80 FR 37559 - Regulations Governing United States Savings Bonds

DEPARTMENT OF THE TREASURY
Fiscal Service

Federal Register Volume 80, Issue 126 (July 1, 2015)

Page Range		37559-37562
FR Document		2015-16278
The United States Department of the Treasury, Bureau of the Fiscal Service, is proposing regulations governing United States savings bonds to address certain state escheat claims.
Federal Register, Volume 80 Issue 126 (Wednesday, July 1, 2015)
[Federal Register Volume 80, Number 126 (Wednesday, July 1, 2015)]
[Proposed Rules]
[Pages 37559-37562]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-16278]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 315, 353, and 360

[Docket No.: FISCAL-2015-0002]
RIN 1530-AA11


Regulations Governing United States Savings Bonds

AGENCY: Bureau of the Fiscal Service, Fiscal Service, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The United States Department of the Treasury, Bureau of the 
Fiscal Service, is proposing regulations governing United States 
savings bonds to address certain state escheat claims.

DATES: Comment due date: August 17, 2015.

ADDRESSES: The Bureau of the Fiscal Service invites comments on this 
proposed rule. Comments may be submitted through one of the following 
methods:
    Electronic Submission of Comments: Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. Electronic submission of comments allows 
the commenter maximum time to prepare and submit a comment, ensures 
timely receipt, and enables the Department to make them available to 
the public. Comments submitted electronically through the http://www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public.
    Mail: Send to Department of the Treasury, Bureau of the Fiscal 
Service, Attn: Theodore Simms, 401 14th Street, SW., Washington, DC 
20227-0001. In general, Treasury will post all comments to http://www.regulations.gov without change, including any business or personal 
information provided, such as names, addresses, email addresses, or 
telephone numbers. Treasury will also make such comments available for 
public inspection and copying. You can make an appointment to inspect 
comments by telephoning (202) 504-3710. All comments received, 
including attachments and other supporting materials, will be part of 
the public record and subject to public disclosure. You should only 
submit information that you wish to make publicly available.

FOR FURTHER INFORMATION CONTACT: Theodore C. Simms II, Senior Attorney, 
202-504-3710 or [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    The Department of the Treasury has issued savings bonds since 1935 
to raise funds for the operation of the Federal government, and to 
encourage savings by small investors. From the beginning of the savings 
bond program, savings bonds have been registered securities. Treasury 
has authorized several forms of registration, including registration to 
individuals, co-owners, fiduciaries, institutions, and beneficiaries. 
See 31 CFR 315.7, 353.7, and 360.6. Savings bonds generally are not 
transferrable and are payable only to the registered owner, except as 
described in Treasury regulations. See 31 CFR 315.15, 353.15, and 
360.15. Detailed regulations describe when payment will be made to a 
person or entity that is not the registered owner.
    Ownership of a savings bond is determined by Treasury's savings 
bond regulations. Federal and state courts, including the United States 
Supreme Court, have upheld these ownership rights against challenges by 
parties asserting claims under state law. See, e.g., Free v. Bland, 369 
U.S. 663 (1962). The rights of registered owners and others under 
Treasury regulations persist even for bonds that matured years ago, 
because Treasury does not require owners to redeem their paper savings 
bonds by a certain date.
    In some cases, Treasury regulations determine who is entitled to 
payment based on state law. Treasury may look to state probate law, for 
example, to determine who is entitled to payment for savings bonds in a 
decedent's estate. See 31 CFR 315.71, 353.71, and 360.71. Treasury may 
also recognize certain state judicial proceedings that require payment 
to creditors, divorced spouses, and other claimants specifically listed 
in the regulations. See 31 CFR part 315, subpart E; Part 353, subpart 
E; part 360, subpart E. The touchstone for these claims, however, is 
Treasury's savings bond regulations.
    Since at least 1952, Treasury has acknowledged circumstances when 
it will recognize a state's claim of title to savings bonds based on a 
judgment of escheat. ``Escheat'' describes a state's claim to property 
that has no owner. Many state probate laws allow a state to escheat the 
property of a person who dies without a will and without heirs. 
Treasury regulations do not specifically mention escheat, but they do 
provide that Treasury will pay a person entitled to the estate of a 
deceased savings bond owner in specified circumstances. When these 
circumstances are met, Treasury will pay a state that has title to 
savings bonds in the estate of a deceased owner. Like all claimants, 
the state must present the bonds to Treasury or otherwise meet 
Treasury's requirements for payment.
    In recent years, states have submitted escheat claims to Treasury 
for savings bonds based on state unclaimed property laws, when there is 
no evidence that the savings bond owner has died. The first claims came 
from states whose escheat laws purported to give them custody, but not 
title, to certain unredeemed savings bonds. In 2012, the United States 
Court of Appeals for the Third Circuit upheld Treasury's position that 
states are not entitled to payment for savings bonds held only in their 
custody, because such claims interfere with the rights of registered 
owners and others under Treasury regulations. New Jersey v. U.S. Dept. 
of Treasury, 684 F.3d 382 (3rd Cir. 2012).
    More recently, the State of Kansas submitted an escheat claim based 
upon a state court judgment that purported to convey title over certain 
unredeemed savings bonds. Kansas sought to redeem savings bonds in its 
possession, which had been turned over to the state as unclaimed 
property, and to redeem a much larger class of savings bonds that it 
did not possess. In this class are matured, unredeemed savings bonds

