issue-1996-03-22•Federal Register final rules — 1996-03-22
Federal Register final rules — 1996-03-22
issue-1996-03-22Federal Register final rules — 1996-03-22Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 96-7073 Voting Rights Program
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11747-11748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7073]
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OFFICE OF PERSONNEL MANAGEMENT
45 CFR Part 801
Voting Rights Program
AGENCY: Office of Personnel Management.
ACTION: Final rule with request for comments.
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SUMMARY: The Office of Personnel Management (OPM) is establishing a new
office for filing applications or complaints under the Voting Rights
Act of 1965, as amended. This designation is necessary to enforce the
voting guarantees of the Fourteenth and Fifteenth amendments to the
Constitution. This amendment establishes Alameda County, California, as
a new office for filing applications or complaints.
DATES: This rule is effective March 23, 1996. In view of the need for
its publication without an opportunity for prior comment, comments will
still be considered. To be timely, comments must be received on or
before April 22, 1996.
ADDRESSES: Send or deliver comments to Barbara Matthews-Beck, Attorney,
Office of Personnel Management, Room 7F10, 1900 E Street NW.,
Washington, DC 20415.
FOR FURTHER INFORMATION CONTACT:
Barbara Matthews-Beck, (202) 606-1700.
SUPPLEMENTARY INFORMATION: Pursuant to the Settlement Agreement and
Order in United States of America v. Alameda County, California, et
al., C.A. No. 95-1266 (N.D. Cal. January 22, 1996), Alameda County has
been designated as an additional examination point under the provisions
of the Voting Rights Act of 1965, as amended. This designation is
necessary to enforce the guarantees of the Fourteenth and Fifteenth
amendments to the Constitution. Accordingly, pursuant to section 6 of
the Voting Rights Act of 1965, as amended, 42 U.S.C. Sec. 1973d, OPM
will appoint Federal Examiners to review the qualifications of
applicants to be registered to vote and Federal observers to observe
local elections.
Under Sec. 553(b)(3)(B) of title 5 of the United States Code, the
Director finds that good cause exists for waiving the general notice of
proposed rulemaking. The notice is being waived because of OPM's legal
responsibilities under 42 U.S.C. Sec. 1973e(a) and other parts of the
Voting Rights Act of 1965, as amended, which require OPM to publish
counties certified by the U.S. Attorney General and locations within
these counties where citizens can be federally listed and become
eligible to vote, and where Federal observers can be sent to observe
local elections.
Under Sec. 553(d)(3) of title 5 of the United States Code, the
Director finds that good cause exists to make this amendment effective
in less than 30 days. The regulation is being made effective
immediately in view of the pending election to be held in the subject
county, where Federal observers will observe the election under the
authority of the Voting Rights Act of 1965, as amended.
[[Page 11748]]
Regulatory Flexibility Act
I certify that this regulation will not have a significant economic
impact on a substantial number of small entities because it adds one
new location to the list of counties in the regulations concerning
OPM's responsibilities under the Voting Rights Act.
List of Subjects in 45 CFR Part 801
Administrative practice and procedure, Voting rights.
U.S. Office of Personnel Management.
James B. King,
Director.
Accordingly, OPM is amending 45 CFR Part 801 as follows:
PART 801--VOTING RIGHTS PROGRAM
1. The authority citation for Part 801 continues to read as
follows:
Authority: 5 U.S.C. Sec. 1103; secs. 7, 9, 79 Stat. 440, 411 (42
U.S.C. Secs. 1973e, 1973g).
2. Appendix A to Part 801 is amended under ``Dates, Times, and
Places for Filing'' by adding alphabetically Alameda County of
California to read as follows:
Appendix A to Part 801
* * * * *
Dates, Times, and Places for Filing
* * * * *
California
County; Place for filing; Beginning date
Alameda; Oakland-U.S. Attorneys Office, Oakland Branch, 1301 Clay
Street, Suite 3405, Oakland, California, 94612
(510) 637-3784 and (510) 637-3748; March 23, 1996
* * * * *
[FR Doc. 96-7073 Filed 3-21-96; 8:45 am]
BILLING CODE 6325-01-M
Complete official Federal Register PDF
FR Doc. 96-7040 Testing Consent Order For Alkyl Glycidyl Ethers
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11740-11743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7040]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 799
[OPPTS-42185; FRL-5356-7]
RIN 2070-0033
Testing Consent Order For Alkyl Glycidyl Ethers
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final consent agreement and order; final rule.
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SUMMARY: Pursuant to the Toxic Substances Control Act (TSCA), EPA has
issued a testing consent order (Order) that incorporates an enforceable
consent agreement (ECA) with Air Products and Chemicals, Inc., Callaway
Chemical Company, Ciba-Geigy Corporation, CVC Specialty Chemicals, and
Shell Chemical Company (the Companies). The Companies have agreed to
perform certain health effects tests on alkyl (C12-C13)
glycidyl ether (CAS No. 120547-52-6), as a representative of the alkyl
glycidyl ethers subcategory of EPA's proposed test rule for glycidol
and its derivatives. This notice summarizes the ECA, adds alkyl
(C12-C13) glycidyl ether to the list of chemical substances
and mixtures subject to testing consent orders, and announces that
export notification requirements apply to alkyl (C12-C13)
glycidyl ether.
EFFECTIVE DATE: March 22, 1996.
FOR FURTHER INFORMATION CONTACT: Susan B. Hazen, Director,
Environmental Assistance Division (7408), Office of Pollution
Prevention and Toxics, Rm. ET-543B, USEPA, 401 M St., SW., Washington,
DC 20460; telephone: (202) 554-1404, TDD: (202) 554-0551; e-mail: TSCA-
H[email protected].
SUPPLEMENTARY INFORMATION: This notice amends 40 CFR 799.5000 by adding
alkyl (C12-C13) glycidyl ether to the list of chemical
substances and mixtures subject to testing consent orders and export
notification requirements.
I. Background
Alkyl glycidyl ethers (AGEs) are epoxy resin additives derived from
glycidol and are used as modifiers for other epoxides in flooring and
adhesives. Their annual production volume is approximately 7 million
pounds. Approximately 37,000-69,000 workers may be exposed to AGEs.
In its Third Report to the EPA Administrator, published in the
Federal Register on October 30, 1978 (43 FR 50630), the TSCA section 4
Interagency Testing Committee (ITC) designated the category glycidol
and its derivatives (collectively referred to as ``glycidyls'') for
priority consideration for health effects testing with regard to the
following endpoints: Carcinogenicity, mutagenicity, teratogenicity, and
other adverse health effects, with particular emphasis on the
reproductive system. Epidemiological studies were also recommended. The
rationale for the original designation is discussed in the same Federal
Register notice. This chemical category was defined by the ITC as all
substances with the general formula:
R-O-CH2CH(O)CH2
where R is a hydrogen atom or any alkyl, aryl, or acyl group. R is
unrestricted as to the number and type of substituents it may carry.
On December 30, 1983, EPA published an advanced notice of proposed
rulemaking (ANPRM) (FRL-2480-7) in the Federal Register (48 FR 57562)
to require testing glycidyls under section 4(a) of TSCA.
In the November 7, 1991 issue of the Federal Register (56 FR
57144), EPA published a notice of proposed rulemaking (FRL-3736-2) for
testing the category glycidol and its derivatives. Unit I.D. of the
notice described EPA's evaluation of the testing needs for glycidyls.
The proposal contained testing requirements for, among others, the
following chemical substances: lauryl glycidyl ether (CAS No. 2461-18-
9); hexadecyl glycidyl ether (CAS No. 15965-99-8); n-octadecyl glycidyl
ether (CAS No. 16245-97-9); tetradecyl glycidyl ether (CAS No. 38954-
75-5); alkyl (C10-C16) glycidyl ether (CAS No. 68081-84-5);
and alkyl (C12-C14) glycidyl ether (CAS No. 68609-97-2). The
proposal designated these chemical substances as subcategory II-A.
The November 7, 1991, notice proposed that manufacturers of
subcategory II-A chemical substances conduct tests on a representative
member of the subcategory for the following endpoints: Subchronic
toxicity, developmental toxicity, subchronic neurotoxicity (functional
observational battery, motor activity, and neuropathology), and genetic
toxicology (immediately required testing--the salmonella typhimurium
reverse mutation assay; in vitro mammalian bone marrow cytogenetics;
and in vivo mammalian bone marrow cytogenetics tests: chromosomal
analysis or micronucleus assay).
II. Enforceable Consent Agreement Negotiations
On July 17, 1992, EPA published a Federal Register notice (57 FR
31714) (FRL-4078-9) announcing an ``open season''. The open season was
a time during which industry and other interested parties could submit
to EPA proposals for enforceable consent agreements (ECAs) to test
chemical substances for which the Agency had not issued final test
rules. In that notice, EPA indicated that it would review the
submissions and select candidates for negotiation of ECAs pursuant to
40 CFR 790.22. EPA also indicated that it would, at a future date,
publish a Federal Register notice soliciting persons interested in
participating in or monitoring negotiations for the development of ECAs
on the chemical substances selected.
On September 15, 1992, the Companies submitted a proposal (Ref. 1)
for a categorization scheme and a testing program that would be an
alternative to that described in the proposed test rule for the
category glycidol and its derivatives. The Companies proposed a testing
program for, among others, a representative of the subcategory II-A
chemical substances. On April 26, 1993, the Companies made another
proposal (Ref. 2) that expanded the scope of the testing program.
On August 18, 1993, EPA published a Federal Register notice (58 FR
43893) (FRL-4639-5) that solicited interested parties to participate in
or monitor ECA negotiations on subcategory II-A chemical substances.
On November 30, 1994, the Companies submitted a draft proposed ECA
(Ref. 3) that revised the material that they had previously submitted
in this matter. The Companies proposed as the test substance alkyl
(C12-C13) glycidyl ether (CAS No. 120547-52-6) which is
subsumed within the six subcategory II-A substances (60 FR 31154, June
13, 1995) (FRL-4960-3). These seven chemicals are referred to as alkyl
glycidyl ethers (AGEs). The Companies proposed the following tests--
subchronic toxicity (with an
[[Page 11741]]
assessment of testicular toxicity), developmental toxicity, subchronic
neurotoxicity (functional observational battery, motor activity,
neuropathology, and electrophysiology), and genetic toxicity (in vivo
mammalian bone marrow cytogenetics test: micronucleus assay). In
addition, the Companies offered to undertake voluntarily a product
stewardship program to address the potential health and environmental
hazards associated with AGEs in the workplace.
On June 13, 1995, EPA published a Federal Register notice (60 FR
31154) (FRL-4960-3) that resolicited interested parties to negotiate an
ECA for AGEs, and announced a public meeting for this negotiation. EPA
held the public meeting, which was attended by representatives of the
Companies and other interested parties, on July 26, 1995. During the
public meeting and following the meeting (Refs. 4, 5, 6, and 7),
consensus was reached on the ECA, with alkyl (C12-C13)
glycidyl ether to be tested as a representative of AGEs, and on the
tests to be included in the ECA (see table 1 in Unit IV of this
preamble). On January 22, 1996, EPA received the ECA and a memorandum
of understanding (MOU) for a product stewardship program, both signed
by the Companies.
On March 15, 1996, EPA signed the ECA and accompanying Order, and
the MOU.
III. Proposed Test Rule
EPA has decided not to finalize the proposed test rule for AGEs
contained in the proposed test rule for the category glycidol and its
derivatives (56 FR 57144, November 7, 1991) (FRL-3736-2). EPA has
instead reached agreement with the Companies that the testing
requirements for AGEs in the proposed rule will be met by implementing
the ECA and Order, and that the issuance of the ECA and Order
constitutes final EPA action for purposes of 5 U.S.C. 704. Should EPA
decide in the future that it requires additional data on AGEs, the
Agency will initiate a separate action.
IV. Testing Program
Table 1 describes the required testing, test standards, and
reporting requirements under the ECA for alkyl (C12-C13)
glycidyl ether as a representative of AGEs. This testing program will
allow EPA to characterize further the potential health hazards
resulting from exposure to AGEs.
Table 1.--Required Testing, Test Standards and Reporting Requirements
for Alkyl (C12-C13) Glycidyl Ether as a Representative of AGEs
------------------------------------------------------------------------
Test Deadline Interim
standard (40 for final reports\2\
Description of test CFR report\1\ required
citation) (months) (number)
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Subchronic Toxicity: (Appendix I) 21 3
1. 90-day dermal subchronic
toxicity study in rats with
assessment of testicular
toxicity.
Developmental Toxicity: (Appendix 21 3
II)
1. Dermal developmental
toxicity screen in rats.
Neurotoxicity: (Appendix 21 3
III)
1. Dermal subchronic
functional observational
battery in rats.
2. Dermal subchronic motor
activity test in rats.
3. Dermal subchronic
neuropathology in rats.
4. Dermal subchronic
electrophysiology in rats.
Genetic Toxicity: 798.5395 12 1
1. In vivo mammalian bone
marrow cytogenetics test:
Micronucleus assay in mice.
2. The salmonella typhimurium 798.5265 12 1
reverse mutation assay.
3. Detection of gene 798.5300 12 1
mutations in somatic cells
in culture.
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\1\ Number of months after the effective date of the testing consent
order.
\2\ Interim reports are required every 6 months from the effective date
until the final report is submitted. This column shows the number of
interim reports required for each test.
V. Export Notification
The issuance of the ECA and Order subjects any persons who export
or intend to export alkyl (C12-C13) glycidyl ether, of any
purity, to the export notification requirements of section 12(b) of
TSCA. The listing of a chemical substance or mixture at 40 CFR 799.5000
serves as notification to persons who export or intend to export such
chemical substance or mixture that the substance or mixture is the
subject of an ECA and Order and that 40 CFR part 707 applies.
VI. Public Record
EPA has established a record for this ECA and Order under docket
number OPPTS-42185 (FRL-5356-7), which is available for inspection
Monday through Friday, excluding legal holidays, in Rm. NE B607, 401 M
St., SW., Washington, DC 20460, from 12 noon to 4 p.m. Information
claimed as Confidential Business Information (CBI), while part of the
record, is not available for public review. This record contains the
basic information considered in developing this ECA and Order and
includes the following information.
A. Supporting Documentation
(1) Testing Consent Order for Alkyl Glycidyl Ethers, with
incorporated Enforceable Consent Agreement and associated testing
protocols attached as appendices.
[[Page 11742]]
(2) Federal Register notices pertaining to this notice, the testing
consent order and the enforceable consent agreement, consisting of:
(a) ``Third Report of the Interagency Testing Committee; receipt of
the report and request for comments'' (43 FR 50630, October 30, 1978).
(b) Advance notice of proposed rulemaking for glycidol and its
derivatives (48 FR 57562, December 30, 1983) (FRL-2480-7).
(c) Notice of proposed rulemaking for glycidol and its derivatives
(56 FR 57144, November 7, 1991) (FRL-3736-2).
(d) Notice of Opportunity to Initiate Negotiations for TSCA Section
4 Testing Consent Agreements (57 FR 31714, July 17, 1992) (FRL-4078-9).
(e) Notice of Testing Consent Agreement Development for Listed
Chemical Substances; Solicitation for Interested Parties (58 FR 43893,
August 18, 1993) (FRL-4639-5).
(h) Testing Consent Agreement Development for Alkyl Glycidyl
Ethers; Solicitation of Interested Parties and Notice of Public Meeting
(60 FR 31154, June 13, 1995) (FRL-4960-3).
(3) Communications consisting of:
(a) Written letters.
(b) Meeting summaries.
(4) Reports - published and unpublished factual materials.
B. References
1. The Epoxy Resin Systems Task Group of The Society of the
Plastics Industry, Inc. Letter from Lynne R. Harris to Gary E. Timm.
Proposed Testing Program for the Chemical Category Glycidol and Its
Derivatives. Washington, DC (September 15, 1992).
2. The Epoxy Resin Systems Task Group of The Society of the
Plastics Industry, Inc. Letter from Lynne R. Harris to TSCA Public
Docket Office. Testing Consent Agreement Development. Washington, DC
(April 26, 1993).
3. The Epoxy Resin Systems Task Group of The Society of the
Plastics Industry, Inc. Letter from Lynne R. Harris to Charles M. Auer.
Draft Enforceable Consent Agreement Proposed for Alkyl Glycidyl Ethers
and Product Stewardship Program. Washington, DC (November 30, 1994).
4. EPA. Letter from Frank D. Kover to Lynne R. Harris. Dermal
Absorption Study--ECA for Alkyl Glycidyl Ethers. Washington, DC (August
16, 1995).
5. EPA. Letter from Charles M. Auer to Lynne R. Harris. Enforceable
Consent Agreement for Alkyl Glycidyl Ethers; Final Draft for Test
Sponsors Signatures. Washington, DC (September 21, 1995).
6. The Epoxy Resin Systems Task Group of The Society of the
Plastics Industry, Inc. Letter from Lynne R. Harris to Keith Cronin.
Draft Protocols for Studies Required Under Enforceable Consent
Agreement. Washington, DC (December 21, 1995).
7. The Epoxy Resin Systems Task Group of the Plastics Industry,
Inc. Letter from Lynne R. Harris to Keith Cronin. Revisions to Draft
Protocols for Studies Required Under Enforceable Consent Agreement.
Washington, DC (February 9, 1996).
VII. Regulatory Requirements
A. Regulatory Assessments
This notice announces a testing consent order incorporating a
negotiated enforceable consent agreement between EPA and the Companies.
Since the action announced is not a ``regulation'', ``rule'' or
``regulatory action'' as these terms are defined by sections 3(d) and
(e) of Executive Order 12866 (58 FR 51735, October 4, 1993), the
Executive Order is not applicable. The current action is not a ``rule''
as defined by section 601(2) of the Regulatory Flexibility Act, 5
U.S.C. 601 et seq.; therefore, this statute does not apply. Similarly,
because the action is not a ``regulation'' or a ``rule'' within the
meaning of section 101(a) of the Unfunded Mandates Reform Act of 1995
(Pub. L. 104-4), the act is not applicable.
B. Paperwork Reduction Act
An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information, unless it displays a
currently valid control number assigned by the Office of Management and
Budget (OMB). The information collection requirements related to the
action announced in this notice have already been approved by OMB
pursuant to the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., under
OMB control number 2070-0033 (EPA ICR No. 1139). This action does not
impose any burdens requiring additional OMB approval.
The public reporting burden for this collection of information is
estimated to average 586 hours per response. The estimate includes time
for reviewing the test protocols attached to the ECA and gathering and
analyzing the data generated by the tests.
List of Subjects in 40 CFR Part 799
Environmental protection, Chemicals, Chemical export, Hazardous
substances, Health effects, Laboratories, Reporting and recordkeeping
requirements, and Testing.
Dated: March 15, 1996.
Lynn R. Goldman,
Assistant Administrator for Prevention, Pesticides and Toxic
Substances.
Therefore, title 40 of the Code of Federal Regulations, chapter I,
subchapter R, part 799 is amended as follows:
PART 799--[AMENDED]
1. The authority citation for part 799 continues to read as
follows:
Authority: 15 U.S.C. 2603, 2611, 2625.
2. Section 799.5000 is amended by adding alkyl (C12-C13)
glycidyl ether to the table in CAS number order, to read as follows:
Sec. 799.5000 Testing consent orders for substances and mixtures with
Chemical Abstract Service Registry Numbers.
* * * * *
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Substance or mixture
CAS Number name Testing FR publication date
----------------------------------------------------------------------------------------------------------------
* * * * * * *
120547-52-6 Alkyl (C12-C13) Health Effects......... March 22, 1996
Glycidyl Ether.
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[[Page 11743]]
[FR Doc. 96-7040 Filed 3-21-96; 8:45 am]
BILLING CODE 6560-50-F
Complete official Federal Register PDF
FR Doc. 96-7039 Waiver of Certain Types of Visas
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11717-11721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7039]
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DEPARTMENT OF JUSTICE
Immigration and Naturalization Service
8 CFR Part 212
[INS No. 1669-94]
RIN 1115-AD77
Waiver of Certain Types of Visas
AGENCY: Immigration and Naturalization Service, Justice.
ACTION: Final rule.
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SUMMARY: This rule amends the Immigration and Naturalization Service
(the Service) regulations to permit district directors, in individual
cases, to waive nonimmigrant visa or passport requirements under
section 212(d)(4)(A) of the Immigration and Nationality Act (the Act),
if satisfied that a nonimmigrant alien is unable to present these
documents because of an unforeseen emergency. The rule clarifies that
carriers are liable for fines imposed under section 273 of the Act for
bringing nonimmigrants to the United States who do not have a valid
passport or nonimmigrant visa, or border crossing identification card,
even if a waiver of these documents is granted by the district director
at the time of admission into the United States. This change was
necessary to conform the language of the regulations with the statutory
provision that imposes fine liability on a carrier which transports an
alien to the United States without the proper documentation.
EFFECTIVE DATE: March 22, 1996.
FOR FURTHER INFORMATION CONTACT:
Robert F. Hutnick, Assistant Chief Inspector, Inspections Division,
Immigration and Naturalization Service, 425 I Street NW., room 7228,
Washington, DC 20536, telephone number (202) 616-7499.
SUPPLEMENTARY INFORMATION: Section 212(d)(4)(A) of the Act allows the
Attorney General to waive the requirement that a nonimmigrant alien be
in possession of a visa or passport if he or she is unable to present
the necessary documents due to an unforeseen emergency. Section 273(b)
of the Act imposes a fine upon a carrier for violations of section
273(a) of the Act. Section 273(a) of the Act requires carriers bringing
aliens into the United States to ensure that its passengers are in
possession of a valid passport and unexpired visa, if a visa is
required under the Act or regulations
The regulations at 8 CFR 212.1(g) had the unintended effect of
relieving the carrier of fine liability if the district director
granted a waiver of the passport or nonimmigrant visa requirement. In
Air BVI Ltd., Flight BL 410 (BIA Unpublished Decision No. SAJ 10/
50.670, August 26, 1992), the Board of Immigration Appeals (the Board)
characterized the regulation as creating a ``blanket'' waiver because
of language in the regulation stated that ``a visa * * * is not
required.'' The Board based its decision on whether an alien's
admission with a waiver relieved the carrier of liability for a fine by
interpreting the regulations in effect at the time involved. Matter of
Plane ``CUT-604'', 7 I&N 701 (BIA 1958). If the regulations creates a
blanket waiver, by stating that no visa is required, no fine liability
is incurred by the carrier. By contrast, a regulation that provides for
a discretionary waiver of the visa and passport requirements to be
granted to a nonimmigrant on a case-by-case basis will not relieve the
carrier of fine liability.
This rule removes the language, ``[a] visa and a passport are not
required of a nonimmigrant'' so that even when the district director
waives the documentary requirements in the exercise of his or her
discretion, on a case-by-case basis, and admits such a nonimmigrant to
the United States, such admission will not eliminate the carrier's fine
liability for bringing that alien to the United States without proper
documentation (Matter of Plane ``CUT-604''). The fine procedures at 8
CFR 280 remain applicable and require no change.
This rule further amends Sec. 212.1(g) by removing the provision
regarding waivers of the visa requirement granted pursuant to section
212(d)(4)(A) of the Act in the case of a national or resident of Cuba.
This action is being taken because this provision is obsolete.
On April 14, 1995, at 60 FR 19001-19002, the Immigration and
Naturalization Service (the Service) published a proposed rule with
request for comments in the Federal Register, in order to correct this
loophole in the regulations which allowed carriers to transport
improperly documented aliens to the United States without incurring
fines under section 273 of the Act. Interested persons were invited to
submit written comments on or before June 13, 1995. The following is a
discussion of those comments received by the Service and the Service's
response.
Discussion of Comments on the Proposed Rule
The Service received four comments on the proposed rule. One
commenter claimed the proposed change ``will have an effect repugnant
to the intent of Congress, the existing regulation of the Attorney
General and the intended effect of the current regulation.'' It must be
emphasized that the Service policy of strictly enforcing the fine
provisions of section 273 of the Act in appropriate cases is a
continuation of a more than 70-year-old policy of carrying out
Congress' intent to hold carriers responsible for passengers they have
transported to the United States. The Board and the courts have
consistently held that carriers must exercise reasonable diligence in
boarding their passengers for transport to the United States and are
subject to administrative fines for failure to do so, e.g., Matter of
[[Page 11718]]
Eastern Airlines, Inc., Flight #798, Int. Dec. 3110 (BIA 1989); Matter
of M/V Guadalupe, 13 I&N Dec. 67 (BIA 1968); New York & Porto Rico S.S.
Co. v. United States, 66 F.2d 523, 525 (2d Cir. 1933).
The imposition of administrative fines in appropriate cases has
long been an important tool in enforcing our immigration laws and
safeguarding our borders. In enacting both section 273 of the Act of
1952 as well as section 16 of the Immigration Act of 1924, the
precursor of section 273, Congress intended to make the carrier ensure
compliance with the requirements of the respective statutory
provisions. See Joint Hearings on the Revision of Immigration,
Naturalization, and Nationality Laws, Senate and House Subcommittees on
the Judiciary, Testimony of Stuart G. Tipton, General Counsel, Air
Transport Association of America at p. 294 (March 14, 1951); Matter of
M/V ``Runaway'', 18 I&N Dec. at 128 (citing section 273 cases). Indeed,
in enacting section 273 of the Act, Congress strengthened the previous
penalty provisions, which only applied to carriers unlawfully
transporting immigrants to this country, to apply to the unlawful
transport of nonimmigrants as well. See Matter of S.S. Greystoke Castle
and M/V Western Queen, 6 I&N Dec. 112, 114-15 (BIA, AG 1954); Legal
Opinion of the INS General Counsel, 56336/273a at 6 (Sept. 3, 1953).
The commenter further claims that ``Congress clearly contemplated
situations whereby nonimmigrant aliens would need to travel to the
United States without the formality of obtaining a passport or visa by
enacting INA 212(d)(4)(A).'' Congress indeed contemplated a situation
where this would arise. Nevertheless, the commenter failed to mention
that a passport or visa may be waived only by ``the Attorney General
and the Secretary of State acting jointly.'' Congress at no time
envisioned that carrier representatives would be responsible for
determining admissibility of aliens to the United States at the port of
embarkation for any reason without prior authority from the Attorney
General or Secretary of State.
One commenter wrote that ``the motivation for the proposed rule is
to circumvent the holding in Matter of ``Flight SR-4'', 10 I&N Dec. 197
(BIA 1963) and Air BVI, LTD., Flight BL 410, SAJ 10/50.670, Decided by
the Board August 26, 1992.'' The Service is not trying to circumvent
these decisions; rather it is clarifying the regulation by amending it
to conform to Congressional intent.
Regarding fines even though an alien was subsequently admitted, a
5th Circuit Court stated, in part:
And intrinsically, [the] 1952 Act which included for the first
time nonimmigrant aliens contains terms indicating quite
persuasively that Congress carefully distinguished between penalties
against the carrier and the ultimate admission of the aliens. The
Peninsular & Occidental Steamship Company versus The United States,
242 F. 2d 639 (5 Cir. 1957). See also the conclusions of the BIA in
such cases as Matter of SS Florida, 5 I&N Dec. 85 (BIA 1954) and
Matter of Plane ``F-BHSO'', 9 I&N Dec. 595 (BIA 1962).
The amending of the regulation also parallels the granting of a
visa waiver to a lawful permanent resident. In 8 CFR 211.1(b)(3) it
reads, in part:
Waiver of visas. An immigrant alien returning to an
unrelinquished lawful permanent residence in the United States after
a temporary absence abroad who satisfies the district director in
charge of the port of entry that there is good cause for his failure
to present an immigrant visa, Form I-151 or I-551, or reentry permit
may, upon application on Form I-193, be granted a waiver of that
requirement.
The regulation at 8 CFR 212.1(g) is being amended to read, in part:
Upon a nonimmigrant's application on Form I-193, a district
director at a port of entry may, in an exercise of his or her
discretion, on a case-by-case basis, waive the documentary
requirements, if satisfied that the nonimmigrant cannot present the
required documents because of an unforeseen emergency.
The clarification at 8 CFR 212.1(g) will give the Service the
ability to exercise discretion to admit improperly documented
nonimmigrants while penalizing carriers for the bringing of these
aliens to the United States in violation of section 273 of the Act.
This is similar to the granting of individual waivers to lawful
permanent residents under 8 CFR 211.1(b)(3), which does not relieve the
carrier of liability under section 273 of the Act. This has been the
intent of Congress since the enactment of the Immigration Act of 1924
which established section 16, the precursor to section 273 of the
Immigration Act of 1952. This will clarify any ambiguity in the
regulation regarding carriers' liability to ensure the transportation
of properly documented aliens to the United States and the imposition
of penalties for failure to do so.
One commenter claimed that the regulatory change violates the
Regulatory Flexibility Act (5 U.S.C. 605(b)) because the rule will have
a significant impact on a substantial number of small entities. The
Service disagrees. The number of aliens entering the United States
without documentation for unforeseen emergent reasons is sufficiently
low that there is no likely harm to any small carrier. According to the
Department of State, very few aliens apply for emergency visa waivers.
Furthermore, fines are not imposed on carriers that have properly
screened their passengers for proper documentation required to enter
the United States. These penalties are imposed only for those cases
where the carrier has failed to properly screen its passengers and
permitted improperly documented aliens to board its aircraft or vessel.
No carrier, whether small or large, need suffer any penalties under
section 273 of the Act if it properly screens its passengers. To this
end, the Service has and will continue to conduct training for carriers
upon request to improve a carrier's screening procedures and thereby
reducing its fines under section 273 of the Act.
In addition, carriers are having their fines burden reduced as a
direct result of the passage of the Immigration and Nationality
Technical Corrections Act of 1994, Public Law 103-416, which was signed
by the President on October 25, 1994. Section 209(a)(6) Pub. L. 103-416
contained a technical amendment which added section 273(e) to the Act.
The addition of section 273(e) to the Act permits the Service to
reduce, refund, or waive fines under section 273 of the Act pursuant to
such regulations as the Attorney General shall prescribe in cases in
which: (1) The carrier demonstrates that it had screened all passengers
on the vessel or aircraft in accordance with procedures prescribed by
the Attorney General, or (2) circumstances exist that the Attorney
General determines would justify such reduction, refund, or waiver. The
new legislation, corresponding regulations, and a Memorandum of
Understanding (MOU) to be signed with individual carriers, will enable
the Service to reduce, refund, or waive a fine imposed under section
273 of the Act for a carrier that demonstrates successful screening
procedures by achieving satisfactory performance in the transportation
of properly documented aliens to the United States. The Service will
reward those carriers that follow the terms of the legislation or MOU
and continue to impose financial penalties on carriers that fail to
properly screen passengers. Increased carrier training and increased
carrier cooperation with the Service are also expected to contribute to
a reduction in the arrival of improperly documented aliens to the
United States. Regulations regarding fines mitigation will be published
as a proposed rule,
[[Page 11719]]
with comment period, in the Federal Register.
The commenter also claims that the proposed rule constitutes a
``significant regulatory action.'' The Service does not agree. This
rule clarifies Sec. 212.1(g) to conform to Congressional intent on the
boarding of improperly documented aliens. In spite of the Board's
holdings to the effect that the old regulation did not allow the
Service to fine a carrier for bringing nonimmigrants to the United
States without the required documents when a visa waiver is
subsequently granted at the port of entry, the Board has never held
that the carrier was not liable for fines in these circumstances under
section 273 of the Act. Consequently, this rule simply amends the
language to conform to Congressional intent, as recognized by the
Board.
The commenter correctly states that ``the legitimate goal of the
Service is to protect the borders of the United States but only to the
extent authorized by Congress and the Attorney General.'' He
incorrectly states ``no national security concern * * * would be served
by the proposed change.'' The Service disagrees with this assertion.
The Service is charged with continually encouraging carriers to
properly screen their passengers prior to embarkation for the United
States. Proper screening by trained carrier personnel overseas can and
should prevent the arrival to the United States of aliens not in
possession of proper documentation. Travel to the United States should
be accomplished through the orderly procedures presently in place to
ensure a legal flow of immigrants and nonimmigrants. Furthermore, a
carrier cannot rely on the passenger's urgent need to travel on short
notice, since considerations of personal expediency do not constitute
due diligence contemplated by the statute (Matter of Aircraft ``VT
DJK'', 12 I. & N. Dec. 267 (BIA 1967).
One commenter claimed it ``defied logic [in cases where] * * * the
[d]istrict [d]irector was satisfied that the alien was unable to
present the required documents and, therefore, found good cause to
grant a waiver'' that the Service should fine the carrier. The reason
that most waivers are given in the first place is not so much that the
district director was satisfied that the alien was unable to present
the required documents, but rather that the Service showed compassion
to the alien for the mistake of the carrier in boarding the alien and,
further, determined that returning the alien to his or her port of
embarkation would impose a significant hardship on the alien. This rule
will permit the Service to continue to grant visa waivers in cases
involving aliens not in possession of proper documentation to enter the
United States, when otherwise admissible, but properly fine the carrier
for allowing the alien to arrive in the United States in the first
place.
One commenter claims that this rule will have an adverse effect on
family well-being. Another commenter stated ``the proposed rule will
adversely affect the travelling public and reflect negatively upon the
Service and air carriers. * * *'' The Service disagrees. The Department
of State and the Service already have in place the proper procedures
which aliens, in emergent circumstances, may utilize to obtain
authorization for travel to the United States without a visa or
passport. The Service does not perceive that family well-being will be
affected whatsoever by this rule. Aliens who are not properly
documented for travel to the United States must obtain permission from
the Department of State and the Service before boarding a carrier.
Accordingly, a carrier should not, under any circumstances, board an
improperly documented alien without prior authorization from the
Department of State and the Service.
The commenter further claims that the carrier should not be
``penalized for showing the same compassion by transporting the
passenger that the Service evidences by issuing a waiver.'' Again the
service disagrees. The decision to admit an alien without proper
documentation is clearly vested in the Attorney General and the
Secretary of State and not in the carrier.
One commenter is concerned about the Service's policy of proceeding
with fines against carriers in certain cases involving improperly
documented aliens arriving because ``emergency medical treatment, for
funerals, for visiting critically injured or dying relatives, and other
`unforeseen emergencies.' '' The commenter further claims that ``a
carrier must have some latitude to determine that the passenger is
travelling due to a valid emergency, such as a death in the family, a
medical emergency, or the loss of all documents due to robbery, etc.''
The Service again disagrees. The statute vests discretionary authority
in the Service and not in the carrier. Furthermore, as stated
previously, procedures presently exist for aliens to obtain emergency
waivers of both passport and visa from the Department of State with
concurrence from the Service. According to section 212(d)(4) of the
Act, as amended by the Immigration Act of 1990 (Pub. L. 101-649, dated
November 29, 1990, 104 Stat. 5076), ``[e]ither or both of the
requirements of paragraph (7)(B)(i) of subsection (a) may be waived by
the Attorney General and the Secretary of State acting jointly (A) on
the basis of unforeseen emergency in individual cases. * * *''
Furthermore, Sec. 41.3 of 22 CFR states:
Under the authority of INA 212(d)(4), the documentary requirements
of INA 212(a)(7)(B)(i)(I), (i)(II) may be waived for any alien in whose
case the consular officer serving the port or place of embarkation is
satisfied after consultation with, and concurrence by, the appropriate
immigration officer, that the case falls within any of the following
categories:
* * *
(d) Emergent circumstances; visa waiver. An alien well and
favorably known at the consular office, who was previously issued a
nonimmigration visa which has expired, and who is proceeding directly
to the United States under emergent circumstances which preclude the
timely issuance of a visa.
The procedures for aliens seeking a passport or visa waiver for
emergent reasons are also described in Title 9 of the Foreign Affairs
Manual (FAM) part 41, section 3, in part, as follows:
Waivers by Joint Action of Consular and Immigration Officers of
Passport and/or Visa Requirements
Under the authority of INA 212(d)(4), the documentary requirements
of INA 212(a)(7)(B)(i)(I), (i)(II), may be waived for any alien in
whose case the consular officer serving the port or place of
embarkation is satisfied after consultation with, and concurrence by,
the appropriate immigration officer, that the case falls within any of
the following categories:
(a) Residents of Foreign Contiguous Territory; Visa and Passport Waiver
* * *;
(b) Aliens for Whom Passport Extension Facilities Are Unavailable;
Passport Waiver
* * *;
(c) Aliens Precluded From Obtaining Passport Extensions by Foreign
Government Restrictions; Passport Waiver
* * *;
(d) Emergent Circumstances; Visa Waiver
An alien well and favorably known at the consular office, who was
previously issued a nonimmigrant visa which has expired, and who is
proceeding directly to the United States under emergent circumstances
which preclude the timely issuance of a visa.
