issue-1995-12-26•Federal Register final rules — 1995-12-26
Federal Register final rules — 1995-12-26
issue-1995-12-26Federal Register final rules — 1995-12-26Regulation
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. 95-31267 Revision of Delegations of Authority
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Page 66713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31267]
========================================================================
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
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========================================================================
Federal Register / Vol. 60, No. 247 / Tuesday, December 26, 1995 /
Rules and Regulations
[[Page 66713]]
DEPARTMENT OF AGRICULTURE
Office of the Secretary
7 CFR Part 2
Revision of Delegations of Authority
AGENCY: Department of Agriculture.
ACTION: Final rule.
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SUMMARY: This document revises the delegations of authority from the
Secretary of Agriculture and general officers of the Department to
change the names of the Rural Housing and Community Development Service
and the Rural Business and Cooperative Development Service.
EFFECTIVE DATE: December 26, 1995.
FOR FURTHER INFORMATION CONTACT:
Robert L. Siegler, Deputy Assistant General Counsel, Research and
Operations Division, Office of the General Counsel, Department of
Agriculture, Room 2321-S, Washington, DC 20250, telephone 202-720-6035.
SUPPLEMENTARY INFORMATION: On November 8, 1995, USDA published in the
Federal Register (60 FR 56392-56465) a revision of the delegations of
authority appearing in 7 CFR part 2 due to a reorganization of the
department. The revised delegations effectuated the Federal Crop
Insurance Reform and Department of Agriculture Reorganization Act of
1994, Public Law 103-354. The Act permits the Secretary to reorganize
the Department of Agriculture. The Act authorized the establishment of
subcabinet positions and the restructuring of agencies and offices of
the Department of Agriculture. The Secretary established the Rural
Housing and Community Development Service and the Rural Business and
Cooperative Development Service. It has been determined that public
confusion exists with regard to the two agency names, and that the
names are long and cumbersome. Accordingly, the Secretary has
determined to change the agency names from the Rural Housing and
Community Development Service to the Rural Housing Service, and the
Rural Business and Cooperative Development Service to the Rural
Business-Cooperative Service. The functions and responsibilities of the
two agencies will remain the same. Accordingly, 7 CFR part 2 is revised
as set forth below.
List of Subjects in 7 CFR Part 2
Authority delegations (Government agencies).
PART 2--DELEGATIONS OF AUTHORITY BY THE SECRETARY OF AGRICULTURE
AND GENERAL OFFICERS OF THE DEPARTMENT
1. The authority citation for part 2 is revised to read as follows:
Authority: Sec. 212(a), Pub. L. 103-354, 108 Stat. 3210, 7
U.S.C. 6912(a)(1); 5 U.S.C. 301; Reorganization Plan No. 2 of 1953,
3 CFR, 1949-1953 Comp., p. 1024.
Subpart C--Delegations of Authority to the Deputy Secretary, the
Under Secretaries and Assistant Secretaries
2. In subpart C, all references to:
(1) ``Rural Housing and Community Development Service'' are revised
to read ``Rural Housing Service'';
(2) ``Rural Business and Cooperative Development Service'' are
revised to read ``Rural Business-Cooperative Service'';
(3) ``rural housing and community development'' are revised to read
``rural housing''; and
(4) ``rural business and cooperative development'' are revised to
read ``rural business-cooperative''.
Subpart D--Delegations of Authority to Other General Officers and
Agency Heads
2. In subpart D, all references to:
(1) ``Rural Housing and Community Development Service'' are revised
to read ``Rural Housing Service''; and
(2) ``Rural Business and Cooperative Development Service'' are
revised to read ``Rural Business-Cooperative Service''.
Subpart F--Delegations of Authority by the Under Secretary for Farm
and Foreign Agricultural Services
3. In subpart F, all references to:
(1) ``Rural Housing and Community Development Service'' are revised
to read ``Rural Housing Service''; and
(2) ``Rural Business and Cooperative Development Service'' are
revised to read ``Rural Business-Cooperative Service''.
Subpart G--Delegations of Authority by the Under Secretary for
Rural Economic and Community Development
4. In subpart G, all references to:
(1) ``Rural Housing and Community Development Service'' are revised
to read ``Rural Housing Service''; and
(2) ``Rural Business and Cooperative Development Service'' are
revised to read ``Rural Business-Cooperative Service''.
Subpart J--Delegations of Authority by the Under Secretary for
Natural Resources and Environment
5. In subpart J, all references to:
(1) ``Rural Housing and Community Development Service'' are revised
to read ``Rural Housing Service''; and
(2) ``Rural Business and Cooperative Development Service'' are
revised to read ``Rural Business-Cooperative Service''.
For subparts C and D:
Dated: December 15, 1995.
Dan Glickman,
Secretary of Agriculture.
For Subpart F:
Dated: December 19, 1995.
Eugene Moos,
Under Secretary for Farm and Foreign Agricultural Services.
For Subpart G:
Dated: December 18, 1995.
Jill Long Thompson,
Under Secretary for Rural Economic and Community Development.
For Subpart J:
Dated: December 19, 1995.
James R. Lyons,
Under Secretary for Natural Resources and Environment
[FR Doc. 95-31267 Filed 12-22-95; 8:45 am]
BILLING CODE 3410-01-M
Complete official Federal Register PDF
FR Doc. 95-31218 Drawbridge Operation Regulations; Okeechobee Waterway, FL
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Pages 66746-66747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31218]
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DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Part 117
[CGD07-94-85]
RIN 2115-AE47
Drawbridge Operation Regulations; Okeechobee Waterway, FL
AGENCY: Coast Guard, DOT.
ACTION: Final rule.
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SUMMARY: The Coast Guard is changing regulations governing the
operation of the Florida East Coast railroad bridge, at mile 38.0, at
Port Mayaca, Florida, by removing the authorization for automatic
operation and returning the draw to manual operation. This action
should accommodate the needs of railroad traffic, while still providing
for the reasonable needs of navigation.
EFFECTIVE DATE: January 25, 1996.
ADDRESSES: Documents in this preamble are available for inspection
and copying at 909 SE 1st Ave, room 406 between 7 am and 4 pm
Monday through Friday, except federal holidays. The telephone
number is (305) 536-4103.
FOR FURTHER INFORMATION CONTACT:
Walter Paskowsky, Project Manager, Bridge Section at (305) 536-4103.
SUPPLEMENTARY INFORMATION:
Drafting Information
The principal persons involved in drafting this document are Walter
Paskowsky, Project Manager, and LCDR Robert Wilkins, Project Counsel.
Regulatory History
On August 17, 1995 the Coast Guard published a notice of proposed
rulemaking entitled Drawbridge Operations Regulations, Okeechobee
Waterway, Florida in the Federal Register (FR 60 42827). No adverse
comments were received. A public hearing was not requested and was not
held.
Background and Purpose
The bridge is normally in the fully open position displaying
flashing green lights to indicate that vessels may pass. When a train
approaches the bridge, the lights go to flashing red and a horn sounds
four blasts, and then repeats four blasts. After an eight minute delay,
the draw lowers and locks, providing the scanning equipment reveals
nothing under the draw. The draw remains down for a period of eight
minutes or while all circuits are occupied. After the train has
cleared, the draw opens and the lights return to flashing green.
Because of declining usage of the rail line, the bridgeowner, Florida
East Coast Railroad, has requested permission to operate the span
manually.
Discussion of Comments and Changes
Three comments were received in response to the Notice of Proposed
Rulemaking. The US Army Corps of Engineers stated the proposed rule
change would not impact navigational interests using the waterway and,
therefore, had no objection to the proposed change. The Florida State
Historic Preservation Office indicated the proposed change would have
no effect on any sites listed or eligible for listing in the National
Register. The US National Marine Fisheries Service anticipates the
change will have no impact to resources for which they have stewardship
responsibility. No objections were received, therefore the final rule
is unchanged from the Notice of Proposed Rulemaking.
Regulatory Evaluation
This rule is not a significant regulatory action under section 3(f)
of Executive Order 12866 and does not require an assessment of
potential costs and benefits under section 6(a)(3) of that order. It
has not been reviewed by the Office of Management and Budget under that
order. It is not significant under the regulatory policies and
procedures of the Department of Transportation (DOT) (44FR 11040;
February 26, 1979). The Coast Guard expects the economic impact of this
proposal to be so minimal that a full regulatory Evaluation under
paragraph 10e of the regulatory policies and procedures of DOT (44 FR
11040; February 26, 1979 is unnecessary. We conclude this because only
a few trains cross the bridge weekly.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the
Coast Guard must consider whether this rule will have a significant
economic impact on a substantial number of small entities. ``Small
entities'' include independently owned and operated small businesses
that are not dominant in their field and that otherwise qualify as
``small business concerns'' under section 3 of the Small Business Act
(15 U.S.C. 632). Because only a few trains cross the bridge weekly, the
Coast Guard certifies under 5 U.S.C. 605(b) that this final rule will
not have a significant impact on a substantial number of small
entities.
Collection of Information
This proposal contains no collection of information requirements
under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Federalism
The Coast Guard has analyzed this proposal under the principles and
criteria contained in Executive Order 12612, and has determined that
this proposal does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
Environment
The Coast Guard considered the environmental impact of this
proposal and concluded that, under section 2.B.2.e.(32)(e) of
Commandant Instruction M16475.1B, promulgation of operating
requirements or procedures for drawbridges is categorically excluded
from further environmental documentation. A Categorical Exclusion
Determination is available in the docket.
List of Subjects in 33 CFR Part 117
Bridges.
For the reasons set out in the preamble, the Coast Guard amends 33
CFR Part 117 as follows:
PART 117--DRAWBRIDGE OPERATION REGULATIONS
1. The authority citation for Part 117 continues to read as
follows:
[[Page 66747]]
Authority: 33 U.S.C. 499; 49 CFR 1.46; 33 CFR 1.05-1(g); Section
117.255 also issued under the authority of Pub. L. 102-587, 106
Stat. 5039.
2. Sec. 117.317 is amended by revising paragraph (f) to read as
follows:
Sec. 117.317 Okeechobee Waterway
* * * * *
(f) Florida East Coast Railroad bridge, mile 38.0, at Port Mayaca.
(1) The bridge is not constantly tended.
(2) The draw is normally in the fully open position displaying
flashing green lights to indicate that vessels may pass.
(3) When a train approaches the bridge it will stop and a
crewmember will observe the waterway for approaching vessels, which
will be allowed to pass. Upon manual signal, the bridge lights will go
to flashing red, and the horn will sound four blasts, pause, then
repeat four blasts, then the draw will lower and lock, providing
scanning equipment reveals nothing under the span.
(4) After the train has cleared, the draw will open, and the lights
will return to flashing green.
* * * * *
Dated: December 11, 1995.
Roger T. Rufe, Jr.,
Rear Admiral, U.S. Coast Guard, Commander, Seventh Coast Guard
District.
[FR Doc. 95-31218 Filed 12-22-95; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 95-31188 Technical Amendments; Organizational Change; Miscellaneous Editorial Changes; and Conforming Amendments
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Pages 66720-66727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31188]
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[[Page 66721]]
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
14 CFR Parts 200, 217, 234, 241, 247, 248, 249, 250, 291, 298,
374a, 385, 399
RIN 2139-AA03
Technical Amendments; Organizational Change; Miscellaneous
Editorial Changes; and Conforming Amendments
AGENCY: Office of the Secretary, DOT.
ACTION: Final rule.
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SUMMARY: The Bureau of Transportation Statistics under delegated
authority 49 CFR 1.71(a) amends the Secretary's regulations in order to
reflect recent Departmental organizational changes, correct outdated
organizational and statutory references, and eliminate obsolete
provisions. It also makes editorial changes to correct addresses and
make other technical corrections. This rule makes no substantive
changes to current regulations.
EFFECTIVE DATE: This rule is effective on December 26, 1995.
FOR FURTHER INFORMATION CONTACT: Bernie Stankus; Regulations Division,
Office of Airline Information, K-25, U.S. Department of Transportation,
400 Seventh Street SW., Washington, DC 20590, (202) 366-4387.
SUPPLEMENTARY INFORMATION:
Background and Purpose
Responsibility for the Department's aviation information program
was transferred from the Administrator of the Research and Special
Programs Administration (RSPA) to the Director of the Bureau of
Transportation Statistics (BTS) in May 1995. Before RSPA, the function
resided in the Civil Aeronautics Board (CAB) until the sunset of the
latter. The office that has this responsibility is the Office of
Airline Information (OAI). Before the transfer, this office was known
as the Office of Airline Statistics (OAS) and, prior to a 1990
reorganization of RSPA, the Office of Aviation Information Management
(OAIM). This rule reflects the transfer by revising those portions of
the CFR that still refer to RSPA, CAB, OAS, and OAIM with respect to
the aviation information program.
The rule also makes editorial changes throughout the 14 CFR chapter
II to eliminate obsolete provisions, and to correct addresses,
terminology, cross-references, and outdated titles of Department
organizations and officials. These changes are necessitated in part by
the revision and recodification of the Federal Aviation Act within
subtitle VII of title 49 of the United States Code (Transportation) by
action of Pubic Law 103-272, enacted July 5, 1994. 14 CFR 399.100 is
being removed since it is redundant to 14 CFR part 241 section 19-7(d);
the policy regarding release of international passenger origin and
destination statistics remains unchanged.
Notice and Opportunity for Public Comment Unnecessary
Since this amendment relates to departmental management,
organization, procedure, and practice, notice and comment are
unnecessary. The amendments made in this document are ministerial,
removing obsolete and redundant material and making minor technical and
terminology changes. For the same reason, good cause exists for not
publishing this rule at least 30 days before its effective date, as is
ordinarily required by 5 U.S.C. 553(d). Therefore, this final rule is
effective upon publication in the Federal Register.
Regulatory Evaluation
This rule is not a significant regulatory action under section 3(f)
of Executive Order 12866. It has not been reviewed by the Office of
Management and Budget under that order. It is not significant under the
regulatory policies and procedures of the Department of Transportation
(DOT) (44 FR 11040, February 26, 1979). As this rule involves internal
agency practices and procedures, it will not impose any costs on the
public.
Paperwork Reduction Act
This rule contains no reporting or recordkeeping requirements.
Federalism
The Bureau of Transportation Statistics has analyzed this rule
under the principles and criteria in Executive Order 12612 and has
determined that this rule does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment.
National Environmental Protection Act
The Bureau of Transportation Statistics has also analyzed the
proposed amendments for the purpose of the National Environmental
Protection Act. The amendments will not have any impact on the quality
of the human environment.
List of Subjects
14 CFR Part 200
Air transportation.
14 CFR Part 217
Air carriers, Reporting and recordkeeping requirements.
14 CFR Part 234
Air carriers, Consumer protection, Reporting and recordkeeping
requirements.
14 CFR Part 241
Air carriers, Reporting and recordkeeping requirements, Uniform
System of Accounts.
14 CFR Part 247
Air carriers, Airports.
14 CFR Part 248
Air carriers, Reporting and recordkeeping requirements, Uniform
System of Accounts.
14 CFR Part 249
Air carriers, Reporting and recordkeeping requirements, Truth in
lending, Uniform System of Accounts.
14 CFR Part 250
Air carriers, Consumer protection, Reporting and recordkeeping
requirements.
14 CFR Part 291
Administrative practice and procedure, Air carriers, Freight,
Reporting and recordkeeping requirements.
14 CFR Part 298
Air taxis, Reporting and recordkeeping requirements.
14 CFR Part 374a
Air carriers, Credit, Political candidates, Reporting and
recordkeeping requirements.
14 CFR Part 385
Organization and functions (Government agencies).
14 CFR Part 399
Administrative practice and procedure, Air carriers, Air rates and
fares, Air taxis, Consumer protection, Small businesses.
For the reasons set out in the preamble, the Bureau of
Transportation Statistics under delegated authority 49 CFR 1.71(a)
amends the Secretarys' regulations in 14 CFR chapter II as set forth
below.
PART 200--DEFINITIONS AND INSTRUCTIONS
1. The authority citation for part 200 continues to read as
follows:
Authority: 49 U.S.C. chapters 401, 411, 413, 415, 417, 461.
[[Page 66722]]
2. In Sec. 200.1, add new paragraph (h) to read as follows:
Sec. 200.1 Terms and definitions.
* * * * *
(h) BTS means the Bureau of Transportation Statistics, U.S.
Department of Transportation.
PART 217--REPORTING TRAFFIC STATISTICS BY FOREIGN AIR CARRIERS IN
CIVILIAN SCHEDULED, CHARTER, AND NONSCHEDULED SERVICES
3. The authority citation for part 217 is revised to read as
follows:
Authority: 49 U.S.C. 329 and chapters 401, 413, 417.
Secs. 217.3, 217.5, 217.6, 217.7, 217.9, 217.10 [Amended]
4. In the list below, for each section indicated in the left
column, remove the term indicated in the middle column from wherever it
appears in the section, and add the term indicated in the right column:
------------------------------------------------------------------------
Section Remove Add
------------------------------------------------------------------------
217.3(a)..................... RSPA................. BTS.
217.3(e)..................... Research and Special Bureau of
Programs Transportation
Administration. Statistics.
217.5(b)(1).................. Office of Aviation Office of Airline
Information Information.
Management.
217.5(b)(1) and (3).......... OAIM's............... OAI's.
217.5(b)(1), (3), and (6).... OAIM................. OAI.
217.6(a)..................... Office of Aviation Office of Airline
Information Information.
Management.
217.7........................ RSPA................. BTS.
217.9(a)..................... Office of Aviation Office of Airline
Information Information.
Management.
217.10(b).................... Office of Aviation Office of Airline
Information Information, K-
Management, DAI-1, 25, Room 4125,
Research and Special U.S. Department
Programs of
Administration, U.S. Transportation,
Department of 400 Seventh St.,
Transportation, 400 SW., Washington,
Seventh St., SW., DC 20590.
Washington, DC 20590.
217.10, appendix (a)(3)...... Data Administration Office of Airline
Division, DAI-20, Information, K-
Room 4125, Office of 25, Room 4125,
Aviation Information U.S. Department
Management, Research of
and Special Programs Transportation,
Administration, U.S. 400 Seventh St.,
Department of SW., Washington,
Transportation, 400 DC 20590.
Seventh Street, SW.,
Washington, DC 20590.
217.10, appendix (f) (1) and OAIM................. OAI.
(2).
217.10, appendix (f) (2)..... RSPA................. BTS.
217.10, appendix (g) (1) and OAIM................. OAI.
(2).
217.10, appendix (g)(1)(i)... Office of Aviation Office of Airline
Information Information.
Management.
217.10, appendix (i)(2)...... OAIM................. OAI.
------------------------------------------------------------------------
Sec. 217.10 [Amended]
5. In Sec. 217.10, the appendix is amended by removing paragraph
(h).
PART 234--AIRLINE SERVICE QUALITY PERFORMANCE REPORTS
6. The authority citation for part 234 is revised to read as
follows:
Authority: 49 U.S.C. 329 and chapters 401, 417.
7. The Note preceding Sec. 234.1 is revised to read as follows:
Note: The reporting requirements contained in this part have
been approved by the Office of Management and Budget under control
number 2138-0041.
Secs. 234.2, 234.4, 234.5, 234.6, 234.8, 234.12 [Amended]
8. In the list below, for each section indicated in the left
column, remove the term indicated in the middle column from wherever it
appears in the section, and add the term indicated in the right column:
------------------------------------------------------------------------
Section Remove Add
------------------------------------------------------------------------
234.2 ``Reportable flight''.. Office of Airline Office of Airline
Statistics. Information.
234.2 ``Reporting carrier''.. Section 401 of the 49 U.S.C. 41102.
Federal Aviation Act
of 1958.
234.2 ``Reporting carrier''.. Office of Airline Office of Airline
Statistics. Information.
234.4(a)..................... RSPA................. BTS.
234.4(a)..................... Office of Airline Office of Airline
Statistics. Information.
234.5........................ Office of Airline Office of Airline
Statistics. Information.
234.6........................ Office of Airline Office of Airline
Statistics. Information.
234.8(a)..................... Office of Airline Office of Airline
Statistics. Information.
234.12....................... Administrator, Director, Bureau
Research and Special of Transportation
Programs Statistics.
Administration.
------------------------------------------------------------------------
PART 241--UNIFORM SYSTEM OF ACCOUNTS AND REPORTS FOR LARGE
CERTIFICATED AIR CARRIERS
9. The authority citation for part 241 is revised to read as
follows:
Authority: 49 U.S.C. 329 and chapters 401, 411, 417.
Secs. 241.03, 04, 1-1, 1-2, 1-3, 1-4, 1-5, 1-6, 1-7, 1-8, 2.1, 2-4, 3,
6, 12, 17, 19-1, 19-5, 19-7, 21, 22, 23, 24, 25 [Amended]
10. In the list below, for each section indicated in the left
column, remove the term indicated in the middle column from wherever it
appears in the section, and add the term indicated in the right column:
[[Page 66723]]
------------------------------------------------------------------------
Section Remove Add
------------------------------------------------------------------------
241 Sec. 03 ``Air carrier, Section 401(d)(3) of 49 U.S.C.
charter''. the Federal Aviation 41102(a)(3).
Act of 1958, as
amended.
241 Sec. 03 ``Air carrier, Section 401 of the 49 U.S.C. 41102.
large certificated''. Federal Aviation Act
of 1958.
241 Sec. 03 ``Certificate of Section 401, of the 49 U.S.C. 41102.
Public Convenience and Act.
Necessity''.
241 Sec. 03 ``Person Section 101 (32) of 49 U.S.C. 40102.
controlling an air carrier''. the Act.
241 Sec. 03, ``Section 418 Section 418.......... Section 41103.
cargo operations''.
241 Sec. 03, ``Section 418 Section 418 of the 49 U.S.C. 41103.
cargo operations''. Act.
241 Sec. 03 ``Traffic, Section 403(b) of the 49 U.S.C.
nonrevenue''. Federal Aviation Act. 41511(a).
241 Sec. 03 ``Traffic, Part 223 of the 14 CFR part 223.
nonrevenue''. Board's Economic
Regulations.
241 Sec. 03 ``Traffic, Section 403(b) of the 49 U.S.C.
revenue''. Federal Aviation Act. 41511(a).
241 Sec. 03 ``Traffic, Part 223 of the 14 CFR part 223.
revenue''. Board's Economic
Regulations.
241 Sec. 04(b)............... Office of Airline Office of Airline
Statistics. Information.
241 Sec. 1-1................. Board................ BTS.
241 Sec. 1-1................. Civil Aeronautics BTS.
Board.
241 Sec. 1-1................. 407 and 416 of the 49 U.S.C. 41701
Federal Aviation Act and 41708.
of 1958, as amended.
241 Sec. 1-2................. Civil Aeronautics BTS.
Board.
241 Sec. 1-3(a).............. Civil Aeronautics BTS.
Board.
241 Sec. 1-4(b).............. Civil Aeronautics BTS.
Board.
241 Sec. 1-4(b).............. Board................ BTS.
241 Sec. 1-5(c).............. Civil Aeronautics DOT.
Board.
241 Sec. 1-5(c).............. Part 249 of the 14 CFR part 249.
Economic Regulations
of the Civil
Aeronautics Board.
241 Sec. 1-6(a).............. Civil Aeronautics BTS.
Board.
241 Sec. 1-6(b).............. Section 406 subsidy, And interchange
interchange sales, sales.
and mutual aid
assistance.
241 Sec. 1-7................. Office of Aviation Office of Airline
Information Information, K-
Management, DAI-1, 25, Bureau of
Research and Special Transportation
Programs Statistics.
Administration.
241 Sec. 1-8................. Data Administration Office of Airline
Division, DAI-20, Information, K-
Office of Aviation 25, Room 4125,
Information U.S. Department
Management, Room of
4125, Research and Transportation,
Special Programs 400 Seventh St.,
Administration, U.S. SW., Washington,
Department of DC 20590.
Transportation, 400
Seventh Street,
S.W., Washington,
D.C., 20590.
241 Sec. 2.1(a).............. Office of Aviation Office of Airline
Information Information
Management (OAIM). (OAI).
241 Sec. 2.1(b).............. OAIM................. OAI.
241 Sec. 2.1(c).............. Office of Aviation Office of Airline
Information Information, K-
Management/RSPA, DAI- 25, Room 4125,
1, U.S. Department U.S. Department
of Transportation, of
Washington, DC 20590. Transportation,
400 Seventh St.,
SW., Washington,
DC 20590.
241 Sec. 2-4(a).............. Civil Aeronautics BTS.
Board.
241 Sec. 2-4(d).............. Civil Aeronautics DOT.
Board.
241 Sec. 3, Note at end of CAB.................. BTS.
Table.
241 Sec. 6, 1609............. Civil Aeronautics BTS.
Board.
241 Sec. 6, 1629, Note....... RSPA................. BTS.
241 Sec. 6, 1649............. Civil Aeronautics BTS.
Board.
241 Sec. 6, 1830(a) and (e).. Civil Aeronautics DOT.
Board.
241 Sec. 6, 1830(c).......... Board................ DOT.
241 Sec. 6, 1890(g).......... Civil Aeronautics DOT.
Board.
241 Sec. 6, 1890(g).......... Board................ BTS.
241 Sec. 6, 1890(h).......... Civil Aeronautics BTS.
Board.
241 Sec. 6, 2130(b).......... RSPA................. BTS.
241 Sec. 12, 01(a)........... Section 403(b) of the 49 U.S.C.
Federal Aviation Act. 41511(a).
241 Sec. 12, 01(a)........... Part 223 of the 14 CFR part 223.
Board's Economic
Regulations.
241 Sec. 12, 08.............. Section 419 of the 49 U.S.C. 41733.
Federal Aviation Act.
241 Sec. 12, 19(a)........... Section 403(b) of the 49 U.S.C.
Federal Aviation Act. 41511(a).
241 Sec. 12, 19(a)........... Part 223 of the 14 CFR part 223.
Board's Economic
Regulations.
241 Sec. 12, 75.6............ Civil Aeronautics BTS.
Board.
241 Sec. 12, 77(b)........... Civil Aeronautics BTS.
Board.
241 Sec. 12, 78.............. Civil Aeronautics BTS.
Board.
241 Sec. 12, 79(a)........... Civil Aeronautics BTS.
Board.
241 Sec. 17, 96.............. RSPA................. BTS.
241 Sec. 19-1(a)............. Section 418 of the 49 U.S.C. 41103.
Act.
241 Sec. 19-1(c)............. OAIM................. OAI.
241 Sec. 19-5(c)(2).......... Office of Aviation Office of Airline
Information Information
Management (OAIM). (OAI).
241 Sec. 19-5(c)(2).......... OAIM's............... OAI's.
241 Sec. 19-5(c)(6).......... OAIM................. OAI.
241 Sec. 19-5(c)(22)......... Office of Aviation Office of Airline
Information Information.
Management.
241 Sec. 19-7(a)............. Research and Special Bureau of
Programs Transportation
Administration Statistics (BTS),
(RSPA), Office of Office of Airline
Aviation Information Information
Management (OAIM). (OAI).
[[Page 66724]]
241 Sec. 19-7(a)............. Office of Aviation Office of Airline
Information Information, K-
Management, RSPA, 25, Room 4125,
Department of U.S. Department
Transportation, DAI- of
1, 400 Seventh Transportation,
Street, SW., 400 Seventh St.,
Washington, DC 20590. SW., Washington,
DC 20590.
241 Sec. 19-7(b)............. RSPA................. BTS.
241 Sec. 19-7(b) and (c)..... Office of Aviation Office of Airline
Information Information.
Management.
241 Sec. 19-7, Appendix A, Robin A. Caldwell, Office of Airline
introductory text. Director, Office of Information, K-
Aviation Information 25, Room 4125,
Management, DAI-1, U.S. Department
Research and Special of
Programs Transportation,
Administration, Room 400 Seventh St.,
4125, U.S. SW., Washington,
Department of DC 20590.
Transportation, 400
Seventh Street, SW.,
Washington, DC 20590.
241 Sec. 19-7, Appendix A, RSPA................. BTS.
IV.C(2).
241 Sec. 19-7, Appendix A, Office of Aviation Office of Airline
IV.C(2). Information Information.
Management.
241 Sec. 19-7, Appendix A, Office of Aviation Office of Airline
IV.E. Information Information.
Management.
241 Sec. 19-7, Appendix A, Office of Aviation Office of Airline
V., footnotes 4 and 5. Information Information.
Management.
241 Sec. 19-7, Appendix A, Office of Aviation Office of Airline
V.C(2). Information Information.
Management.
241 Sec. 19-7, Appendix A, RSPA................. BTS.
VI.B.
241 Sec. 19-7, Appendix A, Office of Aviation Office of Airline
VII.A. Information Information.
Management.
241 Sec. 19-7, Appendix A, Office of Aviation Office of Airline
VIII.A(2). Information Information.
Management.
241 Sec. 19-7, Appendix A, OAIM................. OAI.
VIII.B.
241 Sec. 19-7, Appendix A, RSPA................. BTS.
IX., introductory text.
241 Sec. 19-7, Appendix A, Office of Aviation Office of Airline
IX.B. Information Information.
Management.
241 Sec. 19-7, Appendix A, OAIM................. OAI.
IX.B.
241 Sec. 19-7, Appendix A, RSPA................. BTS.
IX.C.
241 Sec. 21(a), (b) and (d).. CAB.................. BTS.
241 Sec. 21(a)............... Civil Aeronautics BTS.
Board.
241 Sec. 21(e)............... Office of Airline Office of Airline
Statistics. Information.
241 Sec. 21(i)............... Board's Comptroller.. Office of Airline
Information.
241 Sec. 21(k)............... Board................ BTS.
241 Sec. 22.................. CAB.................. BTS.
241 Sec. 22.................. Civil Aeronautics BTS.
Board.
241 Sec. 22(a), Tables....... RSPA................. BTS.
241 Sec. 22(a), List of $10.................. $20 .
Schedules Table, footnotes
(1) and (2).
241 Sec. 22(a), List of Section 418.......... 49 U.S.C. 41103.
Schedules Table, footnote
(3).
241 Sec. 22(b), introductory CAB.................. BTS.
text.
241 Sec. 22(b), introductory Civil Aeronautics BTS.
text. Board.
241 Sec. 22(e)............... Manual of ADP Accounting and
Instructions, Reporting
Outputs, Codes and Directives, which
Related Material, are available
which is available from OAI.
from the Board's
Information
Management Division.
241 Sec. 22, parenthetical 3024-0013............ 2138-0013.
phrase at the end.
241 Sec. 23, Schedule A, (a). RSPA................. BTS.
241 Sec. 23, Schedule B-1.1, Board's Information Office of Airline
(b). Management Division. Information.
241 Sec. 23, Schedule B-43, No. 137.............. No. 178.
(b).
241 Sec. 23, Schedule B-43, Office of Airline Office of Airline
(b). Statistics. Information.
241 Sec. 24, Schedule P-1.1, Board's Information Office of Airline
(c). Management Division. Information.
241 Sec. 24, Schedule P-1.1, Section 419 of the 49 U.S.C. 41733.
(i). Federal Aviation Act.
241 Sec. 24, Schedule P-1(a), Section 401 of the 49 U.S.C. 41102.
(e). Act.
241 Sec. 24, Schedule P-2, Notes to RSPA Form 41 Notes to BTS Form
title. Report. 41 Report.
241 Sec. 24, Schedule P-5.1, Manual of ADP Accounting and
(e). Instructions, Reporting
Outputs, Codes and Directives.
Related Material.
241 Sec. 24, Schedule P-5.2, Manual of ADP Accounting and
(c). Instructions, Reporting
Outputs, Codes and Directives.
Related Material.
241 Sec. 24, Schedule P-5.2, Board's Information Office of Airline
(c). Management Division. Information.
241 Sec. 24, Schedule P-5.2, Board................ BTS.
(d).
241 Sec. 24, Schedule P-12a, Board................ BTS.
(k), introductory text.
241 Sec. 24, Schedule P-12a, Board................ DOT.
(k)(1).
241 Sec. 24, Schedule P-12a, Board................ BTS.
(k)(3).
241 Sec. 24, parenthetical 3024-0013............ 2138-0013.
phrase at the end.
241 Sec. 25, General Office of Aviation Office of Airline
Instructions, (b). Information Information, BTS.
Management, RSPA.
241 Sec. 25, Schedule T- 402 permits.......... Section 41302
100(f), (a). permits.
241 Sec. 25, Schedule T- Office of Aviation Office of Airline
100(f), (b). Information Information, K-
Management, DAI-1, 25, Room 4125,
Research and Special U.S. Department
Programs of
Administration, Transportation,
Department of 400 Seventh St.,
Transportation, 400 SW., Washington,
Seventh Street SW., DC 20590.
Washington, DC 20590.
241 Sec. 25, Appendix, (a)... 401.................. 49 U.S.C. 41102.
241 Sec. 25, Appendix, (a)... Section 418 of the 49 U.S.C. 41103.
Act.
241 Sec. 25, Appendix, (a)... Office of Aviation Office of Airline
Information Information
Management (OAIM). (OAI).
241 Sec. 25, Appendix, OAIM................. OAI.
(c)(2)(ii).
[[Page 66725]]
241 Sec. 25, Appendix, (e)... Data Administration Office of Airline
Division, DAI-20, Information, K-
Room 4125, Office of 25, Room 4125,
Aviation Information U.S. Department
Management, Research of
and Special Programs Transportation,
Administration, U.S. 400 Seventh St.,
Department of SW., Washington,
Transportation, 400 DC 20590.
Seventh Street SW.,
Washington, DC 20590.
241 Sec. 25, Appendix, (m)... Office of Aviation Office of Airline
Information Information.
Management.
241 Sec. 25, Appendix, (m)... OAIM................. OAI.
241 Sec. 25, Appendix, (n)... RSPA................. BTS.
241 Sec. 25, parenthetical 3024-0013............ 2138-0013.
phrase at the end.
------------------------------------------------------------------------
Sec. 241.03 [Amended]
11. In Part 241 Sec. 03, remove the definition ``Board'' and add
the following definition in appropriate alphabetical order to read as
follows:
Section 03--Definitions for Purposes of This System of Accounts and
Reports
* * * * *
BTS. The Bureau of Transportation Statistics.