[[Page 37560]]

that were registered to an owner with an address in Kansas, generally 
more than thirty years ago. Kansas cannot identify who owns these 
bonds, where the owners currently reside, or whether the owners intend 
to redeem their bonds in the future. The physical bonds themselves may 
be in their owners' possession. Kansas asserted that Treasury was bound 
to accept its claim because the state court judgment was a valid 
judicial proceeding, citing 31 CFR 315.20.
    The savings bond regulations do not require Treasury to recognize 
the Kansas escheat judgment. However, Treasury does acknowledge that a 
savings bond can be abandoned, with no one entitled to payment under 
Treasury regulations. Treasury agreed to redeem the savings bonds that 
Kansas possessed using Treasury's waiver authority under 31 CFR 315.90, 
after reviewing evidence showing that the bonds had been abandoned, and 
determining that redemption would not impair any existing rights or 
subject the United States to any substantial expense or liability. In 
addition to other facts presented by the state, Kansas's possession of 
the bonds was evidence of abandonment, as well as a guarantee that no 
one else could submit the bonds for payment.
    Treasury did not redeem the broad class of savings bonds that 
Kansas did not possess. Because Treasury regulations do not require a 
savings bond owner to redeem bonds by a certain date, a bond is not 
abandoned merely because it has not been redeemed. Treasury's standard 
procedures for redeeming savings bonds allow the registered owner to 
present a matured bond for payment at any time, irrespective of state 
law. Recognizing Kansas's escheat claim to bonds that it does not 
possess, and cannot establish are abandoned, would impair the rights of 
registered owners and others under Treasury regulations, and expose 
Treasury to claims for double payment.
    Kansas sued Treasury in the United States Court of Federal Claims, 
seeking payment for all matured, unredeemed savings bonds with 
registration addresses in Kansas that were issued between 1935 and 
1974, as well as other relief. At issue in the ongoing litigation is 
whether Treasury's savings bond regulations at 31 CFR 315.20 require 
Treasury to recognize the Kansas escheat judgment. Although the 
regulations do not require Treasury to recognize a state escheat 
judgment for unclaimed property, especially a judgment that interferes 
with existing rights, Treasury is proposing to amend 31 CFR 315.20 and 
other sections to address issues that arise from state escheat claims.

II. This Proposed Rule

    Treasury proposes to amend its savings bond regulations to 
explicitly address state escheat claims to unclaimed savings bonds. The 
amendments would be published at part 315, subparts E and O; part 353, 
subparts E and O; and part 360, subparts E and M.
    One group of amendments further defines the scope of the judicial 
proceedings covered by subpart E in parts 315, 353, and 360. The 
proposed amendments explicitly provide that escheat proceedings will 
not be recognized under subpart E.
    A second group of amendments establishes a new procedure for states 
to submit escheat claims under their unclaimed property statutes for 
Treasury's consideration. The proposed regulations provide Treasury 
with discretion to recognize an escheat judgment that purports to vest 
a state with title to a definitive savings bond that has reached the 
final extended maturity date and is in the state's possession, when the 
state presents evidence satisfactory to Treasury that the bond has been 
abandoned by all persons entitled to payment under Treasury 
regulations. Escheat judgments that purport to vest a state with title 
to bonds that the state does not possess will not be recognized.
    The proposed regulations would require a state to demonstrate, at a 
minimum, that it made reasonable efforts to provide actual and 
constructive notice of the escheat proceeding to all persons listed on 
the face of the bond and all persons who may have an interest in the 
bond. The state must also demonstrate that those persons had an 
opportunity to be heard before the escheat judgment was entered. The 
steps normally required in a state escheat proceeding may be adequate 
to establish abandonment, but Treasury is not bound by these 
proceedings. Because state escheat rules may vary and state escheat 
proceedings are often uncontested, Treasury reserves the right to 
require additional evidence of abandonment. Under the proposed 
regulations, if a state seeks to redeem bonds in its possession to 
which it has obtained title via escheat, the proceeding must have 
provided notice and an opportunity to be heard to those who the state 
claims have abandoned their right to payment. Treasury may also require 
a bond of indemnity, with or without surety, in any case for the 
protection of the United States' interests. See 31 CFR 315.91, 353.91, 
and 360.91.
    The proposed regulations make explicit that Treasury will not 
recognize escheat judgments that convey custody, but not title, to a 
state. This principle is well established in Federal case law and has 
been incorporated into the proposed regulation.
    Treasury proposes to recognize escheat judgments regarding bonds in 
a state's possession as a discretionary matter, because the breadth of 
state escheat laws is not within Treasury's control. In exercising 
discretion, Treasury will consider whether a state's escheat claim 
impairs any existing rights under Treasury regulations and will assess 
the risk to Treasury of duplicative payment claims. Requiring states to 
possess the bonds that they seek to redeem protects these interests, 
and enables Treasury to locate records of the bonds for which the state 
seeks payment.
    The proposed regulations on escheat claims to unclaimed property do 
not apply when a state claims title to a definitive savings bond as the 
heir to a deceased owner. Treasury has long recognized circumstances in 
which a state may obtain title to a savings bond by escheat when the 
bond owner has died. These escheat claims will be considered under 
existing savings bond regulations that pertain to the estates of 
deceased owners, co-owners, and beneficiaries. See 31 CFR part 315, 
subpart L; part 353, subpart L; and part 360, subpart L.