[[Page 11720]]
(e) Members of Armed Forces of Foreign Countries; Visa and Passport
Waiver
* * *;
(f) Landed Immigrants in Canada; Passport Waiver
* * *;
(g) Authorization to Individual Consular Office; Visa and/or Passport
Waiver
An alien within the district of a consular office which has been
authorized by the Department, because of unusual circumstances
prevailing in that district, to join with immigration officers abroad
in waivers of documentary requirements in specific categories of cases,
and whose case falls within one of those categories.
Notes
N1 Transporting Undocumented Aliens to United States
Posts must inform carriers inquiring about transporting an
undocumented alien that they would be subject to a fine unless such
alien is within one of the categories listed in 22 CFR 41.2 or 41.3.
N2 Areas of Responsibility of Immigration Officers
Consular officers shall address requests for concurrence in waivers
of passport and visa requirements to the immigration officer in charge,
in care of the appropriate post as indicated in 9 FAM Part IV.
N3 Furnishing Information Concerning Waivers to Immigration Officers
* * *
(7) A brief summary of the emergent circumstances surrounding the
case which must include information indicating that all of the
requirements of the subparagraph of 22 CFR 41.3 under which the waiver
is recommended have been met; and
* * *
N4 Issuing Documents to Waiver Beneficiaries
* * *.
Aliens in emergent circumstances can and should obtain a visa or a
waiver of visa, if required, prior to boarding. These procedures are in
place to ensure that aliens are not allowed to arrive in the United
States without first being properly screened, unless waived by statute.
The Service respectfully declines the invitation of one commenter
to ``develop an agreed set of criteria to define an unforeseen
emergency.'' There already exist procedures an alien must follow to
apply for entry into the United States under emergent circumstances as
previously explained. The Service expects aliens to follow these
emergency procedures to obtain the proper documentation to enter the
United States if they lack the necessary documentation. In instances of
emergent circumstances and travel requests occurring after the normal
consulate business hours, consular officers are available for visa or
passport waiver authorization on a case-by-case basis. To allow
carriers the authority to determine admissibility of aliens not in
possession of proper documentation at the port of embarkation would
seriously undermine the enforcement of the Act and the security of the
United States, and would circumvent existing immigration laws and
regulations. As the carrier organizations admit, only immigration
officers can determine the admissibility of an alien to the United
States. The Service is not in a position to abdicate its authority or
responsibility to safeguard the borders of the United States as
Congress has mandated.
One commenter stated that the Service should never consider
granting a visa waiver under emergent circumstances. The commenter
states that ``under no circumstances or unforeseen emergencies * * *
should [a government body] be authorized to grant entry into the United
States [to any alien] without valid documentation.'' Furthermore, the
same commenter concluded, ``in the event that someone attempts to enter
into the United States without proper credentials, they should be fined
and deported to the place of original entry. * * *'' The statute
authorizes a waiver of the documentary requirements in appropriate
circumstances. In the case of a nonimmigrant who is otherwise
admissible, a favorable exercise of that discretion is often
appropriate to avoid unnecessary hardship.
Regulatory Flexibility Act
The Commissioner of the Immigration and Naturalization Service, in
accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has
reviewed this regulation and, by approving it, certifies that the rule
will not have significant economic impact on a substantial number of
small entities. This rule merely removes any ambiguity between the
current regulations and section 273 of the Act.
Executive Order 12866
This rule is not considered by the Department of Justice,
Immigration and Naturalization Service, to be a ``significant
regulatory action'' under Executive Order 12866, section 3(f),
Regulatory Planning and Review, and the Office of Management and Budget
has waived its review process under section 6(a)(3)(A).
Executive Order 12612
The regulation proposed herein will not have substantial direct
effects on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this rule
does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
Paperwork Reduction Act
The information collection requirement contained in this rule has
been cleared by the Office of Management and Budget under the
provisions of the Paperwork Reduction Act. The OMB control number for
this collection is contained in 8 CFR 299.5, Display of Control
Numbers.
List of Subjects in 8 CFR Part 212
Aliens, Documentation, Nonimmigrant, Passport and visas, Waivers.
Accordingly, part 212 of chapter I of title 8 of the Code of
Federal Regulations is amended as follows:
PART 212--DOCUMENTARY REQUIREMENTS: NONIMMIGRANTS; WAIVERS;
ADMISSION OF CERTAIN INADMISSIBLE ALIENS; PAROLE
1. The authority citation for part 212 continues to read as
follows:
Authority: 8 U.S.C. 1101, 1102, 1103, 1182, 1184, 1187, 1225,
1226, 1227, 1228, 1252; 8 CFR part 2.
2. In Sec. 212.1, paragraph (g) is revised to read as follows:
Sec. 212.1 Documentary requirements for nonimmigrants.
* * * * *
(g) Unforeseen emergency. A nonimmigrant seeking admission to the
United States must present an unexpired visa and a passport valid for
the amount of time set forth in section 212(a)(7)(B) of the Act, or a
valid border crossing identification card at the time of application
for admission, unless the nonimmigrant satisfies the requirements
described in one or more of the paragraphs (a) through (f) or (i) of
this section. Upon a nonimmigrant's application on Form I-193, a
district director at a port of entry may, in the exercise of his or her
discretion, on a case-by-case basis, waive the
[[Page 11721]]
documentary requirements, if satisfied that the nonimmigrant cannot
present the required documents because of an unforeseen emergency. The
district director or the Deputy Commissioner may at any time revoke a
waiver previously authorized pursuant to this paragraph and notify the
nonimmigrant in writing to that effect.
* * * * *
Dated: December 11, 1995.
Doris Meissner,
Commissioner, Immigration and Naturalization Service.
[FR Doc. 96-7039 Filed 3-21-96; 8:45 am]
BILLING CODE 4410-10-M
Complete official Federal Register PDF
FR Doc. 96-7035 Clean Air Act Approval of Operating Permits Program; Jefferson County, Kentucky
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11738-11740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7035]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 70
[KY-JEFF-96-01; FRL-5445-7]
Clean Air Act Approval of Operating Permits Program; Jefferson
County, Kentucky
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final full approval.
-----------------------------------------------------------------------
SUMMARY: The EPA is promulgating full approval of the Operating Permits
Program submitted by the Jefferson County, Kentucky Air Pollution
Control District (District) located in the geographic area of Jefferson
County, Kentucky. The Jefferson County, Kentucky program was submitted
for the purpose of complying with Federal requirements which mandate
that state and local agencies develop, and submit to EPA programs for
issuing operating permits to all major stationary sources, and to
certain other sources.
EFFECTIVE DATE: April 22, 1996.
ADDRESSES: Copies of the District's submittal and other supporting
information used in developing the final full approval are available
for inspection during normal business hours at the following location:
U.S. Environmental Protection Agency, Region 4, 345 Courtland Street
NE, Atlanta, Georgia 30365, on the 3rd floor of the Tower Building.
Interested persons wanting to examine these documents, contained in EPA
docket number KY-JEFF-96-01, should make an appointment at least 24
hours before the visiting day.
FOR FURTHER INFORMATION CONTACT: Leonardo Ceron, Title V Program
Development Team, Air Programs Branch, Air, Pesticides & Toxics
Management Division, U.S. Environmental Protection Agency, Region 4,
345 Courtland Street, NE., Atlanta, GA 30365, (404) 347-3555 extension
4196.
SUPPLEMENTARY INFORMATION:
I. Background and Purpose
Title V of the 1990 Clean Air Act Amendments (Section 501-507 of
the Clean Air Act (``the Act'')), and implementing regulations at 40
Code of Federal Regulations (CFR) part 70 require that states or
authorized local agencies develop and submit operating permits programs
to EPA by November 15, 1993, and that EPA act to approve or disapprove
each program within one year after receiving the submittal. EPA's
program review occurs pursuant to section 502 of the Act and the part
70 regulations, which together outline criteria for approval or
disapproval. Where a program substantially, but not fully, meets the
requirements of part 70, EPA may grant interim approval for a period of
up to two years. If EPA has not fully approved a program by November
15, 1995, or by the end of the interim program, it must establish and
implement a Federal Program.
On November 24, 1995, EPA proposed full approval, or in the
alternative, interim approval of the operating permits program for the
Jefferson County, Kentucky, Air Pollution Control District. See 60 FR
58033. The November 24, 1995, notice also proposed approval of the
District's interim mechanism for implementing section 112(g) and for
delegation of section 112 standards as promulgated. EPA did not receive
any comments on the proposal. On February 16, 1996, the District
submitted a package containing revisions to the operating permits
program, which addressed the
[[Page 11739]]
deficiency discussed in the full/interim approval notice. As required
by 40 CFR 70.6(g), the District adopted revisions to Regulation 1.07,
section 2.2, to ensure that excess emissions due to emergency
situations are classified as a violation of an existing permit.
Specifically the new regulation 1.07, section 2.2, reads as follows:
``Notwithstanding the provisions of section 2.1, if a federal
regulation requires compliance with emissions standards during startup,
shutdown, malfunction, or emergency, excess emissions resulting from
any of these events shall be deemed in violation of those standards
even though, based upon a showing by the owner or operator of the
source and an affirmative determination by the district, the applicable
requirements identified in section 2.1 are satisfied.'' Additionally,
40 CFR 70.6(g) required the District to adopt revisions to Regulation
1.07, section 2.1, to only allow sources the use of the legal mechanism
of ``affirmative defense'' when excess emissions are emitted from a
source during an emergency situation. Specifically, the new Regulation
1.07, section 2.2 reads as follows: ``However, in the case of
technology-based federal emission standards, an emergency shall
constitute an affirmative defense to an enforcement action brought for
noncompliance with these emission standards if, based upon a showing by
the owner or operator of the source and an affirmative determination by
the District, the requirements of section 5 are met.'' It is EPA's
understanding that the District's sections 2.1 and 2.2 allow sources to
use the legal mechanism of affirmative defense on federally mandated
emission limits, when a federally promulgated emission standards has
been violated during emergencies situations as defined in Regulation
1.07, section 5. These changes became locally effective on January 17,
1996.
In this action, EPA is promulgating full approval of the Jefferson
County, Kentucky operating permits program, and approving the section
112(g) and section 112(l) mechanisms noted above.
II. Final Action and Implications
A. Title V Operating Permits Program
The EPA is promulgating full approval of the operating permits
program submitted by the Jefferson County, Kentucky, Air Pollution
Control District, on February 1, 1994, and supplemented on November 15,
1994; May 3, 1995; July 14, 1995; and February 16, 1996. The November
24, 1995, notice established that the District would receive full
approval of its program if changes to Regulation 1.07, sections 2.1 and
2.2 were adopted prior to final promulgation. Such changes became
locally effective on January 17, 1996. The District has demonstrated
that the program will be adequate to meet the minimum elements of a
state or local operating permits program as specified in 40 CFR part
70.
The scope of the District's part 70 program approved in this notice
applies to all part 70 sources (as defined in the approved program)
within Jefferson County, Kentucky, except any sources of air pollution
over which an Indian Tribe has jurisdiction. See, e.g., 59 FR 55813,
55815-18 (Nov. 9, 1994). The term ``Indian Tribe'' is defined under the
Act as ``any Indian tribe, band, nation, or other organized group or
community, including any Alaska Native village, which is Federally
recognized as eligible for the special programs and services provided
by the United States to Indians because of their status as Indians.''
See section 302(r) of the Act; see also 59 FR 43956, 43962 (Aug. 25,
1994); 58 FR 54364 (Oct. 21, 1993).
B. Preconstruction Permit Program Implementing Section 112(g)
EPA is approving the use of District's preconstruction program
found in Regulation 2.03 as a mechanism to implement section 112(g)
during the transition period between promulgation of EPA's section
112(g) rule and the District's adoption of rules specifically designed
to implement section 112(g). This approval is limited to the
implementation of the 112(g) rule and is effective only during any
transition time between the effective date of the 112(g) rule and the
adoption of specific rules by the District to implement section 112(g).
The duration of this approval is limited to 18 months following
promulgation by EPA of section 112(g) regulations to provide the
District with adequate time to adopt regulations consistent with
Federal requirements.
C. Program for Delegation of Section 112 Standards as Promulgated
Requirements for approval, specified in 40 CFR 70.4(b), encompass
section 112(l)(5) requirements for approval of a program for delegation
of section 112 standards as promulgated by EPA as they apply to part 70
sources. Section 112(l)(5) requires that the District's program contain
adequate authorities, adequate resources for implementation, and an
expeditious compliance schedule, which are also requirements under part
70. Therefore, the EPA is also promulgating approval under section
112(l)(5) and 40 CFR 63.91 of the District's program for receiving
delegation of section 112 standards and programs that are unchanged
from Federal rules as promulgated. In addition, EPA is approving the
delegation of all existing standards and programs under 40 CFR parts 61
and 63. This program for delegation applies to both part 70 sources and
non-part 70 sources.
III. Administrative Requirements
A. Docket
Copies of the District's submittal and other information relied
upon for the final full approval are contained in docket number KY-
JEFF-96-01 maintained at the EPA Regional Office. The docket is an
organized and complete file of all the information submitted to, or
otherwise considered by, EPA in the development of this final full
approval. The docket is available for public inspection at the location
listed under the ADDRESSES section of this document.
B. Executive Order 12866
The Office of Management and Budget has exempted this regulatory
action from Executive Order 12866 review.
C. Regulatory Flexibility Act
EPA's actions under section 502 of the Act do not create any new
requirements, but simply address operating permits programs submitted
to satisfy the requirements of 40 CFR part 70. Because this action does
not impose any new requirements, it does not have a significant impact
on a substantial number of small entities.
List of Subjects in 40 CFR Part 70
Environmental protection, Administrative practice and procedure,
Air pollution control, Intergovernmental relations, Operating permits,
Reporting and recordkeeping requirements.
Dated: March 15, 1996.
Phyllis P. Harris,
Acting Deputy Regional Administrator.
Part 70, title 40 of the Code of Federal Regulations is amended as
follows:
PART 70--[AMENDED]
1. The authority citation for part 70 continues to read as follows:
Authority: 42 U.S.C. 7401, et seq.
2. Appendix A to part 70 is amended by adding the entry for
Kentucky in alphabetical order to read as follows:
Appendix A to Part 70--Approval Status of State and Local Operating
Permits Programs
* * * * *
[[Page 11740]]
Kentucky
(a) Kentucky Natural Resources and Environmental Protection
Cabinet: submitted on December 27, 1993, and supplemented on
November 15, 1994, April 14, 1995, May 3, 1995 and May 22, 1995;
interim approval effective on December 14, 1995; interim approval
expires on December 14, 1997.
(b) Air Pollution Control District of Jefferson County,
Kentucky: submitted on February 1, 1994, and supplemented on
November 15, 1994, May 3, 1995, July 14, 1995 and February 16, 1996;
full approval effective on April 22, 1996.
* * * * *
[FR Doc. 96-7035 Filed 3-21-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-7026 Revocation of Pesticide Food Additive Regulations
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11994-12009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7026]
[[Page 11993]]
_______________________________________________________________________
Part V
Environmental Protection Agency
_______________________________________________________________________
40 CFR Part 185
Revocation of Pesticide Food Additive Regulations; Final Rule
Federal Register / Vol. 61, No. 57 / Friday, March 22, 1996 / Rules
and Regulations
=======================================================================
-----------------------------------------------------------------------
[[Page 11994]]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 185
[OPP-300335A; FRL-5357-7]
Revocation of Pesticide Food Additive Regulations
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: EPA has made a final determination regarding 26 food additive
regulations (FARs) for 7 pesticides that were previously proposed for
revocation on the grounds that the FARs violated the Delaney clause in
section 409 of the Federal Food, Drug and Cosmetic Act (FFDCA). Today,
EPA is revoking 13 FARs because they violate the Delaney clause and the
remaining 13 FARs because they are not needed to prevent adulterated
food.
EFFECTIVE DATE: This final rule is effective May 21, 1996.
ADDRESSES: Written objections, requests for a hearing, and/or requests
for stays identified by the document control number OPP-300335A (FRL-
5357-7), must be submitted by April 22, 1996, to the Hearing Clerk,
EPA, 401 M Street, SW., Washington, DC 20460, with a copy to the OPP
docket. Comments on objections, requests for a hearing, and/or requests
for stays must be submitted by May 6, 1996 to the OPP docket: Public
Response and Program Resources Branch, Field Operations Division
(7506C), Office of Pesticide Programs, Environmental Protection Agency,
401 M St. SW., Washington, DC 20460. Hand deliver to: Rm. 1132, CM 2,
1921 Jefferson Davis Hwy., Arlington, VA.
Information submitted as a filing concerning this document may be
claimed confidential by marking any part or all of that information as
``Confidential Business Information'' (CBI). Information so marked will
not be disclosed except in accordance with procedures set forth in 40
CFR part 2. A copy of the filings that does not contain CBI must be
submitted for inclusion in the public record. Information not marked
confidential may be disclosed publicly by EPA without prior notice. All
written (non-CBI) filings will be available for public inspection in
Rm. 1132 at the address given above, from 8 a.m. to 4 p.m., Monday
through Friday, excluding legal holidays.
FOR FURTHER INFORMATION CONTACT: By mail: Niloufar Nazmi, Special
Review Branch (7508W), Environmental Protection Agency, 401 M St., SW.,
Washington, DC 20460. Office location and telephone number: Crystal
Mall #2, Room 1113, 1921 Jefferson Davis Highway, Arlington, VA (703)
308-8028; e-mail: [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
A. Statutory Background
B. Regulatory Background
C. Actions Since Proposed Rule
D. Today's Action
II. EPA's Policy Changes Since the Proposal
A. Concentration and Ready-to-Eat Policies
B. Updated Residue Chemistry Guidelines
C. RAC Interpretation
III. Decision Framework
IV. Analysis of the FARs
A. Is a FAR needed?
B. Induce Cancer Determination
V. EPA's Decisions
A. FARs That are Not Needed
B. Food Additive Regulations That Violate the Delaney Clause
VI. Consideration of Comments
VII. Procedural Matters
A. Filing of Objections and Requests for Hearings
B. Effective Date
C. Request for Stays of Effective Date
VIII. Regulatory Requirements
A. Executive Order 12866
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
D. Unfunded Mandates Reform Act and Executive Order 12875
I. Introduction
A. Statutory Background
The Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 301 et
seq., authorizes the establishment by regulation of maximum permissible
levels of pesticides in foods. Such regulations are commonly referred
to as ``tolerances.'' Without such a tolerance or an exemption from the
requirement of a tolerance, a food containing a pesticide residue is
``adulterated'' under section 402 of the FFDCA and may not be legally
moved in interstate commerce. 21 U.S.C. 331, 342. EPA was authorized to
establish pesticide tolerances under Reorganization Plan No. 3 of 1970.
5 U.S.C. App. at 1343 (1988). Monitoring and enforcement of pesticide
tolerances are carried out by the U.S. Food and Drug Administration
(FDA) and the U.S. Department of Agriculture (USDA). EPA can establish
a tolerance in response to a petition (FFDCA section 408(d)(1),
409(b)(1)), or on its own initiative (FFDCA sections 408(e), 409(d)).
The FFDCA has separate provisions for tolerances for pesticide
residues on raw agricultural commodities (RACs) and tolerances on
processed food. For pesticide residues in or on RACs, EPA establishes
tolerances, or exemptions from tolerances when appropriate, under
section 408. 21 U.S.C. 346a. EPA regulates pesticide residues in
processed foods under section 409, which pertains to ``food
additives.'' 21 U.S.C. 348. Maximum residue regulations established
under section 409 are commonly referred to as food additive regulations
(hereafter referred to as ``FARs''). Section 409 FARs are needed,
however, only for certain pesticide residues in processed food. Under
section 402(a)(2) of the FFDCA, a pesticide residue in processed food
generally will not render the food adulterated if the residue results
from application of the pesticide to a RAC and the residue in the
processed food when ready to eat is below the RAC tolerance. This
exemption in section 402(a)(2) is commonly referred to as the ``flow-
through'' provision because it allows the section 408 raw food
tolerance to flow through to the processed food forms. Thus, a section
409 FAR is only necessary to prevent foods from being deemed
adulterated when the level of the pesticide residue in a processed food
when ready to eat is greater than the tolerance prescribed for the RAC,
or if the processed food itself is treated or comes in contact with a
pesticide.
If a food additive regulation must be established, section 409 of
the FFDCA requires that the use of the pesticide will be ``safe'' (21
U.S.C. 348(c)(3)). Relevant factors in this safety determination
include (1) the probable consumption of the pesticide or its
metabolites; (2) the cumulative effect of the pesticide in the diet of
man or animals, taking into account any related substances in the diet;
and (3) appropriate safety factors to relate the animal data to the
human risk evaluation. Section 409 also contains the Delaney clause,
which specifically provides that ``no additive shall be demed safe if
it has been found, after tests which are appropriate for the evaluation
of the safety of food additives, to induce cancer when ingested by man
or animal.''
B. Regulatory Background
1. Les v. Reilly
On May 25, 1989, the State of California, the Natural Resources
Defense Council, Public Citizen, the AFL-CIO, and several individuals
filed a petition requesting that EPA revoke several FARs. The
petitioners argued that these FARs should be revoked because they
violated the Delaney clause.
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EPA responded to the petition by revoking certain FARs, but
retained several others on the grounds that the Delaney clause provides
an exception for pesticide residues posing de minimis risk; EPA denied
the petition with respect to the FARs determined to fall under this
exception. EPA's response was challenged by the petitioners in the U.S.
Court of Appeals, Ninth Circuit. On July 8, 1992, the court ruled in
Les v. Reilly, 968 F.2d 985 (9th Cir.), cert. denied, 113 S.Ct. 1361
(1993), that the Delaney clause barred the establishment of a FAR for
pesticides which ``induce cancer'' no matter how infinitesimal the
risk.
In response to the court's decision in Les v. Reilly, EPA has taken
steps to identify and revoke all section 409 FARs for pesticides which
``induce cancer.'' On March 30, 1994, EPA issued a list of pesticide
uses which potentially could be affected by the court's decision (59 FR
14980). (Note that, for the purpose of today's document, this list has
been superseded by appendices to the court-approved settlement in
California v. Browner, discussed below.)
After revoking certain FARs of six pesticides that were the subject
of the original NRDC petition, EPA decided to evaluate the remaining
pesticide uses in phases. The first phase of proposed revocations was
announced on July 1, 1994, and involved 26 FARs for seven pesticides
(59 FR 33941; July 1, 1994). In today's notice, EPA is making final
determinations regarding these 26 FARs.
2. California v. Browner
In a court-approved settlement, entered on February 9, 1995, in the
case of California v. Browner, EPA agreed to make decisions regarding
pesticides that may be affected by the Delaney clause. This settlement
agreement includes a timetable for making the decisions. This document
is consistent with the timeframes in that settlement.
C. Actions Since Proposed Rule
The National Food Processors' Association (NFPA) filed a petition
with the EPA in September 1993. This petition challenged a number of
policies under which EPA administers its tolerance-setting program. In
the Federal Register of June 14, 1995 (60 FR 31300), EPA issued a
partial response to the NFPA petition. In that document, EPA concluded
that some changes were warranted to its policies concerning application
of the Delaney clause, in particular the concentration and ``ready-to-
eat'' (RTE) policies. On January 25, 1996, EPA completed its response
to the NFPA petition by announcing its coordination policy and its
interpretation of what constitutes a RAC (61 FR 2378). Section II of
this preamble contains a summary of these policy changes.
D. Today's Action
The FAR revocations being made final in this notice were proposed
on July 1, 1994 (59 FR 33941), before EPA had responded to the NFPA
petition and adopted its new policies. In addition, EPA has received
many petitions from the registrants of these pesticides requesting
revocation of many of the FARs, on the basis that they are not needed.
For each of these petitions, EPA has published a ``Notice of
Availability and Request for Comments'', in the Federal Register.
Today's final rule is consistent with EPA's new policies and, where
appropriate, the decisions are based on the petitions rather than the
proposed rule of July 1, 1994.
II. EPA's Policy Changes Since the Proposal
A. Concentration and Ready-to-Eat Policies
To determine whether the use of a pesticide on a growing crop needs
a section 409 FAR in addition to a section 408 tolerance, EPA looks at
the likelihood that the residue levels in the processed food when ready
to eat will exceed the section 408 tolerance level. In the past, EPA
applied this policy focusing almost exclusively on the results of
processing studies using treated crops. In response to the NFPA
petition, EPA announced new policies on how it would determine whether
a pesticide needs a section 409 FAR (60 FR 31300, July 1, 1994). EPA
stated that it would consider a greater range of information in
determining the likelihood of residues in processed food exceeding the
section 408 tolerance. EPA also adopted a definition of RTE as it
applies to human food and animal feed. Whether a food is RTE or not is
critical to application of the concentration policy. If a food is not
RTE, EPA considers the degree of dilution that occurs in producing a
RTE food from the not-RTE food in determining the likelihood that
residues in RTE food will exceed the section 408 tolerance.
Perhaps the most significant new information that EPA stated it
would consider is information bearing on the average residue value from
crop field trials. The data from field residue trials show that it is
possible to obtain significantly different residue values from multiple
field trials. EPA's old policy was to use the highest field trial
sample value to calculate expected residues in the processed food.
However, in response to the NFPA petition, EPA concluded that where a
crop is mixed or blended during processing, it is appropriate to use an
average of the residue levels from field trials, rather than the
highest sample value in estimating the potential level of residue in
processed food. As EPA noted, EPA believes that generally the most
appropriate average value to use is the ``highest average field trial''
(HAFT) value, or the average of the highest values found in each of the
field trials. Consequently, EPA revised its procedures and is now using
the HAFT as the basis for determining whether a section 409 FAR is
needed. Use of the HAFT for food commodities that are likely to be
mixed or blended decreases the likelihood that residues in processed
food will exceed the section 408 tolerance.
In addition EPA has revised its policies for the use of multiple
processing studies. EPA may receive several processing studies for a
crop, with each showing a different concentration factor. When
different concentration factors result from multiple processing
studies, EPA will now use the average concentration factor to determine
the expected level of concentration. In addition, EPA is examining
processing studies to ensure that they reflect typical commercial
practices. If a study does not include a step (e.g., washing) that is
considered typical practice in processing a RAC, EPA may decide not to
include that study in the calculation of the average concentration
factor.
In response to the NFPA petition, EPA stated it would interpret the
phrase RTE food as meaning food ready for consumption ``as is'' without
further preparation. For instance, EPA has determined that cottonseed
oil is not RTE, while oat bran is.
B. Updated Residue Chemistry Guidelines
In a notice issued September 21, 1995 (60 FR 49150), EPA announced
the availability of its updated table II of the Pesticide Assessment
Guidelines, Subdivision O, Residue Chemistry. This table, commonly
referred to ``Residue Chemistry Table II'' provides a listing of all
significant food and feed commodities, both raw and processed, for
which residue data are collected and tolerances or FARs are
established. In the latest update of this table, criteria were
established for inclusion of feed items, and, based on those criteria,
a number of feed items were eliminated as significant animal feeds. If
a commodity is not listed in table II as a significant
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food or feed, a tolerance is not necessary for pesticide residues in
that commodity.
C. RAC Interpretation
On January 25, 1996 (61 FR 2386), EPA published its interpretation
of the term RAC as applied to dried commodities under the FFDCA. This
notice explained EPA's interpretation of which dried commodities
qualify as RACs. EPA based its interpretation on the purpose of drying,
such that commodities dried for the purpose of creating a new
marketable commodity are treated as processed food, while those dried
for storage or transportation needs are treated as raw foods. This
interpretation is consistent with EPA's current practice and therefore
no commodities were reclassified as either RAC or processed as a result
of the interpretation.
III. Decision Framework
In analyzing whether the 26 FARs addressed in this document should
be revoked, EPA has used the following decision framework. First, EPA
determined whether a section 409 FAR was necessary to prevent
adulteration, given the revisions to the concentration, RTE, and RAC
policies as well as to table II. If application of new policies showed
no FAR was needed, this document revokes the FAR on that ground.
However, if the analysis showed that a FAR is still needed, then the
FAR's consistency with the Delaney clause was analyzed. Contrary to the
opinion expressed in some comments on the proposed rule (see comments
of American Crop Protection Association, and EPA's response in Unit VI
of this preamble), EPA does not believe that this approach is legally
required under the FFDCA. EPA has chosen this approach in its
discretion.
In examining whether a FAR was needed, EPA followed a stepwise
process involving a series of questions. In brief, the questions are:
1. Do processing data show that there is actual concentration of
residues during processing? If processing studies demonstrate that the
level of residues in the processed food is less than or equal to the
level of residues in the precursor crop (i.e., no ``concentration in
fact''), residues in the processed food would not be expected to exceed
the section 408 tolerance.
2. Does use of the average of concentration factors from multiple
processing studies show that there is concentration of residues during
processing?
3. Is the commodity mixed or blended during processing, such that
use of the HAFT value is appropriate?
4. Using the HAFT, do residues in processed food exceed the section
408 tolerance?
5. If a processed food item is not eaten ``as is,'' is the dilution
that occurs during preparation of RTE food sufficient to reduce
pesticide residues below the section 408 tolerance? EPA will evaluate
the expected residue level in RTE food containing the processed food
item. If the dilution of residues resulting from RTE food preparation
is greater than the concentration of residues resulting from processing
(the dilution factor is greater than the concentration factor), it is
likely that the residues in the finished RTE food will be less than the
section 408 tolerance. In this case, no FAR would be necessary for the
RTE food.
If, after consideration of the above factors, a FAR was determined
to be necessary, EPA then examined whether the existing FAR for the
pesticide chemical violates the Delaney clause.
IV. Analysis of the FARs
EPA originally proposed to revoke all 26 FARs on the basis that
they violate the Delaney clause. EPA has since determined that under
its revised concentration and RTE policies, 13 FARs are not needed to
prevent adulterated food. For the 13 FARs that are needed, EPA next
examined their consistency with the ``induce cancer'' standard of the
Delaney clause in section IV.B. of this preamble.
A. Is a FAR needed?
Under current policy, a FAR is needed when the appropriate field
trial residue value multiplied by the appropriate concentration factor
significantly exceeds the section 408 tolerance in the ready to eat
commodity. The extent to which EPA will allow residues in the processed
food to exceed the section 408 tolerance is determined on a case by
case basis, taking into account the sensitivity of the analytical
method used to detect the residues. In analyzing the need for section
409 FARs, EPA has taken into account not only existing section 408
tolerances but also available residue data bearing on whether the
current section 408 tolerance should be revised under existing
tolerance-setting policies. EPA has received large amounts of residue
data as part of the pesticide reregistration program of section 4 of
the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). Review
of these data in several instances shows that the existing section 408
tolerance is set either too high or too low. Tolerance adjustments
would normally be accomplished through the reregistration program.
EPA, however, sees no reason to wait until these tolerances are
formally revised to determine whether the pesticide concentrates for
the purpose of applying the coordination policy. EPA has decided that
it should base its concentration decision upon the most recent data on
residues in raw crops. If those data indicate that section 408
tolerances should be adjusted, EPA has used the adjusted section 408
tolerance level as the basis for its determination of whether a section
409 FAR is needed because the pesticide concentrates. The basis for
EPA's determination that a section 408 tolerance should be adjusted is
in the docket for this rulemaking.
Captan on raisins. EPA proposed to revoke FARs for captan both from
pre-harvest use on grapes and direct treatment to raisins.
On January 31, 1996, EPA published notice in the Federal Register
(61 FR 3401) of a petition filed by the Captan Task Force requesting
revocation of the section 409 FAR for raisins. The petition claims that
good manufacturing practice for producing raisins requires that the
raisins are washed before they are ready-to-eat and that washing
raisins substantially eliminates remaining captan residues. The
petition claims that because captan residues do not concentrate in
washed raisins above the established residue levels on treated grapes,
the FAR should be revoked.
EPA has reviewed the public comments and reconsidered the available
grape/raisin processing studies. EPA agrees that washing is standard
practice in raisin production, Accordingly, EPA has determined that
only those studies which involve washing the raisins reflect current
processing practices. When only those data which include a washing step
are used to evaluate the need for a section 409 FAR for raisins, the
average concentration factor for residues of captan per se on washed
raisins is less than one. Therefore, no section 409 FAR is needed for
residues from pre-harvest treatment.
In regard to direct post-harvest application to grapes (drying
raisins), the petition claims that the section 409 FAR is not needed
because there are no registered products containing captan which
include label directions for post-harvest use on raisins. EPA has
reviewed all labels of products containing captan, and agrees with the
petitioner that there are no labels which allow postharvest use of
captan on drying grapes/raisins. Therefore, the
[[Page 11997]]
section 409 FAR is not needed for residues resulting from post-harvest
treatment of the fruit.
Ethylene oxide on ground spices. Since ethylene oxide is directly
applied to processed ground spices, the existing section 409 FAR is
necessary to prevent adulterated food. EPA policies on concentration
and dilution in RTE foods are not relevant to a processed commodity
treated directly with a pesticide.
Mancozeb on brans of oats, barley and rye; flours of oats, barley,
rye and wheat. On May 19, 1993, EPA published notice in the Federal
Register (58 FR 29318) of a petition filed by the Mancozeb Task Force.
This petition sought the revocation of the section 409 FAR for the
flours and brans of barley, oats, rye and wheat. The petitioner argued
that residues do not concentrate in the brans and flours of these
grains over the section 408 RAC tolerances. EPA has reviewed the
available data in accordance with the new Agency policies and made the
following determinations in regard to the residues of Mancozeb on brans
of oats, barley and rye, and flours of oats, barley, rye and wheat.
Oat bran. The current section 408 tolerance for mancozeb on oat
grain is 5 ppm (40 CFR 180.176). Evaluation of new residue data
indicates that the tolerance should be reduced to 1 ppm. Based on the
HAFT of 0.98 ppm for oat grain and an average concentration factor of
2.0 in oat bran, the expected residue in oat bran is calculated as 2.0
ppm. The HAFT multiplied by the concentration factor is 0.98 X 2.0=2.0
ppm. (This calculation is used throughout the document to calculate
expected residue levels.) EPA believes that it is likely that some oat
bran will contain residues exceeding the adjusted RAC tolerance level
of 1 ppm. Oat bran is a RTE processed food and needs a section 409 FAR.
Barley and rye bran. The current section 408 tolerance for mancozeb
on barley and rye grains are 5 ppm (40 CFR 180.176). Evaluation of new
residue data indicate that this tolerance should be reduced to 1 ppm.
Based on the HAFT of 0.98 ppm for barley and rye grain and an average
concentration factor of 2.0 in the brans, the expected residues in
barley and rye brans are calculated as 2.0 ppm. EPA has determined that
both rye and barley bran are not RTE foods and that once they are
prepared to their RTE forms, mancozeb residues are unlikely to exceed
the adjusted section 408 tolerances of 1 ppm for rye and barley grains.
Therefore, the section 409 FARs for mancozeb on brans of barley and rye
are not needed and will be revoked on these grounds. EPA will propose
to establish a Maximum Residue Limit (MRL) under section 701 of FFDCA
in or on barley bran. Moreover, EPA has determined that rye bran is not
a significant human food and does not require pesticide residue
tolerances. A memo to this effect is in OPP docket 300415.
Flours of oat, barley, rye and wheat. The current FAR for flours of
oat, barley, rye and wheat is 1 ppm (40 CFR 185.6300). EPA has
determined that the average concentration factor for wheat flour is
less than one, and has used it for other grains. Residues in processed
flours are not expected to exceed the adjusted RAC tolerance of 1 ppm
for the grains. Therefore, no section 409 FAR is needed for the flours
of oat, barely, rye and wheat.
Oxyfluorfen on spearmint, peppermint, soybean and cottonseed oils.
On December 14, 1994, EPA published notice in the Federal Register (59
FR 64405) of a petition filed by the Rohm and Haas Company which sought
to revoke these section 409 FARs because they are not needed. The
petitioner claimed that all processed oil data from processing studies
show that residue levels in oils are below the section 408 tolerance
levels. The petitioner also argued that these oils are not RTE
commodities.
