issue-1995-12-22•Federal Register final rules — 1995-12-22
Federal Register final rules — 1995-12-22
issue-1995-12-22Federal Register final rules — 1995-12-22Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 95-31203 Establishment of Class E Airspace; Wray, CO
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66490-66491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31203]
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DEPARTMENT OF TRANSPORTATION
14 CFR Part 71
[Airspace Docket No. 95-ANM-17]
Establishment of Class E Airspace; Wray, CO
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
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SUMMARY: This action establishes the Wray, Colorado, Class E airspace.
This action is necessary to accommodate a Global Positioning System
(GPS) Standard Instrument Approach Procedure (SIAP) at Wray Municipal
Airport, Wray, Colorado.
EFFECTIVE DATE: 0901 UTC, February 29, 1996.
FOR FURTHER INFORMATION CONTACT:
James C. Frala, System Management Branch, ANM-535/A, Federal Aviation
Administration, Docket No. 95-ANM-17, 1601 Lind Avenue SW., Renton,
Washington 98055-4056; telephone number: (206) 227-2535.
SUPPLEMENTARY INFORMATION:
History
On October 20, 1995, the FAA proposed to amend part 71 of the
Federal Aviation Regulations (14 CFR part 71) to establish Class E
airspace at Wray, Colorado, to accommodate a new GPS SIAP at Wray
Municipal Airport (60 FR 54206). Interested parties were invited to
participate in the rulemaking proceeding by submitting written comments
on the proposal. No comments were received.
The coordinates for this airspace docket are based on North
American Datum 83. Class E airspace areas extending upward from 700
feet or more above the surface of the earth are published in paragraph
6005 of FAA Order 7400.9C dated August 17, 1995, and effective
September 16, 1995, which is incorporated by reference in 14 CFR 71.1
The Class E airspace listed in this document will be published
subsequently in the Order.
The Rule
This amendment to part 71 of Federal Aviation Regulations
establishes Class E airspace at Wray, Colorado. The FAA has determined
that this regulation only involves an established body of technical
regulations for which frequent and routine amendments are necessary to
keep them operationally current. It, therefore, (1) is not a
``significant regulatory action'' under Executive Order 12866; (2) is
not a ``significant rule'' under DOT Regulatory Policies and Procedures
(44 FR 11034; February 26, 1979); and (3) does not warrant preparation
of a regulatory evaluation as the anticipated impact is so minimal.
Since there is a routine matter that will only affect air traffic
procedures and air navigation, it is certified that this rule will not
have a significant economic impact on a substantial number of small
entities under the criteria of the Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference, Navigation (air).
Adoption of the Amendment
In consideration of the foregoing, the FAA amends 14 CFR part 71 as
follows:
PART 71--[AMENDED]
1. The authority citation for 14 CFR part 71 continues to read as
follows:
Authority: 49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24
FR 9565, 3 CFR, 1959-1963 Comp., p. 389; 14 CFR 11.69.
Sec. 71.1 [Amended]
2. The incorporation by reference in 14 CFR 71.1 of the Federal
Aviation Administration Order 7400.9C, Airspace Designations and
Reporting Points, dated August 17, 1995, and effective September 16,
1995, is amended as follows:
Paragraph 6005 Class E airspace areas extending upward from 700
feet or more above the surface of the earth.
* * * * *
ANM CO E5 Wray, CO [New]
Wray Municipal Airport, CO
(Lat. 40 deg.06'00''N, long. 102 deg.14'27''W)
That airspace extending upward from 700 feet above the surface
within a 6.5-mile radius of the Wray Municipal Airport; that
airspace extending upward from 1,200 feet above the surface bounded
by a line beginning at lat. 40 deg.12'00''N, long. 102 deg.30'00''W;
to lat. 40 deg.16'00''N, long. 102 deg.03'00''W; to lat.
39 deg.45'00''N, long. 102 deg.03'00''W; to lat. 39 deg.45'00''N,
long. 102 deg.14'00''W; to lat. 40 deg.00'00''N, long.
102 deg.30'00''W; thence to point of beginning.
* * * * *
[[Page 66491]]
Issued in Seattle, Washington, on November 29, 1995.
Richard E. Prang,
Acting Assistant Manager, Air Traffic Division, Northwest Mountain
Region.
[FR Doc. 95-31203 Filed 12-21-95; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 95-31201 Airworthiness Directives; Jetstream Aircraft Limited HP137 Mk1, Jetstream Series 200, and Jetstream Models 3101 and 3201 Airplanes.
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66485-66487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31201]
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DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 95-CE-27-AD; Amendment 39-9443; AD 95-24-13]
Airworthiness Directives; Jetstream Aircraft Limited HP137 Mk1,
Jetstream Series 200, and Jetstream Models 3101 and 3201 Airplanes.
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule.
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SUMMARY: This amendment adopts a new airworthiness directive (AD) that
applies to Jetstream Aircraft Limited (JAL) HP137 Mk1, Jetstream Series
200, and Jetstream Models 3101 and 3201 Airplanes. This action requires
inspecting (one-time) the threaded portion of the aileron mounting
spigots for cracks, replacing any cracked spigots, and replacing the
securing nut assemblies with newly designed special nut assemblies and
new split pins. Reports of cracked aileron mounting spigots caused by
stress corrosion prompted this action. The actions specified by this AD
are intended to prevent damage to the aileron control systems, which if
not detected and corrected, could cause loss of lateral control and
eventual loss of control of the airplane.
DATES: Effective January 17, 1996.
The incorporation by reference of certain publications listed in
the regulations is approved by the Director of the Federal Register as
of January 17, 1996.
ADDRESSES: Service information that applies to this AD may be obtained
from Jetstream Aircraft Limited, Prestwick International Airport,
Ayrshire, KA9 2RW, Scotland, telephone (44-292) 79888; facsimile (44-
292) 79703; or Jetstream Aircraft Inc., Librarian, P.O. Box 16029,
Dulles International Airport, Washington, D.C. 20041-6029; telephone
(703) 406-1161; facsimile (703) 406-1469. This information may also be
examined at the Federal Aviation Administration (FAA), Central Region,
Office of the Assistant Chief Counsel, Attention: Rules Docket 95-CE-
27-AD, Room 1558, 601 E. 12th Street, Kansas City, Missouri 64106; or
at the Office of the Federal Register, 800 North Capitol Street, NW.,
suite 700, Washington, DC.
FOR FURTHER INFORMATION CONTACT: Ms. Dorenda Baker, Program Officer,
Brussels Aircraft Certification Office, FAA, Europe, Africa, and Middle
East Office, c/o American Embassy, B-1000 Brussels, Belgium; telephone
(322) 508.2715; facsimile (322) 230.6899; or Mr. Sam Lovell, Project
Officer, Small Airplane Directorate, Airplane Certification Service,
FAA, 1201 Walnut, suite 900, Kansas City, Missouri 64105; telephone
(816) 426-6934; facsimile (816) 426-2169.
SUPPLEMENTARY INFORMATION: A proposal to amend part 39 of the Federal
Aviation Regulations (14 CFR part 39) to include an AD that would apply
to JAL HP 137 Mk1, Jetstream series 200, and Jetstream Models 3101 and
3201 airplanes was published in the Federal Register on July 25, 1995
(60 FR 37966). The action proposed to require inspecting (one-time) the
threaded portion of the aileron mounting spigots for cracks, replacing
any cracked spigots, and replacing the securing nut assemblies with
newly designed special nut assemblies and new split pins.
Accomplishment of the proposed action would be in accordance with
Jetstream Service Bulletin (SB) 57-JA 921140, which incorporates the
following pages and revision levels:
----------------------------------------------------------------------------------------------------------------
Pages Revision level Date
----------------------------------------------------------------------------------------------------------------
4, 5, 8, 9, 10, 12, 13 and 14........... Original Issue...................... Feb. 24, 1993.
1, 2, 3, 6 7, and 11.................... Revision 1.......................... Feb. 3, 1994.
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[[Page 66486]]
Interested persons have been afforded an opportunity to participate
in the making of this amendment. No comments were received on the
proposed rule or the FAA's determination of the cost to the public.
After careful review of all available information related to the
subject presented above, the FAA has determined that air safety and the
public interest require the adoption of the rule as proposed except for
minor editorial corrections. The FAA has determined that these minor
corrections will not change the meaning of the AD and will not add any
additional burden upon the public than was already proposed.
The FAA estimates that 160 airplanes in the U.S. registry will be
affected by this AD, that it will take approximately 22 workhours per
airplane to accomplish the required action, and that the average labor
rate is approximately $60 an hour. Parts will be provided by the
manufacturer at no cost to the owners/operators. Based on these
figures, the total cost impact of this AD on U.S. operators is
estimated to be $211,200 or $1,320 per airplane. This figure is based
on the assumption that no owner/operator has accomplished the proposed
inspection and modification and it does not account for repetitive
inspections. The FAA has no way of determining the number of repetitive
inspections an owner/operator may incur.
The compliance time of this AD is presented in calendar time
instead of hours time-in-service (TIS). The FAA has determined that a
calendar time compliance is the most desirable method because the
unsafe condition described by this AD is caused by stress corrosion.
Stress corrosion initiates as a result of airplane operation, but can
continue to develop regardless of whether the airplane is in service or
in storage. Therefore, to ensure that the above-referenced condition is
detected and corrected on all airplanes within a reasonable period of
time without inadvertently grounding any airplanes, a compliance
schedule based upon calendar time instead of hours TIS is required.
The regulations adopted herein will not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) will not have a
significant economic impact, positive or negative, on a substantial
number of small entities under the criteria of the Regulatory
Flexibility Act. A copy of the final evaluation prepared for this
action is contained in the Rules Docket. A copy of it may be obtained
by contacting the Rules Docket at the location provided under the
caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 USC 106(g), 40101, 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding a new airworthiness directive
(AD) to read as follows:
AD No. 95-24-13 JETSTREAM AIRCRAFT LIMITED: Amendment 39-9443;
Docket No. 95-CE-27-AD.
Applicability: Model HP137 Mk1, Jetstream Series 200, and
Jetstream Models 3101 and 3201 airplanes (all serial numbers),
certificated in any category.
Note 1: This AD applies to each airplane identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must request approval for an
alternative method of compliance in accordance with paragraph (c) of
this AD. The request should include an assessment of the effect of
the modification, alteration, or repair on the unsafe condition
addressed by this AD; and, if the unsafe condition has not been
eliminated, the request should include specific proposed actions to
address it. Compliance: Required within the next 6 calendar months
after the effective date of this AD, unless already accomplished.
To prevent damage to the aileron control systems, which, if not
detected and corrected, could cause loss of lateral control and
eventual loss of control of the airplane, accomplish the following:
(a) Inspect the mounting spigots for cracks using both visual
and fluorescent dye penetrant methods in accordance with the
ACCOMPLISHMENT INSTRUCTIONS section of Jetstream Service Bulletin
(SB) 57-JA 921140, which incorporates the following pages and
revision levels:
----------------------------------------------------------------------------------------------------------------
Pages Revision level Date
----------------------------------------------------------------------------------------------------------------
4, 5, 8, 9, 10, 12, 13 and 14........... Original Issue...................... February 24, 1993.
1, 2, 3, 6 7, and 11.................... Revision 1.......................... February 3, 1994.
----------------------------------------------------------------------------------------------------------------
(1) Prior to further flight, replace any cracked spigots with
applicable parts specified in the Parts Table in paragraph 5 of the
ACCOMPLISHMENT INSTRUCTIONS section of Jetstream SB 57-JA 921140.
(2) Prior to further flight, replace the securing nut assemblies
and split pins with new special nut assemblies (Part No. SL45022
(Qty. 2)), and new split pins (Part No. SP90-C8 and SP90-C6), in
accordance with the ACCOMPLISHMENT INSTRUCTIONS section of Jetstream
SB 57-JA 921140. This replacement is required regardless of the
results of the inspection required in paragraph (a) of this AD.
(b) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the airplane to a location where
the requirements of this AD can be accomplished.
(c) An alternative method of compliance or adjustment of the
compliance time that provides an equivalent level of safety may be
approved by the Manager, Brussels Aircraft Certification Office,
FAA, Europe, Africa, and Middle East Office, c/o American Embassy,
B-1000 Brussels, Belgium or the Small Airplane Directorate, Airplane
Certification Service, FAA, 1201 Walnut, suite 900, Kansas City,
Missouri 64105. The request shall be forwarded through an
appropriate
[[Page 66487]]
FAA Maintenance Inspector, who may add comments and then send it to the
Manager, Brussels Aircraft Certification Office.
Note 2: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Brussels Aircraft Certification Office.
(d) The inspections and replacements required by this AD shall
be done in accordance with Jetstream SB 57-JA 921140 Revision 1,
dated February 24, 1993. This incorporation by reference was
approved by the Director of the Federal Register in accordance with
5 U.S.C. 552(a) and 1 CFR part 51. Copies may be obtained from
Jetstream Aircraft Limited, Prestwick International Airport,
Ayrshire, KA9 2RW, Scotland, or Jetstream Aircraft Inc., Librarian,
P.O. Box 16029, Dulles International Airport, Washington, D.C.
20041-6029. Copies may be inspected at the FAA, Central Region,
Office of the Assistant Chief Counsel, Room 1558, 601 E. 12th
Street, Kansas City, Missouri, or at the Office of the Federal
Register, 800 North Capitol Street, NW., 7th Floor, suite 700,
Washington, DC.
(e) This amendment (39-9443) becomes effective on January 17,
1996.
Issued in Kansas City, Missouri, on November 17, 1995.
Michael Gallagher,
Manager, Small Airplane Directorate, Aircraft Certification Service.
[FR Doc. 95-31201 Filed 12-21-95; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 95-31200 Beverages: Bottled Water; Correction
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Page 66495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31200]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Part 165
[Docket No. 88P-0030]
RIN 0910-AA11
Beverages: Bottled Water; Correction
AGENCY: Food and Drug Administration, HHS.
ACTION: Final rule; correction.
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SUMMARY: The Food and Drug Administration (FDA) is correcting a final
rule that appeared in the Federal Register of November 13, 1995 (60 FR
57076). The document established a standard of identity for bottled
water; recodified the standard of quality for bottled water; revised
the definition of bottled water to include mineral water and ingredient
uses of this product; and defined ``artesian water,'' ``ground water,''
``mineral water,'' ``purified water,'' ``sparkling bottled water,''
``spring water,'' ``sterile water,'' and ``well water.'' The document
was published with some errors. This document corrects those errors.
EFFECTIVE DATE: May 13, 1996.
FOR FURTHER INFORMATION CONTACT: Shellee A. Davis, Center for Food
Safety and Applied Nutrition (HFS-306), Food and Drug Administration,
200 C St. SW., Washington, DC 20204,-202-205-4681.
In FR Doc. 95-27798, appearing on page 57076 in the Federal
Register of Monday, November 13, 1995, the following corrections are
made in Sec. 165.110 Bottled water:
Sec. 165.110 [Corrected]
1. On page 57124, in the third column, in paragraph (a)(2)(v), in
the fourth line, the phrase ``amount of carbon dioxide that'' is
corrected to read ``amount of carbon dioxide from the source that''.
2. On page 57126, in the first column, in paragraph
(b)(4)(i)(C)(4), beginning in the third line, ``Method 501.2'' is
removed.
Dated: December 15, 1995.
William K. Hubbard,
Associate Commissioner for Policy Coordination.
[FR Doc. 95-31200 Filed 12-21-95; 8:45 am]
BILLING CODE 4160-01-F
Complete official Federal Register PDF
FR Doc. 95-31199 New Animal Drugs For Use In Animal Feeds; Zoalene
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66495-66496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31199]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
21 CFR Part 558
New Animal Drugs For Use In Animal Feeds; Zoalene
AGENCY: Food and Drug Administration, HHS.
ACTION: Final rule.
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SUMMARY: The Food and Drug Administration (FDA) is amending the animal
drug regulations to reflect approval of a supplemental new animal drug
application (NADA) filed by A. L. Pharma, Inc. The supplemental NADA
provides for wider assay limits for zoalene Type A medicated articles.
FDA is amending the regulation concerning medicated feed applications
to reflect the approval.
EFFECTIVE DATE: December 22, 1995.
FOR FURTHER INFORMATION CONTACT: William G. Marnane, Center for
Veterinary Medicine (HFV-143), Food and Drug Administration, 7500
Standish Pl., Rockville, MD 20855, 301-594-2701.
SUPPLEMENTARY INFORMATION: A. L. Pharma, Inc., One Executive Dr., P.O.
Box 1399, Fort Lee, NJ 07024, filed supplemental NADA 11-116, which
provides for widening the current assay limits for zoalene Type A
medicated articles. FDA reviewed the data and information submitted and
is amending 21 CFR 558.4 to provide for an assay range of 92 to 104
percent for zoalene Type A medicated articles.
List of Subjects in 21 CFR Part 558
Animal drugs, Animal feeds.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs and
redelegated to the Center for Veterinary Medicine, 21 CFR part 558 is
amended as follows:
PART 558--NEW ANIMAL DRUGS FOR USE IN ANIMAL FEEDS-
1. The authority citation for 21 CFR part 558 continues to read as
follows:
Authority: Secs. 512, 701 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 360b, 371).
Sec. 558.4 [Amended]
2. Section 558.4 Medicated feed applications is amended in
paragraph (d) in the ``Category I'' table in the entry for ``Zoalene''
in the second column by removing ``98-104'' and adding in its place
``92-104''.
[[Page 66496]]
Dated: December 14. 1995.
Robert C. Livingston,
Director, Office of New Animal Drug Evaluation, Center for Veterinary
Medicine.
[FR Doc. 95-31199 Filed 12-21-95; 8:45 am]
BILLING CODE 4160-01-F
Complete official Federal Register PDF
FR Doc. 95-31198 New Animal Drugs; Change of Sponsor
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Page 66496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31198]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
21 CFR Part 558
New Animal Drugs; Change of Sponsor
AGENCY: Food and Drug Administration, HHS.
ACTION: Final rule.
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SUMMARY: The Food and Drug Administration (FDA) is amending the animal
drug regulations to reflect a change of sponsor for two new animal drug
applications (NADA's) from Farmland Industries, Inc., to A. L. Pharma,
Inc.
EFFECTIVE DATE: December 22, 1995.
FOR FURTHER INFORMATION CONTACT: Thomas J. McKay, Center for Veterinary
Medicine (HFV-102), Food and Drug Administration, 7500 Standish Pl.,
Rockville, MD 20855, 301-827-0213.
SUPPLEMENTARY INFORMATION: Farmland Industries, Inc., Kansas City, MS
64116, has informed FDA that it has transferred the ownership of, and
all rights and interests in, approved NADA's 46-415 (Tylosin Premixes)
and 91-749 (Tylosin-Sulfa Premixes) to A. L. Pharma, Inc., One
Executive Dr., Fort Lee, NJ 07024. Accordingly, the agency is amending
the regulations in 21 CFR 558.625 and 558.630.
List of Subject in 21 CFR Part 558
Animal drugs, Animal feeds.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs and
redelegated to the Center for Veterinary Medicine, 21 CFR part 558 is
amended as follows:
PART 558--NEW ANIMAL DRUGS FOR USE IN ANIMAL FEEDS
1. The authority citation for 21 CFR part 558 continues to read as
follows:
Authority: Secs. 512, 701 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 360b, 371).
Sec. 558.625 [Amended]
2. Section 558.625 Tylosin is amended in paragraph (b)(83) by
removing ``021676'' and adding in its place ``046573''.
Sec. 558.630 [Amended]
3. Section 558.630 Tylosin and sulfamethazine is amended in
paragraph (b)(10) by removing ``021676'' and by adding ``046573'' in
numerical order.
Dated: December 14, 1995.
Robert C. Livingston,
Director, Office of New Animal Drug Evaluation, Center for Veterinary
Medicine.
[FR Doc. 95-31198 Filed 12-21-95; 8:45 am]
BILLING CODE 4160-01-F
Complete official Federal Register PDF
FR Doc. 95-31187 Acquisition Regulation; Technology Transfer Activities of Department of Energy (DOE) Management and Operating Contractors
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66510-66516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31187]
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DEPARTMENT OF ENERGY
48 CFR Part 970
RIN 1991-AA63
Acquisition Regulation; Technology Transfer Activities of
Department of Energy (DOE) Management and Operating Contractors
AGENCY: Department of Energy.
ACTION: Final rule.
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SUMMARY: The Department of Energy (DOE) amends the Department of Energy
Acquisiton Regulation (DEAR) to codify DOE's implementation of its
technology transfer mission for DOE laboratories (including weapon
production facilities) operated by management and operating
contractors.
EFFECTIVE DATE: January 22, 1996.
FOR FURTHER INFORMATION CONTACT: Howard K. Mitchell, Policy Analyst,
Office of Policy (HR-51), Office of the Deputy Assistant Secretary for
Procurement and Assistance Management, Washington, D.C., 20585, (202)
586-8190.
SUPPLEMENTARY INFORMATION:
I. Background
II. Disposition of comments
III. Procedural Requirements
A. Regulatory Review Under Executive Order 12866
B. Review Under Executive Order 12612
C. Review Under Executive Order 12778
D. Review Under the Regulatory Flexibility Act
E. Review Under the Paperwork Reduction Act
F. Review Under the National Environmental Policy Act (NEPA)
I. Background
The proposed rule was published on May 22, 1995, at 60 FR 27069
(1995). It was intended to amend the Department of Energy Acquisition
Regulation (DEAR) to codify DOE's implementation of its technology
transfer mission for DOE laboratories and weapon production facilities
operated by management and operating contractors. This mission was
established by The National Competitiveness Technology Transfer Act of
1989, as amended by Sections 3134 and 3160 of the National Defense
Authorization Act for Fiscal Year 1994.
II. Disposition of Comments
DOE received formal comments from only one entity. This commenter
is a current Departmental non-profit Management and Operating
Laboratory contractor. The commenter noted the need for inclusion in
the proposed definition of bailment the term, Laboratory Tangible
Research Product. This term would encompass tangible material results
of research which (i) are provided to permit replication, reproduction,
evaluation or confirmation of the research effort, or to evaluate its
potential commercial utility, (ii) are not materials generally
commercially available, and (iii) were made under the contract by
Laboratory employees or through the use of Laboratory research
facilities. The definition of bailment has been modified to incorporate
this new term. The commenter also expressed concern that the current
definition of allowable costs only encompassed costs ``through an
ORTA'', with the implication that the activities and costs associated
with autonomous Laboratory organizations such as finance, procurement,
legal and other offices involved in technology transfer would be
excluded. DOE agrees that such Laboratory organizations may be
``appropriate organizational elements consistent with the requirements
for an Office of Research and Technology Applications'' and that the
costs associated with supporting technology transfer at these
Laboratory organizations would be allowable subject to other provisions
of the M&O contract. One of the organizational examples cited by the
commenter, however, falls under the definition of a home or corporate
office general and administrative (G&A) expense. DEAR 970.3102-1
indicates that, in its fee allowance, DOE provides appropriate
compensation for home office G&A expense. DOE policy also recognizes
that the circumstances and the need for such home office involvement
vary considerably from site to site. Therefore, home office G&A
(including technology transfer related expenses) would normally be
considered in the individual negotiation of the fee for the contract.
When the fee amount is believed to be insufficient to cover the extent
of such offsite involvement, however, DEAR 970.3102-1 also permits
separate treatment of such a home office expense. Therefore, no change
in the language of the rule is believed necessary.
The commenter further suggested adding language under Conflicts of
Interest to reflect that other persons working at the Laboratory
participating in Laboratory research or technology
[[Page 66511]]
transfer activities should also be considered when implementing
procedures to avoid conflicts of interest. Such other persons would
most likely be long term visitors, job-shop subcontractors, guest
scientists, no-pay appointees, post doctoral fellows, industrial
exchange participants, academic sabbaticals and other non-Laboratory
personnel. DOE agrees and appropriate language to address this comment
has been included under Conflicts of Interest--Technology Transfer. The
commenter also recommended deleting the requirement under (d)(10) which
requires contractors to notify DOE prior to evaluating a proposal by a
third party or DOE when the subject matter of the proposal involves an
elected or waived subject invention or one in which the Contractor
intends to elect to retain title. The commenter believes that (d)(10)
is burdensome for Contractors that manage and operate several private
and DOE facilities because it requires Contractors to search for
inventions unrelated to the contract. DOE has inserted language under
(d)(10) to clarify that the notification requirement applies when the
subject matter of the proposal involves an elected or waived subject
invention under the contract or one in which the Contractor intends to
elect to retain title under the contract.
The commenter recommended adding language to indicate that the U.S.
Industrial Competitiveness requirements apply to intellectual property
where the Laboratory obtains rights during the period the Contractor is
operating the Laboratory and would not apply to intellectual property
owned by the parent organization/company. Language was added to reflect
that the U.S. Industrial Competitiveness requirements solely apply in
licensing and assignment decisions involving Laboratory intellectual
property where the Laboratory obtains rights during the course of the
Contractor's operation of the Laboratory under the contract. The U.S.
Industrial Competitiveness requirements would not apply in licensing
and assignment decisions involving the Contractor's other intellectual
property.
Three comments were made objecting to three separate provisions of
the Indemnity-Product Liability paragraph which might, in the
commenter's view, result in the contractor being subjected to undue
financial/legal risks and administrative burden. Specifically, the
commenter objected to language that limited the indemnification in
licensing to only personal injury or property injury and which also
excluded from the indemnity protection any liability based upon
negligence of the Contractor. The Indemnity--Product Liability
provisions as written are minimally acceptable to DOE and therefore, no
change is being made to the language. However, the Department
emphasizes that the Contractor is permitted to negotiate language that
is deemed more beneficial to both the Contractor and the Department.
With respect to the commenter's objection to the requirement to
identify and obtain the approval of the Contracting Officer for any
proposed exceptions to the Participant providing indemnification, the
Department believes that overall, this requirement is beneficial to the
Contractor. This requirement provides a mechanism by which the
Contractor is able to obtain exceptions to the indemnification
provision and, therefore, no change is believed necessary.
In the Disposition of Income provisions, the commenter made three
suggestions. Under subparagraph (h)(1), the first suggestion was to
modify the language to reflect that the amount of royalties or other
income earned or retained by the Contractor was to be that amount
remaining after payment of patenting costs, licensing costs, payments
to inventors and other expenses incidental to the administration of
Subject Inventions. This language parallels that which appears in 35
U.S.C. 202(c)(7)(E)(i) and has been adopted.
The second comment submitted regarding the Disposition of Income
provision was to add the text of 35 U.S.C. 202 (c)(7)(E)(ii) which
would allow the licensing of Subject Inventions to be administered by
Contractor employees on location at the facility. This suggestion was
not adopted in that 35 U.S.C. 202 (c)(7)(E)(ii) is already contained in
the patent clause of the M&O contract. The third comment objected to
the proposed coverage on inventor award and royalty sharing being
subject to the approval of the Contracting Officer. Changing the
requirement to obtain Contracting Officer approval with respect to
policies for inventor award and royalty sharing, as proposed in this
comment, would result in a major change to a long standing Departmental
policy and has not been adopted.
Under the Transfer to Successor Contractor provision, the commentor
requested that additional assurance be provided in requiring a
successor contractor to accept transfer of title and accounts subject
to the rights and obligations which the previous operator had to its
inventors, its licensees and to its parent organization/company. No
change is believed necessary because the intent of the suggestion is
implicit in the current language.
In the Technology Transfer Through Cooperative Research and
Development Agreements, Withholding of Data provision, the commenter
suggests that the likelihood of obtaining commercially reasonable
patent protection be included as a standard in determining whether a
patent application has to be filed. As provided in the M&O contract's
patent clause, if the Contractor does not file a patent application on
an invention disclosed to the Government as a subject invention, the
Government may file. Disclosure of subject inventions and the
Government's right to file is a statutory requirement.
III. Procedural Requirements
A. Regulatory Review Under Executive Order 12866
Today's regulatory action has been determined not to be a
``significant regulatory action'' under Executive Order 12866,
``Regulatory Planning and Review,'' (58 FR 51735, October 4, 1993).
Accordingly, today's action was not subject to review under the
Executive Order by the Office of Information and Regulatory Affairs.
B. Review Under Executive Order 12612
Executive Order 12612 (52 FR 41285, October 30, 1987) requires that
regulations, rules, legislation, and any other policy actions be
reviewed for any substantial direct effects on States, on the
relationship between the national government and the States, or in the
distribution of power and responsibilities among various levels of
government. If there are sufficient substantial direct effects, then
the Executive Order requires preparation of a federalism assessment to
be used in all decisions involved in promulgating and implementing a
policy action.
