Rule2024-29988
Disclosure of Records
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 18, 2024
Effective
December 18, 2024
Issuing agencies
Treasury DepartmentBureau of the Fiscal Service
Abstract
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.
Full Text
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<title>Federal Register, Volume 89 Issue 243 (Wednesday, December 18, 2024)</title>
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[Federal Register Volume 89, Number 243 (Wednesday, December 18, 2024)]
[Rules and Regulations]
[Pages 102735-102742]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-29988]
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DEPARTMENT OF THE TREASURY
Bureau of the Fiscal Service
31 CFR Part 323
[FISCAL-2023-0002]
RIN 1530-AA28
Disclosure of Records
AGENCY: Bureau of the Fiscal Service, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: The Bureau of the Fiscal Service (Fiscal Service) within the
[[Page 102736]]
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.
DATES: This rule is effective December 18, 2024.
FOR FURTHER INFORMATION CONTACT: Marcia Goodnight, Retail Securities
Services, at <a href="/cdn-cgi/l/email-protection#f8aa9d8c999194ab9d9b8d8a918c81ab9d8a8e919b9d8bbb9795959d968c8bb89e918b9b9994d68c8a9d998b8d8a81d69f978e"><span class="__cf_email__" data-cfemail="77251203161e1b24121402051e030e241205011e14120434181a1a1219030437111e0414161b59030512160402050e59101801">[email protected]</span></a>; or
Lela Anderson, Attorney-Advisor, at 304-480-8692.
SUPPLEMENTARY INFORMATION:
I. Background
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.'' Free v. Bland, 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. See 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. See 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. See, e.g., 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. See 31 U.S.C. 3105(b) and
31 CFR parts 315 and 353, subpart H.
Litigation Over State Escheat Claims
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. Id.
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. See New Jersey
v. U.S. Dep't of the Treasury, 684 F.3d 382, 407-09 (3d Cir. 2012),
cert. denied, 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.'' Id. 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. See 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. Id. After obtaining ex parte 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.'' LaTurner v.
United States, 933 F.3d 1354, 1357 (Fed. Cir. 2019), cert. denied, 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
[[Page 102737]]
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.'' Id. at 1361. The court determined that, because
``federal law takes precedence,'' id. (quoting Murphy v. National
Collegiate Athletic Ass'n, 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,'' id. 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. LaTurner, 933 F.3d at 1357. The court observed that ``the States
do not have the physical bonds or the bond serial numbers.'' Id. The
court therefore determined that, ``even if the bonds here are
considered lost,'' id. at 1364, ``Treasury properly denied [the
States'] request for redemption,'' id. 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.'' Id. at 1366. The Court of Appeals denied the States'
petitions for rehearing en banc, and the Supreme Court denied the
States' petitions for writs of certiorari. LaTurner v. United States,
141 S. Ct. 239 (2020); Lea v. United States, 141 S. Ct. 240 (2020).
While that litigation was ongoing, Treasury amended its regulations
in 2015 through notice-and-comment rulemaking to clarify that it ``will
not recognize an escheat judgment that purports to vest a State with
title to a bond that the State does not possess.'' 31 CFR 315.88(a);
see also 31 CFR 315.20(b) (``Escheat proceedings will not be recognized
under this subpart.''), 80 FR 80264-65. In a separate suit filed in
Federal district court, Kansas and four other States challenged the
amended regulations as an allegedly unjustified departure from
Treasury's past practice. The district court rejected that challenge,
concluding that the regulations clarified rather than changed
Treasury's practice. See Estes v. U.S. Dep't of the Treasury, 219 F.
Supp. 3d 17, 22 (D.D.C. 2016). The States appealed but voluntarily
dismissed the appeal. See Order, LaTurner v. U.S. Dep't of the
Treasury, No. 17-5015 (D.C. Cir. Nov. 21, 2017).
Thus, under 31 U.S.C. 3105 and Treasury's implementing regulations,
U.S. savings bond owners are entitled to redeem their bonds at any time
after maturity without penalty; the United States honors those debts in
perpetuity. See 31 CFR 353.35. State laws that treat matured but not
yet redeemed U.S. savings bonds that are not in a State's possession as
``abandoned'' property subject to escheatment undermine the rights of
registered owners or their heirs to redeem matured bonds whenever they
choose through the simple act of turning in the physical bonds to a
designated payor such as a local bank. Treasury's existing regulations
preempt any State law that deems U.S. savings bonds ``abandoned''
because they are not yet redeemed or otherwise interferes with the
Federal-law rights of the registered owners or their heirs to redeem
them.
