As Penny Production Ending, GFOA Monitors Federal Rounding Standards and Local Impacts

Last month, the U.S. Department of the Treasury officially announced the end of production of pennies, citing consumer behavior in the market and the rising cost of producing each penny. While the minting of new pennies has ceased, the penny remains legal tender and roughly 300 billion pennies continue to circulate nationwide—far exceeding the amount needed for commerce.

The Treasury’s decision to end penny production also reflects ongoing congressional efforts to reconsider the future of the one‑cent coin. This includes H.R. 3074, The Common Cents Act, that was approved on a bipartisan basis in the House Financial Services Committee earlier this year and is awaiting action before the full House.

Companion legislation has also been introduced in the Senate, S.1525. These billsdirect the Secretary of the Treasury to cease minting pennies, establish rounding rules for cash transactions to the nearest five cents, and implement related policy adjustments. 

The rounding rules would be as follows: 

.01 and .02 are rounded down to .00

.03 and .04 are rounded up to .05

.06 and .07 are rounded down to .05

.08 and .09 are rounded up to .10

While the federal government may establish a rounding standard for all types of commerce, governments may need to look at their own local and state laws to determine if such a method can work for payment of tax and fees assessments.  Considerations include whether such rounding applies to all transactions or only for cash transactions, and how to enable this in invoicing, receivables, and reconciliation processes.

GFOA is speaking with the federal government, state and local government associations, and our banking partners with the purpose of developing a resource that will help members navigate concerns about penny shortages and possible federal actions.