When there is a discussion on the design of United States currency, there is no way to avoid politics. Politics drives the designs, composition, and the economic condition that goes behind every coin in your pocket. Politics governs the currency printed by the Bureau of Engraving and Printing, including the overall management of it through the Department of the Treasury.
Mockup of the $20 note featuring Harriet Tubman
Aside from my interest in the nuance of politics, beyond reports on cable news, it is why there is a monthly report on legislation that would effect numismatics. Whether it is a proposal for a commemorative coin or the creation of a commission to celebrate something in history, every bill introduced in Congress has the potential to change numismatics.
Paper currency is less regulated than coins. Coining money is mentioned in Article I Section 8 of the United States Constitution. The federal regulation of currency began with the National Bank Act of 1863. Whereas the Constitution says, “Congress shall have Power…to coin Money, regulate the Value thereof, and of foreign Coin,” there is no provision for paper currency.
The Constitution does not say that Congress should design the coins, but they do, sometimes to the detriment of the final result. But the design of the currency is left to the Department of the Treasury.
There is no set process that the Treasury goes through to decide on the design of the nation’s currency. The process changes for each new Secretary that heads the department. In the previous administration, Secretary Jacob “Jack” Lew, went through his version of the process to decide that the portrait of Andrew Jackson on the $20 Federal Reserve Note will be replaced with Harriett Tubman by 2020.
According to sources, although the Bureau of Engraving and Printing would have preferred a little more time to create the master engraving plates to make this change, the timing of the announcement would not present a significant problem.
Lew resigned as the 76th Secretary of the Treasury on January 20, 2017, with the inauguration of a new administration. Steven T. Mnuchin was sworn in as the 77th Secretary of the Treasury on February 13, 2017.
Sources report that Mnuchin did not interfere with the BEP’s efforts to redesign the $20 FRN immediately. As the work continued, the BEP also continued to work on additional anti-counterfeiting measures for U.S. currency. Specifically, the BEP was looking into changes that would first impact the $10 note followed by the $5 bill.
Steven T. Mnuchin, the 77th Secretary of the Treasury
The paper $5 note was a more significant focus for the BEP. In working with the U.S. Secret Service, they were finding that many counterfeiters were using bleaching products to remove the ink from the paper to use it to print higher denominations, predominantly $20 bills. One internal report suggested that the criminal would see a net gain of $14 for each $20 note they could produce.
Although it costs more to counterfeit $20 bills this way, it is a lower risk for the criminal. As we have seen, few people pay attention to the problem and those that do find that the currency passes the iodine pen test. After all, it is currency paper.
An example of a $100 Federal Reserve Note printed on a bleached $5 note (Image courtesy of Prescott Police Department via AOL.com)
Interference from Mnuchin came after his first three months in office. It started with a question from a reporter who asked the president about the change. The president’s statement was followed by a cabinet meeting where the president said something to Mnuchin about the change. Then, a source reports that the president said something to Mnuchin who agreed to do something without raising concerns.
Mnuchin did not directly interfere with the process. Instead, he used the budgetary process to direct funds away from the development of the proposed change in portrait.
Mnuchin was able to hide the change from the public because of the nature of Treasury’s budgetary process. Since the BEP is self-funded by the profits (seigniorage) that is deposited in its Public Enterprise Fund, all Treasury had to do was obtain Congress’s permission to use a set amount from the fund without providing details.
Treasury and BEP were able to hide the changes in the CFO’s Annual Report by using internal reorganization to obfuscate where the spending was going.
In short, Mnuchin ordered the BEP, which is lead by a career professional and not a politician, to move the resources away from the redesign and prioritizing other aspects of currency redesign. Mnuchin purposely slowed the redesign process in a way that gives Treasury and the BEP deniability.
A statement published on the BEP website, BEP Director Len Olijar wrote in response to the news reports, “BEP was never going to unveil a note design in 2020.” That was not the policy of the Treasury Department and the BEP when Secretary Lew announced the change. Mnuchin changed it at the request of the president.