* * * * *
Sec. 241.2-5 [Amended]
12. In Part 241 Sec. 2-4(c), remove the term ``and Pan American''
wherever it appears.
Sec. 241.22 [Amended]
13. In Part 241 Sec. 22(b)(3), remove the term ``Board'' where it
appears seven times, and add, in place of the first, sixth, and seventh
occurrences, the term ``BTS'', and add, in place of the second, third,
fourth, and fifth occurrences, the term ``DOT''.
Sec. 241.25 [Amended]
14. In Part 241 Sec. 25, Schedule T-8, paragraph (a) is revised to
read as follows:
Schedule T-8--Report of All-Cargo Operations
(a) This schedule shall be filed annually by all air carriers that
conduct all-cargo operations under certificates issued under 49 U.S.C.
41103.
* * * * *
15. Part 241 Sec. 25, Schedule T-9 is removed.
PART 247--DIRECT AIRPORT-TO-AIRPORT MILEAGE RECORDS
16. The authority citation at the end of part 247 is revised to
read as follows:
Authority: 49 U.S.C. chapter 401.
Sec. 247.1 [Amended]
17. In Sec. 247.1, remove the term ``Office of Airline Statistics''
and add ``Office of Airline Information'' in its place, and remove the
term ``Research and Special Programs Administration'' and add ``Bureau
of Transportation Statistics'' in its place.
PART 248--SUBMISSION OF AUDIT REPORTS
18. The authority citation for part 248 is revised to read as
follows:
Authority: 49 U.S.C. 329 and chapters 401, 411, 417.
Sec. 248.2 [Amended]
19. In Sec. 248.2, remove the term ``Board's Office of the
Comptroller'' and add ``Office of Airline Information'' in its place.
20. In the parenthetical phrase at the end of Sec. 248.2, remove
the term ``3024-0004'' and add ``2138-0004'' in its place.
Sec. 248.4 [Amended]
21. In Sec. 248.4, remove the term ``Board's Office of the
Comptroller'' and add ``Office of Airline Information'' in its place,
and remove the term ``CAB'' and add ``BTS'' in its place.
Sec. 248.5 [Amended]
22. In Sec. 248.5, remove the term ``Board'' and add ``BTS'' in its
place.
PART 249--PRESERVATION OF AIR CARRIER RECORDS
23. The authority citation for part 249 is revised to read as
follows:
Authority: 49 U.S.C. 329 and chapters 401, 411, 413, 417.
24. In the Note preceding Subpart A of part 249, remove the term
``3024-0006'' and add ``2138-0006'' in its place.
Secs. 249.1, 249.2, 249.3, 249.4, 249.7, 249.8, 249.9, 249.10, 249.20,
249.21, 249.30, 249.31 [Amended]
25. In the list below, for each section indicated in the left
column, remove the term indicated in the middle column from wherever it
appears in the section, and add the term indicated in the right column:
------------------------------------------------------------------------
Section Remove Add
------------------------------------------------------------------------
249.1(a)..................... Section 101(3) of the 49 U.S.C. 40102.
Act.
249.2........................ Board................ DOT.
249.2........................ Board................ DOT.
249.2........................ Board's.............. DOT's.
249.2 ``Certificated air Civil Aeronautics Department of
carrier''. Board. Transportation.
249.2 ``Certificated air Section 401 of the 49 U.S.C. 41102.
carrier''. Act.
249.2 ``Certificated air Section 418 of the 49 U.S.C. 41103.
carrier''. Act.
249.3(a)..................... Chief, Data Director, Office
Requirements of Airline
Division, Office of Information.
the Comptroller.
249.3(b)..................... Board................ DOT.
249.4(c)..................... Board................ DOT.
249.7........................ Board................ DOT.
249.7........................ Chief, Data Director, Office
Requirements of Airline
Division, Office of Information.
the Comptroller.
249.7(a)..................... Case arising under Mail rate case.
section 406 of the
Act.
249.8........................ Chief, Data Director, Office
Requirements of Airline
Division, Office of Information.
the Comptroller.
249.9........................ Board................ DOT.
[[Page 66726]]
249.10....................... Chief, Data Director, Office
Requirements of Airline
Division, Office of Information.
the Comptroller.
249.10....................... Chief's.............. Director's.
249.20, Schedule of Records.. CAB.................. BTS.
249.21....................... Board................ DOT.
249.30....................... Section 101 of the 49 U.S.C. 40102.
Federal Aviation Act
of 1958.
249.30....................... Section 402 of the 49 U.S.C. 41302.
Act.
249.31....................... Board................ DOT.
------------------------------------------------------------------------
PART 250--OVERSALES
26. The authority citation for part 250 is revised to read as
follows:
Authority: 49 U.S.C. chapters 401, 411, 413, 417.
Sec. 250.10 [Amended]
27. In Sec. 250.10, remove the term ``RSPA'' and add ``BTS'' in its
place.
PART 291--CARGO OPERATIONS IN INTERSTATE AIR TRANSPORTATION
28. The authority citation for part 291 continues to read as
follows:
Authority: 49 U.S.C. chapters 401, 411, 415, 417.
Sec. 291.42 [Amended]
29. In Sec. 291.42(a)(2), remove the term ``Data Administration
Division, DAI-20, room 4125, Office of Airline Statistics, Research and
Special Programs Administration, Department of Transportation, 400
Seventh Street, SW., Washington, DC 20590-0001'' and add ``Office of
Airline Information, K-25, Room 4125, U.S. Department of
Transportation, 400 Seventh St., SW., Washington, DC 20590'' in its
place.
PART 298--EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER
OPERATIONS
30. The authority citation for part 298 continues to read as
follows:
Authority: 49 U.S.C. chapters 401, 411, 417.
Sec. 298.60 [Amended]
31. In Sec. 298.60, remove the term ``RSPA'' and add ``BTS'' in its
place.
32. In Sec. 298.60(a), remove the term ``Research and Special
Programs Administration'' and add ``Bureau of Transportation
Statistics'' in its place.
33. In Sec. 298.60(b), remove the term ``Office of Airline
Statistics'' and add ``Office of Airline Information'' in its place.
34. In Sec. 298.60(c), remove the term ``Data Administration
Division; DAI-20, Room 4125; Office of Airline Statistics; Research and
Special Programs Administration; Department of Transportation; 400
Seventh Street, SW.; Washington, D.C. 20590'' and add ``Office of
Airline Information, K-25, Room 4125, U.S. Department of
Transportation, 400 Seventh St., SW., Washington, DC 20590'' in its
place.
35. In Sec. 298.60(e), remove the term ``366-9847'' and add ``366-
9059'' in its place.
Sec. 298.61 [Amended]
36. In Sec. 298.61(a) and (g), remove the term ``RSPA'' and add
``BTS'' in its place.
37. In Sec. 298.61(g), remove the term ``Office of Airline
Statistics'' and add ``Office of Airline Information'' in its place.
Sec. 298.62 [Amended]
38. In Sec. 298.62(a), remove the term ``RSPA'' and add ``BTS'' in
its place.
Sec. 298.63 [Amended]
39. In Sec. 298.63(a), remove the term ``RSPA'' and add ``BTS'' in
its place.
40. In Sec. 298.63(c), remove the term ``Manual of ADP
Instructions, Outputs, Codes and Related Material'' and add
``Accounting and Reporting Directives'' in its place.
41. In Sec. 298.63(c), remove the term ``RSPA's Office of Airline
Statistics'' and add ``BTS'' Office of Airline Information'' in its
place.
Sec. 298.64 [Amended]
42. In Sec. 298.64(a), remove the term ``RSPA'' and add ``BTS'' in
its place.
43. In Sec. 298.64(e), remove the term ``RSPA's Office of Airline
Statistics'' and add ``BTS'' Office of Airline Information'' in its
place.
Sec. 298.65 [Amended]
44. In Sec. 298.65(a), remove the term ``RSPA'' and add ``BTS'' in
its place, and remove the term ``RSPA's Office of Airline Statistics''
and add ``BTS'' Office of Airline Information'' in its place.
45. In Sec. 298.65(b), remove the term ``Office of Airline
Statistics'' and add ``Office of Airline Information'' in its place.
Sec. 298.66 [Amended]
46. In Sec. 298.66, remove the term ``Office of Airline
Statistics'' and add ``Office of Airline Information'' in its place.
PART 374a--EXTENSION OF CREDIT BY AIRLINES TO FEDERAL POLITICAL
CANDIDATES
47. The authority citation for part 374a is revised to read as
follows:
Authority: 49 U.S.C. chapters 401, 411, 415, 417.
Sec. 374a.6 [Amended]
48. In Sec. 374a.6(a), remove the term ``Board'' and add ``Bureau
of Transportation Statistics'' in its place.
49. In Sec. 374a.6(b)(2), remove the term ``Board's Bureau of
Accounts and Statistics'' and add ``Office of Airline Information'' in
its place.
50. In Sec. 374a.6(c), remove the term ``Board's Bureau of Accounts
and Statistics'' and add ``Office of Airline Information'' in its
place.
Sec. 374a.7 [Amended]
51. In Sec. 374a.7(b), remove the term ``Board'' and add ``DOT'' in
its place.
PART 385--STAFF ASSIGNMENTS AND REVIEW OF ACTION UNDER ASSIGNMENTS
52. The authority citation for part 385 is revised to read as
follows:
Authority: 49 U.S.C. chapters 401, 417.
Sec. 385.1 [Amended]
53. In Sec. 385.1 ``Reviewing Official'', remove the term ``the
Administration of the Research, and Special Programs Administration''
and add ``the Director of the Bureau of Transportation Statistics'' in
its place.
Sec. 385.2 [Amended]
54. In Sec. 385.2, remove the term ``Administrator, Research and
Special Programs Administration (RSPA)'' and add ``Director, Bureau of
Transportation Statistics (BTS)'' in its place.
Sec. 385.27 [Amended]
55. In the section heading for Sec. 385.27, remove the term
``Office of Aviation Information Management, Research and Special
Programs Administration'' and add ``Office of Airline Information,
Bureau of Transportation Statistics'' in its place.
56. In the introductory text to Sec. 385.27, remove the term
``Office of
[[Page 66727]]
Aviation Information Management, Research and Special Programs
Administration (RSPA)'' and add ``Office of Airline Information, Bureau
of Transportation Statistics (BTS)'' in its place.
57. In Sec. 385.27(d), remove the term ``RSPA'' and add ``BTS'' in
its place.
58. In Sec. 385.27(i), remove the term ``RSPA'' and add ``BTS'' in
its place, and remove the term Administrator, RSPA'' and add
``Director, BTS'' in its place.
59. In Sec. 385.27(m), remove the term ``and with the policy set
forth in Sec. 399.100 of this chapter''.
PART 399--STATEMENTS OF GENERAL POLICY
60. The authority citation for part 399 continues to read as
follows:
Authority: 49 U.S.C. chapters 401, 411, 413, 415, 417, 419, 461.
Sec. 399.50 [Amended]
61. In Sec. 399.50, remove the term ``Board'' and add ``Bureau of
Transportation Statistics'' in its place, and remove the term ``section
901(a) of the Act'' and add ``49 U.S.C. 46301'' in its place.
Sec. 399.51 [Amended]
62. In Sec. 399.51, remove the term ``Board'' and add ``Bureau of
Transportation Statistics'' in its place.
Sec. 399.52 [Amended]
63. In Sec. 399.52, remove the term ``Board'' and add ``DOT'' in
its place.
Sec. 399.100 [Removed]
64. Section 399.100 is removed.
Issued in Washington, DC, on December 19, 1995.
T.R. Lakshmanan,
Director, Bureau of Transportation Statistics.
[FR Doc. 95-31188 Filed 12-22-95; 8:45 am]
BILLING CODE 4910-FE-P
Complete official Federal Register PDF
FR Doc. 95-31181 North Pacific Fisheries Research Plan; Amendment 1
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Pages 66755-66758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31181]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 677
[Docket No. 950822211-5291-02; I.D. 080395A]
RIN 0648-AD80
North Pacific Fisheries Research Plan; Amendment 1
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Final rule; technical amendments.
-----------------------------------------------------------------------
SUMMARY: NMFS issues a final rule to implement Amendment 1 to the North
Pacific Fisheries Research Plan (Research Plan). Regulations
implementing Amendment 1 delay full implementation of the Research Plan
until 1997 and establish 1996 observer coverage requirements for the
Research Plan fisheries. This delay is necessary to provide the North
Pacific Fishery Management Council (Council) additional time to address
certain issues presented by implementation of the Research Plan. Two
technical amendments also are implemented to clarify provisions for
refunding excess payments of 1995 Research Plan fee assessments and to
clarify 1996 observer coverage requirements for groundfish vessels.
EFFECTIVE DATE: January 1, 1996.
[[Page 66756]]
ADDRESSES: Copies of the Observer Plan may be obtained from the
Fisheries Management Division, Alaska Region, NMFS, 709 West 9th
Street, Juneau, AK 99801, or P.O. Box 21668, Juneau, AK 99802-1668,
Attn: Lori J. Gravel.
Copies of the Research Plan as revised by Amendment 1, the
environmental assessment/regulatory impact review prepared for the
Research Plan, and the final report ``Establishing the Fee Percentage
and Standard Exvessel Prices for 1995'' may be obtained from the North
Pacific Fishery Management Council, P.O. Box 103136, Anchorage, AK
99510.
FOR FURTHER INFORMATION CONTACT: Susan Salveson, 907-586-7228.
SUPPLEMENTARY INFORMATION:
Background
Regulations implementing the Research Plan became effective October
6, 1994 (59 FR 46126, September 6, 1994). Since then, these regulations
have been amended three times. The first regulatory amendment was
published in the Federal Register on January 9, 1995 (60 FR 2344), to
clarify 1995 observer coverage requirements and revise the definition
of certain terms set out under Sec. 677.2. A second regulatory
amendment was published on July 5, 1995 (60 FR 34904), to require
vessels and shoreside processors to facilitate transmission of observer
data. The third regulatory amendment was published on August 16, 1995
(60 FR 42470), to revise 1995 observer coverage requirements for crab
catcher vessels and exempt certain crab catcher vessels required to
obtain observer coverage from paying 1995 Research Plan fees.
The Council requested that full implementation of the Research Plan
be delayed for a 1-year period to provide additional time to reconsider
certain elements of the Research Plan that were previously adopted by
the Council. This Council action was developed during the Council's
April and June 1995 meetings, as well as during a May 16, 1995,
teleconference. The Council also expressed its intent to continue the
fee collection program implemented for 1995 for the remainder of the
year, so that adequate start-up funds may be collected for full
implementation of the Research Plan in 1997.
A proposed rule to delay full implementation of the Research Plan
was published in the Federal Register on September 11, 1995 (60 FR
47142). Comments on the proposed rule were invited through November 6,
1995. No written comments were received within the comment period. NMFS
received oral comment on the proposed delay of the Research Plan during
a September 18, 1995, public hearing by teleconference. The public
hearing teleconference provided opportunity for public participation in
Anchorage, AK, Juneau, AK, Seattle, WA, and Newport, OR. Members of the
public participating in the public hearing either provided no comment
or endorsed the proposed delay of the Research Plan.
Section 313(c)(3) of the Magnuson Act requires that, within 45 days
of the close of the public comment period, NMFS, in consultation with
the Council, analyze the public comment received and publish final
regulations for implementing an amendment to the Research Plan.
Consultation with the Council was initiated at the Council's September
1995 meeting. Oral comment received by NMFS and the Council indicated
widespread industry support for the proposed delay of the Research
Plan. NMFS received no further comment subsequent to the September
Council meeting that would require further consultation with the
Council.
NMFS has approved a 1-year delay of the full implementation of the
Research Plan under section 313(c) of the Magnuson Act. Upon reviewing
the Council's reasons for this delay and comments by the industry
endorsing this action, NMFS has determined that this final rule is
consistent with the Magnuson Act. The reasons for this delay are
discussed further in the proposed rule (60 FR 47142, September 11,
1995).
Consistent with the Council's expressed intent, NMFS will continue
to assess fees through early 1996 for fish harvested and retained in
the Research Plan fisheries during 1995. Lacking future regulatory
action to the contrary, collected funds will be held in an interest-
bearing account and will be used to award contracts to provide
observers under the Research Plan starting in 1997. Adequate start-up
funds will be collected during 1995; as a result, Research Plan fees
will not be assessed for fish caught in 1996.
The Council intends that 1996 observer coverage levels remain
unchanged from 1995 levels. These observer coverage requirements for
the groundfish and crab fisheries are set out at Sec. 677.10(a). As in
1995, participants in the groundfish and crab Research Plan fisheries
will be responsible for making their own arrangements and paying for
required observer coverage.
The Council's intent to maintain 1995 observer coverage levels
through 1996 applies to mothership processor vessel and shoreside
processor observer coverage requirements set out in regulations
implementing Amendment 35 to the Fishery Management Plan for the
Groundfish Fishery of the Bering Sea and Aleutian Islands Area. Final
regulations implementing Amendment 35 are codified at 50 CFR 675.25(b)
and are effective through December 31, 1995. In keeping with the
Council's intent to maintain 1995 observer coverage levels in 1996,
NMFS is extending the effective date of observer coverage requirements
implemented under Amendment 35 through December 31, 1996, and including
these requirements in the 1996 Research Plan observer coverage
requirements at Sec. 677.10(a).
NMFS notes that regulations at Sec. 677.10(g) set out vessel safety
requirements applicable in 1996 and beyond. No substantive changes to
these requirements are implemented; however, the regulatory text is
revised to clarify that these requirements apply to vessels required to
carry observers in 1996 under Sec. 677.10(a).
NMFS further notes that the following sections of the Observer Plan
still will be in effect until full implementation of the Research Plan
in 1997: (1) Standards of observer conduct; and (2) description,
specifications, and work statement for certified domestic observer
contractors, including conflict of interest standards for NMFS-
certified observers and contractors and conditions for contractor and
observer certification revocation. Copies of the Observer Plan dated
May 1994 are available from NMFS (see ADDRESSES).
Technical Amendments
Two technical amendments are implemented to clarify NMFS's intent
for the Research Plan in 1996. The first technical amendment is
necessary to allow groundfish and crab processors that participate in
the 1996 Research Plan fisheries to receive a refund for costs of 1995
observer coverage up to an amount equal to the sum of the fee
assessments paid by the processor for retained catch during 1995.
Section 677.6(d)(3)(ii)(C) authorizes NMFS to refund excess payments of
1995 Research Plan fee assessments to processors that do not intend to
participate in the Research Plan fisheries during the first half of
1996. This provision assumes that a fee assessment program would be
ongoing in 1996 and that processors participating in the 1996 Research
Plan fisheries could be credited for any excess payments of their 1995
fee assessments on their 1996 bills. However, the final rule to delay
full implementation of the Research Plan does not authorize a fee
assessment program during 1996. As a result,
[[Page 66757]]
regulatory language at Sec. 677.6(d)(3)(ii)(C) must be removed so that
all processors who are owed a refund from the 1995 fee assessment
program can be issued a refund regardless of whether they participate
in a Research Plan fishery during the first half of 1996 or not.
The second technical amendment is necessary to clarify 1996
observer coverage requirements for groundfish vessels that are set out
at Sec. 677.10(a)(1). Under the general provisions, a catcher/processor
or catcher vessel equal to or greater than 60 ft (18.3 m) length
overall (LOA) but less than 125 ft (38.1 m) LOA that is used to
participate for more than 3 fishing days in a directed fishery for
groundfish during a calendar quarter must carry a NMFS-certified
observer during at least 30 percent of its fishing days during that
calendar quarter. This means that if a vessel equal to or greater than
60 ft (18.3 m) LOA but less than 125 ft (38.1 m) LOA retrieves fishing
gear and retains amounts of any groundfish species in excess of the
maximum retainable bycatch amounts specified in Secs. 672.20(g) or
675.20(h) during more than 3 days of a calendar quarter, that vessel
must carry a NMFS-certified observer for at least 30 percent of all
fishing days within that calendar quarter. A fishing day is defined at
Sec. 677.2 as ``a 24-hour period, from 0001 Alaska local time (A.l.t.)
through 2400 A.l.t., in which fishing gear is retrieved and groundfish,
halibut, or king or Tanner crab are retained. Days during which a
vessel only delivers unsorted codends to a processor are not ``fishing
days.'' This final rule does not change these general provisions.
In addition, Sec. 677.10(a)(1)(i) contains specific requirements
that provide that, in addition to the general provisions, a vessel must
carry a NMFS-certified observer during at least one fishing trip during
the calendar quarter for each of six separate groundfish categories in
which the vessel participates. These six categories are defined at
Sec. 677.10(a)(1)(ii); the groundfish categories are: the pollock
fishery, the Pacific cod fishery, the sablefish fishery, the rockfish
fishery, the flatfish fishery, and the other species fishery. Under
current regulations, participation in one of these fisheries is based
on whether the retained catch in that fishery, during any fishing trip,
constitutes the predominant catch of all of the groundfish categories
retained by the vessel. These specific categories were developed to
ensure more complete observer coverage of directed fishing operations
for groundfish and were not intended to include fishing operations that
retained only bycatch amounts of groundfish. This provision was
intended to apply only to directed fishing operations for groundfish.
Nonetheless, the actual language of the regulation, plus recent
regulatory action, increased confusion concerning the meaning of this
provision. It could be argued that the regulations implementing the
individual fishing quota (IFQ) program for halibut inadvertently
changed the requirements for observer coverage by increasing the
probability that a person fishing for halibut would trigger a ``fishing
day'' for groundfish. The IFQ regulations require IFQ card holders to
retain all Pacific cod and rockfish, consistent with the maximum
bycatch amounts specified for these species. All sablefish must be
retained on board if a sablefish IFQ card holder is on board the
vessel.
NMFS is implementing this technical amendment to
Sec. 677.10(a)(1)(ii) to clarify that the groundfish fishery categories
subject to the separate observer coverage requirements apply only with
respect to fishing operations that constitute ``directed fishing'' for
groundfish as defined at Secs. 672.2 and 675.2. This change is
consistent with the original intent of the separate observer coverage
requirement, past practice and the common understanding of the how the
separate observer coverage requirements are supposed to be applied. It
removes a possible unintended effect of the IFQ regulations. To the
extent that this action has any substantive effect, it will relieve an
unintended burden for additional observer coverage that otherwise might
be imposed on fishermen participating in the IFQ program.
Classification
The Assistant General Counsel for Legislation and Regulation of the
Department of Commerce certified to the Chief Counsel for Advocacy of
the Small Business Administration that this rule would not have a
significant economic impact on a substantial number of small entities.
The reasons for this certification were summarized in the preamble to
the proposed rule.
This final rule has been determined to be not significant for
purposes of E.O. 12866.
A delay of full implementation of the Research Plan until 1997
results in a 1-year hiatus of the fee assessment program authorized
under the Research Plan. As such, this final rule relieves a
restriction and, pursuant to authority at 5 U.S.C. 553(d)(1), the
requirement for a 30-day delay in effective date is inapplicable.
However, NMFS has determined to make this rule effective on January 1,
1996, to coincide with the start of the 1996 fishing year.
One of the technical amendments implemented under this action
clarifies NMFS' intent with respect to issuing refunds of excess
payments of the 1995 Research Plan fee assessment. Without this
amendment, processors participating in a Research Plan fishery during
the first part of 1996 would not be eligible to receive a refund until
1997, when the Research Plan fee assessment program would be
reinitiated and refund amounts could be credited against 1997 billed
fees assessments.
The second technical amendment clarifies 1996 groundfish observer
coverage requirements to exempt from observer coverage those vessels
participating in a nongroundfish fishery and retaining bycatch amounts
of groundfish. In that the first technical amendment ensures that an
action that would have occurred under authority of a regulation issued
through notice and comment rulemaking but for the delay in full
implementation of the Research plan does in fact occur and that the
second technical amendment simply clarifies NMFS intent in an existing
regulation, good cause exists, pursuant to authority at 5 U.S.C.
553(b)(B), to waive prior notice and opportunity to comment on the
technical amendments as such procedure is unnecessary. Because the
technical amendments relieve restrictions, a delay in the effective
date is not necessary under U.S.C. 553(d)(1).
List of Subjects in 50 CFR Part 677
Fisheries, Reporting and recordkeeping requirements.
Dated: December 15, 1995.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
For the reasons set out in the preamble, 50 CFR part 677 is amended
as follows:
PART 677--NORTH PACIFIC FISHERIES RESEARCH PLAN
1. The authority citation for part 677 continues to read as
follows:
Authority: 16 U.S.C. 1801 et seq.
2. In Sec. 677.6, paragraph (d)(3)(ii)(C) is removed, paragraph
(b)(2) is redesignated as paragraph (b)(3), paragraph (d)(3)(ii)(D) is
redesignated as paragraph (d)(3)(ii)(C), new paragraph (b)(2) is added,
and the heading to newly redesignated paragraph (b)(3) is revised to
read as follows:
Sec. 677.6 Research Plan fee.
* * * * *
[[Page 66758]]
(b) * * *
(2) Fee assessments during 1996. Processors of Research Plan
fisheries will not be assessed fees based on catch from Research Plan
fisheries that is retained during the 1996 calendar year.
(3) Fee assessments applicable after December 31, 1996. * * *
* * * * *
3. In Sec. 677.10, the headings for paragraphs (a) and (b), the
introductory text to paragraph (g), and paragraphs (a)(1)(ii)(A)
through (F) are revised, paragraphs (a)(1)(i)(C) through (a)(1)(i)(F)
are redesignated as paragraphs (a)(1)(i)(D) through (a)(1)(i)(G),
respectively, and paragraphs (a)(1)(i)(C) and (a)(2)(iii) are added to
read as follows:
Sec. 677.10 General requirements.
(a) Observer requirements applicable through December 31, 1996--(1)
* * * (i) * * *
(C) Each mothership processor vessel that receives pollock
harvested by catcher vessels in the catcher vessel operational area,
defined at Sec. 675.22(g) of this chapter, during the second pollock
season that starts on August 15 under Sec. 675.23(e) of this chapter,
is required to have a second NMFS-certified observer aboard, in
addition to the observer required under paragraphs (a)(1)(i)(A) and (B)
of this section, for each day of the second pollock season until the
chum salmon savings area is closed under Sec. 675.22(h)(2) of this
chapter, or October 15, 1996, whichever occurs first.
* * * * *
(ii) * * *
(A) Pollock fishery. Directed fishing for groundfish that results
in a retained catch of pollock, during any fishing trip, that is
greater than the retained catch of any other groundfish species or
species group that is specified as a separate groundfish fishery under
this paragraph (a)(1)(ii).
(B) Pacific cod fishery. Directed fishing for groundfish that
results in a retained catch of Pacific cod, during any fishing trip,
that is greater than the retained catch of any other groundfish species
or species group that is specified as a separate groundfish fishery
under this paragraph (a)(1)(ii).
(C) Sablefish fishery. Directed fishing for groundfish that results
in a retained catch of sablefish, during any fishing trip, that is
greater than the retained catch of any other groundfish species or
species group that is specified as a separate groundfish fishery under
this paragraph (a)(1)(ii).
(D) Rockfish fishery. Directed fishing for groundfish that results
in a retained aggregate catch of rockfish of the genera Sebastes and
Sebastolobus, during any fishing trip, that is greater than the
retained catch of any other groundfish species or species group that is
specified as a separate groundfish fishery under this paragraph
(a)(1)(ii).
(E) Flatfish fishery. Directed fishing for groundfish that results
in a retained aggregate catch of all flatfish species, except Pacific
halibut, during any fishing trip, that is greater than the retained
catch of any other groundfish species or species group that is
specified as a separate groundfish fishery under this paragraph
(a)(1)(ii).
(F) Other species fishery. Directed fishing for groundfish that
results in a retained catch of groundfish, during any fishing trip,
that does not qualify as a pollock, Pacific cod, sablefish, rockfish,
or flatfish fishery as defined under paragraphs (a)(1)(ii)(A) through
(E) of this section.
* * * * *
(2) * * *
(iii) Each shoreside processor that offloads pollock at more than
one location on the same dock and has distinct and separate equipment
at each location to process those pollock and that receives pollock
harvested by catcher vessels in the catcher vessel operational area,
defined at Sec. 675.22(g) of this chapter, during the second pollock
season that starts on August 15, under Sec. 675.23(e) of this chapter,
is required to have a NMFS-certified observer, in addition to the
observer required under paragraphs (a)(2)(i) and (ii) of this section,
at each location where pollock is offloaded, for each day of the second
pollock season until the chum salmon savings area is closed under
Sec. 675.22(h)(2) of this chapter, or October 15, 1996, whichever
occurs first.
* * * * *
(b) Observer requirements applicable after December 31, 1996--(1) *
* * (i) * * *
* * * * *
(g) Vessel safety requirements applicable after December 31, 1995.
Any vessel that is required to carry observers under paragraph (a) or
(b) of this section must have onboard either:
* * * * *
4. In Sec. 677.11, paragraph (a)(4) is revised to read as follows:
Sec. 677.11 Annual Research Plan specifications.
(a) * * *
(4) Observer coverage. For the period January 1, 1996, through
December 31, 1996, observer coverage levels in Research Plan fisheries
will be as required by Sec. 677.10(a). After December 31, 1996, the
level of observer coverage will be determined annually by NMFS, after
consultation with the Council and the State of Alaska, and may vary by
fishery and vessel or processor size, depending upon the objectives to
be met for the groundfish, halibut, and king and Tanner crab fisheries.
The Regional Director may change observer coverage inseason pursuant to
Sec. 677.10(b)(2)(ii).
* * * * *
[FR Doc. 95-31181 Filed 12-22-95; 8:45 am]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 95-31036 Approval and Promulgation of Implementation Plans; Tennessee: Revisions to Knox County Regulations for Appeals, Violations, Monitoring, Recording, and Reporting
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Pages 66747-66748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31036]
=======================================================================
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[TN-134-1-6769a; FRL-5316-9]
Approval and Promulgation of Implementation Plans; Tennessee:
Revisions to Knox County Regulations for Appeals, Violations,
Monitoring, Recording, and Reporting
AGENCY: Environmental Protection Agency (EPA).
ACTION: Direct final rule.
-----------------------------------------------------------------------
SUMMARY: EPA is approving revisions to the Knox County portion of the
Tennessee State Implementation Plan (SIP) submitted by the State of
Tennessee through the Tennessee Department of Environment and
Conservation on June 28, 1994. This submittal included revisions to the
current regulations concerning appeals, judicial review, and violations
of the air pollution regulations in Knox County. This submittal also
included revisions which added requirements for enhanced monitoring
compliance certification and enforcement. However, no action is being
taken on these revisions at this time, due to the preliminary nature of
the proposed federal requirements for enhanced monitoring and
compliance assurance monitoring.
DATES: This final rule will be effective February 26, 1996, unless
adverse or critical comments are received by January 25, 1996. If the
effective date is delayed, timely notice will be published in the
Federal Register.
ADDRESSES: Written comments on this action should be addressed to Karen
Borel at the EPA Regional Office listed below. Copies of the documents
relative to this action are available for public inspection during
normal business hours at the following locations. The interested
persons wanting to examine these documents should make an appointment
with the appropriate office at least 24 hours before the visiting day.
Air and Radiation Docket and Information Center (Air Docket 6102), U.S.
Environmental Protection Agency, 401 M Street, SW, Washington, DC
20460.
Environmental Protection Agency, Region 4 Air Programs Branch, 345
Courtland Street, NE, Atlanta, Georgia 30365.
Tennessee Department of Environment and Conservation, Division of Air
Pollution Control, L & C Annex, 9th Floor, 401 Church Street,
Nashville, Tennessee 37243-1531
Knox County Department of Air Pollution Control, City-County Building,
Suite 339, 400 West Main Street, Knoxville, Tennessee, 37902.
FOR FURTHER INFORMATION CONTACT: Interested persons wanting to examine
documents relative to this action should make an appointment with the
Region 4 Air Programs Branch at least 24 hours before the visiting day.
To schedule the appointment or to request additional information,
contact Karen C. Borel, Regulatory Planning and Development Section,
Air Programs Branch, Air, Pesticides & Toxics Management Division,
Region 4 EPA, 345 Courtland Street, NE, Atlanta, Georgia 30365. The
telephone number is 404/347-3555, extension 4197. Reference file TN134-
01-6769.
SUPPLEMENTARY INFORMATION: On June 28, 1994, the State of Tennessee
through the Tennessee Department of Environment and Conservation
submitted a revision to the Knox County portion of its SIP
incorporating changes to regulations for appeals, judicial review,
violations, and monitoring, recording and reporting. The SIP revision
consists of changes to sections 29.1.B, 29.3, 30.1.A, and 30.1.D, and
the addition of section 26.6. EPA is not taking action on the addition
of section 26.6 at this time, due to the preliminary nature of the
proposed federal regulations for enhanced monitoring and compliance
assurance monitoring. The revisions which are being approved are
summarized as follows.
1. Section 29.1.B has been revised. This paragraph has been amended
to change the phrase ``citizen of Knox County'' to the word ``person''
early in the first sentence, and to add the word ``a'' just prior to
``public hearing'' at the end of this paragraph.
2. Section 29.3 has been revised. This paragraph has been amended
such that any ruling of the Air Pollution Control Board is now subject
to judicial review in the State court, rather than in the Knox County
Circuit Court.
3. Section 30.1.A has been revised. This paragraph now refers to
``violations'' rather than the singular ``violation.'' It also calls
for punishment of violations in accordance with Tennessee law, rather
than the Tennessee Code Annotated.
4. Section 30.1.D has been deleted and replaced. The previous
language described actual penalties for violations, such as fines or
imprisonment. The replacement language states that civil penalties will
be assessed as provided by Tennessee law.
Final Action
EPA is approving the aforementioned revisions contained in the
State's June 28, 1994, submittal. The EPA is publishing this action
without prior proposal because the Agency views this as a
noncontroversial amendment and anticipates no adverse comments.
However, in a separate document in this Federal Register publication,
the EPA is proposing to approve the SIP revision should adverse or
critical comments be filed. This action will be effective February 26
1996, unless, within 30 days of its publication, adverse or critical
comments are received.