Today's final rule will revise certain policy and procedural
requirements. However, DOE has determined that none of the revisions
will have a substantial direct effect on the institutional interests or
traditional functions of the States.
C. Review Under Executive Order 12778
Section 2 of Executive Order 12778 instructs each agency to adhere
to certain requirements in promulgating new regulations and reviewing
existing regulations. These requirements, set forth in sections 2(a)
and (b)(2), include eliminating drafting errors and needless ambiguity,
drafting the regulations to minimize litigation, providing clear and
[[Page 66512]]
certain legal standards for affected conduct, and promoting
simplification and burden reduction. Agencies are also instructed to
make every reasonable effort to ensure that the regulation: specifies
clearly any preemptive effect, effect on existing Federal law or
regulation, and retroactive effect; describes any administrative
proceedings to be available prior to judicial review and any provisions
for the exhaustion of such administrative proceedings; and defines key
terms. Therefore, DOE certifies that this final rule meets the
requirements of sections 2(a) and (b) of Executive Order 12778.
D. Review Under the Regulatory Flexibility Act
This final rule was reviewed under the Regulatory Flexibility Act
of 1980, Pub. L. 96-354, which requires preparation of a regulatory
flexibility analysis for any rule which is likely to have significant
economic impact on a substantial number of small entities. This final
rule will have no impact on interest rates, tax policies or
liabilities, the cost of goods or services, or other direct economic
factors. It will also not have any indirect economic consequences, such
as changed construction rates. DOE certifies that this final rule will
not have a significant economic impact on a substantial number of small
entities and, therefore, no regulatory flexibility analysis has been
prepared.
E. Review Under the Paperwork Reduction Act
No new information collection or recordkeeping requirements are
imposed by this final rulemaking. Accordingly, no OMB clearance is
required under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et
seq.).
F. Review Under the National Environmental Policy Act (NEPA)
DOE has concluded that promulgation of this rule falls into a class
of actions (categorical exclusion A5) that are categorically excluded
from NEPA review because they would not individually or cumulatively
have significant impact on the human environment, as determined by the
Department's regulations (10 CFR Part 1021, Subpart D) implementing the
National Environmental Policy Act of 1969 (42 U.S.C. 4321, 4331-4335,
4341-4347 (1976)). Therefore, this rule does not require an
environmental impact statement or an environmental assessment pursuant
to NEPA.
List of Subjects in 48 CFR Part 970
Government procurement.
Issued in Washington, DC on December 15, 1995.
Richard H. Hopf,
Deputy Assistant Secretary for Procurement and Assistance Management.
PART 970-DOE MANAGEMENT AND OPERATING CONTRACTS
1. The authority citation for Part 970 continues to read as
follows:
Authority: Sec. 161 of the Atomic Energy Act of 1954 (42 U.S.C.
2201), Sec. 644 of the Department of Energy Organization Act, Pub.
L. 95-91 (42 U.S.C. 7254).
2. Section 970.5204-40, Technology Transfer Mission, is added to
read as follows:
970.5204-40 Technology transfer mission.
As prescribed in 48 CFR 970.73, insert the following clause:
Technology Transfer Mission (Jan. 1996)
This clause has as its purpose implementation of the National
Competitiveness Technology Transfer Act of 1989 (Sections 3131,
3132, 3133, and 3157 of Pub. L. 101-189 and as amended by Pub. L.
103-160, Sections 3134 and 3160). The Contractor shall conduct
technology transfer activities with a purpose of providing benefit
from Federal research to U.S. industrial competitiveness.
(a) Authority.
(1) In order to ensure the full use of the results of research
and development efforts of, and the capabilities of, the Laboratory,
technology transfer, including Cooperative Research and Development
Agreements (CRADAs), is established as a mission of the Laboratory
consistent with the policy, principles and purposes of Sections
11(a)(1) and 12(g) of the Stevenson-Wydler Technology Innovation Act
of 1980, as amended (15 U.S.C. 3710a); Section 3132(b) of Pub. L.
101-189, Sections 3134 and 3160 of P.L. 103-160, and of Chapter 38
of the Patent Laws (35 U.S.C. 200 et seq.); Section 152 of the
Atomic Energy Act of 1954, as amended (42 U.S.C. 2182); Section 9 of
the Federal Nonnuclear Energy Research and Development Act of 1974
(42 U.S.C. 5908); and Executive Order 12591 of April 10, 1987.
(2) In pursuing the technology transfer mission, the Contractor
is authorized to conduct activities including but not limited to:
identifying and protecting Intellectual Property made, created or
acquired at or by the Laboratory; negotiating licensing agreements
and assignments for Intellectual Property made, created or acquired
at or by the Laboratory that the Contractor controls or owns;
bailments; negotiating all aspects of and entering into CRADAs;
providing technical consulting and personnel exchanges; conducting
science education activities and reimbursable Work for Others (WFO);
providing information exchanges; and making available laboratory or
weapon production user facilities. It is fully expected that the
Contractor shall use all of the mechanisms available to it to
accomplish this technology transfer mission, including, but not
limited to, CRADAs, user facilities, WFO, science education
activities, consulting, personnel, assignments, and licensing in
accordance with this clause.
(1) Contractor's Laboratory Director means the individual who
has supervision over all or substantially all of the Contractor's
operations at the Laboratory.
(2) Intellectual Property means patents, trademarks, copyrights,
mask works, protected CRADA information, and other forms of
comparable property rights protected by Federal Law and other
foreign counterparts.
(3) Cooperative Research and Development Agreement (CRADA) means
any agreement entered into between the Contractor as operator of the
Laboratory, and one or more parties including at least one non-
Federal party under which the Government, through its laboratory,
provides personnel, services, facilities, equipment, intellectual
property, or other resources with or without reimbursement (but not
funds to non-Federal parties) and the non-Federal parties provide
funds, personnel, services, facilities, equipment, intellectual
property, or other resources toward the conduct of specified
research or development efforts which are consistent with the
missions of the Laboratory; except that such term does not include a
procurement contract, grant, or cooperative agreement as those terms
are used in sections 6303, 6304, and 6305 of Title 31 of the United
States Code.
(4) Joint Work Statement (JWS) means a proposal for a CRADA
prepared by the Contractor, signed by the Contractor's Laboratory
Director or designee which describes the following:
(i) Purpose;
(ii) Scope of Work which delineates the rights and
responsibilities of the Government, the Contractor and Third
Parties, one of which must be a non-Federal party;
(iii) Schedule for the work; and
(iv) Cost and resource contributions of the parties associated
with the work and the schedule.
(5) Assignment means any agreement by which the Contractor
transfers ownership of Laboratory Intellectual Property, subject to
the Government's retained rights.
(6) Laboratory Biological Materials means biological materials
capable of replication or reproduction, such as plasmids,
deoxyribonucleic acid molecules, ribonucleic acid molecules, living
organisms of any sort and their progeny, including viruses,
prokaryote and eukaryote cell lines, transgenic plants and animals,
and any derivatives or modifications thereof or products produced
through their use or associated biological products, made under this
contract by Laboratory employees or through the use of Laboratory
research facilities.
(7) Laboratory Tangible Research Product means tangible material
results of research which
(i) are provided to permit replication, reproduction, evaluation
or confirmation of
[[Page 66513]]
the research effort, or to evaluate its potential commercial utility;
(ii) are not materials generally commercially available; and
(iii) were made under this contract by Laboratory employees or
through the use of Laboratory research facilities.
(8) Bailment means any agreement in which the Contractor permits
the commercial or non- commercial transfer of custody, access or use
of Laboratory Biological Materials or Laboratory Tangible Research
Product for a specified purpose of technology transfer or research
and development, including without limitation evaluation, and
without transferring ownership to the bailee.
(c) Allowable Costs.
(1) The Contractor shall establish and carry out its technology
transfer efforts through appropriate organizational elements
consistent with the requirements for an Office of Research and
Technology Applications (ORTA) pursuant to paragraphs (b) and (c) of
Section 11 of the Stevenson-Wydler Technology Innovation Act of
1980, as amended (15 U.S.C. 3710). The costs associated with the
conduct of technology transfer through the ORTA including activities
associated with obtaining, maintaining, licensing, and assigning
Intellectual Property rights, increasing the potential for the
transfer of technology, and the widespread notice of technology
transfer opportunities, shall be deemed allowable provided that such
costs meet the other requirements of the allowable costs provisions
of this Contract. In addition to any separately designated funds,
these costs in any fiscal year shall not exceed an amount equal to
0.5 percent of the operating funds included in the Federal research
and development budget (including Work For Others) of the Laboratory
for that fiscal year without written approval of the Contracting
Officer.
(2) The Contractor's participation in litigation to enforce or
defend Intellectual Property claims incurred in its technology
transfer efforts shall be as provided in the clause entitled
``Litigation and Claims'' of this Contract.
(d) Conflicts of Interest--Technology Transfer. The Contractor
shall have implementing procedures that seek to avoid employee and
organizational conflicts of interest, or the appearance of conflicts
of interest, in the conduct of its technology transfer activities.
These procedures shall apply to other persons participating in
Laboratory research or related technology transfer activities. Such
implementing procedures shall be provided to the Contracting Officer
for review and approval within sixty (60) days after execution of
this contract. The Contracting Officer shall have thirty (30) days
thereafter to approve or require specific changes to such
procedures. Such implementing procedures shall include procedures
to:
(1) Inform employees of and require conformance with standards
of conduct and integrity in connection with the CRADA activity in
accordance with the provisions of paragraph (n)(5) of this clause;
(2) Review and approve employee activities so as to avoid
conflicts of interest arising from commercial utilization activities
relating to Contractor-developed Intellectual Property;
(3) Conduct work performed using royalties so as to avoid
interference with or adverse effects on ongoing DOE projects and
programs;
(4) Conduct activities relating to commercial utilization of
Contractor-developed Intellectual Property so as to avoid
interference with or adverse effects on user facility or WFO
activities of the Contractor;
(5) Conduct DOE-funded projects and programs so as to avoid the
appearance of conflicts of interest or actual conflicts of interest
with non-Government funded work;
(6) Notify the Contracting Officer with respect to any new work
to be performed or proposed to be performed under the Contract for
DOE or other Federal agencies where the new work or proposal
involves Intellectual Property in which the Contractor has obtained
or intends to request or elect title;
(7) Except as provided elsewhere in this Contract, obtain the
approval of the Contracting Officer for any licensing of or
assignment of title to Intellectual Property rights by the
Contractor to any business or corporate affiliate of the Contractor;
(8) Obtain the approval of the Contracting Officer prior to any
assignment, exclusive licensing, or option for exclusive licensing,
of Intellectual Property to any person who has been a Laboratory
employee within the previous two years or to the company in which he
or she is a principal; and
(9) Notify non-Federal sponsors of WFO activities, or non-
Federal users of user facilities, of any relevant Intellectual
Property interest of the Contractor prior to execution of WFOs or
user agreements.
(10) Notify DOE prior to evaluating a proposal by a third party
or DOE, when the subject matter of the proposal involves an elected
or waived subject invention under this contract or one in which the
Contractor intends to elect to retain title under this contract.
(e) Fairness of Opportunity. In conducting its technology
transfer activities, the Contractor shall prepare procedures and
take all reasonable measures to ensure widespread notice of
availability of technologies suited for transfer and opportunities
for exclusive licensing and joint research arrangements. The
requirement to widely disseminate the availability of technology
transfer opportunities does not apply to a specific application
originated outside of the Laboratory and by entities other than the
Contractor.
(f) U.S. Industrial Competitiveness.
(1) In the interest of enhancing U.S. Industrial
Competitiveness, the Contractor shall, in its licensing and
assignments of Intellectual Property, give preference in such a
manner as to enhance the accrual of economic and technological
benefits to the U.S. domestic economy. The Contractor shall consider
the following factors in all of its licensing and assignment
decisions involving Laboratory intellectual property where the
Laboratory obtains rights during the course of the Contractor's
operation of the Laboratory under this contract:
(i) whether any resulting design and development will be
performed in the United States and whether resulting products,
embodying parts, including components thereof, will be substantially
manufactured in the United States; or
(ii) (A) whether the proposed licensee or assignee has a
business unit located in the United States and whether significant
economic and technical benefits will flow to the United States as a
result of the license or assignment agreement; and
(B) in licensing any entity subject to the control of a foreign
company or government, whether such foreign government permits
United States agencies, organizations or other persons to enter into
cooperative research and development agreements and licensing
agreements, and has policies to protect United States Intellectual
Property rights.
(2) If the Contractor determines that neither of the conditions
in paragraphs (f)(1)(i) or (ii) of this clause are likely to be
fulfilled, the Contractor, prior to entering into such an agreement,
must obtain the approval of the Contracting Officer. The Contracting
Officer shall act on any such requests for approval within thirty
(30) days.
(3) The Contractor agrees to be bound by the provisions of 35
U.S.C. 204 (Preference for United States industry).
(g) Indemnity--Product Liability. In entering into written
technology transfer agreements, including but not limited to,
research and development agreements, licenses, assignments and
CRADAs, the Contractor agrees to include in such agreements a
requirement that the U.S. Government and the Contractor, except for
any negligent acts or omissions of the Contractor, be indemnified
for all damages, costs, and expenses, including attorneys' fees,
arising from personal injury or property damage occurring as a
result of the making, using or selling of a product, process or
service by or on behalf of the Participant, its assignees or
licensees which was derived from the work performed under the
agreement. The Contractor shall identify and obtain the approval of
the Contracting Officer for any proposed exceptions to this
requirement such as where State or local law expressly prohibit the
Participant from providing indemnification or where the research
results will be placed in the public domain.
(h) Disposition of Income.
(1) Royalties or other income earned or retained by the
Contractor as a result of performance of authorized technology
transfer activities herein shall be used by the Contractor for
scientific research, development, technology transfer, and education
at the Laboratory, consistent with the research and development
mission and objectives of the Laboratory and subject to Section
12(b)(5) of the Stevenson-Wydler Technology Innovation Act of 1980,
as amended (15 U.S.C. 3710a(b)(5)) and Chapter 38 of the Patent Laws
(35 U.S.C. 200 et seq.) as amended through the effective date of
this contract award or modification. If the net amounts of such
royalties and income received from patent licensing after payment of
patenting costs, licensing costs, payments to inventors and other
expenses incidental to the administration of Subject Inventions
during any fiscal year exceed 5 percent of the
[[Page 66514]]
Laboratory's budget for that fiscal year, 75 percent of such excess
amounts shall be paid to the Treasury of the United States, and the
remaining amount of such excess shall be used by the Contractor for
the purposes as described above in this paragraph. Any inventions
arising out of such scientific research and development activities
shall be deemed to be Subject Inventions under the Contract.
(2) The Contractor shall include as a part of its annual
Laboratory Institutional Plan or other such annual document a plan
setting out those uses to which royalties and other income received
as a result of performance of authorized technology transfer
activities herein will be applied at the Laboratory, and at the end
of the year, provide a separate accounting for how the funds were
actually used. Under no circumstances shall these royalties and
income be used for an illegal augmentation of funds furnished by the
U.S. Government.
(3) The Contractor shall establish subject to the approval of
the Contracting Officer a policy for making awards or sharing of
royalties with Contractor employees, other coinventors and
coauthors, including Federal employee coinventors when deemed
appropriate by the Contracting Officer.
(i) Transfer to Successor Contractor. In the event of
termination or upon the expiration of this Contract, any unexpended
balance of income received for use at the Laboratory shall be
transferred, at the Contracting Officer's request, to a successor
contractor, or in the absence of a successor contractor, to such
other entity as designated by the Contracting Officer. The
Contractor shall transfer title, as one package, to the extent the
Contractor retains title, in all patents and patent applications,
licenses, accounts containing royalty revenues from such license
agreements, including equity positions in third party entities, and
other Intellectual Property rights which arose at the Laboratory, to
the successor contractor or to the Government as directed by the
Contracting Officer.
(j) Technology Transfer Affecting the National Security.
(1) The Contractor shall notify and obtain the approval of the
Contracting Officer, prior to entering into any technology transfer
arrangement, when such technology or any part of such technology is
classified or sensitive under Section 148 of the Atomic Energy Act
(42 U.S.C. 2168). Such notification shall include sufficient
information to enable DOE to determine the extent that
commercialization of such technology would enhance or diminish
security interests of the United States, or diminish communications
within DOE's nuclear weapon production complex. DOE shall use its
best efforts to complete its determination within sixty (60) days of
the Contractor's notification, and provision of any supporting
information, and DOE shall promptly notify the Contractor as to
whether the technology is transferable.
(2) The Contractor shall include in all of its technology
transfer agreements with third parties, including, but not limited
to, CRADAs, licensing agreements and assignments, notice to such
third parties that the export of goods and/or Technical Data from
the United States may require some form of export control license or
other authority from the U.S. Government and that failure to obtain
such export control license may result in criminal liability under
U.S. laws.
(3) For other than fundamental research as defined in National
Security Decision Directive 189, the Contractor is responsible to
conduct internal export control reviews and assure that technology
is transferred in accordance with applicable law.
(k) Records. The Contractor shall maintain records of its
technology transfer activities in a manner and to the extent
satisfactory to the DOE and specifically including, but not limited
to, the licensing agreements, assignments and the records required
to implement the requirements of paragraphs (e), (f), and (h) of
this clause and shall provide reports to the Contracting Officer to
enable DOE to maintain the reporting requirements of Section
12(c)(6) of the Stevenson-Wydler Technology Innovation Act of 1980,
as amended (15 U.S.C. 3710a(c)(6)). Such reports shall be made
annually in a format to be agreed upon between the Contractor and
DOE and in such a format which will serve to adequately inform DOE
of the Contractor's technology transfer activities while protecting
any data not subject to disclosure under the Rights in Technical
Data clause and paragraph (n) of this clause. Such records shall be
made available in accordance with the clauses of this Contract
pertaining to inspection, audit and examination of records.
(l) Reports to Congress. To facilitate DOE's reporting to
Congress, the Contractor is required to submit annually to DOE a
technology transfer plan for conducting its technology transfer
function for the upcoming year, including plans for securing
Intellectual Property rights in Laboratory innovations with
commercial promise and plans for managing such innovations so as to
benefit the competitiveness of United States industry. This plan
shall be provided to the Contracting Officer on or before October
1st of each year.
(m) Oversight and Appraisal. The Contractor is responsible for
developing and implementing effective internal controls for all
technology transfer activities consistent with the audit and record
requirements of this Contract. Laboratory Contractor performance in
implementing the technology transfer mission and the effectiveness
of the Contractor's procedures will be evaluated by the Contracting
Officer as part of the annual appraisal process, with input from the
cognizant Secretarial Officer or program office.
(n) Technology Transfer Through Cooperative Research and
Development Agreements. Upon approval of the Contracting Officer and
as provided in a DOE approved Joint Work Statement (JWS), the
Laboratory Director or his designee may enter into CRADAs on behalf
of the DOE subject to the requirements set forth in this paragraph.
(1) Review and Approval of CRADAs
(i) Except as otherwise directed in writing by the Contracting
Officer, each JWS shall be submitted to the Contracting Officer for
approval. The Contractor's Laboratory Director or designee shall
provide a program mission impact statement and shall include an
impact statement regarding related Intellectual Property rights
known by the Contractor to be owned by the Government to assist the
Contracting Officer in his approval determination.
(ii) The Contractor shall also include (specific to the proposed
CRADA), a statement of compliance with the Fairness of Opportunity
requirements of paragraph (e) of this clause.
(iii) Within ninety (90) days after submission of a JWS, the
Contracting Officer shall approve, disapprove or request
modification to the JWS. If a modification is required, the
Contracting Officer shall approve or disapprove any resubmission of
the JWS within thirty (30) days of its resubmission, or ninety (90)
days from the date of the original submission, whichever is later.
The Contracting Officer shall provide a written explanation to the
Contractor's Laboratory Director or designee of any disapproval or
requirement for modification of a JWS.
(iv) Upon approval of a JWS, the Contractor's Laboratory
Director or designee may submit a CRADA, based upon the approved
JWS, to the Contracting Officer. The Contracting Officer, within
thirty (30) days of receipt of the CRADA, shall approve or request
modification of the CRADA. If the Contracting Officer requests a
modification of the CRADA, an explanation of such request shall be
provided to the Laboratory Director or designee.
(v) Except as otherwise directed in writing by the Contracting
Officer, the Contractor shall not enter into, or begin work under, a
CRADA until approval of the CRADA has been granted by the
Contracting Officer. The Contractor may submit its proposed CRADA to
the Contracting Officer at the time of submitting its proposed JWS
or any time thereafter. However, the Contracting Officer is not
obligated to respond under paragraph (n)(1)(iv) of this clause until
within thirty (30) days after approval of the JWS or thirty (30)
days after submittal of the CRADA, whichever is later.
(2) Selection of Participants The Contractor's Laboratory
Director or designee in deciding what CRADA to enter into shall:
(i) Give special consideration to small business firms, and
consortia involving small business firms;
(ii) Give preference to business units located in the United
States which agree that products or processes embodying Intellectual
Property will be substantially manufactured or practiced in the
United States and, in the case of any industrial organization or
other person subject to the control of a foreign company or
government, take into consideration whether or not such foreign
government permits United States agencies, organizations, or other
persons to enter into cooperative research and development
agreements and licensing agreements;
(iii) Provide Fairness of Opportunity in accordance with the
requirements of paragraph (e) of this clause; and
[[Page 66515]]
(iv) Give consideration to the Conflicts of Interest
requirements of paragraph (d) of this clause.
(3) Withholding of Data
(i) Data that is first produced as a result of research and
development activities conducted under a CRADA and that would be a
trade secret or commercial or financial data that would be
privileged or confidential, if such data had been obtained from a
non-Federal third party, may be protected from disclosure under the
Freedom of Information Act as provided in the Stevenson- Wydler
Technology Innovation Act of 1980, as amended (15 U.S.C.
3710a(c)(7)) for a period as agreed in the CRADA of up to five (5)
years from the time the data is first produced. The DOE shall
cooperate with the Contractor in protecting such data.
(ii) Unless otherwise expressly approved by the Contracting
Officer in advance for a specific CRADA, the Contractor agrees, at
the request of the Contracting Officer, to transmit such data to
other DOE facilities for use by DOE or its Contractors by or on
behalf of the Government. When data protected pursuant to paragraph
(n)(3)(i) of this clause is so transferred, the Contractor shall
clearly mark the data with a legend setting out the restrictions
against private use and further dissemination, along with the
expiration date of such restrictions.
(iii) In addition to its authority to license Intellectual
Property, the Contractor may enter into licensing agreements with
third parties for data developed by the Contractor under a CRADA
subject to other provisions of this Contract. However, the
Contractor shall neither use the protection against dissemination
nor the licensing of data as an alternative to the submittal of
invention disclosures which include data protected pursuant to
paragraph (n)(3)(i) of this clause.
(4) Work For Others and User Facility Programs
(i) WFO and User Facility Agreements (UFAs) are not CRADAs and
will be available for use by the Contractor in addition to CRADAs
for achieving utilization of employee expertise and unique
facilities for maximizing technology transfer. The Contractor agrees
to inform prospective CRADA participants, which are intending to
substantially pay full cost recovery for the effort under a proposed
CRADA, of the availability of alternative forms of agreements, i.e.,
WFO and UFA, and of the Class Patent Waiver provisions associated
therewith.
(ii) Where the Contractor believes that the transfer of
technology to the U. S. domestic economy will benefit from, or other
equity considerations dictate, an arrangement other than the Class
Waiver of patent rights to the sponsor in WFO and UFAs, a request
may be made to the Contracting Officer for an exception to the Class
Waivers.
(iii) Rights to inventions made under agreements other than
funding agreements with third parties shall be governed by the
appropriate provisions incorporated, with DOE approval, in such
agreements, and the provisions in such agreements take precedence
over any disposition of rights contained in this Contract.
Disposition of rights under any such agreement shall be in
accordance with any DOE class waiver (including Work for Others and
User Class Waivers) or individually negotiated waiver which applies
to the agreement.
(5) Conflicts of Interest
(i) Except as provided in paragraph (n)(5)(iii) of this clause,
the Contractor shall assure that no employee of the Contractor shall
have a substantial role (including an advisory role) in the
preparation, negotiation, or approval of a CRADA, if, to such
employee's knowledge:
(A) Such employee, or the spouse, child, parent, sibling, or
partner of such employee, or an organization (other than the
Contractor) in which such employee serves as an officer, director,
trustee, partner, or employee--
(1) holds financial interest in any entity, other than the
Contractor, that has a substantial interest in the preparation,
negotiation, or approval of the CRADA;
(2) receives a gift or gratuity from any entity, other than the
Contractor, that has a substantial interest in the preparation,
negotiation, or approval of the CRADA; or
(B) A financial interest in any entity, other than the
Contractor, that has a substantial interest in the preparation,
negotiation, or approval of the CRADA, is held by any person or
organization with whom such employee is negotiating or has any
arrangement concerning prospective employment.
(ii) The Contractor shall require that each employee of the
Contractor who has a substantial role (including an advisory role)
in the preparation, negotiation, or approval of a CRADA certify
through the Contractor to the Contracting Officer that the
circumstances described in paragraph (n)(5)(i) of this clause do not
apply to that employee.
(iii) The requirements of paragraphs (n)(5)(i) and (n)(5)(ii) of
this clause shall not apply in a case where the Contracting Officer
is advised by the Contractor in advance of the participation of an
employee described in those paragraphs in the preparation,
negotiation or approval of a CRADA of the nature of and extent of
any financial interest described in paragraph (n)(5)(i) of this
clause, and the Contracting Officer determines that such financial
interest is not so substantial as to be considered likely to affect
the integrity of the Contractor employee's participation in the
process of preparing, negotiating, or approving the CRADA.
(o) Technology Transfer in Other Cost-Sharing Agreements. In
conducting research and development activities in cost-shared
agreements not covered by paragraph (n) of this clause, the
Contractor, with prior written permission of the Contracting
Officer, may provide for the withholding of data produced thereunder
in accordance with the applicable provisions of paragraph (n)(3) of
this clause.
(End of clause)
Alternate I (Jan 1996). As prescribed in 970.7330(b), add the
following definition under paragraph (b) and new paragraph (p):
(b)(8) Privately funded technology transfer means the
prosecuting, maintaining, licensing, and marketing of inventions
which are not owned by the Government (and not related to CRADAs)
when such activities are conducted entirely without the use of
Government funds.
(p) Nothing in paragraphs (c) Allowable Costs, (e) Fairness of
Opportunity, (f) U.S. Industrial Competitiveness, (g) Indemnity -
Product Liability, (h) Disposition of Income, and (i) Transfer to
Successor Contractor of this clause are intended to apply to the
contractor's privately funded technology transfer activities if such
privately funded activities are addressed elsewhere in the contract.
Alternate II (Jan 1996). As prescribed in 970.7330(c), the
phrase ``weapon production facility'' may be substituted wherever
the word ``laboratory'' appears in the clause.
3. A new subpart 970.73, Technology Transfer, consisting of
sections 970.7310, 970.7320, and 970.7330, is added to read as follows:
Subpart 970.73 Technology Transfer
Secs.
970.7310 General.
970.7320 Policy.
970.7330 Contract Clause.
Subpart 970.73-Technology Transfer
970.7310 General.
This subpart prescribes policies and procedures for implementing
the National Competitiveness Technology Transfer Act of 1989. The Act
required that technology transfer be established as a mission of each
Government-owned laboratory operated under contract by a non-Federal
entity. The National Defense Authorization Act for Fiscal Year 1994
expanded the definition of laboratory to include weapon production
facilities that are operated for national security purposes and are
engaged in the production, maintenance, testing, or dismantlement of a
nuclear weapon or its components.
970.7320 Policy.
All new awards for or extensions of existing DOE laboratory or
weapon production facility management and operating contracts shall
have technology transfer, including authorization to award Cooperative
Research and Development Agreements (CRADAs), as a laboratory or
facility mission under Section 11(a)(1) of the Stevenson-Wydler
Technology Innovation Act of 1980, as amended. A management and
operating contractor for a facility not deemed to be a laboratory or
weapon production facility may be authorized on a case-by-case basis to
support the DOE technology transfer mission including, but not limited
to, participating in CRADAs awarded by DOE laboratories and weapon
production facilities.
