Disclosure of Records

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Bureau of the Fiscal Service</SUBAGY> <CFR>31 CFR Part 323</CFR> <DEPDOC>[FISCAL-2023-0002]</DEPDOC> <RIN>RIN 1530-AA28</RIN> <SUBJECT>Disclosure of Records</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Bureau of the Fiscal Service, Department of the Treasury. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Bureau of the Fiscal Service (Fiscal Service) within the Department of the Treasury (Treasury) is issuing regulations to implement statutory requirements under the SECURE 2.0 Act of 2022 that require Treasury to provide certain U.S. savings bond information to States. A State receiving the information with respect to an applicable savings bond may use the information to locate the owner of the bond pursuant to Treasury's regulations and the State's own standards and requirements under abandoned property rules and regulations of the State. Under the SECURE 2.0 Act of 2022, Treasury is required to issue regulations or guidance to protect the privacy of savings bond owners, prevent fraud, and ensure that information disclosed to a State is used solely to locate savings bond owners. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective December 18, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Marcia Goodnight, Retail Securities Services, at <E T="03">RetailSecurityServicesComments@fiscal.treasury.gov;</E> or Lela Anderson, Attorney-Advisor, at 304-480-8692. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> The U.S. Department of the Treasury has issued savings bonds since 1935 on the credit of the United States to raise funds for Federal programs and operations. Article 8, Section 8, Clause 2 of the Constitution authorizes the Federal Government to “borrow money on the credit of the United States.” Under this grant of power, “Congress authorized the Secretary of the Treasury, with the approval of the President, to issue savings bonds in such form and under such conditions as he may from time to time prescribe.” <E T="03">Free</E> v. <E T="03">Bland,</E> 369 U.S. 663, 667 (1962) (citing the predecessor to 31 U.S.C. 3105). Congress provided that the proceeds of savings bonds may be used by the Federal Government for any expenditures authorized by law. <E T="03">See</E> 31 U.S.C. 3105(a). Congress expressly authorized the Secretary of the Treasury to establish the terms and conditions that govern the savings bond program. 31 U.S.C. 3105(c). Treasury's implementing regulations set forth “a contract between the United States and savings bond purchasers,” giving “purchasers confidence that the United States will honor its debts when a purchaser surrenders a savings bond for payment” and protecting “the public fisc by ensuring that Treasury does not face multiple claims for payment on a single savings bond.” 80 FR 80258 (Dec. 24, 2015). In general, savings bonds are not transferrable and are payable only to the registered owner, except as described in Treasury regulations detailing when payment will be made to a person or entity that is not the registered owner. <E T="03">See</E> 31 CFR 315.15, 353.15, and 360.15. To redeem a paper savings bond, the registered owner or a successor specified in the regulations must surrender the physical bond. See 31 CFR 353.35. Although there are exceptions to this surrender requirement, the exceptions are “carefully drawn to protect the owner's rights and to protect Treasury against competing claims.” 80 FR 80258. For example, if a claimant cannot surrender the bond, the claimant must provide satisfactory evidence of the loss, theft, or destruction of the bond, or a satisfactory explanation of the mutilation or defacement, as well as sufficient information to identify the bond by serial number. <E T="03">See, e.g.,</E> 31 CFR parts 315 and 353, subpart F. Pursuant to express statutory authority, Treasury regulations allow owners to keep their bonds indefinitely and to surrender them for payment at any time after the bonds mature. <E T="03">See</E> 31 U.S.C. 3105(b) and 31 CFR parts 315 and 353, subpart H. <HD SOURCE="HD2">Litigation Over State Escheat Claims</HD> Many State escheat laws allow States to take custody of unclaimed or abandoned property. Treasury discussed the effect of escheat on the rights of savings bond owners in a 1952 bulletin to the Federal Reserve Banks addressing a State claim to the custody of four savings bonds in the State's possession, which had belonged to a ward of the State who died without heirs. In this context, where the State had possession of the bonds it sought to redeem, Treasury stated that it will not recognize a State claim to the custody of savings bonds, but will recognize an escheat judgment that confers title on a State because “in escheat the state is ‘the ultimate heir.' ” 80 FR 80258 (quoting Public Debt Bulletin No. 111, Subject: State Statutes Concerning Abandoned Property (Feb. 27, 1952) at 3). It was unnecessary for the 1952 bulletin to provide further detail about State escheat claims because in that case the State did not claim title over the bonds. <E T="03">Id.