SECURE 2.0 Act of 2022
Against that backdrop, Congress considered legislation to amend 31
U.S.C. 3105. As discussed further below, Congress declined to enact a
2021 legislative proposal that would have allowed States to escheat
matured, unredeemed savings bonds that are not in their possession.
Instead, Congress enacted the SECURE 2.0 Act of 2022 \1\ (Secure 2.0
Act), which was signed into law on December 29, 2022.
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\1\ Public Law 117-328 (Dec. 29, 2022), Division T; 31 U.S.C.
3105(f).
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The Secure 2.0 Act added subsection (f) to 31 U.S.C. 3105,
requiring Treasury to share certain U.S. savings bond information with
States for the purpose of locating savings bond owners. Under new
subsection (f), Treasury ``shall provide each State, in digital or
other electronic form, with information describing any applicable
savings bond which has an applicable address that is within such State,
including (i) the name and applicable address of the registered owner;
and (ii) the name and applicable address of any registered co-owner or
beneficiary.'' \2\ ``Applicable address'' is defined as the registered
address for the registered owner (or co-owner or beneficiary) of the
savings bond or the last-known address for the registered owner (or co-
owner or beneficiary) available to the Secretary.\3\ ``Applicable
savings bond'' is defined as a savings bond (1) which is more than
three years past its final maturity date, (2) is in paper form, or is
in paperless or electronic form and there is no designated bank account
or routing information or the designated bank account or routing
information is incorrect; and (3) has not been redeemed.\4\
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\2\ 31 U.S.C. 3105(f)(1)(A).
\3\ 31 U.S.C. 3105(f)(1)(C).
\4\ 31 U.S.C. 3105(f)(6).
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The new subsection (f) expressly limits the purpose for which a
State may use the information shared by Treasury to locating the
registered savings bond owner. The statute provides: ``Any State that
receives information described in paragraph (1)(A) with respect to an
applicable savings bond may use such information to locate the owner of
such bond pursuant to the same standards and requirements as are
applicable under'' State abandoned property rules and any regulations
or guidance promulgated by Treasury pursuant to the Secure 2.0 Act. 31
U.S.C. 3105(f)(4). The Secure 2.0 Act does not override the Treasury
regulations described above, which do not allow States to escheat
savings bonds that are not in their possession.
The Secure 2.0 Act directs Treasury to prescribe regulations or
guidance as may be necessary to carry out the purposes of subsection
(f), including rules to protect the privacy of the owners of applicable
savings bonds, prevent fraud, and ensure that any information provided
to a State is used solely for the purposes of the new subsection
(f).\5\ Under the Secure 2.0 Act, regulations or guidance issued by
Treasury must not have the effect of prohibiting, restricting, or
otherwise preventing a State from obtaining the information described
above, except as deemed necessary to protect privacy or prevent fraud
or misuse of savings bond information.\6\
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\5\ 31 U.S.C. 3105(f)(2)(A).
\6\ 31 U.S.C. 3105(f)(2)(B).
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II. Public Comments and Fiscal Service's Responses
On October 31, 2023, Fiscal Service published a notice of proposed
rulemaking (NPRM) to carry out the purposes of the Secure 2.0 Act.\7\
Fiscal Service received 14 substantive comment letters in response to
the NPRM. Twelve comments were from State treasurers' offices or their
legal representatives, one was a joint comment from the National
Association of Unclaimed Property Administrators (NAUPA) and the
National Association of State Treasurers (NAST), and one comment was
from a private individual. The comments largely fell into four general
categories: (1) the restriction on using shared information about
savings bonds to escheat those bonds, (2) the lack of Congressional
appropriations for States to use in attempting to locate savings bond
owners, (3) the lack of a claims servicing role for the States after
locating savings bond owners, and (4) the prohibition on publicly
releasing
[[Page 102738]]
savings bond information without the express consent of Treasury. There
were also comments on certain other topics, which we also address
below.
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\7\ 88 FR 74386.