Spearmint and peppermint oils. The current section 408 tolerance
for oxyfluorfen on mint hay is 0.1 ppm (40 CFR 180.381). Evaluation of
new residue data indicates that the tolerance should be reduced to 0.05
ppm. Based on the HAFT of 0.03 ppm for mint hay, and an average
concentration factor of 2.4, the expected residues in mint oils are
calculated as 0.072 ppm. The residue level for mint oils is not
appreciably higher than the adjusted mint RAC tolerance of 0.05 ppm,
taking into account the sensitivity of the analytical method used to
detect oxyfluorfen residues. In addition, peppermint and spearmint oils
are not RTE commodities, and the Agency has determined that they are
diluted by a factor of 120 and 160 respectively in RTE foods.
Therefore, a section 409 FAR is not needed. EPA will propose to
establish Maximum Residue Limits under section 701 of FFDCA for
oxyfluorfen in or on mint oils.
Soybean oil. Dry soybean seeds treated at 5 times the maximum
application rate did not have quantifiable oxyfluorfen residues, thus
processing data are not able to show the degree of concentration in
soybean oil. The maximum theoretical concentration factor for soybean
oil is 5. Since this is the same as the application exaggeration in the
residue study, oxyfluorfen residues in soybean oil, are not expected to
exceed the section 408 tolerance of .05 ppm. Therefore, a section 409
FAR is not needed.
Cottonseed oil. The current section 408 tolerance for oxyfluorfen
on cottonseed is 0.05 ppm (40 CFR 180.381). Evaluation of new residue
data indicates that the tolerance should be reduced to .02 ppm. Based
on the HAFT of 0.01 ppm for cottonseed and a concentration factor of
3.3, the expected residue in cottonseed oil is .04 ppm. Cottonseed oil
is not a RTE processed food and once diluted by a factor of 11, which
accounts for the minimum level of dilution of cottonseed oil in
preparing RTE food, the residues in the RTE food items are not expected
to exceed the adjusted section 408 RAC tolerance of .02 ppm. Therefore
a section 409 FAR is not needed. EPA will propose to establish Maximum
Residue Limits under section 701 of FFDCA for oxyfluorfen in or on
cottonseed oil.
Propargite on raisins, dried figs, and tea. On September 7, 1994,
EPA published a notice in the Federal Register (59 FR 46250) of a
petition filed by Uniroyal Chemical Company which sought to revoke the
section 409 FAR on raisins because it is not needed. The petitioner
claimed that propargite residues are susceptible to release through
mechanical or washing processes and therefore do not concentrate in
raisins.
Raisins. Based on the HAFT of 4.7 ppm for grapes and an average
concentration factor of 1.7, the expected residue in raisins is
calculated at 8.0 ppm, which is less than the established section 408
RAC tolerance of 10 ppm for grapes. Therefore, a section 409 FAR is not
needed for raisins.
Dried figs. Based on a HAFT of 1.8 ppm for figs and an average
concentration factor of 2.7 for dried figs, the expected residue level
in dried figs is 4.9 ppm. EPA believes that it is likely that some
dried figs will contain propargite residues exceeding the established
RAC tolerance level of 3 ppm. Since dried figs are RTE, a section 409
FAR is needed.
Dried tea. Tea is a processed food item even though it is not
considered a RTE food. EPA has determined that the degree of dilution
from dried tea to brewed RTE tea will exceed any concentration from
fresh green tea to dried tea.
Under the circumstances where: (1) There is a section 408 tolerance
for the RAC; and (2) residues in the RTE food are below the section 408
tolerance, EPA normally would determine that the
[[Page 11998]]
section 409 FAR is not necessary. Residues would be covered by the
section 408 tolerance under the flow-through provision of section 402,
and EPA would revoke the FAR on that ground.
Tea presents a unique situation, because the FAR is established
primarily for import purposes. However, because only the dried tea is
imported into the United States, there is no section 408 tolerance for
fresh tea. Without a section 408 tolerance, the flow-through provision
does not apply. Revocation of the section 409 FAR would leave no
tolerance to cover residues in tea, potentially resulting in
adulterated tea. Therefore, the section 409 FAR for dried tea is
necessary.
Propylene oxide on glace fruit, cocoa, gums, dried prunes,
processed nutmeats (except peanuts), starch and processed spices. Since
propylene oxide is directly applied to these commodities, the ``flow
through'' provision of section 402 does not apply and the existing
section 409 FAR is necessary to prevent adulterated food.
Simazine on Sugarcane molasses and syrup. Molasses is a RTE food
item. The average concentration factor in the processing of molasses is
10. A determination of the HAFT has not been made since the
concentration factor is so large that the HAFT multiplied by that
number is certain to appreciably exceed the section 408 tolerance (.25
ppm). EPA expects that in most cases the HAFT will not be lower than
the tolerance by a factor of two. This conclusion is based on EPA's
experience with setting 408 tolerances (i.e., how they are derived
based on the highest residue values) and with the relationships between
average residues in field trials and either tolerances or maximum field
trial residues, which are usually close to the tolerance. In most cases
average residues across all field trials for a given crop are 2-6 times
less than a tolerance or maximum field trial value. The highest average
field trial (HAFT) will be higher than the average residue across all
trials. Therefore, in this particular case the Agency is confident that
ten times the HAFT will be appreciably higher than the 408 tolerance.
Examples of the relationships between average residues and tolerances
or maximum field trial residues are available in the docket for this
notice. EPA's conclusion regarding the level of simazine residues in
sugarcane molasses is confirmed by a processing study in which
sugarcane treated at the maximum application rate showed total residues
of 0.63 ppm in molasses, well above the 0.25 ppm sugarcane tolerance.
Therefore, EPA believes that it is likely that some molasses will
contain residues exceeding the tolerance.
According to Residue Chemistry Table II, sugarcane syrup is not
considered a significant human food item. The Agency has determined
that no section 409 FAR is required.
Simazine in potable water. Even though EPA no longer sets section
409 FARs under the FFDCA for residues in potable water, this FAR for
simazine exists. Therefore, EPA will apply the same analysis to it as
to the other section 409 FARs addressed in this notice.
B. Induce Cancer Determination
If a FAR is necessary to prevent adulterated food, as in the case
of the 13 FARs of the five chemicals discussed above, EPA must
determine whether the pesticide induces cancer within the meaning of
the Delaney clause. In the proposal for this final rule (59 FR 33941;
July 1, 1994), EPA determined that all of the following five chemicals
``induce cancer'' within the meaning of the Delaney clause: Ethylene
oxide, mancozeb, propargite, propylene oxide and simazine. (OPP docket
300335.)
In construing the ``induce cancer'' standard as to animals, EPA
follows a weight-of-the-evidence approach. In regard to animal
carcinogenicity, EPA, in general, interprets ``induces cancer'' to
mean:
The carcinogenicity of a substance in animals is established when
administration in an adequately designed and conducted study or studies
results in an increase in the incidence of one or more types of
malignant (or, where appropriate, benign or a combination of benign and
malignant) neoplasms in treated animals compared to untreated animals
maintained under identical conditions except for exposure to the test
compound. Determination that the incidence of neoplasms increases as
the result of exposure to the test compound requires a full biological,
pathological, and statistical evaluation. Statistics assist in
evaluating the biological significance of the observed responses, but a
conclusion on carcinogenicity is not determined on the basis of
statistics alone. Under this approach, a substance may be found to
``induce cancer'' in animals despite the fact that increased tumor
incidence occurs only at high doses, or that only benign tumors occur,
and despite negative results in other animal feeding studies. (See 58
FR 37863, July 14, 1993; 53 FR 41108, October 19, 1988; and 52 FR
49577, December 31, 1987.)
EPA has considered the comments submitted on the proposed rule, and
has applied this interpretation to the 5 chemicals addressed above.
Based on this analysis, EPA concludes that ethylene oxide, mancozeb,
propargite, propylene oxide and simazine induce cancer within the
meaning of the Delaney clause. Because EPA has determined that the
section 409 FARs for captan and oxyfluorfen should be revoked on
grounds other than the Delaney clause, the Agency is not issuing a
final finding in this action that these chemicals induce cancer within
the meaning of the Delaney clause. Full copies of EPA's reviews of each
chemical and other references in this document are available in the OPP
docket 300335, the location of which is given in the ``ADDRESSES''
section of this preamble.
V. EPA's Decisions
A. FARs That Are Not Needed
Captan. EPA is revoking the FAR for the fungicide captan in or on
raisins (50 ppm). This FAR is codified at 40 CFR 185.500. EPA is
revoking this regulation because the Agency has determined that this
FAR is not needed to prevent adulterated food. This final rule is based
on the grounds discussed in the petition of January 31, 1996, discussed
in Unit IV of this preamble.
Mancozeb. EPA is revoking the FARs for mancozeb (expressed as the
zinc ion and maneb coordination product) for residues in the brans of
barley and rye (20 ppm) and in the flours of barley, oats, rye and
wheat (1 ppm). These FARs are codified at 40 CFR 185.6300. EPA is
revoking these FARs because they are not needed to prevent adulterated
food. This final rule is based on the grounds discussed in the petition
of May 19, 1993, discussed in Unit IV of this preamble.
Oxyfluorfen. EPA is revoking the FARs for residues of oxyfluorfen
on cottonseed oil, peppermint oil, spearmint oil and soybean oil (.25
ppm). These FARs are codified at 40 CFR 185.4600. EPA is revoking these
FARs because the Agency has determined that these FARs are not needed
to prevent adulterated foods. This final rule is based on the grounds
discussed in the petition of December 14, 1994, discussed in Unit IV of
this preamble.
Propargite. EPA is revoking the FAR for residues of propargite on
raisins (25 ppm). This FAR is codified at 40 CFR 185.5000. EPA is
revoking this FAR because the Agency has determined that it is not
needed to prevent adulterated food. This final rule is based on the
grounds discussed in the petition of September 7, 1994, discussed in
Unit IV of this preamble.
[[Page 11999]]
Simazine. EPA is revoking the FAR for residues of simazine in
sugarcane syrup (1 ppm). This FAR is codified at 40 CFR 185.5350. EPA
is revoking this FAR because EPA has determined that it is not needed
to prevent adulterated food. This final rule is based on updated Agency
guidelines which dictate when a FAR is needed.
Table 1.--13 FARs That Are Not Needed
----------------------------------------------------------------------------------------------------------------
Food additive
Pesticide CFR citation Commodity regulation level
----------------------------------------------------------------------------------------------------------------
Captan 185.500 raisins 50.0 ppm
Mancozeb 185.6300 bran of barley, rye 20 ppm
flours of oats, barley, 1 ppm
rye, wheat
Oxyfluorfen 185.4600 peppermint, spearmint, 0.25 ppm
soybean, and cottonseed
oils
Propargite 185.5000 raisins 25 ppm
Simazine 185.5350 sugarcane syrup 1 ppm
----------------------------------------------------------------------------------------------------------------
B. Food Additive Regulations That Violate the Delaney Clause
Ethylene oxide. EPA is revoking the FAR for residues resulting from
the direct application of ethylene oxide to ground spices (50 ppm).
This FAR is codified at 40 CFR 185.2850. Ethylene oxide has been found
to induce cancer in animals based on tests which are appropriate for
the evaluation of the safety of food additives. Thus, this regulation
violates the Delaney clause in section 409 of the FFDCA.
Mancozeb. EPA is revoking the FAR for mancozeb (expressed as the
zinc ion and maneb coordination product) for residues in oat bran (20
ppm). This FAR is codified at 40 CFR 185.6300. Since mancozeb induces
cancer when ingested by animals, this regulation violates the Delaney
clause in section 409 of the FFDCA.
Propargite. EPA is revoking the FARs for residues of propargite on
dried figs (9 ppm) and dried tea (10 ppm). These FARs are codified at
40 CFR 185.5000. Since propargite induces cancer when ingested by
animals, these regulations violate the Delaney clause in section 409 of
the FFDCA.
Propylene oxide. EPA is revoking the FARs for residues of propylene
oxide on cocoa (300 ppm), glace fruit (700 ppm), gums (300 ppm),
processed nutmeats (except peanuts) (300 ppm), dried prunes (700 ppm),
processed spices (300 ppm), and starch (300 ppm). These FARs are
codified at 40 CFR 185.5150. Since propylene oxide induces cancer in
animals in tests appropriate for the evaluation of the safety of food
additives, these regulations violate the Delaney clause in section 409
of the FFDCA.
Simazine. EPA is revoking the FARs for residues of simazine on
sugarcane molasses (1 ppm) and in potable water (.01 ppm). These FARs
are codified at 40 CFR 185.5350. Since simazine induces cancer when
ingested by animals, these FARs violate the Delaney clause in section
409 of the FFDCA.
Table 2.--13 FARs That Violate The Delaney Clause
----------------------------------------------------------------------------------------------------------------
Food additive
Pesticide CFR citation Commodity regulation level
----------------------------------------------------------------------------------------------------------------
Ethylene oxide 185.2850 ground spices 50 ppm
Mancozeb 185.6300 bran of oats 20 ppm
Propargite 185.5000 dried figs 9 ppm
dried tea 10 ppm
Propylene oxide 185.5150 glace fruit 700 ppm
cocoa 300 ppm
gums 300 ppm
processed nutmeats 300 ppm
(except peanuts)
dried prunes 700 ppm
starch 300 ppm
processed spices 300 ppm
Simazine 185.5350 sugarcane molasses 1 ppm
potable water .01 ppm
----------------------------------------------------------------------------------------------------------------
VI. Consideration of Comments
EPA's proposed revocation of these FARs was published prior to
EPA's response to the NFPA petition. Many comments that were submitted
in response to the proposed rule urged EPA to reconsider many of its
tolerance setting policies, including the coordination, concentration,
RTE and RAC policies. As explained in the earlier units of this notice,
EPA has adopted new policies and used them in making the determinations
for this final rule. Because of these new policies, only 13 of the 26
FARs which EPA proposed to revoke on July 1, 1994, are being revoked
because they violate the Delaney clause. In addition, most commenters
also raised chemical specific issues, primarily concerning whether the
chemical induces cancer within the meaning of the Delaney clause. EPA's
response to chemical specific comments is summarized below. Full
responses to comments are in the docket.
American Crop Protection Association (ACPA)
Comments: ACPA submitted extensive comments on the proposal.
[[Page 12000]]
Many of ACPA's comments seem to suggest that EPA has incorrectly
applied the legal standard ``induce cancer'' because EPA failed to
duplicate prior FDA practice. ACPA admits that EPA announced it would
use FDA's ``induce cancer'' standard and would follow the weight of the
evidence approach used by FDA but ACPA contends that EPA's application
of the standard was not sufficiently thorough and that EPA has failed
to consider various categories of relevant evidence. ACPA alleges that
one particular type of evidence ignored by EPA is biologic and
mechanistic data. Further, ACPA argues that EPA has wrongly interpreted
the Delaney clause because EPA has failed to take into account the
relevance of the results of animal studies to humans. ACPA also asserts
that EPA failed to take account of the fact that an ``induce cancer''
finding is appropriate only where the evidence is ``conclusive.''
Finally, ACPA argues that EPA is legally required to determine whether
a section 409 FAR is legally necessary to prevent the adulteration of
food before revoking it on Delaney clause grounds.
EPA's response: EPA believes its application of the ``induce
cancer'' standard and the weight of the evidence approach has
sufficiently addressed all relevant evidence. Where ACPA or other
commenters have raised questions concerning how specific data were
considered for specific chemicals, EPA has in this notice or in the
docket responded to those comments. ACPA's comments regarding the role
of the relevance of animal studies to humans under the Delaney clause,
the relevance of biologic and mechanistic data, the degree of certainty
required for a Delaney clause finding, and the need for a determination
as to the necessity of a FAR are addressed below.
Relevance to humans. ACPA asserts that a substance does not induce
cancer within the meaning of the Delaney clause even if it produces
cancer when fed to experimental animals if the results of the
experiment are not relevant to human carcinogenicity. To support this
conclusion, ACPA first notes that the Delaney clause contains two
clauses separated by the conjunction ``or.''
[N]o additive shall be deemed to be safe if it is found to
induce cancer when ingested by man or animal or if it is found,
after tests which are appropriate for the evaluation of the safety
of food additives, to induce cancer in man or animal * * *.
21 U.S.C. 348(c)(3)(A) (emphasis added). According to ACPA, the first
clause is limited to evidence gathered through epidemiological studies
on humans or animals and the second clause addresses evidence gathered
from experiments. ACPA bases this conclusion on the inclusion of the
word ``tests'' in the second clause but not in the first. Further, ACPA
argues that the requirement that the tests be ``appropriate for the
evaluation of the safety of food additives'' mandates that EPA must
consider the relevance of both the test design and the test results to
human carcinogenicity. For example, ACPA asserts that if the test
produces cancer in the animals but that cancer would not be produced in
humans then the substance does not induce cancer in animals under the
Delaney clause because the test was inappropriate for an evaluation of
human carcinogenicity. A failure to consider the relevance of test
results to humans, ACPA contends, would make the focus of the Delaney
clause protection of the health of experimental animals, not humans.
EPA disagrees with each step of ACPA's analysis. First, EPA
believes that the feeding studies with experimental animals fall within
the first clause of the Delaney clause. It is a difficult stretch to
suggest that a substance that has produced cancer in an animal feeding
study has not been ``found to induce cancer when ingested by * * *
animal[s].'' This is especially the case when the alternative
interpretation is that this phrase refers to a type of study--an
epidemiological study of animals--which is rarely if ever used to
evaluate carcinogenicity.
Moreover, the legislative history refutes ACPA's proposed
interpretation. The second half of the Delaney clause concerning
appropriate tests was included in the anti-cancer provision because of
a concern that tests other than feeding studies might be deemed
controlling under the Delaney clause. At the same time the
``appropriate'' tests clause was added, the original clause was amended
to add a reference to ingestion, thus signaling a special status for
ingestion studies.
Congressman Delaney's anti-cancer clause as initially drafted
stated: ``The Secretary shall not approve for use in food any chemical
additive found to induce cancer in man, or, after tests, found to
induce cancer in animals.'' H.R. 7798, 85th Cong., 1st Sess., section
409 (d), reprinted in XIV A Legislative History of the Federal Food,
Drug, and Cosmetic Act at 97 [hereinafter cited as Leg. Hist.]. At
first, the Department of Health, Education and Welfare (HEW) objected
to a specific mention of cancer in the Food Additive Amendments but
relented and proposed the anti-cancer language which was enacted. HEW
explained in detail the reason for revising the initial anti-cancer
clause:
It would be important, also to use language that would provide
the intended safeguards without creating unintended and unnecessary
complications. For example, the language suggested by some to bar
carcinogenic additives would, if read literally, forbid the approval
for use in food of any substance that causes any type of cancer in
any test animal by any route of administration. This could lead to
undesirable results which obviously were not intended by those who
suggested the language. Concentrated sugar solution, lard, certain
edible vegetable oils, and even cold water have been reported to
cause a type of cancer at the site of injection when injected
repeatedly by hypodermic needle into the same spot in a test animal.
But scientists have not suggested that these same substances cause
cancer when swallowed by mouth.
The enactment of a law which would seem to bar such common
materials from the diet would place the agency that administered it
in an untenable position. The agency would either have to try to
enforce the law literally so as to keep these items out of the
diet--evidently an impossible task--or it would have to read between
the lines of the law an intent which would make the law workable,
without a clear guide from Congress as to what was meant.
This difficulty could readily be avoided, if there is still a
desire to make specific mention of cancer in the bill, by providing
that ``no additive shall be deemed to be safe if it is found to
induce cancer when ingested by man or animal, or if it is found,
after tests which are appropriate to the evaluation of the safety of
food additives, to induce cancer in animals.''
104 Cong. Rec. 17415 (1958), XIV Leg. Hist. at 869 (reprinting a letter
from Elliot L. Richardson, Assistant Secretary, Department of HEW). If
HEW had intended that HEW be granted discretion to decide whether any
test was appropriate for evaluating the safety of food additives, even
ingestion studies, the word ``appropriate'' could have simply been
inserted before ``tests'' in Congressman Delaney's draft. However, the
proposed revision not only added language modifying the word ``test''
but rewrote the opening language of the anticancer provision by
inserting a reference to ingestion and animals. This creates the clear
inference that the appropriateness of ingestion studies was not open to
question.
This was certainly the contemporaneous interpretation of the
Delaney clause. In 1960, when the addition of a Delaney clause to the
Color Additive Amendments was fully debated in Congress, the House
Report on the Amendments described the Delaney clause as follows:
This clause provides that a color additive shall be deemed
unsafe and shall not be
[[Page 12001]]
listed for any use which will or may result in ingestion of any part
of such additive, if the additive is found to induce cancer when
ingested by man or animal, or if it is found to induce cancer in man
or animal by other tests, not involving ingestion, which are
considered to be appropriate for the evaluation of the safety of
additives for use in food.
H. Rep. No. 1761, 86th Cong., 2d Sess. 11 (1960), XVI Leg. Hist. at
680. Similarly, the Secretary of HEW indicated at hearings on the Color
Additive Amendments that HEW interpreted the ``ingestion'' part of the
Delaney clause as requiring the use of scientific tests:
The conclusion that an additive ``is found to induce cancer when
ingested by man or animal'' is a scientific one. The conclusion is
reached by competent scientists using widely accepted scientific
testing methods and critical judgment.
Color Additives: Hearings on H.R. 7624 and S. 2197 Before the Comm. on
Interstate and Foreign Commerce, 86th Cong., 2d Sess. 62 (1960), XVI
Leg. Hist. at 67 (statement of HEW Secretary Flemming). Finally, that
the ``ingestion'' half of the Delaney clause was interpreted as
covering feeding studies and thus as being the principal operative
phrase in the Delaney clause is confirmed by HEW's reaction to a
proposal to delete the first half of the Delaney clause. HEW objected
arguing that this change ``is obviously designed to weaken the
anticancer clause and to allow room for the contention that our
Department should establish tolerances to permit chemicals in food even
though they had been found to induce cancer when fed.'' H. Rep. No.
1761, 86th Cong., 2d Sess. 83 (1960), XVI Leg. Hist. at 752 (reprinting
letter to the Committee from HEW Secretary Flemming) (emphasis added).
Following HEW's objections, this amendment was not further pursued.\1\
\1\ To the extent any statement in the notice published at 58 FR
37862 (July 14, 1993) implies that ingestion studies fall within the
``appropriate tests'' half of the Delaney clause, that implication
was inadvertent and is inconsistent with the statute and with prior
EPA precedent (50 FR 20373, May 15, 1985).
---------------------------------------------------------------------------
Second, even assuming for the sake of argument that feeding studies
only fall within the second half of the Delaney clause, EPA still does
not accept ACPA's suggestion that the ``appropriate'' tests language
allows or requires EPA to consider the relevance to humans of the
results of an animal study in determining whether a pesticide induces
cancer in animals. Just as in the first half of the Delaney clause, the
second half requires a finding of whether a substance induces cancer
``in man or animal.'' The appropriate tests language does not override
the clear intent of the statutory ``or'' but merely insures that the
tests relate to the safety of food additives. As the legislative
history quoted above shows, the appropriate tests language was designed
to give the government the discretion to take into account the ``route
of administration'' in determining whether the substance would cause
cancer when ``swallowed by mouth.'' Accordingly, EPA believes an
``appropriate'' test for the evaluation of the safety of food additives
is one that yields information bearing on whether the substance will
induce cancer in humans or animals when ingested. Clearly, an animal
feeding study meets this criterion in all regards as to animals.
Indeed, it would be strange to suggest otherwise. The very stimulus for
the Delaney clause was that ``[l]aboratory experiments have shown that
a number of substances when added to the diet of test animals have
produced cancer.'' H. Rep. No. 1761, 86th Cong., 2d Sess. 11 (1960),
XVI Leg. Hist. at 680.
Contrary to ACPA's contention, a focus on the potential of a
substance to cause cancer in animals without considering the relevance
of this cancer to humans does not make the goal of the Delaney clause
the protection of laboratory animals. The underlying rationale of the
Delaney clause is that science cannot establish for humans a safe dose
of a substance that induces cancer in animals. As explained by HEW:
[The Delaney clause] allows the Department and its scientific
people full discretion and judgment in deciding whether a substance
has been shown to produce cancer when added to the diet of test
animals. But once this decision is made, the limits of judgment have
been reached and there is no reliable basis on which discretion
could be exercised in determining a safe threshold dose for the
established carcinogen.
H. Rep. No. 1761, 86th Cong., 2d Sess. 14 (1960), XVI Leg. Hist. at 683
(the Committee report adopted the statement of HEW Secretary Flemming).
Thus, by enacting the Delaney clause, Congress concluded that barring
substances based on findings in animals alone was the most practicable
way to protect humans. ACPA may find this approach misguided but that
does not make it not the law.
At bottom, ACPA's argument seeks to give EPA the discretion to set
safe doses for substances found to induce cancer when fed to animals.
That discretion, however, was removed by the Delaney clause. Les v.
Reilly, 968 F.2d 985, 988 (9th Cir. 1992), cert. denied, 113 S.Ct. 1361
(1993). Once a finding of animal carcinogenicity is made, the operation
of the Delaney clause is ``automatic.'' Public Citizen v. Young, 831
F.2d 1108, 1121 (D.C. Cir. 1987), cert. denied, 485 U.S. 1006 (1988).
The D.C. Circuit has previously concluded that the Delaney clause
indicates that ``Congress did not intend the FDA to be able to take a
finding that a substance causes only trivial risk in humans and work
back from that to a finding that the substance does not `induce cancer
in * * * animals.''' Id. Similarly, EPA may not work back from a
conclusion that the results of an animal study are irrelevant to humans
to a finding that the substance does not induce cancer in animals.
``[T]he agency may not, once a color [or food] additive is found to
induce cancer in test animals in the conventional sense of the term,
undercut the statutory consequence.'' Id. at 1122.
Mechanistic and biologic information. EPA believes that mechanistic
and biologic information is relevant to the Delaney clause
determination on animal carcinogenicity to the extent such information
bears on the question of whether a substance induces cancer in the test
animal. Mechanistic and biologic information may have particular
relevance to the issue of causation. However, having said that, EPA
recognizes that proper evaluation under the Delaney clause of
mechanistic and biologic information poses difficult questions. For
example, ACPA contends that if a substance induces cancer through a
secondary mechanism (e.g., the substance causes the growth of urinary
tract stones and the stones irritate the urinary tract causing cancer),
then the substance does not induce cancer within the meaning of the
Delaney clause.
EPA does not believe that EPA or FDA has ever squarely decided this
legal question in taking final action on a substance under the Delaney
clause. Nor does EPA believe that question needs to be addressed in
this notice. Although secondary mechanism arguments have been raised as
to several of the pesticides at issue in this notice, as discussed
elsewhere in this notice, EPA has decided either as a factual matter
that those arguments are not adequately supported or that there exists
other evidence showing cancer induction independent from any cancer
produced through a secondary mechanism.
``Conclusive'' evidence of carcinogenicity. Citing a prior FDA
decision involving cyclamates and the Delaney clause, ACPA has
contended that findings of carcinogenicity under
[[Page 12002]]
the Delaney clause must meet some unusually high level of certainty.
Other commenters also made this argument. EPA disagrees. Neither the
statute, nor FDA precedent for that matter, support using any other
than the general administrative standard of proof which is generally
described as a preponderance of the evidence. The relevant words of the
statute bar the establishment of a regulation for a food additive
``found to induce cancer when ingested by man or animal * * *.'' The
straightforward requirement to make a finding certainly does not impose
some extraordinary level of proof.
Further, EPA does not believe the FDA decision on cyclamates
requires a higher standard of proof. That decision does use the word
``conclusive'' in connection with the Delaney clause, but that is a
factor of FDA having classified the studies involved in that case into
one of three categories: (1) Conclusive or positive; (2) inconclusive
but suggestive; or (3) negative (45 FR 61474, 61481-61482, September
16, 1980). This breakdown was made so as to explicate whether the
proper showing of safety could be made under the section 409 safety
standard excluding the requirements of the Delaney clause. FDA
concluded that inconclusive but suggestive studies would have to be
addressed by a petitioner attempting to show a compound was ``safe''
(45 FR 61477). FDA described a positive study as a study which
``contains results that establish that a test substance causes cancer''
(45 FR 61481). EPA has found nothing in this precedent to suggest that
any standard other than a preponderance of the evidence applies to the
Delaney clause finding.
Determination on the need for section 409 FARs. ACPA as well as
several other commenters argued that EPA is legally required to
determine if a section 409 FAR is necessary to prevent the adulteration
of food prior to revoking such a FAR on Delaney clause grounds. Where
there are grounds for revocation of a section 409 FAR unconnected to
safety, EPA generally would, as a policy matter, rely on those grounds
to revoke the FAR prior to revoking finally under the Delaney clause.
However, as EPA has recently explained in the Coordination Policy
statement (61 FR 2377, January 31, 1996), EPA is under no legal
obligation to subordinate the Delaney clause to other grounds in a
revocation proceeding.
EtO
Comment: The American Spice Trade Association (ASTA) submitted a
panel report which concluded that EtO is not likely to induce cancer in
animals or humans when ingested as a residue on spices. The panel
contends that it is inappropriate to conclude that EtO causes cancer
through ingestion based on inhalation data. Therefore the revocation of
the section 409 FAR because of the Delaney clause is inappropriate.
EPA's response: EPA has concluded that it is appropriate to use
inhalation data to evaluate the safety of EtO as a food additive. This
conclusion is based on the finding of multiple benign and malignant
tumors distant from the site of exposure, which suggests that EtO has
tumor inducing potential independent of route of administration.
Inhalation exposure to EtO was associated with multiple benign and
malignant tumors in F344 rats and B6C3F1 mice. EtO was also associated
with tumor formation following oral gavage administration to Fischer
rats and subcutaneous administration to NMRI mice. In addition, EtO is
a genotoxic agent in vivo and in vitro. The large in vivo genetic
toxicity database shows that EtO produces effects distant from the site
of exposure. Genetic effects noted in vivo include micronuclei, sister
chromatid exchange, germ cell effects (dominant lethal), and heritable
translocations; these effects were associated with intravenous or
intraperitoneal injection and inhalation exposure (Dellarco et al.
1990). These genetic toxicity data provide further support for the
conclusion that EtO induces cancer.
Comment: ASTA had a number of comments regarding exposure. These
comments claim that:
(1) EtO is unstable in the acid pH of the stomach based on in vitro
hydrolysis data.
(2) Ingested EtO is likely to be detoxified by glutathione present
in the gastric mucosa and epithelial cells.
(3) EtO exposure via ingestion of treated spices is expected to be
significantly lower than levels associated with tumors in rodents.
(4) Consumers are unlikely to be exposed to EtO via consumption of
treated spices based on residue persistence studies submitted to EPA.
The study allegedly showed EtO levels in spices at or below the limit
of quantification within 60 days.
EPA's response: The issue central to the Delaney clause is whether
EtO induces cancer in man or animals when ingested or in a study which
is appropriate to evaluate the safety of a food additive. EtO is
associated with cancer in animals following inhalation, oral, and
subcutaneous administration. As explained above, EPA has determined
that these studies are appropriate for the evaluation of the safety of
EtO as a food additive. No data have been submitted which would
establish affirmatively that all EtO residues in food would break down
or be ``detoxified'' in the stomach. Therefore, EPA does not believe
that it should reconsider the determination that inhalation data are
appropriate for evaluating EtO as a food additive on these grounds.
Further, as explained above, EtO is associated with genetic toxicity,
including heritable mutation, in vivo following oral, inhalation,
intraperitoneal, and intravenous administration.
The level of human exposure to EtO residues in treated spices is
not relevant to the Delaney clause. As stated above, the critical issue
is that EtO has been found to induce cancer in animals. The Delaney
clause does not allow EPA to consider exposure levels. Although residue
chemistry data submitted to the Agency show that EtO residues in spices
dissipate over time, the data also show that sufficient residues remain
so that a tolerance is needed for spices treated with EtO.
Comment: ASTA commented that the EPA Office of Pesticide Programs
(OPP) should conduct a peer review of the carcinogenicity of EtO, and
should not rely on a Health Assessment Document developed by the EPA
Office of Research and Development (ORD) to establish the
carcinogenicity of EtO.
EPA's response: The ORD Health Assessment Document cited in the
proposal for this rule is an EPA document which reflects the position
of the Agency on the carcinogenicity of EtO. This document was
subjected to peer review, both internal and external, prior to
publication. In addition, the content of the document was independently
peer-reviewed in a public session by the Environmental Health Committee
of EPA's Science Advisory Board. Therefore, the Agency does not believe
that additional peer review of this finding is needed at this time.
Comment: ASTA stated its position that revocation of the FAR for
EtO is a de facto cancellation of EtO's registration under FIFRA, and
that therefore due process requires that FIFRA section 6 procedures be
followed in this action. ASTA also suggested that EPA refer the matter
of whether EtO induces cancer to the Scientific Advisory Panel (SAP).
EPA's response: EPA has clearly stated its policy on coordination
between FFDCA and FIFRA. Congress has charged EPA with administering
two statutes with different procedural schemes. As discussed in EPA's
[[Page 12003]]
Coordination Policy, EPA has taken an approach which harmonizes the two
statutory standards to the extent possible. FIFRA does not require EPA
to take action under FIFRA before acting under the FFDCA. EPA does not
believe that the rulemaking procedures in the FFDCA violate
Constitutional due process. With respect to ASTA's suggestion that EPA
consult the SAP, there is no requirement that EPA refer FFDCA tolerance
revocations to the SAP prior to taking action. The Agency has reviewed
all the available information on EtO and has made its determination
that EtO induces cancer within the meaning of the Delaney Clause. In
addition, as noted above, the EPA Health Assessment Document for EtO,
which included an evaluation of the chemical's carcinogenicity, was
peer-reviewed in a public session by the Environmental Health Committee
of EPA's Science Advisory Board.
Comment: The National Food Processors' Association (NFPA) and
Grocery Manufacturers Association (GMA) commented that EPA should
withdraw the proposed section 409 revocation of EtO pending a detailed
reexamination of the data.
EPA's response: EPA has made the findings in this notice with
respect to EtO after reviewing all available information, and sees no
reason to withdraw the proposal based on the speculation that other
information might become available someday which would disprove this
finding. If interested persons submit new information on the
carcinogenicity of EtO in the future, EPA will review it and consider
then whether additional regulatory action is warranted.
Mancozeb
Comment: The Mancozeb Task Force (MTF) objected to EPA's
conclusions that exposure to mancozeb causes an increased incidence of
benign and malignant thyroid tumors in rats and an increasing trend of
tumors at the highest dose tested (HDT). The MTF believes that these
tumors resulted from exposure to ETU formed metabolically from
mancozeb.
EPA's response: The Agency is aware that ETU is a contaminant and
degradation product present in mancozeb, and that ETU is a plant and
animal metabolite of mancozeb which is present in food treated with
mancozeb. Exposure to either mancozeb or ETU results in induction of
the same tumor type (thyroid tumors) in rats (ETU also induced thyroid
and liver tumors in mice). Consistent with prior FDA decisions, EPA
believes that the Delaney clause applies to metabolites of a food
additive as well as the parent compound. (See, e.g., 56 FR 41902,
41909, August 23, 1991.)
Comment: The MTF also argued that the rat thyroid lesions resulted
from overstimulation of the thyroid and the development of
proliferative lesions when the threshold for thyroid-pituitary feedback
is exceeded on a chronic basis.
EPA's response: This may be a plausible mechanism for the thyroid
tumors in rats. However, EPA has not received sufficient evidence to
show the mechanism through which mancozeb induces cancer. Moreover, as
noted in EPA's response to ACPA's comments, EPA has not determined the
legal relevance of secondary mechanism claims to the Delaney clause
finding.
In the Agency's Draft Policy Document on Thyroid Follicular
Carcinogenesis: Mechanistic and Science Policy Considerations, SAB
Review Draft, May 1988, EPA explained a mechanism through which a
substance could cause thyroid cancer:
Studies over the last several decades in multiple laboratories
and using a number of different treatment regimens (e.g., iodine
deficiency) have demonstrated the significance of long-term thyroid-
pituitary hormonal imbalance in thyroid carcinogenesis. A consistent
progression of events is noted: reduction in thyroid hormone
concentrations, elevation in thyroid stimulating hormone (TSH)
levels, cellular hypertrophy and hyperplasia, nodular hyperplasia,
and neoplasia. Hyperplasia and sometimes neoplasia of the pituitary
may also be seen * * *. A block in any of the early steps act as a
block for subsequent steps including tumor development, and
cessation of treatment at an early stage in the progression results
in regression toward normal thyroid structure and function.
