frsbog_mim_v17_0959.pdf

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FEDER L RESERVE BO RD

W SHINGTON

August

1,

1922.

X-3492

SUBJECT: Franchise Taxes, Surplus funds, and depreciation charges·

Dear Sir:

·\11th reference

to

tb..; ~ o a r d ' s

le t ter

X-34 2 of June .29,

1922,

enclosin8 a copy of C c m ~ s e 1 ' s opinion dated

June

5,

1 ~ 2 2 ,

rcg3Xdtng the

prope1• m . . ; t ~ . 1 o . l of

buil.iing up

sury..lu::. :funds by Federal Reserve l i ~ : . s and

of d·Jt...,rminin

: t : 1 ~

:.ur.cunt

of

f r a n c ~ l i a e

tcx.:Js .Pa.va.ble to t;l..: U. S,

GovurllUlCnt,

y Ou a r t ~ advised that

in accordance thorowi

th.,

tbOII.lc.t b u r ~

w ~ i c t r : u . t a f - : r r ; . . ~ .::.1r.cunts· to· u l ; e r - > u r p l u s account on D ~ c i ~ t b e r

)1,

l;1C:C

s ~ o u l J . rvcalcula.te the runount of

franchise

taxes pcy:.iblt. to the GovJ rn-

ment and the

:::wx>unt

. t r a n s f t 3 r ~ h l e to surplus account.

In vl.ew

or

·tbe ru1·1ng that tl1e

super

surplus. account is a

bookkeeping entry only

and

that

the

law contenplates only ontt su'l'plus

fund,

al l

charges

heretofore

made against · supersurplus

account

to

cover d3preciation on bank p r ~ m i s ~ s

or

for r ~ s c r v a s

for

undetermined

l iabi l i t ios should.be reversed. No charges against the normal surplus

'· or supersurplus

will be

authorized

in

the future to

cover dt:tpreciation

on bank pr<:lmises or for t ~ e ;

purpose

of setting up special rttsarves, as

such charges

i f

mads might affect a.lJX)unts subsequE.:ntly peyRbltt to the:}

Government

as

franchise

t a x ~ s .

·

For your information there is enclosed hurewi th a s t t ~ e n t

7/17/2019 frsbog_mim_v17_0959.pdf


-2-

LAND

Cost

stimated market

value

Book

value (net)

TOTAL

BANKJ NG BOUSE

Cost to

date

Estimated replacement

cost

Book value

(net)

BUILDINGS IN-

CLUDING

VAULTS

X-3492

FIXED

MACHINERY

AND

EQUIPMENT

In

passing upon

requests

to set

up depreciation reserves or to

charge off depreciation

allowances, the Board

will in general parmit

a

charge

against

current net earnings of

not exceeding

2

per

cent

of the

estimated replacement

cost

of bank

buildings,

i n c l u d i t ~ g vaults but

excluding

fixed

machinery and equipment.

In case,

however, the esti

mated replacement

cost

is

considerably

below

the

book

value,

the Board

will

consider

requests

from Federal Reserve

Banks for permission

to

write off a depreciation charge in excess of 2 per cent.

The esti.m.ated rr::placement cost, less

residual value,

of fixed

machinery and equipment, such as

boilers,

engines, dynamos, motors,

power puaps, elevators, heating, plumbing, lighting and v ~ n t i l t i n g

7/17/2019 frsbog_mim_v17_0959.pdf


-3-

iVhere properties have been purchased with the intention

of

razing

existing buildings

and of

erecting

new

banking

quarters

the

Board will

consider

requests

for

permission to deduct from current

net

earnings

an amount equal to the difference between the cost of

the property and the market value of the building site exclusive of

improvements.

Advance

approval

of

tr

Federal

Reserve Board

shall

be

obtained

for al l

depreciation

and oth.:;r c 1arges against currant net earnings

whether

in

connection with bank

premises

as outlined above or for

other

purposes.

Very

t ruly yours

G

o v e r n o r

LETTER TO ALLCHAIRMEN

7/17/2019 frsbog_mim_v17_0959.pdf


Federal

Reserve

I

:Bank

Boston

New

York

Philade1phia

Cleveland

Richmond

Atlanta

Chicago

St. Louis

Minneapolis

Kansas

City

Dallas

San Fra.ncisco

TOTAL

ADJUSTMENTS TO BE MADE IN SURPLUS ACCOUNTS AT END OF 1922 AND ADDITIONAL

AMOUNTS

PAY A J3LE

TO UNITED STATES

GOVERNMENT

AS FRANCHISE TAXES FOR

J WRMER

YEARS

Amounts

previously charged to supersurplus to be

Amount to

be

credited to

surplus

fund and

debited to

account charged

to

surplus

o r i g i r : : e l l y ~ c r e d i t e d as follows -

fund and

paid to

Bank

Depreciation Reserve for u s.

G o v e r m n ~ ~ J n t

as

Total

premises

reserve on

undetermined

franchise tax for

account bank _premises

l iabili t ies

former

years

247,349.91

1,000,000

1,000,000

1,604,549·37

36,366.25

125,000

125,000

225,276.50

Z25,276.50 20,459.01

213,628.77

2,030,000

2,030,000

710,189·99

52,423.36

208,169·99

250,000

250,000

306,925.46

3,630,276.50 350,2]6.50

2,280,000

1,000,000

3,4oo,o62.ll

Total

surplus

fund

(revised) on

Dec,

31,

1922

before

closing

of books

16,235,807.79

59,592,577.77

17,908,779· 79

22,634,279.19

11,234,665.60

8.899,942.22

30,345,275.43

9,3B8,223.25

7,416,054.44

9,437,561.82

7 J 394,

C 97

.}0

15,142,126.72

215,629.391.32.

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