Common Legal Questions and Answers Concerning Currency, Legal Tender and Money

This report answers common legal questions relating to currency, legal tender, and money.

Report No. 83-150 A COMMON LEGAL QUESTIONS AND ANSWERS CONCERNING CURRENCY, LEGAL TENDER AND MONEY American Law Division HG 546 U . S . GENERAL L I B R A R U DEPOSITORY T h e Congressional Research Service works exclusively for the Congress, conducting research, analyzing legislation, and providing information at the request of committees, Members, and their staffs. T h e Service makes such research available, without partisan bias, in many forms including studies, reports, compilations, digests, and background briefings. Cpon request, CRS assists committees in analyzing legislative proposals and issues, and in assessing the possible effects of these proposals and their alternatives. T h e Service's senior specialists and subject analysts are also available for personal consultations in their respective fields of expertise. ABSTRACT This report answers common l e g a l questions relating to currency, l e g a l tender, and money. CONTENTS COMMON LEGAL QUESTIONS AND ANSWERS CONCERNING CURKENCY. LEGAL TENDER AND MONEY ............................................................ 1 What i s meant by t h e term " l e g a l t e n d e r " ? .......................... 1 What i s t h e "money of account" of t h e United S t a t e s ? ............... 2 What a r e F e d e r a l Reserve n o t e s ? .................................... 3 What "backs" F e d e r a l Reserve n o t e s ? ................................ 3 What can F e d e r a l Reserve n o t e s be redeemed f o r ? .................... 4 I s n ' t "lawful money" defined a t 12 U.S.C. § 152? ................... 5 I s n ' t t h e d o l l a r d e f i n e d i n terms of g o l d ? ......................... 6 A 1. . 3. 4. 2 5 . . 7. 6 . 9. 8 Is A r t i c l e I. S e c t i o n 10 of t h e C o n s t i t u t i o n in e f f e c t i n a l l 50 S t a t e s ? ......................................................... Does A r t i c l e I. S e c t i o n 10 of t h e C o n s t i t u t i o n r e q u i r e gold o r s i l v e r backing? 7 ................................................. 7 . 10. May a S t a t e tax F e d e r a l Reserve n o t e s ? ............................. 8 11. What i s t h e l e g a l s t a t u s of t h e Coinage A c t of 1792? ............... 9 COMMON LEGAL QUESTIONS AND ANSWERS CONCERNING CURRENCY, LEGAL TENDER AND M O N N The following a r e s e v e r a l of t h e more common q u e s t i o n s and answers r e l a t i n g t o United S t a t e s currency, l e g a l t e n d e r , and t h e c o n s t i t u t i o n a l i t y of paper money. 1. What i s meant by t h e term " l e g a l tender"? Legal t e n d e r may be d e f i n e d a s t h e kind of coin o r money which t h e law campels a c r e d i t or t o a c c e p t i n payment of h i s d e b t , when t e n d e r e d i n t h e r i g h t amount. Black's Law D i c t i o n a r y 1637 ( 4 t h ed. 1968). I n t h e United S t a t e s , Congress has d e f i n e d l e g a l t e n d e r by s t a t u t e i n t h e f o l l o w i n g manner: United S t a t e s c o i n s and currency ( i n c l u d i n g F e d e r a l r e s e r v e n o t e s and c i r c u l a t i n g notes of F e d e r a l res e r v e banks and n a t i o n a l banks) a r e l e g a l t e n d e r f o r a l l d e b t s , p u b l i c charges, t a x e s and dues. Foreign g o l d - o r s i l v e r c o i n s a r e not l e g a l t e n d e r f o r d e b t s . ( 3 1 U.S.C. 3 5103). T h i s i s not t o say, of course, t h a t p a r t i e s may not c o n t r a c t u a l l y a g r e e t o payment i n a form o t h e r t h a n l e g a l t e n d e r . Thus, f o r example p a r t i e s may s t i p u l a t e t h a t payment is t o be i n f o r e i g n c o i n s , or currency, o r through an exchange of goods o r s e r v i c e s , and such c o n t r a c t s a r e f u l l y e n f o r c e a b l e . Bm. J u r .2d Payment § 26 (1972) 2. 