970.7330 Contract clause.
(a) The contracting officer shall insert the clause at 970.5204-40,
Technology
[[Page 66516]]
transfer mission, in each solicitation for a new or an extension of an
existing laboratory or weapon production facility management and
operating contract.
(b) If the contractor is a nonprofit organization or small business
eligible under 35 U.S.C. 200 et seq., to receive title to any
inventions under the contract and proposes to fund at private expense
the maintaining, licensing, and marketing of the inventions, the
contracting officer shall use the basic clause with its Alternate I.
(c) The contracting officer may substitute the Alternate II phrase
``weapon production facility'' wherever the word ``laboratory'' appears
in the clause where the facility is operated for national security
purposes and engaged in the production, maintenance, testing, or
dismantlement of a nuclear weapon or its components.
[FR Doc. 95-31187 Filed 12-21-95; 8:45 am]
BILLING CODE 6450-01-P
Complete official Federal Register PDF
FR Doc. 95-31182 Groundfish of the Bering Sea and Aleutian Islands Area; Approval of Community Development Plans
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Page 66516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31182]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 675
[I.D. 121295B]
Groundfish of the Bering Sea and Aleutian Islands Area; Approval
of Community Development Plans
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Allocation of Community Development Quota of pollock for 1996-
98.
-----------------------------------------------------------------------
SUMMARY: NMFS announces the approval of recommendations made by the
Governor of the State of Alaska (Governor) for Community Development
Plans (CDPs) during the calendar years 1996-98 under authority of the
Community Development Quota (CDQ) program. This action announces the
decision of NMFS to approve the Governor's recommended CDPs, including
the pollock CDQs for each subarea or district, and the availability of
findings underlying the decision.
EFFECTIVE DATE: Effective January 1, 1996.
ADDRESSES: Copies of the findings made by NMFS in approving the
Governor's recommendations may be obtained from the Alaska Region,
National Marine Fisheries Service, P.O. Box 21668, Juneau, AK 99802,
Attn: Lori Gravel.
FOR FURTHER INFORMATION CONTACT: David C. Ham, 907-586-7228.
SUPPLEMENTARY INFORMATION: The pollock CDQ program originally was
developed by the North Pacific Fishery Management Council (Council) and
submitted as part of Amendment 18 to the Fishery Management Plan (FMP)
for the Groundfish Fishery of the Bering Sea and Aleutian Islands Area,
which was approved in part by the Secretary of Commerce (57 FR 23321,
June 3, 1992). Initial Federal regulations implementing the CDQ program
became effective on November 18, 1992 (57 FR 54936, November 23, 1992)
and expire on December 31, 1995. The Council proposed re-authorizing
the CDQ program for an additional 3 years as part of Amendment 38 to
the FMP. NMFS approved this amendment on November 28, 1995. Regulations
implementing the pollock CDQ program for 1996, 1997, and 1998, were
published on December 12, 1995 (60 FR 63654), and will be effective on
January 1, 1996.
Eligible western Alaska communities submitted six proposed CDPs
requesting CDQs to the Governor under Sec. 675.27. The State of Alaska
conducted a public hearing on September 23, 1995, in Seattle, WA,
during which all interested persons had an opportunity to be heard. The
hearing covered the substance and content of the proposed CDPs in such
a manner that the general public, and particularly the affected
parties, had a reasonable opportunity to understand the impact of each
proposed CDP. The Governor made available for public review all State
of Alaska materials pertinent to the hearing at the time the hearing
was announced. The public hearing held by the State of Alaska satisfied
the requirements of Sec. 675.27(a).
The Governor consulted the Council concerning the proposed CDPs
during the Council's September 1995 meeting. The Council reviewed
copies of the CDP executive summaries, summary sheets, and the
Governor's recommended allocations and unanimously concurred in the
Governor's recommendations.
Upon receiving the Governor's recommendations on November 1, 1995,
NMFS commenced a review of the record to determine whether the
community eligibility criteria and the evaluation criteria set forth in
regulations implementing the CDQ program have been met. NMFS has found
that the Governor's recommendations for approval of proposed CDPs are
consistent with the community eligibility conditions and evaluation
criteria and other applicable provisions of the regulations.
As required by Sec. 675.27(c)(1), NMFS publishes this announcement
of approval of the Governor's recommendations, including the CDQ
allocated to each CDP (see table below) and the availability of the
findings regarding this decision (see ADDRESSES).
------------------------------------------------------------------------
CDQ for
1996,
CDQ recipient 1997, and
1998
(percent)
------------------------------------------------------------------------
Aleutian Pribilof Island Community Development Association... 16
Bristol Bay Economic Development Corporation................. 20
Central Bering Sea Fishermen's Association................... 04
Coastal Villages Fishing Cooperative......................... 25
Norton Sound Economic Development Corporation................ 22
Yukon Delta Fisheries Development Corporation................ 13
------------------------------------------------------------------------
Authority: This action is taken under 50 CFR 675.27.
Dated: December 14, 1995.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
[FR Doc. 95-31182 Filed 12-21-95; 8:45 am]
BILLING CODE 3510-22-W
Complete official Federal Register PDF
FR Doc. 95-31151 Airworthiness Directives; Cessna Model 441, 500, 550, and 560 Series Airplanes
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66484-66485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31151]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. 95-NM-56-AD; Amendment 39-9456; AD 95-25-10]
Airworthiness Directives; Cessna Model 441, 500, 550, and 560
Series Airplanes
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment adopts a new airworthiness directive (AD),
applicable to certain Cessna Model 441, 500, 550, and 560 series
airplanes, that requires replacement of outflow/safety valves with
serviceable valves. This amendment is prompted by a report of cracking
and subsequent failure of outflow safety valves in the pressurization
system. The actions specified by this AD are intended to prevent such
cracking and subsequent failure of the outflow/safety valves, which
could result in rapid decompression of the airplane.
DATES: Effective January 22, 1996.
The incorporation by reference of certain publications listed in
the regulations is approved by the Director of the Federal Register as
of January 22, 1996.
ADDRESSES: The service information referenced in this AD may be
obtained from Allied Signal, Inc., Controls and Accessories, 1110 North
Oracle Road, Tucson, Arizona 85737-9588. This information may be
examined at the Federal Aviation Administration (FAA), Transport
Airplane Directorate, Rules Docket, 1601 Lind Avenue SW., Renton,
Washington; or at the FAA, Los Angeles Aircraft Certification Office,
Transport Airplane Directorate, 3960 Paramount Boulevard, Lakewood,
California; or at the Office of the Federal Register, 800 North Capitol
Street NW., suite 700, Washington, DC.
FOR FURTHER INFORMATION CONTACT: Walter Eierman, Aerospace Engineer,
Systems and Equipment Branch, ANM-130L, FAA, Los Angeles Aircraft
Certification Office, 3960 Paramount Boulevard, Lakewood, California
90712; telephone (310) 627-5336; fax (310) 627-5210.
SUPPLEMENTARY INFORMATION: A proposal to amend part 39 of the Federal
Aviation Regulations (14 CFR part 39) to include an airworthiness
directive (AD) that is applicable to Cessna Model 441, 500, 550, and
560 series airplanes was published in the Federal Register on August
18, 1995 (60 FR 43089). That action proposed to require replacement of
certain discrepant outflow/safety valves with serviceable valves.
Interested persons have been afforded an opportunity to participate
in the making of this amendment. No comments were submitted in response
to the proposal or the FAA's determination of the cost to the public.
The FAA has determined that air safety and the public interest require
the adoption of the rule as proposed.
There are approximately 150 Model 441, 500, 550, and 560 series
airplanes of the affected design in the worldwide fleet. The FAA
estimates that 120 airplanes of U.S. registry will be affected by this
AD, that it will take approximately 12 work hours per airplane to
accomplish the required actions, and that the average labor rate is $60
per work hour. Based on these figures, the cost impact of the AD on
U.S. operators is estimated to be $86,400, or $720 per airplane.
However, the manufacturer has advised that it will provide replacement
parts at no cost to the operator and will reimburse operators for the
labor costs of the required removal and replacement.
The cost impact figure discussed above is based on assumptions that
no operator has yet accomplished any of the requirements of this AD
action, and that no operator would accomplish those actions in the
future if this AD were not adopted.
The regulations adopted herein will not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) Is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) will not have a
significant economic impact, positive or negative, on a substantial
number of small entities under the criteria of the Regulatory
Flexibility Act. A final evaluation has been prepared for this action
and it is contained in the Rules Docket. A copy of it may be obtained
from the Rules Docket at the location provided under the caption
ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 USC 106(g), 40101, 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding the following new
airworthiness directive:
95-25-10 Cessna Aircraft Company: Amendment 39-9456. Docket 95-NM-
56-AD.
Applicability: Model 441, 500, 550, and 560 series airplanes;
equipped with Allied Signal outflow/safety valves; as identified in
Allied Signal Aerospace Service Bulletins 103576-21-4054, 103576-21-
4056, and 103648-21-4055, all dated January 30, 1995; certificated
in any category.
[[Page 66485]]
Note 1: This AD applies to each airplane identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must use the authority
provided in paragraph (c) of this AD to request approval from the
FAA. This approval may address either no action, if the current
configuration eliminates the unsafe condition; or different actions
necessary to address the unsafe condition described in this AD. Such
a request should include an assessment of the effect of the changed
configuration on the unsafe condition addressed by this AD. In no
case does the presence of any modification, alteration, or repair
remove any airplane from the applicability of this AD.
Compliance: Required as indicated, unless accomplished
previously.
To prevent cracking and subsequent failure of the outflow/safety
valves, which could result in rapid decompression of the airplane,
accomplish the following:
(a) Within 18 months after the effective date of this AD,
replace the outflow/safety valve in accordance with Allied Signal
Aerospace Service Bulletin 103576-21-4054 (for Model 441 series
airplanes), 103576-21-4056 (for Model 500 and 550 series airplanes),
or 103648-21-4055 (for Model 560 series airplanes), all dated
January 30, 1995, as applicable.
(b) As of the effective date of this AD, no person shall install
an outflow/safety valve, having a part number and serial number
identified in Allied Signal Aerospace Service Bulletin 103576-21-
4054 (for Model 441 series airplanes), 103576-21-4056 (for Model 500
and 550 series airplanes), or 103648-21-4055 (for Model 560 series
airplanes), all dated January 30, 1995, on any airplane unless that
valve is considered to be serviceable in accordance with the
applicable service bulletin.
(c) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Los Angeles Aircraft Certification
Office (ACO), FAA, Transport Airplane Directorate. Operators shall
submit their requests through an appropriate FAA Principal
Maintenance Inspector, who may add comments and then send it to the
Manager, Los Angeles ACO.
Note 2: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Los Angeles ACO.
(d) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the airplane to a location where
the requirements of this AD can be accomplished.
(e) The replacement shall be done in accordance with Allied
Signal Aerospace Service Bulletin 103576-21-4054, dated January 30,
1995; Allied Signal Aerospace Service Bulletin 103576-21-4056, dated
January 30, 1995; or Allied Signal Aerospace Service Bulletin
103648-21-4055, dated January 30, 1995, as applicable. This
incorporation by reference was approved by the Director of the
Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part
51. Copies may be obtained from Allied Signal Inc., Controls and
Accessories, 1110 North Oracle Road, Tucson, Arizona 85737-9588.
Copies may be inspected at the FAA, Transport Airplane Directorate,
1601 Lind Avenue SW., Renton, Washington; or at the FAA, Los Angeles
Aircraft Certification Office, Transport Airplane Directorate, 3960
Paramount Boulevard, Lakewood, California; or at the Office of the
Federal Register, 800 North Capitol Street NW., suite 700,
Washington, DC.
(f) This amendment becomes effective on January 22, 1996.
Issued in Renton, Washington, on December 5, 1995.
Darrell M. Pederson,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 95-31151 Filed 12-21-95; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 95-31140 Airworthiness Directives; Robinson Helicopter Company Model R22 Helicopters
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66487-66488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31140]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 95-SW-29-AD; Amendment 39-9462; AD 95-26-04]
Airworthiness Directives; Robinson Helicopter Company Model R22
Helicopters
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment supersedes an existing airworthiness directive
(AD), applicable to Robinson Helicopter Company (RHC) Model R22
helicopters, that currently requires revisions to the Limitations
section, the Normal Procedures section, and the Emergency Procedures
section of the R22 Rotorcraft Flight Manual, revised February 4, 1993.
These revisions limit operations in high winds and turbulence; provide
information about main rotor (M/R) stall and mast bumping; and provide
recommendations for avoiding these situations. Additionally, emergency
procedures are provided for use should certain conditions be
encountered. This action would require similar revisions to the
Limitations, Normal Procedures and Emergency Procedures sections
required by the existing AD, but the revision to the Limitations
section would prohibit only pilots without a certain level of
experience and training from operating in the flight conditions
specified. This action is prompted by data that indicates pilots who
possess a certain level of experience and training are more able to
recognize and react to the adverse meteorological conditions specified
in the AD. The actions specified by this AD are intended to prevent M/R
stall or mast bumping, which could result in the M/R blades contacting
the fuselage causing failure of the M/R system and subsequent loss of
control of the helicopter.
EFFECTIVE DATE: January 26, 1996.
FOR FURTHER INFORMATION CONTACT: Mr. Scott Horn, Aerospace Engineer,
FAA, Rotorcraft Directorate, Rotorcraft Standards Staff, Southwest
Region, 2601 Meacham Blvd., Fort Worth, Texas 76137, telephone (817)
222-5125, fax (817) 222-5961.
SUPPLEMENTARY INFORMATION: A proposal to amend part 39 of the Federal
Aviation Regulations (14 CFR part 39) by superseding AD 95-04-14,
Amendment 39-9166, which superseded Priority Letter AD 95-02-03, issued
January 12, 1995, which is applicable to RHC Model R22 helicopters, was
published in the Federal Register on October 12, 1995 (60 FR 53148).
That action proposed to require revisions to the Limitations section,
the Normal Procedures section, and the Emergency Procedures section of
the R22 Rotorcraft Flight Manual, revised February 4, 1993. These
revisions limit operations in high winds and turbulence; provide
information about M/R stalls and mast bumping; and provide
recommendations for avoiding these situations. Additionally, emergency
procedures are provided for use should certain conditions be
encountered. This supersedure will reduce limitations for pilots who
have the flight experience specified by the AD and who have completed
the SFAR No. 73 training.
Interested persons have been afforded an opportunity to participate
in the making of this amendment. Due consideration has been given to
the comment received. The sole commenter agrees with the FAA's proposal
that the FAA's exemption of those pilots with sufficient training and
experience from limitations that might in some cases substantially
restrict their Model R22 flight operations is justified.
After careful review of the available data, including the comment,
the FAA has determined that air safety and the public interest require
the adoption of the rule as proposed.
The FAA estimates that 800 helicopters of U.S. registry would be
affected by this proposed AD, that it would take approximately one-half
work hour per helicopter to accomplish the proposed actions, and that
the average labor rate is $60 per work hour. Based on these figures,
the total cost impact of the proposed AD on U.S. operators is estimated
to be $24,000.
The regulations adopted herein will not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) will not have a
significant economic impact, positive or negative, on a substantial
number of small entities under the criteria of the Regulatory
Flexibility Act. A final evaluation has been prepared for this action
and it is contained in the Rules Docket. A copy of it may be obtained
from the Rules Docket at the location provided under the caption
ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40101, 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by removing Amendment 39-9166, and by
adding a new airworthiness directive (AD), Amendment 39-9462, to read
as follows:
AD 95-26-04 Robinson Helicopter Company: Amendment 39-9462.
Docket No. 95-SW-29-AD. Supersedes AD 95-04-14, Amendment 39-9166.
[[Page 66488]]
Applicability: Model R22 helicopters, certificated in any
category.
Note 1: This AD applies to each helicopter identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For helicopters that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must use the authority
provided in paragraph (b) to request approval from the FAA. This
approval may address either no action, if the current configuration
eliminates the unsafe condition, or different actions necessary to
address the unsafe condition described in this AD. Such a request
should include an assessment of the effect of the changed
configuration on the unsafe condition addressed by this AD. In no
case does the presence of any modification, alteration, or repair
remove any helicopter from the applicability of this AD.
Compliance: Required before further flight, unless accomplished
previously.
Note 2: Regardless of the experience level of the pilot
manipulating the controls or the amount or quality of the awareness
training received by the pilot manipulating the controls, these
changes to the flight manual are in no way intended to authorize
flight in any condition(s) or under any circumstance(s) that are
otherwise contrary to other Federal Aviation Regulations.
To prevent main rotor (M/R) stall or mast bumping, which could
result in the M/R blades contacting the fuselage causing failure of
the M/R system, and subsequent loss of control of the helicopter,
accomplish the following:
(a) Insert the following information into the Model R22
Rotorcraft Flight Manual. Compliance with the Limitations section is
mandatory. The Normal Procedures and Emergency Procedures sections
are informational.
Limitations Section
The following limitations (1-3) are to be observed unless the
pilot manipulating the controls has logged 200 or more flight hours
in helicopters, at least 50 of which must be in the RHC Model R22
helicopter, and has completed the awareness training specified in
Special Federal Aviation Regulation (SFAR) No. 73, issued February
27, 1995.
(1) Flight when surface winds exceed 25 knots, including gusts,
is prohibited.
(2) Flight when surface wind gust spreads exceed 15 knots is
prohibited.
(3) Continued flight in moderate, severe, or extreme turbulence
is prohibited.
Adjust forward airspeed to between 60 knots indicated airspeed
(KIAS) and 0.7 Vne, but no lower than 57 KIAS, upon
inadvertently encountering moderate, severe, or extreme turbulence.
Note: Moderate turbulence is turbulence that causes: (1) changes
in altitude or attitude; (2) variations in indicated airspeed; and
(3) aircraft occupants to feel definite strains against seat belts.
Normal Procedures Section
Note
Until the FAA completes its research into the conditions and
aircraft characteristics that lead to main rotor blade/fuselage
contact accidents, and corrective type design changes and operating
limitations are identified, Model R22 pilots are strongly urged to
become familiar with the following information and comply with these
recommended procedures.
Main Rotor Stall: Many factors may contribute to main rotor
stall and pilots should be familiar with them. Any flight condition
that creates excessive angle of attack on the main rotor blades can
produce a stall. Low main rotor RPM, aggressive maneuvering, high
collective angle (often the result of high-density altitude, over-
pitching [exceeding power available] during climb, or high forward
airspeed) and slow response to the low main rotor RPM warning horn
and light may result in main rotor stall. The effect of these
conditions can be amplified in turbulence. Main rotor stall can
ultimately result in contact between the main rotor and airframe.
Additional information on main rotor stall is provided in the
Robinson Helicopter Company Safety Notices SN-10, SN-15, SN-20, SN-
24, SN-27, and SN-29.
Mast Bumping: Mast bumping may occur with a teetering rotor
system when excessive main rotor flapping results from low ``G''
(load factor below 1.0) or abrupt control input. A low ``G'' flight
condition can result from an abrupt cyclic pushover in forward
flight. High forward airspeed, turbulence, and excessive sideslip
can accentuate the adverse effects of these control movements. The
excessive flapping results in the main rotor hub assembly striking
the main rotor mast with subsequent main rotor system separation
from the helicopter.
To avoid these conditions, pilots are strongly urged to follow
these recommendations:
(1) Maintain cruise airspeeds between 60 KIAS and less than 0.9
Vne, but no lower than 57 KIAS.
(2) Use maximum ``power-on'' RPM at all times during powered
flight.
(3) Avoid sideslip during flight. Maintain in-trim flight at all
times.
(4) Avoid large, rapid forward cyclic inputs in forward flight,
and abrupt control inputs in turbulence.
Emergency Procedures Section
(1) RIGHT ROLL IN LOW ``G'' CONDITION
Gradually apply aft cyclic to restore positive ``G'' forces and
main rotor thrust. Do not apply lateral cyclic until positive ``G''
forces have been established.
(2) UNCOMMANDED PITCH, ROLL, OR YAW RESULTING FROM FLIGHT IN
TURBULENCE.
Gradually apply controls to maintain rotor RPM, positive ``G''
forces, and to eliminate sideslip. Minimize cyclic control inputs in
turbulence; do not overcontrol.
(3) INADVERTENT ENCOUNTER WITH MODERATE, SEVERE, OR EXTREME
TURBULENCE.
If the area of turbulence is isolated, depart the area;
otherwise, land the helicopter as soon as practical.
(b) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used when approved by the Manager, Rotorcraft Standards Staff,
Rotorcraft Directorate, FAA. Operators shall submit their requests
through an FAA Principal Maintenance Inspector, who may concur or
comment and then send it to the Manager, Rotorcraft Standards Staff.
Note 3: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Rotorcraft Standards Staff.
(c) Special flight permits, pursuant to sections 21.197 and
21.199 of the Federal Aviation Regulations (14 CFR 21.197 and
21.199), will not be issued.
(d) This amendment becomes effective on January 26, 1996.
Issued in Fort Worth, Texas, on December 11, 1995.
Daniel P. Salvano,
Manager, Rotorcraft Directorate, Aircraft Certification Service.
[FR Doc. 95-31140 Filed 12-21-95; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 95-31139 Airworthiness Directives; Robinson Helicopter Company Model R44 Helicopters
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66488-66490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31139]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 95-SW-30-AD; Amendment 39-9463; AD 95-26-05]
Airworthiness Directives; Robinson Helicopter Company Model R44
Helicopters
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment supersedes an existing airworthiness directive
(AD), applicable to Robinson Helicopter Company (RHC) Model R44
helicopters, that currently requires revisions to the Limitations
section, the Normal Procedures section, and the Emergency Procedures
section of the R44 Rotorcraft Flight Manual, revised September 6, 1994.
These revisions limit operations in high winds and turbulence; provide
information about main rotor (M/R) stall and mast bumping; and provide
recommendations for avoiding these situations. Additionally, emergency
procedures are provided for use should certain conditions be
encountered. This action would require similar revisions to the
Limitations, Normal Procedures and Emergency Procedures sections
required by the existing AD, but the revision to the Limitations
section would prohibit only pilots without a certain level of
experience and training from operating in the flight conditions
specified. This action is prompted by data that indicates pilots who
possess a certain level of experience and training are more able to
recognize and react to the adverse meteorological conditions specified
in the AD. The actions
[[Page 66489]]
specified by this AD are intended to prevent M/R stall or mast bumping,
which could result in the M/R blades contacting the fuselage causing
failure of the M/R system and subsequent loss of control of the
helicopter.
EFFECTIVE DATE: January 26, 1996.
FOR FURTHER INFORMATION CONTACT: Mr. Scott Horn, Aerospace Engineer,
FAA, Rotorcraft Directorate, Rotorcraft Standards Staff, Southwest
Region, 2601 Meacham Blvd., Fort Worth, Texas 76137, telephone (817)
222-5125, fax (817) 222-5961.
SUPPLEMENTARY INFORMATION: A proposal to amend part 39 of the Federal
Aviation Regulations (14 CFR part 39) by superseding AD 95-04-13,
Amendment 39-9165, which superseded Priority Letter AD 95-02-04, issued
January 12, 1995, which is applicable to RHC Model R44 helicopters, was
published in the Federal Register on October 12, 1995 (60 FR 53150).
That action proposed to require revisions to the Limitations section,
the Normal Procedures section, and the Emergency Procedures section of
the R44 Rotorcraft Flight Manual, revised September 6, 1994. These
revisions limit operations in high winds and turbulence; provide
information about M/R stalls and mast bumping; and provide
recommendations for avoiding these situations. Additionally, emergency
procedures are provided for use should certain conditions be
encountered. This supersedure will reduce limitations for pilots who
have the flight experience specified by the AD and who have completed
the SFAR No. 73 training.
Interested persons have been afforded an opportunity to participate
in the making of this amendment. Due consideration has been given to
the comment received. The sole commenter agrees with the FAA's proposal
that the FAA's exemption of those pilots with sufficient training and
experience from limitations that might in some cases substantially
restrict their Model R44 flight operations is justified.
After careful review of the available data, including the comment,
the FAA has determined that air safety and the public interest require
the adoption of the rule as proposed.
The FAA estimates that three helicopters of U.S. registry would be
affected by this proposed AD, that it would take approximately one-half
work hour per helicopter to accomplish the proposed actions, and that
the average labor rate is $60 per work hour. Based on these figures,
the total cost impact of the proposed AD on U.S. operators is estimated
to be $90.
The regulations adopted herein will not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) will not have a
significant economic impact, positive or negative, on a substantial
number of small entities under the criteria of the Regulatory
Flexibility Act. A final evaluation has been prepared for this action
and it is contained in the Rules Docket. A copy of it may be obtained
from the Rules Docket at the location provided under the caption
ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39-- AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40101, 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by removing Amendment 39-9165, and by
adding a new airworthiness directive (AD), Amendment 39-9463, to read
as follows:
AD 95-26-05 Robinson Helicopter Company: Amendment 39-9463. Docket
No. 95-SW-30-AD. Supersedes AD 95-04-13, Amendment 39-9165.
Applicability: Model R44 helicopters, certificated in any
category.
Note 1: This AD applies to each helicopter identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For helicopters that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must use the authority
provided in paragraph (b) to request approval from the FAA. This
approval may address either no action, if the current configuration
eliminates the unsafe condition, or different actions necessary to
address the unsafe condition described in this AD. Such a request
should include an assessment of the effect of the changed
configuration on the unsafe condition addressed by this AD. In no
case does the presence of any modification, alteration, or repair
remove any helicopter from the applicability of this AD.
Compliance: Required before further flight, unless accomplished
previously.
Note 2: Regardless of the experience level of the pilot
manipulating the controls or the amount or quality of the awareness
training received by the pilot manipulating the controls, these
changes to the flight manual are in no way intended to authorize
flight in any condition(s) or under any circumstance(s) that are
otherwise contrary to other Federal Aviation Regulations.
To prevent main rotor (M/R) stall or mast bumping, which could
result in the M/R blades contacting the fuselage causing failure of
the M/R system, and subsequent loss of control of the helicopter,
accomplish the following:
(a) Insert the following information into the Model R44
Rotorcraft Flight Manual. Compliance with the Limitations section is
mandatory. The Normal Procedures and Emergency Procedures sections
are informational.
Limitations Section
The following limitations (1-3) are to be observed unless the
pilot manipulating the controls has logged 200 or more flight hours
in helicopters, at least 50 of which must be in the RHC Model R44
helicopter, and has completed the awareness training specified in
Special Federal Aviation Regulation (SFAR) No. 73, issued February
27, 1995.
(1) Flight when surface winds exceed 25 knots, including gusts,
is prohibited.
(2) Flight when surface wind gust spreads exceed 15 knots is
prohibited.
(3) Continued flight in moderate, severe, or extreme turbulence
is prohibited.
Adjust forward airspeed to between 60 knots indicated airspeed
(KIAS) and 0.7 Vne, but no lower than 60 KIAS, upon
inadvertently encountering moderate, severe, or extreme turbulence.
Note: Moderate turbulence is turbulence that causes: (1) changes
in altitude or attitude; (2) variations in indicated airspeed; and
(3) aircraft occupants to feel definite strains against seat belts.
Normal Procedures Section
Note
Until the FAA completes its research into the conditions and
aircraft characteristics that lead to main rotor blade/fuselage
contact accidents, and corrective type design changes and operating
limitations are identified, Model R44 pilots are strongly urged to
become familiar with the following information and comply with these
recommended procedures.
Main Rotor Stall: Many factors may contribute to main rotor
stall and pilots
[[Page 66490]]
should be familiar with them. Any flight condition that creates
excessive angle of attack on the main rotor blades can produce a
stall. Low main rotor RPM, aggressive maneuvering, high collective
angle (often the result of high-density altitude, over-pitching
[exceeding power available] during climb, or high forward airspeed)
and slow response to the low main rotor RPM warning horn and light
may result in main rotor stall. The effect of these conditions can
be amplified in turbulence. Main rotor stall can ultimately result
in contact between the main rotor and airframe. Additional
information on main rotor stall is provided in the Robinson
Helicopter Company Safety Notices SN-10, SN-15, SN-20, SN-24, SN-27,
and SN-29.
Mast Bumping: Mast bumping may occur with a teetering rotor
system when excessive main rotor flapping results from low ``G''
(load factor below 1.0) or abrupt control input. A low ``G'' flight
condition can result from an abrupt cyclic pushover in forward
flight. High forward airspeed, turbulence, and excessive sideslip
can accentuate the adverse effects of these control movements. The
excessive flapping results in the main rotor hub assembly striking
the main rotor mast with subsequent main rotor system separation
from the helicopter.
