Answer:
There is no prohibition on partnerships and corporations holding savings or time accounts, or money market deposit accounts. All of those can, and usually do, earn interest.
Federal law, however, currently prohibits the payment of interest on demand deposit accounts. There are several places in the statutes that include that prohibition -- Section 19(i) of the Federal Reserve Act (12 U.S.C. 371a); section 5(b)(1)(B) of the Home Owners’ Loan Act (12 U.S.C. 1464(b)(1)(B)); and section 18(g) of the Federal Deposit Insurance Act (12 U.S.C. 1828(g)).
Partnerships and corporations organized as for-profit businesses cannot have NOW accounts (Regulation D, section 204.130), so the only other form of checking account they may hold is a demand deposit account, which, as said above, cannot earn interest.
All of this confusion goes away on July 21, 2011, however, when the provisions of law cited above that prohibit the payment of interest on demand deposits will be repealed by the Dodd-Frank Act. Then banks can set their own policies about paying interest to business accounts, remembering that they may need to comply with FDIC regulations at 12 CFR Section 330.16 if they decide to pay interest.
First published on BankersOnline.com 2/21/11
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