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Restriction on Using Shared Information to Escheat Bonds
Eight commenters objected to the proposed regulation's restriction
on using the information shared by Treasury under the Secure 2.0 Act to
escheat the applicable savings bonds. According to those commenters,
escheat would be more efficient and cost effective to unite the bond
owners with their property than the process outlined in the proposed
regulation. One commenter also asserted that (1) the regulations exceed
Treasury's statutory authority by prohibiting escheat, (2) denying
escheatment to the States is arbitrary and capricious, and (3)
prohibiting escheatment using information obtained under the Secure 2.0
Act is a departure from Treasury's existing possession escheat policy.
These objections disregard the express limitations that the Secure
2.0 Act imposes on a State's use of the information shared pursuant to
the Secure 2.0 Act. As described above, the Secure 2.0 Act only
authorizes a State to use the shared information for the purpose of
locating the bond owners. Under the Secure 2.0 Act, ``any State that
receives information [from Treasury] with respect to an applicable
savings bond may use such information to locate the owner of such
bond.'' \8\ The statute also requires Treasury to prescribe regulations
or guidance as may be necessary to ``ensure that any information
provided to a State under [new subsection (f)] shall be used solely to
carry out the purposes of'' that subsection.\9\ By restricting the use
of information provided to a State under these regulations, Treasury is
implementing the statute in accordance with its express terms.
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\8\ 31 U.S.C. 3105(f)(4).
\9\ 31 U.S.C. 3105(f)(2)(A).
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Further, the Secure 2.0 Act does not override existing Treasury
regulations that prohibit a State from escheating a bond that the State
does not have in its possession. Under regulations that predate the
Secure 2.0 Act, a matured U.S. savings bond does not expire and may be
redeemed by the registered owner (or heir) at any time. As the Federal
Circuit explained in LaTurner, those Federal regulations preempt
inconsistent State law.
To the extent that commenters suggest that the Secure 2.0 Act was
intended to override the LaTurner decision and Treasury's regulations
by allowing States to escheat matured, unredeemed savings bonds that
are not in their possession, Treasury disagrees. In 2021, proposed
legislation that would have had that effect was introduced in Congress
but never passed.\10\ The 2021 proposed legislation's language
specifically would have allowed not only for the transfer of applicable
savings bond information to the States but would have allowed the
States to obtain title to the applicable savings bond through a valid
judgment of escheatment. The 2021 proposed legislation stated that
``[n]otwithstanding any other Federal law, the ownership of an
applicable savings bond may be transferred pursuant to a valid judgment
of escheatment vesting a State with title to the bond,'' and that
``[n]othing in this section, or in any regulation promulgated by the
Secretary to implement this section, may be construed to preempt State
law providing for, or governing the escheatment of, applicable savings
bonds.'' \11\ The 2021 proposed legislation further stated that ``[t]he
Secretary may not prescribe any regulation which prevents or prohibits
a State from obtaining title to an applicable savings bond or redeeming
such bond'' under the act.\12\ However, the 2021 proposed legislation
failed to move past the House Ways and Means Committee and the Senate
Finance Committee. Instead, when a version of the proposed legislation
reemerged in 2022 as part of the Secure 2.0 Act, the title-escheat
language had been removed along with the language prohibiting Treasury
from promulgating regulations that would preempt State law on
escheatment.
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\10\ See Unclaimed Savings Bond Act of 2021, H.R. 4085, 117th
Congress; S. 2854, 117th Congress.
\11\ Id. 3105(f)(1).
\12\ Id. 3105(f)(4)(B).
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Because U.S. savings bonds do not expire and Treasury has imposed
no time limit for savings bond owners to redeem them, savings bond
information shared with States under the Secure 2.0 Act does not
pertain to savings bonds that are abandoned or lost, but simply
unredeemed. The restriction in this final rule on using information
shared under the Secure 2.0 Act to escheat savings bonds serves to
protect the bond owner's rights and to prevent future double payments
from Treasury when the rightful owner presents the savings bond for
redemption. As Treasury has previously explained, ``[t]he potential for
competing claims exposes Treasury to the risk of double-payment and
costly litigation, as well as threatens the vested rights of bond
owners.'' 80 FR 80259. Under State escheatment laws, a State could
attempt to claim savings bonds that are still in the possession of
registered owners, who can submit them for payment at any time. A State
could also attempt to claim bonds that are in the possession of another
State, where both States have a claim to title under their own State
laws. Allowing States to escheat unredeemed savings bonds that are not
in the States' possession would be contrary to existing Treasury
regulations, as well as the agreement made between Treasury and a bond
owner when the bond is purchased.
