1. (a) In lieu of the credit bond described in section 71.2 of this Part, an applicant or an agent may deposit with the Department of Taxation and Finance other security, approved by the department, in such amounts as it may require. Among the kinds of security which may be acceptable are the following:

   1. (1) certificated United States Treasury bonds;
   2. (2) certificated bonds of New York State;
   3. (3) certificated bonds of any political subdivision of New York State having general governmental powers, and in connection with which, the credit of the political subdivision is pledged for the payment of the interest and principal due on such bonds;
   4. (4) financial institution passbooks and certificates of deposit;
   5. (5) irrevocable standby letters of credit made payable to the New York State Department of Taxation and Finance; and

   6. (6) any other forms of security acceptable to the Department of Taxation and Finance.

      (b)

   7. (1) Bonds offered as collateral under this section must be certificated and may be either bearer or registered bonds, having maturity dates at least five years subsequent to the date of deposit with the Department of Taxation and Finance. The amount of the bonds will generally be based on the fair market value, not to exceed par value on maturity, determined as of the date of deposit. If such bonds are of the coupon type, the interest coupons must be attached. Certificated registered bonds offered as collateral must be in the name of the agent and must be accompanied by a properly executed assignment or power of attorney with respect to such bonds in such form as the Department of Taxation and Finance may require.

   8. (2) Any interest accruing on bonds offered as collateral under this section shall belong to the agent.

      (c)

   9. (1) Financial institution passbooks and certificates of deposit offered as collateral under this section must represent money on deposit with a financial institution approved by the Department of Taxation and Finance. Certificates of deposit must have maturity dates at least one year subsequent to the date of deposit with the Department of Taxation and Finance. Additionally, financial institution passbooks and certificates of deposit offered under this section must be:

      1. (i) prepared in the name of the agent;
      2. (ii) accompanied by a signed undated withdrawal slip;
      3. (iii) accompanied by a properly completed letter of transmittal in such form as the Department of Taxation and Finance may require, advising that the proceeds of such passbook accounts or certificates of deposit may be withdrawn by the department and applied against any liability of such agent pursuant to article 20 of the Tax Law; provided, however, that any interest accruing on such accounts or certificates shall belong to the agent; and

      4. (iv) accompanied by a letter prepared on the letterhead of the financial institution and signed by an officer of such financial institution:

         1. (a) identifying the passbooks or certificates of deposit by account number and confirming that withdrawal of principal from the passbook or certificate of deposit offered as collateral will not be permitted without written consent from the New York State Department of Taxation and Finance; and
         2. (b) stating that any right of setoff which the financial institution may possess against the agent resulting from a defaulted obligation of such agent shall be subservient to the interest of the Department of Taxation and Finance in the passbook or certificate of deposit offered as collateral.
   10. (2) Any interest accruing on passbooks or certificates offered as collateral under this section shall belong to the agent.

2. (d) Standby letters of credit offered as collateral under this section must:

   1. (1) be irrevocable for such period of time as the Department of Taxation and Finance shall determine;
   2. (2) be made payable to the New York State Department of Taxation and Finance;
   3. (3) be issued or confirmed by a bank approved by the Department of Taxation and Finance; and
   4. (4) contain such other payment terms as are acceptable to the Department of Taxation and Finance.
3. (e) Any security deposited with the Department of Taxation and Finance pursuant to this section must have a fair market value at least equal to the amount of the credit bond required pursuant to this Part. Fair market value greater than the par value of the security on maturity will not be recognized. Accepted marketable securities deposited as security under this section shall be kept in the custody of the Commissioner of Taxation and Finance and may be sold by the Department of Taxation and Finance, should it become necessary to do so in order to recover any sums due from an agent pursuant to article 20 of the Tax Law. No such sale shall be had until after an agent has had an opportunity to litigate the validity of any tax at issue, in the manner set forth in section 478 of the Tax Law, if such agent elects to do so. Upon any such sale of securities, the surplus, if any, above the sums due under article 20 of the Tax Law shall be returned to such agent.

Tax Law, § 472(1)