The story of the “delay” of the redesign with Tubman’s portrait appeared in The New York Times. In the story, the Times used an image from the original announcement that depicted Tubman superimposed on the $20 bill. Sources suggested that Olijar, under orders from Mnuchin, was to try to discredit the story in any way possible. Rather than continue with the fact, albeit flawed compared to previous reports, the statement went on to pick on an inconsequential aspect of the story, the image published by the Times.
“The illustration published by the New York Times was a copy of an old Series note with the signatures of former officials, with a different image superimposed on it.”
As my source said, “let’s attack the messenger and not the message.”
Unfortunately, Olijar, a career government employee, is caught in the middle having to work with the politicians. He loses credibility by contradicting the previous reporting, which is unfortunate because sources have suggested that some other than Mnuchin “ordered” Olijar to issue the statement.
There is an old expression that one should never discuss politics, religion, and sex/money/pick something in polite company. It is impossible to be polite when talking about coins and currency before their manufacture. It spreads through the entire process. Or as George Orwell aptly said:
In our age, there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia.
I said that if we do not act that we would become victims!
A man came into my shop the other day. Like all new visitors, my assistant greeted him with her usual charm while he looked at the eclectic inventory in the showroom.
The man was different than others. On a slow morning, he lingered around the set of auction catalogs I have for sale while saying little to my assistant who felt uncomfortable with this man in the shop. Another customer came into the shop and my assistant took care of them while I watched this gentleman.
After a while, he came to me and, in a heavy accent I could not identify, asked if I was the store’s owner. He pulled out a few folded pieces of paper and showed me a sheet with the article “Coin jewelry is not legal everywhere” I wrote on this blog in April 2016.
He pointed to one of the pictures and asked if I knew anything about the coin. I asked why and he said he was interested in purchasing one. For some reason, I had a feeling that he might have had other interests in mind.
Resin ear rings made by InspiringFlowers using Roosevelt dimes
Hummingbird cut from a Trinidad and Tobago penny by SawArtist
1996 Half Dollar Ring by LuckyLiberty
Examples of the coin jewelry from the orignal post
I explained to that I do not carry a lot of jewelry since it is not a specialty of my business. When I do have jewelry in stock it does not sell well. He opened the paper and asked if I knew anything about the jewelry on the page.
I explained that the article he is holding is from a blog post I made explaining how some countries have restrictions regarding the usage of their coins for jewelry. When he pressed for more information I said that it was noted in the posting that the images came from Etsy and I do not know any of the sellers. Their goods were used as an example for the posting.
It felt like I was being interrogated. I asked if he was a member of law enforcement or any other government investigative agency, he mumbled something I did not like. I asked him to leave. My assistant had called the police.
The police arrived and escorted the man out of the shop and questioned him before letting him drive away in his own vehicle. I noted the license plate. The officer came inside and said that this will be handled elsewhere and that I was not to report it any further.
About a week later, I was visited by someone representing a federal agency and a member of federal law enforcement who wanted to question me about the incident. After they produced proper identification, we went into my office to discuss the matter.
I was told that the man who came into my shop was an agent for an unnamed foreign government. This government has been visiting collectible stores and shows to intimidate people into “returning cultural items” from that country. The country that this person represents considers this legal even though it violates my Fifth Amendment right of due process.
Apparently, the person that visited my shop is responsible for the “confiscation” of items from more than a dozen antiques and collectibles shops in the mid-Atlantic region.
It is not the first time we have heard the foreign governments have tried to go around the United States’ right of due process by trying to confiscate coins under the guise that they are “national treasures.” In 2013, I wrote “Why you should care about restrictions on collecting ancient coins” sounding an alarm for people to act.
People did not act or act strongly enough. It has allowed a foreign government to pervert the 1970 UNESCO Convention’s intent to steal legally obtained inventory from United States businesses they claim are national treasures.
In the next few weeks, I will be writing a short position paper to present to the American Numismatic Association in order to get them to work to protect collectors. It is time that the ANA and other numismatic organizations work together to protect the hobby and stop kowtowing to every country who wants to retroactively make a claim against United States business because a foreign government said so.