In providing that States may use the information shared by Treasury
to ``locate the owner'' of savings bonds pursuant to the States'
abandoned property rules and Treasury regulations and guidance, the
Secure 2.0 Act leaves in place the balance Treasury has struck to
protect bond owners' rights and the public fisc. As discussed above,
the Secure 2.0 Act did not override the LaTurner decision or override
existing Treasury regulations by allowing States to escheat matured,
unredeemed savings bonds that are not in their possession.
Although several commenters expressed a concern that the proposed
regulation could interfere with States' ability to redeem bonds that
are in their possession, the Secure 2.0 Act and this final rule address
only bonds that are not in a State's physical possession. Where a State
has the physical bond, the State has the serial number and other
information needed to ask Treasury--under existing regulations
unchanged here--to redeem that bond. For similar reasons, prohibiting
title escheat using information obtained under the Secure 2.0 Act is
not a departure from Treasury's possession escheat policy, which has
long recognized that States may be able to redeem bonds that are in
their physical possession under circumstances that provide evidence
that the bonds were, in fact, abandoned property.\13\ Under existing
Treasury regulations, States may request payment on an escheat judgment
purporting to vest a State with title to a matured savings bond in the
State's possession.\14\ Those existing regulations are not affected by
this final rule. This final rule continues to support Treasury's policy
requiring States to be in possession of any savings bond they are
purporting to escheat. States may still pursue title escheat for
savings bonds in their possession, as they would be using the
information found on the savings bond itself to complete the
escheatment
[[Page 102739]]
process, rather than using any information provided to them by Treasury
under the Secure 2.0 Act.
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\13\ See 80 FR 80260-61.
\14\ 31 CFR 353.88.
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Lack of Congressional Appropriations To Support States' Location
Services
Some commenters expressed concern about the lack of Federal funding
available to assist the States in locating savings bond owners. For
example, one commenter suggested that a lack of funds will ``hinder the
resources States have available to provide enhanced outreach efforts
beyond currently established efforts.'' Another noted that ``certain
challenges are created for participating States by not actually
receiving the funds that are associated with the bond records,''
leaving the States to bear the financial burden of locator services.
However, the Secure 2.0 Act does not grant funding to assist the
States in providing optional locator services. The Secure 2.0 Act only
directs Treasury to make applicable savings bond information available
to the States for the purpose of locating the owner or owner's
representatives. In prior litigation and in their comments on the NPRM,
multiple States have claimed that they ``have both the dedicated
resources and the solemn responsibility to locate the missing property
owners and reunite them with their property,'' Arkansas Brief at 6-7,
LaTurner v. United States, 933 F.3d 1354 (Fed. Cir. 2019) (No. 18-
1509), ECF No. 37, and have proclaimed that their ultimate goal is to
``help the original owners learn of, and be paid on, th[eir] bonds,''
Kansas Brief at 14, LaTurner v. United States, 933 F.3d 1354 (Fed. Cir.
2019) (No. 18-1509), ECF No. 36. States are free to use their resources
for such efforts, but nothing in the Secure 2.0 Act requires the States
to undertake these administrative efforts to locate bond owners if a
State chooses not to do so.
Lack of a Claims-Servicing Role
A number of commenters expressed a concern regarding the lack of a
``claims servicing'' role for States in the proposed regulations. These
comments appear to propose that States--not Treasury--should accept
State-specific property claim forms and require that savings bond
owners redeem their bonds through the State's unclaimed property
procedures rather than Treasury's savings bond redemption procedures.
Commenters raised concerns about the efficiency and effectiveness of
the overall Secure 2.0 Act framework, stating that a streamlined
process to locate and pay bond owners is essential. These commenters
indicated that Treasury should rely upon the States' experience in
reuniting their respective citizens with unclaimed funds, rather than
asking States to refer savings bond owners to Treasury for redemption.
Another commenter noted that a State's role in the program is unclear
if the States do not provide the proceeds of the savings bonds to their
owners.