Two basic questions must be addressed before this draft policy is
applied. The MTF has not submitted data establishing that the neoplasms
found in the mancozeb studies are due to thyroid-pituitary imbalance,
or that other carcinogenic mechanisms can be discounted. Specifically,
the MTF has not submitted data to demonstrate any of the following six
points:
(a) Goitrogenic activity in vivo;
(b) Clinical chemistry changes (e.g., reduced thyroid hormone and
increased TSH serum concentrations);
(c) Specific evidence of reduced hormone synthesis (e.g., inhibited
iodine uptake) or increased thyroid hormone clearance (e.g., enhanced
biliary excretion);
FR Doc. 96-7026 Revocation of Pesticide Food Additive Regulations
(d) Evidence of progression (e.g., hypertrophy/hyperplasia, nodular
hyperplasia-neoplasia);
(e) Reversibility of effects after exposure is terminated; and
(f) Structure Activity Relationships (SAR) to other thyroid
tumorigens.
Comment: The MTF also commented that the FAR for mancozeb in or on
brans and flours is not necessary because residues do not concentrate
in RTE foods above the level of the RAC tolerance, and that EPA should
complete action on the Task Force's petition to revoke the FAR for
brans and flours on that basis.
EPA's response: As discussed above in EPA's coordination policy,
EPA does not have any obligation to determine whether or not a FAR is
necessary before proceeding to revoke it. However, EPA has reviewed the
Task Force's petition, and, as discussed in Unit V.A. of this preamble,
where EPA agrees with the petition, EPA is revoking the FAR on grounds
that the residues do not concentrate above the level of the RAC
tolerance. The FARs for mancozeb in or on flours of oat, barley, rye
and wheat, and for brans of barley and rye are not needed, and are
being revoked on that basis. EPA did not agree with the petition with
respect to oat bran, which is a RTE food. Therefore, the FAR for oat
bran is being revoked because it violates the Delaney clause.
Propargite
Comment: Uniroyal Chemical Co., Inc. commented that the Agency has
not performed a weight of the evidence review of all available data and
information on propargite, including mechanistic considerations.
Uniroyal also asserted that EPA's ``induces cancer'' determination does
not reflect that one mutagenic study was negative and ignores all other
mutagenicity studies. Based on one negative mutagenicity study and
strong evidence for a secondary mechanism for tumors in rats, Uniroyal
argued that propargite cannot be said to induce cancer.
EPA's response: After a full evaluation of all the data and
supporting information regarding animal carcinogenicity, EPA concludes
that exposure to propargite results in an increased incidence of
undifferentiated sarcoma of the jejunum in both sexes of Sprague-Dawley
rats. This rare (unusual site) and malignant tumor was produced with a
high incidence and is fatal. The mutagenicity data support the
carcinogenicity of propargite.
The commenter argues that the jejunal tumors were caused by a
secondary mechanism involving cell proliferation. In support, the
commenter submitted a study purporting to show that propargite only
causes cell proliferation at high doses. The theory that cancer can be
caused by cell proliferation, and that proliferation is subject to a
[[Page 12004]]
threshold, is just that--a theory. The Agency has yet to validate the
cell proliferation model as it tentatively has done with regard to the
mechanism involving thyroid-pituitary hormonal imbalance in thyroid
carcinogenicity (see EPA's response to secondary mechanism comment on
mancozeb, above). Important basic science data are needed, like those
developed for the thyroid, before EPA can even consider this model.
With respect to the comment regarding mutagenicity data, propargite
was demonstrated to be mutagenic in a Chinese hamster ovary cell gene
mutation study in the absence, but not presence of metabolic
activation; this indicates that propargite is a direct-acting mutagen.
Propargite produced positive and negative results in two replicate
experiments for micronuclei in mouse bone marrow. Propargite was
negative in an older, unclassified Salmonella gene mutation assay and
for unscheduled DNA synthesis. Overall, these data provide evidence for
mutagenicity that would support a finding of carcinogenicity.
Comment: Uniroyal also commented that revocation of the FARs for
propargite may increase dietary risk to consumers and raise the cost
and lower the quality of food. Finally, Uniroyal commented that raisins
and dried tea should be classified as RACs rather than as processed
foods.
EPA's response: The concerns raised by Uniroyal regarding relative
dietary risks and cost or quality of food are not relevant to the
analysis of FARs under the Delaney clause. The Delaney clause contains
no provision for consideration of exposure levels, relative risks, or
cost impacts. See Les v. Reilly, 968 F.2d 985 (9th Cir. 1992), cert.
denied, 113 S.Ct. 1361 (1993).
With regard to whether raisins and dried tea are RACs or processed
foods, EPA recently issued an interpretive ruling defining RACs. Under
this ruling, commodities which are routinely dried for storage or
transportation purposes are considered RACs, while commodities which
are dried for the purpose of creating a distinct commodity are
considered processed. As specifically discussed in that ruling, raisins
are produced by a drying process that converts one distinct commodity
(i.e. grapes) into another distinct commodity (i.e. raisins).
Therefore, raisins are a processed food.
EPA has found that dried tea is also a processed food, but for a
slightly different reason. Tea leaves are not only dried prior to
storage and transport; some varieties constituting a significant
amount, if not the majority, of tea imported into this country, are
fermented to various degrees prior to drying. Fermenting is certainly
within the meaning of ``processing,'' therefore the status of dried tea
as a processed food was not affected by the RAC interpretation of
drying. Although there are some varieties of tea which are not
fermented prior to the drying process, the propargite tea FAR applies
to dried tea generally, and thus must be revoked.
Propyline Oxide
Comment: The Warren Chemical Co. (Warren) commented that inhalation
studies should not be used to determine carcinogenicity because
propylene oxide converts to propylene glycol in the stomach.
EPA's response: The Agency believes that inhalation studies are
appropriate for evaluating the safety of propylene oxide due to the
appearance of tumors in both mice and rats at a site distant (e.g. in
the mammary gland) from the route of exposure (inhalation). EPA does
not have sufficient data to establish that ingestion of propylene oxide
residues in foods would only result in exposure to propylene glycol, as
the commenter asserts. Therefore, the Agency believes that the
inhalation data are appropriate for the evaluation of propylene oxide.
Comment: Warren also commented that EPA's finding that female mice
showed a significant dose related trend of mammary gland
adenocarcinomas relative to controls did not consider a statement in
the study report. The authors of the study stated that the tumor
incidence was within the range found in historical untreated controls,
and that they did not consider the incidence of this tumor to be
related to exposure to propylene oxide.
EPA's response: For comparisons of tumor incidence in treated and
control animals, it is the concurrent control which is the primary
reference. The following excerpt is from EPA's ``Guidelines for
Carcinogen Risk Assessment'' (51 FR 33992-34003, September 24, 1986)
To evaluate carcinogenicity, the primary comparison is tumor
response in dosed animals as compared with that in contemporary
matched control animals. Historical control data are often valuable,
however, and could be used along with concurrent control data in the
evaluation of carcinogenicresponses.
Thus, comparisons with historical controls are secondary to those with
concurrent controls. Historical control data when it is from the same
laboratory and same time period as that in which the study was
performed may be used to determine if the concurrent control response
is within the normal range. EPA often disagrees with authors of studies
regarding the significance of certain observations. In this case, the
EPA review considered the concurrent controls a more appropriate
reference for comparing the tumor incidence in treated animals. In any
event, there were tumors found in the rat study as well, which fact
also forms part of the basis for EPA's finding that propylene oxide
induces cancer.
Comment: Warren also commented that EPA should not consider
fibroadenomas when applying the Delaney clause because a fibroadenoma
could possibly disappear without becoming malignant.
EPA's response: A fibroadenoma is a benign neoplastic lesion.
Adenocarcinomas are malignant and can arise within fibroadenomas. A
fibroadenoma may or may not progress to a carcinoma. As discussed
above, an increase in the incidence of malignant tumors or, where
appropriate, benign tumors or a combination of benign and malignant
tumors, satisfy the ``induce cancer'' standard under the Delaney
clause. In any event, adenocarcinomas were also found in the study
where fibroadenomas occurred.
Comment: Warren also argued that EPA should not rely on the rat
gavage study for each of the following reasons:
(a) It showed tumors only in the forestomach, an organ humans do
not have.
(b) EPA's peer review did not take into account the fact that
propylene oxide converts in the stomach to propylene glycol.
(c) The study went on for three years instead of two, which is
improper because older rats are more susceptible to cancer.
(d) Human stomachs have a protective lining which rat forestomachs
do not have.
(e) Gavage, or pipetting substance into an animal's stomach, is not
what ``ingested'' means in the context of the Delaney clause.
EPA's response: (a) The commenter points out that humans do not
have forestomachs, and argues that tumors in this organ should be
disregarded by EPA in assessing the carcinogenicity of propylene oxide.
However, it is not always possible to draw a direct site to site
correlation between tumors in different species. Just because humans do
not have forestomachs does not mean that there could not be any
tumorigenic response in another organ. In any event, the absence of a
forestomach in humans does not affect the fact that cancer was induced
in the rat forestomach.
(b) EPA addressed the issue of conversion of propylene oxide to
[[Page 12005]]
propylene glycol in the stomach in its response to a prior comment
above.
(c) The commenter argues that because the study lasted three years
instead of two, the Q* or cancer potency factor assigned to propylene
oxide should have been revised. The fact that the study lasted three
years instead of two does not necessarily mean that its findings were
not valid. Although older rats may tend to get more cancer than younger
rats, the concurrent control animals also aged, and their chance of
developing tumors increased with that of the treated animals. Whether
or not the Q* should account for this element of the study is not
relevant to the determination that tumors were produced in the study,
and therefore propylene oxide induces cancer. An ``induces cancer''
finding under the Delaney clause does not depend on relative potency.
(d) The commenter speculates that the protective lining of the
human stomach would protect it from any tumor-causing effects of
exposure to propylene oxide, therefore rat forestomach tumors cannot be
relevant to whether propylene oxide residues in food would cause cancer
in humans. However, there is no data to support the commenter's theory
that such a protective lining would have prevented the forestomach
tumors in the rat study. As noted above, there is not necessarily a
direct site to site correlation between species. EPA does not believe
that this speculation forms any basis to disregard the rat gavage
study.
(e) The Agency believes that studies where test compounds are
administered to treated animals by gavage are ``ingestion'' studies
within the meaning of the Delaney clause. EPA also believes that gavage
studies are generally appropriate for the evaluation of the safety of
food additives. See EPA's response to comments of Grocery
Manufacturers' Association, below.
Comment: Finally, Warren commented that there is no alternative
sterilant for cocoa or for nutmeats. The commenter noted that
irradiation is not appropriate for treatment of cocoa powder because
irradiated cocoa tends to turn rancid. The commenter also noted that
irradiation is not a viable alternative for all spices because it
degrades the oils and flavor of some spices (like chili powder).
Finally, the commenter stated that irradiation would impose high costs
on production of these commodities.
EPA's response: As noted earlier regarding costs of food,
availability of pesticide alternatives is not relevant to the Agency's
decisions on FARs under the Delaney clause. EPA can only consider
whether the substance at issue induces cancer when ingested by man or
animals, or when tested in a test which is appropriate for evaluating
the safety of a food additive.
Comment: John A. Todhunter commented on behalf of Aberco, Inc., a
registrant of pesticides containing propylene oxide. With regard to
cocoa, Dr. Todhunter commented that there will be no propylene oxide
residues in foods made with treated cocoa powder because the cocoa is
incorporated into foods which are processed at high temperatures (i.e.
baked or cooked foods). With regard to gums and spices, Dr. Todhunter
commented that propylene oxide is not a pesticide under the FFDCA when
it is used to sterilize gums and spices. The commenter argued that FDA
has listed gums and spices as ``generally regarded as safe'' (GRAS),
and that therefore anything which becomes a constituent of a GRAS
substance through good manufacturing practices (GMP) cannot be
regulated under section 409. The commenter cited FDA regulations at 21
CFR 182.10 (spices) and 184.1330 through 184.1351 (gums). With regard
to starch, Dr. Todhunter commented that propylene oxide is not a
pesticide under the FFDCA when it is used to sterilize starch because
starch is not a RAC. The commenter also stated that there will be no
propylene oxide residues on foods made with treated starch because the
starch is later incorporated into foods and beverages which are all
processed at high temperatures. Dr. Todhunter also recommended that EPA
establish tolerances for propylene oxide on cocoa powder, gums and
starch under section 406 of the FFDCA. Dr. Todhunter further commented
that the nuts on which propylene oxide is used are not ``processed
nutmeats'' but are RACs, and therefore propylene oxide should be
regulated under FFDCA section 408 rather than 409.
EPA's response: EPA disagrees with most of these comments. First,
propylene oxide, when used to sterilize these processed foods, is a
pesticide as defined under FIFRA because it is used to destroy or
mitigate pests. See 7 U.S.C. 136(u). Cocoa powder is a processed food
which is treated before it moves in commerce, therefore propylene oxide
is a food additive when used to treat cocoa powder. Whether residues
would remain in the cocoa after it is incorporated into other foods is
not relevant to whether or not a FAR is necessary for propylene oxide
residues on cocoa powder.
Edible gums and spices are processed foods which are treated with
propylene oxide before they move in commerce, therefore propylene oxide
is a food additive when used to sterilize them. Whether or not use of
propylene oxide is part of GMP for production of these foods is not
relevant to whether or not a FAR is necessary for propylene oxide
residues. The regulations cited are simply the FDA's listing of the
gums and spices themselves as GRAS. The FDA regulations are not
intended to make anything which may become part of the foods (such as a
sterilant) GRAS.
Starch is a processed food which is treated before it moves in
commerce, therefore propylene oxide is a food additive when used to
treat starch. Whether residues would remain in a food made from treated
starch after it is incorporated into other foods is not relevant to
whether or not a FAR is necessary for propylene oxide residues on
starch.
The notion that EPA should regulate pesticides in processed foods
under FFDCA section 406 was raised by NFPA in their second petition
submitted in July 1995. EPA responded to this issue in the notice
issuing the Coordination Policy (61 FR 2377, January 25, 1996). To the
extent that Congress left EPA with discretion to regulate pesticides
under either sections 406 or 409, EPA has declined to change from its
current practice.
With regard to nutmeats, EPA agrees that nutmeats per se are a RAC
that should have a raw food tolerance established under FFDCA section
408. See Pesticide Assessment Guidelines, Subdivision O: Residue
Chemistry Table II (October 1982, amended September 1995).
The current FAR for propylene oxide on processed nutmeats was
established more than 25 years ago. EPA determined in 1982 that nuts
were a RAC, and since then, has established raw food tolerances for
nuts under FFDCA section 408. Although the FAR was established for
``processed'' nutmeats, it has been viewed by the industry as covering
the current use of propylene oxide on nutmeats, regardless of whether
they were considered raw or processed.
EPA has not yet reviewed propylene oxide in its pesticide
reregistration program, at which time the discrepancy in the tolerance
situation would have been addressed routinely. In light of the strict
standard of the Les v. Reilly court decision, however, EPA has focused
its attention more carefully on each of the statutory provisions
affecting its decisions relating to tolerances. For instance, EPA has
articulated or refined its policies in a number of areas, including its
concentration, ready-to-eat
[[Page 12006]]
and raw/processed policies, discussed in Unit II of this preamble.
EPA has received a petition from SRS International corporation, on
behalf of Aberco, Inc., to establish a 408 tolerance for propylene
oxide on raw nutmeats. A notice of filing of this petition was
published in the Federal Register on February 1, 1996 (61 FR 3696). The
Agency is currently reviewing the petition and the toxicology and
residue databases for propylene oxide, and will act on the petition as
soon as practicable.
Simazine
Comment: Ciba-Geigy Corp. (Ciba) commented that the results of
studies relied upon by EPA for its determination that simazine induces
cancer are not appropriate for evaluation of the human safety of
simazine as a food additive and do not demonstrate that simazine
``induces cancer'' within the meaning of Delaney Clause. Ciba's first
argument for this premise was based on the fact that no increased
incidence of any tumor type was observed in male or female mice which
were fed simazine.
EPA's response: EPA has found that simazine induces cancer in
animals when ingested within the meaning of the Delaney clause. As
such, EPA was precluded from considering relevance of this finding to
humans. (See response to ACPA's comments.) In construing the ``induce
cancer'' standard as to animals, EPA follows a weight-of-the-evidence
approach. After a full evaluation of all the data and supporting
information regarding animal carcinogenicity, EPA concluded that
exposure to simazine by ingestion results in increased incidence of
malignant mammary gland carcinomas and malignant pituitary gland
carcinomas in female Sprague-Dawley rats. The study's tumor incidence
results were statistically significant when compared with concurrent
controls and exceeded the upper limit of the historical control range
of the testing laboratory. The pituitary tumors were fatal with a
possibly accelerated onset at both the mid- and highest dose, and the
mammary tumors also contributed to the increased mortality at the
highest dose. There was equivocal evidence of kidney tubule tumors (an
uncommon tumor type) in both sexes. The structural analogs are strongly
supportive as these compounds mostly induced malignant mammary gland
tumors in Sprague-Dawley rats. There was some evidence of genotoxicity
for simazine, as well as for some of the analogs.
The Agency agrees that there was no increased incidence of tumors
associated with Simazine exposure in the CD-1 mouse study. However,
this negative study in mice does not convince EPA that simazine did not
induce cancer in the study on rats.
Comment: Ciba also argued that the mid-dose level (100 ppm) in the
Sprague-Dawley rat study exceeded the Maximum Tolerated Dose (MTD),
based on significant reductions in survival at this dose. Based on this
argument, Ciba asserted that increased incidence of mammary gland
carcinomas resulted only at doses that exceeded the MTD, i.e., the mid-
and high doses.
EPA's response: The Agency is not convinced that the mid-dose in
female rats exceeded the MTD, because the pituitary tumors contributed
to the mortality. There were statistically significant increases in
mammary gland carcinomas and in pituitary adenomas and combined
adenoma/carcinoma at both the mid-and highest-doses.
The study authors reported that the pituitary tumors (adenomas and
carcinomas) in female rats were considered to be fatal ``by virtue of
their size and compression of the mid-brain'' and thus contributed to
the decreased survivability of both the mid- and highest-dose group
females. In addition, their onset was 4-15 weeks earlier in the mid-
and highest-dose groups as compared to the control and low dose groups.
Comment: Ciba also commented that atrazine, a structurally similar
compound, while displaying a similar oncogenic profile in S-D rats and
in mice, did not induce mammary tumors in the Fisher 344 female rat.
EPA's response: Simazine is one of several s-triazine compounds
used in agriculture as herbicides. It is structurally related to
atrazine, cyanazine, and propazine, among others. Although atrazine did
not induce mammary tumors in Fisher 344 female rats, these structural
analogs provide much evidence from other studies to support EPA's
finding regarding simazine. Atrazine was associated with increased
mammary gland tumors (primarily malignant tumors) in female Sprague-
Dawley rats; early onset of mammary tumors was also observed. Cyanazine
was also associated with increased mammary gland tumors (primarily
malignant tumors in female Sprague-Dawley rats.) Propazine was
associated with increased mammary gland tumors (primarily benign) in
female Sprague-Dawley rats. The structural analogs are strongly
supportive as these compounds mostly induced malignant mammary gland
tumors in Sprague-Dawley rats.
Comment: Ciba asserted that simazine is not genotoxic, although the
commenter admitted that a few positive genotoxicity results have been
reported in the public literature. Ciba argued that potent genotoxic
oncogens usually induce mammary tumors in almost one hundred percent of
animals, while mammary tumor incidence with simazine was far short of
one hundred percent.
EPA's response: Simazine was found negative in the Salmonella assay
for gene mutations; this is consistent with other tested s-triazines.
However, it is reported that simazine is positive for gene mutations in
the mouse lymphoma assay, the Drosophila sex-linked recessive lethal
assay, the cell transformation assay in Syrian hamster embryo cells,
and plant cytogenetic assays. Simazine is also reported negative in
several other assays including yeast assays, unscheduled DNA synthesis
(UDS), sister chromatid exchanges, and for aneuploidy. Overall, these
data suggest a possible mutagenic action for simazine. The Agency
believes that the evidence of simazine's genotoxicity provides
additional support for the finding that it induces cancer.
In addition, structural analogs of simazine have shown genotoxic
actions as well. For example, cyanazine has evidence of positive
genotoxic activity in the mouse lymphoma assay for gene mutations and
for UDS in rat hepatocytes, and propazine induces gene mutations in the
cultured V79 cell assay for gene mutations.
Comment: Ciba argued that Sprague-Dawley rats have a high
spontaneous background rate of mammary tumors, and that any mammary
tumors induced by simazine are hormonally-mediated and therefore have a
threshold. Ciba asserted that therefore simazine's carcinogenicity
should be regulated qualitatively with a safety factor and not
quantitatively.
EPA's response: Simazine induced increased incidence of malignant
mammary gland carcinomas and malignant pituitary gland carcinomas in
female Sprague-Dawley rats. Mammary tumor incidence was as high as 78%,
and was outside the historical control incidence of the testing
laboratory. The pituitary and mammary tumors also contributed to the
observed increased mortality. There was equivocal evidence of kidney
tubule tumors (an uncommon tumor type) in both sexes. The structural
analogs are strongly supportive as these compounds mostly induced
malignant mammary gland
[[Page 12007]]
tumors in Sprague-Dawley rats. There was some evidence of genotoxicity
for Simazine as well as for some of the analogs.
Although a hormonal mechanistic argument for the mammary tumors was
proposed by the commenter, neither the Agency nor the scientific
community at large has yet developed or identified protocols which
could provide data to demonstrate such a mechanism. No agreed upon
experimental model has been identified, and the critical step
associated with the mode of action has not been identified. As
discussed with respect to cell proliferation and jejunal tumors in
EPA's response to comments on propargite, important basic science data
must be developed, as were developed for the thyroid mechanism, before
the Agency can evaluate the validity of the claim that simazine induces
cancer through a hormonal mechanism. (See also EPA's response to ACPA
regarding secondary mechanisms in general.)
Other Comments
Comment: GMA commented that FDA determined in 1974 that the term
``ingestion'' in the Delaney clause does not include gavage studies,
and therefore the results of a gavage study would invoke the Delaney
clause only if this type of study is found to be scientifically
``appropriate'' as a model for dietary exposure. The commenter
submitted an excerpt of FDA's ``Study of the Delaney Clause and Other
Anti-Cancer Clauses,'' (Agriculture, Environmental and Consumer
Protection Appropriations for 1975: Hearings before a Subcommittee on
Appropriations, House of Representatives, 93rd Cong., 2nd Sess., part
8, 1974).
EPA's response: EPA disagrees with this comment. Gavage is merely
one of several different techniques for administering a test compound
to animal orally. Gavage is sometimes used instead of incorporating the
substance into an animal's food because a more precise dose can be
given by gavage. EPA could not find any reference, other than the
report cited, where FDA stated that a gavage study must be evaluated
under the ``appropriate test'' prong of the Delaney clause rather than
the ``ingestion'' prong. Moreover, there is no explanation in the
report as to why a gavage study should not be considered an ingestion
study. In any event, it is not necessary to determine whether gavage is
ingestion for purposes of this notice because EPA believes that gavage
studies are generally appropriate for the evaluation of the safety of a
food additive because they involve dietary exposure to the test
substance, albeit by forced feeding.
VII. Procedural Matters
A. Filing of Objections and Requests for Hearings
Any person adversely affected by this final rule may file written
objections to the final rule, and may include with any such objection a
written request for an evidentiary hearing on the objection. Such
objections must be submitted to the Hearing Clerk on or before April
22, 1996. A copy of the objections and hearing requests filed with the
Hearing Clerk shall be submitted to the Office of Pesticide Programs
Docket Room. Regulations applicable to objections and requests for
hearings are set out at 40 CFR parts 178 and 179. Those regulations
require, among other things, that objections specify with particularity
the provisions of the final rule objected to, the basis for the
objections, and the relief sought. Additional requirements as to the
form and manner of the submission of objections are set out at 40 CFR
178.25. The Administrator will respond as set forth in 40 CFR 178.30,
178.35 and/or 178.37 to objections that are not accompanied by a
request for evidentiary hearing.
A person may include with any objection a written request for an
evidentiary hearing on the objection. A hearing request must include a
statement of the factual issues on which a hearing is requested, the
requestor's contentions on each such issue, and a summary of any
evidence relied upon by the requestor. Additional requirements as to
the form and manner of submission of requests for an evidentiary
hearing are set out at 40 CFR 178.27. Under 40 CFR 178.32(c), the
Administrator, where appropriate, will make rulings on any issues
raised by an objection if such issues must be resolved prior to
determining whether a request for an evidentiary hearing should be
granted. The Administrator will respond to requests for evidentiary
hearings as set forth in 40 CFR 178.30, 178.32, 178.35, 178.37, and/or
179.20. Under 40 CFR 178.32(b), a request for an evidentiary hearing on
an objection will be granted if the objection and request have been
properly submitted and if the Administrator determines that the
material submitted show:
(1) There is a genuine and substantial issue of fact for resolution
at a hearing.
(2) There is a reasonable possibility that available evidence
identified by the requestor would, if established, resolve one or more
of such issues in favor of the requestor.
(3) Resolution of one or more of the factual issues in the manner
sought by the person requesting the hearing would be adequate to
justify the action requested.
Any person wishing to comment on any objections or requests for a
hearing may submit such comments to the Hearing Clerk on or before May
6, 1996.
B. Effective Date
EPA is making this final rule effective May 21, 1996. In addition,
if EPA does not receive objections to this order, this order and the
factual and legal basis for this order, become final and are not
judicially reviewable. See section 409(g)(1), 21 U.S.C. 348 (g)(1) and
Nader v. EPA: 859 F.2d 747 (9th Cir. 1988), cert. denied, 490 U.S. 1931
(1989). For example, if an interested person disagrees with a necessary
finding in this order but agrees with the outcome, that person must
file timely objections to that finding in this order; if no objection
to the finding is made, the finding will become final for purposes of
any future proceedings to which that finding is relevant.
C. Request for Stays of Effective Date
A person filing objections to this final rule may submit with the
objections a petition to stay the effective date of this final rule.
Such stay petitions must be submitted to the Hearing Clerk on or before
April 22, 1996. A copy of the stay request filed with the Hearing Clerk
shall be submitted to the Office of Pesticide Programs Docket Room. A
stay may be requested for a specific time period or for an indefinite
time period. The stay petition must include a citation to this final
rule, the length of time for which the stay is requested, and a full
statement of the factual and legal grounds upon which the petitioner
relies for the stay. In determining whether to grant a stay, EPA will
consider the criteria set out in the Food and Drug Administration's
regulations regarding stays of administrative proceedings at 21 CFR
10.35. Under those rules, a stay will be granted if it is determined
that:
(1) The petitioner will otherwise suffer irreparable injury.
(2) The petitioner's case is not frivolous and is being pursued in
good faith.
(3) The petitioner has demonstrated sound public policy grounds
supporting the stay.
(4) The delay resulting from the stay is not outweighed by public
health or other public interests.
Under FDA's criteria, EPA may also grant a stay if EPA finds such
action is
[[Page 12008]]
in the public interest and in the interest of justice.
Any person wishing to comment on any stay request may submit such
comments and objections to a stay request, to the Hearing Clerk, on or
before May 6, 1996. Any subsequent decisions to stay the effect of this
order, based on a stay request filed, will be published in the Federal
Register, along with EPA's response to comments on the stay request.
VIII. Regulatory Requirements
A. Executive Order 12866
EPA submitted this action to the Office of Management and Budget
(OMB) for review and any changes made during that review have been
documented in the public record.
EPA has estimated the following economic impacts on the affected
pesticide use sites:
1. Spices
EtO may currently be used either on whole spices under its raw food
tolerance (40 CFR 180.151), which are then ground (processed), or
directly on ground spices under the processed food tolerance being
revoked today. Sixty to eighty percent of the American spice supply is
imported, and an estimated 22% of those imported spices are treated
with EtO.
EPA does not have information on what portion of EtO treatments are
made to whole as opposed to ground spices. If EtO were unavailable for
use on all spices (both whole and ground), there would be an estimated
impact of $18 million to $27 million per year in increased costs of
alternative treatments and loss of some untreated product. Impacts are
unlikely to be this high, because only the tolerance on ground spices
is being revoked. The section 408 tolerance will remain, thus allowing
continued use of EtO on whole spices. To the extent that spices are
currently treated whole, a portion of the above estimated impacts will
not be incurred.
Moreover, EPA believes that some portion, possibly a substantial
portion, of spices currently treated in ground form can be shifted to
treatment in whole form. If a change to treating them whole would cost
less than substitution of alternatives, impacts would be further
reduced.
Alternatives to EtO treatment are limited to irradiation treatment
and heat-based technologies, both of which have practical limitations.
There is currently insufficient capacity of contract irradiation
facilities to handle all spices currently treated with EtO. The
majority of these facilities' business comes from the sterilization of
medical devices which have rigorous hygienic specifications causing
most facilities to not accept spices. Current heat-based technologies
have an adverse effect on the color and flavor of some spices. However
these limitations are expected to be reduced over time by the industry.
Only about one percent of the total U.S. spice supply is treated
with propylene oxide and its loss is not expected to cause significant
economic impacts.
2. Nutmeats
Propylene oxide is used to reduce microbial contamination of raw
nutmeats (except peanuts) which are to be used in other food products
such as ice cream, cheese, ready-to-eat cereals, some baked goods and
some confections. It is used because these foods are not processed at
high enough temperatures to reduce microbial contamination to
acceptable levels. There appear to be no viable alternatives to
propylene oxide for nutmeats used in these foods.
The section 409 FAR being revoked today does not authorize
propylene oxide residues in raw nutmeats, only processed nutmeats. At
the time of proposal there was no section 408 tolerance covering use of
propylene oxide on raw nutmeats. The proposed revocation of the
processed nutmeat tolerance would have left no tolerance covering any
use of propylene oxide on nutmeats. As a result, EPA received
considerable comment on the potential economic impacts of the loss of
propylene oxide.
Information on the impacts of the loss of propylene oxide for
nutmeats is limited, and quantifying these impacts is complicated. U.S.
nut production is nearly 1 billion pounds annually. According to
commenters, about 10 to 20 percent of all nutmeats are currently
treated with propylene oxide. At a value of approximately $1.60 per
pound, the farm value of the 10-20% of nutmeats that are treated is
$160-320 million. Commenters suggested that this 10-20 percent segment
of the nutmeat industry would be a total loss if propylene oxide became
unavailable for use. EPA believes that this estimate is high because it
assumes that there are no alternative uses of the nuts.
Untreated nuts currently are roasted or salted or added to other
foods that are processed under conditions that effectively reduce
microbial contaminants to acceptable levels. EPA believes that nuts
that cannot be treated with propylene oxide will not be a total loss,
but will be diverted into alternative uses. EPA cannot estimate with
current information how much this would reduce the overall impacts on
the nutmeat industry, nor can EPA estimate the impacts on the food
industries whose nut supply could be severely curtailed. EPA believes
that there would be substantial incentive for the affected industries
to develop alternative practices or treatments to reduce microbial
contamination in raw nutmeats.
EPA has received a petition to establish a section 408 raw food
tolerance for propylene oxide on nutmeats. If a section 408 tolerance
is granted, propylene oxide could continue to be used on nutmeats, and
there would be no impacts.
3. Cocoa
Impacts to the cocoa industry of losing the use of propylene oxide
are expected to be minor or insignificant. There are no chemical
alternatives to propylene oxide for use on cocoa. However, with proper
handling and processing techniques cocoa powder can be safely produced
without propylene oxide. The U.S. imports all of its cocoa, and
generally, only that cocoa which comes from relatively unsanitary
processing plants (50 percent or less) is treated with propylene oxide.
Without propylene oxide, switching to markets with higher quality cocoa
beans and better processing plant management techniques may cause
slightly higher prices to consumers for products containing cocoa
powder. In 1994, the U.S. imported over 650,000 metric tons of cocoa,
valued at $1 billion.
4. Dried Tea
Insignificant impacts are expected on the dried tea industry from
the loss of the propargite FAR. Propargite is not registered for use in
the U.S. on dried tea and is not the miticide of choice in tea
exporting countries. Dicofol is the preferred miticide on tea and its
FAR currently remains in effect.
5. No impacts
No impacts are expected from revocation of the FARs for the
following processed foods:
Propylene oxide is no longer registered for use on the following:
Glace fruit, gums, dried prunes, and starch.
EPA no longer establishes FARs in potable water. Therefore, no
impact is expected due to this FAR revocation.
For the 13 FARs that are not needed (listed in table I) the section
408 tolerances and registered uses will remain effective. Therefore, no
impact is expected.
[[Page 12009]]
Three of the section 409 FARs being revoked today also have section
408 tolerances which were proposed for revocation in the Federal
Register on March 1, 1996 (61 FR 8174). The estimated impacts from the
loss of these three pesticide uses are included in that notice. These
FARs are mancozeb/oat bran, propargite/dried figs, and simazine/
sugarcane molasses.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (Pub. L. 96-354; 94 Stat.
1164, 5 U.S.C. 601 et seq.) requires EPA to analyze regulatory options
to assess the economic impact on small businesses, small governments
and small organizations.
In general, regulating pesticide residues and FARs in food is
indiscriminate with respect to the size of the farm or business that
was the source or processor of the food. The existence or absence of
FARs, and the levels at which FARs are set must logically apply to all
food available to U.S. consumers. In this instance, there is unlikely
to be a regulatory option that would treat small businesses differently
than large businesses with respect to pesticide FARs. In any event,
under the Delaney clause, the Agency is compelled to take this action
without regard to the economic impacts on either large or small
entities.
C. Paperwork Reduction Act
This order does not contain any information collection requirements
subject to review by Office of Management and Budget under the
Paperwork Reduction Act of 1980, 44 U.S.C. 3501 et seq.
D. Unfunded Mandates Reform Act and Executive Order 12875
Under Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), this action does not result in the expenditure of $100 million
or more by any State, local or tribal governments, or by anyone in the
private sector, and will not result in any ``unfunded mandates'' as
defined by Title II. The costs associated with this action are
described in the Executive Order 12866 section of this preamble.
Under Executive Order 12875 (58 FR 58093, October 28, 1993), EPA
must consult with representatives of affected State, local, and tribal
governments before promulgating a discretionary regulation containing
an unfunded mandate. This action does not contain any mandates on
States, localities or tribes and is therefore not subject to the
requirements of Executive Order 12875.
List of Subjects in 40 CFR Part 185
Environmental protection, Food additives, Pesticides and pests.
Dated: March 15, 1996.
Lynn R. Goldman,
Assistant Administrator for Prevention, Pesticides and Toxic
Substances.
Therefore, 40 CFR part 185 is amended as follows:
PART 185--[AMENDED]
l. The authority citation for part 185 continues to read as
follows:
Authority: 2l U.S.C. 346a and 348.
Sec. 185.500 [Removed]
2. By removing Sec. 185.500.
Sec. 185.2850 [Removed]
3. By removing Sec. 185.2850.
Sec. 185.4600 [Removed]
4. By removing Sec. 185.4600.
Sec. 185.5000 [Amended]
5. By removing from the table in Sec. 185.5000 the entries for
``Figs, dried'', ``Raisins'' and ``Tea, dried.''
Sec. 185.5150 [Removed]
6. By removing Sec. 185.5150.
Sec. 185.5350 [Removed]
7. By removing Sec. 185.5350.
Sec. 185.6300 [Removed]
8. By removing Sec. 185.6300.
[FR Doc. 96-7026 Filed 3-21-96; 8:45 am]
BILLING CODE 6560-50-F
Complete official Federal Register PDF
FR Doc. 96-7000 Special Conditions: McDonnell Douglas Model DC9-10, -20, -30, - 40, -50, High-Intensity Radiated Fields
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11728-11730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7000]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 25
[Docket No. NM-122; Special Conditions No. 25-ANM-111]
Special Conditions: McDonnell Douglas Model DC9-10, -20, -30, -
40, -50, High-Intensity Radiated Fields
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final special conditions; request for comments.