Although this is a numismatic blog, it is difficult to write about any aspect of Congress without recognizing the service of Senator John Sidney McCain, III. McCain died on August 25, 2018, from complications with glioblastoma, an aggressive form of brain cancer. He was buried on Sunday, September 2, 2018, next to his friend and mentor in the cemetery at the U.S. Naval Academy in Annapolis, Maryland.
John Sidney McCain III (1936-2018)
McCain’s story of his stay at the infamous Hanoi Hilton has been long discussed and written about in the books he authored. He served as legislative liaison for the Pentagon to Congress before being elected to the House of Representatives from Arizona’s First District in 1982. After two terms in Congress, he ran for the seat that was being vacated by the retiring Barry Goldwater. McCain would go on to win five elections to the Senate before his passing.
John McCain was a true American Hero. What made him a bigger hero was that he was imperfect and stood up when he was wrong and took ownership of his mistakes. Something the colleagues he leaves behind in Congress should learn from.
To add a numismatic theme, military orders and medals are part of exonumia. To honor the late John McCain, here is a list of medals he earned during his service in the U.S. Navy:
- Silver Star Medal
- Legion of Merit with Combat “V” device and Star
- Distinguished Flying Cross
- Three Bronze Star Medals; all three with Combat “V” device and the second two with stars
- Two Purple Heart Medals; the second with a star
- Meritorious Service Medal
- Two Navy Air Medals; the first with a bronze star and the second with a Strike/Flight numeral “2” device
- Two Navy Commendation Medals; both with Combat “V” device
- Navy Combat Action Ribbon
- Navy Unit Commendation
- Navy Meritorious Unit Commendation
- Two National Defense Service Medals; the second with a star
- Armed Forces Expeditionary Medal
- Three Vietnam Service Medals; the second and third with stars
- Republic of Vietnam National Order of Vietnam—Awarded by the South Vietnamese government, it was the highest honor that can be bestowed on a non-military official by South Vietnam
- Republic of Vietnam Gallantry Cross—Awarded by the South Vietnamese government for valor in combat
- Republic of Vietnam Campaign Medal with Device—Awarded by the South Vietnamese government for wartime service
A Combat “V” device is an award for Valor. These are given to those who earned the award for their service during battle. Stars are awarded when a medal is awarded more than once. The Strike/Flight numeral “2” device is awarded to service members whose award was earned during aerial combat.
As for the legislative update, August in Washington, D.C. is very hot and humid. Those of us who live in the area dread this month. Aside from the weather, it is the slowest month for everything. On the plus side, it is the month where we see less severe traffic as residents flee the area for their last summer fling. All that ends at the end of the month when it becomes time to get ready for the school year.
Congress usually takes off in August. If they are not campaigning for reelection, they are spending time at home. This year was different. There were a few floor sessions but the committees seemed to have a few hearings. While it is normal for committees to meet when there are no floor sessions, it is unusual for it to happen in August.
Other than having all members of Congress in town for John McCain’s funeral, there was no numismatic legislation to report for this month. With mid-term elections predicted to be contentious, it will be interesting to see if Congress will tackle anything that is not necessary between now and Election Day.
For those of you who do not like where politics and policy cross the line into numismatics, this post is not for you. Skip past the beginning into the news section below.
Zimbabwe’s 2009 $100 trillion hyperinflation note
In the news this week was a story about the Reserve Bank of Zimbabwe touting the adoption of Chinese currency for general use in the country as circulating currency.
Zimbabwe’s economy has seen wild swings between massive inflation and significant economic stagnation that has caused currency fluctuations so bad that the country has given up managing its own currency. The economic problems have created a hyperinflation currency with notes printed with denominations as high as 100 Trillion Zimbabwean Dollars. So many of these notes were printed that any collector can buy them for $5-10 each.
Because of trade restrictions, Zimbabweans turned to United States currency smuggled from outside of the country. The supply of United States currency was so limited that some had begun the practice of cleaning the paper because people were carrying their currency in their underwear and new notes were difficult to come by.