However, the Secure 2.0 Act does not contemplate overriding the
longstanding Federal regulations, procedures, and agreements under
which individuals redeem their U.S. savings bonds for payment by the
Federal Government. Under existing Treasury regulations, there is a
well-established framework for savings bond owners to redeem their
bonds.\15\ Any savings bond owner may redeem a savings bond directly
from Fiscal Service, whether they have physical possession of the bond
or need to declare the bond lost, stolen, or destroyed. Fiscal Service
also has dedicated customer service staff trained to process complex
redemption requests, which may include decedents' estates, trusts, and
attorneys-in-fact. All necessary forms for redemption are available to
the public through the <a href="http://TreasuryDirect.gov">TreasuryDirect.gov</a> website. Additionally, any
bond owner who has physical possession of a Series EE or Series I
savings bond, which is in a single owner, co-ownership, or beneficiary
ownership registration, is permitted to redeem the savings bond at any
financial institution designated by Treasury as a paying agent. These
two methods of redemption, through Fiscal Service and through
designated paying agents, promote efficient, consistent, and reliable
pathways to redemption for savings bond owners. Under this final rule,
Treasury will continue to process redemptions through established
methods.
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\15\ 31 CFR 353.39, 31 CFR 360.39.
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Restriction on Public Release of Savings Bond Information
Twelve commenters expressed concern over the NPRM's proposed
restriction of a State's public release of the applicable savings bond
information without Treasury's express consent. Commenters stated that
this restriction would place an increased administrative burden on
State agencies by preventing them from using their current
reunification methods to reunite bond owners with their bonds. The
Secure 2.0 Act requires Treasury to issue regulations or guidance as
may be necessary to ``protect the privacy of the owners of applicable
savings bonds'' and to ``prevent fraud.'' \16\ In order to balance the
competing interests, rather than adopting a blanket prohibition on
public release of relevant information, the NPRM and the final rules
permit the public release of information by States if they first obtain
Treasury's consent. In determining whether to grant such consent,
Treasury will consider the risks to savings bond owners' privacy and
the risk of fraud. In recent years, as printing technologies have
advanced, it has become easier for criminals to create fraudulent paper
savings bonds using publicly available information. Since 2021, there
have been over $40 million in redemptions of counterfeit savings bonds.
Fiscal Service has responded by taking certain steps that have reduced
the opportunities for fraud. By reducing publicly available information
and taking other precautionary steps, Treasury has significantly
reduced the number of counterfeit savings bonds presented for
redemption. Based on its experience addressing fraud, Fiscal Service
believes that making records of matured, unredeemed savings bonds
available to the public creates substantial risks of fraud.
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\16\ 31 U.S.C. 3105(f)(2).
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A few commenters stated that they believe that some savings bond
information is already publicly available; however, savings bond
records are not currently available to the public. Moreover, savings
bond information is subject to the Privacy Act of 1974, which generally
prohibits the release of such information to the public. Fiscal Service
further protects this information in its Privacy Act regulations,\17\
as well its Privacy Act System of Records Notice Treasury/Fiscal
Service .014--United States Securities and Access.\18\ Consistent with
Treasury's obligation to protect savings bond owners' personal
information, the Treasury Hunt website restricts the disclosure of
savings bond information and only suggests that a requestor contact
Fiscal Service to inquire further about their Treasury securities; it
does not provide any specific information regarding any securities that
may be held. Only after Fiscal Service verifies the requestor's
identity will it release any information to the owner as permitted
under the law and its regulations.
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\17\ 31 CFR 323.2.
\18\ 85 FR 11776, (Feb. 27, 2020). Fiscal Service intends to
modify this System of Records Notice to assist in implementing the
Secure 2.0 Act.
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Miscellaneous Comments
Treasury received comments regarding what information will be made
available to the States under the final rule. One commenter requested
[[Page 102740]]
additional information on whether Social Security numbers, savings bond
denominations, and serial numbers will be released to the States.
Another commenter suggested that the release of savings bond serial
numbers is mandatory under the Secure 2.0 Act.
Under the Secure 2.0 Act, Treasury is required to provide each
State, in digital or other electronic form, with information describing
the name and applicable address of a registered owner, co-owner, or
beneficiary of an applicable savings bond with an applicable address
within that State.\19\ Accordingly, Treasury will release the name and
applicable address of such registered owners, co-owners, and
beneficiaries to the States, pursuant to the statute.
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\19\ 31 U.S.C. 3105(f)(1)(A).
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The final rule does not include provisions for releasing Social
Security numbers, saving bond denominations, or bond serial numbers.