To avoid these conditions, pilots are strongly urged to follow
these recommendations:
(1) Maintain cruise airspeeds greater than 60 KIAS and less than
0.9 Vne.
(2) Use maximum ``power-on'' RPM at all times during powered
flight.
(3) Avoid sideslip during flight. Maintain in-trim flight at all
times.
(4) Avoid large, rapid forward cyclic inputs in forward flight,
and abrupt control inputs in turbulence.
Emergency Procedures Section
(1) RIGHT ROLL IN LOW ``G'' CONDITION Gradually apply aft cyclic
to restore positive ``G'' forces and main rotor thrust. Do not apply
lateral cyclic until positive ``G'' forces have been established.
(2) UNCOMMANDED PITCH, ROLL, OR YAW RESULTING FROM FLIGHT IN
TURBULENCE.
Gradually apply controls to maintain rotor RPM, positive ``G''
forces, and to eliminate sideslip. Minimize cyclic control inputs in
turbulence; do not overcontrol.
(3) INADVERTENT ENCOUNTER WITH MODERATE, SEVERE, OR EXTREME
TURBULENCE.
If the area of turbulence is isolated, depart the area;
otherwise, land the helicopter as soon as practical.
(b) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used when approved by the Manager, Rotorcraft Standards Staff,
Rotorcraft Directorate, FAA. Operators shall submit their requests
through an FAA Principal Maintenance Inspector, who may concur or
comment and then send it to the Manager, Rotorcraft Standards Staff.
Note 3: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Rotorcraft Standards Staff.
(c) Special flight permits, pursuant to sections 21.197 and
21.199 of the Federal Aviation Regulations (14 CFR 21.197 and
21.199), will not be issued.
(d) This amendment becomes effective on January 26, 1996.
Issued in Fort Worth, Texas, on December 11, 1995.
Daniel P. Salvano,
Manager, Rotorcraft Directorate, Aircraft Certification Service.
[FR Doc. 95-31139 Filed 12-21-95; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 95-31120 Effectiveness of RTC Regulations After RTC Termination
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66483-66484]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31120]
=======================================================================
-----------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Chapter III
RESOLUTION TRUST CORPORATION
12 CFR Chapter XVI
Effectiveness of RTC Regulations After RTC Termination
AGENCIES: Federal Deposit Insurance Corporation and Resolution Trust
Corporation.
ACTION: Joint notification of status of regulations.
-----------------------------------------------------------------------
SUMMARY: The Resolution Trust Corporation (RTC) and the Federal Deposit
Insurance Corporation (FDIC) are issuing this joint document to inform
the public regarding the effectiveness of the RTC's regulations after
RTC termination. In accordance with the Federal Home Loan Bank Act, the
RTC will terminate on December 31, 1995, and the FDIC will succeed the
RTC as receiver for any remaining RTC receiverships and will be
responsible for managing any remaining assets and liabilities of the
RTC transferred to the FSLIC Resolution Fund. Congress did not include
any provision transferring the RTC's regulations to the FDIC. The two
corporations have considered these issues and are publishing this
document to inform the public that, when the FDIC assumes
responsibility for the RTC's functions at termination, the RTC's
regulations generally will not govern the FDIC's performance of these
functions for occurrences that arise post-termination, and that the
FDIC's regulatory scheme generally will govern former RTC activities on
a prospective basis.
EFFECTIVE DATE: December 31, 1995.
FOR FURTHER INFORMATION CONTACT: Jamey Basham, Counsel, Legal Division,
Federal Deposit Insurance Corporation, 550 17th Street NW., Washington,
DC 20429, (202) 898-7265, or Karen L. Main, Senior Attorney, Legal
Division, Resolution Trust Corporation, 1717 H Street NW., Washington,
DC 20006, (202) 736-3096.
SUPPLEMENTARY INFORMATION:
A. General Rule
Section 21A(m)(1) of the Federal Home Loan Bank Act (FHLBA), 12
U.S.C. 1441a(m)(1), provides that the RTC will terminate on December
31, 1995. At that time, the FDIC shall succeed the RTC as receiver of
any remaining RTC receiverships. Id. In addition, the FDIC will be
responsible for managing any remaining RTC assets and liabilities, all
of which are transferred to the FSLIC Resolution Fund. Section
21A(m)(2) of the FHLBA, 12 U.S.C. 1441a(m)(2). However, Congress did
not include provisions transferring the RTC's regulations, 12 CFR
Chapter XVI, to the FDIC. In similar situations when Congress has
intended an agency's rules to survive transfer of its functions to a
successor, Congress expressly so provided by statute. Therefore, after
the RTC terminates on December 31, 1995 and its functions are
transferred to the FDIC, the RTC's regulations generally will not
govern the FDIC's performance of such functions in dealing with
occurrences that arise post-termination. When the FDIC assumes
responsibility from the RTC for such functions, the FDIC's regulations
generally will govern matters arising on a prospective basis.
However, the termination of the RTC in and of itself does not
affect rights or obligations of the RTC or third parties that have
arisen under the RTC's regulations as a result of factual occurrences
prior to the RTC's termination. The legal consequences of pre-
termination conduct governed by the RTC's regulations will continue to
be determined under such regulations.
B. The RTC's Affordable Housing Disposition Program
In contrast, the RTC's affordable housing disposition program
(AHDP) regulations at 12 CFR part 1609 will continue to govern the sale
of the remaining RTC AHDP inventory and other related responsibilities
assumed by the FDIC even after the RTC termination date. Since Congress
has directed the FDIC to carry out such functions under the provisions
of the RTC AHDP statute, section 21A(c) of the FHLBA, 12 U.S.C.
1441a(c),1 the RTC's AHDP regulations which refine and
[[Page 66484]]
implement this authority will continue to govern these functions.
\1\ Section 21A(c)(17)(C) of the FHLBA provides, inter alia,
that the FDIC shall carry out any remaining authority and
responsibilities of the RTC ``under this subsection.'' 12 U.S.C.
1441a(c)(17)(C). Moreover, section 40(n)(4) of the Federal Deposit
Insurance Act provides that the FDIC shall carry out the remaining
responsibilities and authority of the RTC as set forth in section
1441a(c) of title 12. 12 U.S.C. 1831q(n)(4).
---------------------------------------------------------------------------
By order of the Deputy and Acting Chief Executive Officer.
Dated at Washington, D.C., this 15th day of December, 1995.
Resolution Trust Corporation.
John M. Buckley, Jr.,
Secretary.
By order of the Board of Directors.
Dated at Washington, D.C., this 15th day of December, 1995.
Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
Editorial note: The Federal Home Loan Bank Act, as codified at 12
U.S.C. 1441a(m)(1), provides that the Resolution Trust Corporation
(RTC) will terminate on December 31, 1995. Accordingly, the RTC's
regulations in chapter XVI of title 12 of the Code of Federal
Regulations will be removed and the chapter vacated as of January 1,
1996 pursuant to the authority of the Office of the Federal Register to
establish and maintain an orderly system of codification (44 U.S.C.
1510 and 1 CFR part 8).
[FR Doc. 95-31120 Filed 12-21-95; 8:45 am]
BILLING CODE 6714-01-P
Complete official Federal Register PDF
FR Doc. 95-31089 Public Telecommunications Facilities Program (PTFP), National Endowment for Children's Educational Television (NECET), Telecommunications and Information Infrastructure Assistance Program (TIIAP)
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66491-66495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31089]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Telecommunications and Information Administration
15 CFR Part 2301
[Docket Number 950613151-5304-02]
RIN 0660-XX02
Public Telecommunications Facilities Program (PTFP), National
Endowment for Children's Educational Television (NECET),
Telecommunications and Information Infrastructure Assistance Program
(TIIAP)
AGENCY: National Telecommunications and Information Administration,
Commerce.
ACTION: Final Policy Statement and Conforming Rule Amendments.
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SUMMARY: The National Telecommunications and Information Administration
(NTIA), U.S. Department of Commerce, is publishing a Final Policy
Statement modifying the interpretation of its policy on the use of
NTIA-funded equipment and materials in connection with sectarian
activities and making conforming rule amendments.
Effective Date: December 22, 1995.
FOR FURTHER INFORMATION CONTACT: Jana Gagner, (202) 482-1816.
SUPPLEMENTARY INFORMATION:
I. Introduction
On June 20, 1995, the National Telecommunications and Information
Administration, U.S. Department of Commerce (NTIA), published a notice
in the Federal Register proposing to modify NTIA's interpretation of
its policy regarding the use of Federal grant funds awarded by NTIA in
connection with sectarian activities.1 Eight parties filed
comments in response to the Notice.2 Based on these comments and
current jurisprudence, NTIA is hereby modifying its prior
interpretation of its rules, which prohibited the use of NTIA-funded
equipment, facilities, and materials in connection with any sectarian
activities, no matter how incidental.
\1\ 60 FR 32,142 (1995).
\2\ The following eight parties filed comments in response to
the Notice: Representative Richard Burr, the Corporation for Public
Broadcasting, Fordham University, National Public Radio, North
Carolina Public Radio Association, Lisa Owens, Southern Public
Radio, and Wake Forest University.
---------------------------------------------------------------------------
Under its new interpretation, NTIA will retain its present
requirement that grant funds not be used for purposes the ``essential
thrust of which are sectarian,'' 3 but will modify its
interpretation of this requirement as follows. No more than an
attenuated or incidental benefit may inure to a sectarian interest if a
grantee uses NTIA-funded facilities in connection with a sectarian
activity. In addition, the use must fall within the broad scope of a
grant program's statutory purposes. A grantee cannot, however, use NTIA
grant funds primarily to support sectarian interests.
\3\ 15 CFR 2301.22(d). ``Sectarian'' is defined at 15 CFR 2301.1
as ``that which has the purpose or function of advancing or
propagating a religious belief.'' The PTFP regulation at 15 CFR
Sec. 2301.22(d) provides, ``During the period in which the grantee
possesses or uses the Federally funded facilities (whether or not
this period extends beyond the Federal interest period), the grantee
may not use or allow the use of the Federally funded equipment for
purposes the essential thrust of which are sectarian.'' NTIA
considers these phrases to mean the same thing.
---------------------------------------------------------------------------
For the reasons discussed below, NTIA believes that this approach
is consistent with current jurisprudence.4 We also discuss below
in greater detail the issues raised in the June Notice regarding NTIA's
policy on sectarian activities,5 NTIA's interpretation of its
prior policy, comments received by NTIA in response to the Notice, and
the application of NTIA's new policy to each of its grant programs. Our
discussion is informed by relevant First Amendment jurisprudence,
including the recent Supreme Court holding in Rosenberger v. Rector and
Visitors of the University of Virginia, 115 S.Ct. 2510 (1995).
\4\ See Rosenberger v. Rector and Visitors of the University of
Virginia, 115 S.Ct. 2510 (1995); Zobrest v. Catalina Foothills Sch.
Dist. (Zobrest), 113 S.Ct. 2462 (1993); Witters v. Washington Dep't
of Services for the Blind, 474 U.S. 481, 487 (1986); Mueller v.
Allen, 463 U.S. 388 (1983).
\5\ Notice, supra note 1.
---------------------------------------------------------------------------
II. Background
NTIA's Prior Policy. In 1979, the Public Telecommunications
Facilities Program (PTFP) of the NTIA adopted a rule prohibiting
funding for any equipment, facilities, and other materials that would
be used for any purposes the essential thrust of which is
sectarian.6 NTIA's interpretation of this rule has prohibited use
of NTIA-funded facilities and materials in connection with any
sectarian activity.7 In implementing this ``bright-line'' policy
interpretation, NTIA relied upon Lemon v. Kurtzman.8
\6\ See 44 FR 30898 (1979) for explanation of NTIA's previous
policy. PTFP's regulation regarding sectarian programming appears at
15 CFR 2301.22(d).
\7\ This interpretation stems from policy statement, infra fn.
11 and was applied in the Fordham case.
\8\ 403 U.S. 602 (1971). The constitutional test set forth in
Lemon--and the consistency between NTIA's new policy interpretation
and that test--are described in section III.A. of this policy
statement, infra.
---------------------------------------------------------------------------
NTIA's policy interpretation did, however, permit the
``presentation in an educational or cultural context of music or art
with a religious theme [or] of programs about religion. It [also did]
not preclude distribution of instructional programming of a secular
nature to church-related educational institutions.'' 9 In
addition, sectarian-affiliated organizations could generally apply for
grant funds,10 subject, of course, to the prohibition on the use
of NTIA-funded equipment, facilities, and materials for purposes the
essential thrust of which is sectarian. NTIA's two newer grant
programs, the National Endowment for Children's Educational Television
(NECET) and the Telecommunications and Information Infrastructure
Assistance Program (TIIAP), also adopted the same policy and
interpretation.11
\9\ Public Telecommunications Facilities Program; Report and
Order, 44 FR 30898, 30902 (1979) (Report and Order).
\10\ Id. at 30,900-30,901. Previously, organizations organized
for primarily religious purposes were ineligible to apply for a PTFP
planning grant, although their affiliates were eligible to apply.
See 15 CFR 2301.4(b)(2). We are revising this rule to be consistent
with the new policy adopted herein, such that applicant eligibility
will be the same for both construction and planning grants. See the
conforming amendments to Sec. 2301.4 (a) and (b).
\11\ 60 FR 15636 (1995); 60 FR 8156 (1995).
---------------------------------------------------------------------------
In enforcing this policy over the years, NTIA required grant
applicants to certify that they would comply with its policy by signing
an assurance to that effect.12 By relying upon this assurance,
NTIA avoided evaluating programming schedules for sectarian content as
a routine practice. Such evaluation occurred only if information
contained in the application itself suggested that the applicant would
violate NTIA's policy, a complaint was filed with NTIA, or NTIA
otherwise became aware of information that suggested that its policy
was being or would be violated. By not routinely evaluating program
content and information transmitted using NTIA-funded equipment and
materials, NTIA avoided excessive Government entanglement with
religion,
[[Page 66492]]
as proscribed by the Supreme Court in Lemon v. Kurtzman.13
\12\ The applicant ``will not use or allow the use of the
facilities for essentially sectarian purposes for as long as the
Applicant possesses or uses the facilities . . . .'' Public
Telecommunications Facilities Program, Grant Application,
Assurances, no. 30, at 9.
\13\ For a discussion of this point, see Section III.A. of this
policy statement.
---------------------------------------------------------------------------
The Challenge by Fordham University. In 1993, Fordham University
sued the Department of Commerce, alleging that NTIA's policy on
sectarian broadcasting violated its right to free exercise of religion
and its freedom of speech rights under the First Amendment of the
Constitution. In Fordham University v. Brown, the court upheld NTIA's
bright-line approach with respect to the PTFP as consistent with the
First Amendment.14 In dicta, however, the court noted that it did
not consider whether there were other acceptable interpretations of the
Establishment Clause.15
\14\ 856 F. Supp. 684 (D.D.C. 1994), appeal docketed, No. 94-
5229 (D.C. Cir. Aug. 22, 1994).
\15\ Id. at 697-698.
---------------------------------------------------------------------------
Since the Fordham decision, NTIA has become aware that some public
broadcast stations include in their schedules programs that might
constitute impermissible sectarian programming, which could make them
ineligible for PTFP grants. This was highlighted, in fact, following
the Fordham decision, when NTIA received several requests to modify its
policy.
Issuance of the Notice. As a result, NTIA sought comment on whether
it should modify its policy regarding sectarian programming and
information. Specifically the Notice sought comment on: (1) Whether the
current prohibition on using NTIA grant funds in connection with any
sectarian activities should be continued, or whether there are
alternative approaches that would also be consistent with the First
Amendment; (2) the underlying policy rationale for a given approach;
(3) how such policy would, as practical and constitutional matters, be
implemented and enforced; (4) whether the same policy could and should
be applied to all three NTIA grant programs (PTFP, TIIAP, and NECET)
and, if not, what policy should pertain to each grant program; and (5)
whether the current definition of ``sectarian'' would continue to be
supportable if NTIA's current policy were modified.
The Rosenberger Decision. Subsequent to the issuance of NTIA's
Notice, the Supreme Court decided Rosenberger v. Rector and Visitors of
the University of Virginia,16 which further supports NTIA's
announced policy interpretation change. The Supreme Court held in
Rosenberger that a state university had erred in relying on the First
Amendment's Establishment Clause to deny grant funding to a student
group publisher of a Christian magazine, when that student group
otherwise satisfied neutral funding criteria applied by the university
in making financial grants to other student organizations. As discussed
in more detail below, this decision serves as a basis, in part, for the
new policy approach adopted by NTIA.
\16\ 115 S.Ct. 2510 (1995).
---------------------------------------------------------------------------
Comments Filed in Response to the Notice. All but one of the eight
commenters supported a change in NTIA's policy interpretation. The one
commenter favoring retention of NTIA's long-term policy objected to a
religious organization receiving any benefit, however incidental, from
NTIA's grant programs.17 A majority of the supporting commenters,
however, relied upon the recent Supreme Court case, Rosenberger, in
arguing that a policy change was warranted. Most agreed that
Rosenberger requires that the Federal government behave in a neutral
manner toward religion. Two commenters recommended that NTIA adopt a
specified or maximum percentage for the amount of permissible sectarian
programming.18 Other commenters recommended allowing a
``reasonable minimal amount of sectarian programming.'' 19 Two
other commenters expressed some concern that the proposed change in
policy could result in excessive government entanglement with
religion.20
\17\ Comments of Lisa Owens.
\18\ Comments of National Public Radio at 2,5; Comments of Wake
Forest at 2-3.
\19\ Comments of North Carolina Public Radio Association at 1;
Comments of Honorable Richard Burr at 1; Comments of Southern Public
Radio at 1.
\20\ Comments of Corporation for Public Broadcasting at 3;
Comments of National Public Radio at 3.
---------------------------------------------------------------------------
As noted above, we solicited comments on whether the definition of
``sectarian'' needed to be altered in light of a possible policy
change. Most commenters agreed that no change in the definition of
``sectarian'' was required to allow NTIA to modify its policy
interpretation. One commenter contended, however, that the definition
of ``public telecommunications services'' had to be redefined because
it provides that public telecommunications services ``[do] not include
essentially sectarian programming.'' 21 This commenter also
maintained that NTIA's prior policy should be changed because it
burdened individuals' free exercise of religion in violation of the
Religious Freedom Restoration Act.22
\21\ Comments of Fordham University at 16-17.
\22\ Comments of Fordham University at 9.
---------------------------------------------------------------------------
III. Application of the Modified Policy To NTIA'S Grant Programs
As indicated, NTIA's new policy will retain the requirement that
grant funds not be used for purposes the essential thrust of which is
sectarian. The interpretation of that requirement will be modified,
however, such that as long as the grant funds are used to fulfill the
statutory purposes of the grant programs, attenuated or incidental
benefits to sectarian interests will be permissible.
A. Constitutional Basis for Modified Policy
We believe the alternative approach we are now adopting passes
constitutional muster under First Amendment case law. Having analyzed
our new approach in light of Lemon v. Kurtzman,23 we conclude that
our new policy is consistent with Lemon and other Supreme Court
jurisprudence. Lemon established a three-prong test to determine
whether government action would have the ``primary effect'' of
establishing religion in violation of the Establishment Clause. Under
Lemon, the constitutionality of a statute, regulation, or funding
policy depends on whether: (1) it has a secular legislative purpose;
(2) its principal or primary effect is one that neither advances nor
inhibits religion; and (3) it avoids ``an excessive government
entanglement with religion.'' 24 If any one of these three
questions is answered in the negative, government action is deemed
unconstitutional.
\23\ 403 U.S. 602 (1971).
\24\ Id. at 612-613.
---------------------------------------------------------------------------
Each of NTIA's grant programs has a secular purpose, which remains
unchanged under the new policy, and thus NTIA's change in policy
interpretation passes the first prong of the Lemon test. PTFP promotes
public broadcasting, NECET supports development of children's
programming, and TIIAP promotes new telecommunications technologies.
Each grant award will be reviewed to ensure it meets the appropriate
statutory purpose.
NTIA's new policy interpretation also satisfies the second prong of
the Lemon test as NTIA grant funds still may not be used primarily to
advance or inhibit religion. As recently underscored by the Rosenberger
court, programs that neutrally extend benefits to recipients pass
Establishment Clause muster, if religious interests are only
incidentally served:
[[Page 66493]]
[T]he [constitutional] guarantee of neutrality [toward religion]
is respected, not offended, when the government, following neutral
criteria and evenhanded policies, extends benefits to recipients
whose ideologies and viewpoints, including religious ones, are broad
and diverse. . . . More than once have we rejected the position that
the Establishment Clause even justifies, much less requires, a
refusal to extend free speech rights to religious speakers who
participate in broad-reaching government programs neutral in design.
115 S.Ct. at 2521-22 (emphasis added).
NTIA's new policy interpretation will ensure both that the program
funds are neutrally provided and that any benefit to religion will be
attenuated or incidental. NTIA will behave neutrally toward all grant
applicants. All grant applicants (including sectarian organizations)
will be eligible for funding (assuming they meet NTIA's other
eligibility requirements), provided they comply with the policy that
NTIA grant funds will not be used for purposes the essential thrust of
which is sectarian.25 If, as we discuss further below, questions
arise regarding compliance, however, NTIA will determine whether the
recipients' use of grant funds has the primary, and thus impermissible,
effect of advancing or inhibiting religion. Where some benefit appears
to inure to a sectarian interest, further analysis of the potential
benefit will be undertaken to determine whether it is merely
incidential or attenuated and thus permissible.
\25\ The PTFP regulation at 15 C.F.R. Sec. 2301.22(d) provides:
``During the period in which the grantee possesses or uses the
Federally funded facilities (whether or not this period extends
beyond the Federal interest period), the grantee may not use or
allow the use of the Federally funded equipment for purposes the
essential thrust of which are sectarian.'' The assurance contained
in the PTFP application kit provides that the applicant certify that
he/she ``will not use or allow the use of the facilities for
essentially sectarian purposes for as long as the Applicant
possesses or uses the facilities, whether or not this period extends
beyond the ten-year Federal interest period following completion of
this project.'' NTIA considers these phrases to mean the same thing.
See also n. 3, supra.
---------------------------------------------------------------------------
With regard to the third prong of the Lemon test--avoiding
excessive entanglement of goverment with religion--NTIA's
administrative procedures will remain esssentially the same as before.
NTIA will avoid analyzing individual programs unless a compliance
problem comes to NTIA's attention. Thus, under the new policy,
excessive government entanglement with religion will continue to be
avoided as under our prior policy.
B. Application of New Interpretation to Particular NTIA Programs
Specific application of this new interpretation to each of the
three NTIA grant programs is discussed below.
1. The Public Telecommunications Facilities Program (PTFP).
Under the PTFP rules, a sectarian organization is eligible to apply
as long as it meets the general PTFP eligibility requirements.26
The purpose of PTFP is to make public telecommunications services
available to U.S. citizens. PTFP funds the construction and planning of
public telecommunications services,27 subject to the eligibility
requirements for applicants.28
\26\ To be eligible for a construction or planning grant, an
applicant must be one of the following: a public broadcast station;
a noncommercial telecommunications entity; a system of public
telecommunications entities; a nonprofit foundation, corporation,
institution, or association organized primarily for educational or
cultural purposes; or a state or local government (or any agency
thereof), or a political or special purpose subdivision of a state.
See 15 CFR Sec. 2301.4(a), (b).
\27\ 47 U.S.C. 390-393; 15 CFR Part 2301 et seq.
\28\ For definitions of eligible organizations and projects, see
15 CFR 2301.4.
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To determine whether a grant would have the primary effect of
establishing religion, NTIA will apply the Lemon test. To determine
eligibility and the overall purpose of the planning and construction of
public telecommunications facilities, NTIA will examine the applicant's
proposal and its organizational purposes, as required by the statutory
criteria. This approach ensures that grant awards will neither advance
nor inhibit religion.
To avoid Government entanglement in religion and programming
decisions, NTIA will continue its policy of reviewing the project
narrative and supporting documents, while also relying on the
applicants' assurances that they comply with NTIA's policy on sectarian
activities. General monitoring of grantees' activities will continue
under the normal administrative process pertaining to Federal
assistance programs.
Accordingly, as under our prior policy, submission of broadcast
schedules and program listings will not generally be required. We will
not review the content of all programs or activities for sectarian
content unless NTIA receives a complaint or otherwise becomes aware
that an applicant or grantee may be using NTIA-funded equipment or
materials in connection with a project the essential thrust of which is
sectarian. For example, under the prior approach, a single sectarian
program in a broadcast schedule would have rendered the project
ineligible for funding. Under our new approach, a single program with
sectarian aspects will not necessarily render the project
ineligible.29 In such instances, NTIA will examine the overall
purpose of the project to determine if it is consistent with the PTFP's
statutory purposes. Further inquiry may be made as necessary to ensure
that any benefit to a sectarian interest is merely attenuated or
incidental as permitted under current jurisprudence.
\29\ While this example uses one program, we wish to emphasize
that we are not setting any percentage or hourly maximum on the
amount of sectarian programming that would be considered allowable.
---------------------------------------------------------------------------
To implement this new approach, we do not need to revise the
language in the PTFP regulation, assurance or definition of
``sectarian'' as it pertains to our policy on sectarian
activities.30 We shall, however, revise the definition of ``public
telecommunications services'' to delete the last sentence which
provides, ``It does not include essentially sectarian programming.''
31
\30\ See 15 CFR 2301.1; 15 CFR 2301.5(d)(2)(xvi); 15 CFR
2301.22(d). The PTFP regulation at 15 CFR 2301.22(d) provides:
``During the period in which the grantee possesses or uses the
Federally funded facilities (whether or not this period extends
beyond the Federal interest period), the grantee may not use or
allow the use of the Federally funded equipment for purposes the
essential thrust of which are sectarian.'' The assurance contained
in the PTFP application kit provides that the applicant certify that
he/she ``will not use or allow the use of the facilities for
essentially sectarian purposes for as long as the Applicant
possesses or uses the facilities, whether or not this period extends
beyond the ten-year Federal interest period following completion of
this project.'' NTIA considers these phrases to mean the same thing.
\31\ 15 CFR 2301.1.
---------------------------------------------------------------------------
2. National Endowment for Children's Educational Television (NECET)
Pursuant to NECET's enabling legislation,32 in order to be
eligible to apply for a grant, an applicant must be one of the
following: an individual, corporation (for-profit or not-for-profit),
partnership, association, joint stock company, trust, or state or local
governmental entity.33 A sectarian organization is eligible to
apply, as long as it meets these eligibility requirements. NECET funds
are available ``to enhance the education of children through the
creation and production of television programming specifically directed
toward the development of fundamental intellectual skills.'' 34
Presently, in making a NECET grant, NTIA must, as a part of its
evaluation and review process, review program proposals and
[[Page 66494]]
content to determine whether it would meet these requirements.
\32\ 47 U.S.C. 394.
\33\ 47 U.S.C. 394(i)(2).
\34\ 47 U.S.C. 394 (a).
---------------------------------------------------------------------------
Accordingly, review under our new policy interpretation will be
essentially the same as before. The policy will be applied to each
individual program for which a grant is sought, and the grantee must
comply with the policy that NTIA grant funds will not be used for
purposes the essential thrust of which is sectarian.35 If the
essential purpose of a program is to advance or inhibit religion, its
funding would not be permissible. We do not believe the likelihood of
entanglement is any greater than it was under our prior policy.
\35\ Each award will contain a special award condition which
requires that: ``The grantee will neither use nor allow the NTIA-
funded equipment, facilities or programming to be used for purposes
the essential thrust of which is sectarian.'' There are often
special award conditions attached to each award which provide
conditions on the Federal funds in addition to those required by OMB
Circulars. As noted above in n. 30, supra, NTIA considers this
language to mean the same thing as not allowing the NTIA-funded
equipment, facilities or programming to be used for essentially
sectarian purposes.
---------------------------------------------------------------------------
Under our prior policy interpretation, if, for example, part of a
program encompassed a Catholic mass, the entire project would have been
considered ineligible for funding. In contrast, under the new approach,
we will make a determination on eligibility based on the test that any
benefit to a sectarian interest resulting from the receipt of NTIA
funds must be attenuated or incidental.