60 . What 'is t h e "money of account" of t h e 'United S t a t e s ? P r i o r t o 1982, t h e United S t a t e s Code contained a p r o v i s i o n s t a t i n g t h a t t h e "money of account" of t h e United S t a t e s s h a l l be e x p r e s s e d i n d o l l a r s , dimes, c e n t s and mills. 31 U.S.C. § 371 (1976). T h i s s e c t i o n w a s amended and recodi- . f i e d as 3L U .S C, $ 510L by Puhlic Law 97-258 (l982), so t h a t it n o l o n g e r contains t h e e x p r e s s i o a "money of account," but instead' sfmplp. provkdes: CRS- 2 United States money i s expressed i n dollars, .dimes or tenths, cents or hundreths, and mills or thousandths. A dime i s a tenth of a dollar, a cent i s a hundreth of a dollar, and a m i l l i s a thousandth of a dollar. The omission of the phrase "money of account," as w e l l as the h i s t o r i c a l backgrand and meaning of that phrase, i s discussed i n the House report associated with the amendment, H.R. Rep. N o . 97-651: T h e word "money" is substituted for "money of account" to elimi n a t e unnecessary words. As f a r as can be determined. the p h r a e "money of account" has not been interpreted by a n y court o r Gove r n m e n t agency. T h e phrase was uscd by Alexander Hamilton in hi3 "Report on the Establishment of the RIint" (1791). In t h a t Report. Hamilton propounded 6 questions, including: 1st. What ought to be t h e nature of t h e money unit of t h e United States? Thereafter. Hamiiton uses the phrases "money unit of the United States" a n d "money of account" interchangeably and in the sense t h a t t h e phrases a r e used to denote rhe monetary system h r keep. i n s financial accounts. In short, the phrases simply indicate :hat financial accounts a r e to be based on a decimal money system: . . ., and it is certain t h a t nothing cnn be more simple a n d convenient than the decimal subdivisions. There is every reason to expect t h a t the method will speedily grow into general use, when it shall be seconded by correspondinq coins. On this plan the unit in the money of account will continue to be. as established by t h a t resoiution [of August 8, 17861, a dollar, and its mu:tiplcs, dimes, cents, and mills. o r tenths, hundreths, and thousmds. Thus, t h e phrase "money of account" did not mean, by itself, that dollars o r fractions of dollars must be equal to something having intrinsic or "substantive" value. This concept is supported by earlie r writings of Thomas Jefferson in hi$ "Notes on the Establishm e n t of a Money Unit, and of a Coinage for the United States" (l'i84), a n d the 1782 report to the President of the Continental Congress on t h e coinage of the United States by t h e Superintendent of Finances, Robert Morris, which was apparently prepared by the Assistant Superintendent, Gouverneur blorris. See Paul L. Ford. The Writings o f Thomas Jef;Tcrson. vol. 111 (G.P. Putnnm's Sons. 1894) pp. 44G-457; William G. Sumner, The Financier gnti the Fi. nclnces of tlrc American R e c o l ~ ~ t i o n vol. . I1 ( B u r t Franklin. 