If the EPA receives such comments, this action will be withdrawn
before the effective date by publishing a subsequent document that will
withdraw the final action. All public comments received will then be
addressed in a subsequent final rule based on the separate proposed
rule. The EPA will not institute a second comment period on this
action. Any parties interested in commenting on this action should do
so at this time. If no such comments are received, the public is
advised that this action will be effective February 26, 1996.
[[Page 66748]]
Under section 307(b)(1) of the Act, 42 U.S.C. 7607(b)(1), petitions
for judicial review of this action must be filed in the United States
Court of Appeals for the appropriate circuit by February 26, 1996.
Filing a petition for reconsideration by the Administrator of this
final rule does not affect the finality of this rule for purposes of
judicial review nor does it extend the time within which a petition for
judicial review may be filed, and shall not postpone the effectiveness
of such rule or action. This action may not be challenged later in
proceedings to enforce its requirements. (See section 307(b)(2) of the
Act, 42 U.S.C. 7607 (b)(2).)
This action has been classified as a Table 3 action for signature
by the Regional Administrator under the procedures published in the
Federal Register on January 19, 1989 (54 FR 2214-2225), as revised by a
July 10, 1995, memorandum from Mary Nichols, Assistant Administrator
for Air and Radiation. The Office of Management and Budget (OMB) has
exempted this regulatory action from E.O. 12866 review.
Nothing in this action shall be construed as permitting or allowing
or establishing a precedent for any future request for a revision to
any state implementation plan. Each request for revision to the state
implementation plan shall be considered separately in light of specific
technical, economic, and environmental factors and in relation to
relevant statutory and regulatory requirements.
Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., EPA
must prepare a regulatory flexibility analysis assessing the impact of
any proposed or final rule on small entities. 5 U.S.C. 603 and 604.
Alternatively, EPA may certify that the rule will not have a
significant impact on a substantial number of small entities. Small
entities include small businesses, small not-for-profit enterprises,
and government entities with jurisdiction over populations of less than
50,000.
SIP approvals under section 110 and subchapter I, part D of the CAA
do not create any new requirements, but simply approve requirements
that the State is already imposing. Therefore, because the Federal SIP
approval does not impose any new requirements, I certify that it does
not have a significant impact on any small entities affected. Moreover,
due to the nature of the Federal-state relationship under the CAA,
preparation of a regulatory flexibility analysis would constitute
Federal inquiry into the economic reasonableness of state action. The
CAA forbids EPA to base its actions concerning SIPs on such grounds.
Union Electric Co. v. U.S. E.P.A., 427 U.S. 246, 256-66 (S.Ct. 1976);
42 U.S.C. section 7410(a)(2) and 7410(k)(3).
Under sections 202, 203, and 205 of the Unfunded Mandates Reform
Act of 1995 (``Unfunded Mandates Act''), signed into law on March 22,
1995, EPA must undertake various actions in association with proposed
or final rules that include a Federal mandate that may result in
estimated costs of $100 million or more to the private sector, or to
State, local, or tribal governments in the aggregate.
Through submission of this state implementation plan or plan
revision, the State and any affected local or tribal governments have
elected to adopt the program provided for under the Clean Air Act.
These rules may bind State, local and tribal governments to perform
certain actions and also require the private sector to perform certain
duties. To the extent that the rules being approved by this action will
impose no new requirements; such sources are already subject to these
regulations under State law. Accordingly, no additional costs to State,
local, or tribal governments, or to the private sector, result from
this action. EPA has also determined that this final action does not
include a mandate that may result in estimated costs of $100 million or
more to State, local, or tribal governments in the aggregate or to the
private sector.
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Incorporation by
reference, Reporting and recordkeeping requirements.
Dated: October 2, 1995.
Patrick M. Tobin,
Acting Regional Administrator.
Part 52 of chapter I, title 40, Code of Federal Regulations, is
amended as follows:
PART 52--[AMENDED]
1. The authority citation for part 52 continues to read as follows:
Authority: 42 U.S.C. 7401-7671q.
Subpart RR--Tennessee
2. Section 52.2220, is amended by adding paragraph (c)(132) to read
as follows:
Sec. 52.2220 Identification of plan.
* * * * *
(c) * * *
(132) Revisions to the Knox County Air Pollution Control
Regulations submitted by the Tennessee Department of Environment and
Conservation on June 28, 1994. These consist of revisions to appeals,
judicial review, and violations of the air pollution regulations in
Knox County.
(i) Incorporation by reference.
Knox County Air Pollution Control Regulations, Sections 29.1.B,
29.3, 30.1.A, and 30.1.D adopted May 25, 1994.
[FR Doc. 95-31036 Filed 12-22-95; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 95-31034 Approval and Promulgation of Implementation Plans; Maine; NOINFX Exemption Request for Northern Maine and NOINFX Control Approval
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Pages 66748-66755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31034]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[ME26-1-7263a; FRL-5345-9]
Approval and Promulgation of Implementation Plans; Maine;
NOX Exemption Request for Northern Maine and NOX Control
Approval
AGENCY: United States Environmental Protection Agency (EPA).
ACTION: Direct final rule.
-----------------------------------------------------------------------
SUMMARY: The EPA is approving, in final, a limited exemption request
from the requirements contained in section 182(f) of the Clean Air Act
(Act) for the Northern Maine area (specifically, Oxford, Franklin,
Somerset, Piscataquis, Penobscot, Washington, Aroostook, Hancock and
Waldo Counties). These 9 counties, as with the rest of the State of
Maine, are part of the Ozone Transport Region (OTR) as provided for in
section 184(a) of the Clean Air Act. Section 182(f) in combination with
section 184 (relating to ozone transport regions) of the Act requires
States in the OTR, such as Maine, to adopt reasonably available control
technology (RACT) rules for major stationary sources of nitrogen oxides
(NOX) and to provide for nonattainment area new source review
(NSR) for new sources and modifications that are major for NOX.
This exemption request, submitted by the State of Maine on September 7,
1995, is based on a demonstration that NOX emissions in this 9
county area are not impacting Maine's moderate nonattainment areas or
other nonattainment areas in the Ozone Transport Region (OTR) during
times when elevated ozone levels are monitored in those areas. As such,
additional reductions in NOX emissions from these 9 counties
beyond what the state regulation would provide for are not necessary
for attainment in these areas currently in nonattainment, and, because
they do not contribute to the ozone problem anywhere in the OTR are
also not necessary for purposes of showing future attainment for any
other
[[Page 66749]]
area in the OTR. Thus, as provided for in section 182(f)(2), additional
NOX reductions in these areas would constitute excess reductions
that can be waived under the Clean Air Act. EPA believes the State's
demonstration is appropriate and meets the requirements of section
182(f)(2). Maine has requested that EPA combine its approval of this
NOX exemption with its approval of NOX controls for existing
sources in Northern Maine that were submitted to EPA on August 5, 1994
for purposes of meeting the Act's NOX RACT requirements.
Consequently, this action approves a full exemption from nonattainment
NSR requirements for NOX, but only a limited exemption from
NOX control measures for existing sources that would go beyond
what the State regulations provide for.
DATES: This action will become effective February 26, 1996, unless
notice is received by January 25, 1996 that adverse or critical
comments will be submitted. If the effective date is delayed, timely
notice will be published in the Federal Register.
ADDRESSES: Comments may be mailed to Susan Studlien, Deputy Director,
Office of Ecosystem Protection, U.S. Environmental Protection Agency,
Region I, JFK Federal Bldg., Boston, MA 02203. Copies of the State
submittal and EPA's technical support document are available for public
inspection during normal business hours, by appointment at the Office
of Ecosystem Protection, U.S. Environmental Protection Agency, Region
I, One Congress Street, 10th floor, Boston, MA and the Bureau of Air
Quality Control, Department of Environmental Protection, 71 Hospital
Street, Augusta, ME 04333.
FOR FURTHER INFORMATION CONTACT: Robert C. Judge, Environmental
Engineer, Air Quality Planning (ATS), United States Environmental
Protection Agency, Region 1, JFK Federal Building, Boston, MA 02203.
(617) 565-4874.
SUPPLEMENTARY INFORMATION:
I. Background
The air quality planning requirements for the reduction of NOX
emissions are set out in section 182(f) of the Act. Section 182(f) of
the Act requires States with areas designated and classified as
moderate nonattainment and above for ozone, or in ozone transport
regions, to impose the same control requirements for major stationary
sources of NOX as apply to major stationary sources of volatile
organic compounds (VOC). These requirements include the adoption of
RACT rules for major stationary sources and nonattainment area NSR for
major new sources and major modifications. Section 182(f) provides
further that these requirements do not apply for areas inside an ozone
transport region if EPA determines that reductions of NOX from
such areas would not contribute to net ozone benefits in the OTR. In
addition, implementation of NOX controls may be limited if EPA
determines it is necessary to avoid achieving excess reductions. Also,
NOX-related general conformity provisions (see 58 FR 63214) would
not apply in an area that is granted a section 182(f) exemption. For
marginal and below ozone nonattainment areas such as those addressed by
today's action, a section 182(f) exemption relieves the transportation
conformity requirements of 40 CFR 51.436-51.440 and 40 CFR 93.122-
93.124 for NOX (see 60 FR 44795).
The counties that are the subject of this action, Piscataquis,
Penobscot, Washington, and Aroostook counties and the northern portions
of Oxford, Franklin, and Somerset counties, are designated attainment
for the National Ambient Air Quality Standard (NAAQS) for ozone. The
southern portions of Oxford, Franklin, and Somerset counties are
presently designated nonattainment but have never recorded exceedances
of the ozone NAAQS and are not classified under the Clean Air Act. The
Hancock and Waldo County Area is classified as marginal nonattainment
under the Clean Air Act but presently has air quality better than the
NAAQS for ozone. However, each of the counties for which Maine is
seeking an exemption is within the OTR. For areas within the OTR, the
application of NOX requirements under the Clean Air Act may be
limited if it is shown that additional NOX reductions are excess
to attainment needs throughout the region. EPA believes, in the case of
these counties at the northern extremity of the OTR, that NOX
requirements can be waived because the State has submitted an
acceptable demonstration that additional reductions beyond what the
State regulations provide for are not necessary for nonattainment areas
in the State to attain, and because emissions from these areas are not
contributing to the ozone nonattainment problem for any other area in
the OTR, are also not necessary for purposes of showing future
attainment anywhere in the OTR. Maine has made this showing through
extensive air modeling trajectory analyses.
Scope of Exemptions
If the EPA Administrator determines, under Section 182(f) of the
Act, that additional reductions of NOX are excess, the area at
issue shall automatically (i.e., a State would not need to submit an
exemption request for each requirement) be exempt from the following
requirements (as applicable): the NOX-related general conformity
provisions, the NOX-related transportation conformity provisions
in 40 CFR 51.436-51.440 and 40 CFR 93.122-93.124 (``build/ no-build
test''), NOX RACT, and nonattainment area NSR for new sources and
modifications that are major for NOX. Additionally, NOX
emission reductions would not be required of an enhanced automobile
inspection and maintenance (I/M) program. Because I/M is not required
by the Act in Northern Maine, EPA's action on this request has no
impact on I/M requirements.
Transportation Conformity
The transportation conformity rule, entitled ``Criteria and
Procedures for Determining Conformity to State or Federal
Implementation Plans of Transportation Plans, Programs, and Projects
Funded or Approved Under Title 23 U.S.C. or the Federal Transit Act,''
was published in the November 24, 1993 Federal Register (58 FR 62188).
The rule was promulgated under section 176(c)(4) of the Act.
The transportation conformity rule requires emissions analysis of
motor vehicle NOX emissions for ozone nonattainment and
maintenance areas in order to determine the conformity of
transportation plans and programs to state implementation plan
requirements. This analysis must demonstrate that the NOX
emissions which would result from the transportation system if the
proposed transportation plan and program were implemented are within
the total allowable level of NOX emissions from highway and
transit motor vehicles as identified in a submitted or approved
attainment demonstration or maintenance plan.
Until an attainment demonstration, fifteen-percent rate-of-progress
plan (if applicable), or maintenance plan is approved by EPA, the
emissions analysis of the transportation system must also satisfy the
``build/no-build'' test. That is, the analysis must demonstrate that
emissions from the transportation system, if the proposed
transportation plan and program were implemented, would be less than
the emissions from the transportation system if only the previous
applicable transportation plan and program were implemented.
Furthermore, the regional emissions analysis must show that emissions
from the transportation system, if the transportation plan or program
were implemented, would be lower than 1990 levels.
[[Page 66750]]
The transportation conformity rules provide for an exemption from
these so called ``build/no build'' requirements with respect to
NOX if the Administrator determines that additional reductions of
NOX would not contribute to attainment of the ozone NAAQS.
However, all other NOX provisions in the transportation conformity
rule would apply, including the requirement for consistency with the
NOX motor vehicle emissions budget in a submitted control strategy
state implementation plan, or an approved maintenance plan.
The areas addressed in today's action are not required to submit a
control strategy implementation plan revision (i.e., an attainment
demonstration or 15% RFP plan). Further, only a portion of these areas
are required to satisfy the ``build/ no-build test.'' A section 182(f)
exemption would relieve this requirement for NOX for these areas,
but once any maintenance plan is approved by EPA, consistency with the
NOX budget would be required.
General Conformity
The general conformity rule, entitled ``Determining Conformity of
General Federal Actions to State or Federal Implementation Plans,'' was
published in the Federal Register on November 30, 1993 (58 FR 63214).
The rule was promulgated under section 176(c)(4) of the Act. The
general conformity rule provides for an exemption from NOX
requirements if the area has been exempted under section 182(f) of the
Act.
II. Criteria for Evaluation of Section 182(f) Exemption Requests
The criteria established for the evaluation of an exemption request
from the Section 182(f) requirements are set forth in 2 memoranda from
John S. Seitz, Director, Office of Air Quality Planning and Standards,
dated May 27, 1994 and February 8, 1995, both entitled ``Section 182(f)
Nitrogen Oxides (NOX) Exemptions--Revised Process and Criteria.''
Additional guidance is provided in a document entitled ``Guideline for
Determining the Applicability of Nitrogen Oxides Requirements Under
Section 182(f),'' dated December 1993, from EPA, Office of Air Quality
Planning and Standards, Air Quality Management Division.
III. State Submittal
On September 7, 1995, the State of Maine submitted an exemption
request from the requirements contained in Section 182(f) of the Clean
Air Act (Act) for the Northern Maine area (specifically, Oxford,
Franklin, Somerset, Piscataquis, Penobscot, Washington, Aroostook,
Hancock and Waldo Counties). This exemption request is based on a
demonstration that nitrogen oxides (NOX) emissions in this area
are not impacting Maine's moderate nonattainment areas or other
nonattainment areas in the Ozone Transport Region (OTR) during times
when elevated ozone levels are monitored in those areas. As such,
additional reductions in NOX emissions from these 9 counties, that
is, NOX reductions beyond what the state regulations contemplate
providing for, as explained further below, are not necessary for
nonattainment areas in the State to attain, and, are also not necessary
for attainment purposes anywhere in the OTR. Under these circumstances,
as section 182(f)(2) provides, such additional reductions may be waived
as excess reductions. While Maine generally is requesting an exemption
from applicable NOX requirements for this 9 county area, it has
requested a limited exemption from NOX control measure
requirements that apply for existing stationary sources in these areas.
Maine has requested that EPA combine its approval of the exemption
request with its approval of NOX controls for existing stationary
sources in the Northern Maine area previously submitted to EPA on
August 5, 1994. In approving this NOX exemption request, EPA
considered the impact of the limited exemption from NOX
requirements for existing sources. EPA is approving this action
because, under section 182(f)(2), EPA has determined that additional
NOX reductions from these areas would be excess.
IV. Analysis of State Submittal and Supporting Material
EPA has reviewed the material submitted by the State of Maine in
support of this request. As mentioned above, these areas are presently
monitoring attainment of the National Ambient Air Quality Standard
(NAAQS) for ozone. For ozone, an area is considered to be monitoring
attainment of the NAAQS if there are no violations, as determined in
accordance with 40 CFR Part 50.9, based on quality assured monitoring
data from three complete consecutive calendar years. A violation of the
ozone NAAQS occurs when the expected number exceedances per year (over
a three year period) is greater than 1.0. An exceedance occurs when the
daily maximum hourly ozone concentration equals or exceeds 0.125 parts
per million (ppm). Only Hancock and Waldo Counties, which is a marginal
nonattainment area, were classified under the Clean Air Act, as amended
in 1990. This area has only measured a single exceedance of the
standard since 1992.
Thus, the annual average expected exceedances in the latest three
year period is less than 1.0 and the entire area is meeting the air
quality standard for ozone. In order for the Hancock and Waldo Counties
area to be redesignated to attainment, EPA will need to take action on
a redesignation request, including a maintenance plan.
A more detailed summary of the ozone monitoring data for both areas
is provided in the EPA technical support document prepared for this
action.
V. Air Trajectory Analyses
Maine prepared trajectory analyses for each day when the ozone
standard was exceeded in either New Hampshire or Maine. Additionally,
Maine prepared detailed statistical trajectory analyses for many days
based on ozone monitors just southwest of this 9 county area. Hundreds
of data points were analyzed, and this effort will be described in more
detail below.
Modeling
EPA has performed extensive air quality modeling throughout the
Northeast for the past several years utilizing the regional oxidant
model (ROM). This modeling domain covers virtually all of northern
Maine. Essentially, all ROM analyses have shown no actual or predicted
exceedances in this 9 county area, which is northeast of the remainder
of the OTR. (It should be noted that exceedances were predicted in the
coastal portions of Waldo, Hancock, and Washington Counties in 1987 and
1988, and, during this timeframe, exceedances were actually measured in
Hancock and Waldo Counties forming the basis for their designation as
marginal ozone nonattainment areas. No exceedances were measured in
Washington County. However, since 1992, only Hancock County has
measured a single exceedance of the standard. Given these analyses, and
the direction of the ozone ``plume,'' it is reasonable to expect
negligible contribution from these areas to the overall ozone
nonattainment situation in the OTR.)
However, ROM modeling analyses are not intended to actually predict
attainment or nonattainment. EPA guidance requires more extensive
modeling using photochemical grid modeling in most areas. While this
more sophisticated modeling is technically not required anywhere in
Maine, in concert with Connecticut, Massachusetts, New Hampshire, Rhode
Island, and Vermont, extensive analyses
[[Page 66751]]
are being performed utilizing the urban airshed model (UAM). The EPA
UAM modeling guideline requires that modeling domains be sufficiently
large to analyze the effects of ozone and ozone precursors throughout
the entire area of concern. Based on extensive analyses, including ROM
results, EPA agreed that the UAM modeling domain would not even cover
the vast majority of this 9 county area (it does include a portion of
Oxford county based simply on the geographical shape of the county and
the size of the domain). Consequently, the UAM modeling does not
reflect the effects of ozone and ozone precursors from the northern
Maine area. On the other hand, the determination that the northern
Maine area could be excluded from the modeling domain reflects the
degree of certitude that ozone precursor reductions from this area
would not play a significant role in the process of attaining the ozone
standard in the OTR.
The ``Back Trajectory Analyses'' and the ``Receptor Oriented
Analyses'' include the most substantive technical portion of the
September 7, 1995 NOX exemption request and are described below.
Back Trajectory Analyses
Trajectories are the path of an air mass over time; back
trajectories trace the path of an air mass back in time to determine
the origin of that air mass. The trajectory analyses, which use the HY-
SPLIT trajectory model, show that for the ozone monitoring sites
chosen, (Port Clyde, ME; Rye, NH; Bennington, VT; and Bridgeport, CT)
the back trajectories do not pass over northern Maine and demonstrate
that northern Maine cannot be a source region for ozone on days with
elevated ozone levels. (Sites were chosen to represent a variety of
locations throughout New England.) Trajectories were performed for
every day that the monitor of interest exceeded 0.10 ppm (at 3:00 pm)
between 1989 and 1993. Occasionally, some of these back trajectories
(i.e., those based on Port Clyde monitored readings) pass over extreme
western Maine, specifically Oxford County. Based on the small amount of
emissions emitted from Oxford County, it is unlikely that Oxford County
plays any measurable role in the ozone found in Port Clyde on days that
Port Clyde exceeded 0.12 ppm.
Furthermore, EPA feels that the HY-SPLIT model, in this application
in Maine, has a slight westerly bias in its back trajectory approach
over what the true low-level/surface back trajectory is on days with
high ozone potential. Given this, it is probable that Oxford County
emissions do not even pass over Port Clyde on the days in question.
This westerly bias is caused by HY-SPLIT's reliance on the Nested Grid
Model (NGM) winds which are almost exclusively upper-air winds, not
surface winds. The technical support for this effort describes this
phenomenon in more detail, and can be found in the docket for this
action. Nevertheless, the back trajectory work Maine has performed does
show that a NOX exemption for the 9 counties is justified.
Receptor Oriented Analyses
The receptor analyses, also part of Maine's technical support, is
just a different way of looking at back trajectories from the HY-SPLIT
model. The NOX exemption request states: ``Residence time analysis
performed for these ozone monitoring sites involves taking a large
number of individual back-trajectories from a site and examining the
statistical relationship between the ozone monitored at the site and
the location along each back-trajectory.'' The analysis goes on to
state that although the technique has been shown to work with non-
chemically reactive air pollutants, it may not perform as well with
ozone. Nevertheless, the exemption request provides that: ``the
technique does indicate the primary directional biases from which
regional scale air mass transport may be suspected.''
The receptor oriented analysis also shows that the 9 county
NOX exemption area contributes much less ``ozone'' to southern and
coastal Maine (Gardiner and Port Clyde) than do other areas to the west
and south. First, Maine performed analyses which show the upwind
locations of air masses 3-7 hours prior to ozone concentrations
exceeding 0.040 ppm at either Gardiner or Port Clyde, Maine from 1989
to 1993. Next, they ran 25 hour back trajectories for every day in
which an air mass passed over different portions of New England from
1989 to 1993. Analysis of these graphical depictions supports Maine's
contention that these northern counties do not contribute to elevated
ozone levels in Maine, or elsewhere in the OTR. These two types of
meteorological analyses support Maine's exemption request essentially
by demonstrating that emissions from these areas do not generally pass
over any other part of the OTR on days when even moderate levels of
ozone are measured.
VI. Maine's NOX Rules
On August 5, 1994, the Maine Department of Environmental Protection
(DEP) submitted to EPA, Chapter 138 of the Maine DEP's regulations,
``Reasonably Available Control Technology for Facilities that Emit
Nitrogen Oxides,'' for inclusion into the State Implementation Plan
(SIP). On September 7, 1995, the Maine DEP submitted a request to the
EPA to grant a limited exemption from the requirements of NOX RACT
for facilities located in the non-moderate areas of the State (these 9
counties). In its NOX exemption request, Maine requested that EPA
approve the appropriate portions of Chapter 138 in combination with
approving the exemption. At this time, EPA's action on the NOX
control rule submittal is solely for the 9 county area. Thus, EPA is
approving Chapter 138 only as it applies to the 9 county area in Maine.
Although EPA agrees that Chapter 138 sets enforceable conditions
which will achieve a level of NOX control, EPA is not evaluating
these standards set in Chapter 138 as to whether or not they represent
RACT for all of the emission units located in these 9 counties. EPA is
also not evaluating this rule in regard to the requirements for the
remaining 7 counties in Maine. While EPA's preliminary analysis
suggests that this level of control does not represent RACT for these 9
counties, EPA will be taking formal action on the rule as it pertains
to the remaining 7 counties at a later date. Based on the analysis
prepared as part of the limited exemption request, EPA has determined
that NOX reductions, beyond what is required by Chapter 138 for
facilities in the non-moderate areas, are not necessary for purposes of
showing future attainment in the Maine moderate nonattainment areas or
any areas in the OTR. In EPA's NOX Supplement to the General
Preamble for implementing nonattainment requirements, EPA noted that
states remain free to reduce NOX emissions for a variety of
reasons. 57 Fed. Reg. 55621, 55627 (Nov. 25, 1992). As long as EPA
determines that these NOX reductions are not counterproductive or
will not delay ozone attainment, EPA will approve them into the SIP.
There is no evidence that the NOX reductions from Chapter 138 are
counterproductive, and the conclusion of the demonstration supporting
the exemption request is that additional NOX reductions from this
area are not necessary for purposes of attainment anywhere in the OTR.
Therefore, although EPA is making no formal judgement as to whether
this level of control is RACT, EPA believes that the controls required
by Chapter 138 in the 9 non-moderate counties will strengthen the SIP.
[[Page 66752]]
As stated above, the analysis contained in the State's limited
exemption request assumes that reductions beyond those required by
Chapter 138 in the non-moderate areas are not necessary for purposes of
attainment for either the moderate nonattainment areas or other states
in the OTR. Therefore, emission reductions achieved from units
operating at rates below the limitations of Chapter 138 in this 9
county area cannot be considered creditable for the purpose of
facilities complying with either New Source Review offsetting or
NOX RACT requirements at facilities located in the moderate
nonattainment areas (see the TSD prepared for this action for
additional details).
VII. New Source Review
EPA is not taking action on Maine's New Source Review rule in this
rulemaking. However, in a separate action, EPA is proposing to approve
revisions to Maine's New Source Review rules. These revisions include
an exemption provision for major new sources or major modifications of
NOX. This provision states that lowest achievable emission rate
(LAER) and offsets for NOX shall not apply in those areas that
have received an exemption from the EPA under Section 182(f) of the
CAA.
VIII. Withdrawal of the Exemptions
Continuation of the Section 182(f) exemptions granted herein is
based on the demonstration that NOX emissions in this area are not
impacting Maine's moderate nonattainment areas or other nonattainment
areas in the Ozone Transport Region (OTR) during times when elevated
ozone levels are monitored in those areas. If future air quality
analyses demonstrate that additional NOX controls are necessary
and the exemption should no longer apply, EPA will provide notice to
the public in the Federal Register. A determination that the NOX
exemption no longer applies would mean that the NOX NSR and the
NOX-related general conformity provisions (see 58 FR 63214) would
immediately be applicable. For the marginal and below ozone
nonattainment areas addressed by today's action, rescinding this
section 182(f) exemption would no longer relieve the transportation
conformity requirements of 40 CFR 51.436-51.440 and 40 CFR 93.122-
93.124 for NOX (see 60 FR 44795). The requirement for NOX
RACT would also be applicable, with a reasonable time provided as
necessary to allow major stationary sources subject to the RACT
requirements to purchase, install and operate the required controls.
The EPA believes that the State may provide sources a reasonable time
period after the EPA determination to actually meet the RACT emission
limits. The EPA expects such time period to be as expeditious as
practicable, but in no case longer than 24 months.
IX. Miscellaneous Topics
Comments From Parties Interested in Previous NOX Exemptions
An adverse comment letter has been previously submitted by three
environmental groups and contained generic comments objecting to the
EPA's general policy on NOX exemptions. The three environmental
groups who submitted the generic comments requested that these comments
be included in each EPA rulemaking action on NOX exemption
requests. While some of the comments are not entirely relevant to this
action, we have responded to them in an effort to be complete. EPA is
treating these comments as part of the administrative record for this
action, and they may serve as the basis for a challenge to this final
action without being resubmitted to the Agency in response to the
proposed rule.
Comment
In the past, commenters argued that NOX exemptions are
provided for in two separate parts of the Act, in sections 182(b)(1)
and 182(f). Because the NOX exemption tests in sections 182(b)(1)
and 182(f)(1) include language indicating that action on such requests
should take place ``when [EPA] approves a plan or plan revision,''
these commenters conclude that all NOX exemption determinations by
the EPA, including exemption actions taken under the petition process
established by section 182(f)(3), must occur during consideration of an
approvable attainment or maintenance plan, unless the area has been
redesignated as attainment. The commenters also argue that even if the
petition procedures of section 182(f)(3) may be used to relieve areas
of certain NOX requirements, exemptions from the NOX
conformity requirements must follow the process provided in section
182(b)(1), since this is the only provision explicitly referenced by
section 176(c), the Act's conformity provisions.
Response
Section 182(f) contains very few details regarding the
administrative procedures for acting on NOX exemption requests.
The absence of specific guidelines by Congress leaves the EPA with
discretion to establish reasonable procedures consistent with the
requirements of the Administrative Procedure Act (APA).
The EPA disagrees with the commenters regarding the process for
considering NOX exemption requests under section 182(f), and
instead believes that sections 182(f)(1) and 182(f)(3) provide
independent procedures by which the EPA may act on NOX exemption
requests. The language in section 182(f)(1), which indicates that the
EPA should act on NOX exemptions in conjunction with action on a
plan or a plan revision, does not appear in section 182(f)(3). While
section 182(f)(3) references section 182(f)(1), the EPA believes that
this reference encompasses only the substantive tests in paragraph (1)
[and by extension, paragraph (2)], not the procedural requirement that
the EPA act on exemptions only when acting on State Implementation
Plans (SIPs). Additionally, section 182(f)(3) provides that
``person[s]'' [which section 302(e) of the Act defines to include
States] may petition for NOX exemptions ``at any time,'' and
requires the EPA to make its determination within six months of the
petition's submission. These key differences lead EPA to believe that
Congress intended the exemption petition process of paragraph (3) to be
distinct and more expeditious than the longer plan revision process
intended under paragraph (1).
With respect to major stationary sources, section 182(f) requires
States to adopt NOX RACT and NSR rules, unless exempted. These
rules were generally due to be submitted to the EPA by November 15,
1992. Thus, in order to avoid the CAA sanctions, areas seeking a
NOX exemption would have needed to submit this exemption request
for EPA review and rulemaking action several months before November 15,
1992. In contrast, the CAA specifies that the attainment demonstrations
were not due until November 1993 or 1994 (and EPA may take 12 to 18
months to approve or disapprove the demonstrations). For marginal ozone
nonattainment areas (subject to NOX NSR), no attainment
demonstrations are called for in the CAA. For areas seeking
redesignation to attainment of the ozone NAAQS, the CAA does not
specify a deadline for submittal of maintenance demonstrations (in
reality, EPA would generally consider redesignation requests without
accompanying maintenance plans to be unacceptable). Clearly, the CAA
envisions the submittal of and EPA action on NOX exemption
requests, in some cases, prior to submittal of attainment or
maintenance demonstrations. It is
[[Page 66753]]
important to note that none of these areas in Maine even needed to
submit attainment demonstrations.
With respect to the comment that section 182(b)(1) is the
appropriate authority for granting interim-period transportation
conformity NOX exemptions, EPA agrees with the commenters and has
published an interim final rule that changes the transportation
conformity rule's reference from section 182(f) to section 182(b)(1) as
the correct authority under the Act for waiving the NOX build/no-
build and less-than-1990 emissions tests for certain areas. (see 60 FR
44795) However, EPA also notes that section 182(b)(1), by its terms,
only applies to moderate and above ozone nonattainment areas.
Consequently, EPA believes that the interim-reductions requirements of
section 176(c)(3)(A)(iii), and hence the authority provided in section
182(b)(1) to grant relief from those interim-reduction requirements,
apply only with respect to those areas that are subject to section
182(b)(1). EPA intends to continue to apply the transportation
conformity rule's build/no-build and less-than-1990 emissions tests for
purposes of implementing the requirements of section 176(c)(1), and EPA
intends to continue to provide relief from those requirements under
section 182(f). In addition, because general federal actions are not
subject to section 176(c)(3)(A)(iii), which explicitly references
section 182(b)(1), EPA will also continue to offer relief under section
182(f)(3) from the applicable NOX requirements of the general
conformity rule.
In order to demonstrate conformity, transportation-related federal
actions that are taken in ozone nonattainment areas not subject to
section 182(b)(1) and, hence, not subject to section 176(c)(3)(A)(iii)
must still be consistent with the criteria specified under section
176(c)(1). Specifically, these actions must not, with respect to any
standard, cause or contribute to new violations, increase the frequency
or severity of existing violations, or delay attainment. In addition,
such actions must comply with the relevant requirements and milestones
contained in the applicable state implementation plan, such as
reasonable further progress schedules, assumptions specified in the
attainment or maintenance demonstrations, numerical emission limits, or
prohibitions. EPA believes that the build/no-build and less-than-1990
emissions tests provide an appropriate basis for such areas to
demonstrate compliance with the above criteria.
As noted earlier, EPA intends to continue to offer relief under
section 182(f) from the interim NOX requirements of the conformity
rules that would apply under section 176(c)(1) for the areas not
subject to section 182(b)(1) in the manner described above. EPA
believes this approach is consistent both with the way NOX
requirements in ozone nonattainment areas are treated under the Act
generally, and under section 182(f) in particular. The basic approach
of the Act is that NOX reductions should apply when beneficial to
an area's attainment goals, and should not apply when unhelpful or
counterproductive. Section 182(f) reflects this approach but also
includes specific substantive tests which provide a basis for EPA to
determine when NOX requirements should not apply. There is no
substantive difference between the technical analysis required to make
an assessment of NOX impacts on attainment in a particular area
whether undertaken with respect to mobile source or stationary source
NOX emissions. Moreover, where EPA has determined that NOX
reductions will not benefit attainment or would be counterproductive in
an area, the EPA believes it would be unreasonable to insist on
NOX reductions for purposes of meeting reasonable further progress
or other milestone requirements. Thus, even as to the conformity
requirements of section 176(c)(1), EPA believes it is reasonable and
appropriate, first, to offer relief from the applicable NOX
requirements of the general and transportation conformity rules in
areas where such reductions would not be beneficial and, second, to
rely in doing so based on the exemption tests provided in section
182(f).
Comment
Commenters argue that waiver of NOX control requirements is
unlawful if such a waiver would impede attainment and maintenance of
the ozone standard in downwind areas.
Response
These areas in Maine are generally considered downwind of the
remainder of the United States. Maine's technical demonstration showed
clearly that the waiver of these controls will not impede attainment or
maintenance of the NAAQS for ozone standard anywhere.