III. Procedural Requirements

A. Administrative Procedure Act (APA).

    Because this proposed rule relates to United States securities, 
which are contracts between Treasury and the owner of the security, 
this rulemaking falls within the contract exception to the APA at 5 
U.S.C. 553(a)(2). Treasury, however, is voluntarily seeking public 
comment to assist the agency in giving full consideration to the 
matters discussed in the proposed rule.

B. Congressional Review Act (CRA).

    This proposed rule is not a major rule pursuant to the CRA, 5 
U.S.C. 801 et seq. It is not expected to lead to any of the results 
listed in 5 U.S.C. 804(2). This proposed rule may take immediate effect 
after we submit a copy of it to Congress and the Comptroller General.

C. Paperwork Reduction Act (PRA).

    There is no new collection of information contained in this 
proposed rule that would be subject to the PRA, 44 U.S.C. 3501 et seq. 
Under the PRA,

[[Page 37561]]

an agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a valid OMB 
control number.

D. Regulatory Flexibility Act.

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., does not 
apply to this rulemaking because, pursuant to 5 U.S.C. 553(a)(2), 
issuance does not require notice and opportunity for public comment. 
Nonetheless, this proposed rule will not have a significant economic 
impact on a substantial number of small entities. This rulemaking 
primarily affects states and is not expected to have a direct impact on 
any small entities. The proposed rule formally states Treasury's 
existing interpretation of the savings bond regulations as they apply 
to escheat claims, and proposes a new procedure through which states 
can submit claims to Treasury. Treasury is voluntarily seeking public 
comment in order to give thorough consideration to a range of views on 
state escheat claims before issuing the final rule.

E. Executive Order 12866.

    This rule is not a significant regulatory action pursuant to 
Executive Order 12866.

List of Subjects in 31 CFR Part 315

    Government securities, Savings bonds.

List of Subjects in 31 CFR Part 353

    Government securities, Savings bonds.

List of Subjects in 31 CFR Part 360

    Government securities, Savings bonds.

    Accordingly, for the reasons set out in the preamble, the 
Department of the Treasury proposes to amend 31 CFR part 315 subparts E 
and O; part 353 subparts E and O; and part 360 subparts E and M to read 
as follows:

PART 315--REGULATIONS GOVERNING U.S. SAVINGS BONDS, SERIES A, B, C, 
D, E, F, G, H, J, AND K, AND U.S. SAVINGS NOTES

0
1. The authority citation for part 315 continues to read as follows:

    Authority: 31 U.S.C. 3105 and 5 U.S.C. 301.

0
2. Amend Sec.  315.20 by revising paragraph (b) to read as follows:


Sec.  315.20  General

* * * * *
    (b) The Department of the Treasury will recognize a claim against 
an owner of a savings bond and conflicting claims of ownership of, or 
interest in, a bond between coowners or between the registered owner 
and the beneficiary, if established by valid, judicial proceedings 
specifically listed in this subpart. Escheat proceedings will not be 
recognized under this subpart. Section 315.23 specifies the evidence 
required to establish the validity of the judicial proceedings.
* * * * *
0
3. Redesignate subpart O as subpart P and add a new subpart O to read 
as follows:

Subpart O--Escheat and Unclaimed Property Claims by States

Sec.
315.88 Payment to a State claiming title to abandoned bonds.

Sec.  315.88  Payment to a State claiming title to abandoned bonds.

