§1825 Issuance of Notes, Debentures, Bonds, and Other Obligations; Exemptions

Summary

The Corporation’s notes, bonds, and similar debt are free from most federal, state, and local taxes on both principal and interest, except for estate and inheritance taxes. However, interest, income, or gains from selling those obligations do not get a special federal income tax break, and losses from sales get no special tax treatment. The Corporation itself (its franchise, capital, reserves, surplus, and income) is generally tax-exempt, but any real property it owns must be taxed like other real property. When the Corporation acts as a receiver, it keeps those tax exemptions from state and local taxes, though its real property is still taxed like others and valued for the tax period. Its property cannot be seized, attached, or sold without its consent, and involuntary liens do not attach. The Corporation is not liable for penalties or fines tied to other people’s unpaid taxes or fees. It is also protected from criminal prosecution for past acts before it became receiver, except for matters under the Internal Revenue Code. After August 9, 1989, the Corporation must estimate costs for past and future obligations and include those estimates and quarterly updates in its financial statements. It must also estimate the market value of assets from case resolutions, net of selling costs, and update those values quarterly. The total obligations of the Deposit Insurance Fund cannot exceed the fund’s cash, 90 percent of other asset value, plus amounts the Treasury is authorized to lend under section 1824(a). “Obligation” means guarantees (not deposit guarantees), amounts borrowed under section 1824, and any direct or contingent liability, with contingent liabilities valued at their expected cost. The United States’ full faith and credit backs obligations issued after August 9, 1989, if the obligation states the principal and its maturity date.