Comment
Comments were received regarding the scope of exemption of areas
from the NOX requirements of the conformity rules. The commenters
argue that such exemptions waive only the requirements of section
182(b)(1) to contribute to specific annual reductions; not the
requirement that conformity SIPs contain information showing the
maximum amount of motor vehicle NOX emissions allowed under the
transportation conformity rules and, similarly, the maximum allowable
amounts of any such NOX emissions under the general conformity
rules. The commenters admit that, in prior guidance, EPA has
acknowledged the need to amend a drafting error in the existing
transportation conformity rules to ensure consistency with motor
vehicle emissions budgets for NOX, but want EPA, in actions on
NOX exemptions, to explicitly affirm this obligation and to also
avoid granting waivers until a budget controlling future NOX
increases is in place.
Response
EPA has recently addressed this issue through rulemaking and this
rulemaking appropriately reflects EPA's position on this issue. (see 60
FR 57179)
Comment
Commenters argue that the Act does not authorize any waiver of the
NOX reduction requirements until conclusive evidence exists that
such reductions are counterproductive.
Response
EPA does not agree with this comment since it ignores the
Congressional intent as evidenced by the plain language of section
182(f), the structure of the Title I ozone subpart as a whole, and
relevant legislative history. By contrast, in developing and
implementing its NOX exemption policies, EPA has sought an
approach that reasonably accords with that intent. Section 182(f), in
addition to imposing control requirements on major stationary sources
of NOX similar to those that apply for sources of VOC, also
provides for an exemption (or limitation) from application of these
requirements if, under one of several tests, EPA determines that in
certain areas NOX reductions would generally not be beneficial
towards attainment of the ozone standard. In section 182(f)(1),
Congress explicitly conditioned action on NOX exemptions on the
results of an ozone precursor study required under section 185B of the
Act. Because of the possibility that reducing NOX in an area may
either not contribute to ozone attainment or may cause the ozone
problem to worsen, Congress included attenuating language, not just in
section 182(f), but throughout Title I of the Act, to avoid requiring
NOX reductions where such would not be beneficial or would be
counterproductive. In describing these various ozone
[[Page 66754]]
provisions, including section 182(f), the House Conference Committee
Report states in the pertinent part: ``[T]he Committee included a
separate NOX/VOC study provision in section [185B] to serve as the
basis for the various findings contemplated in the NOX provisions.
The Committee does not intend NOX reduction for reduction's sake,
but rather as a measure scaled to the value of NOX reductions for
achieving attainment in the particular ozone nonattainment area.'' H.R.
Rep. No. 490, 101st Cong., 2d Sess. 257-258 (1990).
As noted in response to an earlier comment, the command in section
182(f)(1) that EPA ``shall consider'' the 185B report taken together
with the timeframe the Act provides for completion of the report and
for acting on NOX exemption petitions clearly demonstrate that
Congress believed the information in the completed section 185B report
would provide a sufficient basis for EPA to act on NOX exemption
requests, even absent the additional information that would be included
in affected areas' attainment or maintenance demonstrations. While
there is no specific requirement in the Act that EPA actions granting
NOX exemption requests must await ``conclusive evidence,'' as the
commenters argue, there is also nothing in the Act to prevent EPA from
revisiting an approved NOX exemption if warranted by additional,
current information.
In addition, the EPA believes, as described in EPA's December 1993
guidance, that section 182(f)(1) of the Act provides that the new
NOX requirements shall not apply (or may be limited to the extent
necessary to avoid excess reductions) if the Administrator determines
that any one of the following tests is met:
(1) In any area, the net air quality benefits are greater in the
absence of NOX reductions from the sources concerned;
(2) In nonattainment areas not within an ozone transport region,
additional NOX reductions would not contribute to ozone attainment
in the area; or
(3) In nonattainment areas within an ozone transport region,
additional NOX reductions would not produce net ozone air quality
benefits in the transport region.
Based on the plain language of section 182(f), EPA believes that
each test provides an independent basis for a full or limited NOX
exemption.
Only the first test listed above is based on a showing that
NOX reductions are ``counter productive.'' If one of the tests is
met (even if another test is failed or not applied), the section 182(f)
NOX requirements would not apply or, under the excess reductions
provision, a portion of these requirements would not apply.
Processing NOX Exemptions
As stated above, section 182(f) contains very few details regarding
the administrative procedure for EPA action on NOX exemption
requests. The absence of specific guidelines by Congress leaves EPA
with discretion to establish reasonable procedures, consistent with the
requirements of the Administrative Procedure Act (APA).
Although a section 182(f) petition may determine the applicability
of SIP requirements pertaining to NOX emission reductions and
controls, this petition itself is not a SIP, nor must it be a revision
to a SIP. Therefore, a petition is not required to undergo a public
hearing, nor must a petition be submitted by a Governor of a State or
his designee. This submission was made by the Maine Commissioner of the
Department of Environmental Protection. A public hearing was not held
on the September 7, 1995 NOX exemption request.
X. Final Action
The EPA is approving the exemption request for the Northern Maine
area from the Section 182(f) NOX requirements based upon the
evidence provided by the State and the State's compliance with the
requirements outlined in the applicable EPA guidance. This action
exempts the Oxford, Franklin, Somerset, Piscataquis, Penobscot,
Washington, Aroostook, Hancock and Waldo counties from the requirements
to implement NOX control measures for existing stationary sources
(other than those controls specified herein), nonattainment area NSR
for new sources and modifications that are major for NOX, the
NOX-related general conformity provisions, and the NOX-
related transportation conformity provisions in 40 CFR 51.436-51.440
and 40 CFR 93.122-93.124 (``build/no-build test''). If EPA determines
based on future air quality analyses that NOX controls in these
areas are necessary, rulemaking may be initiated which may mean that
this NOX exemption no longer applies. As stated before, the State
of Maine requested only a limited exemption from NOX control
requirements for existing stationary sources. EPA is approving this
level of control as strengthening the existing SIP.
XI. Procedural Background
Nothing in this action shall be construed as permitting or allowing
or establishing a precedent for any future request for a revision to
any state implementation plan. Each request for revision to the state
implementation plan shall be considered separately in light of specific
technical, economic, and environmental factors and in relation to
relevant statutory and regulatory requirements.
XII. Regulatory Process
Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., EPA
must prepare a regulatory flexibility analysis assessing the impact of
any proposed or final rule on small entities (5 U.S.C. 603 and 604).
Alternatively, EPA may certify that the rule will not have a
significant impact on a substantial number of small entities. Small
entities include small businesses, small not-for-profit enterprises,
and government entities with jurisdiction over populations of less than
50,000. Today's exemption does not create any new requirements, but
allows suspension of the indicated requirements for the life of the
exemption. Therefore, because the approval does not impose any new
requirements, I certify that it does not have a significant impact on
any small entities affected. This action also approves certain controls
already in effect at the State level, and, as such, imposes no
additional regulatory burden on these facilities.
Under Section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by February 26, 1996. Filing a
petition for reconsideration by the Administrator of this final rule
does not affect the finality of this rule for the purposes of judicial
review nor does it extend the time within which a petition for judicial
review may be filed, and shall not postpone the effectiveness of such
rule or action. This action may not be challenged later in proceedings
to enforce its requirements. (See Section 307(b)(2)).
Under Sections 202, 203, and 205 of the Unfunded Mandates Reform
Act of 1995 (``Unfunded Mandates Act''), signed into law on March 22,
1995, EPA must undertake various actions in association with proposed
or final rules that include a Federal mandate that may result in
estimated costs of $100 million or more to the private sector, or to
State, local, or tribal governments in the aggregate.
[[Page 66755]]
Through submission of this NOX waiver request and NOX
control revisions to its state implementation plan, the State has
elected to adopt the program provided for under Section 110 of the
Clean Air Act. These rules may bind State, local and tribal governments
to perform certain actions and also require the private sector to
perform certain duties. To the extent that the rules being approved by
this action will impose new requirements, such sources are already
subject to these regulations under State law. Accordingly, no
additional costs to State, local, or tribal governments, or to the
private sector, result from this action. EPA has also determined that
this final action does not include a mandate that may result in
estimated costs of $100 million or more to State, local, or tribal
governments in the aggregate or to the private sector.
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Nitrogen oxides,
Ozone, Volatile organic compounds, Intergovernmental relations,
Reporting and recordkeeping requirements.
Authority: 42 U.S.C. 4201-7671q.
Note: Incorporation by reference of the State Implementation
Plan for the State of Maine was approved by the Director of the
Federal Register on July 1, 1982.
Dated: December 1, 1995.
Carol M. Browner,
Administrator.
Part 52 of chapter I, title 40 of the Code of Federal Regulations
is amended as follows:
PART 52--[AMENDED]
1. The authority citation for part 52 continues to read as follows:
Authority: 42 U.S.C. 7401-7671q.
Subpart U--Maine
2. Section 52.1020 is amended by adding paragraph (c)(41) to read
as follows:
Sec. 52.1020 Identification of plan.
* * * * *
(c) * * *
(41) Revisions to the State Implementation Plan submitted by the
Maine Department of Environmental Protection on August 5, 1994 related
to NOX controls in Oxford, Franklin, Somerset, Piscataquis,
Penobscot, Washington, Aroostook, Hancock and Waldo Counties.
(i) Incorporation by reference.
(A) A Letter from the Maine Department of Environmental Protection
dated August 5, 1994 submitting a revision to the Maine State
Implementation Plan.
(B) Chapter 138 of the Maine DEP's regulations, ``Reasonably
Available Control Technology for Facilities that Emit Nitrogen Oxides''
for sources only in Oxford, Franklin, Somerset, Piscataquis, Penobscot,
Washington, Aroostook, Hancock and Waldo Counties (excepted portions
include Sections 1.A.1. and 3.B.). This rule was effective August 3,
1994.
3. In Sec. 52.1031, Table 52.1031 is amended by adding state
citation 138 in numerical order to read as follows:
Sec. 52.1031 EPA-approved Maine regulations.
* * * * *
Table 52.1031.--EPA-Approved Rules and Regulations
--------------------------------------------------------------------------------------------------------------------------------------------------------
Date
State citation Title/subject adopted by Date approved by Federal Register 52.1020
State EPA citation
--------------------------------------------------------------------------------------------------------------------------------------------------------
* * * * * * *
138............................. Reasonably 8/3/94 December 26, 1995. 60 FR (c)(41) Affects sources only in
Available Control Oxford, Franklin,
Technology For Somerset, Piscataquis,
Facilities That Penobscot, Washington,
Emit Nitrogen Aroostook, Hancock and
Oxides. Waldo Counties
(excepted portions of
rule include Sections
1.A.1. and 3.B.).
--------------------------------------------------------------------------------------------------------------------------------------------------------
4. Section 52.1023 is amended by adding paragraph (c) to read as
follows:
Sec. 52.1023 Control strategy: Ozone.
* * * * *
(c) Approval. EPA is approving an exemption request submitted by
the Maine Department of Environmental Protection on September 7, 1995,
for the Northern Maine area from the NOX requirements contained in
Section 182(f) of the Clean Air Act. This approval exempts Oxford,
Franklin, Somerset, Piscataquis, Penobscot, Washington, Aroostook,
Hancock and Waldo Counties from the requirements to implement controls
beyond those approved in Sec. 52.1020(c)(41) for major sources of
nitrogen oxides (NOX), nonattainment area new source review (NSR)
for new sources and modifications that are major for NOX, and the
applicable NOX-related requirements of the general and
transportation conformity provisions.
[FR Doc. 95-31034 Filed 12-22-95; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 95-30870 Recognition of Gain or Loss by Contributing Partner on Distribution of Contributed Property or Other Property
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Pages 66727-66739]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30870]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[T.D. 8642]
RIN 1545-AR48; 1545-AR93
Recognition of Gain or Loss by Contributing Partner on
Distribution of Contributed Property or Other Property
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to the
recognition of gain or loss on certain distributions of contributed
property by a partnership under section 704(c)(1)(B) of the Internal
Revenue Code of 1986 (Code). This document also contains final
regulations relating to the recognition of gain on certain
distributions to a contributing partner under section 737. The final
regulations affect partnerships and their partners and are necessary to
provide guidance for complying with the applicable tax law.
EFFECTIVE DATE: These regulations are effective for January 9, 1995.
FOR FURTHER INFORMATION CONTACT: Stephen J. Coleman, (202) 622- 3060
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The Revenue Reconciliation Act of 1989 added section 704(c)(1)(B)
and section 704(c)(2) to the Internal Revenue Code. Section
704(c)(1)(B) provides that, in the case of a distribution of
contributed property to another partner within five years of its
contribution, the contributing partner must recognize gain or loss in
an amount equal to the gain or loss the partner would have been
allocated under section 704(c)(1)(A) on a sale of the property by the
partnership at its fair market value at the time of the distribution.
Section 704(c)(2) provides an exception for distributions of certain
like-kind property.
The Energy Policy Act of 1992 added section 737 to the Code.
Section 737 requires a partner who contributes appreciated property to
recognize gain on a subsequent distribution of other property to the
contributing partner to the extent of the lesser of (i) the net
precontribution gain on property contributed by the partner, or (ii)
the excess of the value of the distributed property over the adjusted
basis of the partner's interest in the partnership.
On January 9, 1995, a notice of proposed rulemaking (PS-76-92; PS-
51-93) under section 704(c)(1)(B) and section 737 was published in the
Federal Register (60 FR 2352). Written comments responding to this
notice were received. No public hearing was held because no hearing was
requested. After consideration of all comments received, the proposed
regulations under section 704(c)(1)(B) and section 737 are adopted as
revised by this Treasury decision.
Summary of Significant Comments and Revisions
The significant comments on the proposed regulations and the
revisions made in the final regulations are discussed below.
A. Section 704(c)(1)(B)
Determination of Gain and Loss
The proposed regulations provide that section 704(c)(1)(B) applies
only to a distribution that is properly characterized as a distribution
to a partner acting in the capacity of a partner within the meaning of
section 731 and section 737, and not to a transaction or distribution
that is subject to provisions other than section 731(a) or section 737.
Comments requested that the provision be clarified. The final
regulations clarify that section 704(c)(1)(B) applies only to the
extent that a transaction is a distribution under section 731.
References to transactions and distributions not subject to section
704(c)(1)(B) have been deleted.
One commentator suggested certain clarifying revisions to the
proposed regulations' definition of fair market value. The definition
in the proposed regulations, however, is identical to the definition of
fair market value in the 704(b) regulations, and distributed property
should have the same fair market value for purposes of determining gain
and loss under section 704(c)(1)(B) and determining capital account
adjustments under section 704(b). The final regulations therefore adopt
the definition in the proposed regulations without change.
The proposed regulations provide that the amount of gain or loss
resulting from a distribution of partnership property is determined as
if the distributed property had been sold by the partnership to the
distributee partner. As a result, if built-in loss property is
distributed to a partner that holds more than a 50 percent interest in
partnership capital or profits, the built-in loss that otherwise would
be recognized is disallowed under section 707(b)(1)(A). One commentator
suggested that section 704(c)(1)(B) was intended to address disguised
sales between partners and that, therefore, a loss should be disallowed
on a distribution only if it would be disallowed on a direct sale
between the partners. Section 704(c)(1)(B), however, respects the form
of the transaction as between the partnership and a partner and does
not recast the transaction as a disguised sale. See H.R. Rep. No. 247,
101st Cong., 1st Sess. 406 (1989). The final regulations therefore
adopt the proposed regulations without change.
Several of the provisions in the proposed regulations refer to
distributions that are part of ``the same plan or arrangement.''
Commentators requested clarification of this term. The reference to
distributions that are part of the same plan or arrangement was
[[Page 66728]]
intended to reflect the fact that distributions of multiple properties
to one partner or distributions of different properties to more than
one partner over a period of time may be treated as part of the same
distribution under general principles of taxation, such as the step
transaction doctrine. The final regulations remove the reference to
``same plan or arrangement'' and refers to distributions that are part
of the same distribution. This change is made for simplification only
and is not intended as a substantive change to the scope of a
distribution for tax purposes. As under current law, distributions do
not need to be contemporaneous to be part of the same distribution.
Several comments were received regarding the effect of a
partnership termination under section 708(b)(1)(B). One comment
suggested that it was not clear whether property that had previously
been contributed to the partnership (and was therefore already subject
to a five-year period) was subject to a new five- year period after the
termination. The final regulations clarify that a new five-year period
does not begin to the extent of any pre-termination gain or loss that
would have been allocated to a contributing partner under section
704(c)(1)(A) on a sale of contributed property immediately before the
termination.
The legislative history of section 704(c)(1)(B) indicates that a
constructive termination does not change the application of section
704(c) to pre-contribution gain or loss on property contributed to the
partnership before termination. One comment read this legislative
history as possibly suggesting that a pro rata distribution is deemed
to occur under section 708(b)(1)(B) for section 704(c)(1)(A) purposes,
but a different distribution is deemed to occur for section
704(c)(1)(B) purposes. The comment expressed concern about the
complexity of such a system. Section 704(c)(1)(B), however, does not
require or impose such a ``hybrid system.'' The amount of gain or loss
under section 704(c)(1)(B) is determined by reference to the amount of
gain or loss that would have been allocated to the partner under
section 704(c)(1)(A) if the property had been sold. Thus, property of a
partnership that terminates under section 708(b)(1)(B) is deemed to be
distributed to the partners in the same manner for both sections.
Another comment suggested it was unclear whether section
704(c)(1)(B) could apply to property that had not been contributed by a
partner to the partnership prior to the termination. The final
regulations confirm that a new five-year period begins for all property
that is deemed contributed to the new partnership after the termination
(which would include property not actually contributed to the
partnership), except to the extent that such built-in gain or loss
would have been allocated to the contributing partner under section
704(c)(1)(A) on a sale of the contributed property immediately before
the termination.
Commentators also requested guidance on the interaction of section
708(b)(1)(B) and section 704(c) in general. The IRS and Treasury
recognize the need for additional guidance on this issue, but such
guidance is beyond the scope of these regulations. The IRS and Treasury
are considering a separate project involving the interaction of section
704(c) and section 708(b)(1)(B) and invite additional comments and
suggestions regarding the project.
Exceptions
The proposed regulations provide that section 704(c)(1)(B) does not
apply to property contributed to the partnership on or before October
3, 1989. One commentator requested an exception for property required
to be contributed under a binding contract entered into on or before
October 3, 1989. The statutory effective date provisions, however, do
not contain a binding contract exception. Accordingly, the final
regulations adopt the proposed regulations without change.
One commentator suggested an additional exception for distributions
of an undivided interest in property. The final regulations provide
that section 704(c)(1)(B) does not apply to such a distribution to the
extent that the distributed interest does not exceed the undivided
interest contributed by the distributee partner.
One commentator also requested an additional exception for
distributions of fungible property because the partners may not be able
to track the specific contributed property. The final regulations do
not provide such an exception. Contributed property may be fungible
from an economic perspective, but such property is generally not
fungible for tax purposes because each contributed property will have
its own individual tax basis.
The proposed regulations provide an exception for distributions of
section 704(c) property to a noncontributing partner in liquidation of
the partnership if the contributing partner receives an interest in the
contributed property and the built-in gain or loss in that property is
equal to or greater than the built-in gain or loss that would have
otherwise been allocated to the contributing partner. One commentator
suggested that the exception more clearly indicate the amount of built-
in gain or loss that must be reflected in the property distributed to
the contributing partner. The final regulations clarify that the amount
of the built-in gain or loss must be equal to the gain or loss that
would have been allocated to the contributing partner under section
704(c)(1)(A) if the contributed property had been sold immediately
before the distribution.
One commentator also suggested expanding this exception to apply to
the extent of the built-in gain or loss in the property distributed to
the contributing partner. This comment is not adopted in the final
regulations. The exception was intended to apply only in the limited
situation in which a partnership liquidates and the value of the
contributed property exceeds the contributing partner's capital
account. In that situation, the portion of the contributed property in
excess of the contributing partner's capital account would have to be
distributed to another partner, thereby triggering section
704(c)(1)(B). The exception allows a partner to avoid section
704(c)(1)(B) in this situation, so long as the built-in gain or loss in
the property distributed to the contributing partner is at least equal
to the gain or loss that would have been allocated to the contributing
partner under section 704(c)(1)(A) if the contributed property had been
sold immediately before the distribution.
Special Rules
The proposed regulations provide a special rule under section
704(c)(2) for situations in which the partnership distributes like-kind
property to a contributing partner within a specified period of the
distribution of the property contributed by that partner. Under this
rule, the gain or loss that otherwise would have been recognized on the
distribution of the contributed property is reduced by the amount of
the contributing partner's built-in gain or loss in the distributed
like-kind property. One commentator criticized this rule as
inconsistent with the statutory provision.
Section 704(c)(2) provides that ``[u]nder regulations prescribed by
the Secretary, * * * to the extent of the value of the [like-kind
property distributed to the contributing partner, the calculation of
the contributing partner's gain or loss attributable to the
distribution of the contributed property] shall be [determined] as if
the contributing partner had contributed to the partnership the [like-
kind] property.'' This provision is generally intended to treat the
contributing partner as if the partner had exchanged
[[Page 66729]]
the contributed property for like-kind property in a nontaxable
exchange outside of the partnership. This allows the contributing
partner to avoid recognition of gain or loss under section 704(c)(1)(B)
on the distribution of the contributed property to another partner
because the contributing partner is treated as having contributed the
like-kind property, not the property that is actually distributed to
the other partner.
If the contributing partner, however, had engaged in a like- kind
exchange outside of the partnership, the partner's built-in gain or
loss in the like-kind property received would have been the same as the
property that was surrendered. The rule in the proposed regulations
reflects this result by limiting the application of section 704(c)(2)
to the extent that the built-in gain or loss in the contributed
property is not preserved in the like-kind property distributed to the
contributing partner. The IRS and Treasury continue to believe that the
regulations properly implement Congress' objective with respect to this
provision. Therefore, the regulations are finalized without change.
One commentator also suggested a clarification of the interaction
of the like-kind exception and the disguised sale rules of
707(a)(2)(B). The proposed regulations provide that the like-kind
exception reduces any gain that would have otherwise been recognized
under section 704(c)(1)(B). The proposed regulations also provide that
section 704(c)(1)(B) applies only to a distribution to a partner within
the meaning of section 731. There is no suggestion in section 704(c)(2)
or the proposed regulations that the like-kind exception was intended
as an exception to the disguised sale provisions. The final regulations
confirm that the disguised sale provisions can apply to a distribution,
even if the distribution would otherwise have qualified for the section
704(c)(2) like-kind exception.
Anti-Abuse Rule
Commentators made several suggestions for clarifying or modifying
the anti-abuse rule in the proposed regulations. In particular, these
commentators requested clarification of the relationship between this
rule and the general partnership anti-abuse rule in Treas. Reg. section
1.701-2. The general anti-abuse regulation is a rule of general
applicability that provides general principles to be applied in
interpreting and applying all of the provisions of subchapter K. In
certain situations, however, more specific anti-abuse rules are needed
to carry out the purpose of a particular provision. The final
regulations therefore adopt the rule in the proposed regulations
without modification.
B. Section 737
Determination of Gain
The final regulations are clarified to provide that section 737
applies only to the extent that a transaction is a distribution under
section 731. In accordance with section 737(d)(2), the final
regulations also provide that section 737 does not apply to the extent
that section 751(b) applies to the distribution.
Net Precontribution Gain
The proposed regulations provide that a distributee partner's net
precontribution gain is determined without regard to the like-kind
exception of section 704(c)(2) in situations in which the contributed
property is not actually distributed to another partner. One
commentator suggested deleting this provision as superfluous. The final
regulations adopt the proposed regulations without change. This
provision clarifies that section 737 does not contain a like-kind
exception similar to the exception in section 704(c)(2). Section 737
applies even if the property received by the partner is of a like-kind
with the contributed property.
Character of Gain
One commentator suggested that the proposed regulations fail to
clarify whether there are two groups (ordinary and capital) for
purposes of determining the character of a partner's net
precontribution gain or whether there may be an additional section 1231
group or section 1245 and section 1250 groups. The final regulations
adopt the proposed regulations without change.
The proposed regulations provide that character for purposes of a
partner's net precontribution gain is determined as if the contributed
property were sold to an unrelated third party. As a result, all of the
provisions that are relevant in determining the character of gain or
loss on a sale are relevant in determining the character of the net
precontribution gain. For example, if the sale of property would have
resulted in part capital gain and part ordinary income, the character
of the net precontribution gain for that property is part ordinary and
part capital. The same approach applies in determining the allocation
of any adjustment to the partnership's basis in partnership property as
a result of gain recognized by the distributee partner. A basis
adjustment attributable to gain treated as capital gain under section
1231 would be allocated to the property that entered into the
calculation of the amount of section 1231 gain.
One commentator also suggested that the proposed regulations do not
clarify whether character is determined at the partnership or the
partner level. This determination may be important in situations such
as section 1231 where the character of the gain or loss may depend on
the partner's particular tax circumstances. The final regulations
clarify that the character of the gain or loss is determined at the
partnership level for this purpose.
Exceptions
One commentator suggested adding an exception for certain divisive
transactions in which the contributing partner continued to own an
indirect interest in the contributed property. The final regulations
add a new exception under which section 737 does not apply to a
transfer of contributed property by a transferor partnership to a
transferee partnership, followed by a distribution of an interest in
the transferee partnership (and no other property) to the contributing
partner in complete liquidation of the partner's interest.
This exception is added because the distributee partner has simply
converted an interest in the transferor partnership into an interest in
a transferee partnership that holds the same contributed section 704(c)
property. The limitations on this exception ensure that the partner's
basis in the transferee partnership attributable to the contributed
property is the same as the partner's basis in the transferor
partnership attributable to that property. This allows a partnership to
engage in a divisive split-up transaction, while preventing any
avoidance of section 737 that might occur as a result of the basis
allocation rules for non-liquidating distributions.
The proposed regulations provide that section 737 does not apply to
an incorporation of a partnership other than an incorporation involving
an actual distribution of partnership property to the partners. One
commentator suggested that this distinction between methods of
incorporation creates an unnecessary trap for the unwary and may have a
chilling effect on the conversion of partnerships into S corporations.
The final regulations adopt the proposed regulations without change.
The form of incorporation chosen by the partners is respected for
Federal tax purposes and, as a result, the distribution of property in
connection with the incorporation is treated as a distribution for
purposes of section 737.
[[Page 66730]]
One commentator suggested an additional exception for distributions
of an undivided interest in property similar to that described with
respect to the regulations under section 704(c)(1)(B). The final
regulations provide a comparable rule under section 737.
Anti-Abuse Rule
Commentators made several suggestions regarding the anti-abuse rule
in the proposed regulations. These suggestions are essentially the same
as the comments regarding the anti-abuse rule in the section
704(c)(1)(B) regulations, and thus the comments are discussed above.
Effective Date
These regulations are effective for distributions by a partnership
to a partner on or after January 9, 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 has also 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 Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
Several persons from the Office of Chief Counsel and the Treasury
Department participated in the development of these regulations.
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
the following citation:
Authority: 26 U.S.C. 7805 * * *
Section 1.704-4 also issued under 26 U.S.C. 704(c) * * *
Par. 2. Section 1.704-4 is added to read as follows:
Sec. 1.704-4 Distribution of contributed property.
(a) Determination of gain and loss--(1) In general. A partner that
contributes section 704(c) property to a partnership must recognize
gain or loss under section 704(c)(1)(B) and this section on the
distribution of such property to another partner within five years of
its contribution to the partnership in an amount equal to the gain or
loss that would have been allocated to such partner under section
704(c)(1)(A) and Sec. 1.704-3 if the distributed property had been sold
by the partnership to the distributee partner for its fair market value
at the time of the distribution. See Sec. 1.704-3(a)(3)(i) for a
definition of section 704(c) property.
(2) Transactions to which section 704(c)(1)(B) applies. Section
704(c)(1)(B) and this section apply only to the extent that a
distribution by a partnership is a distribution to a partner acting in
the capacity of a partner within the meaning of section 731.
(3) Fair market value of property. The fair market value of the
distributed section 704(c) property is the price at which the property
would change hands between a willing buyer and a willing seller at the
time of the distribution, neither being under any compulsion to buy or
sell and both having reasonable knowledge of the relevant facts. The
fair market value that a partnership assigns to distributed section
704(c) property will be regarded as correct, provided that the value is
reasonably agreed to among the partners in an arm's-length negotiation
and the partners have sufficiently adverse interests.
(4) Determination of five-year period--(i) General rule. The five-
year period specified in paragraph (a)(1) of this section begins on and
includes the date of contribution.
(ii) Section 708(b)(1)(B) terminations. A termination of the
partnership under section 708(b)(1)(B) begins a new five-year period
for each partner with respect to the built-in gain and built-in loss
property that the partner is deemed to recontribute to a new
partnership following the termination, but only to the extent that the
pre-termination built-in gain or loss, if any, on such property would
not have been allocated to the contributing partner under section
704(c)(1)(A) and Sec. 1.704-3 on a sale of the contributed property to
an unrelated party immediately before the termination. See Sec. 1.704-
3(a)(3)(ii) for the definitions of built-in gain and built-in loss on
section 704(c) property.
(5) Examples. The following examples illustrate the rules of this
paragraph (a). Unless otherwise specified, partnership income equals
partnership expenses (other than depreciation deductions for
contributed property) for each year of the partnership, the fair market
value of partnership property does not change, all distributions by the
partnership are subject to section 704(c)(1)(B), and all partners are
unrelated.
Example 1. Recognition of gain. (i) On January 1, 1995, A, B,
and C form partnership ABC as equal partners. A contributes $10,000
cash and Property A, nondepreciable real property with a fair market
value of $10,000 and an adjusted tax basis of $4,000. Thus, there is
a built-in gain of $6,000 on Property A at the time of contribution.
B contributes $10,000 cash and Property B, nondepreciable real
property with a fair market value and adjusted tax basis of $10,000.
C contributes $20,000 cash.
(ii) On December 31, 1998, Property A and Property B are
distributed to C in complete liquidation of C's interest in the
partnership.
(iii) A would have recognized $6,000 of gain under section
704(c)(1)(A) and Sec. 1.704-3 on the sale of Property A at the time
of the distribution ($10,000 fair market value less $4,000 adjusted
tax basis). As a result, A must recognize $6,000 of gain on the
distribution of Property A to C. B would not have recognized any
gain or loss under section 704(c)(1)(A) and Sec. 1.704-3 on the sale
of Property B at the time of distribution because Property B was not
section 704(c) property. As a result, B does not recognize any gain
or loss on the distribution of Property B.
Example 2. Effect of post-contribution depreciation deductions.
(i) On January 1, 1995, A, B, and C form partnership ABC as equal
partners. A contributes Property A, depreciable property with a fair
market value of $30,000 and an adjusted tax basis of $20,000.
Therefore, there is a built-in gain of $10,000 on Property A. B and
C each contribute $30,000 cash. ABC uses the traditional method of
making section 704(c) allocations described in Sec. 1.704-3(b) with
respect to Property A.
(ii) Property A is depreciated using the straight-line method
over its remaining 10-year recovery period. The partnership has book
depreciation of $3,000 per year (10 percent of the $30,000 book
basis), and each partner is allocated $1,000 of book depreciation
per year (one-third of the total annual book depreciation of
$3,000). The partnership has a tax depreciation deduction of $2,000
per year (10 percent of the $20,000 tax basis in Property A). This
$2,000 tax depreciation deduction is allocated equally between B and
C, the noncontributing partners with respect to Property A.
(iii) At the end of the third year, the book value of Property A
is $21,000 ($30,000 initial book value less $9,000 aggregate book
depreciation) and the adjusted tax basis is $14,000 ($20,000 initial
tax basis less $6,000 aggregate tax depreciation). A's remaining
section 704(c)(1)(A) built-in gain with respect to Property A is
$7,000 ($21,000 book value less $14,000 adjusted tax basis).
(iv) On December 31, 1997, Property A is distributed to B in
complete liquidation of B's interest in the partnership. If Property
A had been sold for its fair market value at the
[[Page 66731]]
time of the distribution, A would have recognized $7,000 of gain under
section 704(c)(1)(A) and Sec. 1.704-3(b). Therefore, A recognizes
$7,000 of gain on the distribution of Property A to B.
Example 3. Effect of remedial method. (i) On January 1, 1995, A,
B, and C form partnership ABC as equal partners. A contributes
Property A1, nondepreciable real property with a fair market value
of $10,000 and an adjusted tax basis of $5,000, and Property A2,
nondepreciable real property with a fair market value and adjusted
tax basis of $10,000. B and C each contribute $20,000 cash. ABC uses
the remedial method of making section 704(c) allocations described
in Sec. 1.704-3(d) with respect to Property A1.
(ii) On December 31, 1998, when the fair market value of
Property A1 has decreased to $7,000, Property A1 is distributed to C
in a current distribution. If Property A1 had been sold by the
partnership at the time of the distribution, ABC would have
recognized the $2,000 of remaining built-in gain under section
704(c)(1)(A) on the sale (fair market value of $7,000 less $5,000
adjusted tax basis). All of this gain would have been allocated to
A. ABC would also have recognized a book loss of $3,000 ($10,000
original book value less $7,000 current fair market value of the
property). Book loss in the amount of $2,000 would have been
allocated equally between B and C. Under the remedial method, $2,000
of tax loss would also have been allocated equally to B and C to
match their share of the book loss. As a result, $2,000 of gain
would also have been allocated to A as an offsetting remedial
allocation. A would have recognized $4,000 of total gain under
section 704(c)(1)(A) on the sale of Property A1 ($2,000 of section
704(c) recognized gain plus $2,000 remedial gain). Therefore, A
recognizes $4,000 of gain on the distribution of Property A1 to C
under this section.
(b) Character of gain or loss--(1) General rule. Gain or loss
recognized by the contributing partner under section 704(c)(1)(B) and
this section has the same character as the gain or loss that would have
resulted if the distributed property had been sold by the partnership
to the distributee partner at the time of the distribution.
(2) Example. The following example illustrates the rule of this
paragraph (b). Unless otherwise specified, partnership income equals
partnership expenses (other than depreciation deductions for
contributed property) for each year of the partnership, the fair market
value of partnership property does not change, all distributions by the
partnership are subject to section 704(c)(1)(B), and all partners are
unrelated.