    (a) General. The Department of the Treasury may, in its discretion, 
recognize an escheat judgment that purports to vest a State with title 
to a definitive savings bond that has reached the final extended 
maturity date and is in the State's possession, when the State presents 
evidence satisfactory to Treasury that the bond has been abandoned by 
all persons entitled to payment under Treasury regulations. A State 
claiming title to a definitive savings bond as the heir to a deceased 
owner must comply with the requirements of subpart L, and not this 
section. Treasury will not recognize an escheat judgment that purports 
to vest a State with title to a bond that has not reached its final 
extended maturity date. Treasury also will not recognize an escheat 
judgment that purports to vest a State with title to a bond that the 
State does not possess, or a judgment that purports to grant the State 
custody of a bond, but not title.
    (b) Due Process. At a minimum, a State requesting payment under 
this section must demonstrate to Treasury's satisfaction that it made 
reasonable efforts to provide actual and constructive notice of the 
escheat proceeding to all persons listed on the face of the bond and 
all persons who may have an interest in the bond, and that those 
persons had an opportunity to be heard before the escheat judgment was 
entered.
    (c) Fulfillment of Obligation. Payment to a State claiming title 
under this section fulfills the United States' obligations to the same 
extent as if payment had been made to the registered owner.

PART 353--REGULATIONS GOVERNING DEFINITIVE UNITED STATES SAVINGS 
BONDS, SERIES EE AND HH

0
1. The authority for this part continues to read:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105, 3125.

0
2. Amend Sec.  353.20 by revising paragraph (b) to read as follows:


Sec.  353.20  General .

* * * * *
    (b) The Department of the Treasury will recognize a claim against 
an owner of a savings bond and conflicting claims of ownership of, or 
interest in, a bond between coowners or between the registered owner 
and the beneficiary, if established by valid, judicial proceedings 
specifically listed in this subpart. Escheat proceedings will not be 
recognized under this subpart. Section 353.23 specifies the evidence 
required to establish the validity of the judicial proceedings.
* * * * *
0
3. Redesignate subpart O as subpart P and add a new subpart O to read 
as follows:

Subpart O--Escheat and Unclaimed Property Claims by States

Sec.
353.88 Payment to a State claiming title to abandoned bonds.

Sec.  353.88  Payment to a State claiming title to abandoned bonds.

    (a) General. The Department of the Treasury may, in its discretion, 
recognize an escheat judgment that purports to vest a State with title 
to a definitive savings bond that has reached final maturity and is in 
the State's possession, when the State presents evidence satisfactory 
to Treasury that the bond has been abandoned by all persons entitled to 
payment under Treasury regulations. A State claiming title to a 
definitive savings bond as the heir to a deceased owner must comply 
with the requirements of subpart L, and not this section. Treasury will 
not recognize an escheat judgment that purports to vest a State with 
title to a bond that has not reached its final maturity. Treasury also 
will not recognize escheat judgments that purport to vest a State with 
title to a bond that the State does not possess, or judgments that 
purport to grant the State custody of a bond, but not title.
    (b) Due Process. At a minimum, a State requesting payment under 
this section must demonstrate to Treasury's satisfaction that it made 
reasonable

[[Page 37562]]

efforts to provide actual and constructive notice of the escheat 
proceeding to all persons listed on the face of the bond and all 
persons who may have an interest in the bond, and that those persons 
had an opportunity to be heard before the escheat judgment was entered.
    (c) Fulfillment of Obligation. Payment to a State claiming title 
under this section fulfills the United States' obligations to the same 
extent as if payment had been made to the registered owner.

PART 360--REGULATIONS GOVERNING DEFINITIVE UNITED STATES SAVINGS 
BONDS, SERIES I

0
1. The authority for this part continues to read:

    Authority:  5 U.S.C. 301; 31 U.S.C. 3105 and 3125.

0
2. Amend Sec.  360.20 by revising paragraph (b) to read as follows:


Sec.  360.20  General

* * * * *
    (b) The Department of the Treasury will recognize a claim against 
an owner of a savings bond and conflicting claims of ownership of, or 
interest in, a bond between coowners or between the registered owner 
and the beneficiary, if established by valid, judicial proceedings 
specifically listed in this subpart. Escheat proceedings will not be 
recognized under this subpart. Section 360.23 specifies the evidence 
required to establish the validity of the judicial proceedings.
* * * * *
0
3. Redesignate subpart M as subpart N and add a new subpart M to read 
as follows:

Subpart M--Escheat and Unclaimed Property Claims by States

Sec.
360.77 Payment to a State claiming title to abandoned bonds.

Sec.  360.77  Payment to a State claiming title to abandoned bonds.