3. Telecommunications and Information Infrastructure Assistance Program
(TIIAP)
To be eligible for a TIIAP grant, an applicant must be one of the
following: a state or local government, an accredited college or
university, or a non-profit entity. Individuals and for-profit
organizations are not eligible to apply. A sectarian organization is
eligible to apply, as long as the organization meets these
requirements. TIIAP funds are provided for the ``planning and
construction of telecommunications networks for the provision of
educational, cultural, health care, public information, public safety
or other social services.'' 36
\36\ Pub. L. No. 103-317, 1994 U.S.C.C.A.N. (108 Stat.) 1724,
1747; 47 U.S.C. Sec. 390-393.
---------------------------------------------------------------------------
In contrast to PTFP, however, where the broadcaster maintains
editorial control, a TIIAP grantee may sometimes, but not always,
exercise editorial control over the content of its communications
network. For example, a network may involve a bulletin board where the
operator does not have control of messages sent among individuals. In
some cases, therefore, it could be difficult for a TIIAP applicant to
certify that facilities will not be used for essentially sectarian
purposes. Accordingly, TIIAP awards will be subject to the policy which
requires that the NTIA-funded facilities will not be used for
essentially sectarian purposes to the extent that the applicant
controls the content of network communications.37
\37\ The special award condition for the TIIAP awards will read
as follows: ``During the Federal interest period, to the extent that
the grantee maintains control over network transmissions, the
grantee will neither use nor allow the NTIA-funded network to be
used for purposes the essential thrust of which is sectarian.'' As
noted in fn. 35, supra, NTIA considers this language to mean the
same thing as not allowing the NTIA-funded network to be used for
essentially sectarian purposes.
---------------------------------------------------------------------------
To avoid excessive entanglement in religion, we will not review the
content of information transmitted over TIIAP-funded networks unless
NTIA receives a complaint or otherwise becomes aware that an applicant
or grantee is using NTIA funded equipment or materials in connection
with sectarian activities. In such instances, rather than examining
only the questioned activity, NTIA will examine the overall purpose of
the project to determine whether NTIA funding provides an attenuated or
incidental benefit to the sectarian interest and thus whether it is
permissible.
For example, TIIAP might provide funding to a local organization to
establish a public computer bulletin board. As part of this bulletin
board, a church-affiliated youth group might post information regarding
meetings and meeting times, which includes a meeting time for a worship
service. Under NTIA's prior policy, this project might have been
ineligible for funding because the information regarding the sectarian
meetings and meeting times would have appeared on the network. Applying
NTIA's new policy interpretation, we would examine the overall purpose
of the project to determine whether it fell within the TIIAP's
statutorily authorized purposes and whether any benefit to religion was
merely incidental or attenuated. If the answer to both questions was
yes, such a grant would be permissible under the new policy
interpretation.
IV. Conclusion
NTIA's modified policy interpretation appropriately harmonizes the
First Amendment's Free Exercise and Establishment Clauses, consistent
with current jurisprudence. The new interpretation of our policy
concerning use of NTIA grant funds in connection with sectarian
activities will provide grant applicants greater flexibility, while
continuing to avoid unwarranted government entanglement with religion.
Rulemaking Requirements
1. It has been determined that this rule is not significant for
purposes of Executive Order 12866.
2. Because this rule relates to public property, loans, grants,
benefits, or contracts, it is exempt from the notice and comment and
delayed effective date requirements of the Administrative Procedure Act
(APA).
3. Because a notice of proposed rulemaking is not required by the
APA or any other law, a Regulatory Flexibility Analysis is not required
and was not prepared.
4. This rule contains information collection requirements subject
to the provisions of the Paperwork Reduction Act. This collection has
clearance from the Office of Management and Budget under OMB Approval
No. 0660-0003.
5. This policy does not contain policies with federalism
implications sufficient to warrant preparation of a federalism
assessment under E.O. 12612.
List of Subjects in 15 CFR Part 2301
Administrative procedure, Grant programs--communications, Reporting
and recordkeeping requirements, Telecommunications.
(Catalog of Federal Domestic Assistance No. 11.550)
Dated: December 15, 1995.
Larry Irving,
Assistant Secretary of Communications and Information.
For the reasons set out in the preamble, 15 CFR part 2301 is
amended as follows:
PART 2301--PUBLIC TELECOMMUNICATIONS FACILITIES PROGRAM
1. The authority for part 2301 continues to read as follows:
Authority: Public Telecommunications Financing Act of 1978, Pub.
L. 95-567, 92 Stat. 2405, codified at 47 U.S.C. 390-394, 397-399b;
the Public Broadcasting Amendments Act of 1981, Pub. L. 97-35, 95
Stat. 725; the Consolidated Omnibus Budget Reconciliation Act of
1985, Pub. L. 99-272, section 5001, 100 Stat. 117; and the Public
Telecommunications Act of 1988, Pub. L. 100-626, 102 Stat. 3207.
2. Section 2301.1 is amended by revising the definition of public
telecommunications services to read as follows:
Sec. 2301.1 Definitions.
* * * * *
[[Page 66495]]
Public telecommunications services means noncommercial educational
and cultural radio and television programs, and related noncommercial
instructional or informational material that may be transmitted by
means of electronic communications.
* * * * *
3. Section 2301.4(a) is revised to read as follows:
Sec. 2301.4 Eligible organizations and scope of projects.
(a) Eligible applicants (Construction and Planning Grants). In
order to apply for and receive a PTFP Construction or Planning Grant,
an applicant must be:
(1) A public or noncommercial educational broadcast station;
(2) A noncommercial telecommunications entity;
(3) A system of public telecommunications entities;
(4) A nonprofit foundation, corporation, institution, or
association organized primarily for educational or cultural purposes;
or
(5) A state or local government (or agency thereof), or a political
or special purpose subdivision of a state.
* * * * *
4. Section 2301.4 is further amended by removing paragraph (b),
redesignating paragraph (c) as (b), and revising the newly designated
paragraph (b) to read as follows:
* * * * *
(b) Scope of projects. An applicant that is eligible under
paragraph (a) of this section may file an application with the agency
for a planning or construction grant to achieve the following:
(1) The provision of new public telecommunications facilities to
extend service to areas currently not receiving public
telecommunications services;
(2) The expansion of the service areas of existing public
telecommunications entities;
(3) The establishment of new public telecommunications entities
serving areas currently receiving public telecommunications services;
or
(4) The improvement of the capabilities of existing licensed public
broadcast stations to provide public telecommunications services.
* * * * *
5. Paragraphs (d) through (f) of Sec. 2301.4 are redesignated
paragraphs (c) through (e) respectively.
[FR Doc. 95-31089 Filed 12-21-95; 8:45 am]
BILLING CODE 3510-60-P
Complete official Federal Register PDF
FR Doc. 95-31018 Potassium Hydroxide as a Hog Scald Agent
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Page 66483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31018]
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DEPARTMENT OF AGRICULTURE
9 CFR Part 318
[Docket No. 95-035F]
RIN 0583-AB96
Potassium Hydroxide as a Hog Scald Agent
AGENCY: Food Safety and Inspection Service, USDA.
ACTION: Affirmation of effective date.
-----------------------------------------------------------------------
SUMMARY: On October 23, 1995, the Food Safety and Inspection Service
(FSIS) published a direct final rule, ``Potassium Hydroxide as a Hog
Scald Agent.'' This direct final rule allows the use of potassium
hydroxide in hog scald and hair removal processes. No adverse comments
were received in response to the direct final rule. Therefore, this
rule is effective on December 22, 1995.
EFFECTIVE DATES: December 22, 1995.
FOR FURTHER INFORMATION CONTACT: Dr. Paula M. Cohen, Director,
Regulations Development, Policy, Evaluation and Planning Staff, Food
Safety and Inspection Service, U.S. Department of Agriculture,
Washington, DC 20250-3700; (202) 720-7164.
SUPPLEMENTARY INFORMATION: This notice affirms the effective date of
the direct final rule, ``Potassium Hydroxide as a Hog Scald Agent,''
that was published on October 23, 1995, at 60 FR 54295. This direct
final rule allows the use of potassium hydroxide in hog scald and hair
removal processes. FSIS did not receive any written adverse comments or
written notice of intent to submit adverse comments in response to this
rule. Therefore, the effective date of the rule is December 22, 1995.
Done at Washington, DC, on: December 14, 1995.
Michael R. Taylor,
Acting Under Secretary for Food Safety.
[FR Doc. 95-31018 Filed 12-21-95; 8:45 am]
BILLING CODE 3410-DM-P
Complete official Federal Register PDF
FR Doc. 95-31017 Use of the Fast Antimicrobial Screen Test for Bob Veal Calves
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66482-66483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31017]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Food Safety and Inspection Service
9 CFR Part 310
[Docket No. 95-048DF]
RIN 0583-AC03
Use of the Fast Antimicrobial Screen Test for Bob Veal Calves
AGENCY: Food Safety and Inspection Service, USDA.
ACTION: Direct final rule.
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SUMMARY: The Food Safety and Inspection Service (FSIS) is amending the
Federal meat inspection regulations to permit the use of the Fast
Antimicrobial Screen Test (FAST) in its bob veal calf residue testing
program. Under FSIS' residue testing program, carcasses of bob veal
calves are subject to specific regulatory requirements for residue
testing by FSIS inspectors to assure that adulterated meat does not
enter human food channels. Until recently, the Calf Antibiotic and
Sulfonamide Test (CAST) was the only official test authorized for use
in the bob veal calf residue testing program. FSIS has now developed
FAST, which is an enhanced and equally effective version of CAST that
provides results after 6 hours of incubation, compared to 18-24 hours
of incubation for CAST. This action will permit the use of FAST in lieu
of CAST under FSIS' bob veal calf residue testing program.
DATES: This rule will be effective on February 20, 1996, unless we
receive written adverse comments or written notice of intent to submit
adverse comments on or before January 22, 1996. If FSIS receives
adverse comments or notice of intent to submit adverse comments, FSIS
will withdraw this rule and publish a proposed rule for public comment.
ADDRESSES: Send an original and two copies of written comments to: FSIS
Docket Clerk, Docket #95-048DF, Room 4352, South Agriculture Building,
Food Safety and Inspection Service, U.S. Department of Agriculture,
Washington, DC 20250.
SUPPLEMENTARY INFORMATION:
Background
In June 1984, as a result of findings of increased levels of
sulfonamide and antibiotic residues in young calves, FSIS promulgated
an interim rule (49 FR 23602; affirmed 50 FR 32162) that amended the
Federal meat inspection regulations (9 CFR parts 309, 310 and 318) by
establishing an intensified residue testing program for bob veal calves
(calves up to 3 weeks in age or 150 pounds in weight). FSIS was
concerned with findings of increased levels of sulfonamide and
antibiotic residues in young calves, and undertook an emergency
rulemaking to decrease the likelihood that adulterated meat would enter
into human food channels. FSIS determined that carcasses and parts
thereof from bob veal calves are adulterated under the Federal Meat
Inspection Act if they bear or contain sulfonamide or antibiotic
residues other than in accordance with tolerances established by the
Food and Drug Administration.
In the interim rule, FSIS stated that CAST, a swab bioassay test,
would be the official test used to screen carcasses of bob veal calves.
In trial testing, FSIS had found CAST to be extremely reliable in
detecting violative levels of antibiotics and sulfonamides in animal
tissues.
FSIS has recently developed a new test that, like CAST, is designed
to detect the presence of sulfonamide and antibiotic residues in animal
tissues. FAST is similar to and is performed in a similar manner to
CAST. The major advantage of FAST is that test results can be obtained
in 6 hours, instead of the 18-24 hour period required for CAST. FSIS'
in-plant trial testing of FAST has shown that FAST is equivalent to
CAST in detecting sulfonamide and antibiotic residues in animal
tissues.1
\1\ Results of the in-plant trial for FAST are available for
review in the Office of the FSIS Docket Clerk, Room 4352, South
Agriculture Building, Food Safety and Inspection Service, U.S.
Department of Agriculture, Washington, DC 20250.
---------------------------------------------------------------------------
Therefore, FSIS is amending Sec. 310.21 to add FAST as an
alternative to CAST for use by inspectors in testing carcasses and
parts of bob veal calves for sulfonamide and antibiotic residues.
Effective Date
This rule is being published without a prior proposal because this
action is viewed as noncontroversial, and FSIS does not anticipate any
adverse public comments will be received. This rule will be effective
60 days after the date of publication in the Federal Register unless
FSIS receives written adverse comments or written notice of intent to
submit adverse comments within 30 days of the date of publication of
this rule in the Federal Register.
If FSIS receives adverse comments or notice of intent to submit
adverse comments, FSIS will withdraw this rule and publish a proposed
rule for public comment.
If no adverse comments are received, FSIS will publish a notice in
the Federal Register confirming that the rule is effective on the date
indicated.
Executive Order 12866
This rule is considered not significant and therefore has not been
reviewed by the Office of Management and Budget.
Effect on Small Entities
The Administrator, FSIS, has determined that this rule will not
have a significant impact on a substantial number of small entities.
The rule permits the use of an alternate test, which can provide
results in less than half the time than the original test. Carcasses
that test negative could be released on the day of slaughter, which
will modestly benefit the meat industry.
Executive Order 12778
This rule has been reviewed under Executive Order 12778, Civil
Justice Reform. This rule (1) preempts all State and local laws and
regulations that are inconsistent with this rule; (2) has no
retroactive effect; and (3) does not require administrative proceedings
before parties may file suit in court challenging this rule.
List of Subjects in 9 CFR part 310
Meat inspection, Residue testing.
For the reasons discussed in the preamble, FSIS is amending part
310 of the Federal meat inspection regulations (9 CFR Part 310) as
follows:
PART 310--[AMENDED]
1. The authority citation for part 310 continues to read as
follows:
Authority: 21 U.S.C. 601-695; 7 CFR 2.17, 2.55.
2. The introductory text and footnote to paragraph (c) of
Sec. 310.21 are revised to read as follows:
[[Page 66483]]
Sec. 310.21 Carcasses suspected of containing sulfa and antibiotic
residues; sampling frequency; disposition of affected carcasses and
parts.
* * * * *
(c) * * * The inspector shall perform a swab bioassay test 1
on:
\1\ The procedures for performing the swab bioassay test are set
forth in one of two self-instructional guides: ``Performing the
CAST'' or ``Fast Antimicrobial Screen Test.'' These guides are
available for review in the office of the FSIS Docket Clerk, Room
4352 South, Food Safety and Inspection Service, U.S. Department of
Agriculture, Washington, DC 20250.
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* * * * *
Done at Washington, DC, on: December 14, 1995.
Michael R. Taylor,
Acting Under Secretary for Food Safety.
[FR Doc. 95-31017 Filed 12-21-95; 8:45 am]
BILLING CODE 3410-DM-P
Complete official Federal Register PDF
FR Doc. 95-30901 Allocation and Apportionment of Research and Experimental Expenditures
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66502-66510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30901]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
26 CFR Part 1
[TD 8646]
RIN 1545-AT49
Allocation and Apportionment of Research and Experimental
Expenditures
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document provides guidance concerning the allocation and
apportionment of research and experimental expenditures for purposes of
determining taxable income from sources within and without the United
States. This document affects taxpayers that have income from United
States and foreign sources and that have made expenditures for research
and experimentation that the taxpayer deducts under section 174 of the
Internal Revenue Code of 1986.
EFFECTIVE DATE: January 1, 1996.
FOR FURTHER INFORMATION CONTACT: Carl Cooper at (202) 622-3840 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
On May 24, 1995, the IRS published a notice of proposed rulemaking
and notice of public hearing in the Federal Register (60 FR 27453)
proposing amendments to the Income Tax Regulations (26 CFR part 1)
under section 861 of the Internal Revenue Code of 1986. Section 1.861-
8(e)(3) of the Income Tax Regulations provides rules regarding the
allocation and apportionment of research and experimental expenditures
for purposes of determining taxable income from sources inside and
outside the United States.
The notice of proposed rulemaking proposed three principal changes
to the existing regulations. First, allocation of research and
experimental expenditures to three-digit SIC code product categories of
gross income would be permitted. Second, the percentage of research and
experimental expenditures that may be exclusively apportioned to United
States source income under the sales method of apportionment under
Sec. 1.861-8(e)(3)(ii) would be increased from 30 percent to 50
percent. Third, use of the optional gross income methods of
apportionment would constitute a binding election to use such methods
in subsequent years. The election would not be revocable without the
prior consent of the Commissioner. The three changes were proposed in
part on the basis of an economic study performed by the Treasury
Department pursuant to Rev. Proc. 92-56 (1992-2 C.B. 409), ``The
Relationship Between U.S. Research and Development and Foreign
Income,'' which was published by the Treasury Department simultaneously
with the proposed regulations.
Written comments responding to the notice were received, and a
public hearing was held on September 8, 1995.
Regarding the determination of product categories under Sec. 1.861-
8(e)(3)(i)(B) of the proposed regulations, commenters suggested that
the rule requiring a taxpayer to determine relevant product categories
by reference to the three-digit classification of the Standard
Industrial Classification Manual should be modified to allow
determinations by reference to the five-digit classifications of the
Manual. This suggestion was not adopted, because such a rule would too
narrowly restrict the necessarily broad scope of the deduction. The IRS
continues to believe that research and experimentation is an inherently
speculative activity, that findings may contribute unexpected benefits,
and that gross income derived from successful research and
experimentation must bear the cost of unsuccessful research and
experimentation.
Commenters suggested that the regulations permit taxpayers to
determine product categories by reference to two- or three-digit
categories at the annual election of the taxpayer. This suggestion was
not adopted. The regulations provide that a taxpayer may determine
product categories by reference to two- or three-digit categories. A
taxpayer may aggregate, disaggregate or change a previously selected
SIC code category if the taxpayer establishes to the satisfaction of
the Commissioner that, due to changes in the relevant facts, a change
in product category is appropriate. This rule provides a simple and
workable format for balancing the need for consistency with the desire
for flexibility.
Referring to current Sec. 1.861-8(g) Example 6 (which has been
redesignated Sec. 1.861-17(h) Example 4), commenters suggested that the
regulations allow the use of the Wholesale Trade SIC code category with
respect to sales from any other category. The current Sec. 1.861-8(g)
Example 6 was not correct on this point and does not override the rule
stated parenthetically in the list of two digit SIC code categories in
present Sec. 1.861-8(e)(3)(i)(A) that wholesale trade may not be
combined with other product categories. The final regulations include
this rule along with Example 6 corrected to conform to the rule.
Regarding the exclusive place of performance apportionment rule
under Sec. 1.861-8(e)(3)(ii)(A) of the proposed regulations, commenters
suggested adding a rule providing that if the ratio of foreign research
and experimental expenditures in a three digit SIC code category of all
foreign affiliates of a United States consolidated group over foreign
affiliate sales in that SIC code category exceed fifty percent of the
ratio of United States consolidated group research and experimental
expenditures in that SIC code category over United States consolidated
group sales in that SIC code category, then the United States
consolidated group research and experimental expenditures should be
exclusively apportioned to United States source gross income. This
suggestion has not been adopted. Although a foreign affiliate may incur
substantial research and experimental expenditures in a given product
category, the foreign affiliate may still benefit from the research and
experimental expenditures of the United States consolidated group. See
Perkin-Elmer Corporation v. Commissioner, 103 T.C. 464 (1994).
Regarding the optional gross income methods of apportionment under
Sec. 1.861-8(e)(3)(iii) of the proposed regulations, commenters
suggested that
[[Page 66503]]
the final regulations include a fifty percent exclusive place of
performance apportionment under the optional gross income methods to be
parallel with Sec. 1.861-8(e)(3)(ii)(A). This suggestion has been
adopted in part. Section (b)(1)(ii) of the final regulations includes a
twenty-five percent exclusive place of performance apportionment under
the optional gross income methods. This twenty-five percent exclusive
apportionment ensures that taxpayers electing to use one of the
optional gross income methods also obtain results comparable to those
obtained by taxpayers electing to use the sales method, i.e., an
overall allocation that is twenty-five percent lower on average than
the allocation to foreign source income resulting from the current
regulations. The Treasury Department study does not support a greater
exclusive apportionment.
Commenters suggested that the proposed regulations should be
modified to reduce the floor on the amount of research and experimental
expenditures that must be apportioned to foreign source income under
the optional gross income methods from fifty percent to thirty percent
of the amount that would have been apportioned under the sales method.
This suggestion has not been adopted. The adoption of this suggested
rule in addition to the twenty-five percent exclusive apportionment
rule is not supported by the Treasury Department study.
Commenters suggested the elimination of the binding election to use
the optional gross income methods under Sec. 1.861-8(e)(3)(iii)(C) of
the proposed regulations. Commenters also suggested that the binding
election rule should be modified to provide for a change of method
without the prior consent of the Commissioner after five years' use of
one method. This suggestion, which recognizes the need for consistency
while reducing the administrative burden on taxpayers, has been
adopted.
Commenters suggested that the effective date election under
Sec. 1.861-8(e)(3)(vi) of the proposed regulations permit election by
fiscal year taxpayers whose taxable years begin after August 1, 1994,
but before January 1, 1995. This suggestion has been adopted.
Finally, these provisions, which were previously published as
Sec. 1.861-8(e)(3), have been renumbered and will now be published as
Sec. 1.861-17. This change has been made solely for the purpose of
achieving greater clarity in formatting and is not intended to result
in any additional substantive changes.
Special Analyses
It has been determined that these final regulations are not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and therefore a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking preceding these final regulations has
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
The principal author of these regulations is Carl Cooper, Office of
the Associate Chief Counsel (International). However, other personnel
from IRS and Treasury participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation continues to read as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.861-8 is amended by:
1. Revising paragraph (e)(3) to read as set forth below.
2. Removing and reserving paragraph (g), Examples 3 through 16 and
23.
Sec. 1.861-8 Computation of taxable income from sources within the
United States and from other sources and activities.
* * * * *
(e) * * *
(3) Research and experimental expenditures. For rules regarding the
allocation and apportionment of research and experimental expenditures,
see Sec. 1.861-17.
* * * * *
Par. 3. Section 1.861-17 is added to read as follows:
Sec. 1.861-17 Allocation and apportionment of research and
experimental expenditures.
(a) Allocation--(1) In general. The methods of allocation and
apportionment of research and experimental expenditures set forth in
this section recognize that research and experimentation is an
inherently speculative activity, that findings may contribute
unexpected benefits, and that the gross income derived from successful
research and experimentation must bear the cost of unsuccessful
research and experimentation. Expenditures for research and
experimentation that a taxpayer deducts under section 174 ordinarily
shall be considered deductions that are definitely related to all
income reasonably connected with the relevant broad product category
(or categories) of the taxpayer and therefore allocable to all items of
gross income as a class (including income from sales, royalties, and
dividends) related to such product category (or categories). For
purposes of this allocation, the product category (or categories) that
a taxpayer may be considered to have shall be determined in accordance
with the provisions of paragraph (a)(2) of this section.
(2) Product categories--(i) Allocation based on product categories.
Ordinarily, a taxpayer's research and experimental expenditures may be
divided between the relevant product categories. Where research and
experimentation is conducted with respect to more than one product
category, the taxpayer may aggregate the categories for purposes of
allocation and apportionment; however, the taxpayer may not subdivide
the categories. Where research and experimentation is not clearly
identified with any product category (or categories), it will be
considered conducted with respect to all the taxpayer's product
categories.
(ii) Use of three digit standard industrial classification codes. A
taxpayer shall determine the relevant product categories by reference
to the three digit classification of the Standard Industrial
Classification Manual (SIC code). A copy may be purchased from the
Superintendent of Documents, United States Government Printing Office,
Washington, DC 20402. The individual products included within each
category are enumerated in Executive Office of the President, Office of
Management and Budget, Standard Industrial Classification Manual, 1987
(or later edition, as available).
(iii) Consistency. Once a taxpayer selects a product category for
the first taxable year for which this section is effective with respect
to the taxpayer, it must continue to use that product category in
following years, unless the taxpayer establishes to the satisfaction of
the Commissioner that, due to changes in the relevant facts, a change
in the product category is appropriate. For this purpose, a change in
the
[[Page 66504]]
taxpayer's selection of a product category shall include a change from
a three digit SIC code category to a two digit SIC code category, a
change from a two digit SIC code category to a three digit SIC code
category, or any other aggregation, disaggregation or change of a
previously selected SIC code category.
(iv) Wholesale trade category. The two digit SIC code category
``Wholesale trade'' is not applicable with respect to sales by the
taxpayer of goods and services from any other of the taxpayer's product
categories and is not applicable with respect to a domestic
international sales corporation (DISC) or foreign sales corporation
(FSC) for which the taxpayer is a related supplier of goods and
services from any of the taxpayer's product categories.
(v) Retail trade category. The two digit SIC code category ``Retail
trade'' is not applicable with respect to sales by the taxpayer of
goods and services from any other of the taxpayer's product categories,
except wholesale trade, and is not applicable with respect to a DISC or
FSC for which the taxpayer is a related supplier of goods and services
from any other of the taxpayer's product categories, except wholesale
trade.
(3) Affiliated Groups--(i) In general. Except as provided in
paragraph (a)(3)(ii) of this section, the allocation and apportionment
required by this section shall be determined as if all members of the
affiliated group (as defined in Sec. 1.861-14T(d)) were a single
corporation. See Sec. 1.861-14T.
(ii) Possessions corporations. (A) For purposes of the allocation
and apportionment required by this section, sales and gross income from
products produced in whole or in part in a possession by an electing
corporation (within the meaning of section 936(h)(5)(E)), and dividends
from an electing corporation, shall not be taken into account, except
that this paragraph (a)(3)(ii) shall not apply to sales of (and gross
income and dividends attributable to sales of) products with respect to
which an election under section 936(h)(5)(F) is not in effect.
(B) The research and experimental expenditures taken into account
for purposes of this section shall be reduced by the amount of such
expenditures included in computing the cost-sharing amount (determined
under section 936(h)(5)(C)(i)).
(4) Legally mandated research and experimentation. Where research
and experimentation is undertaken solely to meet legal requirements
imposed by a political entity with respect to improvement or marketing
of specific products or processes, and the results cannot reasonably be
expected to generate amounts of gross income (beyond de minimis
amounts) outside a single geographic source, the deduction for such
research and experimentation shall be considered definitely related and
therefore allocable only to the grouping (or groupings) of gross income
within that geographic source as a class (and apportioned, if
necessary, between such groupings as set forth in paragraphs (c) and
(d) of this section). For example, where a taxpayer performs tests on a
product in response to a requirement imposed by the U.S. Food and Drug
Administration, and the test results cannot reasonably be expected to
generate amounts of gross income (beyond de minimis amounts) outside
the United States, the costs of testing shall be allocated solely to
gross income from sources within the United States.
(b) Exclusive apportionment--(1) In general. An exclusive
apportionment shall be made under this paragraph (b), where an
apportionment based upon geographic sources of income of a deduction
for research and experimentation is necessary (after applying the
exception in paragraph (a)(4) of this section).
(i) Exclusive apportionment under the sales method. If the taxpayer
apportions on the sales method under paragraph (c) of this section, an
amount equal to fifty percent of such deduction for research and
experimentation shall be apportioned exclusively to the statutory
grouping of gross income or the residual grouping of gross income, as
the case may be, arising from the geographic source where the research
and experimental activities which account for more than fifty percent
of the amount of such deduction were performed.
(ii) Exclusive apportionment under the optional gross income
methods. If the taxpayer apportions on the optional gross income
methods under paragraph (d) of this section, an amount equal to twenty-
five percent of such deduction for research and experimentation shall
be apportioned exclusively to the statutory grouping or the residual
grouping of gross income, as the case may be, arising from the
geographic source where the research and experimental activities which
account for more than fifty percent of the amount of such deduction
were performed.
(iii) Exception. If the applicable fifty percent geographic source
test of the preceding paragraph (b)(1)(i) or (ii) is not met, then no
part of the deduction shall be apportioned under this paragraph (b)(1).
(2) Facts and circumstances supporting an increased exclusive
apportionment--(i) In general. The exclusive apportionment provided for
in paragraph (b)(1) of this section reflects the view that research and
experimentation is often most valuable in the country where it is
performed, for two reasons. First, research and experimentation often
benefits a broad product category, consisting of many individual
products, all of which may be sold in the nearest market but only some
of which may be sold in foreign markets. Second, research and
experimentation often is utilized in the nearest market before it is
used in other markets, and in such cases, has a lower value per unit of
sales when used in foreign markets. The taxpayer may establish to the
satisfaction of the Commissioner that, in its case, one or both of the
conditions mentioned in the preceding sentences warrant a significantly
greater exclusive allocation percentage than allowed by paragraph
(b)(1) of this section because the research and experimentation is
reasonably expected to have very limited or long delayed application
outside the geographic source where it was performed. Past experience
with research and experimentation may be considered in determining
reasonable expectations.