Example. Character of gain. (i) On January 1, 1995, A and B form
partnership AB. A contributes $10,000 and Property A, nondepreciable
real property with a fair market value of $10,000 and an adjusted
tax basis of $4,000, in exchange for a 25 percent interest in
partnership capital and profits. B contributes $60,000 cash for a 75
percent interest in partnership capital and profits.
(ii) On December 31, 1998, Property A is distributed to B in a
current distribution. Property A is used in a trade or business of
B.
(iii) A would have recognized $6,000 of gain under section
704(c)(1)(A) on a sale of Property A at the time of the distribution
(the difference between the fair market value ($10,000) and the
adjusted tax basis ($4,000) of the property at that time). Because
Property A is not a capital asset in the hands of Partner B and B
holds more than 50 percent of partnership capital and profits, the
character of the gain on a sale of Property A to B would have been
ordinary income under section 707(b)(2). Therefore, the character of
the gain to A on the distribution of Property A to B is ordinary
income.
(c) Exceptions--(1) Property contributed on or before October 3,
1989. Section 704(c)(1)(B) and this section do not apply to property
contributed to the partnership on or before October 3, 1989.
(2) Certain liquidations. Section 704(c)(1)(B) and this section do
not apply to a distribution of an interest in section 704(c) property
to a partner other than the contributing partner in a liquidation of
the partnership if--
(i) The contributing partner receives an interest in the section
704(c) property contributed by that partner (and no other property);
and
(ii) The built-in gain or loss in the interest distributed to the
contributing partner, determined immediately after the distribution, is
equal to or greater than the built-in gain or loss on the property that
would have been allocated to the contributing partner under section
704(c)(1)(A) and Sec. 1.704-3 on a sale of the contributed property to
an unrelated party immediately before the distribution.
(3) Section 708(b)(1)(B) termination. Section 704(c)(1)(B) and this
section do not apply to a deemed distribution of property caused by a
termination of the partnership under section 708(b)(1)(B). See
paragraph (a)(4)(ii) of this section for a special rule regarding a new
five-year period for certain property deemed contributed to a new
partnership following a termination of the partnership under section
708(b)(1)(B). See also Sec. 1.737-2(a) for a similar rule in the
context of section 737.
(4) Complete transfer to another partnership. Section 704(c)(1)(B)
and this section do not apply to a transfer by a partnership
(transferor partnership) of all of its assets and liabilities to a
second partnership (transferee partnership) in an exchange described in
section 721, followed by a distribution of the interest in the
transferee partnership in liquidation of the transferor partnership as
part of the same plan or arrangement. A subsequent distribution of
section 704(c) property by the transferee partnership to a partner of
the transferee partnership is subject to section 704(c)(1)(B) to the
same extent that a distribution by the transferor partnership would
have been subject to section 704(c)(1)(B). See Sec. 1.737-2(b) for a
similar rule in the context of section 737.
(5) Incorporation of a partnership. Section 704(c)(1)(B) and this
section do not apply to an incorporation of a partnership by any method
of incorporation (other than a method involving an actual distribution
of partnership property to the partners followed by a contribution of
that property to a corporation), provided that the partnership is
liquidated as part of the incorporation transaction. See Sec. 1.737-
2(c) for a similar rule in the context of section 737.
(6) Undivided interests. Section 704(c)(1)(B) and this section do
not apply to a distribution of an undivided interest in property to the
extent that the undivided interest does not exceed the undivided
interest, if any, contributed by the distributee partner in the same
property. See Sec. 1.737-2(d)(4) for the application of section 737 in
a similar context. The portion of the undivided interest in property
retained by the partnership after the distribution, if any, that is
treated as contributed by the distributee partner, is reduced to the
extent of the undivided interest distributed to the distributee
partner.
(7) Example. The following example illustrates the rule of
paragraph (c)(2) of this section. Unless otherwise specified,
partnership income equals partnership expenses (other than depreciation
deductions for contributed property) for each year of the partnership,
the fair market value of partnership property does not change, all
distributions by the partnership are subject to section 704(c)(1)(B),
and all partners are unrelated.
Example. (i) On January 1, 1995, A and B form partnership AB, as
equal partners. A contributes Property A, nondepreciable real
property with a fair market value and adjusted tax basis of $20,000.
B contributes Property B, nondepreciable real property with a fair
market value of $20,000 and an adjusted tax basis of $10,000.
Property B therefore has a built-in gain of $10,000 at the time of
contribution.
(ii) On December 31, 1998, the partnership liquidates when the
fair market value of Property A has not changed, but the fair market
value of Property B has increased to $40,000.
(iii) In the liquidation, A receives Property A and a 25 percent
interest in Property B. This interest in Property B has a fair
market
[[Page 66732]]
value of $10,000 to A, reflecting the fact that A was entitled to 50
percent of the $20,000 post-contribution appreciation in Property B.
The partnership distributes to B a 75 percent interest in Property B
with a fair market value of $30,000. B's basis in this portion of
Property B is $10,000 under section 732(b). As a result, B has a
built-in gain of $20,000 in this portion of Property B immediately
after the distribution ($30,000 fair market value less $10,000
adjusted tax basis). This built-in gain is greater than the $10,000
of built-in gain in Property B at the time of contribution to the
partnership. B therefore does not recognize any gain on the
distribution of a portion of Property B to A under this section.
(d) Special rules--(1) Nonrecognition transactions. Property
received by the partnership in exchange for section 704(c) property in
a nonrecognition transaction is treated as the section 704(c) property
for purposes of section 704(c)(1)(B) and this section to the extent
that the property received is treated as section 704(c) property under
Sec. 1.704-3(a)(8). See Sec. 1.737-2(d)(3) for a similar rule in the
context of section 737.
(2) Transfers of a partnership interest. The transferee of all or a
portion of the partnership interest of a contributing partner is
treated as the contributing partner for purposes of section
704(c)(1)(B) and this section to the extent of the share of built-in
gain or loss allocated to the transferee partner. See Sec. 1.704-
3(a)(7).
(3) Distributions of like-kind property. If section 704(c) property
is distributed to a partner other than the contributing partner and
like-kind property (within the meaning of section 1031) is distributed
to the contributing partner no later than the earlier of (i) 180 days
following the date of the distribution to the non-contributing partner,
or (ii) the due date (determined with regard to extensions) of the
contributing partner's income tax return for the taxable year of the
distribution to the noncontributing partner, the amount of gain or
loss, if any, that the contributing partner would otherwise have
recognized under section 704(c)(1)(B) and this section is reduced by
the amount of built-in gain or loss in the distributed like-kind
property in the hands of the contributing partner immediately after the
distribution. The contributing partner's basis in the distributed like-
kind property is determined as if the like-kind property were
distributed in an unrelated distribution prior to the distribution of
any other property distributed as part of the same distribution and is
determined without regard to the increase in the contributing partner's
adjusted tax basis in the partnership interest under section
704(c)(1)(B) and this section. See Sec. 1.707-3 for provisions treating
the distribution of the like-kind property to the contributing partner
as a disguised sale in certain situations.
(4) Example. The following example illustrates the rules of this
paragraph (d). Unless otherwise specified, partnership income equals
partnership expenses (other than depreciation deductions for
contributed property) for each year of the partnership, the fair market
value of partnership property does not change, all distributions by the
partnership are subject to section 704(c)(1)(B), and all partners are
unrelated.
Example. Distribution of like-kind property. (i) On January 1,
1995, A, B, and C form partnership ABC as equal partners. A
contributes Property A, nondepreciable real property with a fair
market value of $20,000 and an adjusted tax basis of $10,000. B and
C each contribute $20,000 cash. The partnership subsequently buys
Property X, nondepreciable real property of a like-kind to Property
A with a fair market value and adjusted tax basis of $8,000. The
fair market value of Property X subsequently increases to $10,000.
(ii) On December 31, 1998, Property A is distributed to B in a
current distribution. At the same time, Property X is distributed to
A in a current distribution. The distribution of Property X does not
result in the contribution of Property A being properly
characterized as a disguised sale to the partnership under
Sec. 1.707-3. A's basis in Property X is $8,000 under section
732(a)(1). A therefore has $2,000 of built-in gain in Property X
($10,000 fair market value less $8,000 adjusted tax basis).
(iii) A would generally recognize $10,000 of gain under section
704(c)(1)(B) on the distribution of Property A, the difference
between the fair market value ($20,000) of the property and its
adjusted tax basis ($10,000). This gain is reduced, however, by the
amount of the built-in gain of Property X in the hands of A. As a
result, A recognizes only $8,000 of gain on the distribution of
Property A to B under section 704(c)(1)(B) and this section.
(e) Basis adjustments--(1) Contributing partner's basis in the
partnership interest. The basis of the contributing partner's interest
in the partnership is increased by the amount of the gain, or decreased
by the amount of the loss, recognized by the partner under section
704(c)(1)(B) and this section. This increase or decrease is taken into
account in determining (i) the contributing partner's adjusted tax
basis under section 732 for any property distributed to the partner in
a distribution that is part of the same distribution as the
distribution of the contributed property, other than like-kind property
described in paragraph (d)(3) of this section (pertaining to the
special rule for distributions of like-kind property), and (ii) the
amount of the gain recognized by the contributing partner under section
731 or section 737, if any, on a distribution of money or property to
the contributing partner that is part of the same distribution as the
distribution of the contributed property. For a determination of basis
in a distribution subject to section 737, see Sec. 1.737-3(a).
(2) Partnership's basis in partnership property. The partnership's
adjusted tax basis in the distributed section 704(c) property is
increased or decreased immediately before the distribution by the
amount of gain or loss recognized by the contributing partner under
section 704(c)(1)(B) and this section. Any increase or decrease in
basis is therefore taken into account in determining the distributee
partner's adjusted tax basis in the distributed property under section
732. For a determination of basis in a distribution subject to section
737, see Sec. 1.737-3(b).
(3) Section 754 adjustments. The basis adjustments to partnership
property made pursuant to paragraph (e)(2) of this section are not
elective and must be made regardless of whether the partnership has an
election in effect under section 754. Any adjustments to the bases of
partnership property (including the distributed section 704(c)
property) under section 734(b) pursuant to a section 754 election must
be made after (and must take into account) the adjustments to basis
made under paragraph (e)(2) of this section. See Sec. 1.737-3(c)(4) for
a similar rule in the context of section 737.
(4) Example. The following example illustrates the rules of this
paragraph (e). Unless otherwise specified, partnership income equals
partnership expenses (other than depreciation deductions for
contributed property) for each year of the partnership, the fair market
value of partnership property does not change, all distributions by the
partnership are subject to section 704(c)(1)(B), and all partners are
unrelated.
Example. Basis adjustment. On January 1, 1995, A, B, and C form
partnership ABC as equal partners. A contributes $10,000 cash and
Property A, nondepreciable real property with a fair market value of
$10,000 and an adjusted tax basis of $4,000. B and C each contribute
$20,000 cash.
(ii) On December 31, 1998, Property A is distributed to B in a
current distribution.
(iii) Under paragraph (a) of this section, A recognizes $6,000
of gain on the distribution of Property A because that is the amount
of gain that would have been allocated to A under section
704(c)(1)(A) and Sec. 1.704-3 on a sale of Property A for its fair
market value at the time of the distribution (fair market value of
Property A ($10,000) less its
[[Page 66733]]
adjusted tax basis at the time of distribution ($4,000)). The adjusted
tax basis of A's partnership interest is increased from $14,000 to
$20,000 to reflect this gain. The partnership's adjusted tax basis
in Property A is increased from $4,000 to $10,000 immediately prior
to its distribution to B. B's adjusted tax basis in Property A is
therefore $10,000 under section 732(a)(1).
(f) Anti-abuse rule--(1) In general. The rules of section
704(c)(1)(B) and this section must be applied in a manner consistent
with the purpose of section 704(c)(1)(B). Accordingly, if a principal
purpose of a transaction is to achieve a tax result that is
inconsistent with the purpose of section 704(c)(1)(B), the Commissioner
can recast the transaction for federal tax purposes as appropriate to
achieve tax results that are consistent with the purpose of section
704(c)(1)(B) and this section. Whether a tax result is inconsistent
with the purpose of section 704(c)(1)(B) and this section must be
determined based on all the facts and circumstances. See Sec. 1.737-4
for an anti-abuse rule and examples in the context of section 737.
(2) Examples. The following examples illustrate the anti-abuse rule
of this paragraph (f). The examples set forth below do not delineate
the boundaries of either permissible or impermissible types of
transactions. Further, the addition of any facts or circumstances that
are not specifically set forth in an example (or the deletion of any
facts or circumstances) may alter the outcome of the transaction
described in the example. Unless otherwise specified, partnership
income equals partnership expenses (other than depreciation deductions
for contributed property) for each year of the partnership, the fair
market value of partnership property does not change, all distributions
by the partnership are subject to section 704(c)(1)(B), and all
partners are unrelated.
Example 1. Distribution in substance made within five-year
period; results inconsistent with the purpose of section
704(c)(1)(B). (i) On January 1, 1995, A, B, and C form partnership
ABC as equal partners. A contributes Property A, nondepreciable real
property with a fair market value of $10,000 and an adjusted tax
basis of $1,000. B and C each contributes $10,000 cash.
(ii) On December 31, 1998, the partners desire to distribute
Property A to B in complete liquidation of B's interest in the
partnership. If Property A were distributed at that time, however, A
would recognize $9,000 of gain under section 704(c)(1)(B), the
difference between the $10,000 fair market value and the $1,000
adjusted tax basis of Property A, because Property A was contributed
to the partnership less than five years before December 31, 1998. On
becoming aware of this potential gain recognition, and with a
principal purpose of avoiding such gain, the partners amend the
partnership agreement on December 31, 1998, and take any other steps
necessary to provide that substantially all of the economic risks
and benefits of Property A are borne by B as of December 31, 1998,
and that substantially all of the economic risks and benefits of all
other partnership property are borne by A and C. The partnership
holds Property A until January 5, 2000, at which time it is
distributed to B in complete liquidation of B's interest in the
partnership.
(iii) The actual distribution of Property A occurred more than
five years after the contribution of the property to the
partnership. The steps taken by the partnership on December 31,
1998, however, are the functional equivalent of an actual
distribution of Property A to B in complete liquidation of B's
interest in the partnership as of that date. Section 704(c)(1)(B)
requires recognition of gain when contributed section 704(c)
property is in substance distributed to another partner within five
years of its contribution to the partnership. Allowing a
contributing partner to avoid section 704(c)(1)(B) through
arrangements such as those in this Example 1 that have the effect of
a distribution of property within five years of the date of its
contribution to the partnership would effectively undermine the
purpose of section 704(c)(1)(B) and this section. As a result, the
steps taken by the partnership on December 31, 1998, are treated as
causing a distribution of Property A to B for purposes of section
704(c)(1)(B) on that date, and A recognizes gain of $9,000 under
section 704(c)(1)(B) and this section at that time.
(iv) Alternatively, if on becoming aware of the potential gain
recognition to A on a distribution of Property A on December 31,
1998, the partners had instead agreed that B would continue as a
partner with no changes to the partnership agreement or to B's
economic interest in partnership operations, the distribution of
Property A to B on January 5, 2000, would not have been inconsistent
with the purpose of section 704(c)(1)(B) and this section. In that
situation, Property A would not have been distributed until after
the expiration of the five-year period specified in section
704(c)(1)(B) and this section. Deferring the distribution of
Property A until the end of the five-year period for a principal
purpose of avoiding the recognition of gain under section
704(c)(1)(B) and this section is not inconsistent with the purpose
of section 704(c)(1)(B). Therefore, A would not have recognized gain
on the distribution of Property A in that case.
Example 2. Suspension of five-year period in manner consistent
with the purpose of section 704(c)(1)(B). (i) A, B, and C form
partnership ABC on January 1, 1995, to conduct bona fide business
activities. A contributes Property A, nondepreciable real property
with a fair market value of $10,000 and an adjusted tax basis of
$1,000, in exchange for a 49.5 percent interest in partnership
capital and profits. B contributes $10,000 in cash for a 49.5
percent interest in partnership capital and profits. C contributes
cash for a 1 percent interest in partnership capital and profits. A
and B are wholly owned subsidiaries of the same affiliated group and
continue to control the management of Property A by virtue of their
controlling interests in the partnership. The partnership is formed
pursuant to a plan a principal purpose of which is to minimize the
period of time that A would have to remain a partner with a
potential acquiror of Property A.
(ii) On December 31, 1997, D is admitted as a partner to the
partnership in exchange for $10,000 cash.
(iii) On January 5, 2000, Property A is distributed to D in
complete liquidation of D's interest in the partnership.
(iv) The distribution of Property A to D occurred more than five
years after the contribution of the property to the partnership. On
these facts, however, a principal purpose of the transaction was to
minimize the period of time that A would have to remain partners
with a potential acquiror of Property A, and treating the five-year
period of section 704(c)(1)(B) as running during a time when
Property A was still effectively owned through the partnership by
members of the contributing affiliated group of which A is a member
is inconsistent with the purpose of section 704(c)(1)(B). Prior to
the admission of D as a partner, the pooling of assets between A and
B, on the one hand, and C, on the other hand, although sufficient to
constitute ABC as a valid partnership for federal income tax
purposes, is not a sufficient pooling of assets for purposes of
running the five-year period with respect to the distribution of
Property A to D. Allowing a contributing partner to avoid section
704(c)(1)(B) through arrangements such as those in this Example 2
would have the effect of substantially nullifying the five-year
requirement of section 704(c)(1)(B) and this section and elevating
the form of the transaction over its substance. As a result, with
respect to the distribution of Property A to D, the five-year period
of section 704(c)(1)(B) is tolled until the admission of D as a
partner on December 31, 1997. Therefore, the distribution of
Property A occurred before the end of the five-year period of
section 704(c)(1)(B), and A recognizes gain of $9,000 under section
704(c)(1)(B) on the distribution.
(g) Effective date. This section applies to distributions by a
partnership to a partner on or after January 9, 1995.
Par. 3. Sections 1.737-1, 1.737-2, 1.737-3, 1.737-4, and 1.737-5
are added to read as follows:
Sec. 1.737-1 Recognition of precontribution gain.
(a) Determination of gain--(1) In general. A partner that receives
a distribution of property (other than money) must recognize gain under
section 737 and this section in an amount equal to the lesser of the
excess distribution (as defined in paragraph (b) of this section) or
the partner's net precontribution gain (as defined in paragraph (c) of
this section). Gain recognized under section 737 and this section is in
addition to any gain recognized under section 731.
[[Page 66734]]
(2) Transactions to which section 737 applies. Section 737 and this
section apply only to the extent that a distribution by a partnership
is a distribution to a partner acting in the capacity of a partner
within the meaning of section 731, except that section 737 and this
section do not apply to the extent that section 751(b) applies to the
distribution.
(b) Excess distribution--(1) Definition. The excess distribution is
the amount (if any) by which the fair market value of the distributed
property (other than money) exceeds the distributee partner's adjusted
tax basis in the partner's partnership interest.
(2) Fair market value of property. The fair market value of the
distributed property is the price at which the property would change
hands between a willing buyer and a willing seller at the time of the
distribution, neither being under any compulsion to buy or sell and
both having reasonable knowledge of the relevant facts. The fair market
value that a partnership assigns to distributed property will be
regarded as correct, provided that the value is reasonably agreed to
among the partners in an arm's-length negotiation and the partners have
sufficiently adverse interests.
(3) Distributee partner's adjusted tax basis--(i) General rule. In
determining the amount of the excess distribution, the distributee
partner's adjusted tax basis in the partnership interest includes any
basis adjustment resulting from the distribution that is subject to
section 737 (for example, adjustments required under section 752) and
from any other distribution or transaction that is part of the same
distribution, except for--
(A) The increase required under section 737(c)(1) for the gain
recognized by the partner under section 737; and
(B) The decrease required under section 733(2) for any property
distributed to the partner other than property previously contributed
to the partnership by the distributee partner. See Sec. 1.704-4(e)(1)
for a rule in the context of section 704(c)(1)(B). See also Sec. 1.737-
3(b)(2) for a special rule for determining a partner's adjusted tax
basis in distributed property previously contributed by the partner to
the partnership.
(ii) Advances or drawings. The distributee partner's adjusted tax
basis in the partnership interest is determined as of the last day of
the partnership's taxable year if the distribution to which section 737
applies is properly characterized as an advance or drawing against the
partner's distributive share of income. See Sec. 1.731-1(a)(1)(ii).
(c) Net precontribution gain--(1) General rule. The distributee
partner's net precontribution gain is the net gain (if any) that would
have been recognized by the distributee partner under section
704(c)(1)(B) and Sec. 1.704-4 if all property that had been contributed
to the partnership by the distributee partner within five years of the
distribution and is held by the partnership immediately before the
distribution had been distributed by the partnership to another partner
other than a partner who owns, directly or indirectly, more than 50
percent of the capital or profits interest in the partnership. See
Sec. 1.704-4 for provisions determining a contributing partner's gain
or loss under section 704(c)(1)(B) on an actual distribution of
contributed section 704(c) property to another partner.
(2) Special rules--(i) Property contributed on or before October 3,
1989. Property contributed to the partnership on or before October 3,
1989, is not taken into account in determining a partner's net
precontribution gain. See Sec. 1.704-4(c)(1) for a similar rule in the
context of section 704(c)(1)(B).
(ii) Section 734(b)(1)(A) adjustments. For distributions to a
distributee partner of money by a partnership with a section 754
election in effect that are part of the same distribution as the
distribution of property subject to section 737, for purposes of
paragraph (a) and (c)(1) of this section the distributee partner's net
precontribution gain is reduced by the basis adjustments (if any) made
to section 704(c) property contributed by the distributee partner under
section 734(b)(1)(A). See Sec. 1.737-3(c)(4) for rules regarding basis
adjustments for partnerships with a section 754 election in effect.
(iii) Transfers of a partnership interest. The transferee of all or
a portion of a contributing partner's partnership interest succeeds to
the transferor's net precontribution gain, if any, in an amount
proportionate to the interest transferred. See Sec. 1.704-3(a)(7) and
Sec. 1.704-4(d)(2) for similar provisions in the context of section
704(c)(1)(A) and section 704(c)(1)(B).
(iv) Section 704(c)(1)(B) gain recognized in related distribution.
A distributee partner's net precontribution gain is determined after
taking into account any gain or loss recognized by the partner under
section 704(c)(1)(B) and Sec. 1.704-4 (or that would have been
recognized by the partner except for the like-kind exception in section
704(c)(2) and Sec. 1.704-4(d)(3)) on an actual distribution to another
partner of section 704(c) property contributed by the distributee
partner that is part of the same distribution as the distribution to
the distributee partner.
(v) Section 704(c)(2) disregarded. A distributee partner's net
precontribution gain is determined without regard to the provisions of
section 704(c)(2) and Sec. 1.704-4(d)(3) in situations in which the
property contributed by the distributee partner is not actually
distributed to another partner in a distribution related to the section
737 distribution.
(d) Character of gain. The character of the gain recognized by the
distributee partner under section 737 and this section is determined
by, and is proportionate to, the character of the partner's net
precontribution gain. For this purpose, all gains and losses on section
704(c) property taken into account in determining the partner's net
precontribution gain are netted according to their character. Character
is determined at the partnership level for this purpose, and any
character with a net negative amount is disregarded. The character of
the partner's gain under section 737 is the same as, and in proportion
to, any character with a net positive amount. Character for this
purpose is determined as if the section 704(c) property had been sold
by the partnership to an unrelated third party at the time of the
distribution and includes any item that would have been taken into
account separately by the contributing partner under section 702(a) and
Sec. 1.702-1(a).
(e) Examples. The following examples illustrate the provisions of
this section. Unless otherwise specified, partnership income equals
partnership expenses (other than depreciation deductions for
contributed property) for each year of the partnership, the fair market
value of partnership property does not change, all distributions by the
partnership are subject to section 737, and all partners are unrelated.
Example 1. Calculation of excess distribution and net
precontribution gain. (i) On January 1, 1995, A, B, and C form
partnership ABC as equal partners. A contributes Property A,
depreciable real property with a fair market value of $30,000 and an
adjusted tax basis of $20,000. B contributes Property B,
nondepreciable real property with a fair market value and adjusted
tax basis of $30,000. C contributes $30,000 cash.
(ii) Property A has 10 years remaining on its cost recovery
schedule and is depreciated using the straight-line method. The
partnership uses the traditional method for allocating items under
section 704(c) described in Sec. 1.704-3(b)(1) for Property A. The
partnership has book depreciation of $3,000 per year (10 percent of
the $30,000 book basis in Property A) and each partner
[[Page 66735]]
is allocated $1,000 of book depreciation per year (one-third of the
total annual book depreciation of $3,000). The partnership also has
tax depreciation of $2,000 per year (10 percent of the $20,000
adjusted tax basis in Property A). This $2,000 tax depreciation is
allocated equally between B and C, the noncontributing partners with
respect to Property A.
(iii) At the end of 1997, the book value of Property A is
$21,000 ($30,000 initial book value less $9,000 aggregate book
depreciation) and its adjusted tax basis is $14,000 ($20,000 initial
tax basis less $6,000 aggregate tax depreciation).
(iv) On December 31, 1997, Property B is distributed to A in
complete liquidation of A's partnership interest. The adjusted tax
basis of A's partnership interest at that time is $20,000. The
amount of the excess distribution is $10,000, the difference between
the fair market value of the distributed Property B ($30,000) and
A's adjusted tax basis in A's partnership interest ($20,000). A's
net precontribution gain is $7,000, the difference between the book
value of Property A ($21,000) and its adjusted tax basis at the time
of the distribution ($14,000). A recognizes gain of $7,000 on the
distribution, the lesser of the excess distribution and the net
precontribution gain.
Example 2. Determination of distributee partner's basis. (i) On
January 1, 1995, A, B, and C form general partnership ABC as equal
partners. A contributes Property A, nondepreciable real property
with a fair market value of $10,000 and an adjusted tax basis of
$4,000. B and C each contributes $10,000 cash.
(ii) The partnership purchases Property B, nondepreciable real
property with a fair market value of $9,000, subject to a $9,000
nonrecourse liability. This nonrecourse liability is allocated
equally among the partners under section 752, increasing A's
adjusted tax basis in A's partnership interest from $4,000 to
$7,000.
(iii) On December 31, 1998, A receives $2,000 cash and Property
B, subject to the $9,000 liability, in a current distribution.
(iv) In determining the amount of the excess distribution, the
adjusted tax basis of A's partnership interest is adjusted to take
into account the distribution of money and the shift in liabilities.
A's adjusted tax basis is therefore increased to $11,000 for this
purpose ($7,000 initial adjusted tax basis, less $2,000 distribution
of money, less $3,000 (decrease in A's share of the $9,000
partnership liability), plus $9,000 (increase in A's individual
liabilities)). As a result of this basis adjustment, the adjusted
tax basis of A's partnership interest ($11,000) is greater than the
fair market value of the distributed property ($9,000) and
therefore, there is no excess distribution. A recognizes no gain
under section 737.
Example 3. Net precontribution gain reduced for gain recognized
under section 704(c)(1)(B). (i) On January 1, 1995, A, B, and C form
partnership ABC as equal partners. A contributes Properties A1 and
A2, nondepreciable real properties located in the United States each
with a fair market value of $10,000 and an adjusted tax basis of
$6,000. B contributes Property B, nondepreciable real property
located outside the United States, with a fair market value and
adjusted tax basis of $20,000. C contributes $20,000 cash.
(ii) On December 31, 1998, Property B is distributed to A in
complete liquidation of A's interest and, as part of the same
distribution, Property A1 is distributed to B in a current
distribution.
(iii) A's net precontribution gain before the distribution is
$8,000 ($20,000 fair market value of Properties A1 and A2 less
$12,000 adjusted tax basis of such properties). A recognizes $4,000
of gain under section 704(c)(1)(B) and Sec. 1.704-4 on the
distribution of Property A1 to B ($10,000 fair market value of
Property A1 less $6,000 adjusted tax basis of Property A1). This
gain is taken into account in determining A's excess distribution
and net precontribution gain. As a result, A's net precontribution
gain is reduced from $8,000 to $4,000, and the adjusted tax basis in
A's partnership interest is increased by $4,000 to $16,000.
(iv) A recognizes gain of $4,000 on the receipt of Property B
under section 737, an amount equal to the lesser of the excess
distribution of $4,000 ($20,000 fair market value of Property B less
$16,000 adjusted tax basis of A's interest in the partnership) and
A's remaining net precontribution gain of $4,000.
Example 4. Character of gain. (i) On January 1, 1995, A, B, and
C form partnership ABC as equal partners. A contributes the
following nondepreciable property to the partnership:
------------------------------------------------------------------------
Fair
market Adjusted
value tax basis
------------------------------------------------------------------------
Property A1....................................... $30,000 $20,000
Property A2....................................... 30,000 38,000
Property A3....................................... 10,000 9,000
------------------------------------------------------------------------
(ii) The character of gain or loss on Property A1 and Property
A2 is long-term, U.S.-source capital gain or loss. The character of
gain on Property A3 is long-term, foreign-source capital gain. B
contributes Property B, nondepreciable real property with a fair
market value and adjusted tax basis of $70,000. C contributes
$70,000 cash.
(iii) On December 31, 1998, Property B is distributed to A in
complete liquidation of A's interest in the partnership. A
recognizes $3,000 of gain under section 737, an amount equal to the
excess distribution of $3,000 ($70,000 fair market value of Property
B less $67,000 adjusted tax basis in A's partnership interest) and
A's net precontribution gain of $3,000 ($70,000 aggregate fair
market value of properties contributed by A less $67,000 aggregate
adjusted tax basis of such properties).
(iv) In determining the character of A's gain, all gains and
losses on property taken into account in determining A's net
precontribution gain are netted according to their character and
allocated to A's recognized gain under section 737 based on the
relative proportions of the net positive amounts. U.S.-source and
foreign-source gains must be netted separately because A would have
been required to take such gains into account separately under
section 702. As a result, A's net precontribution gain of $3,000
consists of $2,000 of net long-term, U.S.-source capital gain
($10,000 gain on Property A1 and $8,000 loss on Property A2) and
$1,000 of net long-term, foreign-source capital gain ($1,000 gain on
Property A3).
(v) The character of A's gain under paragraph (d) of this
section is therefore $2,000 long-term, U.S.-source capital gain
($3,000 gain recognized under section 737 x $2,000 net long-term,
U.S.-source capital gain/$3,000 total net precontribution gain) and
$1,000 long-term, foreign-source capital gain ($3,000 gain
recognized under section 737 x $1,000 net long-term, foreign-
source capital gain/$3,000 total net precontribution gain).
Sec. 1.737-2 Exceptions and special rules.
(a) Section 708(b)(1)(B) terminations. Section 737 and this section
do not apply to a deemed distribution of property caused by a
termination of the partnership under section 708(b)(1)(B). See
Sec. 1.704-4(c)(3) for a similar rule in the context of section
704(c)(1)(B).
(b) Transfers to another partnership--(1) Complete transfer.
Section 737 and this section do not apply to a transfer by a
partnership (transferor partnership) of all of its assets and
liabilities to a second partnership (transferee partnership) in an
exchange described in section 721, followed by a distribution of the
interest in the transferee partnership in liquidation of the transferor
partnership as part of the same plan or arrangement. See Sec. 1.704-
4(c)(4) for a similar rule in the context of section 704(c)(1)(B).
(2) Certain divisive transactions. Section 737 and this section do
not apply to a transfer by a partnership (transferor partnership) of
all of the section 704(c) property contributed by a partner to a second
partnership (transferee partnership) in an exchange described in
section 721, followed by a distribution as part of the same plan or
arrangement of an interest in the transferee partnership (and no other
property) in complete liquidation of the interest of the partner that
originally contributed the section 704(c) property to the transferor
partnership.
(3) Subsequent distributions. A subsequent distribution of property
by the transferee partnership to a partner of the transferee
partnership that was formerly a partner of the transferor partnership
is subject to section 737 to the same extent that a distribution from
the transferor partnership would have been subject to section 737.
(c) Incorporation of a partnership. Section 737 and this section do
not apply to an incorporation of a partnership by any method of
incorporation (other than a method involving an actual distribution of
[[Page 66736]]
partnership property to the partners followed by a contribution of that
property to a corporation), provided that the partnership is liquidated
as part of the incorporation transaction. See Sec. 1.704-4(c)(5) for a
similar rule in the context of section 704(c)(1)(B).
(d) Distribution of previously contributed property--(1) General
rule. Any portion of the distributed property that consists of property
previously contributed by the distributee partner (including property
treated as contributed by the partner in connection with a termination
of the partnership under section 708(b)(1)(B)) (previously contributed
property) is not taken into account in determining the amount of the
excess distribution or the partner's net precontribution gain. See
Sec. 1.737-3(b)(2) for a special rule for determining the basis of
previously contributed property in the hands of a distributee partner
who contributed the property to the partnership.
(2) Limitation for distribution of previously contributed interest
in an entity. An interest in an entity previously contributed to the
partnership is not treated as previously contributed property to the
extent that the value of the interest is attributable to property
contributed to the entity after the interest was contributed to the
partnership. The preceding sentence does not apply to the extent that
the property contributed to the entity was contributed to the
partnership by the partner that also contributed the interest in the
entity to the partnership.
(3) Nonrecognition transactions. Property received by the
partnership in exchange for contributed section 704(c) property in a
nonrecognition transaction is treated as the contributed property with
regard to the contributing partner for purposes of section 737 to the
extent that the property received is treated as section 704(c) property
under Sec. 1.704-3(a)(8). See Sec. 1.704-4(d)(1) for a similar rule in
the context of section 704(c)(1)(B).
(4) Undivided interests. The distribution of an undivided interest
in property is treated as the distribution of previously contributed
property to the extent that the undivided interest does not exceed the
undivided interest, if any, contributed by the distributee partner in
the same property. See Sec. 1.704-4(c)(6) for the application of
section 704(c)(1)(B) in a similar context. The portion of the undivided
interest in property retained by the partnership after the
distribution, if any, that is treated as contributed by the distributee
partner, is reduced to the extent of the undivided interest distributed
to the distributee partner.