1S91, rer r i n t e d 1970) pp. 36-47; and George T. Curtis, History o f thc Cor~strtdtion, ool. I (Harper and Brothers, 185.9) p. 4&?, n 2 Thc words "or units" and "and all accounts in thc public of;ficvs and all procceri: ings in the courts shall be, kept and had in conformity to lhis rrgrrlotion" are omitted a s surplus. 3. What a r e F e d e r a l Reserve n o t e s ? F e d e r a l Reserve n o t e s a r e n o t e s i s s u e d by t h e Board of Governors of t h e F e d e r a l Reserve System t o F e d e r a l Reserve banks, f o r e v e n t u a l c i r c u l a t i o n a s paper currency. F e d e r a l Reserve n o t e s a r e s t a t u t o r i l y d e f i n e d a s o b l i g a t i o n s of t h e United S t a t e s , and a s l e g a l t e n d e r . 12 U.S.C. § 411, 3 1 U.S.C. § 5103. A t p r e s e n t , n e a r l y a l l of t h e c i r c u l a t i n g paper currency i n t h e United S t a t e s c o n s i s t s of t h e s e n o t e s . Although some may d i s a g r e e , t h e c o n s t i t u t i o n a l a u t h o r i t y of t h e F e d e r a l Government t o i s s u e c i r c u l a t i n g notes was upheld by t h e Supreme Court i n t h e case of J u i l l i a r d v. Greenman, 110 U.S . 421 (1884). I n t h i s case t h e Court exp l a i n e d : ... Under t h e power t o borrow money on t h e c r e d i t of t h e United S t a t e s , and t o i s s u e c i r c u l a t i n g n o t e s f o r t h e money borrowed, i t s pawer t o d e f i n e t h e qual i t y and f o r c e of t h o s e n o t e s a s currency i s a s broad a s t h e l i k e pawer over a m e t a l l i c currency under t h e pcwer t o c o i n money and t o r e g u l a t e t h e v a l u e t h e r e o f . Under t h e two powers, taken t o g e t h e r , Congress i s a u t h o r i z e d t o e s t a b l i s h a n a t i o n a l currency, e i t h e r i n c o i n o r i n p a p e r , and t o make t h a t currency l a w f u l money f o r a l l purposes, a s r e g a r d s t h e n a t i o n a l government o r p r i v a t e p a r t i e s . [Emphasis added] (110 U.S. a t 1 3 0 ) . ... Lawer c o u r t d e c i s i o n s have s p e c i f i c a l l y upheld t h e l e g a l i t y of t h e issuance of F e d e r a l Reserve n o t e s and t h e i r u s e a s l e g a l t e n d e r . See, e.g. , - Milam v. United Scares, 524 F.2d 629 ( 9 t h C i r . 1974); United S t a t e s v. Rifken, 577 F.2d 1111 ( 8 t h C i r . 1978); United S t a t e s v. Wangrud, 533 F.2d 495 ( 9 t h C i r . -- 1976) c e r t . den. 429 U.S. 4. 818 (1976). What "backs" F e d e r a l Reserve n o t e s ? F e d e r a l Reserve n o t e s are c o l l a t e r a l i z e d by F e d e r a l Reserve bank h o l d i n g s of Government s e c u r i t i e s , gold c e r t i f i c a t e s , Special Drawing Rights c e r t i f F c a t e s , o b l i g a t i o n e i e s u e d o r g u a r a n t e e d by a s agencp oE the U n i t e d Stat=, . - t y p e s of commercial paper. -&..t'' , - 4 - 12 U - S - C - § 412. '- . and certain -- Under s e c t i o n 105(b) of t h e Monetary CRS-4 Control Act of 1980, Publie Law 96-221, Federal Reserve banks may also collateralize notes with "obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof." This provision has been criticized as allowing tbe Federal Reserve System the authority to "monetize" foreign government debt. However, as explained in a recent House Banking Committee publication, this was neither the intent of the provision, nor the manner in which it is being carried out by the Federal Reserve System. Rather, the purpose of this provision is to allow Federal Reserve banks to invest foreign currencies, acquired through the normal course of business, in interest bearing investments, and additionally, to permit these assets to be used as collateral for Federal Reserve notes when demand for currency requires the use of additional collateral. See, Staff of the House Subcommittee on Domestic - Monetary Policy, House Committee on Banking, Finance and Urban Affairs, The Use of Certain Provisions of the Federal Reserve Act, As Amended by Section 105(b)(2) of the Monetary Control Act of 1980, Cormn. Print. No. 98-3 (1983). 