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Definition: Tax and Loan Accounts
Tax and Loan Accounts are non-dividend paying banking accounts present at private banking institutions used for the deposition of funds received from tax collection, payments for US government securities and employers’ contribution to the social security fund.
They enable to maintain the liquidity and stability of the banking sector and try to limit the effect of taxation on the monetary policy. They reduce the uncertainty about the availability of reserves in the banking system and prevent tax payments from making abrupt changes in the depository reserves held. These accounts are used to cover operating expenses for the United States Treasury.