(e) Examples. The following examples illustrate the rules
FR Doc. 95-30870 Recognition of Gain or Loss by Contributing Partner on Distribution of Contributed Property or Other Property
of this
section. Unless otherwise specified, partnership income equals
partnership expenses (other than depreciation deductions for
contributed property) for each year of the partnership, the fair market
value of partnership property does not change, all distributions by the
partnership are subject to section 737, and all partners are unrelated.
Example 1. Distribution of previously contributed property. (i)
On January 1, 1995, A, B, and C form partnership ABC as equal
partners. A contributes the following nondepreciable real property
to the partnership:
------------------------------------------------------------------------
Fair
market Adjusted
value tax basis
------------------------------------------------------------------------
Property A1....................................... $20,000 $10,000
Property A2....................................... 10,000 6,000
------------------------------------------------------------------------
(ii) A's total net precontribution gain on the contributed
property is $14,000 ($10,000 on Property A1 plus $4,000 on Property
A2). B contributes $10,000 cash and Property B, nondepreciable real
property with a fair market value and adjusted tax basis of $20,000.
C contributes $30,000 cash.
(iii) On December 31, 1998, Property A2 and Property B are
distributed to A in complete liquidation of A's interest in the
partnership. Property A2 was previously contributed by A and is
therefore not taken into account in determining the amount of the
excess distribution or A's net precontribution gain. The adjusted
tax basis of Property A2 in the hands of A is also determined under
section 732 as if that property were the only property distributed
to A.
(iv) As a result of excluding Property A2 from these
determinations, the amount of the excess distribution is $10,000
($20,000 fair market value of distributed Property B less $10,000
adjusted tax basis in A's partnership interest). A's net
precontribution gain is also $10,000 ($14,000 total net
precontribution gain less $4,000 gain with respect to previously
contributed Property A2). A therefore recognizes $10,000 of gain on
the distribution, the lesser of the excess distribution and the net
precontribution gain.
Example 2. Distribution of a previously contributed interest in
an entity. (i) On January 1, 1995, A, B, and C form partnership ABC
as equal partners. A contributes Property A, nondepreciable real
property with a fair market value of $10,000 and an adjusted tax
basis of $5,000, and all of the stock of Corporation X with a fair
market value and adjusted tax basis of $500. B contributes $500 cash
and Property B, nondepreciable real property with a fair market
value and adjusted tax basis of $10,000. Partner C contributes
$10,500 cash. On December 31, 1996, ABC contributes Property B to
Corporation X in a nonrecognition transaction under section 351.
(ii) On December 31, 1998, all of the stock of Corporation X is
distributed to A in complete liquidation of A's interest in the
partnership. The stock is treated as previously contributed property
with respect to A only to the extent of the $500 fair market value
of the Corporation X stock contributed by A. The fair market value
of the distributed stock for purposes of determining the amount of
the excess distribution is therefore $10,000 ($10,500 total fair
market value of Corporation X stock less $500 portion treated as
previously contributed property). The $500 fair market value and
adjusted tax basis of the Corporation X stock is also not taken into
account in determining the amount of the excess distribution and the
net precontribution gain.
(iii) A recognizes $5,000 of gain under section 737, the amount
of the excess distribution ($10,000 fair market value of distributed
property less $5,000 adjusted tax basis in A's partnership interest)
and A's net precontribution gain ($10,000 fair market value of
Property A less $5,000 adjusted tax basis in Property A).
Example 3. Distribution of undivided interest in property. (i)
On January 1, 1995, A and B form partnership AB as equal partners. A
contributes $500 cash and an undivided one-half interest in Property
X. B contributes $500 cash and an undivided one-half interest in
Property X.
(ii) On December 31, 1998, an undivided one-half interest in
Property X is distributed to A in a current distribution. The
distribution of the undivided one-half interest in Property X is
treated as a distribution of previously contributed property because
A contributed an undivided one-half interest in Property X. As a
result, A does not recognize any gain under section 737 on the
distribution.
Sec. 1.737-3 Basis adjustments; Recovery rules.
(a) Distributee partner's adjusted tax basis in the partnership
interest. The distributee partner's adjusted tax basis in the
partnership interest is increased by the amount of gain recognized by
the distributee partner under section 737 and this section. This
increase is not taken into account in determining the amount of gain
recognized by the partner under section 737(a)(1) and this section or
in determining the amount of gain recognized by the partner under
section 731(a) on the distribution of money in the same distribution or
any related distribution. See Sec. 1.704-4(e)(1) for a determination of
the distributee partner's adjusted tax basis in a distribution subject
to section 704(c)(1)(B).
(b) Distributee partner's adjusted tax basis in distributed
property--(1) In general. The distributee partner's adjusted tax basis
in the distributed property is determined under section 732 (a) or (b)
as applicable. The increase in the distributee partner's adjusted tax
basis in the partnership interest under paragraph (a) of this section
is taken into account in determining the distributee partner's adjusted
tax basis
[[Page 66737]]
in the distributed property other than property previously contributed
by the partner. See Sec. 1.704-4(e)(2) for a determination of basis in
a distribution subject to section 704(c)(1)(B).
(2) Previously contributed property. The distributee partner's
adjusted tax basis in distributed property that the partner previously
contributed to the partnership is determined as if it were distributed
in a separate and independent distribution prior to the distribution
that is subject to section 737 and Sec. 1.737-1.
(c) Partnership's adjusted tax basis in partnership property--(1)
Increase in basis. The partnership's adjusted tax basis in eligible
property is increased by the amount of gain recognized by the
distributee partner under section 737.
(2) Eligible property. Eligible property is property that----
(i) Entered into the calculation of the distributee partner's net
precontribution gain;
(ii) Has an adjusted tax basis to the partnership less than the
property's fair market value at the time of the distribution;
(iii) Would have the same character of gain on a sale by the
partnership to an unrelated party as the character of any of the gain
recognized by the distributee partner under section 737; and
(iv) Was not distributed to another partner in a distribution
subject to section 704(c)(1)(B) and Sec. 1.704-4 that was part of the
same distribution as the distribution subject to section 737.
(3) Method of adjustment. For the purpose of allocating the basis
increase under paragraph (c)(2) of this section among the eligible
property, all eligible property of the same character is treated as a
single group. Character for this purpose is determined in the same
manner as the character of the recognized gain is determined under
Sec. 1.737-1(d). The basis increase is allocated among the separate
groups of eligible property in proportion to the character of the gain
recognized under section 737. The basis increase is then allocated
among property within each group in the order in which the property was
contributed to the partnership by the partner, starting with the
property contributed first, in an amount equal to the difference
between the property's fair market value and its adjusted tax basis to
the partnership at the time of the distribution. For property that has
the same character and was contributed in the same (or a related)
transaction, the basis increase is allocated based on the respective
amounts of unrealized appreciation in such properties at the time of
the distribution.
(4) Section 754 adjustments. The basis adjustments to partnership
property made pursuant to paragraph (c)(1) of this section are not
elective and must be made regardless of whether the partnership has an
election in effect under section 754. Any adjustments to the bases of
partnership property (including eligible property as defined in
paragraph (c)(2) of this section) under section 734(b) pursuant to a
section 754 election (other than basis adjustments under section
734(b)(1)(A) described in the following sentence) must be made after
(and must take into account) the adjustments to basis made under
paragraph (a) and paragraph (c)(1) of this section. Basis adjustments
under section 734(b)(1)(A) that are attributable to distributions of
money to the distributee partner that are part of the same distribution
as the distribution of property subject to section 737 are made before
the adjustments to basis under paragraph (a) and paragraph (c)(1) of
this section. See Sec. 1.737-1(c)(2)(ii) for the effect, if any, of
basis adjustments under section 734(b)(1)(A) on a partner's net
precontribution gain. See also Sec. 1.704-4(e)(3) for a similar rule
regarding basis adjustments pursuant to a section 754 election in the
context of section 704(c)(1)(B).
(d) Recovery of increase to adjusted tax basis. Any increase to the
adjusted tax basis of partnership property under paragraph (c)(1) of
this section is recovered using any applicable recovery period and
depreciation (or other cost recovery) method (including first-year
conventions) available to the partnership for newly purchased property
(of the type adjusted) placed in service at the time of the
distribution.
(e) Examples. The following examples illustrate the rules of this
section. Unless otherwise specified, partnership income equals
partnership expenses (other than depreciation deductions for
contributed property) for each year of the partnership, the fair market
value of partnership property does not change, all distributions by the
partnership are subject to section 737, and all partners are unrelated.
(e) Example 1. Partner's basis in distributed property. (i) On
January 1, 1995, A, B, and C form partnership ABC as equal partners.
A contributes Property A, nondepreciable real property with a fair
market value of $10,000 and an adjusted tax basis of $5,000. B
contributes Property B, nondepreciable real property with a fair
market value and adjusted tax basis of $10,000. C contributes
$10,000 cash.
(ii) On December 31, 1998, Property B is distributed to A in
complete liquidation of A's interest in the partnership. A
recognizes $5,000 of gain under section 737, an amount equal to the
excess distribution of $5,000 ($10,000 fair market value of Property
B less $5,000 adjusted tax basis in A's partnership interest) and
A's net precontribution gain of $5,000 ($10,000 fair market value of
Property A less $5,000 adjusted tax basis of such property).
(iii) A's adjusted tax basis in A's partnership interest is
increased by the $5,000 of gain recognized under section 737. This
increase is taken into account in determining A's basis in the
distributed property. Therefore, A's adjusted tax basis in
distributed Property B is $10,000 under section 732(b).
Example 2. Partner's basis in distributed property in connection
with gain recognized under section 704(c)(1)(B). (i) On January 1,
1995, A, B, and C form partnership ABC as equal partners. A
contributes the following nondepreciable real property to the
partnership:
------------------------------------------------------------------------
Fair
market Adjusted
value tax basis
------------------------------------------------------------------------
Property A1....................................... $10,000 5,000
Property A2....................................... 10,000 2,000
------------------------------------------------------------------------
(ii) B contributes $10,000 cash and Property B, nondepreciable
real property, with a fair market value and adjusted tax basis of
$10,000. C contributes $20,000 cash.
(iii) On December 31, 1998, Property B is distributed to A in a
current distribution and Property A1 is distributed to B in a
current distribution. A recognizes $5,000 of gain under section
704(c)(1)(B) and Sec. 1.704-4 on the distribution of Property A1 to
B, the difference between the fair market value of such property
($10,000) and the adjusted tax basis in distributed Property A1
($5,000). The adjusted tax basis of A's partnership interest is
increased by this $5,000 of gain under section 704(c)(1)(B) and
Sec. 1.704-4(e)(1).
(iv) The increase in the adjusted tax basis of A's partnership
interest is taken into account in determining the amount of the
excess distribution. As a result, there is no excess distribution
because the fair market value of Property B ($10,000) is less than
the adjusted tax basis of A's interest in the partnership at the
time of distribution ($12,000). A therefore recognizes no gain under
section 737 on the receipt of Property B. A's adjusted tax basis in
Property B is $10,000 under section 732(a)(1). The adjusted tax
basis of A's partnership interest is reduced from $12,000 to $2,000
under section 733. See Example 3 of Sec. 1.737-1(e).
Example 3. Partnership's basis in partnership property after a
distribution with section 737 gain. (i) On January 31, 1995, A, B,
and C form partnership ABC as equal partners. A contributes the
following nondepreciable property to the partnership:
------------------------------------------------------------------------
Fair
market Adjusted
value tax basis
------------------------------------------------------------------------
Property A1....................................... $1,000 $500
Property A2....................................... 4,000 1,500
Property A3....................................... 4,000 6,000
Property A4....................................... 6,000 4,000
------------------------------------------------------------------------
(ii) The character of gain or loss on Properties A1, A2, and A3
is long-term, U.S.-
[[Page 66738]]
source capital gain or loss. The character of gain on Property A4 is
long-term, foreign-source capital gain. B contributes Property B,
nondepreciable real property with a fair market value and adjusted
tax basis of $15,000. C contributes $15,000 cash.
(iii) On December 31, 1998, Property B is distributed to A in
complete liquidation of A's interest in the partnership. A
recognizes gain of $3,000 under section 737, an amount equal to the
excess distribution of $3,000 ($15,000 fair market value of Property
B less $12,000 adjusted tax basis in A's partnership interest) and
A's net precontribution gain of $3,000 ($15,000 aggregate fair
market value of the property contributed by A less $12,000 aggregate
adjusted tax basis of such property).
(iv) $2,000 of A's gain is long-term, foreign-source capital
gain ($3,000 total gain under section 737 x $2,000 net long-term,
foreign-source capital gain/$3,000 total net precontribution gain).
$1,000 of A's gain is long-term, U.S.-source capital gain ($3,000
total gain under section 737 x $1,000 net long-term, U.S.-source
capital gain/$3,000 total net precontribution gain).
(v) The partnership must increase the adjusted tax basis of the
property contributed by A by $3,000. All property contributed by A
is eligible property. Properties A1, A2, and A3 have the same
character and are grouped into a single group for purposes of
allocating this basis increase. Property A4 is in a separate
character group.
(vi) $2,000 of the basis increase must be allocated to long-
term, foreign-source capital assets because $2,000 of the gain
recognized by A was long-term, foreign-source capital gain. The
adjusted tax basis of Property A4 is therefore increased from $4,000
to $6,000. $1,000 of the increase must be allocated to Properties A1
and A2 because $1,000 of the gain recognized by A is long-term,
U.S.-source capital gain. No basis increase is allocated to Property
A3 because its fair market value is less than its adjusted tax
basis. The $1,000 basis increase is allocated between Properties A1
and A2 based on the unrealized appreciation in each asset before
such basis adjustment. As a result, the adjusted tax basis of
Property A1 is increased by $167 ($1,000 x $500/$3,000) and the
adjusted tax basis of Property A2 is increased by $833 ($1,000 x
$2,500/3,000).
Sec. 1.737-4 Anti-abuse rule.
(a) In general. The rules of section 737 and Secs. 1.737-1, 1.737-
2, and 1.737-3 must be applied in a manner consistent with the purpose
of section 737. Accordingly, if a principal purpose of a transaction is
to achieve a tax result that is inconsistent with the purpose of
section 737, the Commissioner can recast the transaction for federal
tax purposes as appropriate to achieve tax results that are consistent
with the purpose of section 737. Whether a tax result is inconsistent
with the purpose of section 737 must be determined based on all the
facts and circumstances. See Sec. 1.704-4(f) for an anti-abuse rule and
examples in the context of section 704(c)(1)(B). The anti-abuse rule
and examples under section 704(c)(1)(B) and Sec. 1.704-4(f) are
relevant to section 737 and Secs. 1.737-1, 1.737-2, and 1.737-3 to the
extent that the net precontribution gain for purposes of section 737 is
determined by reference to section 704(c)(1)(B).
(b) Examples. The following examples illustrate the rules of this
section. The examples set forth below do not delineate the boundaries
of either permissible or impermissible types of transactions. Further,
the addition of any facts or circumstances that are not specifically
set forth in an example (or the deletion of any facts or circumstances)
may alter the outcome of the transaction described in the example.
Unless otherwise specified, partnership income equals partnership
expenses (other than depreciation deductions for contributed property)
for each year of the partnership, the fair market value of partnership
property does not change, all distributions by the partnership are
subject to section 737, and all partners are unrelated.
Example 1. Increase in distributee partner's basis by temporary
contribution; results inconsistent with the purpose of section 737.
(i) On January 1, 1995, A, B, and C form partnership ABC as equal
partners. A contributes Property A1, nondepreciable real property
with a fair market value of $10,000 and an adjusted tax basis of
$1,000. B contributes Property B, nondepreciable real property with
a fair market value of $10,000 and an adjusted tax basis of $10,000.
C contributes $10,000 cash.
(ii) On January 1, 1999, pursuant to a plan a principal purpose
of which is to avoid gain under section 737, A transfers to the
partnership Property A2, nondepreciable real property with a fair
market value and adjusted tax basis of $9,000. A treats the transfer
as a contribution to the partnership pursuant to section 721 and
increases the adjusted tax basis of A's partnership interest from
$1,000 to $10,000. On January 1, 1999, the partnership agreement is
amended and all other necessary steps are taken so that
substantially all of the economic risks and benefits of Property A2
are retained by A. On February 1, 1999, Property B is distributed to
A in a current distribution. If the contribution of Property A2 is
treated as a contribution to the partnership for purposes of section
737, there is no excess distribution because the fair market value
of distributed Property B ($10,000) does not exceed the adjusted tax
basis of A's interest in the partnership ($10,000), and therefore
section 737 does not apply. A's adjusted tax basis in distributed
Property B is $10,000 under section 732(a)(1) and the adjusted tax
basis of A's partnership interest is reduced to zero under section
733.
(iii) On March 1, 2000, A receives Property A2 from the
partnership in complete liquidation of A's interest in the
partnership. A recognizes no gain on the distribution of Property A2
because the property was previously contributed property. See
Sec. 1.737-2(d).
(iv) Although A has treated the transfer of Property A2 as a
contribution to the partnership that increased the adjusted tax
basis of A's interest in the partnership, it would be inconsistent
with the purpose of section 737 to recognize the transfer as a
contribution to the partnership. Section 737 requires recognition of
gain when the value of distributed property exceeds the distributee
partner's adjusted tax basis in the partnership interest. Section
737 assumes that any contribution or other transaction that affects
a partner's adjusted tax basis in the partnership interest is a
contribution or transaction in substance and is not engaged in with
a principal purpose of avoiding recognition of gain under section
737. Because the transfer of Property A2 to the partnership was not
a contribution in substance and was made with a principal purpose of
avoiding recognition of gain under section 737, the Commissioner can
disregard the contribution of Property A2 for this purpose. As a
result, A recognizes gain of $9,000 under section 737 on the receipt
of Property B, an amount equal to the lesser of the excess
distribution of $9,000 ($10,000 fair market value of distributed
Property B less the $1,000 adjusted tax basis of A's partnership
interest, determined without regard to the transitory contribution
of Property A2) or A's net precontribution gain of $9,000 on
Property A1.
Example 2. Increase in distributee partner's basis; section 752
liability shift; results consistent with the purpose of section 737.
(i) On January 1, 1995, A and B form general partnership AB as equal
partners. A contributes Property A, nondepreciable real property
with a fair market value of $10,000 and an adjusted tax basis of
$1,000. B contributes Property B, nondepreciable real property with
a fair market value and adjusted tax basis of $10,000. The
partnership also borrows $10,000 on a recourse basis and purchases
Property C. The $10,000 liability is allocated equally between A and
B under section 752, thereby increasing the adjusted tax basis in
A's partnership interest to $6,000.
(ii) On December 31, 1998, the partners agree that A is to
receive Property B in a current distribution. If A were to receive
Property B at that time, A would recognize $4,000 of gain under
section 737, an amount equal to the lesser of the excess
distribution of $4,000 ($10,000 fair market value of Property B less
$6,000 adjusted tax basis in A's partnership interest) or A's net
precontribution gain of $9,000 ($10,000 fair market value of
Property A less $1,000 adjusted tax basis of Property A).
(iii) With a principal purpose of avoiding such gain, A and B
agree that A will be solely liable for the repayment of the $10,000
partnership liability and take the steps necessary so that the
entire amount of the liability is allocated to A under section 752.
The adjusted tax basis in A's partnership interest is thereby
increased from $6,000 to $11,000 to reflect A's share of the $5,000
of liability previously allocated to B. As a result of this increase
in A's adjusted tax basis, there is no excess distribution because
the
[[Page 66739]]
fair market value of distributed Property B ($10,000) is less than the
adjusted tax basis of A's partnership interest. Recognizing A's
increased adjusted tax basis as a result of the shift in liabilities
is consistent with the purpose of section 737 and this section.
Section 737 requires recognition of gain only when the value of the
distributed property exceeds the distributee partner's adjusted tax
basis in the partnership interest. The $10,000 recourse liability is
a bona fide liability of the partnership that was undertaken for a
substantial business purpose and A's and B's agreement that A will
assume responsibility for repayment of that debt has substance.
Therefore, the increase in A's adjusted tax basis in A's interest in
the partnership due to the shift in partnership liabilities under
section 752 is respected, and A recognizes no gain under section
737.
Sec. 1.737-5 Effective date.
Sections 1.737-1, 1.737-2, 1.737-3, and 1.737-4 apply to
distributions by a partnership to a partner on or after January 9,
1995.
Dated: December 13, 1995.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved:
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-30870 Filed 12-22-95; 8:45 am]
BILLING CODE 4830-01-U
Complete official Federal Register PDF
FR Doc. 95-30829 Certain Transfers of Domestic Stock or Securities by U.S. Persons to Foreign Corporations
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Pages 66739-66746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30829]
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DEPARTMENT OF THE TREASURY
26 CFR Parts 1 and 602
[TD 8638]
RIN 1545-AT44
Certain Transfers of Domestic Stock or Securities by U.S. Persons
to Foreign Corporations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
-----------------------------------------------------------------------
SUMMARY: These temporary regulations provide the public with guidance
necessary to comply with the Tax Reform Act of 1984. These regulations
amend the Income Tax Regulations with respect to certain transfers of
stock or securities of domestic corporations by United States persons
to foreign corporations pursuant to the corporate organization,
reorganization, or liquidation provisions of the Internal Revenue Code.
This Treasury decision also removes certain of the existing temporary
regulations regarding transfers by U.S. persons of stock or securities
of both domestic and foreign corporations. This action is necessary to
update the existing temporary regulations and to reflect certain of the
changes announced by Notice 87-85 (1987-2 C.B. 395) (with respect to
transfers of both domestic and foreign stock or securities) and by
Notice 94-46 (1994-1 C.B. 356) (with respect to transfers of stock or
securities of a domestic corporation). The text of these temporary
regulations also serves as the text of the proposed regulations set
forth in the notice of proposed rulemaking on this subject in the
Proposed Rules section of this issue of the Federal Register. When
finalized, the regulations under section 367(a) relating to the
transfer of stock or securities will integrate the regulations herein
with the 1991 proposed regulations relating to transfers of stock or
securities (see Proposed Rule Secs. 1.367(a)-3 and 1.367(a)-8,
published at 56 FR 41993, August 26, 1991).
EFFECTIVE DATE: April 17, 1994. For further information, see the
Applicability and Effective Dates section under SUPPLEMENTARY
INFORMATION.
FOR FURTHER INFORMATION CONTACT: Philip L. Tretiak at (202) 622-3860
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Applicability and Effective Dates
These regulations are generally applicable to transfers occurring
after April 17, 1994, the effective date of Notice 94-46. However, the
active trade or business requirement (described in Sec. 1.367(a)-
3T(c)(1)(iii) of the temporary regulations herein), which was not
contained in Notice 94-46, is effective for transfers occurring January
25, 1996. Moreover, these regulations remove as ``deadwood'' paragraphs
(c)(1) through (c)(4), (d), (e), (f), (g)(1)(iii) and (h)(1) of
Sec. 1.367(a)-3T of the existing temporary regulations with respect to
transfers occurring after December 16, 1987, the effective date of
Notice 87-85.
Paperwork Reduction Act
These regulations are being issued without prior notice and public
procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553).
For this reason, the collection of information contained in these
regulations has been reviewed and, pending receipt and evaluation of
public comments, approved by the Office of Management and Budget under
control number 1545-1478. Responses to this collection of information
are required in order for U.S. shareholders that transfer stock or
securities in section 367(a) exchanges to qualify for an exception to
the general rule of taxation under section 367(a)(1).
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
For further information concerning this collection of information,
and where to submit comments on the collection of information and the
accuracy of the estimated burden, and suggestions for reducing this
burden, please refer to the preamble to the cross-referencing notice of
proposed rulemaking published in the Proposed Rules section of this
issue of the Federal Register. Books or records relating to a
collection of information must be retained as long as their contents
may become material in the administration of any internal revenue law.
Generally, tax returns and tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
On May 16, 1986, temporary and proposed regulations under sections
367 (a) and (d) and section 6038B were published in the Federal
Register (51 FR 17936). These regulations were published to provide the
public with guidance necessary to comply with changes made to the
Internal Revenue Code by the Tax Reform Act of 1984. Included in the
1986 temporary regulations was Sec. 1.367(a)-3T, concerning transfers
of stock or securities of domestic or foreign corporations by U.S.
persons to foreign corporations. Subsequently, the IRS and the Treasury
Department issued Notice 87-85 (1987-2 C.B. 395), which set forth
substantial changes to be made to Sec. 1.367(a)-3T, effective with
respect to transfers occurring after December 16, 1987. A further
notice of proposed rulemaking, containing rules under section 367(a),
as well as under section 367(b), was published in the Federal Register
on August 26, 1991 (56 FR 41993). The 1991 proposed section 367(a)
regulations were generally based upon the positions announced in Notice
87-85, but the regulations made certain modifications to Notice 87-85,
particularly with respect to transfers of stock or securities of
foreign corporations.
Most recently, the IRS and the Treasury Department issued Notice
94-46 (1994-1 C.B. 356), announcing modifications to the positions set
forth in Notice 87-85 (and the 1991 proposed regulations) with respect
to transfers of stock or securities of domestic corporations occurring
after April 17, 1994. The temporary regulations set forth herein
generally incorporate the modifications announced in Notice 94-46. The
notice of proposed rulemaking on this subject in the Proposed Rules
section of this issue of the Federal
[[Page 66740]]
Register supplements and, where inconsistent with, supersedes, the 1991
proposed regulations with respect to transfers of domestic stock or
securities occurring after April 17, 1994.
Notice 94-46 announced that the regulations under section 367(a)
would be amended to deny nonrecognition treatment to the transfer of
stock or securities of a domestic corporation by a U.S. person to a
foreign corporation if all U.S. transferors owned in the aggregate 50
percent or more of either the total voting power or the total value of
the stock of the transferee foreign corporation immediately after the
exchange. (Under the approach taken in Notice 87-85, transfers of
domestic stock or securities occurring prior to April 18, 1994 (and
after December 16, 1987) were generally denied nonrecognition treatment
only in the case of a single U.S. transferor that owned more than 50
percent of the total voting power or the total value of the stock of
the transferee foreign corporation immediately after the transfer or of
a U.S. transferor that held at least 5 percent (but no more than 50
percent) of the total voting power or the total value of the stock of
the transferee foreign corporation immediately after the transfer and
that failed to enter into a gain recognition agreement.)
In Notice 94-46, the IRS and the Treasury Department invited
comments on possible exceptions to the general rule set forth in the
Notice, specifically with respect to cases where (i) a domestic
corporation is acquired by a foreign corporation that is engaged in an
active trade or business and that, prior to the transaction, is
unrelated to the acquired corporation or its shareholders, or (ii) the
transferee foreign corporation is a controlled foreign corporation
(within the meaning of section 957) after the transfer. After
consideration of the comments received, the IRS and the Treasury
Department have concluded that no exceptions to the general rule are
warranted.
In the Notice, the IRS and the Treasury Department also invited
specific comment on whether special rules should be provided to
determine the ownership of the transferee foreign corporation in cases
where the corporation is publicly traded. As described below, in
response to comments received, the ``cross-ownership'' rules of Notice
94-46 have been modified in a way that will ameliorate the burdens of
identifying shareholders of publicly traded (or widely-held)
corporations and that should reduce the impact of the general rule on
business combinations involving unrelated U.S. and foreign corporations
that are engaged in the active conduct of a trade or business.
Need for Temporary Regulations
The rules contained in this Treasury decision provide taxpayers
with guidance necessary to comply with Notice 94-46, which was
effective with respect to transfers of stock or securities of domestic
corporations to foreign corporations occurring after April 17, 1994.
The provisions of Notice 94-46 were made immediately effective to
forestall certain tax-avoidance transfers by U.S. persons of the stock
of U.S.-based multinationals to foreign corporations. Because of the
Notice's immediate effective date, there is a need for implementing
regulations on which both taxpayers and the Service may rely with
respect to current transfers.
Based on these considerations, it is determined that immediate
regulatory guidance will ensure the efficient administration of the tax
laws and that it would be impracticable and contrary to the public
interest to issue this Treasury decision with prior notice under
section 553(b) or subject to the effective date limitation of section
553(d) of title 5 of the United States Code.
Explanation of Provisions
Section 367(a)(1) generally treats a transfer of property
(including stock or securities) by a U.S. person to a foreign
corporation in connection with an exchange described in section 332,
351, 354, 356 or 361 as a taxable exchange unless the transfer
qualifies for an exception to this general rule. Temporary regulations
published on May, 16, 1986 (TD 8087) provided exceptions in the case of
certain transfers of stock or securities of domestic and foreign
corporations (see Sec. 1.367(a)-3T). Notice 87-85 announced
modifications to those exceptions for transfers of domestic or foreign
stock or securities occurring after December 16, 1987. Proposed
regulations issued on August 26, 1991 largely incorporated the
positions set forth in Notice 87-85, and expanded the application of
section 367(a) with respect to certain transfers of stock or securities
of foreign corporations. Notice 94-46 announced modifications to the
exceptions originally announced in Notice 87-85, effective with respect
to certain transfers of stock or securities of domestic corporations
occurring after April 17, 1994.
Both the temporary regulations herein and the notice of proposed
rulemaking on this subject in the Proposed Rules section of this issue
of the Federal Register generally incorporate the positions taken in
Notice 94-46, with modifications as described below. As indicated
previously, Notice 94-46 did not modify the positions taken in Notice
87-85 governing the transfer of stock or securities of a foreign
corporation. Until the 1991 proposed regulations are finalized, the
positions originally announced in Notice 87-85 will continue to govern
the availability of section 367(a) exceptions for transfers of stock or
securities of foreign corporations.
In addition to implementing the positions announced in Notice 94-
46, this Treasury decision removes those portions of Sec. 1.367(a)-3T
of the 1986 temporary regulations that Notice 87-85 announced would no
longer be applicable with respect to stock transfers occurring after
December 16, 1987. This includes removal of the exceptions in
paragraphs (c) (1) through (4) (providing exceptions for certain
transfers of domestic stock or securities); of paragraph (d) (providing
exceptions for certain transfers of foreign stock or securities,
including an exception for transfers to a foreign corporation organized
in the same foreign country as the corporation the stock of which is
being transferred); of paragraph (e) (involving exceptions where stock
is an operating asset or where there is a consolidation of an
integrated business); and of paragraph (f) (exceptions where U.S.
transferors obtain a limited interest in the transferee foreign
corporation).
The temporary regulations herein also incorporate (in paragraph
(a)) the 1991 proposed regulations' restatement of the general rule
applicable to outbound stock transfers (see Prop. Reg. Sec. 1.367(a)-
3(a)). This restatement revises the general rule contained in the 1986
temporary regulations to reflect changes to section 367 made by
Congress after promulgation of those regulations. For example, the 1986
temporary regulations' statement of the general rule included transfers
of stock or securities in section 332 liquidations as one of the
transactions covered by section 367(a) (see Sec. 1.367(a)-3T(a)). The
restatement of the general rule in the temporary regulations herein
removes the reference to section 332 because an outbound transfer of
stock or securities pursuant to a section 332 liquidation is now
covered by section 367(e)(2) and the regulations under Sec. 1.367(e)-
2T. Even though the temporary regulations under Sec. 1.367(e)-2T have
sunset (because they were promulgated as temporary regulations on
January 12, 1990 (TD 8280) and were not finalized within three years of
that date), the Service announced its
[[Page 66741]]
intention to follow the principles of those regulations in the preamble
to the final regulations under section 367(e)(1) (see the preamble to
the final section 367(e)(1) regulations in TD 8472, adopted January 15,
1993).
The revised statement of the general rule herein refers explicitly
to transfers that may be indirect or constructive. Thus, transactions
that are recharacterized as indirect or constructive stock transfers
will be subject to the section 367(a) stock transfer regulations and
will be taxable unless an exception applies.
The restatement of the general rule herein is not intended to
change the 1986 temporary regulations' treatment of a case in which
stock or securities of a foreign corporation are transferred pursuant
to a reorganization described in section 368(a)(1)(B), including a
transaction that is described in both section 368(a)(1)(B) and section
351. It is anticipated, however, that the final regulations issued with
respect to an outbound transfer of foreign stock or securities will
incorporate the principles of the 1991 proposed regulations, and thus,
for example, a transaction described in both section 368(a)(1)(B) and
section 351 will be subject to section 367(a).
Notice 87-85 and the 1991 Proposed Regulations
Under Notice 87-85 and the 1991 proposed regulations, a U.S.
transferor of stock or securities that owns five percent or more of
either the total voting power or the total value of the transferee
foreign corporation immediately after the transfer generally is not
subject to current taxation under section 367(a)(1) if that transferor
enters into a gain recognition agreement (GRA). The term of the GRA is
five years if all U.S. transferors, in the aggregate, own less than 50
percent of both the total voting power and the total value of the stock
of the transferee foreign corporation immediately after the transfer,
or ten years if the U.S. transferors, in the aggregate, own 50 percent
or more of either the total voting power or the total value of the
stock of the transferee foreign corporation immediately after the
transfer. U.S. transferors that own an interest of less than 5 percent
in the transferee foreign corporation immediately after the transfer
are not taxable under section 367(a)(1) and are not required to enter
into a GRA. If a single U.S. transferor transfers stock or securities
of a domestic corporation and owns directly or by attribution more than
50 percent of either the total voting power or the total value of the
stock of the transferee foreign corporation immediately after the
transfer, gain is recognized on the exchange.
The determination whether (i) a U.S. transferor owns five percent
or more of the transferee foreign corporation immediately after the
transfer, (ii) U.S. transferors own in the aggregate 50 percent or more
of the transferee foreign corporation (and, thus, whether a 10-year GRA
is required), or (iii) a single U.S. transferor owns more than 50
percent of the transferee foreign corporation (and, thus, whether gain
is recognized) takes into account both stock of the transferee foreign
corporation received by the U.S. transferor(s) in the exchange and
stock in the transferee foreign corporation owned by the U.S.
transferor(s) independent of the exchange (referred to as cross-
ownership).
Notice 87-85 and the 1991 proposed regulations presume that U.S.
transferors own in the aggregate 50 percent or more of the total voting
power or the total value of the transferee foreign corporation
immediately after the transfer (and thus a ten-year GRA is required),
unless U.S. transferors can demonstrate otherwise (referred to as the
ownership presumption). The ownership presumption contained in both the
Notice and the 1991 proposed regulations actually consists of two
rebuttable presumptions, one relating to ownership of stock in the U.S.
corporation the stock or securities of which are transferred (referred
to as the U.S. target company) and the other relating to ownership of
stock in the transferee foreign corporation.