5. What Can Federal Reserve Notes Be Redeemed For? Pursuant to statute, Federal Reserve notes may be redeemed for "lawful money" on demand at the Treasury Department or at any Federal Reserve bank. 12 U.S.C. § 411. The term "lawful money" is not generally defined by statute. However, the courts have interpreted this term to be equivalent to "legal tender," which includes other Federal Reserve notes. For example, in United States v. Rickman, 638 F.2d 182 (10th Cir. 1980), the court stated at page 184: Defendant argues that the Federal Reserve notes in which he was paid were not lawful money within the meaning of Art. 1, 8, United States Constitution. We find no validity in the distinction which defendant draws between "lawful money" and "legal tender." Money is a medium of exchange. Legal tender is money which the 1aw.requires a creditor to receive in payment of an obligation. The aggregate of the powers granted to Congress by the ... C o n s t i t u t i o n i n c l u d e s broad' and comprehensive autho r i t y over revenue, f i n a n c e , and currency. I n t h e e x e r c i s e of t h a t power Congress has d e c l a r e d t h a t F e d e r a l Reserve n o t e s a r e l e g a l t e n d e r and redeemable i n l a w f u l money. Defendant r e c e i v e d F e d e r a l Reserve n o t e s when he cashed h i s pay checks and used t h o s e n o t e s t o pay h i s p e r s o n a l expenses. He obtained and used l a w f u l money. ... Thus, F e d e r a l Reserve n o t e s may be redeemed f o r o t h e r F e d e r a l Reserve n o t e s , o r f o r o t h e r n o t e s o r coins p r e s e n t l y a v a i l a b l e and c i r c u l a t i n g a s l e g a l t e n d e r . 6. I s n ' t "Lawful Money" Defined a t 12 U.S.C. § 1521 S e c t i o n 152 of T i t l e 12, United S t a t e s Code provides f o r r e q u i r e d r e s e r v e s f o r so-called "gold banks," which were a u t h o r i z e d pursuant t o s e c t i o n 151 of that Title. Gold banks were banking a s s o c i a t i o n s organized f o r t h e purpose of i s s u i n g n o t e s payable i n g o l d , a s w e l l a s United S t a t e s n o t e s redeemable i n S e c t i o n 152 provides t h a t such gold banks =st gold. keep a t a l l times not less than 25 p e r c e n t of t h e i r outstanding n o t e s i n gold and s i l v e r c o i n of t h e United S t a t e s . T h i s s e c t i o n goes on t o s t a t e t h a t " i n a p p l y i n g t h e same t o a s s o c i a t i o n s organized f o r i s s u i n g gold n o t e s [gold banks'], t h e terms, " l a w f u l money" and "lawful money of t h e United S t a t e s " s h a l l be c o n s t r u e d t o mean gold o r s i l v e r c o i n of t h e United S t a t e s . . ." The Gold Reserve Act of 1934 provides t h a t "no gold s h a l l h e r e a f t e r be coined, and no gold c o i n s h a l l h e r e a f t e r be paid out or d e l i v e r e d by t h e United States ... A l l gold coins of t h e United S t a t e s s h a l l be withdrawn from cir- c u l a t i o n , and, t o g e t h e r w i t h a l l o t h e r gold owned by t h e United S t a t e s , s h a l l be formed i n t o bars. . . ." 48 S t a t . 