(ii) Not all products sold in foreign markets. For purposes of
establishing that only some products within the product category (or
categories) are sold in foreign markets, the taxpayer shall compare the
commercial production of individual products in domestic and foreign
markets made by itself, by uncontrolled parties (as defined under
paragraph (c)(2)(i) of this section) of products involving intangible
property which was licensed or sold by the taxpayer, and by those
controlled corporations (as defined under paragraph (c)(3)(ii) of this
section) that can reasonably be expected to benefit directly or
indirectly from any of the taxpayer's research expense connected with
the product category (or categories). The individual products compared
for this purpose shall be limited, for nonmanufactured categories,
solely to those enumerated in Executive Office of the President, Office
of Management and Budget Standard Industrial Classification Manual,
1987 (or later edition, as available), and, for manufactured
categories, solely to those enumerated at a 7-digit level in the U.S.
Bureau of the Census, Census of Manufacturers: 1992, Numerical List of
Manufactured Products, 1993, (or later edition, as available). Copies
of both of these documents may be purchased from the Superintendent of
Documents,
[[Page 66505]]
United States Government Printing Office, Washington, DC 20402.
(iii) Delayed application of research findings abroad. For purposes
of establishing the delayed application of research findings abroad,
the taxpayer shall compare the commercial introduction of its own
particular products and processes (not limited by those listed in the
Standard Industrial Classification Manual or the Numerical List of
Manufactured Products) in the United States and foreign markets, made
by itself, by uncontrolled parties (as defined under paragraph
(c)(2)(i) of this section) of products involving intangible property
that was licensed or sold by the taxpayer, and by those controlled
corporations (as defined under paragraph (c)(3)(i) of this section)
that can reasonably be expected to benefit, directly or indirectly,
from the taxpayer's research expense. For purposes of evaluating the
delay in the application of research findings in foreign markets, the
taxpayer shall use a safe haven discount rate of 10 percent per year of
delay unless he is able to establish to the satisfaction of the
Commissioner, by reference to the cost of money and the number of years
during which economic benefit can be directly attributable to the
results of the taxpayer's research, that another discount rate is more
appropriate.
(c) Sales method--(1) In general. The amount equal to the remaining
portion of such deduction for research and experimentation, not
apportioned under paragraph (a)(4) or (b)(1)(i) of this section, shall
be apportioned between the statutory grouping (or among the statutory
groupings) within the class of gross income and the residual grouping
within such class in the same proportions that the amount of sales from
the product category (or categories) that resulted in such gross income
within the statutory grouping (or statutory groupings) and in the
residual grouping bear, respectively, to the total amount of sales from
the product category (or categories).
(i) Apportionment in excess of gross income. Amounts apportioned
under this section may exceed the amount of gross income related to the
product category within the statutory grouping. In such case, the
excess shall be applied against other gross income within the statutory
grouping. See Sec. 1.861-8(d)(1) for instances where the apportionment
leads to an excess of deductions over gross income within the statutory
grouping.
(ii) Leased property. For purposes of this paragraph (c), amounts
received from the lease of equipment during a taxable year shall be
regarded as sales receipts for such taxable year.
(2) Sales of uncontrolled parties. For purposes of the
apportionment under paragraph (c)(1) of this section, the sales from
the product category (or categories) by each party uncontrolled by the
taxpayer, of particular products involving intangible property that was
licensed or sold by the taxpayer to such uncontrolled party shall be
taken fully into account both for determining the taxpayer's
apportionment and for determining the apportionment of any other member
of a controlled group of corporations to which the taxpayer belongs if
the uncontrolled party can reasonably be expected to benefit directly
or indirectly (through any member of the controlled group of
corporations to which the taxpayer belongs) from the research expense
connected with the product category (or categories) of such other
member. An uncontrolled party can reasonably be expected to benefit
from the research expense of a member of a controlled group of
corporations to which the taxpayer belongs if such member can
reasonably be expected to license, sell, or transfer intangible
property to that uncontrolled party or transfer secret processes to
that uncontrolled party, directly or indirectly through a member of the
controlled group of corporations to which the taxpayer belongs. Past
experience with research and experimentation shall be considered in
determining reasonable expectations.
(i) Definition of uncontrolled party. For purposes of this
paragraph (c)(2) the term uncontrolled party means a party that is not
a person with a relationship to the taxpayer specified in section
267(b), or is not a member of a controlled group of corporations to
which the taxpayer belongs (within the meaning of section 993(a)(3) or
927(d)(4)).
(ii) Licensed products. In the case of licensed products, if the
amount of sales of such products is unknown (for example, where the
licensed product is a component of a large machine), a reasonable
estimate based on the principles of section 482 should be made.
(iii) Sales of intangible property. In the case of sales of
intangible property, regardless of whether the consideration received
in exchange for the intangible is a fixed amount or is contingent on
the productivity, use, or disposition of the intangible, if the amount
of sales of products utilizing the intangible property is unknown, a
reasonable estimate of sales shall be made annually. If necessary,
appropriate economic analyses shall be used to estimate sales.
(3) Sales of controlled parties. For purposes of the apportionment
under paragraph (c)(1) of this section, the sales from the product
category (or categories) of the taxpayer shall be taken fully into
account and the sales from the product category (or categories) of a
corporation controlled by the taxpayer shall be taken into account to
the extent provided in this paragraph (c)(3) for determining the
taxpayer's apportionment, if such corporation can reasonably be
expected to benefit directly or indirectly (through another member of
the controlled group of corporations to which the taxpayer belongs)
from the taxpayer's research expense connected with the product
category (or categories). A corporation controlled by the taxpayer can
reasonably be expected to benefit from the taxpayer's research expense
if the taxpayer can be expected to license, sell, or transfer
intangible property to that corporation or transfer secret processes to
that corporation, either directly or indirectly through a member of the
controlled group of corporations to which the taxpayer belongs. Past
experience with research and experimentation shall be considered in
determining reasonable expectations.
(i) Definition of a corporation controlled by the taxpayer. For
purposes of this paragraph (c)(3), the term a corporation controlled by
the taxpayer means any corporation that has a relationship to the
taxpayer specified in section 267(b) or is a member of a controlled
group of corporations to which the taxpayer belongs (within the meaning
of section 993(a)(3) or 927(d)(4).
(ii) Sales to be taken into account. The sales from the product
category (or categories) of a corporation controlled by the taxpayer
taken into account shall be equal to the amount of sales that bear the
same proportion to the total sales of the controlled corporation as the
total value of all classes of the stock of such corporation owned
directly or indirectly by the taxpayer, within the meaning of section
1563, bears to the total value of all classes of stock of such
corporation.
(iii) Sales not to be taken into account more than once. Sales from
the product category (or categories) between or among such controlled
corporations or the taxpayer shall not be taken into account more than
once; in such a situation, the amount sold by the selling corporation
to the buying corporation shall be subtracted from the sales of the
buying corporation.
(iv) Effect of cost-sharing arrangements. If the corporation
controlled by the taxpayer has entered
[[Page 66506]]
into a bona fide cost-sharing arrangement, in accordance with the
provisions of Sec. 1.482-7, with the taxpayer for the purpose of
developing intangible property, then that corporation shall not
reasonably be expected to benefit from the taxpayer's share of the
research expense.
(d) Gross income methods--(1)(i) In general. In lieu of applying
the sales method of paragraph (c) of this section, the remaining amount
of the deduction for research and experimentation, not apportioned
under paragraph (a)(4) or (b)(1)(ii) of this section, shall be
apportioned as prescribed in paragraphs (d)(2) and (3) of this section,
between the statutory grouping (or among the statutory groupings) of
gross income and the residual grouping of gross income.
(ii) Optional methods to be applied to all research and
experimental expenditures. These optional methods must be applied to
the taxpayer's entire deduction for research and experimental expense
remaining after applying the exception in paragraph (a)(4) of this
section, and may not be applied on a product category basis. Thus,
after the allocation of the taxpayer's entire deduction for research
and experimental expense under paragraph (a)(2) of this section (by
attribution to SIC code categories), the taxpayer must then apportion
as necessary the entire deduction as allocated by separate amounts to
various product categories, using only the sales method under paragraph
(c) of this section or only the optional gross income methods under
this paragraph (d). The taxpayer may not use the sales method for a
portion of the deduction and optional gross income methods for the
remainder of the deduction separately allocated.
(2) Option one. The taxpayer may apportion its research and
experimental expenditures ratably on the basis of gross income between
the statutory grouping (or among the statutory groupings) of gross
income and the residual grouping of gross income in the same
proportions that the amount of gross income in the statutory grouping
(or groupings) and the amount of gross income in the residual grouping
bear, respectively, to the total amount of gross income, if the
conditions described in paragraph (d)(2)(i) and (ii) of this section
are both met.
(i) The amount of research and experimental expense ratably
apportioned to the statutory grouping (or groupings in the aggregate)
is not less than fifty percent of the amount that would have been so
apportioned if the taxpayer had used the method described in paragraph
(c) of this section; and
(ii) The amount of research and experimental expense ratably
apportioned to the residual grouping is not less than fifty percent of
the amount that would have been so apportioned if the taxpayer had used
the method described in paragraph (c) of this section.
(3) Option two. If, when the amount of research and experimental
expense is apportioned ratably on the basis of gross income, either of
the conditions described in paragraph (d)(2)(i) or (ii) of this section
is not met, the taxpayer may either--
(i) Where the condition of paragraph (d)(2)(i) of this section is
not met, apportion fifty percent of the amount of research and
experimental expense that would have been apportioned to the statutory
grouping (or groupings in the aggregate) under paragraph (c) of this
section to such statutory grouping (or to such statutory groupings in
the aggregate and then among such groupings on the basis of gross
income within each grouping), and apportion the balance of the amount
of research and experimental expenses to the residual grouping; or
(ii) Where the condition of paragraph (d)(2)(ii) of this section is
not met, apportion fifty percent of the amount of research and
experimental expense that would have been apportioned to the residual
grouping under paragraph (c) of this section to such residual grouping,
and apportion the balance of the amount of research and experimental
expenses to the statutory grouping (or to the statutory groupings in
the aggregate and then among such groupings ratably on the basis of
gross income within each grouping).
(e) Binding election--(1) In general. A taxpayer may choose to use
either the sales method under paragraph (c) of this section or the
optional gross income methods under paragraph (d) of this section for
its original return for its first taxable year to which this section
applies. The taxpayer's use of either the sales method or the optional
gross income methods for its return filed for its first taxable year to
which this section applies shall constitute a binding election to use
the method chosen for that year and for four taxable years thereafter.
(2) Change of method. The taxpayer's election of a method may not
be revoked during the period referred to in paragraph (e)(1) of this
section without the prior consent of the Commissioner. After the
expiration of that period, the taxpayer may change methods without the
prior consent of the Commissioner. However, the taxpayer's use of the
new method shall constitute a binding election to use the new method
for its return filed for the first year for which the taxpayer uses the
new method and for four taxable years thereafter. The taxpayer's
election of the new method may not be revoked during that period
without the prior consent of the Commissioner.
(i) Short taxable years. For purposes of this paragraph (e), the
term taxable year includes a taxable year of less than twelve months.
(ii) Affiliated groups. In the case of an affiliated group, the
period referred to in paragraph (e)(1) of this section shall commence
as of the latest taxable year in which any member of the group has
changed methods.
(f) Special rules for partnerships--(1) Research and experimental
expenditures. For purposes of applying this section, if research and
experimental expenditures are incurred by a partnership in which the
taxpayer is a partner, the taxpayer's research and experimental
expenditures shall include the taxpayer's distributive share of the
partnership's research and experimental expenditures.
(2) Purpose and location of expenditures. In applying the exception
for expenditures undertaken to meet legal requirements under paragraph
(a)(4) of this section and the exclusive apportionment for the sales
method and the optional gross income methods under paragraph (b) of
this section, a partner's distributive share of research and
experimental expenditures incurred by a partnership shall be treated as
incurred by the partner for the same purpose and in the same location
as incurred by the partnership.
(3) Apportionment under the sales method. In applying the remaining
apportionment for the sales method under paragraph (c) of this section,
a taxpayer's sales from a product category shall include the taxpayer's
share of any sales from the product category of any partnership in
which the taxpayer is a partner. For purposes of the preceding
sentence, a taxpayer's share of sales shall be proportionate to the
taxpayer's distributive share of the partnership's gross income in the
product category.
(g) Effective date. This section applies to taxable years beginning
after December 31, 1995. However, a taxpayer may at his or her option,
apply this section in its entirety to all taxable years beginning after
August 1, 1994.
(h) Examples. The following examples illustrate the application of
this section:
Example 1--(i) Facts. X, a domestic corporation, is a
manufacturer and distributor of small gasoline engines for lawn
mowers. Gasoline engines are a product within the category, Engines
and Turbines
[[Page 66507]]
(SIC Industry Group 351). Y, a wholly owned foreign subsidiary of X,
also manufactures and sells these engines abroad. During 1996, X
incurred expenditures of $60,000 on research and experimentation,
which it deducts as a current expense, to invent and patent a new
and improved gasoline engine. All of the research and
experimentation was performed in the United States. In 1996, the
domestic sales by X of the new engine total $500,000 and foreign
sales by Y total $300,000. X provides technology for the manufacture
of engines to Y via a license that requires the payment of an arm's
length royalty. In 1996, X's gross income is $160,000, of which
$140,000 is U.S. source income from domestic sales of gasoline
engines and $10,000 is foreign source royalties from Y, and $10,000
is U.S. source interest income.
(ii) Allocation. The research and experimental expenditures were
incurred in connection with small gasoline engines and they are
definitely related to the items of gross income to which the
research gives rise, namely gross income from the sale of small
gasoline engines in the United States and royalties received from
subsidiary Y, a foreign manufacturer of gasoline engines.
Accordingly, the expenses are allocable to this class of gross
income. The U.S. source interest income is not within this class of
gross income and, therefore, is not taken into account.
(iii) Apportionment. (A) For purposes of applying the foreign
tax credit limitation, the statutory grouping is general limitation
gross income from sources without the United States and the residual
grouping is gross income from sources within the United States.
Since the related class of gross income derived from the use of
engine technology consists of both gross income from sources without
the United States (royalties from Y) and gross income from sources
within the United States (gross income from engine sales), X's
deduction of $60,000 for its research and experimental expenditure
must be apportioned between the statutory and residual grouping
before the foreign tax credit limitation may be determined. Because
more than 50 percent of X's research and experimental activity was
performed in the United States, 50 percent of that deduction can be
apportioned exclusively to the residual grouping of gross income,
gross income from sources within the United States. The remaining 50
percent of the deduction can then be apportioned between the
residual and statutory groupings on the basis of sales of small
gasoline engines by X and Y. Alternatively, X's deduction for
research and experimentation can be apportioned under the optional
gross income method. The apportionment for 1996 is as follows:
(1) Tentative Apportionment on the Basis of Sales
(i) Research and experimental expense to be apportioned
between residual and statutory groupings of gross income:... $60,000
(ii) Less: Exclusive apportionment of research and
experimental expense to the residual grouping of gross
income ($60,000 x 50 percent):.............................. $30,000
(iii) Research and experimental expense to be apportioned
between residual and statutory groupings of gross income on
the basis of sales:......................................... $30,000
(iv) Apportionment of research and experimental expense to
the residual grouping of gross income ($30,000 x $500,000/
($500,000+$300,000)):....................................... $18,750
(v) Apportionment of research and experimental expense to the
statutory grouping of gross income ($30,000 x $300,000/
($500,000+$300,000)):....................................... $11,250
(vi) Total apportioned deduction for research and
experimentation:............................................ $60,000
(vii) Amount apportioned to the residual grouping
($30,000+$18,750):.......................................... $48,750
(viii) Amount apportioned to the statutory grouping:......... $11,250
(2) Tentative Apportionment on the Basis of Gross Income.
(i) Exclusive apportionment of research and experimental
expense to the residual grouping of gross income ($60,000 x
25 percent):................................................ $15,000
(ii) Research and experimental expense apportioned to sources
within the United States (residual grouping) ($45,000 x
$140,000/($140,000+$10,000)):............................... $42,000
(iii) Research and experimental expense apportioned to
sources within country Y (statutory grouping) ($45,000 x
$10,000/($140,000+$10,000)):................................ $3,000
(iv) Amount apportioned to the residual grouping:............ $57,000
(v) Amount apportioned to the statutory grouping:............ $3,000
(B) The total research and experimental expense apportioned to
the statutory grouping ($3,000) under the gross income method is
approximately 26 percent of the amount apportioned to the statutory
grouping under the sales method. Thus, X may use option two of the
gross income method (paragraph (d)(3) of this section) and apportion
to the statutory grouping fifty percent (50%) of the $11,250
apportioned to that grouping under the sales method. Thus, X
apportions $5,625 of research and experimental expense to the
statutory grouping. X's use of the optional gross income methods
will constitute a binding election to use the optional gross income
methods for 1996 and four taxable years thereafter.
Example 2--(i) Facts. Assume the same facts as in Example 1
except that X also spends $30,000 in 1996 for research on steam
turbines, all of which is performed in the United States, and X has
steam turbine sales in the United States of $400,000. X's foreign
subsidiary Y neither manufactures nor sells steam turbines. The
steam turbine research is in addition to the $60,000 in research
which X does on gasoline engines for lawnmowers. X thus has a
deduction of $90,000 for its research activity. X's gross income is
$200,000, of which $140,000 is U.S. source income from domestic
sales of gasoline engines, $50,000 is U.S. source income from
domestic sales of steam turbines, and $10,000 is foreign source
royalties from Y.
(ii) Allocation. X's research expenses generate income from
sales of small gasoline engines and steam turbines. Both of these
products are in the same three digit SIC code category, Engines and
Turbines (SIC Industry Group 351). Therefore, the deduction is
definitely related to this product category and allocable to all
items of income attributable to it. These items of X's income are
gross income from the sale of small gasoline engines and steam
turbines in the United States and royalties from foreign subsidiary
Y, a foreign manufacturer and seller of small gasoline engines.
(iii) Apportionment. (A) For purposes of applying the foreign
tax credit limitation, the statutory grouping is general limitation
gross income from sources outside the United States and the residual
grouping is gross income from sources within the United States. X's
deduction of $90,000 must be apportioned between the statutory and
residual groupings. Because more than 50 percent of X's research and
experimental activity was performed in the United States, 50 percent
of that deduction can be apportioned exclusively to the residual
grouping, gross income from sources within the United States. The
remaining 50 percent of the deduction can then be apportioned
between the residual and statutory groupings on the basis of total
sales of small gasoline engines and steam turbines by X and Y.
Alternatively, X's deduction for research and experimentation can be
apportioned under the optional gross income methods. The
apportionment for 1996 is as follows:
(1) Tentative Apportionment on the Basis of Sales
(i) Research and experimental expense to be apportioned
between residual and statutory groupings of gross income:... $90,000
(ii) Less: Exclusive apportionment of the research and
experimental expense to the residual grouping of gross
income ($90,000 x 50 percent):.............................. $45,000
(iii) Research and experimental expense to be apportioned
between the residual and statutory groupings of gross income
on the basis of sales:...................................... $45,000
(iv) Apportionment of research and experimental expense to
the residual grouping of gross income ($45,000 x
($500,000+$400,000)/($500,000+$400,000+$300,000)):.......... $33,750
[[Page 66508]]
(v) Apportionment of research and experimental expense to the
statutory grouping of gross income ($45,000 x $300,000/
($500,000+$400,000+$300,000)):.............................. $11,250
(vi) Total apportioned deduction for research and
experimentation:............................................ $90,000
(vii) Amount apportioned to the residual grouping
($45,000+$33,750):.......................................... $78,750
(viii) Amount apportioned to the statutory grouping:......... $11,250
(2) Tentative Apportionment on the Basis of Gross Income
(i) Exclusive apportionment of research and experimental
expense to the residual grouping of gross income ($90,000 x
25 percent):................................................ $22,500
(ii) Research and experimental expense apportioned to sources
within the United States (residual grouping) ($67,500 x
$190,000/($140,000+$50,000+$10,000)):....................... $64,125
(iii) Research and experimental expense apportioned to
sources within country Y (statutory grouping) ($67,500 x
$10,000/($140,000+$50,000+$10,000)):........................ $3,375
(iv) Amount apportioned to the residual grouping:............ $86,625
(v) Amount apportioned to the statutory grouping:............ $3,375
(B) The total research and experimental expense apportioned to
the statutory grouping ($3,375) under the gross income method is 30
percent of the amount apportioned to the statutory grouping under
the sales method. Thus, X may use option two of the gross income
method (paragraph (d)(3) of this section) and apportion to the
statutory grouping fifty percent (50%) of the $11,250 apportioned to
that grouping under the sales method. Thus, X apportions $5,625 of
research and experimental expense to the statutory grouping. X's use
of the optional gross income methods will constitute a binding
election to use the optional gross income methods for 1996 and four
taxable years thereafter.
Example 3--(i) Facts. Assume the same facts as in Example 1
except that in 1997 X continues its sales of the new engines, with
sales of $600,000 in the United States and $400,000 abroad by
subsidiary Y. X also acquires a 60 percent (by value) ownership
interest in foreign corporation Z and a 100 percent ownership
interest in foreign corporation C. X transfers its engine technology
to Z for a royalty equal to 5 percent of sales, and X enters into an
arm's length cost-sharing arrangement with C to share the funding of
all of X's research activity. In 1997, corporation Z has sales in
country Z equal to $1,000,000. X incurs expense of $80,000 on
research and experimentation in 1997, and in addition, X performs
$15,000 of research on gasoline engines which was funded by the
cost-sharing arrangement with C. All of Z's sales are from the
product category, Engines and Turbines (SIC Industry Group 351). X
performs all of its research in the United States and $20,000 of its
expenditure of $80,000 is made solely to meet pollution standards
mandated by law. X establishes, to the satisfaction of the
Commissioner, that the expenditure in response to pollution
standards is not expected to generate gross income (beyond de
minimis amounts) outside the United States.
(ii) Allocation. The $20,000 of research expense which X
incurred in connection with pollution standards is definitely
related and thus allocable to the residual grouping, gross income
from sources within the United States. The remaining $60,000 in
research and experimental expenditure incurred by X is definitely
related to all gasoline engines and is therefore allocable to the
class of gross income to which the engines give rise, gross income
from sales of gasoline engines in the United States, royalties from
country Y, and royalties from country Z. No part of the $60,000
research expense is allocable to dividends from country C, because
corporation C has already paid, through its cost-sharing
arrangement, for research activity performed by X which may benefit
C.
(iii) Apportionment. For purposes of applying the foreign tax
credit limitation, the statutory grouping is general limitation
gross income from sources without the United States, and the
residual grouping is gross income from sources within the United
States. X's deduction of $60,000 for its research and experimental
expenditure must be apportioned between these groupings. Because
more than 50 percent of the research and experimentation was
performed in the United States, 50 percent of the $60,000 deduction
can be apportioned exclusively to the residual grouping. The
remaining 50 percent of the deduction can then be apportioned
between the residual and the statutory grouping on the basis of
sales of gasoline engines by X, Y, and Z. (If X utilized the
optional gross income methods in 1996, then its use of such methods
constituted a binding election to use the optional gross income
methods in 1996 and for four taxable years thereafter. If X utilized
the sales method in 1996, then its use of such method constituted a
binding election to use the sales method in 1996 and for four
taxable years thereafter.) The optional gross income methods are not
illustrated in this Example 3 (see instead Examples 1 and 2). Since
X has only a 60 percent ownership interest in corporation Z, only 60
percent of Z's sales (60% of $1,000,000, or $600,000) are included
for purposes of apportionment. The allocation and apportionment for
1997 is as follows:
(A) X's total research expense:.............................. $80,000
(B) Less: Legally mandated research directly allocated to the
residual grouping of gross income:.......................... $20,000
(C) Tentative apportionment on the basis of sales............
(1) Research and experimental expense to be apportioned
between residual and statutory groupings of gross income:... $60,000
(2) Less: Exclusive apportionment of research and
experimental expense to the residual grouping of gross
income ($60,000 x 50 percent):.............................. $30,000
(3) Research and experimental expense to be apportioned
between the residual and the statutory groupings on the
basis of sales:............................................. $30,000
(4) Apportionment of research and experimental expense to
gross income from sources within the United States (residual
grouping) ($30,000 x $600,000/($600,000+$400,000+$600,000)): $11,250
(5) Apportionment of research and experimental expense to
general limitation gross income from countries Y and Z
(statutory grouping) ($30,000 x $400,000+$600,000/
($600,000+$400,000+$600,000)):.............................. $18,750
(6) Total apportioned deduction for research and
experimentation ($30,000+$30,000):.......................... $60,000
(7) Amount apportioned to the residual grouping
($30,000+$11,250):.......................................... $41,250
(8) Amount apportioned to the statutory grouping of gross
income from sources within countries Y and Z:............... $18,750
Example 4--Research and Experimentation--(i) Facts. X, a
domestic corporation, manufactures and sells forklift trucks and
other types of materials handling equipment in the United States.
The manufacture and sale of forklift trucks and other materials
handling equipment belongs to the product category, Construction,
Mining, and Materials Handling Machinery and Equipment (SIC Industry
Group 353). X also sells its forklift trucks to a wholesaling
subsidiary located in foreign country Y (but title passes in the
United States), and X manufactures forklift trucks in foreign
country Z. The wholesaling of forklift trucks to country Y also
belongs to X's product category Transportation equipment and,
therefore, may not belong to the product
[[Page 66509]]
category, Wholesale trade (SIC Major Group 50 and 51). In 1997, X sold
$7,000,000 of forklift trucks to purchasers in the United States,
$3,000,000 of forklift trucks to the wholesaling subsidiary in Y,
and transferred forklift truck components with an FOB export value
of $2,000,000 to its branch in Z. The branch's sales of finished
forklift trucks were $5,000,000. In response to legally mandated
emission control requirements, X's United States research department
has been engaged in a research project to improve the performance
and quality of engine exhaust systems used on its products in the
United States. It incurs expenses of $100,000 for this purpose in
1997. In the past, X has customarily adapted the product
improvements developed originally for the domestic market to its
forklift trucks manufactured abroad. During the taxable year 1997,
development of an improved engine exhaust system is completed and X
begins installing the new system during the latter part of the
taxable year in products manufactured and sold in the United States.
X continues to manufacture and sell forklift trucks in foreign
countries without the improved engine exhaust systems.
(ii) Allocation. X's deduction for its research expense is
definitely related to the income to which it gives rise, namely
income from the manufacture and sale of forklift trucks within the
United States and in country Z. Although the research is undertaken
in response to a legal mandate, it can reasonably be expected to
generate gross income from the manufacture and sale of trucks by the
branch in Z. Therefore, the deduction is not allocable solely to
income from X's domestic sales of forklift trucks. It is allocable
to income from such sales and income from the sales of X's branch in
Z.
(iii) Apportionment. For the method of apportionment on the
basis of either sales or gross income, see Example 3. However, in
determining the amount of research apportioned to income from
foreign and domestic sources, the net sales of the branch in Z are
$3,000,000 ($5,000,000 less $2,000,000) and the sales within the
United States are $12,000,000 ($7,000,000 plus $3,000,000 plus
$2,000,000). See Sec. 1.861-17(c)(3)(iii).
Example 5--(i) Facts. X, a domestic corporation, is a drug
company that manufactures a wide variety of pharmaceutical products
for sale in the United States. Pharmaceutical products belong to the
product category, Drugs (SIC Industry Group 283). X exports its
pharmaceutical products through a foreign sales corporation (FSC).
X's wholly owned foreign subsidiary Y also manufactures
pharmaceutical products. In 1997, X has domestic sales of
pharmaceutical products of $10,000,000, the FSC has sales of
pharmaceutical products of $3,000,000, and Y has sales of
pharmaceutical products of $5,000,000. In that same year, 1997, X
incurs expense of $200,000 on research to test a product in response
to requirements imposed by the United States Food and Drug
Administration (FDA). X is able to show that, even though country Y
imposes certain testing requirements on pharmaceutical products, the
research performed in the United States is not accepted by country Y
for purposes of its own licensing requirements, and the research has
minimal use abroad. X is further able to show that FSC sells goods
to countries that do not accept or do not require research performed
in the United States for purposes of their own licensing standards.