    (a) General. The Department of the Treasury may, in its discretion, 
recognize an escheat judgment that purports to vest a State with title 
to a definitive savings bond that has stopped earning interest and is 
in the State's possession, when the State presents evidence 
satisfactory to Treasury that the bond has been abandoned by all 
persons entitled to payment under Treasury regulations. A State 
claiming title to a definitive savings bond as the heir to a deceased 
owner must comply with the requirements of subpart L of this part, and 
not this section. Treasury will not recognize an escheat judgment that 
purports to vest a State with title to a bond that is still earning 
interest. Treasury also will not recognize escheat judgments that 
purport to vest a State with title to a bond that the State does not 
possess, or judgments that purport to grant the State custody of a 
bond, but not title.
    (b) Due Process. At a minimum, a State requesting payment under 
this section must demonstrate to Treasury's satisfaction that it made 
reasonable efforts to provide actual and constructive notice of the 
escheat proceeding to all persons listed on the face of the bond and 
all persons who may have an interest in the bond, and that those 
persons had an opportunity to be heard before the escheat judgment was 
entered.
    (c) Fulfillment of Obligation. Payment to a State claiming title 
under this section fulfills the United States' obligations to the same 
extent as if payment had been made to the registered owner.

    Dated: June 26, 2015.
David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2015-16278 Filed 6-30-15; 8:45 am]
 BILLING CODE 4810-AS-P
Federal Register / Vol. 80, No. 126 / Wednesday, July 1, 2015 / Proposed Rules 37559

C. Information Identifying the Person receipt, and enables the Department to require owners to redeem their paper
Submitting the Comment make them available to the public. savings bonds by a certain date.
Comments submitted electronically In some cases, Treasury regulations
Please note that your name, contact
through the http://www.regulations.gov determine who is entitled to payment
information, and other information
Web site can be viewed by other based on state law. Treasury may look
identifying you will be posted on http://
commenters and interested members of to state probate law, for example, to
www.regulations.gov if you include that
the public. determine who is entitled to payment
information in the body of your
Mail: Send to Department of the for savings bonds in a decedent’s estate.
comments. For electronic comments See 31 CFR 315.71, 353.71, and 360.71.
submitted to http:// Treasury, Bureau of the Fiscal Service,
Attn: Theodore Simms, 401 14th Street, Treasury may also recognize certain
www.regulations.gov, FDA will post the state judicial proceedings that require
body of your comment on http:// SW., Washington, DC 20227–0001. In
general, Treasury will post all payment to creditors, divorced spouses,
www.regulations.gov along with your and other claimants specifically listed
State/province and country (if comments to http://www.regulations.gov
without change, including any business in the regulations. See 31 CFR part 315,
provided), the name of your subpart E; Part 353, subpart E; part 360,
representative (if any), and the category or personal information provided, such
as names, addresses, email addresses, or subpart E. The touchstone for these
identifying you (e.g., individual, claims, however, is Treasury’s savings
consumer, academic, industry). For telephone numbers. Treasury will also
make such comments available for bond regulations.
written submissions submitted to the Since at least 1952, Treasury has
Division of Dockets Management, FDA public inspection and copying. You can
make an appointment to inspect acknowledged circumstances when it
will post the body of your comments on will recognize a state’s claim of title to
http://www.regulations.gov, but you can comments by telephoning (202) 504–
3710. All comments received, including savings bonds based on a judgment of
put your name and/or contact escheat. ‘‘Escheat’’ describes a state’s
information on a separate cover sheet attachments and other supporting
claim to property that has no owner.
and not in the body of your comments. materials, will be part of the public
Many state probate laws allow a state to
record and subject to public disclosure.
Dated: June 26, 2015. escheat the property of a person who
You should only submit information
Leslie Kux, dies without a will and without heirs.
that you wish to make publicly
Associate Commissioner for Policy. Treasury regulations do not specifically
available.
[FR Doc. 2015–16151 Filed 6–30–15; 8:45 am]
mention escheat, but they do provide
FOR FURTHER INFORMATION CONTACT: that Treasury will pay a person entitled
BILLING CODE 4164–01–P
Theodore C. Simms II, Senior Attorney, to the estate of a deceased savings bond
202–504–3710 or Theodore.Simms@ owner in specified circumstances. When
fiscal.treasury.gov. these circumstances are met, Treasury
DEPARTMENT OF THE TREASURY will pay a state that has title to savings
SUPPLEMENTARY INFORMATION:
bonds in the estate of a deceased owner.
Fiscal Service Like all claimants, the state must
I. Background
present the bonds to Treasury or
31 CFR Parts 315, 353, and 360 The Department of the Treasury has otherwise meet Treasury’s requirements
issued savings bonds since 1935 to raise for payment.
[Docket No.: FISCAL–2015–0002]
funds for the operation of the Federal In recent years, states have submitted
RIN 1530–AA11 government, and to encourage savings escheat claims to Treasury for savings
by small investors. From the beginning bonds based on state unclaimed
Regulations Governing United States of the savings bond program, savings property laws, when there is no
Savings Bonds bonds have been registered securities. evidence that the savings bond owner
Treasury has authorized several forms of has died. The first claims came from
AGENCY: Bureau of the Fiscal Service, registration, including registration to
Fiscal Service, Treasury. states whose escheat laws purported to
individuals, co-owners, fiduciaries, give them custody, but not title, to
ACTION: Notice of proposed rulemaking. institutions, and beneficiaries. See 31 certain unredeemed savings bonds. In
CFR 315.7, 353.7, and 360.6. Savings 2012, the United States Court of
SUMMARY: The United States Department
bonds generally are not transferrable Appeals for the Third Circuit upheld
of the Treasury, Bureau of the Fiscal
and are payable only to the registered Treasury’s position that states are not
Service, is proposing regulations
owner, except as described in Treasury entitled to payment for savings bonds
governing United States savings bonds
regulations. See 31 CFR 315.15, 353.15, held only in their custody, because such
to address certain state escheat claims.
and 360.15. Detailed regulations claims interfere with the rights of
DATES: Comment due date: August 17, describe when payment will be made to registered owners and others under
2015. a person or entity that is not the Treasury regulations. New Jersey v. U.S.
ADDRESSES: The Bureau of the Fiscal registered owner. Dept. of Treasury, 684 F.3d 382 (3rd Cir.
Service invites comments on this Ownership of a savings bond is 2012).
proposed rule. Comments may be determined by Treasury’s savings bond More recently, the State of Kansas
submitted through one of the following regulations. Federal and state courts, submitted an escheat claim based upon
methods: including the United States Supreme a state court judgment that purported to
tkelley on DSK3SPTVN1PROD with PROPOSALS