</E> Treasury addressed a new, broader custody escheat claim in 2004 and 2006, when several States attempted to claim the proceeds of all matured, unredeemed bonds registered to residents in their State. Unlike the claim addressed by the 1952 bulletin, these States did not possess the bonds they sought to redeem, which presumably were still held by their owners. Treasury informed the States that they “must possess the bonds they seek to redeem.” 80 FR 20259 & n.3 (citing 2004 and 2006 letters to various States). In the ensuing litigation, the U.S. Court of Appeals for the Third Circuit concluded that the State unclaimed property statutes conflicted with Federal law. <E T="03">See New Jersey</E> v. <E T="03">U.S. Dep't of the Treasury,</E> 684 F.3d 382, 407-09 (3d Cir. 2012), <E T="03">cert. denied,</E> 569 U.S. 1004 (2013). The States' “efforts to impose the status of `abandoned' or `unclaimed' on the Federal Government's obligations” could not be reconciled with the fact that the bond proceeds are not `abandoned' or `unclaimed' under Federal law because the owners of the bonds may redeem them at any time after they mature.” <E T="03">Id.</E> at 409. Subsequent litigation was prompted by certain States enacting title escheat laws specifically for savings bonds that the States deemed to be “unclaimed” or “abandoned.” In 2000 and 2015, respectively, Kansas and Arkansas enacted statutes providing that a U.S. savings bond is presumed to be abandoned if it has not been redeemed by a certain time and further providing that such bonds escheat to the State a certain time after the bonds are presumed abandoned. <E T="03">See</E> 80 FR 80259. Pursuant to those laws, Kansas and Arkansas initiated escheat proceedings to claim title to bonds in their possession, as well as to a broad class of bonds the States did not possess. With respect to the bonds not in their possession, Kansas and Arkansas published statements in local newspapers of their intention to claim title to bonds of a particular description. Although bond owners were not parties to the escheat proceeding, and may never have learned that the State was attempting to claim title over their bonds, they were obligated to respond to the escheat proceeding in order to protect their ownership of the bonds. <E T="03">Id.</E> After obtaining <E T="03">ex parte</E> escheat judgments, Kansas and Arkansas sought to redeem the savings bonds not in their possession. Treasury denied those requests. The U.S. Court of Appeals for the Federal Circuit upheld Treasury's decision for two independent reasons. First, the Court of Appeals held that “federal law preempts the States' escheat laws.” <E T="03">LaTurner</E> v. <E T="03">United States,</E> 933 F.3d 1354, 1357 (Fed. Cir. 2019), <E T="03">cert. denied,</E> 141 S. Ct. 239 (2020). The court explained that, whereas “Treasury regulations impose no time limit on the redemption of savings bonds,” the State laws provide that, “if bond holders do not redeem their bonds promptly enough (as decided by the States), they lose ownership and the bonds will transfer to the state.” <E T="03">Id.</E> at 1361. The court determined that, because “federal law takes precedence,” <E T="03">id.</E> (quoting <E T="03">Murphy</E> v. <E T="03">National Collegiate Athletic Ass'n,</E> 584 U.S. 453, 477 (2018)), “the bonds belong to the original bond owners, not the States, and thus the States cannot redeem the bonds,” <E T="03">id.</E> at 1357. Second, the Court of Appeals held that, “even if the States owned the bonds, they could not obtain any greater rights than the original bond owners,” and Treasury's regulations make clear that “a bond owner must provide the serial number to redeem” the specific bonds at issue. <E T="03">LaTurner,</E> 933 F.3d at 1357. The court observed that “the States do not have the physical bonds or the bond serial numbers.” <E T="03">Id.</E> The court therefore determined that, “even if the bonds here are considered lost,” <E T="03">id.</E> at 1364, “Treasury properly denied [the States'] request for redemption,” <E T="03">id.</E> at 1357. The court also concluded that the States could not “circumvent the [regulatory] requirement” to “provide the serial number” of the bonds by asking “the government to disclose the bond serial numbers as a matter of discovery.” <E T="03">Id.</E> at 1366. The Court of Appeals denied the States' petitions for rehearing <E T="03">en banc,</E> and the Supreme Court denied the States' petitions for writs of certiorari. <E T="03">LaTurner</E> v. <E T="03">United States,</E> 141 S. Ct. 239 (2020); <E ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 51k characters. 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