(ii) Allocation. Since X's research expense of $200,000 is
undertaken to meet the requirements of the United States Food and
Drug Administration, and since it is reasonable to expect that the
expenditure will not generate gross income (beyond de minimis
amounts) outside the United States, the deduction is definitely
related and thus allocable to the residual grouping.
(iii) Apportionment. No apportionment is necessary since the
entire expense is allocated to the residual grouping, gross income
from sales within the United States.
Example 6--(i) Facts. X, a domestic corporation, is engaged in
continuous research and experimentation to improve the quality of
the products that it manufactures and sells, which are floodlights,
flashlights, fuse boxes, and solderless connectors. X incurs and
deducts $100,000 of expenditure for research and experimentation in
1997 that was performed exclusively in the United States. As a
result of this research activity, X acquires patents that it uses in
its own manufacturing activity. X licenses its floodlight patent to
Y and Z, uncontrolled foreign corporations, for use in their own
territories, countries Y and Z, respectively. Corporation Y pays X
an arm's length royalty of $3,000 plus $0.20 for each floodlight
sold. Sales of floodlights by Y for the taxable year are $135,000
(at $4.50 per unit) or 30,000 units, and the royalty is $9,000
($3,000 + $0.20 x 30,000). Y has sales of other products of
$500,000. Z pays X an arm's length royalty of $3,000 plus $0.30 for
each unit sold. Z manufactures 30,000 floodlights in the taxable
year, and the royalty is $12,000 ($3,000 + $0.30 x 30,000). The
dollar value of Z's floodlight sales is not known and cannot be
reasonably estimated because, in this case, the floodlights are not
sold separately by Z but are instead used as a component in Z's
manufacture of lighting equipment for theaters. The sales of all Z's
products, including the lighting equipment for theaters, are
$1,000,000. Y and Z each sell the floodlights exclusively within
their respective countries. X's sales of floodlights for the taxable
year are $500,000 and its sales of its other products, flashlights,
fuse boxes, and solderless connectors, are $400,000. X has gross
income of $500,000, consisting of gross income from domestic sources
from sales of floodlights, flashlights, fuse boxes, and solderless
connectors of $479,000, and royalty income of $9,000 and $12,000
from foreign corporations Y and Z respectively. X utilized the
optional gross income methods of apportionment for its return filed
for its first taxable year to which this section applies.
(ii) Allocation. X's research and experimental expenses are
definitely related to all of the products that it produces, which
are floodlights, flashlights, fuse boxes, and solderless connectors.
All of these products are in the same three digit SIC Code category,
Electric Lighting and Wiring Equipment (SIC Industry Group 364).
Thus, X's research and experimental expenses are allocable to all
items of income attributable to this product category, domestic
sales income and royalty income from the foreign countries in which
corporations Y and Z operate.
(iii) Apportionment. (A) The statutory grouping of gross income
is general limitation income from sources without the United States.
The residual grouping is gross income from sources within the United
States. X's deduction of $100,000 for its research expenditures must
be apportioned between the groupings. For apportionment on the basis
of sales in accordance with paragraph (c) of this section, X is
entitled to an exclusive apportionment of 50 percent of its research
and experimental expense to the residual grouping, gross income from
sources within the United States, since more than 50 percent of the
research activity was performed in the United States. The remaining
50 percent of the deduction can then be apportioned between the
residual and statutory groupings on the basis of sales. Since Y and
Z are unrelated licensees of X, only their sales of the licensed
product, floodlights, are included for purposes of apportionment.
Floodlight sales of Z are unknown, but are estimated at ten times
royalties from Z, or $120,000. All of X's sales from the entire
product category are included for purposes of apportionment on the
basis of sales. Alternatively, X may apportion its deduction on the
basis of gross income, in accordance with paragraph (d) of this
section. The apportionment is as follows:
(1) Tentative Apportionment on the Basis of Sales
(i) Research and experimental expense to be apportioned
between statutory and residual groupings of gross income:... $100,000
(ii) Less: Exclusive apportionment of research and
experimental expense to the residual groupings of gross
income ($100,000 x 50 percent):............................. $50,000
(iii) Research and experimental expense to be apportioned
between the statutory and residual groupings of gross income
on the basis of sales:...................................... $50,000
(iv) Apportionment of research and experimental expense to
the residual groupings of gross income ($50,000 x $900,000/
($900,000+$135,000+$120,000)):.............................. $38,961
(v) Apportionment of research and experimental expense to the
statutory grouping, royalty income from countries Y and Z
($50,000 x $135,000+$120,000/($900,000+$135,000+$120,000)):. $11,039
[[Page 66510]]
(vi) Total apportioned deduction for research and
experimentation:............................................ $100,000
(vii) Amount apportioned to the residual grouping
($50,000+$38,961):.......................................... $88,961
(viii) Amount apportioned to the statutory grouping of
sources within countries Y and Z:........................... $11,039
(2) Tentative Apportionment on Gross Income Basis
(i) Exclusive apportionment of research and experimental
expense to the residual grouping of gross income ($100,000 x
25 percent):................................................ $25,000
(ii) Apportionment of research and experimental expense to
the residual grouping of gross income ($75,000 x $479,000/
$500,000):.................................................. $71,850
(iii) Apportionment of research and experimental expense to
the statutory grouping of gross income ($75,000 x
$9,000+$12,000/$500,000):................................... $3,150
(iv) Amount apportioned to the residual grouping:............ $96,850
(v) Amount apportioned to the statutory grouping of general
limitation income from sources without the United States:... $3,150
(B) Since X has elected to use the optional gross income methods
of apportionment and its apportionment on the basis of gross income
to the statutory grouping, $3,150, is less than 50 percent of its
apportionment on the basis of sales to the statutory grouping,
$11,039, it must use Option two of paragraph (d)(3) of this section
and apportion $5,520 (50 percent of $11,039) to the statutory
grouping.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: December 13, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-30901 Filed 12-21-95; 8:45 am]
BILLING CODE 4830-01-U
Complete official Federal Register PDF
FR Doc. 95-30872 Rules for Certain Rental Real Estate Activities
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66496-66502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30872]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 8645]
RIN 1545-AS38
Rules for Certain Rental Real Estate Activities
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations providing rules for
rental real estate activities of taxpayers engaged in certain real
property trades or businesses. The regulations reflect changes to the
law made by the Omnibus Budget Reconciliation Act of 1993, and affect
taxpayers subject to the limitations on passive activity losses and
passive activity credits.
DATES: These regulations are effective on January 1, 1995. See
Sec. 1.469-11 for applicability.
ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (TD 8645), room 5228,
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington,
DC 20044. In the alternative, submissions may be hand delivered between
the hours of 8:00 a.m. and 5:00 p.m. to: CC:DOM:CORP:T:R (TD 8645),
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW,
Washington, DC.
FOR FURTHER INFORMATION CONTACT: William M. Kostak at (202) 622-3080
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h))
under control number 1545-AS38. The estimated annual burden per
respondent varies from 0.10 hours to 0.25 hours, depending on
individual circumstances, with an estimated average of 0.15 hours.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, PC:FP,
Washington, DC 20224, and to the Office of Management and Budget, Attn:
Desk Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC 20503.
Background
This document amends 26 CFR part 1 to provide rules relating to the
treatment of rental real estate activities of certain taxpayers under
the passive activity loss and credit limitations of section 469.
Section 469 disallows losses from passive activities to the extent they
exceed income from passive activities and similarly disallows credits
from passive activities to the extent they exceed tax liability
allocable to passive activities. In general, passive activities are
activities in which the taxpayer does not materially participate. In
addition, until the enactment of the Omnibus Budget Reconciliation Act
of 1993 (OBRA 1993), all rental activities (including those in which a
taxpayer materially participated) were passive.
OBRA 1993 added section 469(c)(7), which provides that rental real
estate activities of qualifying taxpayers are not subject to the rule
that treats all rental activities as passive. Thus, a rental real
estate activity of a qualifying taxpayer is not passive if the taxpayer
materially participates in the activity. Further, section 469(c)(7)
provides that each of a qualifying taxpayer's interests in rental real
estate is treated as a separate activity unless the taxpayer elects to
treat all interests in rental real estate as a single activity.
On January 10, 1995, the IRS published in the Federal Register a
notice of proposed rulemaking (60 FR 2557) to provide guidance
regarding section 469(c)(7). A number of public comments were received
concerning the proposed regulations, and a public hearing was held on
May 11, 1995. After consideration of the comments received, the
proposed regulations are adopted as revised by this Treasury decision.
Explanation of Provisions
I. General Background
The proposed regulations provide rules for determining whether a
taxpayer qualifies for treatment under section 469(c)(7). The proposed
regulations also provide rules for determining the rental real estate
activities of qualifying taxpayers for purposes of section 469. Except
for modifications in response to comments received on the proposed
regulations,
[[Page 66497]]
the final regulations generally adopt the rules contained in the
proposed regulations.
II. Public Comments
Several comments requested that the Service reconsider the rule in
the proposed regulations prohibiting qualifying taxpayers from grouping
rental real estate activities with other activities in determining
whether the taxpayers materially participate in the rental real estate
activities. After careful consideration, the final regulations adopt
the rule in the proposed regulations because that position is
consistent with the statutory language and the legislative history.
Several comments suggested that the rule in the proposed
regulations prohibiting the grouping of rental real estate activities
with other activities be modified to allow qualifying taxpayers to
group the activities of development or construction of rental real
estate with rental real estate activities. The final regulations do not
adopt this modification because in most cases development and
construction activities are separate and distinct from rental
activities. In addition, this modification would introduce significant
administrative difficulties in determining which development activities
or construction activities qualify. However, the IRS and Treasury
Department invite comments concerning whether the material
participation tests in Sec. 1.469-5T(a) should be amended to include a
look-back material participation test for taxpayers significantly
involved in the development or construction of their rental real estate
interests.
Several comments requested clarification regarding whether a
qualifying taxpayer's participation in a management activity may count
towards material participation in a rental real estate activity if the
management activity includes the management of rental real estate owned
by the taxpayer. The final regulations clarify that a qualifying
taxpayer may participate in a rental real estate activity through
participation in a management activity. In determining whether the
taxpayer materially participates in the rental real estate activity,
however, work the taxpayer performs in the management activity is taken
into account only to the extent it is performed in managing the
taxpayer's own rental real estate. The final regulations also clarify
that a qualifying taxpayer who owns rental real estate through an
entity, including a C corporation that is subject to section 469, may
count work performed by the taxpayer in managing the rental real estate
of the entity in establishing material participation in the taxpayer's
rental real estate activities. Thus, if a qualifying taxpayer owns some
interests in rental real estate through a closely held C corporation
and makes the election to treat all interests in rental real estate as
a single activity, the aggregate rental real estate activity will
include those interests held through the closely held C corporation for
purposes of material participation.
One comment requested that the regulations modify the definition of
trade or business to clarify that a taxpayer's real property trades or
businesses are determined without regard to the taxpayer's grouping of
activities under Sec. 1.469-4. The final regulations clarify that a
taxpayer's grouping of activities under Sec. 1.469-4 does not control
the determination of the taxpayer's real property trades or businesses
for purposes of this section.
Several comments requested that the regulations provide a detailed
definition of real property trades or businesses beyond the cross-
reference to section 469(c)(7)(C). However, to avoid complex and
mechanical rules, the final regulations do not adopt a detailed
definition of real property trades or businesses. Instead, the
regulations provide that taxpayers may use any reasonable method for
determining their real property trades or businesses.
Several comments requested that the final regulations modify the
rule in the proposed regulations providing that only employees who are
five-percent owners of their employer at all times during the taxable
year may treat personal services performed as an employee as services
performed in a real property trade or business. The comments suggested
that the regulations should take into account personal services
performed by employees that are five-percent owners for a significant
portion of a taxable year. In response to these comments, the final
regulations are modified to provide that an employee may count services
performed in a real property trade or business during the portion of
the taxable year that the employee is a five-percent owner in the
employer.
Several comments requested clarification concerning whether a
qualifying taxpayer that makes an election to treat all interests in
rental real estate as a single activity will be treated as having a
single rental real estate activity for purposes of the former passive
activity rule under section 469 (f). In addition, comments requested
that the regulations be modified to provide that qualifying taxpayers
that make the aggregation election will be treated as having separate
activities for purposes of the disposition rules under section 469(g)
and Sec. 1.469-4(g). In response to these comments, the final
regulations clarify that a qualifying taxpayer that makes the election
to treat all interests in rental real estate as a single rental real
estate activity will be treated as having a single activity for all
purposes of section 469, including sections 469(f) and (g). The
statutory language and the legislative history do not support a rule
allowing a qualifying taxpayer to treat all interests in rental real
estate as a single activity for purposes of material participation and
section 469(f), but as separate activities for purposes of section
469(g).
In addition, in response to comments, the final regulations provide
an example illustrating the operation of the former passive activity
rule for qualifying taxpayers that make the election to treat all
interests in rental real estate as a single activity. This example
illustrates that qualifying taxpayers that make the aggregation
election may use current net income from the aggregate rental real
estate activity to offset the prior-year disallowed passive losses of
the aggregate rental real estate activity, regardless of which rental
real estate interests within that activity produced the income or
prior-year losses.
Some comments requested that the regulations permit qualifying
taxpayers to make or revoke the aggregation election on an amended
income tax return. After careful consideration of this issue, the final
regulations adopt the rule in the proposed regulations that aggregation
elections must be made or revoked on an original return. The final
regulations provide, however, that the election may be revoked in any
year in which the facts are materially changed from those in the
taxable year for which the election was made.
In addition, one comment requested clarification as to what
constitutes a material change in the facts and circumstances that would
allow a taxpayer to revoke an aggregation election. However, the final
regulations do not provide an example or bright-line rule for
determining when a material change in the facts and circumstances has
occurred, because this determination is intended to be a broad factual
inquiry. Providing an example or bright-line rule may inappropriately
restrict the scope of that inquiry.
One comment requested the modification of the rule in the proposed
regulations that the aggregation election has no effect in years the
taxpayer is not a qualifying taxpayer. Instead, the comment suggested
that, for ease of administration and compliance, the
[[Page 66498]]
aggregation election should be binding and irrevocable for all future
years, including years in which the taxpayer is not a qualifying
taxpayer. However, the final regulations adopt the rule in the proposed
regulations because the position advocated by the comment would be
unfavorable to many taxpayers and would not significantly improve
administration.
Several comments requested that the regulations modify the rule in
the proposed regulations treating each rental real estate interest of a
passthrough entity as a separate interest of a person owning a fifty-
percent or greater interest in the capital, gain, loss, income,
deduction, or credit of the entity at any time during a taxable year. A
commentator stated that this rule is burdensome on many passthrough
entities and should be eliminated or modified. The final regulations
modify this rule so that it applies only when a qualifying taxpayer
owns a fifty-percent or greater interest in the capital, profits, or
losses of a passthrough entity for a taxable year. Accordingly, this
rule will not apply if a qualifying taxpayer owns a fifty-percent or
greater interest in a single item of income or deduction but does not
own a fifty-percent or greater interest in the overall capital,
profits, or losses of the passthrough entity.
In response to one comment, the final regulations also clarify the
application of the fifty-percent ownership rule to tiered passthrough
entities. The final regulations provide that if a passthrough entity
owns a fifty-percent or greater interest in the capital, profits, or
losses of another passthrough entity for a taxable year, each interest
in rental real estate of the lower-tier entity will be a separate
interest in rental real estate of the upper-tier entity.
In response to another comment, the final regulations clarify that
section 469(i) applies after the rules of section 469(c)(7) are
applied. Accordingly, the $25,000 offset will be applied only against
passive losses from rental real estate activities, and not against
losses that are allowable as a result of section 469(c)(7). In
addition, the final regulations clarify that adjusted gross income for
purposes of section 469(i) is not reduced by any losses from rental
real estate that are allowable as a result of section 469(c)(7).
Several comments requested a modification to the effective date
provision, to provide that aggregation elections made for taxable years
beginning before January 1, 1995, are not binding for future years.
Because taxpayers had sufficient notice of the rules of section
469(c)(7) and these regulations, this modification is unnecessary and
would add administrative complexity. Accordingly, the final regulations
adopt the effective date provision of the proposed regulations.
Finally, in response to a comment, the activity regrouping rule of
Sec. 1.469-4(e)(2) is clarified to provide that a taxpayer may not
regroup activities unless the taxpayer's original grouping was clearly
inappropriate or there has been a material change in the facts and
circumstances that makes the original grouping clearly inappropriate.
III. Effective Dates
In general, section 469(c)(7) applies for taxable years beginning
after December 31, 1993. These regulations are effective for taxable
years beginning on or after January 1, 1995. These regulations are also
effective for elections under section 469(c)(7)(A) and paragraph (g) of
these regulations that are made with returns filed on or after January
1, 1995.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking preceding these regulations was
submitted to the Small Business Administration for comment on its
impact on small business.
Drafting Information
The principal author of these regulations is William M. Kostak,
Office of Assistant Chief Counsel (Passthroughs and Special
Industries), IRS. However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
an entry in numerical order to read as follows:
Authority: 26 U.S.C. 7805. * * *
Section 1.469-9 also issued under 26 U.S.C. 469(c)(6), (h)(2),
and (l)(1).
Par. 2. Section 1.469-0 is amended by:
1. Revising the entry for Sec. 1.469-4(h).
2. Revising the heading for Sec. 1.469-9 and adding entries for
paragraphs (a) through (j) of Sec. 1.469-9.
3. Revising the entry for Sec. 1.469-11(b)(2) and removing the
entries for Sec. 1.469-11(b)(2)(i) and (ii).
4. Revising the entry for Sec. 1.469-11(b)(3).
5. Adding an entry for Sec. 1.469-11(b)(4).
6. The revisions and additions read as follows:
Sec. 1.469-0 Table of contents.
* * * * *
Sec. 1.469-4 Definition of Activity.
* * * * *
(h) Rules for grouping rental real estate activities for
taxpayers qualifying under section 469(c)(7).
* * * * *
Sec. 1.469-9 Rules for certain rental real estate activities.
(a) Scope and purpose.
(b) Definitions.
(1) Trade or business.
(2) Real property trade or business.
(3) Rental real estate.
(4) Personal services.
(5) Material participation.
(6) Qualifying taxpayer.
(c) Requirements for qualifying taxpayers.
(1) In general.
(2) Closely held C corporations.
(3) Requirement of material participation in the real property
trades or businesses.
(4) Treatment of spouses.
(5) Employees in real property trades or businesses.
(d) General rule for determining real property trades or
businesses.
(1) Facts and circumstances.
(2) Consistency requirement.
(e) Treatment of rental real estate activities of a qualifying
taxpayer.
(1) In general.
(2) Treatment as a former passive activity.
(3) Grouping rental real estate activities with other
activities.
(i) In general.
(ii) Special rule for certain management activities.
(4) Example.
(f) Limited partnership interests in rental real estate
activities.
(1) In general.
(2) De minimis exception.
(g) Election to treat all interests in rental real estate as a
single rental real estate activity.
(1) In general.
(2) Certain changes not material.
(3) Filing a statement to make or revoke the election.
(h) Interests in rental real estate held by certain passthrough
entities.
[[Page 66499]]
(1) General rule.
(2) Special rule if a qualifying taxpayer holds a fifty-percent
or greater interest in a passthrough entity.
(3) Special rule for interests held in tiered passthrough
entities.
(i) [Reserved].
(j) $25,000 offset for rental real estate activities of
qualifying taxpayers.
(1) In general.
(2) Example.
* * * * *
Sec. 1.469-11 Effective date and transition rules.
* * * * *
(b) * * *
(2) Additional transition rule for 1992 amendments.
(3) Fresh starts under consistency rules.
(i) Regrouping when tax liability is first determined under
Project PS-1-89.
(ii) Regrouping when tax liability is first determined under
Sec. 1.469-4.
(iii) Regrouping when taxpayer is first subject to section
469(c)(7).
(4) Certain investment credit property.
* * * * *
Par. 3. Section 1.469-4 is amended by revising paragraphs (e) (1)
and (2) and (h). The revisions read as follows:
Sec. 1.469-4 Definition of Activity.
* * * * *
(e) * * *
(1) Original groupings. Except as provided in paragraph (e)(2) of
this section and Sec. 1.469-11, once a taxpayer has grouped activities
under this section, the taxpayer may not regroup those activities in
subsequent taxable years. Taxpayers must comply with disclosure
requirements that the Commissioner may prescribe with respect to both
their original groupings and the addition and disposition of specific
activities within those chosen groupings in subsequent taxable years.
(2) Regroupings. If it is determined that a taxpayer's original
grouping was clearly inappropriate or a material change in the facts
and circumstances has occurred that makes the original grouping clearly
inappropriate, the taxpayer must regroup the activities and must comply
with disclosure requirements that the Commissioner may prescribe.
* * * * *
(h) Rules for grouping rental real estate activities for taxpayers
qualifying under section 469(c)(7). See Sec. 1.469-9 for rules for
certain rental real estate activities.
Par. 4. Section 1.469-9 is revised to read as follows:
Sec. 1.469-9 Rules for certain rental real estate activities.
(a) Scope and purpose. This section provides guidance to taxpayers
engaged in certain real property trades or businesses on applying
section 469(c)(7) to their rental real estate activities.
(b) Definitions. The following definitions apply for purposes of
this section:
(1) Trade or business. A trade or business is any trade or business
determined by treating the types of activities in Sec. 1.469-4(b)(1) as
if they involved the conduct of a trade or business, and any interest
in rental real estate, including any interest in rental real estate
that gives rise to deductions under section 212.
(2) Real property trade or business. Real property trade or
business is defined in section 469(c)(7)(C).
(3) Rental real estate. Rental real estate is any real property
used by customers or held for use by customers in a rental activity
within the meaning of Sec. 1.469-1T(e)(3). However, any rental real
estate that the taxpayer grouped with a trade or business activity
under Sec. 1.469-4(d)(1)(i)(A) or (C) is not an interest in rental real
estate for purposes of this section.
(4) Personal services. Personal services means any work performed
by an individual in connection with a trade or business. However,
personal services do not include any work performed by an individual in
the individual's capacity as an investor as described in Sec. 1.469-
5T(f)(2)(ii).
(5) Material participation. Material participation has the same
meaning as under Sec. 1.469-5T. Paragraph (f) of this section contains
rules applicable to limited partnership interests in rental real estate
that a qualifying taxpayer elects to aggregate with other interests in
rental real estate of that taxpayer.
(6) Qualifying taxpayer. A qualifying taxpayer is a taxpayer that
owns at least one interest in rental real estate and meets the
requirements of paragraph (c) of this section.
(c) Requirements for qualifying taxpayers--(1) In general. A
qualifying taxpayer must meet the requirements of section 469(c)(7)(B).
(2) Closely held C corporations. A closely held C corporation meets
the requirements of paragraph (c)(1) of this section by satisfying the
requirements of section 469(c)(7)(D)(i). For purposes of section
469(c)(7)(D)(i), gross receipts do not include items of portfolio
income within the meaning of Sec. 1.469-2T(c)(3).
(3) Requirement of material participation in the real property
trades or businesses. A taxpayer must materially participate in a real
property trade or business in order for the personal services provided
by the taxpayer in that real property trade or business to count
towards meeting the requirements of paragraph (c)(1) of this section.
(4) Treatment of spouses. Spouses filing a joint return are
qualifying taxpayers only if one spouse separately satisfies both
requirements of section 469(c)(7)(B). In determining the real property
trades or businesses in which a married taxpayer materially
participates (but not for any other purpose under this paragraph (c)),
work performed by the taxpayer's spouse in a trade or business is
treated as work performed by the taxpayer under Sec. 1.469-5T(f)(3),
regardless of whether the spouses file a joint return for the year.
(5) Employees in real property trades or businesses. For purposes
of paragraph (c)(1) of this section, personal services performed during
a taxable year as an employee generally will be treated as performed in
a trade or business but will not be treated as performed in a real
property trade or business, unless the taxpayer is a five-percent owner
(within the meaning of section 416(i)(1)(B)) in the employer. If an
employee is not a five-percent owner in the employer at all times
during the taxable year, only the personal services performed by the
employee during the period the employee is a five-percent owner in the
employer will be treated as performed in a real property trade or
business.
(d) General rule for determining real property trades or
businesses--(1) Facts and circumstances. The determination of a
taxpayer's real property trades or businesses for purposes of paragraph
(c) of this section is based on all of the relevant facts and
circumstances. A taxpayer may use any reasonable method of applying the
facts and circumstances in determining the real property trades or
businesses in which the taxpayer provides personal services. Depending
on the facts and circumstances, a real property trade or business
consists either of one or more than one trade or business specifically
described in section 469(c)(7)(C). A taxpayer's grouping of activities
under Sec. 1.469-4 does not control the determination of the taxpayer's
real property trades or businesses under this paragraph (d).
(2) Consistency requirement. Once a taxpayer determines the real
property trades or businesses in which personal services are provided
for purposes of paragraph (c) of this section, the taxpayer may not
redetermine those real property trades or businesses in subsequent
taxable years unless the original determination was clearly
inappropriate or there has been a material change in the facts and
[[Page 66500]]
circumstances that makes the original determination clearly
inappropriate.
(e) Treatment of rental real estate activities of a qualifying
taxpayer--(1) In general. Section 469(c)(2) does not apply to any
rental real estate activity of a taxpayer for a taxable year in which
the taxpayer is a qualifying taxpayer under paragraph (c) of this
section. Instead, a rental real estate activity of a qualifying
taxpayer is a passive activity under section 469 for the taxable year
unless the taxpayer materially participates in the activity. Each
interest in rental real estate of a qualifying taxpayer will be treated
as a separate rental real estate activity, unless the taxpayer makes an
election under paragraph (g) of this section to treat all interests in
rental real estate as a single rental real estate activity. Each
separate rental real estate activity, or the single combined rental
real estate activity if the taxpayer makes an election under paragraph
(g), will be an activity of the taxpayer for all purposes of section
469, including the former passive activity rules under section 469(f)
and the disposition rules under section 469(g). However, section 469
will continue to be applied separately with respect to each publicly
traded partnership, as required under section 469(k), notwithstanding
the rules of this section.
(2) Treatment as a former passive activity. For any taxable year in
which a qualifying taxpayer materially participates in a rental real
estate activity, that rental real estate activity will be treated as a
former passive activity under section 469(f) if disallowed deductions
or credits are allocated to the activity under Sec. 1.469-1(f)(4).
(3) Grouping rental real estate activities with other activities--
(i) In general. For purposes of this section, a qualifying taxpayer may
not group a rental real estate activity with any other activity of the
taxpayer. For example, if a qualifying taxpayer develops real property,
constructs buildings, and owns an interest in rental real estate, the
taxpayer's interest in rental real estate may not be grouped with the
taxpayer's development activity or construction activity. Thus, only
the participation of the taxpayer with respect to the rental real
estate may be used to determine if the taxpayer materially participates
in the rental real estate activity under Sec. 1.469-5T.
(ii) Special rule for certain management activities. A qualifying
taxpayer may participate in a rental real estate activity through
participation, within the meaning of Secs. 1.469-5(f) and 5T(f), in an
activity involving the management of rental real estate (even if this
management activity is conducted through a separate entity). In
determining whether the taxpayer materially participates in the rental
real estate activity, however, work the taxpayer performs in the
management activity is taken into account only to the extent it is
performed in managing the taxpayer's own rental real estate interests.
(4) Example. The following example illustrates the application of
this paragraph (e).
Example. (i) Taxpayer B owns interests in three rental
buildings, U, V and W. In 1995, B has $30,000 of disallowed passive
losses allocable to Building U and $10,000 of disallowed passive
losses allocable to Building V under Sec. 1.469-1(f)(4). In 1996, B
has $5,000 of net income from Building U, $5,000 of net losses from
Building V, and $10,000 of net income from Building W. Also in 1996,
B is a qualifying taxpayer within the meaning of paragraph (c) of
this section. Each building is treated as a separate activity of B
under paragraph (e)(1) of this section, unless B makes the election
under paragraph (g) to treat the three buildings as a single rental
real estate activity. If the buildings are treated as separate
activities, material participation is determined separately with
respect to each building. If B makes the election under paragraph
(g) to treat the buildings as a single activity, all participation
relating to the buildings is aggregated in determining whether B
materially participates in the combined activity.