Electronic Submission of Comments: Court, have upheld these ownership convey title over certain unredeemed
Interested persons may submit rights against challenges by parties savings bonds. Kansas sought to redeem
comments electronically through the asserting claims under state law. See, savings bonds in its possession, which
Federal eRulemaking Portal at http:// e.g., Free v. Bland, 369 U.S. 663 (1962). had been turned over to the state as
www.regulations.gov. Electronic The rights of registered owners and unclaimed property, and to redeem a
submission of comments allows the others under Treasury regulations much larger class of savings bonds that
commenter maximum time to prepare persist even for bonds that matured it did not possess. In this class are
and submit a comment, ensures timely years ago, because Treasury does not matured, unredeemed savings bonds

VerDate Sep<11>2014 18:04 Jun 30, 2015 Jkt 235001 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 E:\FR\FM\01JYP1.SGM 01JYP1
37560 Federal Register / Vol. 80, No. 126 / Wednesday, July 1, 2015 / Proposed Rules

that were registered to an owner with an address issues that arise from state interests. See 31 CFR 315.91, 353.91,
address in Kansas, generally more than escheat claims. and 360.91.
thirty years ago. Kansas cannot identify The proposed regulations make
II. This Proposed Rule
who owns these bonds, where the explicit that Treasury will not recognize
owners currently reside, or whether the Treasury proposes to amend its escheat judgments that convey custody,
owners intend to redeem their bonds in savings bond regulations to explicitly but not title, to a state. This principle is
the future. The physical bonds address state escheat claims to well established in Federal case law and
themselves may be in their owners’ unclaimed savings bonds. The has been incorporated into the proposed
possession. Kansas asserted that amendments would be published at part regulation.
Treasury was bound to accept its claim 315, subparts E and O; part 353, Treasury proposes to recognize
because the state court judgment was a subparts E and O; and part 360, subparts escheat judgments regarding bonds in a
valid judicial proceeding, citing 31 CFR E and M. state’s possession as a discretionary
315.20. One group of amendments further matter, because the breadth of state
The savings bond regulations do not defines the scope of the judicial escheat laws is not within Treasury’s
require Treasury to recognize the Kansas proceedings covered by subpart E in control. In exercising discretion,
escheat judgment. However, Treasury parts 315, 353, and 360. The proposed Treasury will consider whether a state’s
does acknowledge that a savings bond amendments explicitly provide that escheat claim impairs any existing
can be abandoned, with no one entitled escheat proceedings will not be rights under Treasury regulations and
to payment under Treasury regulations. recognized under subpart E. will assess the risk to Treasury of
Treasury agreed to redeem the savings A second group of amendments duplicative payment claims. Requiring
bonds that Kansas possessed using establishes a new procedure for states to states to possess the bonds that they
Treasury’s waiver authority under 31 submit escheat claims under their seek to redeem protects these interests,
CFR 315.90, after reviewing evidence unclaimed property statutes for and enables Treasury to locate records
showing that the bonds had been Treasury’s consideration. The proposed of the bonds for which the state seeks
abandoned, and determining that regulations provide Treasury with payment.
redemption would not impair any discretion to recognize an escheat The proposed regulations on escheat
existing rights or subject the United claims to unclaimed property do not
judgment that purports to vest a state
States to any substantial expense or apply when a state claims title to a
with title to a definitive savings bond
liability. In addition to other facts definitive savings bond as the heir to a
that has reached the final extended
presented by the state, Kansas’s deceased owner. Treasury has long
maturity date and is in the state’s
possession of the bonds was evidence of recognized circumstances in which a