-----------------------------------------------------------------------
SUMMARY: These special conditions are issued for the McDonnell Douglas
DC9-10, -20, -30, -40, -50 airplane. This airplane will utilize new
avionics/electronic systems that provide critical data to the
flightcrew. The applicable regulations do not contain adequate or
appropriate safety standards for the protection of these systems from
the effects of high-intensity radiated fields. These special conditions
contain the additional safety standards that the Administrator
considers necessary to establish a level of safety equivalent to that
established by the existing airworthiness standards.
DATES: The effective date of these special conditions is March 14,
1996. Comments must be received on or before April 6, 1996.
ADDRESSES: Comments on these final special conditions, request for
comments, may be mailed in duplicate to: Federal Aviation
Administration, Office of the Assistant Chief Counsel, Attn: Rules
Docket (ANM-7), Docket No. NM-122, 1601 Lind Avenue SW., Renton,
Washington 98055-4056; or delivered in duplicate to the Office of the
Assistant Chief Counsel at the above address. Comments must be marked:
Docket No. NM-122. Comments may be inspected in the Rules Docket
weekdays, except Federal holidays, between 7:30 a.m. and 4:00 p.m.
FOR FURTHER INFORMATION CONTACT:
Gerald Lakin, FAA, Standardization Branch, ANM-113, Transport Airplane
[[Page 11729]]
Directorate, Aircraft Certification Service, 1601 Lind Avenue SW.,
Renton, Washington, 98055-4056, (206) 227-1187.
SUPPLEMENTARY INFORMATION:
Comments Invited
The FAA has determined that good cause exits for making these
special conditions effective upon issuance; however, interested persons
are invited to submit such written data, views, or arguments as they
may desire. Communications should identify the regulatory docket and
special conditions number and be submitted in duplicate to the address
specified above. All communications received on or before the closing
date for comments will be considered by the Administrator. These
special conditions may be changed in light of comments received. All
comments submitted will be available in the Rules Docket for
examination by interested persons, both before and after the closing
date for comments. A report summarizing each substantive public contact
with FAA personnel concerning this rulemaking will be filed in the
docket. Persons wishing the FAA to acknowledge receipt of their
comments submitted in response to this request must be submitted with
those comments a self-addressed, stamped postcard on which the
following statement is made: ``Comments to Docket No. NM-122.'' The
postcard will be date stamped and returned to the commenter.
Background
On June 25, 1995, JanzAir Consulting Services, Suite 202, Lee
Wagener Blvd., Fort Lauderdale, Florida 33315-3570, applied for a
supplemental type certificate in the transport airplane category for
the McDonnell Douglas Model DC9-10, -20, -30, -40, -50 airplane. The
DC9-10, -20, -30, -40, -50 is a low swept wing, commercial jet airplane
powered by two Pratt & Whitney JT8D turbofan engines mounted on pylons
extending from the aft fuselage. The airplane has a seating capacity of
80 to 125 passengers, and a maximum takeoff weight of 85,700 to 121,000
pounds. The flight controls will be powered and capable of manual
reversion.
Type Certification Basis
Under the provisions of Sec. 21.101 of the FAR, JanzAir must show,
except as provided in Sec. 25.2, that the modified DC9-10, -20, -30, -
40, -50 meets the applicable provisions of part 25, effective February
1, 1965, as amended by Amendments 25-1 through 25-83. In addition, the
proposed certification basis for the modified DC9-10, -20, -30, -40, -
50 includes part 34, effective September 10, 1990, plus any amendments
in effect at the time of certification; and part 36, effective December
1, 1969, as amended by Amendment 36-1 through the amendment in effect
at the time of certification. No exemptions are anticipated. The
special conditions incorporated herein form an additional part of the
type certification basis. In addition, the certification basis may
include other special conditions that are not relevant to these special
conditions.
If the Administrator finds that the applicable airworthiness
regulations (i.e., part 25, as amended) do not contain adequate or
appropriate safety standards for the modified DC9-10, -20, -30, -40, -
50 because of a novel or unusual design feature, special conditions are
prescribed under the provisions of Sec. 21.16 to establish a level of
safety equivalent to that established in the regulations.
Special conditions, as appropriate, are issued in accordance with
Sec. 11.49 of the FAR after public notice, as required by Secs. 11.28
and 11.29, and become part of the type certification basis in
accordance with Sec. 21.101(b)(2).
Special conditions are initially applicable to the model for which
they are issued. Should the type certificate for that model be amended
later to include any other model that incorporates the same novel or
unusual design feature, or should any other model already included on
the same type certificate be modified to incorporate the same novel or
unusual design feature, the special conditions would also apply to the
other model under the provisions of Sec. 21.101(a)(1).
Novel or Unusual Design Features
The McDonnell Douglas Model DC9-10, -20, -30, -40, -50 airplane
avionics enhancement will utilize electronic systems that perform
critical functions, including a digital Electronic Flight Instrument
System (EFIS), attitude and heading reference systems (AHRS), and air
data systems (ADS). These systems may be vulnerable to high-intensity
radiated fields (HIRF) external to the airplane.
Discussion
There is no specific regulation that addresses protection
requirements for electrical and electronic systems from HIRF. Increased
power levels from ground based radio transmitters and the growing use
of sensitive electrical and electronic systems to command and control
airplanes have made it necessary to provide adequate protection.
To ensure that a level of safety is achieved equivalent to that
intended by the regulations incorporated by reference, special
conditions are issued for the modified McDonnell Douglas DC9 which
require that new technology electrical and electronic systems, such as
the EFIS, AHRS and ADS, be designed and installed to preclude component
damage and interruption of function due to both the direct and indirect
effects of HIRF.
High-Intensity Radiated Fields
With the trend toward increased power levels from ground based
transmitters, plus the advent of space and satellite communications,
coupled with electronic command and control of the airplane, the
immunity of critical digital avionics systems to HIRF must be
established.
It is not possible to precisely define the HIRF to which the
airplane will be exposed in service. There is also uncertainty
concerning the effectiveness of airframe shielding for HIRF.
Furthermore, coupling of electromagnetic energy to cockpit-installed
equipment through the cockpit window apertures is undefined. Based on
surveys and analysis of existing HIRF emitters, an adequate level of
protection exists when compliance with the HIRF protection special
condition is shown with either paragraphs 1 or 2 below.
1. A minimum threat of 100 volts per meter peak electric field
strength from 10 KHz to 18 GHz.
a. The threat must be applied to the system elements and their
associated wiring harnesses without the benefit of airframe shielding.
b. Demonstration of this level of protection is established through
system tests and analysis.
2. A threat external to the airframe of the following field
strengths for the frequency ranges indicated.
------------------------------------------------------------------------
Peak (V/ Average
Frequency M) (V/M)
------------------------------------------------------------------------
10 KHz-100 KHz........................................ 50 50
100 KHz-500 KHz....................................... 60 60
500 KHz-2000 KHz...................................... 70 70
2 MHz-30 MHz.......................................... 200 200
30 MHz-100 MHz........................................ 30 30
100 MHz-200 MHz....................................... 150 33
200 MHz-400 MHz....................................... 70 70
400 MHz-700 MHz....................................... 4,020 935
700 MHz-1000 MHz...................................... 1,700 170
1 GHz-2 GHz........................................... 5,000 990
2 GHz-4 GHz........................................... 6,680 840
4 GHz-6 GHz........................................... 6,850 310
6 GHz-8 GHz........................................... 3,600 670
8 GHz-12 GHz.......................................... 3,500 1,270
12 GHz-18 GHz......................................... 3,500 360
18 GHz-40 GHz......................................... 2,100 750
------------------------------------------------------------------------
[[Page 11730]]
As discussed above, these special conditions would be applicable
initially to the modified Model DC9-10, -20, -30, -40, -50. Should
JanzAir apply at a later date for a supplemental type certificate to
include another model incorporating the same novel or unusual design
feature, these special conditions would apply to that model as well,
under the provisions of Sec. 21.101(a)(1).
Under standard practice, the effective date of final special
conditions would be 30 days after the date of publication in the
Federal Register. However, as issuance of the supplemental type
certificate for the JanzAir modified DC9 airplane is planned for March
22, 1996, the FAA finds that good cause exists for making these special
conditions effective upon issuance.
Conclusion
This action affects certain design features only on the modified
DC9-10, -20, -30, -40, -50 airplane. It is not a rule of general
applicability and affects only the manufacturer who applied to the FAA
for approval of these features on the airplane.
List of Subjects in 14 CFR Part 25
Aircraft, Aviation safety, Federal Aviation Administration,
Reporting and record keeping requirements.
The authority citation for these proposed special conditions is as
follows:
Authority: 49 U.S.C. app. 1344, 1348(c), 1352, 1354(a), 1355,
1421 through 1431, 1502, 1651(b)(2), 42 U.S.C. 1857f-10, 4321 et
seq., E.O. 11514; and 49 U.S.C. 106(g).
The Special Conditions
Accordingly, the following special conditions are issued as part of
the type certification basis for the JanzAir modified DC9-10, -20, -30,
-40, -50 airplanes.
1. Protection from Unwanted Effects of High-Intensity Radiated
Fields (HIRF). Each electrical and electronic system that performs
critical functions must be designed and installed to ensure that the
operation and operational capability of these systems to perform
critical functions are not adversely affected when the airplane is
exposed to high-intensity radiated fields.
2. For the purpose of this special conditions, the following
definition applies: Critical Functions. Functions whose failure would
contribute to or cause a failure condition that would prevent the
continued safe flight and landing of the airplane.
Issued in Renton, Washington, on March 14, 1996.
James V. Devany,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service, ANM-100.
[FR Doc. 96-7000 Filed 3-21-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-6942 Food Labeling: Nutrient Content Claim for ``Extra''
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11730-11731]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6942]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Part 101
[Docket No. 94P-0216]
Food Labeling: Nutrient Content Claim for ``Extra''
AGENCY: Food and Drug Administration, HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Food and Drug Administration (FDA) is amending its food
labeling regulations to include the term ``extra'' as a synonym for the
term ``added.'' This action is in response to FDA's decision to grant a
citizen petition for the synonym filed by Darigold, Inc. FDA concludes
that the term ``extra'' is a clear and unambiguous synonym for ``more''
and is consistent with the term ``added.''
DATES: The regulation is effective March 22, 1996; comments by April
22, 1996.
ADDRESSES: Submit written comments to the Dockets Management Branch
(HFA-305), 12420 Parklawn Dr., rm 1-23, Rockville, MD 20857.
FOR FURTHER INFORMATION CONTACT: Joyce J. Saltsman, Center for Food
Safety and Applied Nutrition (HFS-165), Food and Drug Administration,
200 C St. SW., Washington, DC 20204, 202-205-5916.
SUPPLEMENTARY INFORMATION:
Section 403(r)(4) of the Federal Food, Drug, and Cosmetic Act (the
act) provides that any person may petition the Secretary of Health and
Human Services (and, by delegation, FDA) to approve nutrient content
claims that are not specifically provided for in FDA's regulations. In
the Federal Register of January 6, 1993 (58 FR 2302), FDA published a
final rule entitled ``Food Labeling: Nutrient Content Claims, General
Principles, Petitions, Definition of Terms; Definitions of Nutrient
Content Claims for the Fat, Fatty Acid, and Cholesterol Content of
Food'' (hereinafter referred to as ``nutrient content claims final
rule''). That final rule, among other things, defined specific nutrient
content claims that included the terms ``good source,'' ``high,'' and
``more'' (Sec. 101.54 (21 CFR 101.54)), and established procedures for
the submission and review of petitions regarding the use of nutrient
content claims (Sec. 101.69 (21 CFR 101.69)). Section 101.69(n)
establishes the procedures to petition for use of a synonymous term.
On March 21, 1995, FDA received a petition from Darigold, Inc.,
P.O. Box 79007, Seattle, WA 98119, to establish the term ``extra'' as a
synonym for the term ``more'' (Ref. 1). In accordance with procedures
established in Sec. 101.69(n), FDA concluded that the term ``extra'' is
a clear and unambiguous synonym for ``more'' and, in particular, is
consistent with the term ``added.'' To evaluate whether the term
``extra'' and existing terms, such as ``more'' and ``added,'' have the
same meaning, FDA reviewed definitions for the term ``extra'' in
current dictionaries and found that it is common for the term ``extra''
to be defined as ``more than is usual'' and ``additional.'' Both
meanings clearly relate ``extra'' to the defined terms ``more'' and
``added.'' Based on this information, FDA concluded that the term
``extra'' would be commonly understood to have the same meaning as
``more'' and ``added.'' It advised the firm of this in a letter dated
October 30, 1995 (Ref.2). The agency also explained in the October 30
letter that the term ``extra'' is most closely synonymous with the term
``added'' in that it suggests that the labeled food has been altered
compared to a similar reference food. Therefore, the agency concluded
that the term ``extra'' as a relative claim must be used in the same
way that the term ``added'' is used, as specified under
(Sec. 101.13(j)(1)(i)(B) (21 CFR 101.13(j)(1)(i)(B)).
In Sec. 101.69(n)(4), FDA stated that as soon as practicable
following the agency's decision to either grant or deny a petition for
a synonymous term, it would publish a notice in the Federal Register
informing the public of its decision, and that if it grants the
petition, FDA will list the term in its nutrient content claims
regulation. Therefore, in this document, the agency is amending
Secs. 101.13(j) and 101.54(e) to include the term ``extra'' as a
synonym for the term ``added.''
I. References
The following references have been placed on display in the Dockets
Management Branch (address above) and may be seen by interested persons
between 9 a. m. and 4 p. m., Monday through Friday.
1. Darigold, Inc., ``Petition for Synonymous Term `Extra','' March
18, 1994 [CP1].
[[Page 11731]]
2. Scarbrough, F. Edward, CFSAN, FDA, Letter to Douglas C.
Marshall, Darigold, Inc., October 30, 1995 [PAV1].
II. Environmental Impact
The agency has determined under 21 CFR 25.24(a)(11) that this
action is of a type that does not individually or cumulatively have a
significant effect on the human environment. Therefore, neither an
environmental assessment nor an environmental impact statement is
required.
III. Analysis of Impact
FDA has examined the economic implications of the final rule
amending 21 CFR part 101 as required by Executive Order 12866 and the
Regulatory Flexibility Act (Pub. L. 96-354). Executive Order 12866
directs agencies to assess all costs and benefits of available
regulatory alternatives and, when regulation is necessary, to select
regulatory approaches which maximize net benefits (including potential
economic, environmental, public health and safety effects; distributive
impacts; and equity). The Regulatory Flexibility Act requires analyzing
options for regulatory relief for small businesses. This rule provides
added flexibility to existing rules governing nutrient content claims.
FDA finds that this final rule is not a significant rule as defined by
Executive Order 12866. In addition, in accordance with the Regulatory
Flexibility Act, the agency certifies that the final rule will not have
a significant impact on a substantial number of small businesses.
IV. Paperwork Reduction Act
This rule contains no information collection or recordkeeping
requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
et. seq.).
V. Public Comment
FDA, for good cause, finds that this final rule is announcing an
agency decision reached in accordance with a procedure established by
statute, and that notice and public procedure thereon are unnecessary.
However, in accordance with 21 CFR 10.40(e)(1), FDA is providing 30
days for comment on whether the announced action should be modified or
revoked.
Interested persons may, on or before April 22, 1996, submit to the
Dockets Management Branch (address above) written comments regarding
this proposal. Two copies of any comments are to be submitted, except
that individuals may submit one copy. Comments are to be identified
with the docket number found in brackets in the heading of this
document. Received comments may be seen in the office above between 9
a.m. and 4 p.m., Monday through Friday.
List of Subjects in 21 CFR Part 101
Food labeling, Nutrition, Reporting and recordkeeping requirements.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, 21 CFR part
101 is amended as follows:
PART 101--FOOD LABELING
1. The authority citation for 21 CFR part 101 continues to read as
follows:
-Authority: Secs. 4, 5, 6 of the Fair Packaging and Labeling Act
(15 U.S.C. 1453, 1454, 1455); secs. 201, 301, 402, 403, 409, 701 of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321, 331, 342,
343, 348, 371).
Sec. 101.13 [Amended]
2. Section 101.13 Nutrient content claims--general principles is
amended in paragraph (j)(1)(i)(B) by adding the word ``extra,'' before
the word ``fortified''.
Sec. 101.54 [Amended]
3. Section 101.54 Nutrient content claims for ``good source,''
``high,'' and ``more,'' is amended in the first sentence of the
introductory text of paragraphs (e)(1) and (e)(2) by removing the words
```enriched,' and `added''', and adding in their place the words
```enriched,' `added,' and `extra'''.
Dated: March 14, 1996.
William B. Schultz,
Deputy Commissioner for Policy.
[FR Doc. 96-6942 Filed 3-21-96; 8:45 am]
BILLING CODE 4160-01-F
Complete official Federal Register PDF
FR Doc. 96-6939 Cable Television Rate Regulation; Cost of Service Rules; Correction
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Page 11749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6939]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MM Docket No. 93-215; FCC 95-502]
Cable Television Rate Regulation; Cost of Service Rules;
Correction
AGENCY: Federal Communications Commission.
ACTION: Correction to final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains corrections to the final cost rules and
regulations, which were published Friday, March 8, 1996, (61 FR 9361).
The regulations govern the standard cost of service showings filed by
cable operators seeking to justify rates for regulated cable services.
EFFECTIVE DATE: April 18, 1996, except for new information collection
requirements adopted herein, which will become effective on the date of
approval by the Office of Management and Budget or on April 18, 1996,
whichever date occurs later.
FOR FURTHER INFORMATION CONTACT: Tom Power, Cable Services Bureau,
(202) 416-0800.
SUPPLEMENTARY INFORMATION:
Background
The Second Report and Order and First Order on Reconsideration in
MM Docket 93-215 refines existing cost of service rules and creates
final rules governing standard cost of service showings filed by
capable operators seeking to justify rates for regulated cable
services.
Need for Correction
As published, statements indicating the effective date for the
requirements and regulations established in the Second Report and Order
and First Order on Reconsideration in MM Docket 93-215 contained errors
which may prove to be misleading and are in need of clarification.
Correction of Publication
Accordingly, the publication on March 8, 1996 of the final
regulations, which were the subject of FR Doc. 96-5427, is corrected as
follows:
Effective Date [Corrected]
On page 9361, in the second column, the statement of the effective
date should be revised to read EFFECTIVE DATE: This final rule contains
information collection requirements that will not become effective
until approval by the Office of Management and Budget, but no sooner
than April 18, 1996. The Commission will publish a document specifying
the effective date of such requirements. All other requirements and
regulations contained in this final rule shall become effective on
April 18, 1996.''
* * * * *
IV. Ordering Clauses [Corrected]
Paragraph 60. On page 9367, in the second column, the paragraph
should be revised to read ``It is further ordered that the requirements
and regulations established in this decision shall become effective on
April 18, 1996, except for the new information collection requirements
adopted herein, which shall become effective upon the date of approval
by the Office of Management and Budget or on April 18, 1996, whichever
date occurs later.''
* * * * *
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-6939 Filed 3-21-96; 8:45 am]
BILLING CODE 6712-01-M
Complete official Federal Register PDF
FR Doc. 96-6878 Uniform Administrative Requirements for Awards and Subawards to Institutions of Higher Education, Hospitals, Other Non-Profit Organizations, and Commercial Organizations; and Certain Grants and Agreements With States, Local Governments and Indian Tribal Governments
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11743-11747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6878]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Part 74
RIN 0991-AA56
Uniform Administrative Requirements for Awards and Subawards to
Institutions of Higher Education, Hospitals, Other Non-Profit
Organizations, and Commercial Organizations; and Certain Grants and
Agreements With States, Local Governments and Indian Tribal Governments
AGENCY: Department of Health and Human Services (HHS).
ACTION: Final Rule including an Interim Final Rule for State-
Administered Entitlement Programs.
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SUMMARY: This final rule amends the HHS grants administration
regulations to incorporate changes resulting from comments received in
response to the publication of an interim rule implementing Office of
Management and Budget (OMB) Circular A-110 on August 25, 1994. The
revision of Section 74.1(a)(3), which applies this rule to the
entitlement programs, remains an interim final rule until permanent
policies are developed for these programs.
EFFECTIVE DATES: This final rule is effective April 22, 1996. The
interim final rule revising Sec. 74.1(a)(3) is effective April 22,
1996.
FOR FURTHER INFORMATION CONTACT:
Charles Gale, Director, Division of Grants Policy and Oversight, HHS,
Room 517-D, 200 Independence Ave. SW, Washington, DC 20201; telephone
(202) 690-6377; fax (202) 690-8772; for the hearing impaired only: TDD
(202) 690-6415.
SUPPLEMENTARY INFORMATION: The interim rule published by the Department
on August 25, 1994 (59 FR 43754) provided recipients with substantial
flexibility regarding OMB Circular A-110. This flexibility included,
for example, declining to exercise the authority to require prior
approval for percentage budget transfers (Circular A-110, Section
______.25(f)), declining to exercise the authority to require prior
approval for fund transfers between direct and indirect costs (Circular
A-110, Section ______.25(c)(5)), and declining to exercise the
authority to require a notice of Federal interest in equipment
(Circular A-110, Section ______.37). This final rule continues that
flexibility.
The Department received comments on the interim rule from several
organizations representing the grantee community and from within HHS.
Organizations commenting included community action agencies, community
health centers, universities, State governments, law firms, and firms
of certified public accountants. Many comments were supportive of HHS'
implementation of OMB Circular A-110. All comments were considered in
developing these final amendments.
The following section presents a summary of the comments, grouped
by subject, and a response to each. Whenever possible we have cited the
specific provision under consideration.
General
Comment: HHS should control the use of policy options by HHS
awarding agencies. (For example, the choice of how program income shall
be used under particular grants may be determined by HHS awarding
agencies pursuant to Section 74.24(b).)
Response: We believe the regulation strikes an appropriate balance
between providing overall HHS uniformity, and giving flexibility to HHS
awarding agencies, particularly in that HHS awarding agencies must
operate within the requirements of the new rule in exercising their
options.
Comment: The definition of ``Federal share'' includes property
improved with Federal funds. Do not apply the Federal share requirement
to property improved with Federal funds.
Response: We do not agree. Improvement of property with Federal
funds creates a Federal interest in the same way as methods of
financing property with Federal funds creates a Federal interest.
(Section 74.2)
Comment: The definition of ``Federal share'' includes ``improvement
expenditures.'' Define ``improvement.''
Response: ``Improvement'' needs no special definition because this
is not a specialized use of the term. Only the ordinary, common sense
meaning is intended. (Section 74.2)
Comment: The definition of ``Federal share'' discusses property
acquired on an amortized basis. Give examples of the Federal share on
an amortized basis.
Response: We have dropped that addition to the definition in order
to avoid any implication of a change in the basic definition. It was
not intended to alter the definition. The Federal share of property
acquired on an amortized basis is determined in the same way as the
Federal share of any other property. (Section 74.2)
Comment: The external policy issuances of HHS awarding agencies
should be rescinded.
Response: There is no need to rescind HHS agencies' policy
issuances. In many cases those issuances provide helpful explanations
of HHS policy as it applies to special situations. Provisions of those
issuances which conflict with this regulation, if any, are superseded.
(Section 74.3)
Comment: Deviations from the Part 74 rules, in individual cases,
should be approved at the HHS level, rather than by the HHS awarding
agencies.
Response: We do not agree. HHS agencies make thousands of awards
each year. It is not administratively feasible to route all individual
cases to a central office. It would entail unacceptable delays for
recipients. (Section 74.4)
Comment: We would hope that the new rule continues to exempt block
grants and other grants and subgrants covered by 45 CFR Part 92.
Response: Part 74 applies to subawards made by State and local
governments under 45 CFR Part 92 when those subawards are made to
organizations covered by Part 74. Part 74 does not apply to subawards
under block grants covered by 45 CFR Part 96. We have amended the text
to make it clear that it does not apply to block grants. (Section
74.5(a)(1))
Comment: May a recipient impose special conditions on a
subrecipient as it deems necessary or appropriate? For example, may a
recipient insist on obtaining title when a subrecipient purchases
equipment?
Response: A recipient may impose special conditions on a
subrecipient provided the special conditions are consistent with the
provisions of this regulation. Rules which apply to recipients flow
down also to subrecipients, as provided in Section 74.5. When a
subrecipient purchases equipment, the subrecipient retains title
subject to the recipient's right to require transfer under Section
74.34(h).
Pre-Award Requirements
Comment: Why was the previous subpart E, Waiver of Single State
Agency Requirements, dropped from the regulation?
Response: Subpart E was dropped from the interim final because it
was decided that it would be better placed in the individual program
regulations. However, in recognition of its placement in Part 74 for
many years, we have now concluded it should be retained in this
regulation as a matter of general information. Accordingly, we
[[Page 11744]]
have added the waiver provision at Section 74.1(a)(3).
Comment: The circumstances for imposing special conditions should
be limited to violations of statutory and regulatory conditions.
Response: We do not agree. In addition to violations of statutory
and regulatory conditions, Section 74.14(a) lists other situations
which we believe warrant special conditions.
Post-Award Requirements
Comment: Allow recipients to request advances when their cash
declines to a percentage of their monthly budget.
Response: We do not agree. A percentage rule would allow recipients
to request advances, in some cases, before they are actually needed.
(Section 74.22(g))
Comment: Relax the requirement for insured bank accounts for
certain days, such as payroll days, when cash balances are temporarily
higher than the amount covered by Federal Deposit Insurance.
Response: The insured account requirement says ``whenever
possible.'' This covers situations, as described above, where
recipients can justify that compliance is not possible. (Section
74.22(i)(2))
Comment: Do not apply the requirement for return of interest earned
on advance payments to the period between deposit of the funds in the
recipient's bank, and their disbursement by the recipient.
Response: We do not agree. This is precisely the period that the
interest-return requirement was designed to cover. (Section 74.22(k))
Comment: Correct the reference to ``paid fringe benefits'' in the
discussion of volunteer services.
Response: We agree. We have amended the last sentence of section
74.23(d) to read ``fringe benefits consistent with those paid * * *.''
Comment: Do not require that recipients use the deductive
alternative for program income in cases where the HHS awarding agency
does not specify which alternative to use.
Response: We do not agree. Not all Federally-supported projects are
suitable for expansion with additional funds from program income.
(Section 74.24(d))
Comment: Delete the requirement that recipients use the deductive
alternative for any income that exceeds the amount authorized by the
HHS awarding agency for the recipient to use under the additive or
cost-sharing alternatives.
Response: We do not agree. Not all Federally-supported projects are
suitable for unlimited expansion with additional funds from program
income. (Section 74.24(c))
Comment: Budget revisions should be considered approved if the HHS
awarding agency does not reply within 30 days.
Response: We do not agree. Occasionally it is not possible to reply
in 30 days. This does not make the requested budget revision
appropriate. (Section 74.25(i))
Comment: Do not impose OMB Circular A-133 audit requirements on
commercial organizations because most are already audited in accordance
with generally accepted auditing standards (GAAS).
Response: We have revised section 74.26(a) to add new paragraphs
(2) and (3) to give commercial organizations which receive annual HHS
awards that exceed the OMB Circular A-133 audit threshold the option of
either a Circular A-133 audit or a financial related audit of HHS
awards in accordance with Government Auditing Standards (GAS). However,
an audit performed in accordance with GAAS alone can not be used as a
substitute. (Proposed revisions to OMB Circular A-133 (60 FR 14594) set
the audit threshold at $300,000).
Comment: Amend the real property disposition rules to authorize
waiver of the recipient's requirement to reimburse the Federal
Government if the property has been used for its authorized purpose for
the period, usually 20 years, specified in the conditions of the award.
(Comment from an HHS awarding agency.)
Response: Since the commenter's objection can be accomplished in a
particular program through OMB Circular A-110's deviations procedures,
we see no reason to amend the real property disposition rules. (Section
74.32(c))
Comment: When real property is sold, the Federal share should be
based on the proceeds of sale rather than the fair market value.
Response: We do not agree. In order for the Federal Government to
equitably share in the appreciation or depreciation of real property
acquired with Federal funds, the Federal Government's share must be
based on the current fair market value. (Section 74.32(c)(2))
Comment: Federally-furnished equipment should be included in the
provisions for Federally-owned equipment.
Response: Federally-owned equipment includes Federally-furnished
equipment. (Section 74.33)
Comment: Restore Circular A-110's introductory language in the
provisions on exempt property.
Response: We have amended section 74.33(b) to reference 31 U.S.C.
6306, which authorizes HHS to vest title to tangible personal property
in certain specified organizations conducting scientific research.
Comment: In determining equipment's value for disposition purposes,
``imputed undepreciated value'' should be an acceptable alternative to
the regulation's ``current fair market value.''
Response: We do not agree. In our view, current fair market value
is a more accurate measure of value. (Section 74.34)
Comment: The prohibition on use of equipment to provide services
for a fee that is less than that charged by private companies should be
limited to services other than those for which the award was made.
Response: The prohibition does not apply to the activities for
which the award was specifically made, because the award was
statutorily authorized for that purpose, e.g., the provision of health
care under an award to a community health center. (Section 74.34(b)(1))
Comment: The statement that property shall be held in ``trust'' for
the award's beneficiaries, and that the recipient shall record
``liens'' should be deleted because ``trust'' and ``lien'' have legal
meanings that go beyond the requirements of the policy.
Response: We do not agree. We believe that the legal effect of
``trusts'' and ``liens,'' as used in Section 74.37, is consistent with
the requirements of the policy and that Federal interests are better
protected by considering recipients as trustees for the beneficiaries
of the program and by providing the Federal Government with a lien on
the applicable property. (Section 74.37)
Comment: Delete the requirement that the recipient record a notice
of Federal interest in property, unless the HHS awarding agency
furnishes a computation of the Federal interest in each item of
property.
Response: The recipient has much better information with which to
calculate the Federal recipient shares of property than does the HHS
awarding agency. In order to furnish such a computation to the
recipient, HHS would have to impose a burdensome reporting requirement.
There is no advantage to any of the parties in doing so. (Section
74.37)
Comment: Exempt small purchases from the requirement for a cost or
price analysis.
Response: Although this is not a new requirement, OMB and the
Federal
[[Page 11745]]
agencies will carefully review this requirement, especially for
purchases involving $2,500, or less, as revisions to OMB Circular A-110
are developed. Federal fiscal interests require, and the section on
cost or price analysis is intended to assure, that each element of the
cost of a recipient's procurement action is reasonable, allocable and
allowable. Recipients, however, are provided considerable latitude in
determining the appropriate form of the cost or price analysis,
depending on the nature and size of the procurement action. (Section
74.45)
Comment: Do not require the contract clauses to be used with
purchase orders that do not require a written contract.
Response: We do not agree. All of these clauses have been
determined necessary to protect Federal interests, if not actually
required by law, and therefore cannot be waived. (Section 74.48(e))
Comment: The requirement for reasonable access to the recipient's
employees for purposes of discussing records should be rewritten to
state that recipients do not have an affirmative obligation to produce
an employee for an interview.
Response: We do not agree. Reasonable access to a recipient's
personnel is necessary in order for the Federal Government to exercise
fully its rights to undertake audits, examinations and similar
procedures. Accordingly, recipients do have an affirmative obligation
to provide that access. (Section 74.53(e))
Comment: Since Appendix G has been removed, do HHS awarding
agencies continue to have authority to place pre-award approval
requirements on procurements under the entitlement programs? (Comment
from an HHS awarding agency.)
Response. Yes. OMB Circular A-110 does not preclude HHS awarding
agencies from continuing their longstanding policies pertaining to pre-
award approval and other requirements regarding procurements under the
entitlement programs.
Comment: All enforcement actions should have a hearing on the
record.
Response: Part 74 is not intended to establish any enforcement
action hearing rights. The section on enforcement simply states that
recipients and subrecipients will receive whatever opportunity for a
hearing, appeal or other administrative proceeding that they are
entitled to. (Section 74.62(b))
Comment: Allow subrecipients to appeal recipient enforcement
actions to HHS.
Response: See the previous response. (Section 74.62(b))
Other Substantive Changes
Other substantive changes are as follows:
1. In section 74.1(a)(3) we have added references to section 74.23,
Cost sharing or matching, and section 74.52, Financial reporting, to
the list of sections of this part which do not apply to the entitlement
programs. These have been approved deviations for many years, and were
inadvertently left out of the interim regulation.
2. As we discussed in the preamble to the interim regulation (at 59
FR 43758), the applicability of this regulation to the entitlement
programs is a temporary measure until new policies for these programs
are developed. Therefore, section 74.1(a)(3) remains as interim final
rule. We intend to work with the Department of Agriculture and OMB to
review existing policies and promulgate new regulations regarding these
programs.
3. We have added OMB Circular A-110's prohibitions on additional
requirements, additional copies of payment reports, and additional
prior approval requirements at sections 74.1(c), 74.22(m), and
74.25(l), respectively. We have included the Circular's references, at
section ______.25 (d) and (i), with respect to approval of deviations
by OMB, and specified that it refers to class deviations (74.25(l)). It
is noted that individual case deviations do not require OMB approval.
(Circular section ______.4.)
4. Because this regulation is applicable to some awards to
governmental organizations (the entitlement programs), while OMB
Circular A-110 is not, we have added a sentence to the definition of
program income in section 74.2 to exempt taxes, special assessments,
levies, and fines raised by governmental recipients from the definition
of program income.
5. We have added a statement of policy that the Department will use
its deviation authority to facilitate comprehensive or integrated
service delivery or multi-source consolidated awards. A particularly
appropriate example would be to facilitate Empowerment Zones or
Enterprise Communities, and similar awards in communities that
unsuccessfully applied for those designations. (HHS may not grant
deviations in classes of cases without the approval of OMB.) (Section
74.4(b))
6. We have amended sections 74.5, 74.12, and 74.22 to exempt
subawards from section 74.12, Forms for applying for HHS financial
assistance, and use of the forms prescribed in section 74.22, Payment.
Recipients need not apply the forms in dealing with their subrecipients
and should not impose more burdensome requirements on subrecipients.
7. In order to permit automated tracking of audits, we have amended
section 74.26(d) to provide that audits shall include the recipient's
Employer Identification Number, and to request that recipients submit a
computer disk containing the audit report in addition to the paper
copy.
8. We have amended section 74.34 to add a provision that formerly
appeared at section 74.139(b)(2) and was inadvertently left out of the
interim rule. That provision allows proceeds from equipment disposition
to be used for project costs if the recipient's project is still
receiving support from the same HHS program, and if the HHS awarding
agency gives prior approval.
9. We have amended section 74.44(e)(2) to change the simplified
acquisition threshold (formerly the ``small purchase threshold'') for
recipient procurements from $25,000 to $100,000 as provided in the
Federal Acquisition Streamlining Act of 1994. We have also added the
$100,000 reference to Section 74.48(b).
10. Two changes have been made to Appendix A as a result of the
Federal acquisition Streamlining Act, Public Law 103-355. The threshold
for the requirement to include a provision for compliance with the
Copeland ``Anti-Kickback Act'' (18 U.S.C. 874) was raised from $2,000
to $100,000. Also, the threshold for the requirement to include the
provision for compliance with sections 102 and 107 of the Contract Work
Hours and Safety Standards Act (40 U.S.C. 327-333) was raised to
$100,000.
Other editorial changes have been made to correct errors and
improve clarity.
Regulatory Impact Analyses
Executive Order 12866
This rule was submitted to the Office of Management and Budget.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and, by
approving it, certifies that it does not have a significant impact on a
substantial number of small entities.
Paperwork Reduction Act
In keeping with the requirements of 44 U.S.C. 3504(h), the
information
[[Page 11746]]
collection requirements in this rule have been approved by OMB as
Standard Forms or HHS adaptations of Standard Forms with the following
clearance numbers: SF-269: 0348-0039; SF-424: 0348-0043; and PMS 270
and 272: 0937-0200.
List of Subjects in 45 CFR Part 74
Accounting, Administrative practice and procedures, Grant programs-
health, Grant programs-social programs, Grants administration,
Reporting and recordkeeping requirements.
(Catalog of Federal Domestic Assistance Number does not apply.)
Dated: March 4, 1996.
Donna E. Shalala,
Secretary of Health and Human Services.
