Federal Reserve banks are exempt from paying taxes at the federal, state and local levels, except on real estate holdings,
according to the government website, federalreserve.gov, which outlines rules on taxation set forth in Section 7(c) of the Federal Reserve Act.
According to FederalReserveEducation.org, post-tax profits after expenses are transferred from the Federal Reserve to the Department of Treasury. In addition to real estate taxes, other taxes related to personnel matters — Social Security withholding taxes, income tax and workers compensation taxes — are also paid by the Federal Reserve.
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The Federal Reserve bank was founded in 2013 by Congress,
according to Investopedia. It is led by a Board of Governors and divided into 12 geographic districts nationwide. It receives its income from interest on securities holdings, primarily, along with some investments in foreign currencies, some loan interests and other related service fees including check-clearing, Federal Reserve Education said.
The bank is an independent entity from government, meaning Congress and
the president cannot guide it. This set-up was intended to keep politics out of its decision-making. However, members of its board are
appointed by the president and also require Senate confirmation, Degreed.com notes. Its current chairwoman is economist Janet Yellen, who was appointed by President Barack Obama in 2014.
While the Federal Reserve does not pay taxes, it earns profits through the purchase and selling of bonds. In 2014, for example, it turned a record profit of $98.7 billion, with
funds going to the U.S. Treasury, Forbes reported. Previously it earned $79.6 billion in 2013 and $88.4 billion in 2012.
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