possession, when the state presents
abandonment, as well as a guarantee state may obtain title to a savings bond
evidence satisfactory to Treasury that
that no one else could submit the bonds by escheat when the bond owner has
the bond has been abandoned by all
for payment. died. These escheat claims will be
Treasury did not redeem the broad persons entitled to payment under
Treasury regulations. Escheat judgments considered under existing savings bond
class of savings bonds that Kansas did
that purport to vest a state with title to regulations that pertain to the estates of
not possess. Because Treasury
bonds that the state does not possess deceased owners, co-owners, and
regulations do not require a savings
will not be recognized. beneficiaries. See 31 CFR part 315,
bond owner to redeem bonds by a
The proposed regulations would subpart L; part 353, subpart L; and part
certain date, a bond is not abandoned
require a state to demonstrate, at a 360, subpart L.
merely because it has not been
redeemed. Treasury’s standard minimum, that it made reasonable III. Procedural Requirements
procedures for redeeming savings bonds efforts to provide actual and
allow the registered owner to present a constructive notice of the escheat A. Administrative Procedure Act (APA).
matured bond for payment at any time, proceeding to all persons listed on the Because this proposed rule relates to
irrespective of state law. Recognizing face of the bond and all persons who United States securities, which are
Kansas’s escheat claim to bonds that it may have an interest in the bond. The contracts between Treasury and the
does not possess, and cannot establish state must also demonstrate that those owner of the security, this rulemaking
are abandoned, would impair the rights persons had an opportunity to be heard falls within the contract exception to the
of registered owners and others under before the escheat judgment was APA at 5 U.S.C. 553(a)(2). Treasury,
Treasury regulations, and expose entered. The steps normally required in however, is voluntarily seeking public
Treasury to claims for double payment. a state escheat proceeding may be comment to assist the agency in giving
Kansas sued Treasury in the United adequate to establish abandonment, but full consideration to the matters
States Court of Federal Claims, seeking Treasury is not bound by these discussed in the proposed rule.
payment for all matured, unredeemed proceedings. Because state escheat rules
savings bonds with registration may vary and state escheat proceedings B. Congressional Review Act (CRA).
addresses in Kansas that were issued are often uncontested, Treasury reserves This proposed rule is not a major rule
between 1935 and 1974, as well as other the right to require additional evidence pursuant to the CRA, 5 U.S.C. 801 et
relief. At issue in the ongoing litigation of abandonment. Under the proposed seq. It is not expected to lead to any of
is whether Treasury’s savings bond regulations, if a state seeks to redeem the results listed in 5 U.S.C. 804(2). This
regulations at 31 CFR 315.20 require bonds in its possession to which it has proposed rule may take immediate
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Treasury to recognize the Kansas obtained title via escheat, the effect after we submit a copy of it to
escheat judgment. Although the proceeding must have provided notice Congress and the Comptroller General.
regulations do not require Treasury to and an opportunity to be heard to those
recognize a state escheat judgment for who the state claims have abandoned C. Paperwork Reduction Act (PRA).
unclaimed property, especially a their right to payment. Treasury may There is no new collection of
judgment that interferes with existing also require a bond of indemnity, with information contained in this proposed
rights, Treasury is proposing to amend or without surety, in any case for the rule that would be subject to the PRA,
31 CFR 315.20 and other sections to protection of the United States’ 44 U.S.C. 3501 et seq. Under the PRA,

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Federal Register / Vol. 80, No. 126 / Wednesday, July 1, 2015 / Proposed Rules 37561