340 (1934). This A c t a l s o s t a t e s t h a t , e x c e p t t o t h e e x t e n t p e r m i t t e d by t h e S e c r e t a r y of t h e Treasury, "no c u r r e n c y . . ." and t h a t "No redemptions . . - " 48 S t a t . 340 (1934) Based of t h e United S t a t e s s h a l l be redeemed i n gold. in g o l d shall be made e x c e p t in gold b u l l i o n . * .. o a t h e s e provisions, it w w l d a p p e a r that it; is presently imposoiblei: to o r g a n i z e CRS- 6 a g o l d bank. u n d e r 1 2 U.S.C. h d s i n c e 1 2 .U.S .C. S 151, i t s § 152 s o l e l y relates t o g o l d banks o r g a n i z e d p r o v i s i o n s would a p p e a r t o be dormant. i n c l u d e t h e last s e n t e n c e of 1 2 U.S.C. T h i s would § 152, which d e f i n e s t h e terms " l a w f u l money" and " l a w f u l money of t h e U n i t e d S t a t e s " f o r purposes of a p p l y i n g t h o s e terms t o g o l d banks. 7. I s n ' t - t h e D o l l a r Defined i n Terms of Gold? As o r i g i n a l l y i n s t i t u t e d , t h e U n i t e d S t a t e s c u r r e n c y system e q u a t e d t h e d o l l a r w i t h s p e c i f i c w e i g h t s of gold o r s i l v e r . For example, t h e Coinage Act of 1792 p r o v i d e d t h a t E a g l e s o r $10 d o l l a r c o i n s were t o c o n t a i n 275 g r a i n s of s t a n d a r d g o l d and t h a t $ 1 d o l l a r c o i n s were t o c o n t a i n 416 g r a i n s of s t a n d a r d silver. 1 S t a t . 246, 248 (1792). L a t e r enactments amended t h e s e p r o v i s i o n s . For i n s t a n c e , t h e Gold S t a n d a r d Act of 1 9 0 0 , 31 S t a t . 45, p r o v i d e d t h a t t h e d o l l a r w a s t o be d e f i n e d as e q u a l t o 25.8 g r a i n s of gold. I n 1934, a c t i n g under Thomas Amendment t o t h e A g r i c u l t u r a l Adjustment Act (48 S t a t . 3 1 ) , P r e s i d e n t R o o s e v e l t s e t t h e g o l d v a l u e of t h e d o l l a r a t 13.7 g r a i n s of g o l d , e q u i v a l e n t t o $35 d o l l a r s p e r ounce. 92-268) I n 1972, t h e P a r Value M o d i f i c a t i o n Act ( P u b l i c Law In e s t a b l i s h e d t h e p a r v a l u e of t h e d o l l a r a t 1138th ounce of gold. 1973 t h i s was changed t o .829848 S p e c i a l Drawing R i g h t s o r $42.22 p e r ounce of g o l d ( P u b l i c Law 93-110). F i n a l l y , i n 1976, t h e p a r v a l u e of t h e d o l l a r w a s a b o l i s h e d ( P u b l i c Law 94-564 5 6). However, even when t h e d o l l a r had a p a r v a l u e e x p r e s s e d i n terms of a q u a n t i t y of g o l d , t h i s d i d n o t mean t h a t one could redeem d o l l a r s f o r g o l d , or t h a t a d o l l a r w a s "worth" a c e r t a i n amount of g o l d f o r domestic purposes. Domestic redemption in g o l d w a s p r o h i b i t e d by t h e Gold R e s e r v e A c t of 1 9 3 4 , 48 S t a t . 337, and t h e p a r v a l u e w a s b a s i c a l l y a bookkeeping d e v i c e used f o r s e t t l i n g i n t e r n a t i o n a l monetary b a l a n c e s . There- f o r e t h e p a r v a l u e of t h e d o l l a r d i d n o t r e l a t e t o t h e "worth" o r " a c t u a l v a l u e " of t h e d o l l a r , and a t t e m p t s t o s o e q u a t e i t (and t h e r e b y r e d u c e income t a x l i a b i l i t y ) have been r e j e c t e d by t h e c o u r t s . See, e.g., Birkenstock v. Commis- s i o n of I n t e r n a l Revenue, 646 F .2d 1185 ( 7 t h C i r . 1981); Mathes v. Commissioner -- of I n t e r n a l Revenue, 576 F.2d 70 ( 5 t h C i r . 