, Jan. 17, 2003; 68 FR 7427, Feb. 14, 2003; 77 FR 16166, Mar. 20, 2012] § 321.9 Specific limitations on payment authority. An agent is not authorized to redeem a security for cash or on redemption-exchange: (a)(1) If it is a Series EE bond or a Series I bond issued on January 1, 2003, or earlier, presented for payment prior to six months from its issue date; or (2) If it is a Series EE bond or a Series I bond issued on February 1, 2003, or thereafter, presented for payment prior to 12 months from its issue date. (b) If it is a savings bond of Series F, G, H, J, K, or HH. (c) If the presenter is acting under a power of attorney. (d) If the agent does not know or cannot establish the identity of the presenter as a person entitled to request payment as provided in § 321.7. (e) If the presenter does not sign his or her name in ink as it is inscribed on the security (except as provided in § 321.7 (b) or (c) of this part, or appears in evidence of appointment (see § 321.7(f)), and show a home or business address. (f) If the taxpayer identifying number of the presenter, or the estate represented by the presenter, is not known to the agent and the presenter refuses to furnish the number. (g) If the security bears a material irregularity, such as an illegible, incomplete or unauthorized inscription, issue date, or issuing agent's validating data, or if any essential part of the security appears to have been altered or is mutilated or defaced in such a manner as to create doubt or arouse suspicion. (h) If the security is registered in the name of a corporation, association, partnership, or other organization in its own right. (i) If Treasury regulations require the submission of documentary evidence to support the redemption, except as provided in § 321.7 (d) or (f) of this part, as in the case of incompetents, minors under legal guardianship, or the change of a registrant's name other than by marriage. (j) If the presenter is a minor who, in the opinion of the agent, is not of sufficient competency and understanding to sign the request for payment and comprehend the nature of the act. (k) If it is known to the agent that the presenter has been legally declared incompetent to manage his or her affairs. (l) If partial redemption is requested. [53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35396, Aug. 29, 1990; 63 FR 38042, July 14, 1998; 68 FR 2666, Jan. 17, 2003; 68 FR 7427, Feb. 14, 2003] § 321.10 Responsibilities of paying agents. (a) Payment of securities. (b) Restrictions. [53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35396, Aug. 29, 1990] Subpart D—Payment and Transmittal of Securities § 321.11 Payment. (a) Examination. (b) Identification and evidence of entitlement. (c) Evidence—Payment to a beneficiary. (d) Evidence—Payment to a legal representative of the last deceased registrant's estate. (e) Execution of request. (i) That the request for payment on the back of each security be signed by the presenter in the presence of one of its officers or authorized employees; and (ii) That the presenter's address be furnished. Fiduciaries must sign as provided in § 321.7 (e) and (f). (2) If the agent is qualified under 31 CFR part 330 (Circular No. 888, current revision) and elects to use the special endorsement procedure, the request for payment need not be signed. If the request has already been signed when the security is presented, it should be signed again. (f) Certification of request. [53 FR 37511, Sept. 26, 1988, as amended at 55 FR 35396, Aug. 29, 1990; 59 FR 10537, Mar. 4, 1994] § 321.12 Redemption value of securities. The redemption value of each savings security is determined by the terms of its offering and the length of time it has been outstanding. The Bureau of the Fiscal Service determines redemption values for Series A-E bonds, eligible Series EE and I bonds, and savings notes, that should be used in redeeming savings securities. [63 FR 38042, July 14, 1998] § 321.13 Cancellation of redeemed securities. A paying agent shall cancel each redeemed security by imprinting the word “PAID” on its face and entering the amount and date of the actual payment and the agent's name, location, and four-digit code number assigned by a TRS Site or nine-digit ABA code number. The recordation of this data shall constitute a certification by the agent that the security was redeemed in accordance with the provisions of this part, that the presenter's identity and entitlement to request payment were duly established, and that the proceeds were paid to the presenter or remitted to a TRS Site in payment for Series HH savings bonds. [77 FR 16166, Mar. 20, 2012] § 321.14 Transmittal to and settlement with a Federal Reserve Processing Site. Except for eligible securities redeemed on exchange pursuant to § 321.8, a paying agent shall transmit for payment all redeemed securities to a Federal Reserve Processing Site in accordance with the Federal Reserve Operating Circular. [77 FR 16167, Mar. 20, 2012] Subpart E—Losses Resulting From Erroneous Payments § 321.15 Liability for losses. Under the governing statute, as amended (31 U.S.C. 3126(a)), an agent cannot