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
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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
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-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
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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.