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DEPARTMENT OF TREASURY AGREES TO CLARIFY U.S. SAVINGS BOND 'NOW TAX FREE FOR COLLEGE' ADVERTISING CAMPAIGN

 DEPARTMENT OF TREASURY AGREES TO CLARIFY U.S. SAVINGS BOND
 'NOW TAX FREE FOR COLLEGE' ADVERTISING CAMPAIGN
 PRINCETON, N.J., Jan. 7 /PRNewswire/ -- The following was released today by College Savings Bank:
 After a two-year battle, College Savings Bank has finally succeeded in urging the U.S. Treasury to clarify its misleading "Now Tax Free for College" U.S. Savings Bond advertising campaign.
 The bank's contention has been that the Treasury omitted the disclosure of important income and use restrictions when it advertised the bonds. Print advertisements and other material published by the U.S. Treasury for the EE Bonds simply stated "Now Tax Free for College" when, in fact, the bonds are neither tax free for everyone nor do they cover all college expenses.
 In a letter dated Dec. 24, 1991, to the bank's counsel, Patton, Boggs & Blow, Thomas E. Anfinson, executive director of the U.S. Savings Bonds Division, Department of the Treasury, outlined the department's new policy on savings bond advertising:
 After review by the Department and informal consultation with the Federal Trade Commission, the Savings Bonds Division has undertaken the following actions to clarify some of its advertising of the tax- exclusion for education feature of Series EE Savings Bonds.
 -- The Division has ceased publishing small space print advertisements containing unqualified statements that the Bonds are tax free for education.
 -- The Division has asked the public service directors of broadcast stations to cease airing certain public service announcements which do not clearly state that limitations apply.
 -- All future print and broadcast advertising addressing the education feature will, at a minimum, clearly indicate that maximum income and other limitations apply.
 -- ...future advertisements will encourage the public to seek additional information from the Savings Bonds Division and financial institutions.
 -- Finally, the message on our 800 information line (1-800-US-BONDS) has been revised to contain information on the limitations on the availability of the tax-exclusion for education feature.
 College Savings Bank's contention was originally brought to the attention of the Treasury Department back in December of 1989. Peter A. Roberts, chairman and chief executive officer of College Savings Bank, followed up periodically, but to no avail. Frustrated from getting nowhere with the agency, in the summer of 1991 Roberts sought the advocacy of the Federal Trade Commission, the Securities and Exchange Commission and congressional committees.
 Roberts remarked, "I'm relieved that the Treasury has consented to amend its advertising. There are a number of limitations on the EE Bonds which haven't been made clear to the public. For instance, to date most advertising fails to point out that the bonds are tax free only up to a predetermined income level. For 1992, taxable income cannot be more than $66,200 for a married couple or $44,150 for a single investor in the year the bonds are redeemed. In fact, all the accumulated interest on the bonds count as income in the year in which the bonds are cashed."
 In addition, Roberts tried to encourage the Treasury to engage in corrective advertising as well as permit families to redeem bonds issued after Dec. 31, 1989, penalty free, but the Treasury pointed out in its letter that it does not intend to undertake such actions. The Treasury's belief is that the information distributed in the past regarding tax exclusions coupled with the actions described above will sufficiently resolve the situation.
 "I only wish Treasury would take the additional steps," Roberts explained. "About 9 million families purchase Series EE Bonds every year. I'm sure many of these people are completely unaware of the restrictions and still believe they will be able to redeem the bonds without any tax consequences. Some families are going to have difficulty reaching their college funding goals when they redeem their bonds and learn to their surprise that the interest income is not tax free."
 Roberts has provided testimony on college costs and tax incentives to save before the U.S. Senate Finance Committee and the U.S. House Ways and Means Committee. Roberts is in favor of proposals such as the Super IRA and the Family Savings Account as types of initiatives that will help increase the nation's savings rate and spur growth. However, Roberts is critical of initiatives that provide subsidies exclusively to government products such as the Series EE Bond. Exclusive subsidies tend to crowd out the private sector, distort investor choices, impair competition and innovation and, over the long term, reduce the rate at which families save.
 Roberts is the inventor of the CollegeSure(R) CD, America's first commercially available and nationally marketed college cost prepayment product. The CollegeSure CD provides a variable rate of return tied to the annual increase in college costs and guarantees to meet the future cost of college. It is backed by the full faith and credit of the U.S. government for up to $100,000 per depositor.
 For more information, call College Savings Bank at 609-987-3770.
 -0- 1/7/92
 /CONTACT: Peter A. Roberts of College Savings Bank, 609-987-3770/ CO: College Savings Bank; U.S. Department of Treasury ST: New Jersey, District of Columbia IN: FIN ADV SU:


SB-ML -- DE008 -- 7192 01/07/92 09:11 EST
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