be relieved of liability for a loss resulting from an erroneous payment unless the Secretary of the Treasury can make a determination that the loss resulted from no fault or negligence on the agent's part. § 321.16 Report of erroneous payment. If an agent discovers an erroneous payment of securities, it should immediately advise the Bureau of the Fiscal Service, Parkersburg, WV, as further described in the instructions and guidance issued pursuant to § 321.27. [77 FR 16167, Mar. 20, 2012] § 321.17 Investigation of potential loss. (a) Notice to an agent. (b) Investigative procedure. § 321.18 Determination of loss. Upon completion of the investigation, and after consideration of the results, the Bureau of the Fiscal Service shall advise the agent through which the payment occurred: (a) That no final loss to the United States has occurred, and, accordingly, that the agent is relieved from liability for the payment, or that no claim for reimbursement shall be made unless and until a loss has been sustained; or (b) That while a final loss to the United States has occurred, the agent is not required to make reimbursement therefor, as the Secretary of the Treasury, or his designee, has determined that such loss resulted from no fault or negligence on the part of such agent; or (c) That a final loss to the United States has occurred, and that, the Secretary of the Treasury, or his designee, has been unable to make an affirmative finding that such loss resulted from no fault or negligence on the part of such agent, reimbursement must be made promptly, except where credit for the payment had not previously been extended. § 321.19 Certification of signatures. The regulations in this subpart shall, to the extent appropriate, apply to losses resulting from payments made in reliance on certifications of signatures by an officer or designated employee of any financial institution authorized to certify requests for payment. § 321.20 Applicability of provisions. The provisions of this subpart shall apply to securities redeemed by or submitted to any Federal Reserve Processing Site, any TRS Site, or any Treasury office authorized to redeem securities, as well as to paying agents. [77 FR 16167, Mar. 20, 2012] § 321.21 Replacement and recovery of losses. (a) If a final loss results from the redemption of a security, and the paying agent redeeming the security is not relieved of liability for such loss under 31 U.S.C. 3126(a), the Bureau of the Fiscal Service will demand that the paying agent promptly reimburse the United States in the amount of the final loss and will take such other action as may be necessary to collect such amount as set out in the procedure described in paragraph 21 of the appendix to this part. (b) If a final loss has resulted from the redemption of a security, and no reimbursement has been or will be made, the loss shall be subject to replacement out of the fund established by the Government Losses in Shipment Act, as amended. [61 FR 37197, July 16, 1996] Subpart F—Forwarding Items § 321.22 Forwarding securities not payable by an agent. Any securities an agent is not authorized to pay under the provisions of this part should be forwarded for redemption to a TRS Site. The requests for payment on the securities should be properly certified. Any documentary evidence required to support the transaction should accompany the securities. If the securities are presented for redemption-exchange, they must also be accompanied by a completed and signed exchange subscription and additional cash needed to complete the transaction. Unpaid securities must be forwarded to a TRS Site in accordance with the rules in this part. The Bureau of the Fiscal Service provides agents with instructions and guidance regarding forwarding items. These instructions identify the specific types of redemption cases that should be forwarded and the processing instructions that paying agents must follow. These instructions are available from a TRS Site or online at www.treasurydirect.gov. [77 FR 16167, Mar. 20, 2012] Subpart G—Miscellaneous Provisions § 321.23 Paying agent fees and charges. (a) Fees. Federal Register. www.treasurydirect.gov. (b) Discontinuance, reduction, or delay in fees. Federal Register, (c) Charges to presenters. [77 FR 16167, Mar. 20, 2012] § 321.24 Claims on account of lost securities. If a security redeemed by an agent is lost, stolen or destroyed while in its custody or in transit prior to settlement, the agent's claim for reimbursement of the missing security's redemption value on the original payment date will be considered, provided the security can be identified by serial number. § 321.25 Payment and retention of definitive securities. The definitive security must be presented and surrendered to the paying agent in order to receive payment. An agent is prohibited from accepting an image, or other copy or reproduction of the definitive security, for redemption or processing. To ensure that all transactions processed by agents are properly validated, agents must establish and comply with a retention period for definitive securities that are truncated and converted