Under the first presumption, all persons that exchange U.S. target
company stock (or other property) for stock of the transferee foreign
corporation in the exchange are presumed to be U.S. persons. Thus, if
shareholders of the U.S. target company receive 50 percent or more of
the stock of the transferee foreign corporation in the exchange, U.S.
transferors are presumed to own 50 percent or more of the stock of the
transferee foreign corporation immediately after the transfer. Even if
application of this first presumption does not result in U.S.
transferors being deemed to own at least 50 percent of the total voting
power or the total value of the transferee foreign corporation
immediately after the transfer, the second presumption may do so. The
second presumption is that U.S. transferors also own stock of the
transferee foreign corporation independent of the exchange in an amount
sufficient to bring their total ownership immediately after the
exchange up to 50 percent. This second component of the ownership
presumption is referred to as the cross-ownership presumption.
Notice 94-46
Notice 94-46 modified the exceptions set forth in Notice 87-85 with
respect to post-April 17, 1994 transfers of stock or securities of
domestic corporations. The purpose of Notice 94-46 was to forestall
outbound transfers that are structured to avoid or that lay a
foundation for future avoidance of the Internal Revenue Code anti-
deferral regimes by imposing a shareholder-level tax on such transfers.
Notice 94-46 stated that regulations would provide that the transfer of
stock or securities of a domestic corporation by a U.S. person to a
foreign corporation described in section 367(a) would be taxable if all
U.S. transferors owned, in the aggregate, 50 percent or more of either
the total voting power or the total value of the stock of the
transferee corporation immediately after the exchange. All U.S.
transferors, regardless of their level of ownership, would be subject
to tax in such a case.
The rules of Notice 94-46 incorporated the ownership presumption of
Notice 87-85. As a result of the cross- ownership aspect of that
presumption, even if U.S. shareholders receive significantly less than
50 percent of the stock of a transferee foreign corporation in an
exchange described in section 367(a), the transaction could still be
taxable. If, for example, U.S. shareholders of a U.S. target company
received 30 percent of the stock of a transferee foreign corporation in
an exchange described in section 367(a)(1), those shareholders would be
presumed to own independently at least an additional 20 percent of the
stock of the transferee foreign corporation immediately after the
transfer, with the result that the exchange would be taxable (unless
the cross-ownership presumption were rebutted). Commentators argued
that where a U.S. target company and a foreign acquirer were publicly
traded or widely-held, taxpayers' ability to rebut the cross-ownership
aspect of the ownership presumption was limited. As a result, Notice
94-46 potentially had the effect of forestalling acquisitions of U.S.
public companies by larger foreign corporations in cases where they
were unrelated and both engaged in the active conduct of a trade or
business.
In response to comments received from taxpayers, and in particular
with respect to the difficulties of rebutting the cross-ownership
presumption, these temporary regulations modify positions taken in
Notice 94-46 in two significant ways. First, the regulations shift the
ownership threshold from ``50 percent
[[Page 66742]]
or more'' to ``more than 50 percent'' so that a U.S. transferor may
qualify for an exception to section 367(a) in cases where U.S.
transferors, in the aggregate, receive exactly 50 percent of the stock
of the transferee foreign corporation in the exchange. The relaxation
of the ownership threshold was intended to give 50-50 joint ventures
involving unrelated U.S. and foreign corporations that are engaged in
active businesses the option of using a foreign transferee corporation.
Where a foreign corporation is smaller than a U.S. corporation that it
acquires, the transaction will still generally be taxable; it would not
be taxable if the U.S. participant were the acquiring corporation in
the transaction (or if another U.S. holding company were the acquiring
corporation). Second, although the regulation retains the presumption
that shareholders of the U.S. target company are U.S. persons, it does
not, in general, retain the cross-ownership presumption and no longer,
as a general matter, takes cross-ownership into account. The regulation
counts cross-ownership only in the limited circumstance where U.S.
officers, directors, and 5-percent or greater shareholders of the U.S.
target company own, in the aggregate, more than 50 percent of the total
voting power or the total value of the transferee foreign corporation
immediately after the transfer (a control group case). In such a case,
the exchange is taxable to all U.S. transferors. The regulation allows
taxpayers to rely on Schedule 13-D or 13-G filings made under the
Securities Exchange Act of 1934 (15 U.S.C. 78m) to identify 5-percent
shareholders of public companies for this purpose.
Although cross-ownership does not count toward the 50 percent
ownership threshold (unless the control group case applies), it is
still relevant in determining whether a U.S. transferor owns five
percent or more of the transferee foreign corporation under the rules
originally announced in Notice 87-85. Moreover, cross-ownership
continues to be relevant for determining whether a 5-year or 10-year
GRA is required under the rules originally announced in 87-85, and, for
these purposes, there continues to be a rebuttable presumption.
In addition to the two modifications described above that were made
in response to comments received with respect to Notice 94-46, these
regulations contain a new active trade or business requirement not
contained in Notice 94-46, which taxpayers must meet in order to
qualify for an exception to the general rule of taxation under section
367(a). The IRS and the Treasury Department added the active trade or
business requirement to address abuse potential, in particular, in a
case in which a U.S. target company is smaller than a foreign acquirer
that was formed and capitalized with a view to enabling the smaller
U.S. company to move offshore. The IRS and the Treasury Department
believe that this type of transaction presents an inappropriate
opportunity for avoiding the anti-deferral regime without payment of
the tax envisioned by Notice 94-46. The IRS and the Treasury Department
believe that an exception to taxation is proper only in cases where a
combination of two active businesses is contemplated and that the
opportunity for tax avoidance is ameliorated when such businesses have
been conducted for a period of at least 36 months prior to the
exchange. Under the requirement contained in the regulations, no
exception to taxation is available unless either the transferee foreign
corporation or an affiliate of that corporation was engaged in the
active conduct of a trade or business for the entire 36-month period
prior to the exchange, and unless such business is substantial in
relation to the business conducted by the U.S. target company. For this
purpose, an affiliate is generally defined by reference to the rules in
section 1504(a) (without the exclusion of foreign corporations), and
generally includes a parent, subsidiary or brother-sister corporation
of the transferee foreign corporation.
To summarize, under the temporary regulations, a U.S. person that
exchanges stock or securities in a U.S. corporation for stock of a
foreign corporation in an exchange described in section 367(a) will be
taxable in cases where:
(i) The 50 percent ownership threshold is exceeded;
(ii) The control group case applies;
(iii) The active trade or business requirement is not met; or
(iv) The exchanging U.S. shareholder owns five percent or more of
the stock of the transferee foreign corporation and fails to enter into
a GRA and/or satisfy the requirements of section 6038B.
The duration of the GRA in case (iv) is 5 years if the transferor
can demonstrate that all U.S. transferors in the aggregate own less
than 50 percent of the total voting power or the total value of the
stock of the transferee foreign corporation immediately after the
transfer or 10 years if U.S. transferors own exactly 50 percent (or
more than 50 percent as a result of cross-ownership) of the transferee
foreign corporation immediately after the transfer. In all cases other
than those enumerated in (i) through (iv) above, a U.S. person that
transfers stock or securities of a domestic corporation in exchange for
stock of a transferee foreign corporation will not be taxable under
section 367(a) if certain reporting requirements described in the
regulations are met.
Final regulations under section 367(a) are expected to address the
transfer of stock or securities of foreign corporations and other
matters contained in the 1991 proposed regulations that are not
addressed herein.
Special Analyses
It has been determined that this temporary regulation is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that this regulation does not have a significant impact on a
substantial number of small entities. Thus, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply to these regulations, and
therefore, a Regulatory Flexibility Analysis is not required. Pursuant
to section 7805(f) of the Internal Revenue Code, a copy of these
temporary regulations will be submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on their
impact on small business.
Drafting Information
The principal author of these regulations is Philip L. Tretiak of
the Office of Associate Chief Counsel (International), within the
Office of Chief Counsel, Internal Revenue Service. However, other
personnel from the IRS and Treasury Department participated in their
development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and Recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
Part 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
[[Page 66743]]
Par. 2. Section 1.367(a)-3T is amended by revising paragraphs (a),
(c), (d), (e), (f), (g)(1) and (h)(1) to read as follows:
Sec. 1.367(a)-3T Treatment of transfers of stock or securities to
foreign corporations (temporary).
(a) In general. This section provides rules concerning the transfer
of stock or securities by a U.S. person to a foreign corporation in an
exchange described in section 367(a). In general, a transfer of stock
or securities by a U.S. person (directly, indirectly or constructively)
to a foreign corporation that is described in section 351, 354
(pursuant to a reorganization described in section 368(a)(1)(B)) or
section 361(a) or (b) is subject to section 367(a)(1) and, therefore,
is treated as a taxable exchange, unless one of the exceptions set
forth in paragraph (b), (c) or (d) of this section applies. For
additional rules relating to an exchange involving a foreign
corporation in connection with which there is a transfer of stock, see
section 367(b) and the regulations under that section. For additional
rules regarding a transfer of stock or securities in an exchange
described in section 361(a) or (b), see section 367(a)(5) and any
regulations under that section.
* * * * *
(c) Transfers by U.S. persons of stock or securities of domestic
corporations to foreign corporations--(1) In general. Except as
provided in section 367(a)(5), a transfer of stock or securities of a
domestic corporation by a U.S. person to a foreign corporation that
would otherwise be subject to section 367(a)(1) under paragraph (a) of
this section shall not be subject to section 367(a)(1) if the domestic
corporation the stock or securities of which are transferred (referred
to as the U.S. target company) complies with the reporting requirements
in paragraph (c)(4) of this section and if each of the following four
conditions is met:
(i) Fifty percent or less of both the total voting power and the
total value of the stock of the transferee foreign corporation is
received in the transaction, in the aggregate, by U.S. transferors
(i.e., the amount of stock received does not exceed the 50 percent
threshold).
(ii) No more than 50 percent of each of the total voting power and
the total value of the stock of the transferee foreign corporation is
owned, in the aggregate, immediately after the transfer by U.S. persons
who are either officers or directors of the U.S. target company or who
are five-percent target shareholders (as defined in paragraph
(c)(6)(iii) of this section) (i.e., there is no control group). For
purposes of this paragraph (c)(1)(ii), any stock of the transferee
foreign corporation owned by U.S. persons immediately after the
transfer will be taken into account, whether or not it was received in
the exchange for stock or securities of the U.S. target company.
(iii) In the case of a transfer occurring after January 25, 1996,
the transferee foreign corporation or an affiliate of the transferee
foreign corporation has been engaged in the active conduct of a trade
or business, within the meaning of Sec. 1.367(a)-2T(b)(2) and (3), that
is substantial in comparison to the trade or business of the U.S.
target company, for the entire 36-month period immediately preceding
the date of the transfer.
(iv) Either--
(A) The U.S. person is not a five-percent transferee shareholder
(as defined in paragraph (c)(6)(ii) of this section); or
(B) The U.S. person is a five-percent transferee shareholder and
enters into an agreement to recognize gain with respect to the U.S.
target company stock or securities it exchanged in the form provided in
paragraph (g) of this section, as modified by paragraph (c)(3) of this
section (setting the duration of the gain recognition agreement).
(2) Ownership Presumption. For purposes of paragraph (c)(1) of this
section, persons who transfer stock or securities of the U.S. target
company or other property in exchange for stock of the transferee
foreign corporation are presumed to be U.S. persons. This presumption
may be rebutted in accordance with paragraph (c)(4)(ii) of this
section.
(3) Term of the gain recognition agreement. If, immediately after
the transfer described in section 367(a)(1), all U.S. transferors own
in the aggregate less than fifty percent of both the total voting power
and the total value of the stock of the transferee foreign corporation
(counting both stock of the transferee foreign corporation owned as a
result of the exchange as well as stock of the transferee foreign
corporation owned independently by such U.S. transferors), the
agreement to recognize gain shall be in the form specified in paragraph
(g)(3) of this section. The term of the agreement shall be ten years,
rather than the five years specified in paragraph (g)(3) of this
section, the waiver described in paragraph (g)(4) of this section shall
extend the period for assessment of tax for an additional five years,
and the certification and waiver described in paragraph (g)(5) of this
section must be filed for an additional five years if--
(i) The five-percent transferee shareholder cannot determine
whether the condition in the preceding sentence is satisfied; or
(ii) Immediately after the transfer, all U.S. transferors own in
the aggregate fifty percent or more of either the total voting power or
the total value of the stock of the transferee foreign corporation
(counting both stock of the transferee foreign corporation owned as a
result of the exchange, as well as stock of the transferee foreign
corporation owned independently by such U.S. transferors).
(4) Reporting requirements of U.S. target company. (i) In order for
a U.S. person that transfers stock or securities of a domestic
corporation to qualify for the exception to the general rule under
section 367(a)(1) provided by this paragraph (c), the U.S. target
company must comply with the reporting requirements contained in this
paragraph (c)(4). The U.S. target company must attach to its timely
filed U.S. income tax return (or a subsequent, timely filed amended
return) for the taxable year in which the transfer occurs a statement
titled ``Section 367(a)--Reporting of Cross-Border Transfer Under Reg.
Sec. 1.367(a)-3T(c)(4),'' signed under penalties of perjury by an
officer of the corporation, disclosing the following information--
(A) A description of the transaction in which a U.S. person or
persons transferred stock or securities in the U.S. target company to
the transferee foreign corporation in a transfer otherwise subject to
section 367(a)(1);
(B) The amount (specified as to the percentage of the total voting
power and the total value) of stock of the transferee foreign
corporation received in the transaction, in the aggregate, by persons
who transferred stock or securities of the U.S. target company or other
property. For additional information that may be required to rebut the
ownership presumption of paragraph (c)(2) of this section in cases
where more than 50 percent of either the total voting power or the
total value of the stock of the transferee foreign corporation is
received in the transaction, in the aggregate, by persons who
transferred stock or securities of the U.S. target company or other
property, see paragraph (c)(4)(ii) of this section;
(C) The amount (if any) of transferee foreign corporation stock
owned directly or indirectly (applying the attribution rules of
sections 267(c)(1) and (5)) immediately after the exchange by the U.S.
target company;
[[Page 66744]]
(D) A statement that there is no control group within the meaning
of paragraph (c)(1)(ii) of this section;
(E) A list of U.S. persons who are officers, directors or five-
percent target shareholders and the percentage of the total voting
power and the total value of the stock of the transferee foreign
corporation owned by such persons both immediately before and
immediately after the transaction; and
(F) A statement that the active trade or business test described in
paragraph (c)(1)(iii) of this section is satisfied by the transferee
foreign corporation or an affiliate and a description of such business.
(ii) To rebut the ownership presumption of paragraph (c)(2) of this
section, the U.S. target company must obtain ownership statements
(described in paragraph (c)(6)(i) of this section) from a sufficient
number of persons that transfer U.S. target company stock or securities
(or other property) in the transaction that are not U.S. persons to
demonstrate that the 50 percent threshold is not exceeded. In addition,
the U.S. target company must attach to its timely filed U.S. income tax
return (or a subsequent, timely filed amended return) for the taxable
year in which the transfer occurs a statement, titled ``Section
367(a)--Compilation of Ownership Statements under Reg. Sec. 1.367(a)-
3T(c),'' signed under penalties of perjury by an officer of the
corporation, disclosing the following information:
(A) The amount (specified as to the percentage of the total voting
power and the total value) of stock of the transferee foreign
corporation received, in the aggregate, by U.S. transferors;
(B) The amount (specified as to the percentage of total voting
power and total value) of stock of the transferee foreign corporation
received, in the aggregate, by foreign persons that filed ownership
statements;
(C) A summary of the information tabulated from the ownership
statements, including--
(1) The names of the persons that filed ownership statements
stating that they are not U.S. persons;
(2) The countries of residence and citizenship of such persons; and
(3) The ownership of such persons (by voting power and by value) in
the U.S. target company prior to the exchange and the amount of stock
of the transferee foreign corporation (by voting power and value)
received by such persons in the exchange.
(iii) For purposes of paragraph (c)(4), an income tax return
(including an amended return) will be considered timely filed if it is
filed prior to the time that the Internal Revenue Service discovers
that the reporting requirements of this paragraph have not been
satisfied.
(5) Special Rules--(i) Treatment of partnerships. For purposes of
paragraph (c), if a partnership (whether domestic or foreign) owns or
transfers stock or securities or other property in an exchange
described in section 367(a), each partner in the partnership, and not
the partnership itself, is treated as owning and as having transferred
a proportionate share of the stock or securities or other property. See
Sec. 1.367(a)-1T(c)(3).
(ii) Treatment of options. For purposes of paragraph (c) of this
section, one or more options (or an interest similar to an option) will
be treated as exercised and thus will be counted as stock for purposes
of determining whether the 50 percent threshold is exceeded or whether
a control group exists if a principal purpose of the issuance or the
acquisition of the option (or other interest) was the avoidance of the
general rule contained in section 367(a).
(iii) U.S. target has a vestigial ownership interest in transferee
foreign corporation. In cases where, immediately after the transfer,
the U.S. target company owns, directly or indirectly (applying the
attribution rules of sections 267(c) (1) and (5)) stock of the
transferee foreign corporation, that stock will not in any way be taken
into account (and, thus, will not be treated as outstanding) in
determining whether the 50 percent threshold under paragraph (c)(1)(i)
of this section is exceeded or whether a control group under paragraph
(c)(1)(ii) of this section exists.
(iv) Attribution rule. The rules of section 958 shall apply for
purposes of determining the ownership of stock, securities or other
property under this paragraph (c).
(6) Definitions--(i) Ownership statement. An ownership statement is
a statement, signed under penalties of perjury, stating--
(A) The identity and taxpayer identification number, if any, of the
person making the statement;
(B) That the person making the statement is not a U.S. person (as
defined in paragraph (c)(6)(iv) of this section);
(C) That the person making the statement is not related to any U.S.
person to whom the stock or securities owned by the person making the
statement are attributable under the rules of section 958, or, if stock
or securities are so attributable, the identity and taxpayer
identification number of the relevant U.S. person;
(D) The citizenship, permanent residence, home address, and U.S.
address, if any, of the person making the statement; and
(E) The ownership such person has (by voting power and by value) in
the U.S. target company prior to the exchange and the amount of stock
of the transferee foreign corporation (by voting power and value)
received by such person in the exchange.
(ii) Five-percent transferee shareholder. A five-percent transferee
shareholder is a person that owns at least five percent of either the
total voting power or the total value of the stock of the transferee
foreign corporation immediately after the transfer described in section
367(a)(1). For special rules involving cases in which stock is held by
a partnership, see paragraph (c)(5)(i) of this section.
(iii) Five-percent target shareholder. A five-percent target
shareholder is a person that owns at least five percent of either the
total voting power or the total value of the stock of the U.S. target
company immediately prior to the transfer described in section
367(a)(1). If the stock of the U.S. target company is described in Rule
13d-1(d) of Regulation 13D (17 CFR 240.13d-1(d)) (or any rule or
regulation to generally the same effect), promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934 (15
USC 78m), the existence or absence of filings of Schedule 13-D or 13-G
(or any similar schedules) may be relied upon for purposes of
identifying five-percent target shareholders. For special rules
involving cases in which U.S. target company stock is held by a
partnership, see paragraph (c)(5)(i) of this section.
(iv) U.S. Person. For purposes of this section, a U.S. person is
defined by reference to Sec. 1.367(a)-1T(d)(1). For application of the
rules of this section to stock or securities owned or transferred by a
partnership that is a U.S. person, however, see paragraph (c)(5)(i) of
this section.
(v) U.S. Transferor. A U.S. transferor is a U.S. person (as defined
in paragraph (c)(6)(iv) of this section) who transfers directly,
indirectly or constructively stock or securities of the U.S. target
company or other property in exchange for stock of the transferee
foreign corporation in an exchange described in section 367.
(vi) Transferee foreign corporation. A transferee foreign
corporation is the foreign corporation whose stock is received in the
exchange by U.S. persons.
[[Page 66745]]
(vii) Affiliate. An affiliate is a corporation that is a member of
the same affiliated group (as defined in section 1504(a), without
regard to section 1504(b)(3)) as the transferee foreign corporation.
(7) Certain transfers in connection with performance of services.
Section 367(a)(1) shall not apply to a domestic corporation's transfer
of its own stock or securities in connection with the performance of
services, if the transfer is considered to be to a foreign corporation
solely by reason of Sec. 1.83-6(d)(1).
(8) Examples. This paragraph (c) may be illustrated by the
following examples:
Example 1. Ownership presumption. (i) FC, a foreign corporation,
issues 51 percent of its stock to the shareholders of S, a domestic
corporation, in exchange for their S stock, in a transaction
described in section 367(a)(1).
(ii) Under paragraph (c)(2) of this section, all shareholders of S
who receive stock of FC in the exchange are presumed to be U.S.
persons. Unless this ownership presumption is rebutted, the condition
set forth in paragraph (c)(1)(i) of this section will not be satisfied,
and the exception in paragraph (c)(1) of this section will not be
available. As a result, all U.S. persons that transferred S stock will
recognize gain on the exchange. To rebut the ownership presumption, S
must comply with the reporting requirements contained in paragraph
(c)(4)(ii) of this section, obtaining ownership statements (described
in paragraph (c)(6)(i) of this section) from a sufficient number of
non-U.S. persons who received FC stock in the exchange to demonstrate
that the amount of FC stock received by U.S. persons in the exchange
does not exceed 50 percent.
Example 2. Filing of Gain Recognition Agreement. (i) The facts are
the same as in Example 1, except that FC issues only 40 percent of its
stock to the shareholders of S in the exchange. FC satisfies the active
trade or business test (described in paragraph (c)(1)(iii) of this
section). A, a U.S. person, owns 10 percent of S's stock immediately
before the transfer. All other shareholders of S own less than five
percent of its stock. None of S's officers or directors owns any stock
in FC immediately after the transfer. A will own 15 percent of the
stock of FC immediately after the transfer, 4 percent received in the
exchange, and the balance being stock in FC that A owned prior to and
independent of the transaction. No S shareholder besides A owns five
percent or more of FC immediately after the transfer. The reporting
requirements under paragraph (c)(4)(i) of this section are satisfied.
(ii) The condition set forth in paragraph (c)(1)(i) of this
section is satisfied because, even after application of the
presumption in paragraph (c)(2) of this section, U.S. transferors
could not receive more than 50 percent of FC's stock in the
transaction. There is no control group because five-percent target
shareholders and officers and directors of S do not, in the
aggregate, own more than 50 percent of the stock of FC immediately
after the transfer (A, the sole five-percent target shareholder,
owns 15 percent of the stock of FC immediately after the transfer,
and no officers or directors of S own any stock of FC immediately
after the transfer). Therefore, the condition set forth in paragraph
(c)(1)(ii) of this section is satisfied (and A's cross-ownership of
FC stock is not taken into account). The facts assume that the
condition set forth in paragraph (c)(1)(iii) of this section is
satisfied. Thus, U.S. persons that are not five-percent transferee
shareholders will not recognize gain on the exchange of S shares for
FC shares. A, a five-percent transferee shareholder, will not be
required to include in income any gain realized on the exchange in
the year of the transfer if he files a gain recognition agreement
(GRA) and complies with section 6038B. The duration of the GRA is
five years if all U.S. transferors own in the aggregate less than 50
percent of the total voting power and the total value of FC
immediately after the transfer, and ten years if this condition is
not satisfied. If A lacks the information to determine whether he is
eligible to file a five-year GRA (because the determination includes
a cross-ownership inquiry for all U.S. transferors), he is required
to file a ten-year GRA.
Example 3. Control Group. (i) The facts are the same as in Example
2, except that B, another U.S. person, is a 5- percent target
shareholder, owning 25 percent of S's stock immediately before the
transfer. B owns 40 percent of the stock of FC immediately after the
transfer, 10 percent received in the exchange, and the balance being
stock in FC that B owned prior to and independent of the transaction.
(ii) A control group exists because A and B, each a five-percent
target shareholder within the meaning of paragraph (c)(6)(iii) of this
section, together own more than 50 percent of FC immediately after the
transfer (counting both stock received in the exchange and stock owned
prior to and independent of the exchange). As a result, the condition
set forth in paragraph (c)(1)(ii) of this section is not satisfied, and
all U.S. persons (not merely A and B) who transferred S stock will
recognize gain on the exchange.
Example 4. Partnerships. (i) The facts are the same as in
Example 3, except that B is a partnership (domestic or foreign) that
has five equal partners, only two of whom, X and Y, are U.S.
persons. X and Y are treated as the owners and transferors of 5
percent each of the S stock owned and transferred by B and as owners
of 8 percent each of the FC stock owned by B immediately after the
transfer. Five-percent target shareholders thus own a total of 31
percent of the stock of FC immediately after the transfer (A's 15
percent, plus X's 8 percent, plus Y's 8 percent).
(ii) Because no control group exists, the condition in paragraph
(c)(1)(ii) of this section is satisfied. The conditions in paragraphs
(c)(1) (i) and (iii) of this section also are satisfied. Thus, U.S.
persons that are not five- percent transferee shareholders will not
recognize gain on the exchange of S shares for FC shares. A, X, and Y,
each a five-percent transferee shareholder, will not be required to
include in income in the year of the transfer any gain realized on the
exchange if they file GRAs and comply with section 6038B. The duration
of the GRA is five years if all U.S. transferors own in the aggregate
less than 50 percent of the total voting power and the total value of
FC immediately after the transfer, and ten years if this condition is
not satisfied. If A, X, and Y lack the information to determine whether
they are eligible to file five-year GRAs (because the determination
includes a cross- ownership inquiry for all U.S. transferors), they are
required to file ten-year GRAs.
(9) Effective date. This paragraph (c) applies to transfers
occurring after April 17, 1994. However, paragraph (c)(1)(iii) of this
section applies only to transfers occurring after January 25, 1996. For
transfers occurring before December 17, 1987, see Sec. 1.367(a)-3T(c)
(1) through (4) as contained in 26 CFR Part 1 revised April 1, 1995.
(d) Transfers of stock or securities of foreign corporations. For
guidance, see Notice 87-85 (1987-2 C.B. 395). See Sec. 601.601(d)(2) of
this chapter.
(e) [Reserved.] For transfers occurring before December 17, 1987,
see Sec. 1.367(a)-3T(e) as contained in 26 CFR Part 1 revised April 1,
1995.
(f) [Reserved.] For transfers occurring before December 17, 1987,
see Sec. 1.367(a)-3T(f) as contained in 26 CFR Part 1 revised April 1,
1995.
(g) Transferor's agreement to recognize gain upon later disposition
by transferee--(1) In general. A transfer of stock or securities shall
not be subject to section 367(a)(1) if--
(i) The transferor complies with the reporting requirements of
section 6038B and any regulations thereunder; and
(ii) The transferor files a binding agreement to recognize gain
upon the transferee corporation's later disposition of the transferred
stock or securities, in
[[Page 66746]]
accordance with the rules of this section.
* * * * *
(h) Anti-abuse rules.
(1) [Reserved.] For transfers occurring before December 17, 1987,
see Sec. 1.367(a)-3T(h)(1) as contained in 26 CFR Part 1 revised April
1, 1995.
* * * * *
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 3. The authority for citation for part 602 continues to read
as follows:
Authority: 26 U.S.C. 7805.
Par. 4. In Sec. 602.101, paragraph (c) is amended by revising the
entry in the table for ``1.367(a)-3T'' to read as follows:
``1.367(a)-3T.............................. 0026
1478''.
Dated: December 13, 1995.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved:
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-30829 Filed 12-22-95; 8:45 am]
BILLING CODE 4830-01-U
Complete official Federal Register PDF
FR Doc. 95-30541 Technical Amendments; Loans to One Borrower
[Federal Register Volume 60, Number 247 (Tuesday, December 26, 1995)]
[Rules and Regulations]
[Pages 66713-66720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30541]
=======================================================================
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[[Page 66714]]
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR 505, 506, 510, 512, 516, 543, 544, 545, 550, 552, 556, 563,
563b, 563c, 563d, 565, 566, 567, 571, 574, 575, 583, 584
[No. 95-200]
Technical Amendments; Loans to One Borrower
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of Thrift Supervision (OTS) is revising its
regulations to incorporate a number of technical and conforming
amendments. The amendments include corrections to: Amendments adopted
in 1994 that were not codified as OTS intended, cross-references that
became outdated due to other regulatory amendments, regulations
affected by legislation, regulations containing addresses, office
titles, and other titles that are out of date, the table setting forth
OMB control numbers assigned to regulations under the Paperwork
Reduction Act, and regulations containing typographical errors.
This rulemaking also adopts as final the OTS's interim final rule
regarding loans to one borrower (LTOB).
EFFECTIVE DATE: December 26, 1996.
FOR FURTHER INFORMATION CONTACT: For Technical and Conforming Amendment
information contact: Mary Gottlieb, Senior Paralegal, (202) 906-7135,
Regulations & Legislation Division, Chief Counsel's Office. For Loans
to One Borrower information contact: William J. Magrini, Project
Manager, Supervision Policy, (202) 906-5744; or Valerie J. Lithotomos,
Counsel (Banking and Finance), Regulations and Legislation Division,
Chief Counsel's Office, (202) 906-6439, Regulations and Legislation
Division, Chief Counsel's Office, Office of Thrift Supervision, 1700 G
Street, NW., Washington DC 20552.
SUPPLEMENTARY INFORMATION:
Technical and Conforming Amendments
Sections 505.1 through 505.4 are being amended to reflect the
reorganization and relocation of the Public Reference Room announced in
the Federal Register on September 14, 1995.1 The former
Information Services Division is now part of the Dissemination Branch
and is located at 1700 G Street, NW. on the lower level.
\1\ 60 FR 47801 (September 14, 1995).
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Part 506, concerning the control numbers assigned pursuant to the
Paperwork Reduction Act, is being amended to reflect the Paperwork
Reduction Act of 1995 2 and to generally update the regulation
reference table.
\2\ Pub. L. 104-13 (May 22, 1995).
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Section 516.1 is being amended to correct the addresses of OTS's
Regional Offices. The definition of ``CAMEL Rating'' found at
Sec. 516.3(c) is being amended to reflect the previous global change
from the MACRO to the CAMEL rating system for examinations.3
Section 516.3(c) still refers to the components of the obsolete MACRO
system.
\3\ 59 FR 18474 (April 19, 1994).
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The model bylaws for stock associations in the appendix to part 552
are being amended to make them conform with the regulatory change that
removed the annual independent audit requirement for small savings
associations with composite CAMEL ratings of 1 or 2.4 Institutions
regulated under the Securities Exchange Act of 1934 ('34 Act) will
still have to comply with Sec. 552.10, which requires associations to
send an annual report to stockholders containing financial statements
that satisfy the requirements of Rule 14a-3 of the '34 Act. Rule 14a-3
allows an institution that does not have an annual audit to include
unaudited financial statements in its annual report.
\4\ 59 FR 60300 (November 23, 1994).
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Sections 563b.2(a)(16) and 574.6(a)(4)-(a)(6) were inadvertently
removed 5 and are being reinstated without revision.
\5\ 59 FR 22725 (May 3, 1994); 59 FR 28468 (June 2, 1994).
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This final rule also includes a number of non-substantive technical
revisions correcting a variety of erroneous cross-references and
eliminating obsolete terminology. The majority of the revisions concern
the removal of the term ``District Director'' and ``District Office.''
The OTS's field offices were converted from district to regional
offices several years ago. The regulations have been reviewed to
determine, in each individual case, whether references to ``District
Director'' should refer instead to ``Regional Director'' or ``OTS,''
and whether references to ``District Office'' should refer instead to
``Regional Office'' or ``OTS.''
Loans to One Borrower
On March 28, 1995, the OTS published an interim final rule with
request for comment on LTOB.6 That interim final rule reflected
changes that the Office of the Comptroller of the Currency (OCC) had
recently made to its lending limits regulation. Section 5(u) of the
Home Owners' Loan Act requires that savings association lending limits
conform to those applicable to national banks.7
\6\ See 60 FR 15861 (March 28, 1995).
\7\ 12 U.S.C. 1464 (u).
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The comment period for the interim final rule closed on April 27,
1995. The OTS received two comment letters: one from a savings bank and
one from a national trade association. Both comment letters raised one
issue--whether the removal of the term ``monthly or quarterly'' (used
in describing the periodic reports in which LTOB limits must be
computed) prevents savings associations from calculating their LTOB
limits on a monthly basis.
The reference to ``monthly or quarterly'' was removed because the
OTS no longer requires institutions to file monthly Thrift Financial
Reports (TFRs). TFRs are now filed only at the end of each quarter.
Thus, for compliance tracking purposes, an institution's LTOB limits
are now normally computed on the basis of its unimpaired capital and
unimpaired surplus at the end of each quarter. The purpose for the
quarterly computation rule is to reduce the burden associated with
frequent recomputation of LTOB limits. The OTS will not object if
institutions choose to recompute their LTOB limits more frequently than
quarterly, provided that adequate documentation is maintained.
Moreover, we also note that the LTOB rule expressly provides that
if an association knows, or has reason to know, that its level of
unimpaired capital and unimpaired surplus has changed significantly,
either upward or downward, subsequent to a quarter-end computation, the
institution must recompute its LTOB limits.8
\8\ See 12 CFR 563.93(f)(1).
---------------------------------------------------------------------------
Because the OTS has decided to make no substantive changes to its
interim final rule, that rule is adopted as final today, with one
technical correction. The words ``general valuation'' are being removed
from the definition of ``unimpaired capital and unimpaired surplus'' at
Sec. 563.93(b)(11)(ii). In its present form, the definition specifies
that an association's ``general valuation allowances for loan and lease
losses not included in supplementary capital under part 567 of this
chapter'' are to be added to the association's computation of
unimpaired capital and unimpaired surplus.9 The words ``general
valuation''
[[Page 66715]]
were inadvertently included in the interim final rule. The words are
extraneous.
\9\ 60 FR at 15864.