Following negotiations with the United States, the RBZ was able to obtain new currency notes and offered an exchange to its residents. But that is where the negotiations ended. Upon the change of administrations, the current Department of the Treasury stopped negotiating with Zimbabwe and other African nations to introduce additional trade in United States dollars.
As the United States began to abandon these countries, the Chinese stepped in. The Chinese government has been negotiating with these countries and have made several inroads, especially in Africa. Zimbabwe is just the latest to announce that they could adopt the Yuan as their currency.
Although Zimbabwe is not an influential economy, it expands the Chinese economic base in Africa. By chipping away at the United States economic influence, it reduces the impact of the dollar on the continent that could have an effect on numismatics.
Africa continues to have the largest deposits of precious metals. Southern African regions have the world’s most active gold, silver, and platinum mines that if the United States loses influence in the region could have a negative effect on worldwide precious metals prices.
It is not a matter of the golden rule, “He who has the gold rules,” it is a matter of who controls the flow of gold from those mines. If the Chinese control the economic engine that runs those mines, they can use that influence to make or break the markets as they see fit. The ripple effect could not only bring higher precious metals prices but worldwide economic instability.
History has taught us that market manipulating does not work except if the manipulators have a backup plan. In this case, the Chinese are using their treasury as the backup plan. They are amassing economic power that could manipulate markets to the point that would cause prices to rise.
Currently, precious metals prices are set by arrangement with the London Bullion Market Association (LBMA) based on the daily auction prices in London. This is known as the London Fix Price. The market uses United States dollars for its pricing. However, if the dollar loses its economic power because the Chinese are controlling the markets where the metals are mined, it will affect the cost of everything.
In the short term, economic factors will affect the price of bullion being produced by the U.S. Mint since those prices are based on LBMA price averages. Collectors and investors will be hit first. After that, it would be a short time before economic instability hits everyone else.
And now the news…
May 27, 2018
If you visit Stones River National Battlefield and Cemetery, you'll likely see coins on the top of many tombstones. According to park workers, the small mementos are a way some choose to pay their respects to the fallen soldier, and each kind of coin has a different meaning. → Read more at newschannel5.com
May 27, 2018
In this edition of East Idaho Newsmakers, Nate Eaton speaks with Randy’L Teton. Teton is a Fort Hall native and is featured on the US Sacagawea dollar gold coin. She is the only living person to currently appear on a United States coin. During their conversation, Teton shares the fascinating story of how she ended … → Read more at eastidahonews.com
May 28, 2018
TOKYO (Jiji Press) — The Finance Ministry said Friday that it will issue a silver coin to commemorate the 150th anniversary of the 1868 start of the country’s Meiji period, which ended in 1912. → Read more at the-japan-news.com
May 29, 2018
Ahmed Mohamed Fahmy Yousef has spent the last academic year at the University of Colorado conducting research on learning technologies and instructional design in computer science education. → Read more at dailycamera.com
May 29, 2018
Tawanda Musarurwa, Harare Bureau The adoption of Renmimbi/Yuan as a reserve currency, will help the country repay loans and grants from China, the Reserve Bank of Zimbabwe has said. → Read more at chronicle.co.zw
June 1, 2018
Archaeologists in Egypt have unearthed a 2,200-year-old gold coin depicting the ancient King Ptolemy III, an ancestor of the famed Cleopatra. → Read more at foxnews.com
June 1, 2018
An ancient Egyptian coin discovered in far north Queensland has researchers questioning how it got there. → Read more at abc.net.au
June 3, 2018
The Royal Canadian Mint unveiled their first-ever panda-themed coin at the Calgary Zoo. → Read more at thestar.com
On Friday, January 19, 2018, rather than working to prevent the shutdown of the government, Sen. Chuck Grassley (R-IA) took to the floor of the Senate and delivered a message that he intends to object to the proceeding to the nomination of David Ryder to be the next Director of the U.S. Mint.