Based on Treasury's experience, the serial number and Social Security
number are the two items of information most likely to facilitate
fraud. Further, the Secure 2.0 Act provides that the information
Treasury shares ``may include the serial number of any applicable
savings bond,'' not that serial numbers must be shared.\20\ In
addition, in Treasury's long experience administering the savings bond
program, bond denominations have marginal or no utility in locating
bond owners. Denominations and bond serial numbers are important in the
redemption of a savings bond, but do not offer Treasury or a
participating State information regarding the location or identity of
the savings bond owner.
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\20\ See 31 U.S.C. 3105(f)(1)(B).
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One commentor submitted questions regarding the contracting and
enforcement of information sharing with the States. At this time,
Fiscal Service is working to develop a technical solution for sharing
the mandated information with the States. Any mandatory security
requirements for accessing the information will be included in the
information-sharing contracts with the States. Fiscal Service intends
to work closely with the States to ensure compliance with our security
requirements, monitoring the use of the information in accordance with
the information-sharing contract.
III. Summary of Final Rule Amendments
Overview
Fiscal Service is adding these Secure 2.0 Act regulations to 31 CFR
part 323, which includes regulations adopted under the Freedom of
Information Act (FOIA) regarding the disclosure of records.\21\ Fiscal
Service is maintaining the current FOIA regulations found in part 323
by moving the existing provisions in Sec. Sec. 323.1 through 323.5
into a new subpart A. A new subpart B contains the regulations to
implement the Secure 2.0 Act requirements to provide information and
records containing applicable savings bond information to States.
Subpart B includes definitions necessary to implement the regulations,
requirements for a State to receive applicable savings bond
information, conditions regarding the use of the information, and
liability terms. Separating the regulations implementing the two
different statutory authorities, FOIA and the Secure 2.0 Act, by
subpart is intended to assist the public in identifying the two
separate authorities under which an individual or a State may request
information.
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\21\ 31 CFR part 323.
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Treasury believes the new disclosure of applicable savings bond
information requirements is closely associated with the purpose of FOIA
and its existing disclosure regulations. While the Secure 2.0 Act only
allows for disclosure of certain information to States, rather than to
the public at large, a savings bond owner could look to a single
regulation, part 323, to determine the various ways in which their
savings bond information could be disclosed.
Subpart A, Sec. 323.1
As noted above, subpart A as amended contains regulations that
implement FOIA for Fiscal Service, previously found at part 323.
Accordingly, the final rule makes a technical modification to the first
sentence of Sec. 323.1 to identify ``this subpart'' rather than ``this
part.''
Subpart B
Following are summaries of the provisions in the new subpart B, all
of which are being added in this final rule.
Purpose of the Regulations, Sec. 323.10
This section briefly describes the purpose of the new regulatory
provisions, namely to implement the Secure 2.0 Act.
Rules Governing Sharing of Applicable Savings Bond Information With
States, Sec. 323.11
Section 323.11 includes the definitions and terms necessary to
provide States the information required by the Secure 2.0 Act. In
addition, the amendments add new provisions to help protect the privacy
of the owners of applicable savings bonds, prevent fraud, and ensure
that shared information is used only for permissible purposes under the
Secure 2.0 Act.
Definitions, Sec. 323.11(a)
The Secure 2.0 Act requires Treasury to provide, in digital or
other electronic form, each State with information describing any
``applicable savings bond'' that has an ``applicable address'' within
such State. The statute requires this information to include the name
and applicable address for each registered owner, co-owner, or
beneficiary. ``Applicable address'' is defined in the statute as the
registered address for the registered owner, co-owner, or beneficiary
of the savings bond or the last-known address for the foregoing if it
is available to Treasury.\22\ The final rule defines ``last-known
address'' to mean an address available to Fiscal Service after a
reasonable search of its records.
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\22\ 31 U.S.C. 3105(f)(1)(C).
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While the level of effort dedicated to the search could be
expressed in various degrees, a ``reasonable'' search balances the
goals of efficiency and effectiveness. An exhaustive search, for
example, would be unduly costly and burdensome on Fiscal Service, given
the breadth of our systems of records, and unlikely to significantly
change the results of the search. ``Record'' is broadly defined to
include any data or documentation containing or composed of information
describing relevant applicable savings bonds, including the applicable
addresses of the owners. This definition allows Fiscal Service to
protect savings bond owners from unauthorized disclosure of their
information, as any information received from Treasury will remain a
record subsequent to disclosure.