an agency may not conduct or sponsor, of ownership of, or interest in, a bond PART 353—REGULATIONS
and a person is not required to respond between coowners or between the GOVERNING DEFINITIVE UNITED
to, a collection of information unless it registered owner and the beneficiary, if STATES SAVINGS BONDS, SERIES EE
displays a valid OMB control number. established by valid, judicial AND HH
proceedings specifically listed in this
D. Regulatory Flexibility Act. ■ 1. The authority for this part
subpart. Escheat proceedings will not be
The Regulatory Flexibility Act, 5 recognized under this subpart. Section continues to read:
U.S.C. 601 et seq., does not apply to this 315.23 specifies the evidence required Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31
rulemaking because, pursuant to 5 to establish the validity of the judicial U.S.C. 3105, 3125.
U.S.C. 553(a)(2), issuance does not proceedings. ■ 2. Amend § 353.20 by revising
require notice and opportunity for * * * * * paragraph (b) to read as follows:
public comment. Nonetheless, this
proposed rule will not have a significant ■ 3. Redesignate subpart O as subpart P § 353.20 General .
economic impact on a substantial and add a new subpart O to read as * * * * *
number of small entities. This follows: (b) The Department of the Treasury
rulemaking primarily affects states and will recognize a claim against an owner
Subpart O—Escheat and Unclaimed of a savings bond and conflicting claims
is not expected to have a direct impact
Property Claims by States of ownership of, or interest in, a bond
on any small entities. The proposed rule
formally states Treasury’s existing between coowners or between the
Sec. registered owner and the beneficiary, if
interpretation of the savings bond 315.88 Payment to a State claiming title to
regulations as they apply to escheat established by valid, judicial
abandoned bonds.
claims, and proposes a new procedure proceedings specifically listed in this
through which states can submit claims subpart. Escheat proceedings will not be
§ 315.88 Payment to a State claiming title
to Treasury. Treasury is voluntarily to abandoned bonds. recognized under this subpart. Section
seeking public comment in order to give 353.23 specifies the evidence required
thorough consideration to a range of (a) General. The Department of the to establish the validity of the judicial
views on state escheat claims before Treasury may, in its discretion, proceedings.
issuing the final rule. recognize an escheat judgment that * * * * *
purports to vest a State with title to a ■ 3. Redesignate subpart O as subpart P
E. Executive Order 12866. definitive savings bond that has reached and add a new subpart O to read as
This rule is not a significant the final extended maturity date and is follows:
regulatory action pursuant to Executive in the State’s possession, when the State
Order 12866. presents evidence satisfactory to Subpart O—Escheat and Unclaimed
Treasury that the bond has been Property Claims by States
List of Subjects in 31 CFR Part 315 abandoned by all persons entitled to
Government securities, Savings payment under Treasury regulations. A Sec.
bonds. State claiming title to a definitive 353.88 Payment to a State claiming title to
savings bond as the heir to a deceased abandoned bonds.
List of Subjects in 31 CFR Part 353
owner must comply with the
Government securities, Savings requirements of subpart L, and not this § 353.88 Payment to a State claiming title
bonds. section. Treasury will not recognize an to abandoned bonds.
escheat judgment that purports to vest a (a) General. The Department of the
List of Subjects in 31 CFR Part 360 Treasury may, in its discretion,
State with title to a bond that has not
Government securities, Savings reached its final extended maturity date. recognize an escheat judgment that
bonds. Treasury also will not recognize an purports to vest a State with title to a
Accordingly, for the reasons set out in escheat judgment that purports to vest a definitive savings bond that has reached
the preamble, the Department of the State with title to a bond that the State final maturity and is in the State’s
Treasury proposes to amend 31 CFR does not possess, or a judgment that possession, when the State presents
part 315 subparts E and O; part 353 purports to grant the State custody of a evidence satisfactory to Treasury that
subparts E and O; and part 360 subparts bond, but not title. the bond has been abandoned by all
E and M to read as follows: persons entitled to payment under
(b) Due Process. At a minimum, a Treasury regulations. A State claiming
PART 315—REGULATIONS State requesting payment under this title to a definitive savings bond as the
GOVERNING U.S. SAVINGS BONDS, section must demonstrate to Treasury’s heir to a deceased owner must comply
SERIES A, B, C, D, E, F, G, H, J, AND satisfaction that it made reasonable with the requirements of subpart L, and
K, AND U.S. SAVINGS NOTES efforts to provide actual and not this section. Treasury will not
constructive notice of the escheat recognize an escheat judgment that
■ 1. The authority citation for part 315 proceeding to all persons listed on the purports to vest a State with title to a
continues to read as follows: face of the bond and all persons who bond that has not reached its final
Authority: 31 U.S.C. 3105 and 5 U.S.C. may have an interest in the bond, and maturity. Treasury also will not
301. that those persons had an opportunity to recognize escheat judgments that
be heard before the escheat judgment
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■ 2. Amend § 315.20 by revising purport to vest a State with title to a
was entered. bond that the State does not possess, or
paragraph (b) to read as follows:
(c) Fulfillment of Obligation. Payment judgments that purport to grant the State
§ 315.20 General to a State claiming title under this custody of a bond, but not title.
* * * * * section fulfills the United States’ (b) Due Process. At a minimum, a
(b) The Department of the Treasury obligations to the same extent as if State requesting payment under this
will recognize a claim against an owner payment had been made to the section must demonstrate to Treasury’s
of a savings bond and conflicting claims registered owner. satisfaction that it made reasonable

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Document Created: 2015-12-15 13:20:06
Document Modified: 2015-12-15 13:20:06
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Notice of proposed rulemaking.
Contact		Theodore C. Simms II, Senior Attorney, 202-504-3710 or [email protected]
FR Citation		80 FR 37559
RIN Number		1530-AA11
CFR Citation		31 CFR 315 31 CFR 353 31 CFR 360
CFR Associated		Government Securities and Savings Bonds
80 FR 37559 - Regulations Governing United States Savings Bonds

DEPARTMENT OF THE TREASURYFiscal Service

Federal Register Volume 80, Issue 126 (July 1, 2015)

DEPARTMENT OF THE TREASURY
Fiscal Service