to an electronic image. At a minimum, the agent must retain such securities for a period of thirty calendar days following the date that the agent submitted the electronic image of the paid security to a Federal Reserve Processing Site. Agents may establish longer retention periods for definitive securities at their discretion. [77 FR 16167, Mar. 20, 2012] § 321.26 Role of Federal Reserve Banks. Federal Reserve Banks (including any Branch or office thereof, as appropriate) perform services as fiscal agents of the United States. These Federal Reserve Banks shall perform such services in connection with this part as may be requested by the Secretary of the Treasury, or a designee. These Federal Reserve Banks are authorized and directed to perform such duties, including the issuance of supplemental instructions and forms, as may be necessary to fulfill the purposes and requirements of these regulations. The instructions and guidance issued pursuant to § 321.27 set forth each Federal Reserve Bank that has been designated as a Federal Reserve Processing Site or as a TRS Site by the Secretary of the Treasury, or a designee. [77 FR 16167, Mar. 20, 2012] § 321.27 Instructions and guidance. (a) The Bureau of the Fiscal Service will provide Federal Reserve Processing Sites, TRS Sites, and paying agents with instructions and guidance on how to process redemption transactions. This information is available online at the Bureau of the Fiscal Service's Web site at www.treasurydirect.gov (b) The Federal Reserve Operating Circular sets forth additional rights and obligations of paying agents with respect to redemption transactions. Additional instructions and guidance are available online at the Federal Reserve Bank Services Web site at www.FRBservices.org. (c) Paying agents are required to process redemptions in accordance with the terms and conditions cited in paragraphs (a) and (b) of this section. The Secretary of the Treasury, or a designee, reserves the right to hold an agent liable whose failure to follow these instructions results in an incorrect amount being paid for a redeemed security. [77 FR 16167, Mar. 20, 2012] § 321.28 Preservation of rights. Nothing contained in this part shall limit or restrict any existing rights which holders of securities may have acquired under the offering circulars and the applicable regulations. [53 FR 37511, Sept. 26, 1988. Redesignated at 77 FR 16167, Mar. 20, 2012] § 321.29 Supplements, amendments, or revisions. The Secretary of the Treasury may, at any time or from time to time, revise, supplement, amend or withdraw, in whole or in part, the provisions of this part. [53 FR 37511, Sept. 26, 1988. Redesignated at 77 FR 16167, Mar. 20, 2012] Appendix to Part 321—Appendix to Department of the Treasury Circular No. 750, Fourth Revision Fiscal Service, Bureau of the Fiscal Service Subpart A—General Information 1. Purpose. 2. Other pertinent publications. (a) Offering circulars. (b) Regulations. Subpart B—Procedures for Qualification 3. Qualification of branches. 4. Paying agent code numbers. 5. Requalification. 6. Announcement of authority. (a) “We are an authorized agent for payment of U.S. Savings Bonds and U.S. Savings Notes (Freedom Shares).” (b) “This (bank/savings and loan association/credit union, etc.) is authorized to pay U.S. Savings Bonds and U.S. Savings Notes (Freedom Shares) and process eligible Series E and EE bonds and savings notes in exchange for Series HH bonds.” Subpart C—Scope of Authority 7. Authorized cash payments. (a) General. (b) Securities submitted by mail. (c) Interest reporting. 8. Redemption-exchange of Series E and EE savings bonds and savings notes. (a) General. (b) Securities in the name of a minor. (c) Interest reporting. 9. Specific limitations on payment authority. (a) Allowable exceptions. (b) Taxpayer identifying number of presenter. (c) Payments to minors. 10. Responsibilities of paying agents. (a) Requirements for redeeming securities. (b) Restrictions. Subpart D—Payment and Transmittal of Securities 11. Identification of presenter. (a) Identification guide. (b) Record of identification practice and evidence presented. [Sec. 321.11 (b) through (d)] At the time of payment, the agent should make a notation on the back of the security or in its own records specifying precisely what was relied on to establish the presenter's identity. The identification should be adequate to identify the payee under the circumstances of the transaction. If an agent redeems a security upon the request of a surviving beneficiary or a legal representative of the last deceased registrant's estate, it should also make a notation of the evidence presented to establish the payee's entitlement; this might include the document or case number on the death certificate(s) and/or evidence of the legal representative's appointment, the date(s) of death, and the names and locations of the issuing authorities. The notations should be sufficient to permit a determination of the evidence of identity and entitlement at a later date. Otherwise, the agent runs the risk that no evidence can be developed to show that it acted without fault or negligence, in which case it could not be relieved of liability should a loss occur. 