The term ``State'' is also broadly defined in the final rule to
mean U.S. territories, possessions, and the District of Columbia, as
well as the 50 States. This definition is consistent with available
registered addresses over the lifetime of the savings bond program.
Requests for Records
Section 323.11(b) provides that each State may request applicable
savings bond records from Fiscal Service. Upon request, the State must
enter into an information-sharing agreement with Fiscal Service to
receive the requested records. Fiscal Service expects that this
agreement will require a State to make representations regarding
protecting the savings bond records from unauthorized
[[Page 102741]]
disclosure, including security requirements for receiving and storing
the records. These security requirements are appropriate to minimize
the risk of fraud or misuse or misappropriation of information.
Use of Records
Section 323.11(c) specifies how the records or information
contained therein may be used by States, in compliance with the Secure
2.0 Act. As stated at 31 U.S.C. 3105(f), Treasury's regulations are
required to ensure that applicable savings bond information provided to
a State will be used solely to carry out the purpose of locating the
owner of the savings bond.\23\ In accordance with this statutory
requirement, the regulation provides that the applicable savings bond
information cannot be used to escheat savings bond ownership to a
State. The purpose of the Secure 2.0 Act is for Treasury to provide
information regarding applicable savings bonds to States to assist in
locating the owner of the bonds. The Secure 2.0 Act does not allow
States to use the provided records and information to escheat the
bonds, which would conflict with the rights of savings bond owners to
redeem matured savings bonds whenever they choose.
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\23\ 31 U.S.C. 3105(f)(2).
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Under the regulation, in order to protect the savings bond owner's
privacy, any applicable savings bond information provided to States
cannot be released to the public or any third party without Treasury's
express written approval. This requirement is also expected to be
incorporated into the information-sharing agreement described above.
The requirement to obtain such approval from Treasury is also intended
to ensure that the release of savings bond records or the information
therein does not subject Fiscal Service customers to fraud risk. In
recent years, Fiscal Service has taken steps that have reduced the
opportunities for fraud, and making records of matured, unredeemed
savings bonds available to the public would create an unacceptable risk
of fraud. Fiscal Service will continue to monitor savings bond fraud
and consider implementing further risk-mitigation strategies, which may
eventually allow for certain savings bond records to be distributed
publicly.
Liability
Under Sec. 323.11(d), Treasury will not be responsible for any
loss, liability, cost, or expense that results from a State's receipt,
use, or distribution of records regarding applicable savings bonds or
any information contained therein. Any misuse of savings bond records
or information provided to a State under the regulations could result
in fraudulent activity, breach of privacy for a savings bond owner, and
financial loss for bond owners. Under the regulations, a State that
receives information under the regulations bears the responsibility
for, and indemnifies Treasury against, any loss or other costs
associated with the State's receipt, use, distribution of, or failure
to adequately protect, any records or information.
Severability, Sec. 323.12
This provision clarifies Treasury's intent with respect to the
severability of provisions of this rule. In the event any section,
subsection, clause, paragraph, or phrase of this subpart is deemed
invalid or unconstitutional by a court of competent jurisdiction, all
remaining provisions shall continue in effect.
IV. Procedural Requirements
A. Executive Order 12866
This rule is not a significant regulatory action as defined in E.O.
12866, dated September 30, 1993, as amended, and is not a major rule
under 5 U.S.C. 804.
B. Administrative Procedure Act (APA)
Because this rule relates to United States securities, which are
contracts between Treasury and the owner of the security, this rule
falls within the contract exception to the APA, 5 U.S.C. 553(a)(2).
Treasury voluntarily sought public comment to assist the agency in
assessing the impact of the rule.
C. Regulatory Flexibility Act
This rule relates to matters of public contract and procedures for
United States securities. Since a notice of proposed rulemaking is not
required, the provisions of the Regulatory Flexibility Act, 5 U.S.C.
601 et seq., do not apply. In any event, Treasury certifies that this
rule, which implements the Secure 2.0 Act's requirements that Treasury
provide certain U.S. savings bond information to States, will not have
a significant economic impact on a substantial number of small
entities.\24\
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\24\ 5 U.S.C. 605(b).
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D. Paperwork Reduction Act
The provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et
seq., and its implementing regulations, 5 CFR part 1320, do not apply
to this rule because there are no new or revised recordkeeping or
reporting requirements.
List of Subjects in 31 CFR Part 323
Archives and records, Freedom of information, Privacy, Savings
bonds.