Sen. Chuck Grassley (R-IA)
According to the notice filed in the Congressional Record:
Mr. President, I intend to object to any unanimous
consent request at the present time relating to the nomination of David J. Ryder, of New Jersey, to be Director of the Mint, PN1355
I will object because the Department of the Treasury has failed to respond to a letter I sent on September 29, 2017, to a bureau within the Department seeking documents relevant to an ongoing investigation by the Senate Committee on the Judiciary. Despite several phone calls between committee staff and Treasury personnel to prioritize particular requests within that letter, the Treasury Department has to date failed to provide any documents.
My objection is not intended to question the credentials of Mr. Ryder in any way. However, the Department must recognize that it has an ongoing obligation to respond to congressional inquiries in a timely and reasonable manner.
Charles E. Grassley is a seven-term Republican Senator from Iowa. Grassley has a history of abusing† the Department of the Treasury to make it look like he’s doing something to keep his seat in the Senate. It is common for Grassley to have something to complain about without substance regardless of the ramifications of his actions.
In the meantime, the U.S. Mint remains without a permanent director while Grassley has his hissy fit.
PN1355: David J. Ryder — Department of the Treasury
Date Received from President: January 8, 2018
Summary: David J. Ryder, of New Jersey, to be Director of the Mint for a term of five years, vice Edmund C. Moy, resigned.
Received in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs. — Jan 8, 2018
Committee on Banking, Housing, and Urban Affairs. Ordered to be reported favorably. — Jan 17, 2018
Reported by Senator Crapo, Committee on Banking, Housing, and Urban Affairs, without printed report. — Jan 17, 2018
Placed on Senate Executive Calendar. Calendar No. 596. Subject to nominee’s commitment to respond to requests to appear and testify before any duly constituted committee of the Senate. — Jan 17, 2018
† If you look at Grassley’s record, he has a record of making outlandish claims and using his office against Treasury bureaus regardless of the party in the White House. In 2005, I was involved with a Treasury bureau forced to a hearing in the Senate. Even though the evidence showed the contractor was clearly derelict in the performance of their contract, Grassley did everything except put on knee pads in deference to the contractor. Outside of the hearing room, I had a confrontation with one of his staffers and offered to supply the knee pads so that Grassley could complete the job. Since that hearing, I have held Grassley in contempt for being a bully and not a representative of the interests of his constituents in Iowa.
The last time the government shutdown, because Congress did not do their job, was on September 30, 2013. Over the weekend, the major impact will be the recreational-based activities including the National Parks and the Smithsonian Museums—although many of these agencies will remain mostly open using what is called “carry-over funding” which are services whose bills are paid but the agencies are owed the services. It is an accounting trick that can help some agencies up to 72-hours during a shutdown depending on the amount of money and to whom it is paid.
Thankfully, the Washington, D.C. government will pick up the trash and provide basic cleanup services on the National Mall and other areas that would normally be taken care of by the National Parks Service.
Should the shutdown last through Monday, both the U.S. Mint and Bureau of Engraving and Printing will be operational. Both organizations are funded from their profits (seigniorage) which is held in their respective Public Enterprise Funds. The only responsibility that Congress has in their funding is to authorize the spending of the money. That authorization is not impacted by the shutdown because these are not (technically) taxpayer funds.
Since the U.S. Mint and Bureau of Engraving and Printing are self-funded, they are also not subject to the debt ceiling issues.
Although the U.S. Mint and Bureau of Engraving and Printing has not made a formal announcement, it is likely that facility tours will be suspended during the shutdown. This is because the security personnel are Treasury employees and not direct employees of the bureaus. Some will be designated as “essential personnel” and continue to work to help maintain security at all U.S. Mint and Bureau of Engraving and Printing facilities.
Security for the Bullion Depository at Fort Knox, Kentucky will not be impacted by the shutdown.
Since the Federal Reserve is an independent organization and not subject to congressional appropriations, they will remain open during a shutdown. The Office of the Comptroller of the Currency (OCC) will probably also remain open. OCC is funded by the Federal Reserve to help regulate banks.
All independent government organizations not subject to congressional appropriations will continue to operate including the United States Postal Service.
