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Today I learned that, unlike people or other corporations, Federal reserve bank stockholders don't have to pay federal, state,or local taxes on their annual, fixed dividends of 6% on capital stock (which they ironically call "entitlements"). They only pay property taxes on their buildings.

Federal reserve banks are "independent, privately owned and locally controlled corporations." The top 4 owner banks appear to be Bank of America, JP Morgan Chase, Citigroup, and Wachovia, who control roughly 50% of the stock. (Although, what is more important than who owns the Fed is who controls the power and wealth.)

Of course, the rest of us pay regular income tax rates on dividends. Go figure.


USC Title 12 Chapter 3 Subchapter VI Sec 289 Dividends and surplus funds of federal reserve banks





Sec. 289. Dividends and surplus funds of reserve banks; transfer for fiscal year 2000


(a) Dividends and surplus funds of reserve banks

(1) Stockholder dividends

 A) In general

  After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders of the bank shall be entitled to receive an annual dividend of 6 percent on paid-in capital stock.

 (B) Dividend cumulative

  The entitlement to dividends under subparagraph (A) shall be cumulative.

12 USC Sec. 289

Exemption from Taxation

(c) Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate.

[12 USC 531. Part of original Federal Reserve Act

Federal Reserve Act Section 7. Division of Earnings

What did you learn today?


Original posting by Braincrave Second Life staff on Oct 25, 2011 at http://www.braincrave.com/viewblog.php?id=663

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