1978) cert. den. 440 U.S. 911 (1979). Is Article I, S e c t i o n 10 of t h e C o n s t i t u t i o n i n e f f e c t i n a l l of t h e Stares? A r t i c l e I , S e c t i o n 10 i s p a r t of t h e United S t a t e s C o n s t i t u t i o n . It i s e f f e c t i n a l l of t h e 50 S t a t e s . Does A r t i t r e I, S e c t i o n 1O'of t h e C o n s t i t u t i o n Require Gold o r S i l v e r Backing? Article 1, S e c t i o n 10 of t h e C o n s t i t u t i o n provides t h a t "No s t a t e s h a l l ... make any Thing but gold o r s i l v e r Coin a Tender i n Payment of Debts. . . ." T h i s p r o v i s i o n has been c o n s i s t e n t l y i n t e r p r e t e d by t h e c o u r t s a s l i m i t i n g t h e power of t h e S t a t e s , but not t h e F e d e r a l Government. v. Greenman, 110 U.S. For example, i n J u i l l i a r d 421 (1884), t h e Supreme Court s t a t e d a t page 446: By t h e C o n s t i t u t i o n of t h e United S t a t e s , t h e s e v e r a l S t a t e s a r e p r o h i b i t e d from c o i n i n g money, e m i t t i n g b i l l s of c r e d i t , o r making anything but gold o r s i l v e r c o i n a t e n d e r i n payment of debts. But no intent i o n can be i n f e r r e d from t h i s t o deny t o Congress e i t h e r o r t h e s e powers. ... Thus, although t h e S t a t e s may not make paper money l e g a l t e n d e r , t h e F e d e r a l Government may do s o , and pursuant t o 31 U.S.C. 5 5103, a l l United S t a t e s c o i n s and c u r r e n c i e s , i n c l u d i n g F e d e r a l Reserve n o t e s , a r e l e g a l t e n d e r . The c o u r t s have a l s o uniformly r e j e c t e d t h e argument t h a t S t a t e s v i o l a t e A r t i c l e 1, S e c t i o n 10 when t h e y a u t h o r i z e o r demand payment i n F e d e r a l Reserve notes. -I/ For example, in Leitch v. Oregon, 519 P.2d 1045 (1974), t h e Court of Appeals f o r the S t a t e 1/ I n Hagar v. Land Reclamation District No- 108, 111 U.S. 7 0 1 (L88Q), t h e supre= Court h e l d that t h e F e d e r a l legal texxder s t a t u t e s dicE not- apply to S-e taxes. Hcwever, - t h e s t a t u t e was s u b s e q u e n t l y amended.t o inch& S t a t e taxes.. See, Cowry v. Alaska, 655.P.23'780 (1982). . - - - CRS- 8 of Oregon r e j e c t e d t h e argument t h a t t h e S t a t e could n o t demand t h a t t a x e s be p a i d .with F e d e r a l Reserve notes: U . S . C o n s t i t u t i o n , A r t . 1, 5 1 0 , upon which t h e p l a i n t i f f relies, p r o h i b i t s states from making "any Thing but gold and s i l v e r Coin a Tender i n Payment of Debts " P l a i n t i f f has no cogniz a b l e complaint i n t h i s regard, f o r i t i s t h e f e d e r a l government, and not t h e s t a t e , t h a t has made " a l l coins and c u r r e n c i e s of t h e United S t a t e s l e g a l tender (519 P.2d a t 1046). * * *. *** * * *." S i m i l a r l y , i n Kauffman v. C i t i z e n s S t a t e Bank of Loyal, 307 N.W.2d 325 ( l 9 8 l ) , t h e Court of Appeals of Wisconsin held: F e d e r a l r e s e r v e notes a r e l e g a l tender i n Wisconsin, not by any law of t h i s s t a t e , but because Congress has nade them l e g a l t e n d e r throughout t h e s e United S t a t e s . Wisconsin has made no e f f o r t t o d e c l a r e t h a t f e d e r a l r e s e r v e notes a r e or a r e n o t , i n t h e words of Art. I , s e c . 