Representatives of these agencies may contact me to provide additional information. Government employees who work for these agencies that want to provide additional information may also contact me. Please note that I do respect the confidentiality of all sources!
Although I no longer work as a contractor to the federal government, my views on the government have changed only in my level of disgust with their practices. I am not a member of any political party. I am a supporter of government employees who makes up a very dedicated workforce and do not deserve the way they are treated by elected and appointed officials.
Starting on January 19, 2018, the U.S. Mint will be resuming the Mutilated Coin Redemption program. The program was suspended in December 2015 when the government alleged that a company in New Jersey was importing counterfeit coins from China to redeem as mutilated coins. Formal charges were brought against the persons involved in March 2016 and the U.S. Mint extended the suspension indefinitely in May 2016.
Coins found in the recycling stream.
The recycling industry has complained to the Department of the Treasury and their members of Congress over the U.S. Mint’s inaction with providing new rules to restart the program. After publishing two draft rules and making adjustments based on the comments, the Final Rule was published in the Federal Register (82 FR 60309) on December 11, 2017.
The Final Rule that makes adjustments to the regulations for “Exchange of Paper Currency and Coin” (31 CFR Part 100 Subpart C) in order to add additional clarity and oversight to the process. This includes depositing worn or heavily scratch coins in a bank or other authorized depository. Bulk submission over one pound must be separated by denomination and must be identifiable. Each denomination is considered one submission and must be over one pound (e.g., one pound of nickels and one pound of dimes and one pound of quarters, etc.). Dollar coins also have to be separated by type (e.g., Eisenhower, Sacagawea, Presidential, etc.). The updated program restricts the redemption of fused, unsorted, and unidentifiable coins. Coins made of gold and silver are not accepted as part of this program.
Those needing more detailed information should consult the “Mutilated Coin Redemption Program” webpage on the U.S. Mint website (see http://bit.ly/Mutilated-Coin).
With the gaveling in the second session of the 115th Congress, the Senate allows the inaction to the nomination of David Ryder to be the next Director of the U.S. Mint to end without a vote.
David J. Ryder at the hearing regarding his nomination to be the 39th Director of the U.S. Mint
Officially, Ryder’s nomination was “[returned] to the President under the provisions of Senate Rule XXXI, paragraph 6 of the Standing Rules of the Senate.”
Senate Rule XXXI, paragraph 6 states:
Nominations neither confirmed nor rejected during the session at which they are made shall not be acted upon at any succeeding session without being again made to the Senate by the President; and if the Senate shall adjourn or take a recess for more than thirty days, all nominations pending and not finally acted upon at the time of taking such adjournment or recess shall be returned by the Secretary to the President, and shall not again be considered unless they shall again be made to the Senate by the President.
However, according to the Congressional Research Service (CRS Report RL31980):
The Senate can, however, waive this rule by unanimous consent, and it often does to allow nominations to remain “in status quo” between the first and second sessions of a Congress or during a long recess. The majority leader or his designee also may exempt specific nominees by name from the unanimous consent agreement, allowing them to be returned during the recess or adjournment.
Since the Senate calendars are controlled the Majority Leader, Mitch McConnell (R-KY) allowed the nomination to be silently rejected by not exercising his power to exempt Ryder from Senate Rule XXXI, paragraph 6.
Senate Majority Leader Mitch McConnell (R-KY)
There should be no reason to reject Ryder’s nomination. Aside from being previously confirmed by the Senate, there was no issue with Ryder’s confirmation hearing. In fact, his hearing was considered a pro forma session because of his past experience with the U.S. Mint and commercial Secure Products, a company focused on developing anti-counterfeiting solutions for currency and branded products.
This is clearly a political move by McConnell who has his issues with the president while polls show the popularity of both men is declining. McConnell may be trying to calculate what it will take to hold the Senate this November in an election that is seen to be potentially contentious. McConnell ask has to consider that his term is up in 2020. If he does not retire, he would have to run alongside the president. It might help McConnell to poke the president in the eye when he has the chance.