Accordingly, the interim rule amending Part 74 of Title 45 of the
Code of Federal Regulations, which was published at 59 FR 43754 on
August 25, 1994, is adopted as final, except for Section 74.1(a)(3),
which remains interim, with the following changes:
PART 74--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR AWARDS AND
SUBAWARDS TO INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, OTHER
NONPROFIT ORGANIZATIONS, AND COMMERCIAL ORGANIZATIONS; AND CERTAIN
GRANTS AND AGREEMENTS WITH STATES, LOCAL GOVERNMENTS AND INDIAN
TRIBAL GOVERNMENTS
1. The authority citation for Part 74 is revised to read as
follows:
Authority: 5 U.S.C. section 301; OMB Circular A-110; Appendix J
is also issued under 31 U.S.C. section 7505.
2. Section 74.1 is amended by adding a new paragraph (c) to read as
follows:
Sec. 74.1 Purpose and applicability.
* * * * *
(c) HHS shall not impose additional or inconsistent requirements
except as provided in Secs. 74.4 and 74.14, or unless specifically
required by Federal statute or executive order.
Sec. 74.2 [Amended]
3. Section 74.2 is amended by:
a. Removing the last sentence in the definition of ``Federal
share.''
b. Adding a sentence at the end of the definition of ``Program
income'' to read as follows:
Sec. 74.2 Definitions.
* * * * *
Program income * * * Furthermore, program income does not include
taxes, special assessments, levies, and fines raised by governmental
recipients.
* * * * *
Sec. 74.3 [Amended]
4. Section 74.3 is amended by adding ``Federal'' before
``statute''.
5. Section 74.4 is amended by designating the current text as
paragraph (a) and adding a new paragraph (b) to read as follows:
Sec. 74.4 Deviations.
(a) * * *
(b) As a matter of Departmental policy, requests for individual
case deviations will be considered favorably by HHS and its awarding
agencies whenever the deviation will facilitate comprehensive or
integrated service delivery, or multiple-source consolidated awards,
unless the deviation would impair the integrity of the program.
Sec. 74.5 [Amended]
6. Section 74.5(a) introductory text is amended by adding ``(except
for Sec. 74.12 and the forms prescribed in Sec. 74.22)'' after ``this
part''.
7. Section 74.5(a)(1) is revised to read as follows:
Sec. 74.5 Subawards.
(a) * * *
(1) Except for subawards under block grants (45 CFR part 96), all
subawards received by institutions of higher education, hospitals,
other nonprofit organizations, and commercial organizations from any
recipient of an HHS award, including any subawards received from
States, local governments, and Indian tribal governments covered by 45
CFR part 92; and
* * * * *
8. Section 74.12 is amended by adding a new paragraph (e) to read
as follows:
Sec. 74.12 Forms for applying for HHS financial assistance.
* * * * *
(e) This section does not apply to applications for subawards.
Sec. 74.17 [Amended]
9. Section 74.17 is amended by removing the ``HHS'' preceding
``official(s)'' in the second sentence.
10. Section 74.22 is amended by adding a sentence at the end of
paragraph (m) and a new paragraph (n) to read as follows:
Sec. 74.22 Payment.
* * * * *
(m) * * * HHS shall not require recipients to submit more than an
original and two copies.
(n) Recipients and subrecipients are not required to use forms PMS-
270 and 272 in connection with subaward payments.
11. Section 74.23(d) is amended by revising the last sentence to
read as follows:
Sec. 74.23 Cost sharing or matching.
* * * * *
(d) * * * In either case, fringe benefits consistent with those
paid that are reasonable, allowable, and allocable may be included in
the valuation.
* * * * *
12. Section 74.25 is amended in paragraph (c)(5) by revising ``or
costs'' to read ``of costs'', and by adding a new paragraph (l) to read
as follows:
Sec. 74.25 Revision of budget and program plans.
* * * * *
(l) No other prior approval requirements for specific items may be
imposed unless a class deviation has been approved by OMB.
13. Section 74.26 is amended by revising paragraphs (a) and (d) to
read as follows:
Sec. 74.26 Non-Federal audits.
(a)(1) Recipients and subrecipients that are institutions of higher
education, hospitals affiliated with institutions of higher education,
and other nonprofit organizations shall be subject to the audit
requirements contained in OMB Circular A-133, ``Audits of Institutions
of Higher Education and Other Non-Profit Institutions.'' (See Appendix
I to this part.)
(2) Recipients and subrecipients that are commercial organizations
have two options regarding audits:
(i) A financial related audit (as defined in the Government
Auditing Standards, GPO Stock #020-000-00-265--4) of a particular award
in accordance with Government Auditing Standards, in those cases where
the recipient receives awards under only one HHS program; or, if awards
are received under multiple HHS programs, a financial related audit of
all HHS awards in accordance with Government Auditing Standards; or
(ii) An audit that meets the requirements contained in OMB Circular
A-133.
(3) Commercial organizations that receive annual HHS awards
totaling less than OMB Circular A-133'a audit requirement threshold are
exempt from requirements for a non-Federal audit for that year, but
records must be available for review by appropriate officials of
Federal agencies.
* * * * *
(d)(1) All copies of audit reports required by this section shall
be submitted to: Department of Health and Human Services, Office of
Inspector
[[Page 11747]]
General, National External Audit Review Center, Lucas Place, Room 514,
323 West 8th Street, Kansas City, MO 64105.
(2) The HHS Office of Inspector General will distribute copies as
appropriate within HHS. Recipients, therefore, are not required to send
their audit reports to any other HHS officials. Recipients shall
provide their Employer Identification Numbers (EIN) on the cover page
of reports and submit along with the printed reports a computer disk
containing the entire contents of the audit report a computer disk
containing the entire contents of the audit report or at least the
information in the report relating to HHS awards.
14. Section 74.33(b) is amended by adding two sentences at the
beginning of the paragraph to read as follows:
Sec. 74.33 Federally-owned and exempt property.
* * * * *
(b) For research awards to certain types of recipients, 31 U.S.C.
6306 authorizes HHS to vest title to property acquired with Federal
funds in the recipient without further obligation to the Federal
government and under conditions that HHS considers appropriate. Such
property is ``exempt property.'' * * *
15. Section 74.34 is amended by adding a new paragraph (g)(4) to
read as follows:
Sec. 74.34 Equipment.
* * * * *
(g) * * *
(4) If the recipient's project or program for which or under which
the equipment was acquired is still receiving support from the same HHS
program, and if the HHS awarding agency approves, the net amount due
may be used for allowable costs of that project or program. Otherwise
the net amount must be remitted to the HHS awarding agency by check.
* * * * *
Sec. 74.35 [Amended]
16. Section 74.35(b)(2) is amended by adding the word ``are'' after
``supplies''.
Sec. 74.44 [Amended]
17. Section 74.44(a)(2) is amended by adding ``recipient and the''
before ``Federal Government''.
18. Section 74.44(e)(2) is amended by removing ``small purchase
threshold fixed at 41 U.S.C. 403(11) (currently $25,000)'' and
replacing it with ``simplified acquisition threshold fixed at 41 U.S.C.
403(11) (currently $100,000)''.
Sec. 74.48 [Amended]
19. Section 74.48(b) is amended by removing ``small purchase
threshold'' and replacing it with ``simplified acquisition threshold
(currently $100,000''.
Sec. 74.81 [Amended]
20. Section 74.81 is amended by adding ``Transfer'' after
``Technology''.
Sec. 74.90 [Amended]
21. Section 74.90(d) is amended by adding ``the office responsible
for awarding agency preliminary appeal process or, where none,'' after
``e.g.,''.
Appendix A to Part 74 [Amended]
22. Paragraph 2 of Appendix A is amended by removing ``$2,000'' and
replacing it with ``$100,000''.
23. Paragraph 4 of Appendix A is amended by removing ``$2,000 for
construction contracts and in excess of $2500'' and replacing it with
``$100,000 for construction contracts and''.
24. Section 74.1(a)(3) is amended as an interim final rule by
revising interim paragraph (a)(3) to read as follows:
Sec. 74.1 Purpose and applicability.
(a) * * *
(3) HHS grants and agreements, and any subawards under such grants
and agreements, awarded to carry out the entitlement programs
identified at 45 CFR Part 92, Sec. 92.4(a)(3), (a)(7), and (a)(8),
except that Secs. 74.12, 74.23, 74.25, and 74.52 of this part do not
apply. Under these programs, requests to HHS from Governors or other
duly constituted State authorities for waiver of single State agency
requirements in accordance with 31 U.S.C. 6501-6508 will be given
expeditious handling. Whenever possible, such requests will be granted.
* * * * *
[FR Doc. 96-6878 Filed 3-21-96; 8:45 am]
BILLING CODE 4160-17-M
Complete official Federal Register PDF
FR Doc. 96-6867 High Seas Fishing Compliance Act; Initial Regulations; OMB Control Numbers
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11751-11755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6867]
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DEPARTMENT OF COMMERCE
50 CFR Part 300
[Docket No. 960228054-6054-01; I.D. 120495A]
RIN 0648-A150
High Seas Fishing Compliance Act; Initial Regulations; OMB
Control Numbers
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Interim final rule; request for comments.
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SUMMARY: NMFS issues an interim final rule (IFR) to implement the High
Seas Fishing Compliance Act of 1995 (HSFCA). The purpose of the HSFCA
is to license U.S. vessels fishing on the high seas and to implement
the Agreement to Promote Compliance with International Conservation and
Management Measures by Fishing Vessels on the High Seas (Agreement).
DATES: Effective upon publication. Comments must be received on or
before May 21, 1996.
ADDRESSES: Send comments on the IFR and on the collection-of-
information requirement to Richard Schaefer, Office of Fisheries
Conservation and Management, National Marine Fisheries Service, 1315
East West Highway, Silver Spring, MD 20910. Also send comments on the
collection-of-information requirement to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Attn: Paperwork
Reduction Project 0648-0304, Washington, D.C. 20503.
FOR FURTHER INFORMATION CONTACT: Robert Dickinson, (301) 713-2337.
SUPPLEMENTARY INFORMATION: On November 24, 1993, the United Nations
Food and Agriculture Organization (FAO) adopted the Agreement. The
Agreement was negotiated largely at the initiative of the United States
in response to fisheries crises that have arisen in many areas of the
world. As the size and efficiency of modern fleets have come to exceed
the productivity of their traditional coastal harvesting areas, fishery
managers of coastal nations generally have reacted by imposing stricter
management regimes. As a result, increasing numbers of vessels have
sought fishing opportunities on the high seas.
The need for the Agreement evolved from the concern that vessels
belonging to member nations of regional fisheries organizations were
reflagging to non-member nations, in order to continue fishing in the
management areas unconstrained by rules set by the organizations and
their members. For example, the effectiveness of the International
Commission for the Conservation of Atlantic Tunas (ICCAT) has been
compromised by vessels registered in nations that are not ICCAT
members. Flying ``flags of convenience,'' these vessels then fish for
tuna in the North Atlantic in defiance of ICCAT rules and management
regimes.
Although the Agreement has been popularly referred to as the
``reflagging agreement,'' it does not deal directly with the reflagging
of fishing vessels, in part because FAO negotiators did not wish to
deter legitimate transfers of vessel registries or flags. The primary
tenet of the Agreement is the obligation of Parties to the Agreement
(Parties) to require that fishing vessels carrying their flags obtain
specific authorization to operate on the high seas. Parties are also
responsible for ensuring that their authorized vessels do not undermine
conservation and management measures that have been adopted by global
or regional fishery management organizations.
The HSFCA implements the Agreement, primarily by requiring a system
of licensing for all U.S. vessels that fish on the high seas, and by
requiring vessels so licensed to fish in accordance with international
conservation and management measures recognized by the United States.
The HSFCA also requires the Secretary of Commerce (Secretary), in
consultation with the Secretary of State, to publish from time to time
in the Federal Register a list of agreements containing or resulting in
such measures.
For purposes of the HSFCA, the Secretary, in consultation with the
Secretary of State, has determined that all conservation and management
measures for living marine resources set forth in, or adopted pursuant
to, the following international agreements to which the United States
is party are included within the term ``international conservation and
management measures recognized by the United States,'' except any such
measure to which the United States, consistent with the terms of such
agreement, has lodged an objection or reservation:
International Convention for the Conservation of Atlantic Tunas
(basic instrument for the International Commission for the Conservation
of Atlantic Tunas--ICCAT);
Convention between the United States of America and the Republic of
Costa Rica for the Establishment of an Inter-American Tropical Tuna
Commission (basic instrument for the Inter-American Tropical Tuna
Commission--IATTC);
Convention for the Conservation of Salmon in the North Atlantic
Ocean (basic instrument for the North Atlantic Salmon Conservation
Organization--NASCO);
Convention on Future Multilateral Cooperation in the Northwest
Atlantic Fisheries (basic instrument for the Northwest Atlantic
Fisheries Organization--NAFO);
Convention for the Conservation of Anadromous Stocks in the North
Pacific Ocean (basic instrument for the North Pacific Anadromous Fish
Commission--NPAFC);
Convention on the Conservation and Management of Pollock Resources
of the Central Bering Sea;
Convention for the Conservation of Antarctic Marine Living
Resources (basic instrument for the Commission for the Conservation of
Antarctic Marine Living Resources--CCAMLR);
International Convention for the Regulation of Whaling (basic
instrument for the International Whaling Commission--IWC);
Treaty on Fisheries Between the Governments of Certain Pacific
Island States and the Government of the United States of America;
Convention for the Conservation of Antarctic Seals;
Agreement to Reduce Dolphin Mortality in the Eastern Tropical
Pacific Tuna Fishery; and
Convention for the Prohibition of Fishing with Long Driftnets in
the South Pacific Ocean.
In addition, conservation and management measures set forth in, or
adopted pursuant to, the following international agreements to which
the United States is not party are included in the term ``international
conservation
[[Page 11752]]
and management measures recognized by the United States'':
Convention on Future Multilateral Cooperation in North-East
Atlantic Fisheries (basic instrument for the North-East Atlantic
Fisheries Commission);
Agreement between the Government of the Kingdom of Norway and the
Government of the Union of Soviet Socialist Republics Concerning Co-
operation in the Field of Fisheries; and
Convention for the Conservation of Southern Bluefin Tuna.
This listing of ``international conservation and management
measures recognized by the United States'' will be revised and updated
from time to time by publication in the Federal Register. The inclusion
or exclusion of items from this listing is without prejudice to any
positions or views the United States Government may take or express
with regard to such items in the future.
This IFR implements the application and issuance procedures for
HSFCA permits. Application forms are available from NMFS Regional
Offices. Applicants for HSFCA permits are encouraged to apply for their
permits through the NMFS Regional Office with which they usually
interact on Federal fisheries matters. The amount of fees charged for a
permit issued under the HSFCA may recover administrative costs incurred
in issuing such permits. Anticipated administrative costs for issuance
of HSFCA permits have been determined to be $50.00 per application.
This amount is the HSFCA application fee until further notice.
Permits issued under the HSFCA are valid for 5 years. Except for
vessels that have unpaid or overdue civil penalties, criminal fines, or
other liabilities incurred in a judicial proceeding under any statute
administered by NOAA, any vessel of the United States is eligible to
receive a permit under the HSFCA, unless the vessel was previously
authorized by a foreign nation to be used for fishing on the high seas,
and (1) the foreign nation suspended such authorization, because the
vessel undermined the effectiveness of international conservation and
management measures, and the suspension has not expired; or (2) the
foreign nation, within the 3 years preceding application for a permit
under the HSFCA, withdrew such authorization, because the vessel
undermined the effectiveness of international conservation and
management measures.
The restrictions in the above paragraph related to any sanctions
imposed on a vessel by a foreign nation do not apply if ownership of
the vessel has changed since the vessel undermined the effectiveness of
international conservation and management measures, and the present
owner provides sufficient evidence to the director of the NMFS Regional
Office serving as the issuing office (Regional Director) demonstrating
that the owner and operator at the time the vessel undermined the
effectiveness of international conservation and management measures
have no further legal, beneficial, or financial interest in, or control
of, the vessel. The restrictions in the above paragraph related to any
sanctions imposed on a vessel by a foreign nation also do not apply if
a determination is made by the Regional Director that issuing a permit
under the HSFCA would not subvert the purposes of the Agreement.
A permit issued under the HSFCA is void in the event the permitted
vessel is no longer eligible for United States documentation, such
documentation is revoked or denied, or the vessel is deleted from such
documentation.
NMFS has experienced delays in implementing the HSFCA due to
government furloughs and closures. NMFS realizes that some individuals
may experience unavoidable delays in obtaining an HSFCA permit due to
circumstances such as extended trips at sea. Such individual
circumstances will be taken into consideration during any enforcement
operations.
Classification
The Assistant Administrator for Fisheries, NOAA, under 5 U.S.C.
553(b)(B), finds that the need to license U.S. vessels to fish on the
high seas, as required by the HSFCA, constitutes good cause to waive
providing notice and the opportunity for public comment and to waive
the 30-day delay in effective date under 5 U.S.C. 553(d)(3). Because
the HSFCA requires that owners and operators of such vessels have
licenses in order to operate legally on the high seas after March 3,
1996, delay in the issuance and effectiveness of this rule affording
them the opportunity to apply for such licenses would be contrary to
the public interest.
This IFR has been determined to be not significant for purposes of
E.O. 12866.
This IFR contains a collection-of-information requirement subject
to the Paperwork Reduction Act, namely the information required to be
submitted on a permit application. The collection of this information
has been approved by the OMB under OMB Control Number 0648-0304. The
burden estimate for compliance is 30 minutes. Send comments regarding
this burden estimate or any other aspect of the collection of
information, including suggestions for reducing this burden, to Richard
Schaefer, NMFS, or the Office of Information and Regulatory Affairs,
OMB (see ADDRESSES).
Notwithstanding any other provision of law, no person is required
to respond to, nor shall a person be subject to a penalty for failure
to comply with, a collection-of-information subject to the requirements
of the Paperwork Reduction Act unless that collection of information
displays a currently valid OMB Control Number.
List of Subjects in 50 CFR Part 300
High Seas Fishing, Fisheries, Permits, International Agreements,
Reporting and recordkeeping requirements.
Dated: March 18, 1996.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service
For the reasons set out in the preamble, 15 CFR Chapter IX and 50
CFR Chapter III are amended as follows:
15 CFR Chapter IX
PART 902--NOAA INFORMATION COLLECTION REQUIREMENTS UNDER THE
PAPERWORK REDUCTION ACT: OMB CONTROL NUMBERS
1. The authority citation for part 902 continues to read as
follows:
Authority: 44 U.S.C. 3501 et seq.
2. In 902.1, paragraph (b), the table is amended by adding in the
left column under 50 CFR, in numerical order, ``300.4'', and in the
right column, in corresponding position, the control number ``-0304.''.
50 CFR Chapter III
3. Subchapters A through D are redesignated as Subchapters B
through E, respectively.
4. Subchapter A, High Seas Fishing Compliance Act, consisting of
Part 300, is added to read as follows:
SUBCHAPTER A--HIGH SEAS FISHING COMPLIANCE ACT
PART 300--HIGH SEAS FISHERIES
Subpart A--General Provisions
Sec.
300.1 Purpose.
300.2 Definitions.
300.3 Issuing offices.
300.4 Vessel permits.
300.5 Vessel and gear identification. [Reserved]
300.6 Prohibitions.
[[Page 11753]]
300.7 Facilitation of enforcement.
300.8 Penalties.
Subpart B--Reporting and Recording
300.20 [Reserved]
Authority: 16 U.S.C. 5501 et seq.
Subpart A--General Provisions
Sec. 300.1 Purpose.
This part implements the High Seas Fishing Compliance Act of 1995
(Act), which requires the Secretary of Commerce to license U.S. vessels
fishing on the high seas.
Sec. 300.2 Definitions.
The terms used in this part have the following meanings:
Act means the High Seas Fishing Compliance Act of 1995, 16 U.S.C.
5501 et seq.
Agreement means the Agreement to Promote Compliance with
International Conservation and Management Measures by Fishing Vessels
on the High Seas, adopted by the Conference of the Food and Agriculture
Organization of the United Nations on November 24, 1993.
Authorized officer means:
(1) Any commissioned, warrant, or petty officer of the U.S. Coast
Guard; or any U.S. Coast Guard personnel accompanying and acting under
the direction of a commissioned, warrant, or petty officer of the U.S.
Coast Guard;
(2) Any special agent or fisheries enforcement officer of NMFS; or
(3) Any person designated by the head of any Federal or state
agency that has entered into an agreement with the Secretary or the
Commandant of the U.S. Coast Guard to enforce the provisions of the
Act.
High seas means the waters beyond the territorial sea or exclusive
economic zone (or the equivalent) of any nation, to the extent that
such territorial sea or exclusive economic zone (or the equivalent) is
recognized by the United States.
High seas fishing vessel means any vessel of the United States used
or intended for use:
(1) On the high seas;
(2) For the purpose of the commercial exploitation of living marine
resources; and
(3) As a harvesting vessel, mothership, or any other support vessel
directly engaged in a fishing operation.
International conservation and management measures means measures
to conserve or manage one or more species of living marine resources
that are adopted and applied in accordance with the relevant rules of
international law, as reflected in the 1982 United Nations Convention
on the Law of the Sea, and that are recognized by the United States.
NMFS means the National Marine Fisheries Service, National Oceanic
and Atmospheric Administration, Department of Commerce.
NMFS issuing office means the NMFS regional office through which a
permit is issued under the Act.
Operator means, with respect to any vessel, the master or other
individual on board and in charge of that vessel.
Owner means, with respect to any vessel:
(1) Any person who owns that vessel in whole or part;
(2) Any charterer of the vessel, whether bareboat, time, or voyage;
(3) Any person who acts in the capacity of a charterer, including
but not limited to parties to a management agreement, operating
agreement, or any similar agreement that bestows control over the
destination, function, or operation of the vessel; or
(4) Any agent designated as such by a person described in this
paragraph.
Regional Director means the director of the NMFS regional office
serving as the issuing office.
Sec. 300.3 Issuing offices.
NMFS Regional Offices will issue permits required under this part.
While applicants for permits may submit an application to any NMFS
Regional Office, applicants are encouraged to submit their applications
to the NMFS Regional Office with which they normally interact on
fisheries matters. The addresses of the NMFS Regional Offices are as
follows:
(a) Northeast Region, NMFS, (Attn: HSFCA Permits), One Blackburn
Drive, Gloucester, MA 01930-2298.
(b) Southeast Region, NMFS, (Attn: HSFCA Permits), 9721 Executive
Center Drive, N., St. Petersburg, FL 33702.
(c) Southwest Region, NMFS, (Attn: HSFCA Permits), 501 West Ocean
Boulevard, Suite 4200, Long Beach, CA 90802-4213.
(d) Northwest Region, NMFS, (Attn: HSFCA Permits), 7600 Sand Point
Way, NE., BIN C15700, Bldg. 1, Seattle, WA 98115.
(e) Alaska Region, NMFS, (Attn: HSFCA Permits), 709 West Ninth
Street, Suite 401, P.O. Box 21668, Juneau, AK 99802.
Sec. 300.4 Vessel permits.
(a) Eligibility. (1) Except for vessels having unpaid or overdue
civil penalties, criminal fines, or other liabilities incurred in a
judicial proceeding under any statute administered by NOAA, any high
seas fishing vessel of the United States is eligible to receive a
permit under this part, unless the vessel was previously authorized to
be used for fishing on the high seas by a foreign nation, and
(i) The foreign nation suspended such authorization, because the
vessel undermined the effectiveness of international conservation and
management measures, and the suspension has not expired; or
(ii) The foreign nation, within the 3 years preceding application
for a permit under this section, withdrew such authorization, because
the vessel undermined the effectiveness of international conservation
and management measures.
(2) The restrictions in paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if ownership of the vessel has changed since the
vessel undermined the effectiveness of international conservation and
management measures, and the new owner has provided sufficient evidence
to the Regional Director demonstrating that the owner and operator at
the time the vessel undermined the effectiveness of such measures has
no further legal, beneficial, or financial interest in, or control of,
the vessel.
(3) The restrictions in paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if it is determined by the Regional Director that
issuing a permit would not subvert the purposes of the Agreement.
(b) Application forms. The owner or operator of a high seas fishing
vessel may apply for a permit under this part by completing an
application form. Applicants may obtain an application form from an
NMFS issuing office listed in Sec. 300.3. (c) Application information.
An applicant must submit a complete and accurate permit application,
signed by the owner or operator, to the appropriate Regional Director.
(d) Fees. The NMFS issuing office will charge a fee to recover the
administrative expenses of permit issuance. The amount of the fee will
be determined in accordance with the procedures of the NOAA Finance
Handbook for determining administrative costs of each special product
or service. The fee is specified with the application form. The
appropriate fee must accompany each application. Failure to pay the fee
will preclude issuance of the permit. Payment by a commercial
instrument later determined to be insufficiently funded will invalidate
any permit.
(e) Issuance. (1) Except as provided in subpart D of 15 CFR part
904, the Regional Director will issue a permit, which will include
appropriate
[[Page 11754]]
conditions or restrictions, within 30 days of receipt of a completed
application and payment of the appropriate fee.
(2) The Regional Director will notify the applicant of any
deficiency in the application.
(f) Validity. Permits issued under this part are valid for 5 years
from the date of issuance. Renewal of a permit prior to its expiration
is the responsibility of the permit holder. For a permit to remain
valid to its expiration date, the vessel's U.S. Coast Guard
documentation or state registration must be kept current. A permit
issued under this part is void when the name of the owner or vessel
changes, or in the event the vessel is no longer eligible for U.S.
documentation, such documentation is revoked or denied, or the vessel
is deleted from such documentation.
(g) Change in application information. Any changes in vessel
documentation status or other permit application information must be
reported to the Regional Director in writing within 15 days of such
changes.
(h) Transfer. A permit issued under this part is not transferable
or assignable to another vessel or owner; it is valid only for the
vessel and owner to which it is issued.
(i) Display. A valid permit, or a copy thereof, issued under this
part must be on board the vessel while operating on the high seas and
available for inspection by an authorized officer. Faxed copies of
permits are acceptable.
Sec. 300.5 Vessel and gear identification. [Reserved]
Sec. 300.6 Prohibitions.
It is unlawful for any person to:
(a) Use a high seas fishing vessel on the high seas in
contravention of international conservation and management measures.
(b) Use a high seas fishing vessel on the high seas, unless the
vessel has on board a valid permit issued under Sec. 300.4.
(c) Violate the conditions or restrictions of a permit issued under
Sec. 300.4.
(d) Fail to submit information, fail to submit information in a
timely manner, or to submit false or inaccurate information, with
respect to any information required to be submitted, reported,
communicated, or recorded pursuant to the Act or the regulations in
this part.
(e) Refuse to permit an authorized officer to board a high seas
fishing vessel subject to such person's control for purposes of
conducting any search or inspection in connection with the enforcement
of the Act, this part or any other applicable law.
(f) Forcibly assault, resist, oppose, impede, intimidate, or
interfere with an authorized officer in the conduct of any search or
inspection described in paragraph (e) of this section.
(g) Resist a lawful arrest or detention for any act prohibited by
this section.
(h) Interfere with, delay, or prevent, by any means, the
apprehension, arrest, or detection of another person, knowing that such
person has committed any act prohibited by this section.
(i) Ship, transport, offer for sale, sell, purchase, import,
export, or have custody, control or possession of, any living marine
resource taken or retained in violation of the Act or this part.
(j) Violate any provision of the Act or the regulations in this
part.
Sec. 300.7 Facilitation of enforcement.
(a) Compliance. The operator of, or any other person on board, any
fishing vessel subject to this part must immediately comply with
instructions and signals issued by an authorized officer to stop the
vessel and with instructions to facilitate safe boarding and inspection
of the vessel, its gear, equipment, fishing record (where applicable),
and catch for purposes of enforcing the Act and this part.
(b) Communications. (1) Upon being approached at sea by a U.S.
Coast Guard vessel or aircraft, or other vessel or aircraft with an
authorized officer on board, the operator of a fishing vessel must be
alert for communications conveying enforcement instructions.
(2) VHF-FM radiotelephone is the preferred method of communicating
between vessels. If the size of the vessel and the wind, sea, and
visibility conditions allow, a loudhailer may be used instead of the
radio. Hand signals, placards, high frequency radiotelephone, or voice
may be employed by an authorized officer, and message blocks may be
dropped from an aircraft.
(3) If other communications are not practicable, visual signals may
be transmitted by flashing light directed at the vessel signaled. Coast
Guard units will normally use the flashing light signal ``L'' as the
signal to stop. In the International Code of Signals, ``L'' (.-..)
means ``you should stop your vessel instantly.''
(4) Failure of a vessel's operator promptly to stop the vessel when
directed to do so by an authorized officer using loudhailer,
radiotelephone, flashing light signal, or other means constitutes prima
facie evidence of the offense of refusal to allow an authorized officer
to board.
(5) The operator of a vessel who does not understand a signal from
an enforcement unit and who is unable to obtain clarification by
loudhailer or radiotelephone must consider the signal to be a command
to stop the vessel immediately.
(c) Boarding. The operator of a vessel directed to stop must:
(1) Monitor Channel 16, VHF-FM, if so equipped;
(2) Stop immediately and lay to or, if appropriate and/or directed
to do so by the authorized officer, maneuver in such a way as to allow
the safe boarding of the vessel by the authorized officer and the
boarding party;
(3) Except for those vessels with a freeboard of 4 ft (1.25 meters)
or less, provide a safe ladder, if needed, for the authorized officer
and boarding party to come on board;
(4) When necessary to facilitate the boarding or when requested by
an authorized officer, provide a manrope or safety line, and
illumination for the ladder; and
(5) Take such other actions as necessary to facilitate boarding and
to ensure the safety of the authorized officer and the boarding party.
(d) Signals. The following signals, extracted from the
International Code of Signals, may be sent by flashing light by an
enforcement unit when conditions do not allow communications by
loudhailer or radiotelephone. Knowledge of these signals by vessel
operators is not required. However, knowledge of these signals and
appropriate action by a vessel operator may preclude the necessity of
sending the signal ``L'' and the necessity for the vessel to stop
instantly.
(1) ``AA'' repeated (.- .-) is the call to an unknown station. The
operator of the signaled vessel should respond by identifying the
vessel by radiotelephone or by illuminating the vessel's
identification.
(2) ``RY-CY'' (.-. -.-- -.-. -.--) means ``you should proceed at
slow speed, a boat is coming to you.'' This signal is normally employed
when conditions allow an enforcement boarding without the necessity of
the vessel being boarded coming to a complete stop, or, in some cases,
without retrieval of fishing gear that may be in the water.
(3) ``SQ3'' ( ... --.- ...--) means ``you should stop or heave to;
I am going to board you.''
Sec. 300.8 Penalties.
Any person or high seas fishing vessel found to be in violation of
the Act, this part, or any permit issued under this part will be
subject to the civil and criminal penalty provisions, permit
[[Page 11755]]
sanctions, and forfeiture provisions prescribed in the Act, 15 CFR part
904 (Civil Procedures), and other applicable laws.
Subpart B--Reporting and recordkeeping.
Sec. 300.20 [Reserved]
[FR Doc. 96-6867 Filed 3-21-96; 3:24 pm]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 96-6855 Taking and Importing of Marine Mammals; Consolidation of Regulations
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11749-11751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6855]
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[[Page 11750]]
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Parts 215 and 216
[Docket No. 960313071-6071-01; I.D. 022796E]
RIN 0648-AI20
Taking and Importing of Marine Mammals; Consolidation of
Regulations
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Final rule.
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SUMMARY: To simplify NMFS' Code of Federal Regulations (CFR), NMFS
issues this final rule to redesignate those regulations governing the
take of northern fur seals for subsistence purposes on the Pribilof
Island and aspects of the administration of the Pribilof Islands. By
this rule, an entire part within the CFR is removed. This final rule
does not make substantive changes to the existing regulations. The
purpose of this final rule is to make the regulations more concise,
better organized, and thereby easier for the public to use. This action
is consistent with the President's Regulatory Reform Initiative to
simplify regulations and reduce the regulatory burden on the public.
EFFECTIVE DATE: This rule is effective March 22, 1996.
FOR FURTHER INFORMATION CONTACT: Margot L. Bohan, Office of Protected
Resources, NMFS, (301) 713-2322.
SUPPLEMENTARY INFORMATION:
In March 1995, President Clinton issued a directive to Federal
agencies regarding their responsibilities under his Regulatory
Reinvention Initiative. This initiative is part of the National
Performance Review and calls for comprehensive regulatory reform. The
President directed all agencies to undertake a review of all their
regulations, with an emphasis on eliminating or modifying those that
are obsolete, duplicative, or otherwise in need of reform. This final
rule is intended to carry out the President's directive with respect to
those regulations implementing the annual Pribilof Island fur seal
subsistence harvest.
NMFS is consolidating the provisions of 50 CFR part 215, critical
to the management of the northern fur seal subsistence harvest on the
Pribilof Island, into 50 CFR part 216--Regulations Governing the Taking
and Importing of Marine Mammals. This final rule moves definitions in
Sec. 215.2 to Sec. 216.3 and makes definition additions and revisions
in Sec. 216.3. Subparts C and D of part 215 are redesignated,
respectively, as subpart G--Pribilof Island Administration and subpart
F--Pribilof Islands, Taking for Subsistence Purposes of part 216, and
part 215 is removed.
Classification
This final rule is exempt from review under E.O. 12866. Because
this rule makes only nonsubstantive changes to existing regulations, no
useful purpose would be served by providing advance notice and
opportunity for public comment. Accordingly, the Assistant
Administrator for Fisheries, NOAA, under 5 U.S.C. 553(b)(B), for good
cause finds that it is unnecessary to provide prior notice and
opportunity for public comment on this rule or to delay for 30 days its
effective date. Because this rule is being issued without public
comment, a regulatory flexibility analysis is not required under the
Regulatory Flexibility Act, and none has been prepared. This final rule
is expected to result in no economic costs to the public.
This action is categorically excluded from the requirement to
prepare an environmental assessment by section 6.02b.3(b)(ii)(aa) of
NOAA Administrative Order 216-6 as revised. This final rule does not
contain a collection-of-information requirement for purposes of the
Paperwork Reduction Act.
This rule does not directly affect the coastal zone of any state
with an approved coastal zone management program.
List of Subjects
50 CFR Part 215
Administrative practice and procedure, Marine mammals, Penalties,
Pribilof Islands, Reporting and recordkeeping requirements.
50 CFR Part 216
Adminstrative practice and procedure, Imports, Indians, Marine
mammals, Penalties, Reporting and recordkeeping requirements,
Transportation.
Dated: March 15, 1996.
Charles Karnella,
Acting Assistant Administrator for Fisheries, National Marine Fisheries
Service.
For the reasons set out in the preamble, 50 CFR parts 215 and 216
are amended as follows:
PART 215--PRIBILOF ISLANDS
1. The authority citation for part 215 continues to read as
follows:
Authority: 16 U.S.C. 1151-1175, 1361 et seq.
2. In Sec. 215.2, paragraphs (d), (g) and (h) are redesignated to
Sec. 216.3, in alphabetical order, and the paragraph designations are
removed.
3. Subpart C, consisting of Secs. 215.21 through 215.27, and
subpart D, consisting of Secs. 215.31 through 215.34, of part 215 are
redesignated as subpart G, Pribilof Islands Administration, consisting
of Secs. 216.81 through 216.87, and subpart F, Pribilof Islands, Taking
for Subsistence Purposes, consisting of Secs. 216.71 through 216.74, of
part 216, respectively and the subpart headings are revised to read as
set forth above.
PART 215--[REMOVED]
4. Part 215 is removed.
PART 216--REGULATIONS GOVERNING THE TAKING AND IMPORTING OF MARINE
MAMMALS
5. The authority citation for part 216 continues to read as
follows:
Authority: 16 U.S.C. 1361 et seq.
6. In 216.3, the definition, ``Article of Handicraft'', is added
and the definition, ``Wasteful Manner'', is revised, in alphabetical
order, to read as follows:
Sec. 216.3 Definitions.