12. Request for payment. (a) Signature. (b) Address. 13. Redemption value of securities. (a) Redemption value tables. (b) Use of tables. (c) Cash redemption. (d) Redemption-exchange. 14. Cancellation of redeemed securities. (a) Paying agent stamp. 1/8 Paid $___ (for recording amount paid) Name, location, and four-digit paying agent code number assigned by a TRS Site (subject to abbreviation and arrangement by a TRS Site) or ABA code number. Date ___ (for recording actual date of payment). By ___ (for use by agent in recording initials, or signature, codes, symbols, etc., of the officer or employee who approved or made the payment.) (b) Procurement of stamps. (c) Imprinting payment stamp and recording payment date. (d) Redemption-exchange. (e) MICR-encoding of payment information. 15. Transmittal of securities to a Federal Reserve Processing Site. 16. Record of securities paid. Subpart E—Losses Resulting from Erroneous Payments [§ 321.16] 17. Report of erroneous payment. 18. Notice to agent. 19. Determination of liability. (a) Upon completing the investigation, the Bureau of the Fiscal Service will examine the available information and determine whether a paying agent may be relieved of liability for any loss that may have resulted. If the paying agent cannot be relieved of liability, demand will be made upon the paying agent to reimburse the Treasury promptly. Any amount not paid within 30 days following the mailing of the first demand letter is subject to the following charges. (1) Interest shall accrue from the date the first demand letter is mailed to the date reimbursement is made. The rate of interest to be used will be the current value of funds rate published annually or quarterly in the Federal Register (2) Administrative costs shall be assessed as set out in the first demand letter, if reimbursement is not made within 30 days of the date the first demand letter is mailed. (3) Penalty charges shall be assessed, in accordance with 31 U.S.C. 3717(e), if reimbursement is not made within 120 days of the date the first demand letter is mailed. The penalty charge will accrue and be calculated from 30 days after the date the first demand letter is mailed to the date of reimbursement. (b) When a paying agent fails, within 120 days of the date the first demand letter is mailed, to make such reimbursement or to submit new evidence sufficient for Fiscal Service to change the determination of liability, by virtue of the paying agent's acceptance of settlement via credits to a Reserve, correspondent, or clearing account with a Federal Reserve Bank or Branch, the agent is deemed to have authorized the Federal Reserve Bank to debit the amount due from that account designated or utilized by the agent at the Federal Reserve Bank or Branch. An institution, designated by a paying agent to receive settlement on its behalf, in authorizing such paying agent to utilize its Reserve, correspondent, or clearing account on the books at the Federal Reserve Bank shall similarly be deemed to authorize such debits from that account. (c) Reconsideration of a determination of liability will be made in any case when a paying agent so requests and presents additional evidence and information regarding the transaction. 20. Relief for lack of timely notice. Subpart F—Forwarding Items 21. Securities forwarded to a TRS Site for payment. (a) General. (b) Signature to and certification of request for payment. (c) Address and Taxpayer identifying number. (d) Redemption-exchange. (e) Partial redemption. Subpart G—Miscellaneous Provisions 22. Fees and charges. 23. Claims on account of lost securities. 24. Education savings bond program. (a) Section 6009 of the Technical Corrections and Miscellaneous Revenue Act of 1988, Public Law 100-647 (see 26 U.S.C. 135), permits taxpayers to exclude all, or a portion, of the interest earned on Series EE savings bonds bearing issue dates on or after January 1, 1990, and on Series I savings bonds from their income under certain conditions. This legislation did not create new savings bond redemption and interest reporting requirements for savings bond paying agents. However, if a bond owner indicates that he or she intends to seek the special tax treatment offered under this program, the paying agent is encouraged to provide assistance by: (1) Suggesting that he or she read IRS Form 8815 (particularly, the instructions on the form) as well as relevant portions of IRS Publication 17, “Your Federal Income Tax “, and Publication 550, “Investment Income and Expenses,” for detailed information; and (2) Suggesting that the presenter make a record of eligible bonds redeemed either by using IRS Optional Form 8818, or otherwise. (b) Bond owners seeking to benefit from the special tax exclusion, available through the savings bond education feature, should be aware of the following basic rules: (1) Only interest earned on Series EE bonds bearing issue dates on or after January 1, 1990, is eligible for the exclusion of interest income, where the proceeds from the