It has been seven years since Edmund Moy resigned as Director of the U.S. Mint. Since January 2011, there have been three nominations that the Senate has not considered (Bibiana Boerio & Rhett Jeppson by Obama and currently Ryder). At this rate, will anyone accept a nomination given the Senate’s record of inaction? Or will the U.S. Mint have to accept a less than optimal candidate because nobody else will take the job?
Gallery of Rejected Nominees to be Director of the U.S. Mint
Bibiana Boerio was nominated in Sept 2010 but never acted on by the Senate.
Rhett Jeppson was nominated in July 2015 and even had a hearing, but his nomination was not acted on in the Senate.
David J. Ryder, Director of the U.S. Mint.
Each two-year term of congress is marked by sessions that begin every January 3rd at noon. When the House and Senate gavel into session on January 3, 2018, it will be the second session of the 115th Congress.
Political watchers have called the 115th congress everything from contentious to partisan to dysfunctional to names that cannot be repeated to a family audience. One thing they have not called this congress: boring.
For numismatists, Congress did pass The American Legion 100th Anniversary Commemorative Coin Act (Public Law No. 115-65) making it the second commemorative coin program for 2019. The Apollo 11 50th Anniversary commemorative is the other. Also, two bills passed the House and have been sent to the Senate for their consideration:
- Saint-Gaudens National Historical Park Redesignation Act (H.R. 965)
This bill redesignates the Saint-Gaudens National Historic Site, in New Hampshire, as the “Saint-Gaudens National Historical Park.”
- Naismith Memorial Basketball Hall of Fame Commemorative Coin Act (H.R. 1235)
This bill creates the first commemorative coin program in 2020 in recognition and celebration of the Naismith Memorial Basketball Hall of Fame in Springfield, Massachusetts.
In between the partisan wrangling, there were three bills were introduced in Congress last month. They are as follows:
H.R. 4539: Plymouth 400th Anniversary Commemorative Coin Act of 2017
Referred to the House Committee on Financial Services. — Dec 4, 2017
S. 2189: Plymouth 400th Anniversary Commemorative Coin Act of 2017
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs. — Dec 4, 2017
H.R. 4732: National Law Enforcement Museum Commemorative Coin Act
Referred to the House Committee on Financial Services. — Dec 21, 2017
In the meantime, the nomination of David Ryder to be the next Director of the U.S. Mint is now 73rd on the Senate Executive Calendar, down from 70th last month. A few nominations for key administrative positions were added to the calendar in front of Ryder. It is possible that his nomination will be confirmed within the next two months.
PN1082: David J. Ryder — Department of the Treasury
Date Received from President: October 5, 2017
Summary: David J. Ryder, of New Jersey, to be Director of the Mint for a term of five years, vice Edmund C. Moy, resigned.
Received in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs. — Oct 5, 2017
Committee on Banking, Housing, and Urban Affairs. Hearings held. — Oct 24, 2017
Committee on Banking, Housing, and Urban Affairs. Ordered to be reported favorably. — Nov 1, 2017
Reported by Senator Crapo, Committee on Banking, Housing, and Urban Affairs, without printed report. — Nov 1, 2017
Placed on Senate Executive Calendar. Calendar No. 458. Subject to nominee’s commitment to respond to requests to appear and testify before any duly constituted committee of the Senate. — Nov 1, 2017
The Industry Council for Tangible Assets (ICTA) issued an alert warning that a provision on the House of Representatives’s tax plan has the potential to hurt the numismatic industry and asked its members to contact their representatives to let them know of the issue.
Like many legislative actions, the bill was probably not targeted at the numismatic industry but at others where alleged abuses have allowed some to avoid paying taxes or reducing their tax burden. Some suggest that it is aimed at the burgeoning crypto-currency or Bitcoin economy.
In a bill that is supposed to be business-friendly, under Title III, Subtitle D (Reform of Business-Related Exclusions, Deductions, Etc.), Section. 3303 (Like-Kind Exchanges of Real Property) has an innocuous statement that says:
Section 1031(a)(1) is amended by striking “property” each place it appears and inserting “real property”.