10 of t h e United S t a t e s C o n s t i t u t i o n , a "tender i n payment of debts." (307 N.W.2d a t 328) 10. May a S t a t e Tax. Federal Reserve Notes? I n g e n e r a l , S t a t e s m y not t a x F e d e r a l o b l i g a t i o n s , such as United S t a t e s bonds and Treasury notes. The b a s i s f o r t h i s exemption is t h a t a tax upon t h e o b l i g a t i o n s of t h e United S t a t e s i s v i r t u a l l y a t a x upon t h e c r e d i t of t h e F e d e r a l Government, and upon i t s p w e r t o r a i s e money. The e f f i c i e n c y of t h e United S t a t e s Government t o c a r r y out i t s f u n c t i o n s i n t h i s manner cannot be impaired by a tax imposed by t h e S t a t e s . ( 4 Wheat) 316 (1819). McCulloch v. Maryland, 17 U.S However, i n H i b e m i a Savings and Loan Society v. San Francisco, 200 U.S. 310 (1906), t h e Supreme Court explained: The p r i n c i p l e , upon which t h i s exemption i s claimed, intended f o r does not apply t o o b l i g a t i o n s immediate use, and designed merely t o s t a n d i n t h e p l a c e of money u n t i l p r e s e n t e d a t t h e Treasury, and t h e money a c t u a l l y drawn thereon. I n such case t h e tax i s v i r t u a l l y a t a x upon t h e money As w a s s a i d by M r . J u s t i c e Miller i n F i r s t Nat. Bank v. "That l i m i t , a t i a n [upon t h e pcwer t o Kentucky t a x ] i s , t h a t t h e agencies of t h e F e d e r a l government a r e only exempted from s t a t e l e g i s l a t i o n , s o f a r a s ... ... . .. . t h a t l e g i s l a t i o n may i n t e r f e r e with, or impair t h e i r e f f i c i e n c y i n performing t h e f u n c t i o n s by which t h e y a r e designed t o s e r v e t h a t government." (200 U.S. a t 314) Thus, t h e exemption from S t a t e t a x a t i o n does not apply t o United S t a t e s o b l i g a t i o n s which s t a n d i n f o r or a r e "money," such a s F e d e r a l Reserve n o t e s . F u r t h e r , Congress, through l e g i s l a t i o n , a l s o waived any c l a i m of exemption, a t 31 U.S.C. § 5154, which s t a t e s : A State ... may t a x United S t a t e s coins and currency ( i n c l u d i n g F e d e r a l Reserve n o t e s and c i r c u l a t i n g n o t e s of F e d e r a l r e s e r v e hanks and n a t i o n a l banks) a s money on hand or on d e p o s i t i n t h e same way and a t t h e same r a t e t h a t t h e S t a t e t a x e s United S t a t e s c o i n s and currency c i r c u l a t i n g w i t h i n i t s j u r i s d i c t i o n . F i n a l l y , i t should be noted t h a t most S t a t e t a x e s a r e not t a x e s on t h e F e d e r a l Reserve n o t e s but on underlying t r a n s a c t i o n s . Thus, f o r example, a S t a t e income t a x i s a t a x on t h e income received, which i s measured i n t h e number of d o l l a r s ( F e d e r a l Reserve n o t e s ) t r a n s f e r r e d , but is n o t a tax on t h e n o t e s themselves. S i m i l a r l y , a S t a t e sales tax i s a t a x on b u s i n e s s transac- t i o n s ( s a l e s ) , t h e amount of t h e t a x p r o p o r t i o n a l t o t h e number of d o l l a r s ( F e d e r a l Reserve n o t e s ) involved, but a g a i n is not a t a x on t h e n o t e s themselves. 11. What i s t h e Legal S t a t u s of t h e Coinage Act of 1792? The Coinage or Mint Act of 1792, 1 S t a t . 