---------------------------------------------------------------------------
Administrative Procedure Act; Riegle Community Development and
Regulatory Improvement Act of 1994
The OTS has found good cause to dispense with both prior notice and
comment on this final rule and a 30-day delay of its effective date
mandated by the Administrative Procedure Act.10 OTS believes that
it is contrary to public interest to delay the effective date of the
rule, as it corrects a number of errors that have caused confusion and
these corrections will aid the public in using OTS's regulations.
Because the technical amendments in the final rule are not substantive,
they will not detrimentally affect savings associations by becoming
effective immediately; the LTOB rule is already effective.
\10\ 5 U.S.C. 553.
---------------------------------------------------------------------------
In addition, this document is exempt from the requirement found in
section 302 of the Riegle Community Development and Regulatory
Improvement Act of 1994 11 that regulations must not take effect
before the first day of the quarter following publication, as it
imposes no new requirements.
\11\ Pub. L. No 103-325, 12 U.S.C. 4802.
---------------------------------------------------------------------------
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility
Act,12 it is certified that this technical corrections regulation
will not have a significant economic impact on a substantial number of
small savings associations, small service corporations, or other small
entities.
\12\ Pub. L. No 96-354, 5 U.S.C. 601.
---------------------------------------------------------------------------
Executive Order 12866
The Acting Director has determined that this rule is not a
``significant regulatory action'' for purposes of Executive Order
12866.
Unfunded Mandates Reform Act of 1995
The OTS has determined that the requirements of this final rule
will not result in expenditures by State, local, and tribal
governments, or by the private sector, of more than $100 million in any
one year. Accordingly, a budgetary impact statement is not required
under section 202 of the Unfunded Mandates Reform Act of 1995.
List of Subjects
12 CFR Part 505
Freedom of information.
12 CFR Part 506
Reporting and recordkeeping requirements.
12 CFR Part 510
Administrative practice and procedure.
12 CFR Part 512
Administrative practice and procedure, Investigations.
12 CFR Part 516
Administrative practice and procedure, Reporting and recordkeeping
requirements, Savings associations.
12 CFR Parts 543 and 544
Reporting and recordkeeping requirements, Savings associations.
12 CFR Part 545
Accounting, Consumer protection, Credit, Electronic funds
transfers, Investments, Manufactured homes, Mortgages, Reporting and
recordkeeping requirements, Savings associations.
12 CFR Part 550
Savings associations, Trusts and trustees.
12 CFR Part 552
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 556
Savings associations.
12 CFR Part 563
Accounting, Advertising, Crime, Currency, Flood insurance,
Investments, Mortgages, Reporting and recordkeeping requirements,
Savings associations, Securities, Surety bonds.
12 CFR Part 563b
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 563c
Accounting, Savings associations, Securities.
12 CFR Part 563d
Authority delegations (Government agencies), Reporting and
recordkeeping requirements, Savings associations, Securities.
12 CFR Part 565
Administrative practice and procedure, Capital, Savings
associations.
12 CFR Part 566
Liquidity, Reporting and recordkeeping requirements, Savings
associations.
12 CFR Part 567
Capital, Savings associations.
12 CFR Part 571
Accounting, Conflicts of interest, Investments, Reporting and
recordkeeping requirements, Savings associations.
12 CFR Part 574
Administrative practice and procedure, Holding companies, Reporting
and recordkeeping requirements, Savings associations, Securities.
12 CFR Part 575
Administrative practice and procedure, Capital, Holding companies,
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 583
Holding companies, Savings associations.
12 CFR Part 584
Administrative practice and procedure, Holding companies, Reporting
and recordkeeping requirements, Savings associations, Securities.
Accordingly, for the reasons set out in the preamble and under the
authority of 12 U.S.C. 1462a, the Office of Thrift Supervision hereby
amends chapter V, title 12 of the Code of Federal Regulations and
adopts as final the interim rule amending 12 CFR 563.93 published at 60
FR 15861 on March 28, 1995, with one change, as set forth below:
Chapter V [Amended]
1. Chapter V of title 12 is amended by removing the headings for
subchapters A through G; and by removing the term ``subchapter''
wherever it appears, and by adding in lieu thereof the word
``chapter''.
PART 505--FREEDOM OF INFORMATION ACT
2. The authority citation for part 505 continues to read as
follows:
Authority: 5 U.S.C. 552; 12 U.S.C. 1462a, 1463, 1464.
Sec. 505.1 [Amended]
3. Section 505.1 is amended in paragraph (a) by removing the word
``('Office')'', and by adding in lieu
[[Page 66716]]
thereof the word ``('OTS')'', and by removing the words ``the Office
as'', and adding in lieu thereof the words ``the OTS as''; and in
paragraph (b) by removing the word ``Office'' each place it appears,
and by adding in lieu thereof the word ``OTS''.
4. Section 505.2 is revised to read as follows:
Sec. 505.2 Public reference room.
The OTS will make materials available for review on an ad hoc basis
when necessary. Contact the Dissemination Branch, Records Management
and Information Policy Division, Office of Thrift Supervision, 1700 G
Street, NW., Washington, DC 20552, or visit the Public Reference Room
at 1700 G Street, NW., lower level, from 9:00 a.m. to 4:00 p.m. on
business days.
5. Section 505.3 is revised to read as follows:
Sec. 505.3 Requests for records.
Initial determinations under 31 CFR 1.5(g) as to whether to grant
requests for records of the OTS will be made by the Manager,
Dissemination Branch or by an official so designated. Requests may be
mailed to: Freedom of Information Act Request, Dissemination Branch,
Records Management and Information Policy Division, Office of Thrift
Supervision, 1700 G Street, NW., Washington, DC 20552, or marked
``FOIA'' and delivered in person to the Public Reference Room,
Dissemination Branch, Records Management and Information Policy
Division, 1700 G Street, NW., Lower Level. Requests may also be sent by
facsimile.
6. Section 505.4 is revised to read as follows:
Sec. 505.4 Administrative appeal of initial determination to deny
records.
Appellate determinations under 31 CFR 1.5(h) with respect to
records of the OTS will be made by the Executive Director for
Administration or the Director, Records Management and Information
Policy Division. Appeals by mail should be addressed to: Dissemination
Branch, Records Management and Information Policy Division, 1700 G
Street, NW., Washington, DC 20552. Appeals may be delivered personally
to the Dissemination Branch, Records Management and Information Policy
Division, Office of Thrift Supervision, 1700 G Street, NW., Lower
Level. Appeals may also be sent by facsimile.
PART 506--INFORMATION COLLECTION REQUIREMENTS UNDER THE PAPERWORK
REDUCTION ACT
7. The authority citation for part 506 continues to read as
follows:
Authority: 44 U.S.C. 3501 et seq.
8. Section 506.1 is revised to read as follows:
Sec. 506.1 OMB control numbers assigned pursuant to the Paperwork
Reduction Act.
(a) Purpose. This part collects and displays the control numbers
assigned to information collection requirements contained in
regulations of the Office of Thrift Supervision by the Office of
Management and Budget (OMB) pursuant to the Paperwork Reduction Act of
1995, Pub. L. 104-13, 109 Stat. 163, and is adopted in compliance with
the requirements of 5 CFR 1320.8. Information collection requirements
that are not mandated by statute must be assigned control numbers by
OMB in order to be enforceable.
(b) Display.
------------------------------------------------------------------------
Current OMB
12 CFR part or section where identified and described control No.
------------------------------------------------------------------------
502.3................................................... 1550-0053
510..................................................... 1550-0081
516.1(c)................................................ 1550-0056
Part 528................................................ 1550-0021
528.1a.................................................. 1550-0011
533.1................................................... 1550-0011
543.1................................................... 1550-0018
543.2................................................... 1550-0005
543.9................................................... 1550-0007
544.2................................................... 1550-0017
544.5................................................... 1550-0018
545.36(d)............................................... 1550-0011
545.74.................................................. 1550-0013
545.81.................................................. 1550-0077
545.82.................................................. 1550-0033
545.92.................................................. 1550-0006
545.95.................................................. 1550-0006
545.96(c)............................................... 1550-0011
545.121................................................. 1550-0047
545.131................................................. 1550-0011
546.2................................................... 1550-0016
546.4................................................... 1550-0066
550.2................................................... 1550-0037
550.14.................................................. 1550-0037
552.2-1................................................. 1550-0005
552.2-6................................................. 1550-0007
552.4................................................... 1550-0017
552.5................................................... 1550-0018
552.6................................................... 1550-0025
552.7................................................... 1550-0025
552.10.................................................. 1550-0019
552.11.................................................. 1550-0011
552.13.................................................. 1550-0016,
1550-0025
562.1(b)................................................ 1550-0011
563.1(b)................................................ 1550-0011
563.10.................................................. 1550-0027
563.22.................................................. 1550-0016,
1550-0025
563.34.................................................. 1550-0011
563.37(c)............................................... 1550-0067
563.38.................................................. 1550-0065
563.41(e)............................................... 1550-0011
563.42(e)............................................... 1550-0011
563.43 (f) through (h).................................. 1550-0075
563.43(i)(3)............................................ 1550-0075
563.47(e)............................................... 1550-0011
563.48(c)............................................... 1550-0011
563.74.................................................. 1550-0050
563.80.................................................. 1550-0061
563.81.................................................. 1550-0030
563.93(f)............................................... 1550-0011
563.99-563.101 (Subpart D), Appendix A.................. 1550-0078
563.99e................................................. 1550-0011
563.132................................................. 1550-0033
563.134................................................. 1550-0059
563.170................................................. 1550-0011
563.170(c).............................................. 1550-0011,
1550-0083
563.172................................................. 1550-0011
563.173(e).............................................. 1550-0011
563.174(e).............................................. 1550-0011
563.174(f).............................................. 1550-0011
563.175(e).............................................. 1550-0011
563.175(f).............................................. 1550-0011
563.177................................................. 1550-0041
563.180................................................. 1550-0084
563.180(d).............................................. 1550-0003
563.181................................................. 1550-0032
563.183................................................. 1550-0032
Part 563b............................................... 1550-0014
563b.4.................................................. 1550-0032
563b.20 through 563b.32................................. 1550-0074
Part 563d............................................... 1550-0019
Part 563e............................................... 1550-0012
Part 563f............................................... 1550-0051
Part 563g............................................... 1550-0035
Part 564................................................ 1550-0011
566.4................................................... 1550-0011
Part 568................................................ 1550-0062
571.6................................................... 1550-0005
574..................................................... 1550-0032
574.6................................................... 1550-0015
Part 575................................................ 1550-0071
584.2-1................................................. 1550-0063
584.2-2................................................. 1550-0063
584.9................................................... 1550-0063
------------------------------------------------------------------------
PART 510--MISCELLANEOUS ORGANIZATIONAL REGULATIONS
8a. The authority citation for part 510 is revised to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464.
Sec. 510.2 [Amended]
8b. Section 510.2 is amended in paragraph (a) by removing the
phrase ``subchapters A, B, C, D, E, F, and G of''.
PART 512--RULES FOR INVESTIGATIVE PROCEEDINGS AND FORMAL
EXAMINATION PROCEEDINGS
9. The authority citation for part 512 is revised to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467, 1467a, 1813; 15
U.S.C. 78 l.
[[Page 66717]]
Sec. 512.4 [Amended]
10. Section 512.4 is amended by removing the phrase ``Director or
any Deputy Director of Enforcement'', and by adding in lieu thereof the
phrase ``Deputy Chief Counsel for Enforcement or the appropriate
Regional Counsel for Enforcement''.
Sec. 512.5 [Amended]
11. Section 512.5 is amended in paragraph (a) by removing the
phrase ``Director or any Deputy Director of Enforcement'', and by
adding in lieu thereof the phrase ``Deputy Chief Counsel for
Enforcement or the appropriate Regional Counsel for Enforcement''.
PART 516--APPLICATION PROCESSING GUIDELINES AND PROCEDURES
12. The authority citation for part 516 continues to read as
follows:
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462a, 1463, 1464.
Sec. 516.1 [Amended]
13. Section 516.1 is amended in paragraph (b)(1) by removing the
word ``17th'' and by adding in lieu thereof the word ``18th''; in
paragraph (b)(2) by removing the number ``30348-5217'' and by adding in
lieu thereof the number ``30309''; in paragraph (b)(3) by removing the
phrase ``111 East Wacker Drive, suite 800, Chicago, Illinois 60601-
4360'', and by adding in lieu thereof the phrase ``200 West Madison
Street, Suite 1300, Chicago, Illinois 60606''; in paragraph (b)(4) by
removing the phrase ``P.O. Box 619027,''; and in paragraph (b)(5) by
removing the word ``Center'' and by adding in lieu thereof the word
``Street''.
14. Section 516.3 is amended by revising paragraph (c) to read as
follows:
Sec. 516.3 Definitions.
* * * * *
(c) CAMEL rating. A savings association's CAMEL rating is its
Capital, Assets, Management, Earnings, and Liquidity rating as of the
most recent rating update (as determined either on-site or off-site by
the most recent examination) of which the savings association has been
notified in writing.
* * * * *
PART 543--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL
MUTUAL ASSOCIATIONS
15. The authority citation for part 543 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
16. Section 543.8 is amended in paragraph (a) by removing the
phrase ``District Director or his or her designee'', and by adding in
lieu thereof the word ``OTS''; and by adding a second sentence to read
as follows:
Sec. 543.8 Conversion of State mutual charter to Federal charter.
(a) * * * Requests for such approval shall be filed in accordance
with Sec. 516.1(c) of this chapter.
Sec. 543.11 [Amended]
17. Section 543.11 is amended in paragraph (c)(1)(iii)(C) by
removing the last sentence.
PART 544--CHARTER AND BYLAWS
18. The authority citation for part 544 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
Sec. 544.3 [Amended]
19. Section 544.3 is amended in the petition by removing the phrase
``District Director'', and by adding in lieu thereof the phrase
``Regional Director''.
PART 545--OPERATIONS
20. The authority citation for part 545 continues to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1828.
Sec. 545.74 [Amended]
21. Section 545.74 is amended in paragraph (c)(4)(iv) by removing
the phrase ``District Director or his or her designee'', and by adding
in lieu thereof the phrase ``Regional Director''; and by removing the
phrase ``he or she has'', and by adding in lieu thereof the phrase
``there are''.
Sec. 545.82 [Amended]
22. Section 545.82 is amended in paragraph (c)(1)(i) by removing
the phrase ``District Director'', and by adding in lieu thereof the
phrase ``OTS'', and by removing the phrase ``of the parent Federal
savings association''; in paragraph (c)(1)(ii) by removing the phrase
``District Director'', and by adding in lieu thereof the word ``OTS'',
and by removing the phrase ``the Federal savings association's''; and
in paragraph (f)(2) by removing the phrase ``its District Director'',
and by adding in lieu thereof the phrase ``the OTS''.
Sec. 545.121 [Amended]
23. Section 545.121 is amended in paragraph (c) concluding text by
removing the phrase ``District Director'', and by adding in lieu
thereof the phrase ``Regional Director'', and by removing the phrase
``Director of the Office'', and by adding in lieu thereof the word
``OTS''; and in the third sentence of paragraph (e) by removing the
phrase ``it the person'', and by adding in lieu thereof the phrase ``if
the person''.
Sec. 545.131 [Amended]
24. Section 545.131 is amended in paragraph (b)(7) introductory
text by removing the phrase ``District Director'', and by adding in
lieu thereof the phrase ``Regional Director''.
PART 550--TRUST POWERS OF FEDERAL SAVINGS ASSOCIATIONS
25. The authority citation for part 550 continues to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1735f-7.
Sec. 550.2 [Amended]
26. Section 550.2 is amended in paragraph (c) introductory text by
removing the phrase ``District Director's'', and by adding in lieu
thereof the phrase ``Regional Director's''; and in paragraph (c)
introductory text, and paragraphs (c)(1), (c)(4), (c)(5), (c)(7),
(c)(9), and (d) by removing the phrase ``District Director'' each place
it appears, and by adding in lieu thereof the phrase ``Regional
Director''.
Sec. 550.3 [Amended]
27. Section 550.3 is amended by removing the phrase ``or the
District Director'', and by adding in lieu thereof the phrase
``Regional Director''.
Sec. 550.10 [Amended]
28. Section 550.10 is amended in paragraph (b)(2) by removing the
phrase ``District Director'', and by adding in lieu thereof the phrase
``Regional Director''.
Sec. 550.13 [Amended]
29. Section 550.13(b) is amended by removing the phrase ``shall
also be filed with the District Director and that the Office may review
such documents'', and by adding in lieu thereof the phrase ``shall also
be filed in accordance with the filing instructions in Sec. 516.1(c) of
this chapter and that the OTS may review such documents''.
Sec. 550.14 [Amended]
30. Section 550.14 is amended in paragraph (a) by removing the
phrase ``Sec. 500.32(c)(5)'', and by adding in lieu thereof the phrase
``Sec. 516.1(c)''; and in paragraphs (b) and (c) introductory text by
removing the phrase ``District Director'', and by adding in lieu
thereof the phrase ``Regional Director''.
[[Page 66718]]
Sec. 550.15 [Amended]
31. Section 550.15 is amended in paragraph (a) by removing the
phrase ``parts 558 and 559 of this title'', and by adding in lieu
thereof the phrase ``part 558 of this chapter''.
PART 552--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL
STOCK ASSOCIATIONS
32. The authority citation for part 552 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.
Sec. 552.5 [Amended]
33. Section 552.5 is amended in paragraph (a) by removing the
phrase ``552.6-3, and 552.6-4'', and by adding in lieu thereof the
phrase ``and 552.6-3''; and in paragraph (b)(1)(ii) by removing the
phrase ``552.6-3 and 552.6-4'', and by adding ``and 552.6-3'' in its
place.
34. Article VIII of the appendix to part 552 is revised to read as
follows:
Appendix to Part 552--Model Bylaws for Stock Associations
* * * * *
Article VIII--Fiscal Year
The fiscal year of the association shall end on the
________________ of ________________ of each year. The appointment
of accountants shall be subject to annual ratification by the
shareholders.
* * * * *
PART 556--STATEMENTS OF POLICY
34a. The authority citation for part 556 continues to read as
follows:
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1464, 1701j-3; 15 U.S.C.
1693-1693r.
Sec. 556.5 [Amended]
34b. Section 556.5 is amended in paragraph (c)(4) by removing the
phrases ``of chapter C'' and ``of chapter D''.
PART 563--OPERATIONS
35. The authority citation for part 563 continues to read as
follows:
Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,
1817, 1828, 3806; 42 U.S.C. 4106.
Sec. 563.9 [Amended]
36. Section 563.9 is amended in paragraph (f) by removing the
phrase ``Notwithstanding the provisions of Sec. 571.25 of this chapter,
a'', and by adding in lieu thereof the word ``A''.
Sec. 563.93 [Amended]
37. Section 563.93 is amended in paragraph (b)(11)(ii) by removing
the phrase ``general valuation''.
Sec. 563.134 [Amended]
38. Section 563.134 is amended in paragraphs (b)(5) and (c) by
removing the phrase ``District Director'', and by adding in lieu
thereof the phrase ``Regional Director''.
Sec. 563.160 [Amended]
39. Section 563.160 is amended in paragraphs (c)(2) and (d)(1) by
removing the phrase ``District Director'', and by adding in lieu
thereof the phrase ``Regional Director''; and by removing paragraph
(f).
Sec. 563.170 [Amended]
40. Section 563.170 is amended in paragraph (b)(1) by removing the
phrase ``District Director'' each place it appears, and by adding in
lieu thereof the phrase ``Regional Director'', and by removing the term
``District'' and by adding in lieu thereof the term ``Region''; in
paragraph (c)(3)(iii) by removing the phrase ``, its District Director,
or the'', and by adding in lieu thereof the phrase ``or its''; and in
paragraph (e) by removing the phrases ``District Director'' and
``District'', and by adding in lieu thereof the phrases ``Regional
Director'' and ``Region'', respectively.
Sec. 563.177 [Amended]
40a. Section 563.177 is amended in paragraphs (a) and (b) by
removing the phrase ``chapter II'', and by adding in lieu thereof the
phrase ``subchapter II''.
Sec. 563.183 [Amended]
41. Section 563.183 is amended in paragraph (c)(1) by removing the
phrase ``shall be by letter signed by the officer making the report
with the original and two copies to the District Director or his or her
designee'', and by adding in lieu thereof the phrase ``shall be done in
accordance with Sec. 516.1(c) of this chapter''.
PART 563b--CONVERSIONS FROM MUTUAL TO STOCK FORM
42. The authority citation for part 563b continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901; 15
U.S.C. 78c, 78l, 78m, 78n, 78w.
43. Section 563b.2 is amended by removing paragraph (a)(15), by
redesignating paragraph (a)(16) as paragraph (a)(15) and by adding new
paragraph (a)(16) to read as follows:
Sec. 563b.2 Definitions.
(a) * * *
(16) Employee. The term employee does not include a director or
officer.
* * * * *
Sec. 563b.3 [Amended]
44. Section 563b.3 is amended in the last sentence of paragraph
(c)(8) by removing the phrase ``Sec. 563b.10(c)'', and by adding in
lieu thereof the phrase ``Sec. 563b.10''.
Sec. 563b.3 [Amended]
44a. Section 563b.3 is amended in the charter provision of
paragraph (c)(13) by removing the phrase ``chapter D'', and by adding
in lieu thereof the phrase ``Part 563b''.
Sec. 563b.4 [Amended]
45. Section 563b.4 is amended by designating the concluding text of
paragraph (b)(1)(i) as paragraph (b)(1)(ii); and by removing the phrase
``Corporate and Securities'' where it appears in newly designated
paragraph (b)(1)(ii) and by adding in lieu thereof the phrase
``Business Transactions''.
Sec. 563b.8 [Amended]
46. Section 563b.8 is amended by removing the phrase ``Corporate
and Securities'' where it appears in the first, second, and third
sentences of paragraph (e)(1) and adding in lieu thereof the phrase
``Business Transactions''.
Sec. 563b.29 [Amended]
47. Section 563b.29 is amended in paragraph (b) by removing the
phrase ``District Director'', and by adding in lieu thereof the phrase
``Regional Director''.
PART 563c--ACCOUNTING REQUIREMENTS
48. The authority citation for part 563c is revised to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464; 15 U.S.C. 78c(b), 78m,
78n, 78w.
Sec. 563c.3 [Amended]
49. Section 563c.3 is amended by removing paragraph (b) and the
paragraph designation for paragraph (a).
PART 563d--SECURITIES OF SAVINGS ASSOCIATIONS
50. The authority citation for part 563d is revised to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464; 15 U.S.C. 78c(b), 78l,
78m, 78w, 78d-1.
Sec. 563d.1 [Amended]
51. Section 563d.1 is amended by removing the phrase ``Corporate
and Securities'', and by adding in lieu thereof the phrase ``Business
Transactions''.
Sec. 563d.2 [Amended]
52. Section 563d.2 is amended by removing the phrase ``Corporate
and
[[Page 66719]]
Securities'' where it appears in the first, third, and fourth
sentences, and by adding in lieu thereof the phrase ``Business
Transactions''; and by removing the word ``District'', and the phrases
``District Office'', ``District Offices'', and ``District Director''
where they appear, and by adding in lieu thereof the word ``Region'',
and the phrases ``Regional Office'', ``Regional Offices'', and
``Regional Director'', respectively.
PART 565--PROMPT CORRECTIVE ACTION
53. The authority citation for part 565 continues to read as
follows:
Authority: 12 U.S.C. 1831o.
Sec. 565.9 [Amended]
54. Section 565.9 is amended by removing the phrase ``section
565.8'' in paragraph (a) and by adding in lieu thereof the phrase
``Sec. 565.7''.
PART 566--LIQUIDITY
55. The authority citation for part 566 is revised to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1465, 1467a; 15
U.S.C. 1691, 1691a.
Sec. 566.2 [Amended]
56. Section 566.2 is amended in paragraph (c) by removing the
phrase ``, Sec. 566.1, and Sec. 566.3'', and by adding in lieu thereof
the phrase ``and Sec. 566.1''.
PART 567--CAPITAL
57. The authority citation for part 567 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828
(note).
58. Section 567.3 is amended by:
a. revising paragraph (a);
b. removing, in paragraph (b)(5), the phrase ``Sec. 563.131 of this
chapter or other Office regulations'', and by adding in lieu thereof
the phrase ``other Office regulations or other guidance'';
c. revising paragraph (d)(1);
d. removing, in paragraphs (d)(2) and (d)(3), the phrases
``District Director'' and ``District Director's'' each place they
appear, and by adding in lieu thereof the phrases ``OTS'' and
``OTS's'', respectively;
e. revising the fourth and fifth sentences of paragraph (d)(3), and
removing the third sentence of paragraph (d)(3); and
f. revising paragraph (d)(5). The revisions read as follows:
Sec. 567.3 Individual minimum capital requirements.
(a) Purpose and scope. The rules and procedures specified in this
section apply to the establishment of an individual minimum capital
requirement for a savings association that varies from the requirement
that would otherwise apply to the savings association under Sec. 567.2
of this part. Pursuant to 12 U.S.C. 1464(s), the OTS may establish such
individual minimum capital requirements for savings associations as it
deems necessary or appropriate on a case-by-case basis in light of the
particular circumstances of each savings association.
* * * * *
(d) Procedures--(1) Notification. When the OTS determines that a
minimum capital requirement different from that set forth in Sec. 567.2
of this part is necessary or appropriate for a particular savings
association, it shall notify the savings association in writing of its
proposed individual minimum capital requirement; the schedule for
compliance with the new requirement; and the specific causes for
determining that the higher individual minimum capital requirement is
necessary or appropriate for the savings association. The OTS shall
forward the notifying letter to the appropriate state supervisor if a
state-chartered savings association would be subject to an individual
minimum capital requirement.
* * * * *
(3) * * * The OTS shall provide the savings association and the
appropriate state supervisor (if a state-chartered savings association
is involved) with a written decision on the individual minimum capital
requirement, addressing the substantive comments made by the savings
association and setting forth the decision and the basis for that
decision. Upon receipt of this decision by the savings association, the
individual minimum capital requirement becomes effective and binding
upon the savings association. * * *
* * * * *
(5) Change in circumstances. If, after a decision is made under
paragraph (d)(3) of this section, there is a change in the
circumstances affecting the savings association's capital adequacy or
its ability to reach its required minimum capital level by the
specified date, OTS may amend the individual minimum capital
requirement or the savings association's schedule for such compliance.
The OTS may decline to consider a savings association's request for
such changes that are not based on a significant change in
circumstances or that are repetitive or frivolous. Pending the OTS's
reexamination of the original decision, that original decision and any
compliance schedule established thereunder shall continue in full force
and effect.
59. Section 567.4 is amended by:
a. removing, in paragraph (a)(1) introductory text, the phrase ``,
after referral of an appropriate case by a District Director and based
on a recommendation of the Office's Office of Enforcement developed in
coordination with the Deputy Director for Regional Operations'';
b. revising paragraph (a)(2) introductory text;
c. revising the second and fifth sentences in paragraph (a)(3)(i)
introductory text;
d. removing, in paragraph (a)(3)(i) introductory text the word
``Enforcement'' each place it appears, and adding in lieu thereof the
phrase ``the Office''; and in paragraphs (a)(3)(i)(A) and (C),
(a)(3)(ii), (a)(4), and (a)(5)(ii), by removing the words ``of
Enforcement'' each place it appears;
e. removing, in paragraph (a)(4), the phrase ``, based on a
recommendation from the Office developed in coordination with the
Deputy Director for Regional Operations,'';
f. revising paragraph (a)(6); and
g. removing in paragraph (b)(1) the phrase ``(such as an
application under Sec. 563.131 of this chapter, or an application for
approval to exceed its applicable equity risk investment threshold
pursuant to Sec. 563.98(g) of this chapter)''.
The revisions read as follows:
Sec. 567.4 Capital directives.
(a) * * *
(2) Notice of intent to issue capital directive. The OTS will
determine whether to initiate the process of issuing a capital
directive. The OTS will notify a savings association in writing by
registered mail of its intention to issue a capital directive. If a
state-chartered savings association is involved, the OTS will also
notify and solicit comment from the appropriate state supervisor. The
notice will state:
* * * * *
(3) Response to notice of intent. (i) * * * The response should
also include any information that the savings association wishes the
OTS to consider in deciding whether to issue a capital directive. * * *
Such responses shall be submitted in accordance with Sec. 516.1(c) of
this chapter. * * *
* * * * *
(6) Change in circumstances. Upon a change in circumstances, a
savings association may submit a request to the OTS to reconsider the
terms of the capital directive or consider changes in the savings
association's capital plan
[[Page 66720]]
issued under a directive for the savings association to achieve its
minimum capital requirement. If the OTS believes such a change is
warranted, the OTS may modify the savings association's capital
requirement or may refuse to make such modification if it determines
that there are not significant changes in circumstances. Pending a
decision on reconsideration, the capital directive and capital plan
shall continue in full force and effect.
* * * * *
Sec. 567.10 [Amended]
60. Section 567.10 is amended in paragraphs (a)(3) introductory
text and (c) by removing the phrase ``its District Director'' and by
adding in lieu thereof the phrase ``the Regional Director''.
Sec. 567.13 [Amended]
61. Section 567.13 is amended in paragraph (c) by removing the
phrase ``by the District Director''.
PART 571--STATEMENTS OF POLICY
62. The authority citation for part 571 continues to read as
follows:
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462a, 1463, 1464.
Sec. 571.6 [Amended]
63. Section 571.6 is amended in paragraphs (a)(2)(iv), (b)(3)(i),
(d)(1), (d)(2), (d)(4)(ii), and (g) by removing the phrase ``District
Director'', and by adding in lieu thereof the phrase ``Regional
Director''; and by redesignating paragraph (b)(3)(i) as paragraph
(b)(3).
Sec. 571.13 [Amended]
64. Section 571.13 is amended in the introductory text of paragraph
(a) by removing the phrase ``563.90 and''; and in paragraph (a)(1) by
removing the phrase ``or District Directors''.
Sec. 571.20 [Amended]
65. Section 571.20 is amended in paragraph (a) by removing the
phrase ``District Director'', and by adding in lieu thereof the phrase
``Regional Director''.
PART 574--ACQUISITION OF CONTROL OF SAVINGS ASSOCIATIONS
66. The authority citation for part 574 continues to read as
follows:
Authority: 12 U.S.C. 1467a, 1817, 1831i.
Sec. 574.2 [Amended]
67. Section 574.2 is amended by removing and reserving paragraph
(i).
Sec. 574.3 [Amended]
68. Section 574.3 is amended in paragraph (c)(2)(v) by removing the
phrase ``District Director'', and by adding in lieu thereof the phrase
``Regional Director''.
Sec. 574.4 [Amended]
69. Section 574.4 is amended in paragraph (c)(4)(ii) by removing
the phrase ``District Director or his or her designee'', and by adding
in lieu thereof the phrase ``Regional Director''; and in paragraph
(f)(2) by removing the phrase ``Sec. 574.6(b)(3) of this part'', and by
adding in lieu thereof the phrase ``Sec. 516.1(c) of this chapter''.
70. Section 574.6 is amended by adding paragraphs (a)(4) through
(a)(6); by removing in paragraph (c)(3)(ii)(D) the phrase ``chapter
II'', and by adding in lieu thereof the phrase ``subchapter II''; and
by removing paragraph (c)(3)(iii) to read as follows:
Sec. 574.6 Procedural requirements.
(a) * * *
(4) H-(e)3. This application shall be used for all applications
filed under Sec. 574.3(a) of this part:
(i) By a savings and loan holding company for approval of
acquisitions by a merger, consolidation, or purchase of assets of a
savings association or uninsured institution or a savings and loan
holding company; or
(ii) By any company for approval of acquisitions by a merger,
consolidation, or purchase of assets of two or more savings
associations.
(5) H-(e)4. This information filing shall be used to claim that a
reorganization is exempt from prior written approval of the OTS under
Sec. 574.3(c)(1)(ii) of this part.
(6) Notice Form 1393, parts A and B. This form shall be used for
all notices filed under Sec. 574.3(b) of this part regarding the
acquisition of control of a savings association by any person or
persons not constituting a company except as provided in paragraph
(a)(3) of this section.
* * * * *
Sec. 574.7 [Amended]
71. Section 574.7 is amended in paragraphs (a)(2)(iii)(A) and (E)
by removing the phrase ``Senior Deputy Director for Supervision
(Policy)'', and by adding in lieu thereof the word ``OTS''; in
paragraphs (a)(2)(iii)(F)(1) through (4) by removing the phrase
``District Director or his or her designee'', and by adding in lieu
thereof the word ``OTS''; and in paragraph (c)(2) introductory text by
removing the phrase ``(a)(4), and''.
PART 575--MUTUAL SAVINGS AND LOAN HOLDING COMPANIES
72. The authority citation for part 575 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828, 2901.
Sec. 575.2 [Amended]
72a. Section 575.2 is amended in paragraphs (i) and (p) by removing
the phrase ``of chapter F''.
Sec. 575.10 [Amended]
73. Section 575.10 is amended in paragraphs (a)(1) and (a)(2)(iii)
by removing the phrase ``and 571.5''.
Sec. 575.11 [Amended]
74. Section 575.11 is amended in paragraph (g) by removing the
phrase ``Secs. 563.39 and 571.5'', and by adding in lieu thereof the
phrase ``Sec. 563.39''.
PART 583--DEFINITIONS
75. The authority citation for part 583 is revised to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.
Sec. 583.10 [Removed]
76. Section 583.10 is removed.
PART 584--REGULATED ACTIVITIES
77. The authority citation for part 584 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.
Sec. 584.1 [Amended]
78. Section 584.1 is amended in paragraph (b) by removing the
phrase ``District Director'', and by adding in lieu thereof the phrase
``Regional Director''.
Sec. 584.2-2 [Amended]
79. Section 584.2-2 is amended in paragraph (b) by removing the
third sentence; and in paragraph (c) by removing the phrase ``the
District Director or the Director of the Office, as the case may be,'',
and by adding in lieu thereof the phrase ``the OTS''.
Dated: December 11, 1995.
By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 95-30541 Filed 12-22-95; 8:45 am]
BILLING CODE 6720-01-P
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