Accordingly, for the reasons set forth in the preamble, Treasury
amends 31 CFR part 323, as follows:
PART 323--DISCLOSURE OF RECORDS
0
1. The authority citation for part 323 continues to read as follows:
Authority: 80 Stat. 379; sec. 3, 60 Stat. 238, as amended; 5
U.S.C. 301, 552.
0
2. Add subpart A to read as follows:
Subpart A--Freedom of Information Act
Sec. Sec. 323.1 through 323.5 [Designated as Subpart A]
0
3. Designate Sec. Sec. 323.1 through 323.5 as subpart A.
0
4. Revise the first sentence of Sec. 323.1 to read as follows:
Sec. 323.1 Purpose of regulations.
The regulations of this subpart are issued to implement 5 U.S.C.
552(a)-(2) and (3). * * *
0
5. Add subpart B to read as follows:
Subpart B--SECURE 2.0 Act of 2022
Sec.
323.10 Purpose of this subpart.
323.11 Rules governing sharing of applicable savings bond
information with States.
323.12 Severability.
Authority: 31 U.S.C. 3105(f).
Subpart B--SECURE 2.0 Act of 2022
Sec. 323.10 Purpose of this subpart.
The regulations of this subpart are issued to implement section 122
of the SECURE 2.0 Act of 2022, 31 U.S.C. 3105(f). The requirements of
31 U.S.C. 3105(f) are additionally met through the publication of a new
Routine Use in the applicable Fiscal Service System of Record Notice.
Sec. 323.11 Rules governing sharing of applicable savings bond
information with States.
(a) Definitions. For purposes of this section:
Applicable address has the meaning set forth in 31 U.S.C.
3105(f)(1)(C).
Applicable savings bond has the meaning set forth in 31 U.S.C.
3105(f)(6).
Last known address means the full street address, if available,
found after a reasonable search of Fiscal Service records.
Name means the full registered name of the owner, co-owner, or
beneficiary of
[[Page 102742]]
an applicable savings bond, as it appears on the savings bond
inscription.
Record means data or documentation, whether in paper, digital, or
other electronic form, containing or composed of information describing
any applicable savings bond which has an applicable address within a
State, including the name and registered address or last known address
of the registered owner, co-owner, or beneficiary, as further defined
in 31 U.S.C. 3105(f)(1).
Registered address means the address included in the savings bond
inscription.
State means the fifty States, the District of Columbia, American
Samoa, the Federated States of Micronesia, Guam, the United States
Virgin Islands, the Marshall Islands, the Commonwealth of the Northern
Mariana Islands, Palau, and the Commonwealth of Puerto Rico.
(b) Requests for records. Records will be made available to States
in compliance with 31 U.S.C. 3105(f) and this subpart, upon request by
a State to Fiscal Service. Prior to receiving access to records, each
State, through an authorized State representative, must enter into an
information-sharing agreement with Fiscal Service using a form that
will be provided by Fiscal Service. Such agreements may contain, among
other things, requirements that Treasury deems necessary or appropriate
to ensure the security of the information.
(c) Use of records. Any records or any information made available
to a State under this subpart:
(1) Must be used only for the purpose of locating the owner of an
applicable savings bond;
(2) Must not be used to escheat savings bond ownership to a State;
and
(3) Must not be released by a State to the public or any third
party, unless explicitly approved in writing, in advance, by Treasury.
(d) Liability. Treasury is not liable for any loss, liability,
cost, or expense that may result from a State's receipt, use, or
distribution of records or any information contained therein. A State
receiving records under this subpart shall indemnify Treasury for any
loss, liability, cost, or expense associated with the State's receipt,
use, or distribution of, or failure to adequately protect, records or
any information contained therein.
Sec. 323.12 Severability.
The provisions of this subpart are severable, and if any section,
subsection, clause, paragraph, or phrase of this subpart shall be
adjudged to be invalid or unconstitutional by any court of competent
jurisdiction, the judgment shall not affect, impair, or invalidate the
remainder of this subpart, but shall be confined in its operation to
the section, subsection, clause, paragraph, or phrase directly involved
in the controversy in which such judgment shall have been rendered, and
the remainder of this subpart shall continue to be in force and effect.
By the Department of the Treasury.
David Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2024-29988 Filed 12-17-24; 8:45 am]
BILLING CODE P
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