246 (1792), e s t a b l i s h e d t h e United S t a t e s Mint i n P h i l a d e l p h i a , and provided f o r t h e appointment of t h e M i n t ' s D i r e c t o r and o t h e r o f f i c e r s - The A c t d i r e c t e d t h a t c o i n s of p r e s c r i b e d weights of gold and s i l v e r be coined, ranging from t e n d o l l a r " e a g l e s m t o half-cents. S e c t i o n 11 of t h e o r i g i n a l A c t provided that. the " p r o p o r t i o n a l v a l u e of gold t o s i l v e r in all coins . . - s h a l l be fffteen: t o cme-" Ln o t h e r words, every f i f t e e n ounces of pare s i l v e r w a s t o b e c o a a i d e r e d of e q u a l value to one ounce of gold. Section 14 provided that it shall be lawful for every person to bring silver or gold to the Mint in the form of bullion, for purposes of striking the bullion into coins or for redemption in the form of previously minted coins. Section 16 provided that all gold and silver coins issued from the Mint shall be lawful tender in all payments whatsoever. Sec- tion 19 provided for criminal penalties for the debasement or embezzlement of coins struck at the Mint. And section 20 provided that the "money of account" of the United States shall be expressed in dollars, "dismes," cents and nilles. Under well-established principles of law, a later-passed enactment will 1/ repeal a prior provision of law which is inconsistent with the newer law. - A total of 26 major coinage bills were enacted between 1792 and 1842, with a -2 / The 1792 Act was substantially revised again in -3/ 1873, and according to one commentator, effectively replaced. And legisla- major revision in 1837. tion since that date has in effect totally rewritten the law of coinage as 4/ it existed in the 19th Century. The modern laws relating to coins and minting may be found in Title 31 of the United States Code. Section 5111 of this Title (as recodified and enacted into positive law by Public Law 97-258 (1982)), provides that the Secretary of the Treasury shall mint and issue coins in amounts he determines 11 C. Sands, Sutherland's Statutes and Statutory Construction 5 51.02 (4th gd. 1973); Posadas v. National City Bank, 296 U.S. 497 (1936). 2/ Act of Jan. 18, 1837, 5 Stat. 136 (1837); Ganz, Toward a Revision of the and Coinage Laws of the United States, 26 Clev. St. L.R. 175, 188 (1977). in tin^ 31 See, Ganz, supra note 2. Id. -41 - CRS- 11 a r e n e c e s s a r y t o meet t h e needs of t h e U n i t e d S t a t e s . S e c t i o n 5112 p r o v i d e s t h a t t h e S e c r e t a r y may only i s s u e c o i n s i n t h e denominations o f : d o l l a r , h a l f d o l l a r , q u a r t e r , dime, 5-cent p i e c e , and one-cent d o l l a r , q u a r t e r d o l l a r , and dime c o i n s =st coin. The d o l l a r , h a l f be " c l a d c o i n s " c o n s i s t i n g of copper sandwiched between a n a l l o y of n i c k e l and copper. must be composed of an a l l o y o r copper and z i n c . The 5-cent coin The S e c r e t a r y h a s t h e a u t h o r i t y t o mint a l i m i t e d number of d o l l a r and h a l f d o l l a r c o i n s composed of a n a l l o y of s i l v e r and copper. However, t h e a u t h o r i t y t o mint s u c h c o i n s i s due t o e x p i r e J a n u a r y 1, 1984. Based on t h e s e newer p r o v i s i o n s , it a p p e a r s t h a t t h e Mint no l o n g e r h a s t h e s t a t u t o r y a u t h o r i t y t o s t r i k e s i l v e r or gold coins a s p r e s c r i b e d i n t h e Coinage Act of 1792, and t h e s e p r o v i s i o n s =st be c o n s i d e r e d t o have been r e p e a l e d by i m p l i c a t i o n . I n a d d i t i o n , p r o v i s i o n s r e l a t i n g t o t h e r i g h t of c i t i z e n s t o b r i n g g o l d o r s i l v e r t o t h e Mint f o r purposes of c o i n a g e must l i k e w i s e be c o n s i d e r e d no l o n g e r i n e f f e c t . Under c u r r e n t law, a p e r s o n s t i l l has t h e r i g h t t o b r i n g g o l d o r s i l v e r b u l l i o n t o be c a s t i n t o b a r s . S e e , 31 U.S.C. 5 5121.