* * * * *
Article of Handicraft means items made by an Indian, Aleut or
Eskimo from the nonedible byproducts of fur seals taken for personal or
family consumption which--
(1) Were commonly produced by Alaskan Natives on or before October
14, 1983;
(2) Are composed wholly or in some significant respect of natural
materials, and;
(3) Are significantly altered from their natural form and which are
produced, decorated, or fashioned in the exercise of traditional native
handicrafts without the use of pantographs, multiple carvers, or
similar mass copying devices. Improved methods of production utilizing
modern implements such as sewing machines or modern tanning techniques
at a tannery registered pursuant to Sec. 216.23(c) may be used so long
as no large scale mass production industry results. Traditional native
handicrafts include, but are not limited to, weaving, carving,
stitching, sewing, lacing, beading, drawing, and painting. The
formation of traditional
[[Page 11751]]
native groups, such as a cooperative, is permitted so long as no large
scale mass production results.
* * * * *
Wasteful Manner means any taking or method of taking which is
likely to result in the killing of marine mammals beyond those needed
for subsistence, subsistence uses, or for the making of authentic
native articles of handicrafts and clothing, or which results in the
waste of a substantial portion of the marine mammal and includes,
without limitation, the employment of a method of taking which is not
likely to assure the capture or killing of a marine mammal, or which is
not immediately followed by a reasonable effort to retrieve the marine
mammal.
[FR Doc. 96-6855 Filed 3-21-96; 8:45 am]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 96-6800 Travel Time; Removal of Obsolete Provisions From the CFR
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Page 11731]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6800]
=======================================================================
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 3
RIN 2900-AH86
Travel Time; Removal of Obsolete Provisions From the CFR
AGENCY: Department of Veterans Affairs.
ACTION: Correcting amendments.
-----------------------------------------------------------------------
SUMMARY: In a document published in the Federal Register on June 29,
1976 (41 FR 26681), we deleted the material currently included in
paragraphs (i), (ii), and (iii) of 38 CFR 3.6(b)(7). These paragraphs
concerned travel-time provisions for determining whether a person was
on ``active duty'' for purposes of VA-benefit eligibility. They were
deleted because they were obsolete and no longer served any purpose.
Inadvertently, the deletions were never reflected in the Code of
Federal Regulations. Accordingly, this document makes a correction in
the Code of Federal Regulations by deleting said paragraphs (b)(7) (i),
(ii), and (iii).
EFFECTIVE DATE: March 22, 1996.
FOR FURTHER INFORMATION CONTACT: Paul Trowbridge, Consultant,
Regulations Staff, Compensation and Pension Service, Veterans Benefits
Administration, Department of Veterans Affairs, 810 Vermont Avenue,
NW., Washington, DC 20420, telephone (202) 273-7210.
List of Subjects in 38 CFR Part 3
Administrative practice and procedure, Claims, Veterans.
Accordingly, 38 CFR part 3 is corrected as follows:
PART 3--ADJUDICATION
1. The authority citation for part 3, subpart A continues to read
as follows:
Authority: 38 U.S.C. 501(a), unless otherwise noted.
Sec. 3.6 [Corrected]
2. Section 3.6 is amended by removing paragraphs (b)(7) (i), (ii),
and (iii).
Dated: March 15, 1996.
Thomas O. Gessel,
Director, Office of Regulations Management, Office of General Counsel.
[FR Doc. 96-6800 Filed 3-21-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-6779 Approval and Promulgation of State Implementation Plan; Wisconsin; Rate-of-Progress and Contingency Plans
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11735-11738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6779]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[WI64-01-7169a; FRL-5437-3]
Approval and Promulgation of State Implementation Plan;
Wisconsin; Rate-of-Progress and Contingency Plans
AGENCY: United States Environmental Protection Agency (USEPA).
ACTION: Direct final rule.
-----------------------------------------------------------------------
SUMMARY: In this action, USEPA is approving a revision to the Wisconsin
State Implementation Plan (SIP) for the purpose of satisfying the rate-
of-progress and contingency plan requirements of the Clean Air Act
(Act) which will aid in ensuring the attainment of the national ambient
air quality (NAAQS) for ozone.
DATES: This ``direct final'' rule will be effective May 21, 1996,
unless USEPA receives adverse or critical comments by April 22, 1996.
If the effective date is delayed, timely notice will be published in
the Federal Register.
ADDRESSES: Comments may be mailed to: Carlton T. Nash, United States
Environmental Protection Agency, Region 5, Air and Radiation Division,
Air Programs Branch (AR-18J), 77 West Jackson Boulevard, Chicago,
Illinois, 60604.
Copies of the documents relevant to this action are available at
the above address for public inspection during normal business hours.
FOR FURTHER INFORMATION CONTACT: Brad J. Beeson at (312) 353-4779.
SUPPLEMENTARY INFORMATION:
I. Background
On November 15, 1990, Congress enacted amendments to the 1977 Clean
Air Act (CAA); Public Law 101-549, 104 Stat. 2399, codified at 42
U.S.C. 7401-7671q. Section 182(b)(1) of the CAA requires all ozone
nonattainment areas classified as moderate and above to submit a SIP
revision by November 15, 1993, which describes, in part, how these
areas will achieve an actual emissions reduction of at least 15 percent
during the first 6 years after enactment of the CAA (November 15,
1996). Emissions and emissions reductions shall be calculated on a
typical weekday basis for the ``peak'' 3-month ozone period (generally
June through August).
The 15 percent VOC emissions reduction required by November 15,
1996 is defined within this document as ``rate-of-progress.''
Furthermore, the portion of the SIP revision that illustrates the plan
for the achievement of the emissions reduction is subsequently defined
in this document as the ``rate-of-progress plan.''
In addition, section 172(c)(9) requires moderate and above areas to
adopt contingency measures by November 15, 1993. The General Preamble
states that the contingency measures generally must provide reductions
of 3 percent of the emissions from the adjusted base year inventory.
While all contingency measures must be fully adopted rules or measures,
the State can use these measures in 2 different ways. The State can use
its discretion to implement any contingency measures it wants before
1996. Alternatively, the State may decide not to implement a measure
until the area has failed to either make rate-of-progress or attain the
national ambient air quality standards (NAAQS). In that situation, the
reductions must be achieved in the year following that in which the
failure has been identified.
II. Wisconsin's SIP Submittal
The Act requires States to observe certain procedural requirements
in developing implementation plans and plan revisions for submission to
USEPA. Section 110(a)(2) of the Act provides that each implementation
plan submitted by a State must be adopted after reasonable notice and
public hearing. Section 110(l) of the Act similarly provides that each
revision to an implementation plan submitted by a State under the Act
must be adopted by such State after reasonable notice and public
hearing.
The State of Wisconsin held a public hearing on October 14, 1993,
to receive public comment on the implementation plan for their moderate
and above ozone nonattainment areas. Following the public hearing the
plan was adopted by the State Natural Resources Board and signed by the
Governor's designee, George Meyer on September 9, 1993, and submitted
to USEPA on November 15, 1993 as a proposed revision to the SIP.
The SIP revision was reviewed by USEPA to determine completeness
shortly after its submittal, in accordance with the completeness
criteria set out at 40 CFR Part 51, Appendix V (1991), as amended by 57
FR 42216 (August 26, 1991). Because neither plan included fully adopted
rules for all the measures listed in the plans, these submittals were
deemed incomplete.
On July 13, 1995, the State made a supplemental submittal which
included fully adopted rules for both the rate-of-progress and
contingency plan. On July 18, the State's SIP submittal was deemed
complete.
III. The USEPA's Analysis of Wisconsin's Rate-of-Progress and
Contingency Plans
The USEPA has reviewed the State's submittal for consistency with
the requirements of USEPA regulations. A summary of USEPA's analysis is
provided below. More detailed support for approval of the State's
submittal is contained in a Technical Support Document (TSD), dated
January 10, 1996, which is available from the Region 5 Office, listed
above.
A. Accurate Emission Inventory
Sections 172(c)(3) and 182(b)(1) of the Act require that
nonattainment plan provisions include a comprehensive, accurate,
current inventory of actual emissions from all sources of relevant
pollutants in the nonattainment area. Because the approval of such
inventories is necessary to an area's rate-of-progress plan and
attainment demonstration, the emission inventory must be approved prior
to or with the rate-of-progress plan submission.
On June 15, 1994, USEPA approved Wisconsin's base year inventory.
Therefore, Wisconsin has a comprehensive, accurate, current inventory
of actual emissions from all sources of relevant pollutants in the
nonattainment area.
[[Page 11736]]
B. Calculation of the Adjusted Base Year Inventory
The Act specifies the emission baseline from which the 15 percent
reduction is calculated. This baseline value is termed the 1990
adjusted base year inventory. Section 182(b)(1)(D) excludes from the
baseline the emissions that would be eliminated by Federal Motor
Vehicle Control Program (FMVCP) regulations promulgated by January 1,
1990, and Reid vapor pressure (RVP) regulations (55 FR 23666, June 11,
1990), which require maximum RVP limits in nonattainment areas during
the peak ozone season.
The adjusted base year inventory is determined by starting with the
emission inventory, and then removing all biogenic emissions as well as
emissions from sources located outside of the designated nonattainment
boundary. The resulting inventory is termed the rate-of-progress base
year inventory. The rate-of-progress base year inventory is then
adjusted by removing the expected FMVCP and RVP reductions in order to
derive the adjusted base year inventory.
Wisconsin used USEPA's MOBILE5a emission factor model to correctly
calculate its adjusted base year inventory. Wisconsin's documentation
includes the actual 1990 motor vehicle emissions using 1990 vehicle
miles traveled (VMT) and MOBILE5a emission factors, and the adjusted
emissions using 1990 VMT and the MOBILE emission factors in calendar
year 1996 with the appropriate RVP for the nonattainment area as
mandated by USEPA. The plan includes adequate information on how the
MOBILE5a model was run to calculate the expected emission reductions
from FMVCP and RVP.
As specified by the Act, section 182(b)(1)(B), preenactment banked
emission credits were not included in any of Wisconsin's inventories.
Provided below is a tabular summary of the emission inventories
calculated above.
------------------------------------------------------------------------
Tons
Emissions inventory per day
------------------------------------------------------------------------
A. 1990 Base Year Emission Inventory........................... 559.9
B. 1990 Rate-of-Progress Inventory............................. 409.5
C. Emission Reductions from the pre-1990 FMVCP and Phase II RVP
expected by 1996.............................................. 70.2
D. 1990 Adjusted Base Year Inventory (B-C)..................... 339.3
------------------------------------------------------------------------
C. Required Reductions
The adjusted base year inventory is multiplied by 0.15 to calculate
the amount of the required rate-of-progress emission reduction. The
amount of reductions necessary to meet the contingency plan requirement
is 3 percent of the adjusted base year inventory. Therefore the
adjusted base year inventory is multiplied by 0.03 to calculate the
amount of required reductions for the contingency plan requirement.
Shown below is a table summarizing the amount of required
reductions for the rate-of-progress and contingency plans.
------------------------------------------------------------------------
Tons
Inventory per day
------------------------------------------------------------------------
1990 Adjusted Base Year Inventory.............................. 339.3
Reduction for Rate-of-Progress Requirement..................... 50.9
Reduction for Contingency Requirement.......................... 10.2
------------------------------------------------------------------------
Therefore, to meet the rate-of-progress requirement, Wisconsin's
plan must provide for at least a 50.9 tons per day (tpd) reduction, net
of growth, in VOC emissions. In addition, to meet the contingency
requirement, the State's plan must provide for at least a 10.2 tpd
reduction, net of growth, in VOC emissions.
Under section 182(b)(1)(D) of the Act, the following reductions are
not creditable towards the rate-of-progress reductions: (1) FMVCP
regulations promulgated by January 1, 1990; (2) RVP regulations; (3)
RACT corrections; and (4) inspection and maintenance (I/M) corrections.
Thus, the total expected reductions comprise the amount of reductions
necessary to meet the rate-of-progress requirement and the expected
reductions from the four noncreditable programs just described.
Wisconsin has documented the correct amount for the total expected
reductions in the nonattainment area by showing each step, discussing
any assumptions made, and stating the origin of the number used in the
calculations.
D. Projected Emission Inventory
Emission projections for sources within an air basin are needed to
determine if the rate-of-progress requirements in the Act are met and
to determine if the area will attain the NAAQS by the applicable
attainment date. The purpose of projecting the emission inventories
into the future is not solely to predict what is likely to happen, but
also to test the ability of the regulations in the control strategy to
meet the rate-of-progress goals and attain the ozone NAAQS.
Growth factors are not included in the calculations of the 1990
adjusted base year inventory or the 1996 target. Growth factors are
needed, however, to project emissions to 1996 for the rate-of-progress
demonstration as part of the rate-of-progress plan.
Wisconsin has included growth factors documenting assumptions made.
The State's calculations for growth in the on-road mobile, industrial,
and area source sectors is 11.6, 0.5, and 2.1 tpd respectively. These
growth estimations were calculated in a manner consistent with USEPA's
guidance.
E. Control Measures
The revision submitted by the State lists a series of control
measures projected to achieve a 63.8 tpd reduction in VOC emissions.
See the table below for list of the measures and their associated
reductions.
------------------------------------------------------------------------
Expected Implemented
Control measure reductions by Nov. 1996
------------------------------------------------------------------------
On road mobile sector:
94-96 tailpipe and evaporative............. 0.72
I/M and RFG (severe counties).............. 34.06
I/M (Sheboygan County)....................... 0.98
ECO.......................................... 1.57
Federal detergent additive rule.............. 0.57
RFG--Class C (moderate counties)............. 1.50
RFG--Class B (severe counties)...............
5.66
Industrial Sector
Wood furniture coating....................... 2.38
Misc. wood product coating................... 0.91
[[Page 11737]]
Yeast manufacturing.......................... 0.73
Screen printing controls..................... 0.12
Foundries--gray iron and steel............... 0.06
Industrial adhesives......................... 0.21
Lithography.................................. 0.58
Degreasing...................................
2.01
Area Sources
AIM coatings................................. 3.77
Autobody refinishing......................... 2.91
RFG (off-road)............................... 1.56
Federal non-road engine standards............ 0.87
Stage II vapor recovery...................... 7.70
Traffic markings............................. 3.62
Gas station tank breathing................... 0.91
Consumer and commercial products............. 2.80
------------------------------------------------------------------------
F. Rate-of-Progress and Contingency Plan Demonstrations
Overall, a State's rate-of-progress and contingency plans must
provide for an 18 percent reduction in VOC emissions, of which rules
for 15 percent must be implemented by November 15, 1996. For Wisconsin
this means that at a minimum the State's plan must provide for a 61.1
tpd reduction in VOCs, of which at least 50.9 tpd of these reductions
must be achieved by November 15, 1996.
The State's plan provides for a 62.0 tpd reduction, net of growth,
in VOCs of which 54.8 tpd will be accomplished by November 15, 1996.
For measures not implemented by 1996, Wisconsin's SIP clearly states
the trigger mechanisms, a schedule of the implementation of the
measures, and an indication that the measures will be implemented with
no further action by the State or USEPA (e.g., additional rulemaking
actions such as public hearings or legislative review). Therefore the
State's plan meets the minimum program requirements.
G. Enforceability Issues
All measures and other elements in the SIP must be enforceable by
the State and USEPA (see sections 172(c)(6), 110(a)(2)(A) of the Act,
and 57 FR 13556). The USEPA criteria addressing the enforceability of
SIP's and SIP revisions were stated in a September 23, 1987 memorandum
(with attachments) from J. Craig Potter, Assistant Administrator for
Air and Radiation (see 57 FR 13541). Nonattainment area plan provisions
must also contain a program that provides for enforcement of the
control measures and other elements in the SIP [see section
110(a)(2)(C) of the Act].
Each rule has been or will be independently reviewed and approved
by USEPA as part of the State's SIP. Part of this review process
includes a review of the enforceability of the rule. Rules that are not
enforceable will not be approved by USEPA.
H. Concluding Statement
The USEPA has reviewed Wisconsin's rate-of-progress and contingency
plan SIP revisions submitted to USEPA as described above. The materials
contained in these SIP revisions represent an acceptable approach to
the rate-of-progress and contingency plan requirements and meet all the
criteria required for approvability.
IV. Action
The USEPA approves Wisconsin's rate-of-progress and contingency
plan SIP submittals. With this action, USEPA incorporates Wisconsin's
rate-of-progress and contingency plan SIP revision into the SIP, making
them federally enforceable.
For the purposes of transportation conformity determinations, final
approval of this rate-of-progress plan revision would eliminate the
need for a build/no-build test for VOC for the 1996 analysis year.
However, for analysis years later than 1996, conformity determinations
addressing VOC must demonstrate consistency with this plan revision's
motor vehicle emissions budget, consistency with the VOC motor vehicle
emissions budget in the submitted (but not yet approved) attainment
demonstration (if any), and satisfaction of the build/no-build test
(until the attainment demonstration is approved). Final approval of
this rate-of-progress plan revision would not eliminate the need for a
build/no-build test for NOX for the 1996 analysis year.
Because USEPA considers this action noncontroversial and routine,
we are approving it without prior proposal. This action will become
effective on May 21, 1996. However, if we receive significant adverse
comments by April 22, 1996, USEPA will publish a notice that modifies
or withdraws this action.
V. Miscellaneous.
A. Applicability to Future SIP Decisions
Nothing in this action should be construed as permitting, allowing
or establishing a precedent for any future request for revision to any
SIP. The USEPA shall consider each request for revision to the SIP in
light of specific technical, economic, and environmental factors and in
relation to relevant statutory and regulatory requirements.
B. Executive Order 12866
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 has exempted
this regulatory action from E.O. 12866 review.
C. Regulatory Flexibility.
Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., USEPA
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, USEPA 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.
This approval does not create any new requirements. Therefore, I
certify that this action does not have a significant impact on any
small entities
[[Page 11738]]
affected. Moreover, due to the nature of the Federal-State relationship
under the Act, preparation of the regulatory flexibility analysis would
constitute Federal inquiry into the economic reasonableness of the
State action. The Act forbids USEPA to base its actions concerning SIPs
on such grounds. Union Electric Co. v. U.S. E.P.A., 427 U.S. 246, 256-
66 (1976).
D. Unfunded Mandates
Under Section 202 of the Unfunded Mandates Reform Act of 1995
(``Unfunded Mandates Act''), signed into law on March 22, 1995, USEPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a Federal mandate that may result in estimated
costs to state, local, or tribal governments in the aggregate; or to
the private sector, of $100 million or more. Under Section 205, USEPA
must select the most cost-effective and least burdensome alternative
that achieves the objectives of the rule and is consistent with
statutory requirements. Section 203 requires USEPA to establish a plan
for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
The USEPA has determined that the approval action promulgated today
does not include a Federal mandate that may result in estimated costs
of $100 million or more to either state, local, or tribal governments
in the aggregate, or to the private sector.
This Federal action approves pre-existing requirements under state
or local law, and imposes no new Federal requirements. Accordingly, no
additional costs to state, local, or tribal governments, or the private
sector, result from this action.
E. Petitions for Judicial Review
Under section 307(b)(1) of the Act, petitions for judicial review
of this action must be filed in the United States Court of Appeals for
the appropriate circuit by May 21, 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)).
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Hydrocarbons,
Incorporation by reference, Intergovernmental relations, Ozone,
Reporting and recordkeeping requirements.
Dated: January 26, 1996.
Valdas V. Adamkus,
Regional Administrator.
Part 52, 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 YY--Wisconsin
2. Section 52.2570 is amended by adding paragraph (c)(87) to read
as follows:
Sec. 52.2570 Identification of plan.
* * * * *
(c) * * *
(91) The State of Wisconsin requested a revision to the Wisconsin
State Implementation Plan (SIP). This revision is for the purpose of
satisfying the rate-of-progress requirement of section 182(b) and the
contingency measure requirement of section 172(c)(9) of the Clean Air
Act (Act) which will aid in ensuring the attainment of the national
ambient air quality standard (NAAQS) for ozone.
(i) Incorporation by reference.
(A) Wisconsin Statutes, sections 144.31(1)(e) and (f), enacted on
April 30, 1992, by Wisconsin Act 302.
[FR Doc. 96-6779 Filed 3-21-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-6701 Federal Credit Union Field of Membership and Chartering Policy
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11721-11728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6701]
=======================================================================
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
Federal Credit Union Field of Membership and Chartering Policy
AGENCY: National Credit Union Administration (``NCUA'').
ACTION: Final rule and final amendments to Interpretive Ruling and
Policy Statement 94-1 (``IRPS 96-1'').
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SUMMARY: The NCUA Board is updating the references to federal credit
union chartering, field of membership modifications and conversions.
The NCUA Board is issuing amendments to its field of membership
policies. One change will require senior citizen and retiree groups to
meet the same conditions as other associational groups in order to
qualify for a federal credit union charter or addition to an existing
charter through a field of membership amendment. The Board is also
issuing five amendments to clarify operational issues. The amendments
clarify: The application of field of membership requirements to
mergers; the streamlined expansion procedure; the documentation
requirements for low-income communities; the use of surveys to support
a community common bond; and appeal procedures.
EFFECTIVE DATE: July 1, 1996.
FOR FURTHER INFORMATION CONTACT: Michael J. McKenna, Staff Attorney,
Office of General Counsel, 1775 Duke Street, Alexandria, Virginia
22314-3428 or telephone (703) 518-6540.
SUPPLEMENTARY INFORMATION:
A. Background
In 1984, NCUA adopted a policy which permitted federal credit
unions (FCUs) to accept senior citizen and retiree members through the
formation of associations. The only requirement for adding these
associations to a credit union charter was a written request from the
FCU to the NCUA; no request from the group or copy of the association's
charter or bylaws was necessary. As a result, many FCUs added senior
citizen/retiree associations to their charters. Subsequent policy
statements, including Interpretive Ruling and Policy Statement 94-1
(IRPS 94-1) (the ``Chartering Manual''), continued this policy. 59 FR
29066 (June 3, 1994).
In 1994, two bank trade associations and six Texas commercial banks
filed suit against Communicators FCU of Houston, Texas, as a result of
several additions to the FCU's field of membership. The suit
challenged, among other additions, the 1994 addition of a senior
citizen/retiree group formed solely for the purpose of acquiring credit
union service. While upholding the other field of membership additions,
the court vacated the addition of the senior citizen/retiree
association and permanently enjoined NCUA from adding any similar
associations to the FCU. Texas Bankers Association, et al. v. NCUA, et
al., 1995 WL 328319 (D.D.C., May 31, 1995) (the ``Communicators FCU''
decision). On September 28, 1995, partly in response to the
Communicators FCU decision, the Board issued proposed amendments to the
Chartering Manual. 60 Fed. Reg. 51396 (October 4, 1995).
B. Comments
Seventy comments were received. Comments were received from thirty-
four federal credit unions, two state chartered credit unions, seven
state credit union leagues and three national credit union trade
associations. The comments were generally positive and supported most
of the proposed amendments.
The Board also received comments from twenty-five banking
associations. Briefly summarized, the bank commenters support NCUA's
proposed amendment to require senior citizen/retiree groups to meet the
same conditions as other associational groups before seeking to charter
or join a federal credit union. The bank commenters argue against
permitting federal credit unions that have adopted the ``once a member,
always a member'' bylaw to continue serving members based on their
membership in the senior citizen group. Many of the bank commenters
also request that NCUA re-examine its policies relating to all forms of
select group field of membership expansions.
The Senior Citizen and Retiree Association Policy
The Board proposed to modify its senior citizen/retiree policy to
require such groups to meet associational common bond requirements
before seeking to join or charter an FCU. Twenty-three commenters agree
with NCUA that senior citizen and retiree groups should meet the same
criteria as other associational groups before seeking to charter or
join a federal credit union.
Sixteen commenters disagreed with the Board's proposal. Seven of
these commenters believe that such groups are an underserved segment of
the population. They believe that a formal organization with bylaws and
officer and membership requirements should be sufficient for senior
citizen associations. Two commenters recommend that NCUA treat senior
citizen groups the same as low-income groups. Two commenters state that
the conversion of an existing group to a bona fide association should
not require that the association be completely divorced from the credit
union. They suggest that a senior citizen/retiree group could have
bylaws that permit the group to have the same directors as the credit
union and conduct their annual meeting concurrently with the credit
union's annual meeting. One commenter suggests that the final
amendments clarify that a credit union may help senior groups meet the
associational common bond requirement.
The Board believes the policy modification is an appropriate
response to the Communicators FCU decision and is adopting the proposed
amendment in final. In determining whether a group satisfies this
common bond requirement, NCUA will consider the totality of the
circumstances, such as whether the members pay dues, have voting
rights, hold office, hold meetings, have a purpose other than to obtain
credit union services, whether there is interaction among members and
whether the group has its own bylaws. See, Chapter 1, Section II.B. of
the Chartering Manual, 59 FR at 29076. Provided operational area
requirements are met, senior citizen/retiree associations formed for
purposes other than seeking credit union service will qualify to join
an existing FCU. The Board is not requiring such associations to have a
specific type of internal structure. Moreover, the Board continues to
stress that an FCU may assist a senior citizen group to form an
association that will qualify under the Chartering Manual.
[[Page 11722]]
The Board also requested comment on how to address members of
existing senior citizen/retiree groups which do not meet the proposed
characteristics of an association. The Board proposed that such groups
must meet the normal associational common bond requirements to enroll
new senior citizen/retiree group members. If the credit union has
adopted the ``once a member, always a member'' bylaw, it may continue
to serve its current members. Fourteen commenters agree with this
proposal. One commenter believes it would be unfair to current senior
citizen members to deny them credit union service and benefits because
of a change in NCUA policy.
Thirteen commenters oppose NCUA's proposed treatment of senior
citizen/retiree groups that do not have associational characteristics.
Nine of these commenters recommend grandfathering any existing senior
citizen/retiree groups and allowing the credit unions to continue to
serve the groups. Two commenters state that the Communicators FCU
decision does not compel the Board to retroactively apply any new
policy it adopts. The comments from banking associations all opposed
permitting existing members to retain membership.
The Communicators FCU decision does not compel the Board to apply
its new policy retroactively. The Board considered whether to
grandfather existing groups in the final amendment. However, in light
of the rationale expressed in the Communicators FCU decision, the Board
believes that grandfathering groups that do not meet the requirements
of the new policy is inappropriate. Grandfathering the groups will
simply invite litigation without furthering any of NCUA's chartering
goals. Therefore, the Board is requiring that all existing senior
citizen groups meet standard associational common bond requirements or
be deleted from the charter. Many of these groups may already meet
these requirements. If the FCU has adopted the ``once a member, always
a member'' bylaw, it can continue to serve members who had joined based
on their membership in the senior citizen/retiree group. Any other
treatment would not be in the best interest of current members or the
credit unions to which they belong. An FCU that has a group that does
not meet the associational requirements in its field of membership
should delete the group by submitting a charter amendment to the
appropriate regional office. Compliance will be monitored through the
exam program.
Low-Income Associations
The Board did not propose any changes to the ability of a federal
credit union to add low-income associations that are formed solely for
the purpose of obtaining credit union service without meeting the
standard characteristics of an association. Thirteen commenters agreed
that credit unions should be allowed to add to low-income groups to
their field of membership. Three of these commenters stated that this
policy enables credit unions to serve groups not currently receiving
financial services. One commenter believes this policy is consistent
with credit unions' ``people helping people'' philosophy.
Five commenters stated that federal credit unions should not be
allowed to add low-income groups formed solely for the purpose of
seeking credit union service. Two of these commenters found no reason
to differentiate between senior citizen groups and low-income groups.
One of these commenters believes eliminating this policy would not
significantly affect the ability of low-income persons to join federal
credit unions. One commenter believes it is preferable for low-income
groups seeking credit union service to be encouraged to form a credit
union rather than to be included in the field of membership of an
existing credit union.
Congress and the NCUA Board have long recognized that special
efforts must be made for those who are attempting to serve the needs of
persons of limited means. The FCU Act was enacted ``to make more
available to people of small means credit for provident purposes
through a national system of cooperative credit.'' 12 U.S.C. 1751.
Congress established a special segment of credit unions serving
predominantly low-income members. 12 U.S.C. 1752(5). Congress also
established and funded a Community Development Revolving Loan Fund for
Credit Unions, designed to help, through loans to credit unions serving
predominantly low-income persons, in providing ``basic financial and
related services'' to low-income persons and in ``stimulating economic
activities * * * which will result in increased income, ownership and
employment opportunities for low-income residents.'' 12 CFR 705.2(a).
See also, 12 U.S.C. 1766(k) (giving the Board authority over the
Community Development Revolving Loan Fund for Credit Unions). NCUA
defines as ``low-income'' persons earning less than 80 percent of the
average for all wage earners and persons whose annual household income
falls at or below 80 percent of the median household income for the
nation. 12 CFR 701.32(d)(2). The Board believes that the current low
income credit union program continues to serve an important
governmental purpose and is therefore not modifying its low-income
association policy.
Clarifications of Operational Issues
The Board proposed five amendments to its chartering and field of
membership policies to clarify operational issues. The amendments
addressed: (1) the application of field of membership rules to credit
union mergers; (2) the use of the streamlined expansion procedure; (3)
the documentation requirements for low-income community credit unions
as well as low-income additions; (4) the use of surveys to support a
community charter; and (5) appeal procedures.
Mergers
A. Operational Area
The Board proposed to clarify how it applies operational and field
of membership requirements to mergers. The Board reiterated that
mergers will usually fall into the common bond addition or select group
addition category, but some may fall into both categories. In a merger,
common bond groups may be added to a federal credit union's field of
membership without regard to location. The Board then clarified that
for select group additions the field of membership requirements are met
for each merging group only if the group could have been added to the
continuing credit union without the benefit of the merger. The
continuing credit union would have to analyze each group in the merging
credit union's field of membership as if the continuing credit union
was expanding its own field of membership without a merger. Three
commenters support this proposal. One of these commenters believes that
a more expansive policy would give large credit unions a great
advantage over smaller credit unions in expanding their field of
membership. This commenter believes that most credit unions cannot
realistically provide quality service to members who live and work a
great distance from the credit union.
Thirty-four commenters disagree with the concept of applying
operational area requirements to ``select group additions'' in a
merger. Nineteen commenters believe that a discontinuing credit union's
groups should be added to the continuing credit union's charter. Nine
commenters believe that operational area is an anachronism in an era of
significant technological advancements. Three commenters
[[Page 11723]]
believe that mergers are a business decision that should best be left
to credit unions, not NCUA. Three commenters state that the proposal is
overly restrictive. Three commenters state that the clarification will
create additional paperwork and delay approval. Two commenters believe
the proposal will result in a decrease in the number of mergers. Two
commenters state that mergers should be based on the services the
continuing credit union can provide and the philosophical ``fit''
between the merging credit unions. One commenter believes that the
economic impact on other credit unions in a similar area should not be
the determining factor on whether a merger is approved or not. One
commenter suggests NCUA should be concerned with safety and soundness
issues and not field of membership issues when considering a merger.
The Board recognizes that how field of membership requirements
should be applied in a merger is a continuing controversy within the
credit union community. The Board wishes to reiterate that it is not
willing to discard operational area requirements in the merger context.
However, the Board believes that in response to changing technologies,
operational area requirements need to be reviewed, and not only in the
context of mergers. The Board is currently in the process of conducting
such a review and may issue new policies after the study is complete.
The Board's proposed clarification may, however, impose a paperwork
burden without providing any significant assistance in reaching NCUA's
field of membership goals. In light of the commenter's concerns and the
language of IRPS 94-1, the Board believes that the proposed
clarification was overly broad and has reconsidered its position.
Rather than requiring each group in the discontinuing field of
membership to be within the operational area of the continuing credit
union, any of the discontinuing credit union's groups that are within
the operational area of either credit union may be transferred intact
to the continuing credit union. Any group that is not within the
operational area of either federal credit union, prior to the
completion of the merger, will be deleted from the continuing credit
union's field of membership and only members of record will be
transferred to the continuing credit union.
This clarification should not significantly decrease the number of
mergers or impose a significant burden on credit unions wishing to
merge. Rather, it applies the operational area requirements to mergers
as required by IRPS 94-1 since a group could not ordinarily be added to
either credit union's field of membership if it was not within the
operational area of the credit union.
The Board also requested comment on whether mergers should be
limited to credit unions that primarily serve groups in the same
geographic location. One commenter supports this concept. Fourteen
commenters disagree and believe that credit unions should be able to
merge even if they do not primarily serve groups in the same geographic
area. Seven commenters believe that geographic location is unimportant
because of current and coming technologies. Four commenters state that
the standard for considering mergers should be whether the continuing
credit union can provide quality member services. One commenter
believes that financial soundness is more important than geographic
location. The Board is not placing any new geographic limitations on
mergers but is continuing to study whether it should modify how it
applies field of membership requirements to mergers.
B. Views of Overlapped Credit Unions
The Board requested comment on whether it should require NCUA
Regions to conduct an overlap analysis for merging credit unions and
whether an affected credit union should be notified of the merger and
be given an opportunity to comment or object. Twelve commenters wanted
both an overlap analysis and the opportunity to comment or object. One
of these commenters believes that some recent merger decisions have put
some smaller credit unions in a competitive disadvantage with larger
credit unions. One commenter believes that such an analysis is
necessary because of the potential harm to the overlapped credit union.
This commenter states that with respect to a preexisting overlap, NCUA
should review the effect a proposed merger may have on the nature of
any preexisting overlaps.
Sixteen commenters believe that NCUA should not require an overlap
analysis for a group in a discontinuing credit union's field of
membership that has service available from another credit union. Five
of these commenters believe the analysis is unnecessary since one was
conducted when the overlap was originally granted. Two commenters state
that there is no useful purpose in re-examining an existing overlap.
One commenter states that the merger should not adversely affect the
credit union anymore than it was affected by the original overlap. Two
commenters state that a merger does not add to the number of federal
credit unions a member can belong, it just replaces an existing overlap
with a different credit union.
The Board believes that conducting an analysis of a preexisting
overlap is unnecessary. Such a requirement would increase the burden on
the merging credit unions as well as NCUA without any corresponding
benefit. The Board believes that transferring a preexisting overlap to
the continuing credit would not ordinarily have a significant impact on
any other credit union. Consequently, the Board is not modifying its
existing policy which does not require the Region to conduct an overlap
analysis for merging credit unions.
The Board also requested comment on whether credit unions that may
be adversely affected by a merger should have the right to appeal the
Regional Director's determination. The Board also asked whether NCUA
should establish a formal process for credit unions to comment on a
merger prior to the Regional Director making a determination. Thirteen
commenters believe that NCUA should establish such a comment process;
twelve oppose the right to appeal the Regional Director's decision.
Four commenters state that such an appeal creates an unnecessary
obstacle to a merger and will delay the process. One of these
commenters believes that the appeal process will prove costly to NCUA
and credit unions.
The Board believes that a formal comment period will delay the
merger process and increase costs for credit unions and NCUA without
any corresponding benefits. Therefore, the Board is not establishing
such a process. However, the Board will continue to consider appeals
from credit unions that may be adversely affected by a merger through
the normal appeal process.
C. Waivers
An operational area waiver procedure is available when a state-
chartered credit union is merged into an FCU. The Board clarified that
the waiver is discretionary on the part of NCUA and permits groups
already receiving quality credit union services, who are located
outside of the credit union's operational area, to continue to have
credit union service after the merger. Two commenters recommend making
available to federal credit unions the operational area waiver
procedure. The Board does not believe the waiver procedure needs to be
extended to federal credit unions because in almost all cases involving
federal credit unions
[[Page 11724]]
operational area requirements will be met. The Board is clarifying in
the final amendments that the waiver is only available if the group is
not being served by any other credit union. The Board will continue to
review this area but is not making any further changes at this time.
Streamlined Expansion Procedure (SEP)
SEP permits well-operated federal credit unions to add small groups
of less than 100 persons with an occupational common bond to its field
of membership without prior NCUA approval. The group must be located
within 25 miles of the credit union's service facilities and in
general, the group must not have credit union service available. The
Board proposed three clarifications to this policy. First, the Board
proposed that a credit union may use SEP if the only other credit union
service available is from a community credit union. The Board is
adopting this proposal. Nineteen commenters supported this proposal.
One of those commenters requests that it be modified to protect
community credit unions serving smaller rural communities. Another
commenter that approved of the proposal states that there should be
some minimum overlap protection for community credit unions.
Six commenters do not believe credit unions should be able to use
SEP to overlap a community credit union. Three commenters believe any
overlap of a community credit union should be done through the normal
expansion process because the use of SEP could erode a community credit
union's potential for growth. One commenter believes that community
credit unions need overlap protection. One commenter states that if a
company is within a community's boundaries and being adequately served
by a community credit union, then no overlap should be permitted.