redemption of the bonds are used to pay qualified post-secondary education expenses. Interest received on bonds bearing issue dates prior to January 1, 1990, is not eligible. (2)(i) The bonds must be registered in the name of a taxpayer as sole owner, or in the name of the taxpayer as co-owner, with the taxpayer's spouse as the other co-owner. Bonds registered in the name of the taxpayer's child, as owner or co-owner, will not qualify for the exclusion. A taxpayer may purchase bonds registered in beneficiary form, i.e., “A payable on death to B”, naming any individual, including a child, as beneficary. (ii) The bonds must be registered in the name of a taxpayer who has attained the age of 24 years at the time of issue. Generally, a taxpayer must be 24 years of age on or before the first day of the month in which the taxpayer purchases the bond, because savings bonds bear the issue date of the first day of the month in which purchased. (3) The bond must be redeemed by the owner or co-owner. It may not be transferred to-the educational institution. (4) If the entire amount of the proceeds of the eligible bonds is less than, or equal to, the qualified post-secondary educational expenses incurred by the owner, his or her spouse, or his or her dependent, all interest received is excludable, subject to the limitations in paragraph (b)(7) of this section. If the amount of the proceeds exceeds such qualified expenses, the excludable portion of the interest will be reduced by a pro rata amount. (5) Qualified educational expenses are limited to tuition and fees required for the enrollment of, or attendance by, the taxpayer, or the taxpayer's spouse or dependent, at an eligible educational institution. These expenses are calculated net of scholarships, fellowships, employer-provided educational assistance, and other tuition reduction amounts, and must be incurred during the tax year of the redemption of the bonds for which the interest exclusion is claimed. (6) Eligible educational institutions include those defined in sections 1201(a) and 481(a)(1) (C) and (D) of the Higher Education Act of 1965, as in effect on October 21, 1988, excluding proprietary institutions. Such eligible institutions include post-secondary institutions, and vocational schools that meet the standards for participation in Federal financial aid programs, excluding proprietary institutions. Additional gudiance concerning eligible institutions should be obtained from the Department of Education. (7)(i) Interest exclusion benefits are based on the modified adjusted gross income of the taxpayer. For taxpayers filing a joint Federal income tax return, the exclusion is gradually decreased for modified adjusted gross income between $60,000 and $90,000. Married taxpayers filing jointly who have modified adjusted gross incomes above $90,000 are ineligible for the exclusion. For single taxpayers and heads of households, the exclusion is gradually decreased for such incomes between $40,000 and $55,000. Single taxpayers with such incomes above $55,000 are ineligible for the exclusion. After 1990, these income limits will be adjusted for inflation. (ii) Married taxpayers must file a joint return in order to qualify for the exclusion. Married taxpayers filing separate returns will not qualify for the exclusion, regardless of their modified adjusted gross incomes. (8) The taxpayer is responsible for maintaining adequate records of bond redemption transactions to support claims for the exclusion, in accordance with applicable rules and regulations of the Internal Revenue Service. (9) The Internal Revenue Service should be consulted for advice concerning the eligibility and tax treatment of bonds for the income exclusion under the educational savings bond program. 25. Payment and retention of definitive securities. (a) Example: if the agent paid the presenter of a security on May 7, 2012, and submitted the security's electronic image to a Federal Reserve Processing Site on May 11, 2012, then the retention requirements would obligate the agent to retain the definitive security, at a minimum, until June 10, 2012. (b) During the specified retention period, agents must store the securities under suitably secured conditions that safeguard customer information. Specifically, the securities must be stored in a secured location with physical, procedural, and systemic controls in place to ensure that access to the securities is restricted to authorized personnel and that the securities are protected from loss, theft, destruction, and unauthorized or inadvertent viewing. (c) At the end of the retention period, agents must destroy the securities in a manner that safeguards customer information. Specifically, securities must be destroyed by burning, mulching, pulping, pulverizing, or shredding beyond recognition and reconstruction. 26. Additional information. [53 FR 37511, Sept. 26, 1988; 53 FR 39581, Oct. 7, 1988, as amended at 55 FR 35397, Aug. 29, 1990; 59 FR 10538, Mar. 4, 1994; 61 FR 37197, July 16, 1996; 63 FR 38042, 38043, July 14, 1998; 68 FR 2666, Jan. 17, 2003; 68 FR 7427, Feb. 14, 2003; 77 FR 16167, Mar. 20, 2012]