(ii) Effective beginning in 1996, B makes the election under
paragraph (g) to treat the three buildings as a single rental real
estate activity. B works full-time managing the three buildings and
thus materially participates in the combined activity in 1996 (even
if B conducts this management function through a separate entity,
including a closely held C corporation). Accordingly, the combined
activity is not a passive activity of B in 1996. Moreover, as a
result of the election under paragraph (g), disallowed passive
losses of $40,000 ($30,000+$10,000) are allocated to the combined
activity. B's net income from the activity for 1996 is $10,000
($5,000-$5,000+$10,000). This net income is nonpassive income for
purposes of section 469. However, under section 469(f), the net
income from a former passive activity may be offset with the
disallowed passive losses from the same activity. Because Buildings
U, V and W are treated as one activity for all purposes of section
469 due to the election under paragraph (g), and this activity is a
former passive activity under section 469(f), B may offset the
$10,000 of net income from the buildings with an equal amount of
disallowed passive losses allocable to the buildings, regardless of
which buildings produced the income or losses. As a result, B has
$30,000 ($40,000-$10,000) of disallowed passive losses remaining
from the buildings after 1996.
(f) Limited partnership interests in rental real estate
activities--(1) In general. If a taxpayer elects under paragraph (g) of
this section to treat all interests in rental real estate as a single
rental real estate activity, and at least one interest in rental real
estate is held by the taxpayer as a limited partnership interest
(within the meaning of Sec. 1.469-5T(e)(3)), the combined rental real
estate activity will be treated as a limited partnership interest of
the taxpayer for purposes of determining material participation.
Accordingly, the taxpayer will not be treated under this section as
materially participating in the combined rental real estate activity
unless the taxpayer materially participates in the activity under the
tests listed in Sec. 1.469-5T(e)(2) (dealing with the tests for
determining the material participation of a limited partner).
(2) De minimis exception. If a qualifying taxpayer elects under
paragraph (g) of this section to treat all interests in rental real
estate as a single rental real estate activity, and the taxpayer's
share of gross rental income from all of the taxpayer's limited
partnership interests in rental real estate is less than ten percent of
the taxpayer's share of gross rental income from all of the taxpayer's
interests in rental real estate for the taxable year, paragraph (f)(1)
of this section does not apply. Thus the taxpayer may determine
material participation under any of the tests listed in Sec. 1.469-
5T(a) that apply to rental real estate activities.
(g) Election to treat all interests in rental real estate as a
single rental real estate activity--(1) In general. A qualifying
taxpayer may make an election to treat all of the taxpayer's interests
in rental real estate as a single rental real estate activity. This
election is binding for the taxable year in which it is made and for
all future years in which the taxpayer is a qualifying taxpayer under
paragraph (c) of this section, even if there are intervening years in
which the taxpayer is not a qualifying taxpayer. The election may be
made in any year in which the taxpayer is a qualifying taxpayer, and
the failure to make the election in one year does not preclude the
taxpayer from making the election in a subsequent year. In years in
which the taxpayer is not a qualifying taxpayer, the election will not
have effect and the taxpayer's activities will be those determined
under Sec. 1.469-4. If there is a material change in the taxpayer's
facts and circumstances, the taxpayer may revoke the election using the
procedure described in paragraph (g)(3) of this section.
(2) Certain changes not material. The fact that an election is less
advantageous to the taxpayer in a particular taxable year is not, of
itself, a material change
[[Page 66501]]
in the taxpayer's facts and circumstances. Similarly, a break in the
taxpayer's status as a qualifying taxpayer is not, of itself, a
material change in the taxpayer's facts and circumstances.
(3) Filing a statement to make or revoke the election. A qualifying
taxpayer makes the election to treat all interests in rental real
estate as a single rental real estate activity by filing a statement
with the taxpayer's original income tax return for the taxable year.
This statement must contain a declaration that the taxpayer is a
qualifying taxpayer for the taxable year and is making the election
pursuant to section 469(c)(7)(A). The taxpayer may make this election
for any taxable year in which section 469(c)(7) is applicable. A
taxpayer may revoke the election only in the taxable year in which a
material change in the taxpayer's facts and circumstances occurs or in
a subsequent year in which the facts and circumstances remain
materially changed from those in the taxable year for which the
election was made. To revoke the election, the taxpayer must file a
statement with the taxpayer's original income tax return for the year
of revocation. This statement must contain a declaration that the
taxpayer is revoking the election under section 469(c)(7)(A) and an
explanation of the nature of the material change.
(h) Interests in rental real estate held by certain passthrough
entities--(1) General rule. Except as provided in paragraph (h)(2) of
this section, a qualifying taxpayer's interest in rental real estate
held by a partnership or an S corporation (passthrough entity) is
treated as a single interest in rental real estate if the passthrough
entity grouped its rental real estate as one rental activity under
Sec. 1.469-4(d)(5). If the passthrough entity grouped its rental real
estate into separate rental activities under Sec. 1.469-4(d)(5), each
rental real estate activity of the passthrough entity will be treated
as a separate interest in rental real estate of the qualifying
taxpayer. However, the qualifying taxpayer may elect under paragraph
(g) of this section to treat all interests in rental real estate,
including the rental real estate interests held through passthrough
entities, as a single rental real estate activity.
(2) Special rule if a qualifying taxpayer holds a fifty-percent or
greater interest in a passthrough entity. If a qualifying taxpayer
owns, directly or indirectly, a fifty-percent or greater interest in
the capital, profits, or losses of a passthrough entity for a taxable
year, each interest in rental real estate held by the passthrough
entity will be treated as a separate interest in rental real estate of
the qualifying taxpayer, regardless of the passthrough entity's
grouping of activities under Sec. 1.469-4(d)(5). However, the
qualifying taxpayer may elect under paragraph (g) of this section to
treat all interests in rental real estate, including the rental real
estate interests held through passthrough entities, as a single rental
real estate activity.
(3) Special rule for interests held in tiered passthrough entities.
If a passthrough entity owns a fifty-percent or greater interest in the
capital, profits, or losses of another passthrough entity for a taxable
year, each interest in rental real estate held by the lower-tier entity
will be treated as a separate interest in rental real estate of the
upper-tier entity, regardless of the lower-tier entity's grouping of
activities under Sec. 1.469-4(d)(5).
(i) [Reserved].
(j) $25,000 offset for rental real estate activities of qualifying
taxpayers--(1) In general. A qualifying taxpayer's passive losses and
credits from rental real estate activities (including prior-year
disallowed passive activity losses and credits from rental real estate
activities in which the taxpayer materially participates) are allowed
to the extent permitted under section 469(i). The amount of losses or
credits allowable under section 469(i) is determined after the rules of
this section are applied. However, losses allowable by reason of this
section are not taken into account in determining adjusted gross income
for purposes of section 469(i)(3).
(2) Example. The following example illustrates the application of
this paragraph (j).
Example. (i) Taxpayer A owns building X and building Y, both
interests in rental real estate. In 1995, A is a qualifying taxpayer
within the meaning of paragraph (c) of this section. A does not
elect to treat X and Y as one activity under section 469(c)(7)(A)
and paragraph (g) of this section. As a result, X and Y are treated
as separate activities pursuant to section 469(c)(7)(A)(ii). A
materially participates in X which has $100,000 of passive losses
disallowed from prior years and produces $20,000 of losses in 1995.
A does not materially participate in Y which produces $40,000 of
income in 1995. A also has $50,000 of income from other nonpassive
sources in 1995. A otherwise meets the requirements of section
469(i).
(ii) Because X is not a passive activity in 1995, the $20,000 of
losses produced by X in 1995 are nonpassive losses that may be used
by A to offset part of the $50,000 of nonpassive income.
Accordingly, A is left with $30,000 ($50,000-$20,000) of nonpassive
income. In addition, A may use the prior year disallowed passive
losses of X to offset any income from X and passive income from
other sources. Therefore, A may offset the $40,000 of passive income
from Y with $40,000 of passive losses from X.
(iii) Because A has $60,000 ($100,000-$40,000) of passive losses
remaining from X and meets all of the requirements of section
469(i), A may offset up to $25,000 of nonpassive income with passive
losses from X pursuant to section 469(i). As a result, A has $5,000
($30,000-$25,000) of nonpassive income remaining and disallowed
passive losses from X of $35,000 ($60,000-$25,000) in 1995.
Par. 5. Section 1.469-11 is amended as follows:
1. Paragraph (a)(2) is amended by removing ``; and'' and adding
``;'' in its place.
2. Paragraph (a)(3) is redesignated as paragraph (a)(4) and a new
paragraph (a)(3) is added.
3. Paragraph (b)(1) is revised.
4. The heading for paragraph (b)(2) is revised; the headings for
paragraphs (b)(2)(i) and (b)(2)(ii) are removed; paragraph (b)(2)(ii)
is removed, and paragraph (b)(2)(i) is redesignated as paragraph
(b)(2).
5. Paragraph (b)(3) is redesignated as paragraph (b)(4).
6. A new paragraph (b)(3) is added.
The added and revised provisions read as follows:
Sec. 1.469-11 Effective date and transition rules.
(a) * * *
(3) The rules contained in Sec. 1.469-9 apply for taxable years
beginning on or after January 1, 1995, and to elections made under
Sec. 1.469-9(g) with returns filed on or after January 1, 1995; and
* * * * *
(b) * * * (1) Application of 1992 amendments for taxable years
beginning before October 4, 1994. Except as provided in paragraph
(b)(2) of this section, for taxable years that end after May 10, 1992,
and begin before October 4, 1994, a taxpayer may determine tax
liability in accordance with Project PS-1-89 published at 1992-1 C.B.
1219 (see Sec. 601.601(d)(2)(ii)(b) of this chapter).
(2) Additional transition rule for 1992 amendments. * * *
(3) Fresh starts under consistency rules--(i) Regrouping when tax
liability is first determined under Project PS-1-89. For the first
taxable year in which a taxpayer determines its tax liability under
Project PS-1-89, the taxpayer may regroup its activities without regard
to the manner in which the activities were grouped in the preceding
taxable year and must regroup its activities if the grouping in the
preceding taxable year is inconsistent with the rules of Project PS-1-
89.
(ii) Regrouping when tax liability is first determined under
Sec. 1.469-4. For the first taxable year in which a
[[Page 66502]]
taxpayer determines its tax liability under Sec. 1.469-4, rather than
under the rules of Project PS-1-89, the taxpayer may regroup its
activities without regard to the manner in which the activities were
grouped in the preceding taxable year and must regroup its activities
if the grouping in the preceding taxable year is inconsistent with the
rules of Sec. 1.469-4.
(iii) Regrouping when taxpayer is first subject to section
469(c)(7). For the first taxable year beginning after December 31,
1993, a taxpayer may regroup its activities to the extent necessary or
appropriate to avail itself of the provisions of section 469(c)(7) and
without regard to the manner in which the activities were grouped in
the preceding taxable year.
* * * * *
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: December 12, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 95-30872 Filed 12-21-95; 8:45 am]
BILLING CODE 4830-01-U
Complete official Federal Register PDF
FR Doc. 95-30674 Departmental Proceedings, Judicial Proceedings, and NEPA Policy
[Federal Register Volume 60, Number 246 (Friday, December 22, 1995)]
[Rules and Regulations]
[Pages 66479-66482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30674]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 60, No. 246 / Friday, December 22, 1995 /
Rules and Regulations
[[Page 66479]]
DEPARTMENT OF AGRICULTURE
Office of the Secretary
7 CFR Parts 1 and 1b
Departmental Proceedings, Judicial Proceedings, and NEPA Policy
AGENCY: Office of the Secretary of Agriculture, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: We are amending the Administrative Regulations--Departmental
Proceedings, the Administrative Regulations--Judicial Proceedings, and
the National Environmental Policy Act regulations as part of the United
States Department of Agriculture's (USDA) regulatory reinvention
initiative to improve its regulations. This final rule updates and
corrects references to statutes, regulations, USDA agencies, and USDA
officials; removes gender specific references; removes unnecessary
regulations; and makes minor nonsubstantive changes for clarity.
EFFECTIVE DATE: This final rule is effective January 22, 1996.
FOR FURTHER INFORMATION CONTACT:
William Jenson, Senior Counsel, Regulatory Division, Office of the
General Counsel, USDA, room 2422, South Building, 14th Street and
Independence Avenue SW., Washington, DC 20250, (202) 720-2453.
SUPPLEMENTARY INFORMATION:
Background
The President directed the heads of all departments and agencies to
review all regulations and eliminate or revise those that are outdated
or otherwise in need of reform. The Department completed its review and
submitted a report on the review to the Office of Management and Budget
on June 1, 1995. The review included USDA's Administrative
Regulations--Departmental Proceedings (7 CFR, part 1, subpart B);
Administrative Regulations--Judicial Proceedings (7 CFR, part 1,
subpart C); and National Environmental Policy Act regulations (7 CFR,
part 1b). The Department found that these regulations contain outdated
and incorrect references to statutes, regulations, USDA agencies, and
USDA officials; unnecessary provisions; gender specific references; and
provisions that could be clarified by making minor nonsubstantive
changes. This final rule updates and corrects references to statutes,
regulations, USDA agencies, and USDA officials; removes gender specific
references; removes unnecessary regulations; and makes minor
nonsubstantive changes for clarity.
7 CFR, Part 1, Subpart B
This final rule amends 7 CFR, part 1, subpart B, by adding a
citation to the statutory authority for the subpart. This final rule
also amends Secs. 1.26, 1.27, 1.28, and 1.29 in 7 CFR, part 1, subpart
B.
Section 1.26(c) provides that ``[c]hapter 11 of title 18, United
States Code prohibits employees and former employees from representing
others under certain circumstances. See Sec. 0.735-41 of this subtitle
for illustrations.'' Section 1.26(c) is unnecessary and has no effect
and is therefore removed. In addition, this final rule makes minor
nonsubstantive amendments to 7 CFR 1.26 (a), (b)(2), and (b)(3) for
clarity and to remove gender specific references.
Section 1.27 sets forth the Department policy with respect to the
availability of written submissions in response to certain notices
published by the Department. Sections 1.27 (a) through (d) appear by
their terms to apply only to written submissions in response to notices
of proposed rulemaking published by the Department. However,
Sec. 1.27(e) provides that, despite the limiting language in Sec. 1.27
(a) through (d), the policy annunciated in Sec. 1.27 applies to written
submissions in response to any published notice which solicits, or
affords interested members of the public an opportunity to submit,
written views with respect to any proposed action relating to any
program administered by the Department regardless of the fact that the
issuance of a rule may not be contemplated.
Further, this final rule amends the provisions regarding the
confidentiality of written submissions. Sections 1.27 (c) and (d)
provide for confidentiality if making the submission public would have
an adverse effect on the submitter by reason of: (1) Disclosing trade
secrets, processes, operations, style of work or apparatus; (2)
disclosing the identity, confidential statistical data, amount or
source of any income, profits, losses, or expenditures; or (3) exposing
the submitter to substantial disadvantage in business or employment.
This confidentiality provision was written before the enactment of the
Freedom of Information Act. The confidentiality provision in Sec. 1.27
(c) and (d) includes agency records that the Department may not be able
to withhold under the Freedom of Information Act. Therefore, Sec. 1.27
is amended to provide that confidentiality may be given to written
submissions only if they may be withheld under the Freedom of
Information Act.
Further still, this final rule amends Sec. 1.27 by setting forth
the scope of the Department policy at the beginning of Sec. 1.27,
eliminating the inaccurate limiting language currently found in
Sec. 1.27 (a) through (d), and making other minor nonsubstantive
changes for clarity.
Section 1.28 contains an inaccurate reference to a provision of the
Administrative Procedure Act. This final rule amends Sec. 1.28 to
correct that inaccurate reference.
Section 1.29(a) provides that the ``Administrator, Agricultural
Marketing Service may delegate the authority to issue subpoenas in
connection with investigations being conducted under the Packers and
Stockyards Act, as amended and supplemented (7 U.S.C. 181-229), to the
Deputy Administrator, Packers and Stockyards, Agricultural Marketing
Service.'' Since Sec. 1.29(a) was issued, the Department has been
reorganized and the references to Department officials in Sec. 1.29(a)
are no longer accurate. This final rule amends this provision within
Sec. 1.29(a) to correct the references to Department officials.
In addition, this final rule amends other provisions in
Sec. 1.29(a), and Secs. 1.29(b)(1)(iii), (b)(2), and (b)(3) for clarity
and to remove gender-specific references and surplusage.
[[Page 66480]]
7 CFR, Part 1, Subpart C
This final rule amends 7 CFR, part 1, subpart C, by adding a
citation to the statutory authority for the subpart. This final rule
also amends Sec. 1.41 in 7 CFR, part 1, subpart C, to remove a gender-
specific reference and to remove a provision that requires service of
process to be made upon the General Counsel to enforce child support or
alimony payments owed by employees of the Department. This provision is
removed because the regulations related to service of legal process for
the enforcement of child support and alimony owed by Department
employees are set forth in 5 CFR, part 581.
7 CFR, Part 1b
This final rule amends the authority citation for 7 CFR, part 1b,
to remove inaccurate references to the Federal Register.
Section 1b.1 contains inaccurate references to regulations and an
inaccurate reference to the Council on Environmental Quality. This
final rule corrects those inaccuracies.
Section 1b.2(a) describes the purposes of some of the Department's
programs and the methods by which some of these programs are conducted.
Section 1b.2(a) is unnecessary and has no effect and is therefore
removed. In addition, this final rule makes minor nonsubstantive
amendments to 7 CFR 1b.2 paragraphs (c), (d), and (e) for clarity; to
remove inaccurate references to regulations, the Under Secretary,
Natural Resources and Environment, and the Agricultural Council on
Environmental Quality; and to remove surplusage.
Section 1b.3(c) is amended to correct a cross reference.
Section 1b.4 lists agencies that are excluded from the requirement
to prepare procedures to implement the National Environmental Policy
Act and categorically excluded from the preparation of environmental
assessments and environmental impact statements unless the agency head
determines that an action may have a significant environmental effect.
Since Sec. 1b.4 was published, the Department has been reorganized and
some of the listed agencies no longer exist. This final rule corrects
the list of Department agencies in Sec. 1b.4 and makes minor
nonsubstantive changes for clarity.
Notice and Comment
This rule makes only minor nonsubstantive amendments to the
regulations in order to update and correct incorrect references, remove
gender-specific references, remove unnecessary provisions, and clarify
existing regulations. The rule will not have any effect on the public
and no public participation is expected. Therefore, notice and public
procedure with respect to this rule are unnecessary, and there is good
cause under 5 U.S.C. 553 to make this rule effective without
opportunity for public participation.
Executive Order 12866 and Regulatory Flexibility Act
This rule has been reviewed under Executive Order 12866. The rule
has been determined to be not significant for the purposes of Executive
Order 12866 and, therefore, has not been reviewed by the Office of
Management and Budget.
This final rule updates and corrects references to statutes,
regulations, USDA agencies, and USDA officials; removes gender-specific
references; removes unnecessary provisions; and makes minor
nonsubstantive changes for clarity. This final rule will not have any
economic impact.
Under these circumstances, the Secretary has determined that this
action will not have a significant economic impact on a substantial
number of small entities.
Executive Order 12778
This rule has been reviewed under Executive Order 12778, Civil
Justice Reform. This rule: (1) Preempts all state and local laws and
regulations that are inconsistent with this rule; (2) has no
retroactive effect; and (3) does not require administrative proceedings
before parties may file suit in court challenging this rule.
Paperwork Reduction Act
This final rule contains no information collection or recordkeeping
requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
et seq.).
List of Subjects
7 CFR Part 1
Administrative practice and procedure, Agriculture, Antitrust,
Blind, Claims, Concessions, Cooperatives, Equal access to justice,
Federal buildings and facilities, Freedom of information, Lawyers,
Privacy.
7 CFR Part 1b
Environmental policy statements.
Accordingly, 7 CFR parts 1 and 1b are amended as follows:
PART 1--ADMINISTRATIVE REGULATIONS
1. The authority citation for part 1 continues to read as follows:
Authority: 5 U.S.C. 301, unless otherwise noted.
Sec. 1.26 [Amended]
2-3. Section 1.26 is amended as follows:
a. In paragraph (a), by removing the words ``The provisions of this
section apply'' and by adding the words ``This section applies'' in
their place; and by removing the words ``such provisions, or any part
thereof'' and by adding the words ``this section, or any part of this
section'' in their place.
b. In paragraph (b)(2), by removing the word ``he'' and adding the
words ``the Secretary'' in its place each time it appears; and by
removing the word ``him'' and adding the words ``the person'' in its
place.
c. In paragraph (b)(3), by removing the words ``his employment he''
and adding the words ``employment with the Department the employee or
former employee'' in their place; and by removing the word ``him'' and
adding the words ``the employee or former employee'' in its place.
d. By removing paragraph (c).
Sec. 1.27 [Amended]
4. Section 1.27 is revised to read as follows:
Sec. 1.27 Rulemaking and other notice procedures.
(a) This section shall apply to:
(1) Notices of proposed rulemaking;
(2) Interim final rules;
(3) Advance notices of proposed rulemaking; and
(4) Any other published notice that solicits, or affords interested
members of the public an opportunity to submit, written views with
respect to any proposed action relating to any program administered in
the Department regardless of the fact that the issuance of a rule may
not be contemplated.
(b) Each notice identified in paragraph (a) of this section shall
indicate the procedure to be followed with respect to the notice,
unless the procedure is prescribed by statute or by published rule of
the Department. Each notice shall contain a statement that advises the
public of the policy regarding the availability of written submissions
by indicating whether paragraph (c), (d), or (e) of this section is
applicable to written submissions made pursuant to the notice.
(c) All written submissions made pursuant to the notice shall be
made
[[Page 66481]]
available for public inspection at times and places and in a manner
convenient to the public business.
(d)(1) Any written submission, pursuant to a notice, may be held
confidential if the person making the submission requests that the
submission be held confidential, the person making the submission has
shown that the written submission may be withheld under the Freedom of
Information Act, and the Department official authorized to issue the
notice determines that the submission may be withheld under the Freedom
of Information Act.
(2) If a request is made in accordance with paragraph (d)(1) of
this section for confidential treatment of a written submission, the
person making the request shall be informed promptly in the event the
request is denied and afforded an opportunity to withdraw the
submission.
(3) If a determination is made to grant a request for confidential
treatment under paragraph (d)(1) of this section, a statement of the
specific basis for the determination that will not be susceptible of
identifying the person making the request will be made available for
public inspection.
(e) If the subject of the notice is such that meaningful
submissions cannot be expected unless they disclose information that
may be withheld under the Freedom of Information Act, the notice shall
so indicate and contain a statement that written submissions pursuant
to the notice will be treated as confidential and withheld under the
Freedom of Information Act. Provided, That the policy regarding
availability of written submissions set forth in this paragraph may
only be used with the prior approval of the Secretary, or the Under
Secretary or Assistant Secretary that administers the program that is
the subject of the notice.
Sec. 1.28 [Amended]
5. Section 1.28 is amended by removing the phrase ``the provisions
of section 4(d) of the Administrative Procedure Act (60 Stat. 239; 5
U.S.C. 1003(d))'' and adding the reference ``5 U.S.C. 553(e)'' in its
place.
Sec. 1.29 [Amended]
6. Section 1.29 is amended as follows:
a. By revising paragraph (a) to read as set forth below.
b. In paragraph (b)(1)(iii), by adding the word ``, her,''
immediately after the word ``his''.
c. In paragraph (b)(2), by adding the words ``or she'' immediately
after the word ``he''; and by removing the word ``therein'' and adding
the words ``in the subpoena'' in its place.
d. In paragraph (b)(3), by removing the reference ``(5 U.S.C.
301).''.
Sec. 1.29 Subpoenas relating to investigations under statutes
administered by the Secretary of Agriculture.
(a) Issuance of subpoena. (1) When the Secretary is authorized by
statute to issue a subpoena in connection with an investigation being
conducted by the Department, the attendance of a witness and the
production of evidence relating to the investigation may be required by
subpoena at any designated place, including the witness' place of
business. Upon request of any representative of the Secretary involved
in connection with the investigation, the subpoena may be issued by the
Secretary, the Inspector General, or any Department official authorized
pursuant to part 2 of this title to administer the program to which the
subpoena relates, if the official who is to issue the subpoena is
satisfied as to the reasonableness of the grounds, necessity, and scope
of the subpoena. Except as provided in paragraph (a)(2) of this
section, the authority to issue subpoenas may not be delegated or
redelegated by the head of an agency.
(2) The Administrator, Grain Inspection, Packers and Stockyards
Administration, may delegate the authority to issue subpoenas in
connection with investigations being conducted under the Packers and
Stockyards Act (7 U.S.C. 181-229), to the Deputy Administrator, Packers
and Stockyards Programs.
* * * * *
Sec. 1.41 [Amended]
7-8. Section 1.41 is amended as follows:
a. In the third sentence, by removing the word ``he'' and adding
the words ``the officer'' in its place.
b. By removing the last sentence.
PART 1b--NATIONAL ENVIRONMENTAL POLICY ACT
9. The authority citation for part 1b is revised to read as
follows:
Authority: 5 U.S.C. 301; 42 U.S.C. 4321 et seq.; E.O. 11514, 3
CFR, 1966-1970 Comp., p. 902, as amended by E.O. 11991, 3 CFR, 1978
Comp., p. 123; E.O. 12114, 3 CFR, 1980 Comp., p. 356; 40 CFR 1507.3.
Sec. 1b.1 [Amended]
10. Section 1b.1 is amended as follows:
a. In paragraph (a), by removing the words ``This subpart'' and
adding the words ``This part'' in their place; by removing the words
``Council of'' and adding the words ``Council on'' in their place; and
by removing the words ``The subpart'' and adding the words ``This
part'' in their place.
b. In paragraph (b), by removing the word ``subpart'' and adding
the word ``part'' in its place.
Sec. 1b.2 [Amended]
11. Section 1b.2 is amended as follows:
a. By removing paragraph (a).
b. In paragraph (c), by removing the words ``the provisions of this
subpart'' and adding the words ``this part'' in their place; and by
removing the words ``the provisions of NEPA'' and adding the word
``NEPA'' in their place.
c. In paragraph (d), the first sentence, by removing the word
``Assistant'' and adding the word ``Under'' in its place; and by
removing the reference ``(7 CFR 2.19(b))''.
d. In paragraph (d), the second sentence, by removing the words
``Assistant Secretary, through the USDA Natural Resources and
Environment Committee'' and adding the words ``Under Secretary, NR&E,
through the Agricultural Council on Environmental Quality'' in their
place.
e. In paragraph (e), the first sentence, by removing the word
``subpart'' and adding the word ``part'' in its place.
f. In paragraph (e), the third sentence, by removing the word
``Assistant'' and adding the word ``Under'' in its place.
g. By redesignating paragraphs (b), (c), (d), and (e) as paragraphs
(a), (b), (c), and (d), respectively.
Sec. 1b.3 [Amended]
12. In Sec. 1b.3, paragraph (c) is amended by removing the words
``above and in'' and adding the words ``in paragraphs (a) of this
section and'' in their place.
13. Section 1b.4 is revised to read as follows:
Sec. 1b.4 Exclusion of agencies.
(a) The USDA agencies and agency units listed in paragraph (b) of
this section conduct programs and activities that have been found to
have no individual or cumulative effect on the human environment. The
USDA agencies and agency units listed in paragraph (b) of this section
are excluded from the requirements of preparing procedures to implement
NEPA. Actions of USDA agencies and agency units listed in paragraph (b)
of this section are categorically excluded from the preparation of an
EA or EIS unless the agency head determines that an action may have a
significant environmental effect.
(b)(1) Agricultural Marketing Service
[[Page 66482]]
(2) Economic Research Service
(3) Extension Service
(4) Federal Corp Insurance Corporation
(5) Food and Consumer Service
(6) Food Safety and Inspection Service
(7) Foreign Agricultural Service
(8) Grain Inspection, Packers and Stockyards Administration
(9) National Agricultural Library
(10) National Agricultural Statistics Service
(11) Office of the General Counsel
(12) Office of the Inspector General
Done in Washington, DC, this 8th day of December, 1995.
Dan Glickman,
Secretary of Agriculture.
FR Doc. 95-30674 Filed 12-21-95; 8:45 am]
BILLING CODE 3410-01-M
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