Section 1301(a)(1) refers to 26 U.S.C. §1301(a)(1) that currently says:
No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.
In plain English, this is the basis of the bartering economy. If I trade goods and services for goods and services, they are assumed to be a trade of even value and no taxes are paid on the transaction. The new bill (H.R. 1) will tax the barter economy.
In numismatic terms, a collector walks into to a coin shop with 10 Mercury dimes graded by one of the third-party grading services worth about $475 on the retail market. While talking to a dealer you see a nice 1928 Peace Dollar that he has marked $460 rather than selling the Mercury dimes for cash, you work out a trade with the dealer for the Peace Dollar. You make the trade and everyone is happy.
Under the current tax law, that is a “like kind” trade of items of value and not taxed as income.
If the bill that just passed the House is enacted, the dealer will be required to pay a tax on that that transaction.
The amount of the tax will be based on an interpretation of the law by the IRS which is where this could get very tricky.
If the dealer is taxed on the retail value of the trade, the dealer could be taxed on $15 of income if based on the dealer’s valuation of the transaction.
If the IRS requires the dealer to make a valuation based on prevailing market values, who sets those market values? Can the dealer use any price guide to determine the value of the coins? For example, if a price guide determines the Mercury dimes are worth $475 on the retail market as we assumed earlier, but the Peace dollar is worth $450 on one price guide but $480 on another, which guide does the dealer use? The dealer will either make $25 on the transaction, which is subject to taxation or lose $5 that will lower the dealer’s overall tax liability.
But the dealer does not buy at retail valuation. The cost of the inventory would be based on market values of the coins. Does the IRS allow the dealer to base the transaction on the “buy” cost of the coins? Based on the “buy” valuation the transaction may be closer to break-even.
The result will be more bookkeeping for the dealer and a tougher set of accounting rules when managing inventory. Managing inventory for a coin dealer is not like a regular retail store. Each coin is its only item and may be given its own identification (stock keeping unit, or SKU).
Most coin dealers are small businesses that are either sole proprietors or have a few employees. They either work at coin shows or have a few thousand square feet of retail space. Some are family operated business while others hire from the local community. Dealers make a living but it may not be enough to support the necessary change to their inventory management under the new tax law.
Eventually, this will make you, the collector, the loser.
First, it will eliminate the possibility of a trading because of the accounting problems. The dealer who has the Peace dollar in inventory that is not selling but can trade it for Mercury dimes that will sell quicker will not be able to happen. Of course, the dealer could buy the Mercury dimes for the same price as you buy the Peace dollars. The dealer could also be accused of a tax avoidance scheme which will make matters worse. Even if the accusation is not true, the IRS is notorious for treating these cases as “guilty until proven innocent.”
This can also drive dealers out of business.
If this drives small dealers out of business, then there will be no dealers to participate in local, small coin shows. With no dealers, those shows will end and so will your access to dealers to help you with your collection. With no smaller shows, you will have to travel further to find shows or will have lesser access to quality collectibles. Sure, you can purchase coins and currency online, but who will be there to answer questions? What happens if you are not happy with the purchase and you have to ship the coin back to the seller?
Ironically, the change proposed in H.R. 1 strengthens the trading of real estate and real property as “like kind” transaction.
This change in the tax law is not good for small business or the numismatic industry. Please contact your member of the House and Senators to let them know that the side effects of Title III Section 3303 will hurt the hobby we love!
If you do not know your member of Congress, you can call the Capitol switchboard operator at (202) 224-3121. They can transfer you to the appropriate representative.
If you are not sure what to say to the staffer who answers the phone, try the following:
Please tell the Representative/Senator that in H.R. 1, the new tax bill, Section 3303 of Title III may have the unintended consequences of hurting the barter economy and the numismatic industry. It will place a heavy accounting burden on coin dealers who are mostly small businesses that will damage the industry. I cannot express in any stronger terms how this change in the tax law will hurt this sector of the small business economy. Thank you for passing this message along.
Please call! Make your voice heard!