NCUA does not afford overlap protection to a community credit union
when it is overlapped by an occupational group. Chapter I, IV.B.1,
Chartering Manual, 59 FR at 29080. This long-standing policy is working
well and the Board is not convinced that it should be changed. Since
the standard policy is not being changed it is only logical to extend
the policy to SEP. To do otherwise would simply place an unnecessary
paperwork burden on credit unions and NCUA. Consequently, the Board is
adopting the proposed amendment in final.
Second, the Board proposed that, consistent with standard field of
membership expansions, the group as a whole will be considered to be
within a credit union's 25 mile limit when: a majority of the group's
members live or work within the 25 mile limit; or the group's
headquarters is located within the 25 mile limit; or the group's ``paid
from'' or ``supervised from'' location is within the 25 mile limit.
Eight commenters support this proposal. One commenter objects to the
proposed amendment. Eleven commenters believe that NCUA should
eliminate the 25 mile limit for SEP because they believe the concept of
operational area is outdated. Six commenters believe that groups added
to a credit union's field of membership under SEP should be required to
be within 25 miles of the credit union.
The Board believes the 25 mile limit for SEP is working well and
should not be modified at this time. The Board is adopting the proposed
amendment in final so that SEP's definition of a group's location is
consistent with standard field of membership expansions. To eliminate
any possible confusion the Board is reiterating that there is no
standard 25 mile operational area limit for standard field of
membership expansions.
Third, the Board proposed that if an FCU has SEP in its charter and
merges into a credit union without SEP, the continuing credit union
must submit a charter amendment and receive NCUA approval if it wishes
to use SEP. Nine commenters support this proposal. One commenter states
that applying for SEP is not a burden for credit unions. One commenter
believes that this proposal provides NCUA with appropriate control. One
commenter requests that NCUA clarify that if the continuing credit
union already had SEP it would not need to reapply after the merger.
One commenter believes that if either federal credit union in a merger
has SEP then the continuing credit union should maintain SEP.
The Board is adopting this proposed amendment in final to maintain
appropriate controls over SEP. The Board believes that the continuing
credit union's application for SEP can be accomplished as part of the
merger process. The Board is also clarifying that if the continuing
credit union already has SEP it need not reapply after the merger.
Documentation Requirements to Establish Low-Income Services
The Board proposed that for new low-income charters or community
expansions, the Regional Director would decide what documentation
satisfies the community common bond requirement. The Board is adopting
this proposal. Such documentation must clearly define the area's
geographic boundaries and the charter applicant must establish that the
area is recognized as a distinct ``neighborhood, community or rural
district.'' Chapter 1, Section II.C.1, Chartering Manual, 59 FR at
29077. Twelve commenters support this proposal. One commenter states
that depending on the circumstances the Regional Director may be better
able to determine documentation requirements. One commenter supports
this proposal if it will result in providing more flexibility for
groups seeking to charter low-income credit unions or for low-income
community expansions.
Five commenters state that the Regional Director should not be
allowed to determine the appropriate documentation for low-income
charters or low-income expansions. Three commenters believe that
documentation requirements for low-income credit unions and expansions
should be specific and uniform. Two of the commenters believe this
proposal will result in inconsistencies among the Regions.
The Board believes that in many cases, a low-income area already
has the common interest and characteristics of a community just by
lacking the basic financial services found in more affluent
communities. The Board also believes that allowing the Regional
Director to decide what documentation will satisfy the community common
bond requirement will provide NCUA with more flexibility in granting
low-income community charters and low-income community expansions. The
Board also expects that this amendment will minimize bureaucratic
hurdles and expedite making credit union service available to persons
in low-income communities. The Board will be monitoring the process to
assure consistent application among NCUA Regions.
Community Charters
The Board proposed to amend the Chartering Manual to clarify that
surveys are not always required to demonstrate a community charter. Ten
commenters agreed with this proposal and none opposed. Surveys should
not be required if other evidence is more relevant or more clearly
demonstrates the sentiment of the community. The Board is adopting the
proposed amendment in final.
Procedures for Appealing Chartering and Field of Membership
Determinations
The Board proposed that all appeals be made within 60 days of the
Regional Director's determination. Seventeen
[[Page 11725]]
commenters agree with this proposal; two commenters believe there
should be less time and four commenters oppose the proposed appeal
procedure.
Three commenters recommend that the appeal process for chartering
and field of membership should be the same as those adopted by NCUA for
examination issues. One commenter believes the current appeal process
is sufficient.
The Board believes that a timeframe should be established to deal
with appeals expeditiously and concludes that the 60 days proposed by a
majority of those commenting gives the credit union sufficient time to
appeal the region's determination. The Board also believes that it and
not the supervisory review committee is best suited to resolve field of
membership issues. The Board is adopting the proposed amendment in
final.
The Board also requested comment on whether there should be a time
limit on the Board to render a decision on the appeal. Fourteen
commenters believe there should be such a time limit. Nine commenters
suggest 60 days, four suggest 30 days and one suggests 10 days. Two
commenters believe that the Board's time limit for deciding an appeal
could be extended if there were extenuating circumstance or good cause.
Two commenters state that there should be a procedure to protect credit
unions from possible retaliation as a result of their appeal.
Recent experience leads the Board to believe that flexibility is
necessary to respond to unique circumstances. The appealing credit
union does not necessarily want the Board's determination fast, they
want it correct. The Board is setting a goal of 90 days to render a
decision. The Board will investigate any claim by a credit union that
believes it is being singled out by NCUA because of its proper use of
the appeal process to immediately contact the Board.
Miscellaneous Comments
There were several comments received which did not address
themselves to specific requests for comment. Three commenters believe
that charter amendments and mergers which create virtually unlimited
fields of membership violate the cooperative nature of credit unions
and dilute the principle of the common bond. One commenter, discussing
operational area requirements, stated that if a select group feels they
will be better served by a credit union 1000 miles away instead of the
neighboring credit union then the select group should be permitted to
be added to the field of membership of the distant credit union. One
commenter states that NCUA should develop policies that would prohibit
overlapping memberships. The Board is continuing to review operational
area and overlaps and will take these comments into consideration when
studying the issues.
One commenter states that the Regions should be required to make
field of membership expansion determinations within 10 days. In fact,
most determinations are made within a 10 day period. There are
circumstances, however, which make it difficult to meet this goal.
One commenter requests that students should be part of the
community common bond so that persons who attend any educational
institution located in a community would be eligible to join a credit
union whose field of membership includes that community. The Board
agrees. The Board believes that a student is working for the purpose of
the community common bond and therefore a person going to school within
a community but is not living within the community boundaries is deemed
to be working in the community for field of membership purposes. One
commenter believes that NCUA should not allow a federal credit union to
add low-income communities to their field of membership. The Board
disagrees. The policy is working well and has increased the number of
low-income people receiving credit union service.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires the NCUA to prepare an
analysis to describe any significant economic impact a proposed
regulation may have on a substantial number of small credit unions
(primarily those under $1 million in assets). The changes to NCUA
policy resulting from the adoption of these amendments to the IRPS do
not have a significant economic impact on a substantial number of small
credit unions. The changes are either legally required or simply
clarify existing policy. Accordingly, the Board determines and
certifies that this final rule does not have a significant economic
impact on a substantial number of small credit unions and that a
Regulatory Flexibility Act analysis is not required.
Paperwork Reduction Act
NCUA has determined that the requirement for a FCU to delete from
its charter senior citizen/retiree groups that do not meet standard
associational requirements do constitute a collection of information
under the Paperwork Reduction Act. The Paperwork Reduction Act and
regulations of the Office of Management and Budget (OMB) require that
the public be provided an opportunity to comment on information
collection requirements, including an agency's estimate of burden of
the collection of information.
NCUA estimates that it should take an average of 15 minutes for an
FCU to prepare and submit the required charter amendment. NCUA
estimates that approximately 300 FCUs will need to submit the charter
amendment, resulting in a total of 75 burden hours. This increase in
burden will only occur once.
The NCUA Board invites comment on (1) whether the collection of
information is necessary for the proper performance of the functions of
NCUA including whether the information will have practical utility; (2)
the accuracy of NCUA's estimate of the burden of the collection of
information; (3) ways to enhance the quality, utility, and clarity of
the information to be collected; and (4) ways to minimize the burden of
the collection on respondents, including through the use of automated
collection techniques or other forms of information technology. Send
comments to Suzanne Beauchesne, National Credit Union Administration,
1775 Duke Street, Alexandria, VA 22314-3428. Comments should be
postmarked by May 21, 1996.
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
actions on state interests. The proposed amendments apply to federal
credit unions as well as state chartered credit unions that seek to
become federal credit unions. Therefore, the actions will not affect
state interests.
List of Subjects in 12 CFR Part 701
Credit unions, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board on March 13,
1996.
Becky Baker,
Secretary of the Board.
Accordingly, NCUA amends 12 CFR part 701 as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
1. The authority citation for part 701 continues to read as
follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,
1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by
15 U.S.C 1601 et seq.;
[[Page 11726]]
42 U.S.C. 1981 and 3601-3610. Section 701.35 is also authorized by
42 U.S.C 4311-4312.
2. Section 701.1 is revised to read as follows:
Sec. 701.1 Federal credit union chartering, field of membership
modifications, and conversions.
National Credit Union Administration practice and procedure
concerning chartering, field of membership modifications, and
conversions are set forth in Interpretive Ruling and Policy Statement
94-1--Chartering and Field of Membership Policy (IRPS 94-1), as amended
by IRPS 96-1. Both IRPS are incorporated into this section.
(Approved by the Office of Management and Budget under control
number 3133-0015)
Note: The text of the interpretive ruling and policy statement
(IRPS 94-1) does not and the following amendments will not appear in
the Code of Federal Regulations.
3. In IRPS 94-1, Chapter 1, Section II.C.2 is revised to read as
follows:
II.C.2--Special Documentation Requirements
Information to support that the area chosen represents one well-
defined area, distinguishable from the immediate surrounding areas,
includes: -
Political jurisdictions;
Major trade areas (shopping patterns);
Traffic flows;
Shared/common facilities (for example, educational,
medical, police and fire protection, school district, water, etc.);
Organizations/clubs whose membership is made up
exclusively of persons within the area;
Newspapers or other periodicals published for and about
the area;
Census tracts;
Common characteristics and background of residents (for
example, income, religious beliefs, primary ethnic groups,
similarity of occupations, household types, primary age group,
etc.);
History of area; and
In general, what causes the chosen area and its
residents to be distinguishable from the immediate surrounding areas
and residents--some examples are old, well-established ethnic
neighborhoods, planned communities and small/rural towns or rural
counties.
The following information must be provided to support a need for
a community credit union or community field of membership expansion:
A list of credit unions presently in the area and those
credit union's positions regarding a new charter or field of
membership expansion; and
A list of other financial institutions (for example,
banks, savings and loan associations) that service the area.
Written documentation reflecting support for the
application for the charter, field of membership expansion or
conversion to a community credit union may be in the form of
letters, surveys, studies, pledges, or a petition. Other types of
evidence may also be acceptable. If a survey is used it should
reflect the following:
For the residents of the community:
-Approximate number contacted
Number in favor of the credit union
Number against the credit union
Number who will join the credit union
Number who have pledged initial and/or systematic savings and amount
of pledges
For the employers in the community:
Number of area employers and number of employees
Number contacted
Number in favor of the credit union
Number against the credit union
Number willing to provide payroll deductions to the credit union
Number willing to provide other type(s) of support to the credit
union
For community organizations (including churches):
Number in area and number of members
Number contacted
Number in favor of the credit union
Number against the credit union
Number willing to provide some type of support to the credit union,
i.e., advertising facilities, etc.
Letters of support from area civic leaders
If the community is also a recognized legal entity, it may be
served as, or be included in, the field of membership--for example,
``DEF Township, Kansas'' or ``GHI County, Minnesota.''
4. In IRPS 94-1, Chapter 1, Section V.A.2 is revised to read as
follows:
V.A.2--Special Common Bond Rules for Low-Income Federal Credit Unions
Generally, a low-income credit union is chartered as a community
or associational credit union. The Regional Director will determine
whether the applicants have provided sufficient evidence to
demonstrate the need for a low-income community charter. Such
evidence must establish that the geographic area's boundaries are
clearly defined and that the area is recognized as a distinct
neighborhood, community, or rural district. A low-income credit
union that has a community common bond may include the following
language in its field of membership:
``Persons who live in [the target area]; persons who regularly
work, worship, perform volunteer services, or participate in
associations headquartered in [the target area]; persons
participating in programs to alleviate poverty or distress which are
located in [the target area]; incorporated and unincorporated
organizations located in [the target area] or maintaining a facility
in [the target area]; and organizations of such persons.''
In recognition of the special efforts needed to help make credit
union service available to persons in low-income communities, NCUA
permits credit union chartering and field of membership amendments
based on associational groups formed for the sole purpose of making
credit union service available to low-income persons. The
association must be defined so that all its members will meet the
low-income definition of Part 701.32 of NCUA's Regulations. The
association, in documenting its low-income membership, may use the
same types of documentation as are currently permitted for
determining whether a community is low-income under Part 701.32 of
NCUA's Regulations.
In addition, a proposed or existing low-income federal credit
union whether community or associationally based, may include in its
field of membership, without regard to location, one or more groups
constituting an occupational, associational or community common
bond. Except for the operational area requirements, the proposed or
existing credit union must meet all the requisites for including the
group in its charter. Moreover, the proposed or existing credit
union must take care to ensure that it will continue to meet the
requirements for low-income status.
5. In IRPS 94-1, Chapter 1, Section V.A.3 is revised to read as
follows:
V.A.3--Special Common Bond Rules for Other Federal Credit Unions
Seeking To Serve Low-Income Persons
In the interest of making credit union service available to
persons in low-income communities, NCUA also permits any
occupational, associational, multiple group, or community federal
credit union to include in its field of membership, without regard
to location, communities and associational groups satisfying the
low-income definition of Part 701.32 of NCUA's Regulations. The
associational group may be formed for the sole purpose of providing
eligibility for federal credit union service, but must comprise only
persons meeting NCUA's low-income definition.
The federal credit union adding the low-income community or
association must document that the community or association meets
the low income definition in Part 701.32 of NCUA's Regulations, just
as is required for a designated low-income credit union. The
Regional Director will ensure that the proposed low-income community
addition is sufficient to establish a community common bond. A
federal credit union adding such a community or association,
however, would not be able to receive the benefits, such as expanded
use of non member deposits and access to the Community Development
Revolving Loan Program for Credit Unions, offered to low-income
credit unions.
A federal credit union that desires to include a low-income
community or association in its field of membership must first
develop a business plan specifying how it will serve the entire low-
income community. The business plan, at a minimum, must identify the
credit and depository needs of the low-income community or
association and detail how the credit union plans to serve those
needs. The credit union will be expected to regularly review the
business plan as well as loan penetration rates in the community to
determine if the community is being adequately served. NCUA will
require periodic service status reports on its service
[[Page 11727]]
to the low-income community and may review the credit union's
service to low-income persons during examinations.
6. In IRPS 94-1, Chapter 1, Section V.B is deleted and Sections
V.C. and V.D. are redesignated V.B and V.C, respectively.
7. In IRPS 94-1, Chapter 1, Section VIII.D is revised to read as
follows:
VIII.D--Appeal of Regional Director's Decision
If the Regional Director denies a charter application, the group
may appeal the decision to the NCUA Board. If not included with the
denial notice, a copy of these procedures may be obtained from the
appropriate region. An appeal will be sent to the regional office
within sixty days of the denial. The Regional Director will then
forward the appeal to the NCUA Board. NCUA central office staff will
make an independent review of the facts and present the appeal with
recommendations to the Board.
Before appealing, the prospective group may, within thirty days
of the denial, provide supplemental information to the Regional
Director for reconsideration. In these cases, the request will not
be considered as an appeal but as a request for reconsideration by
the regional director. If the request is again denied, the group may
proceed with the appeal process.
8. In IRPS 94-1, Chapter 2, Section II.A.3.a is revised to read as
follows:
II.A.3.a--General
The special rules for credit unions serving low-income persons
and serving employees at industrial parks, shopping centers and
similar facilities apply equally to field of membership additions.
However, there are two special situations unique to existing federal
credit unions: (1) corporate restructurings and (2) plant or base
closings, and other kinds of distress to a substantial portion of a
credit union's membership.
9. In IRPS 94-1, Chapter 2, Section III.A is revised to read as
follows:
III.A--Mergers
Generally, the standards applicable to field of membership
amendments found in Section II of this chapter apply to mergers
where the continuing credit union is a federal charter. This
requires analyzing each group in the merging credit union's field of
membership. Groups in the merging credit union that are within the
operating area of either credit union may be transferred intact into
the continuing credit union. Merger applicants must provide NCUA
with their own analysis of how the proposed field of membership of
the continuing credit union conforms to this policy. For those
groups from the merging credit union that do not meet operational
area requirements, unless granted a waiver under the procedure for
merging state chartered credit unions, only the members of record
will be transferred to the continuing credit union.
Where the merging credit union is state chartered, the field of
membership rules for a credit union converting to a federal charter
apply with the following differences:
In a merger involving a common bond addition, the
requirements to provide a request for credit union service from the
corporate, associational, or other unit to be added is not required,
since the unit already has credit union service.
In a merger involving a select group addition:
For the same reason as above, the requirement for a letter from
each group included in the credit union's field of membership is not
required.
Where a state credit union is merging into a federal credit
union, the operational area requirement may be waived if it can
demonstrate that the group does not have other credit union service
available and the credit union will continue to be able to provide
quality credit union service to the group. In determining quality of
services, NCUA will consider the number of members of the group who
are using the credit union's services. The waiver is discretionary
on the part of NCUA and will be strictly scrutinized. The waiver
will only be granted if supported by clear and convincing evidence.
Absent any waivers, only members of record of groups that do not
meet operational area requirements will be transferred to the
continuing credit union. Upon merging, the state credit union's
field of membership will be worded to conform to the NCUA standards
set forth in Chapter 1. Any subsequent field of membership
amendments must comply with applicable amendment procedures.
In a merger of a community credit union into a federal
credit union of any type, the continuing credit union may be
permitted to continue to provide service to the merging credit
union's members of record as of the merger date where the
operational area requirement is satisfied. Except in the case of an
emergency merger or where the continuing credit union is low-income,
the continuing federal credit union can obtain only the members of
record of the merging community credit union.
Where both credit unions are community charters, the
continuing credit union is a federal credit union, and the criteria
for expanding the service area of a community federal credit union
(as discussed previously in this Chapter) are satisfied, the entire
field of membership of the merging credit union may be added to the
continuing federal credit union's charter.
Mergers must be approved by all affected NCUA regional
directors, and, as applicable, the state regulators.
10. In IRPS 94-1, Chapter 2, Section III.B. is revised to read as
follows:
III.B--Emergency Mergers
NCUA may approve emergency mergers without regard to field of
membership or other legal constraints. An emergency merger involves
NCUA's direct intervention. The credit union to be merged must
either be insolvent or be likely to become insolvent within 12
months and NCUA must determine that:
An emergency requiring expeditious action exists;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
In an emergency merger situation, NCUA takes an active role in
finding a suitable merger partner (continuing credit union). NCUA is
primarily concerned that the continuing credit union has the
financial strength and management expertise to absorb the troubled
credit union without adversely affecting its own financial condition
and stability.
As a stipulated condition to an emergency merger, the field of
membership of the merging credit union may be transferred intact to
the continuing federal credit union without regard to any field of
membership restrictions and without changing the character of the
continuing federal credit union for future amendments. Under this
authority, therefore, a federal credit union may take into its field
of membership a group defined by a community or associational common
bond permitted under state law, regardless of whether that common
bond definition could be approved under the Federal Credit Union
Act. If a federal credit union which has added groups or communities
under an emergency merger later proposes to merge with another
federal credit union, the groups or communities added pursuant to
the emergency merger will not be subject to operational area or
field of membership analysis.
11. In IRPS 94-1, Chapter 2, Section VIII.B is revised to read as
follows:
VIII.B--Streamlined Expansion Procedure (SEP) for Small Occupational
Groups
In keeping with the goals of NCUA chartering policy to provide
service to all eligible groups desiring credit union service, well
operated federal credit unions except those designated as
``distressed'' may take advantage of the SEP for adding occupational
groups to their fields of membership.
To use this procedure, the federal credit union's board of
directors must first apply to their respective NCUA regional
director for a charter amendment. The charter amendment request must
be signed by the presiding officer of the board of directors.
The following is a sample amendment for permitting a federal
credit union to use the SEP authority:
Groups of persons with occupational common bonds which are
located within 25 miles of one of the credit union's service
facilities, which have provided a written request for service to the
credit union, which do not presently have credit union service
available, other than through a community credit union, which have
no more members in the group than the maximum number established by
the NCUA Board for additions under this provision: Provided,
however, that the National Credit Union Administration may
permanently or temporarily revoke the power to add groups under this
provision upon a finding, in the Agency's discretion, that
permitting additions under this provision are not in the best
interests of the credit union, its members, or the National Credit
Union Share Insurance Fund.
[[Page 11728]]
Once NCUA has approved the amendment and the credit union board
has adopted it, the SEP authority may be implemented. The charter
amendment permits approved federal credit unions to immediately
begin serving employee groups meeting criteria set forth in this
section. Under this procedure, there is no formal NCUA action
necessary on each group being added.
The maximum number of persons for each group of employees which
may be added under SEP will be established by the NCUA Board from
time to time. The number will be based on potential primary
members--that is, the persons sharing the basic occupational
affinity to each sponsor group; family members and other derivative
members are not included in the SEP limit. Several groups may be
simultaneously added using these procedures; however, the maximum
number of persons for each group must fall within the SEP limit.
The SEP does not apply to associational groups since NCUA must
review membership requirements and geographical area prior to these
groups being added to a field of membership. The procedure also does
not apply to community charter expansions, because of the more
individualized analysis required.
The following SEP steps and documentation requirements must be
adhered to:
The federal credit union must complete, for each group
to be added, an Application for Field of Membership Amendment form,
NCUA 4015, shown in Appendix D.
The federal credit union must obtain a letter, on the
group's letterhead where possible, signed by an official
representative identified by title, requesting credit union service
and stating that the group does not have any other credit union
service available from any associational, occupational or multiple
group credit union.
The group must be located within 25 miles of one of the
federal credit union's service facilities. The group will be
considered to be within the 25 mile limit when: (1) a majority of
the group's members live or work within the 25 mile limit; or (2)
the group's headquarters is located within the 25 mile limit; or (3)
the group's ``paid from'' or ``supervised from'' location is within
the 25 mile limit.
The group must indicate the number of potential
members--the number of employees--seeking service.
The federal credit union must maintain the above
documentation permanently with its charter.
The federal credit union must maintain a control log of
groups added to its field of membership under the SEP procedure. The
control log must include the date the group obtained service, the
name and location of the sponsor group, the number of potential
primary members added, the number of miles to the nearest main or
branch office, the federal credit union board of director's approval
of the group and the date approved. See Appendix D for the SEP
Control Log, NCUA 4016.
The groups added under SEP must be reported to the
federal credit union's board at the next regular board meeting and
made a part of the meeting minutes.
The control log and other SEP documentation must be
made available to NCUA upon request.-
The regional director may from time to time request service
status reports on groups added under SEP. It is advisable to use
some method, such as a sponsor prefix added to the member account
number, to readily access data for such groups.
Should a federal credit union fail to provide quality credit
union service, as determined by the group's members or employees, to
a group added under SEP, NCUA may subsequently permit dual
membership with another credit union.
Should a federal credit union fail to follow the above
procedures or deteriorate financially or operationally, NCUA, at its
discretion, may revoke the SEP privilege.
If a federal credit union that has SEP in its charter merges
with another federal credit union that does not have SEP, the
continuing credit union, if it desires to have SEP, must submit a
charter amendment and receive approval from NCUA to implement SEP.
Otherwise, the groups obtained by the merging credit union through
SEP must be listed specifically in the continuing credit union's
field of membership or a reference to the merging credit union's SEP
log must be made in the continuing credit union's field of
membership as of the date of the merger.
12. In IRPS 94-1, Chapter 2, Section VIII.G is revised to read as
follows:
VIII.G--Appeal of Regional Director Decision
If a field of membership expansion, merger, or spin-off is
denied by the Regional Director, the federal credit union may appeal
the decision to the NCUA Board. If not included with the denial
notice, a copy of these procedures may be obtained from the Regional
Director who made the decision. An appeal must be sent to the
appropriate regional office within sixty days of the denial. The
Regional Director will then forward the appeal to the NCUA Board.
NCUA central office staff will make an independent review of the
facts and present the appeal to the Board with a recommendation.
The federal credit union may, within thirty days of the denial,
request reconsideration and provide supplemental information to the
regional director. The request for reconsideration will not be
considered an appeal but will toll the sixty day requirement to file
an appeal until a ruling is received on the request for
reconsideration.
13. In IRPS 94-1, Chapter 3, Section 3.H, is added as follows:
III.H--Appeal of Regional Director Decision
If a conversion to a state charter is denied by the Regional
Director, the credit union may appeal the decision to the NCUA
Board. If not included with the denial notice, a copy of these
procedures may be obtained from the Regional Director who made the
decision. An appeal must be sent to the appropriate regional office
within sixty days of the denial. The Regional Director will then
forward the appeal to the NCUA Board. NCUA central office staff will
make an independent review of the facts and present the appeal to
the Board with a recommendation.
The federal credit union may, within thirty days of the denial,
request reconsideration and provide supplemental information to the
regional director. The request for reconsideration will not be
considered an appeal but will toll the sixty day requirement to file
an appeal until a ruling is received on the request for
reconsideration.
[FR Doc. 96-6701 Filed 3-21-96; 8:45 am]
BILLING CODE 7535-01-U
Complete official Federal Register PDF
FR Doc. 96-6698 Real Estate Title Clearance and Loan Closing
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11709-11717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6698]
========================================================================
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. 61, No. 57 / Friday, March 22, 1996 / Rules
and Regulations
[[Page 11709]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service, Rural Business-Cooperative Service, Rural
Utilities Service, and Farm Service Agency
7 CFR Part 1927
RIN 0575-AB52
Real Estate Title Clearance and Loan Closing
AGENCIES: Rural Housing Service, Rural Business-Cooperative Service,
Rural Utilities Service, and Farm Service Agency, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Rural Housing Service (RHS) and the Farm Service Agency
(FSA), collectively hereafter referred to as ``agency,'' amend the Real
Estate Title Clearance and Loan Closing regulation. This action makes
loan closing procedures consistent with the private sector for
commercial loans and makes loan closing requirements consistent with
local laws and procedures that are typical in the area where an agency
loan is made. The intended effect is to provide the public with easier
and less costly access to agency programs.
EFFECTIVE DATE: April 22, 1996.
FOR FURTHER INFORMATION CONTACT: Walter B. Patton, Senior Loan
Specialist, Rural Housing Service, USDA, Room 5334, South Agriculture
Building, 14th and Independence Ave. SW, Washington, DC 20250,
Telephone (202) 720-0099.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been determined to be not significant for purposes of
Executive Order 12866 and, therefore, has not been reviewed by OMB.
Paperwork Reduction Act
The information collection requirements contained in this
regulation have been approved by the Office of Management and Budget
(OMB) under the provisions of 44 U.S.C. chapter 35 and have been
assigned OMB control number 0575-0147, in accordance with the Paperwork
Reduction Act of 1980. This final rule does not impose any new
information collection requirements from those approved by OMB.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' It is the determination of the
agency that this action does not constitute a major Federal action
significantly affecting the quality of the human environment, and in
accordance with the National Environmental Policy Act of 1949, Pub. L.
91-190, an Environmental Impact Statement is not required.
Intergovernmental Consultation
This regulation is an instructional procedure and is not covered by
Executive Order 12372. Programs listed in the Catalog of Federal
Domestic Assistance are as follows: Catalog Nos. 10.405, Farm Labor
Housing Loans and Grants; 10.415, Rural Rental Housing Loans; and
10.416, Soil and Water Loans, are subject to the provisions of
Executive Order 12372, which require intergovernmental consultation
with State and local officials (7 CFR part 3015, subpart V, 48 FR
29112, June 24, 1983). Catalog Nos. 10.404, Emergency Loans; 10.406,
Farm Operating Loans; 10.407, Farm Ownership Loans; 10.410, Very Low to
Moderate Income Housing Loans, and nonprogram loans are excluded from
the scope of Executive Order 12372.
Civil Justice Reform
This final rule has been reviewed under Executive Order 12778,
Civil Justice Reform. In accordance with this rule: (1) all state and
local laws and regulations that are in conflict with this rule will be
preempted; (2) no retroactive effect will be given to this rule; and
(3) pursuant to section 212 of the Department of Agriculture
Reorganization Act of 1994, Public Law 103-354 (October 13, 1994),
administrative appeal proceedings must be exhausted before bringing
suit challenging actions taken under this rule.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.
104-4, establishes requirements for Federal agencies to assess the
effects of their regulator actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, the
agency generally must prepare a written statement, including a cost-
benefit analysis for proposed and final rules with ``Federal mandates''
that may result in expenditures to State, local, or tribal governments,
in the aggregate, or to the private sector, of $100 million or more in
any one year. When such a statement is needed for a rule, section 205
of the UMRA generally requires the agency to identify and consider a
reasonable number of regulatory alternatives and adopt the least
costly, more cost-effective or least burdensome alternative that
achieves the objectives of the rule.
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local, and tribal
governments or the private sector. Thus, today's rule is not subject to
the requirements of sections 202 and 205 of the UMRA.
Discussion
On May 11, 1994, the Farmers Home Administration (FmHA)
(predecessor to the Rural Housing Service and the Farm Service Agency),
published a proposed rule with a request for public comments to revise
7 CFR part 1927, subpart B, ``Real Estate Title Clearance and Loan
Closing.''
The agency received fifteen comments. Eight comments came from
within the United States Department of Agriculture (USDA); six comments
came from private practice attorneys, and one comment came from a title
insurance company.
Those sections of the proposed regulation that are administrative
in nature and apply only to administrative procedures within the agency
have been removed from this document. These procedures are available
from any agency office upon request.
The proposed rule discussed the need to make real estate title
clearance and loan closing procedures more
[[Page 11710]]
compatible with the public sector requirements. Many of the comments
addressed this desire.
The agency policy is that all loans be closed with the issuance of
a title insurance policy except in those areas of the country where
title insurance is unavailable. It is anticipated that in most states,
attorneys will continue to close loans and be issuing agents of title
insurance for a title insurance company instead of providing a title
opinion. This provides better protection for both the agency and the
borrower. When a title insurance company indemnifies the issuing agent
attorney through the use of an indemnification agreement, the attorney
will not be required to obtain a fidelity bond or errors and omissions
insurance.
Comments and Other Significant Changes are Discussed Below
One respondent questioned the need for a title insurance company to
provide an audited financial statement in order to show financial
responsibility to the agency. We feel it is important that the agency
can determine the financial responsibility of a title insurance
company. We will allow each State Office to determine whether the State
Agency which regulates title insurance companies requires sufficient
proof of financial responsibility to meet this requirement, or if
additional proof is necessary. If the State Office concludes that the
State Insurance Agency provides sufficient assurance of financial
responsibility of State regulated title insurance companies, no other
minimal information will be required from the individual title
insurance company.
One respondent questioned Sec. 1927.59(a)(1) (i) through (iii),
which states that title insurance will only be obtained for subsequent
loans in certain situations. The recommendation was that title
insurance should be required in all subsequent loan cases. It has been
decided that title insurance or title opinions will be obtained unless
the cost of title services is excessive in relationship to the size of
the loan, the agency currently has a first mortgage security interest,
the applicant has sufficient income to service all loans from the
agency, the borrower is current on all existing agency loans, and the
best mortgage obtainable adequately protects agency security interests.
A comment questioned the policy of not allowing the mention of the
use of abstracts of title in any title opinions furnished to the United
States Department of Agriculture (USDA). The agency does not prevent an
attorney from using an abstract of title when preparing an attorney's
opinion, but what the agency requires is the unqualified opinion of the
attorney, not an opinion which passes the liability for an error from
the attorney to an abstract company. Reviewing the abstract is a method
an attorney can use to arrive at his or her opinion and it is not
necessary on the face of the opinion to indicate the methodology by
which the attorney arrived at the opinion. With the agency's policy
shifting to the use of title insurance policies, instead of title
opinions, this concern will be diminished. (This subject is not
specifically addressed in this regulation and no change is being made.)
The recommendation to continue to have the attorney use Forms FmHA
1927-9, ``Preliminary Title Opinion,'' and FmHA 1927-10, ``Final Title
Opinion,'' on title opinions for both loan closing and foreclosure
proceedings when an attorney's opinion is used, is acceptable. The
proposed regulation did not preclude this practice.
A comment was made suggesting that loan closing attorneys and title
companies agree to indemnify the agency against any losses that occur
as a result of mistakes. The agency does not agree with this
suggestion. Title insurance will provide the agency with adequate
coverage against any errors made by the title insurers. The agency will
be a named insured on title insurance policies issued in conjunction
with agency loans. In those areas where attorney's opinions will still
be used, the agency is protected to a lesser extent by the attorney's
malpractice insurance.
A comment was received debating the use of a title opinion versus
title insurance, and the additional cost incurred if a title insurance
company were to require a survey. Typically, the agency requires a
survey unless the title insurance company provides survey coverage. The
change to the regulation will give State Offices the authority to
decide the form of title insurance certification and form of survey
that is best for their state.
It was recommended that the definitions of ``approved attorney''
and ``approved title insurance company,'' be expanded to cross
reference the provisions providing for approval. This recommendation
was accepted.
It was pointed out that an ``issuing agent'' may or may not be a
party who can perform closing services, depending on local law. This
fact was incorporated.
It was pointed out that the reference to ``warranty deed'' in the
definition of ``mortgage'' in Sec. 1927.52 is somewhat confusing. This
reference was removed.
It was suggested to expand the definition of ``quitclaim deed.''
The current method of conveying title by use of a quitclaim deed has
not been a problem.
The Anti-Deficiency Act, 31 U.S.C. Secs. 1512-1519, precludes
Federal agencies from agreeing to expend federal funds in excess of an
appropriation. The covenants in warranty deeds could commit the agency
to expend funds in future fiscal years were a warranty to be breached.
This would violate the Anti-Deficiency Act and, for this reason, the
agency cannot use warranty deeds in conveying property to which it
holds title. Therefore, no change was made.
It was pointed out that a closing protection letter need not be
furnished when the loan closing is conducted in a branch office of the
title insurance company. This was incorporated.
It was also pointed out that by saying a closing protection letter
must provide equivalent protection of a ``professional liability and
fidelity insurance policy,'' will create problems, because title
insurance companies are prohibited by law from providing professional
liability and fidelity insurance. This reference was removed.
It was pointed out that Sec. 1927.54(d)(4) is not needed when a
closing protection letter is provided. The paragraph stated, ``Title
insurance company agrees that the title insurance company employee or
closing agent who supervises the closing of the transaction will be
authorized to receive funds and give receipts for the company's
charges.'' This paragraph has been removed.
It was suggested that we remove what appears to be a mandatory
requirement that an owner's title insurance policy be issued. In most
instances, an owner should obtain an owner's policy of title insurance
for the owner's protection and the agency will encourage but not
require this. A correction was made to clarify this point.
It was pointed out that in some states only an attorney can prepare
a deed. Therefore, a change was made that a closing agent can prepare a
deed unless prohibited by law.
One commentor stated that the statement, ``Loan funds for the
payment of a lien may be disbursed only upon the receipt of a
discharge, satisfaction, or release,'' in Sec. 1927.58(a), is
impracticable. We agree with this perception; however, a completely
satisfactory wording is impracticable. The word ``receipt'' is being
changed to ``recording.'' We believe it is understood by closing agents
that funds change hands and releases and recordings occur substantially
simultaneously.
[[Page 11711]]
A comment was made that instead of ``recommending'' the use of
title insurance, we should ``require'' its use unless prohibited by
State law. If this were implemented, any deviation would need to be
authorized by the Administrator. Since State laws vary greatly, it is
important to give State Offices latitude in this regard. In some very
rural areas of the country title insurance may be unavailable for
logistical as opposed to legal reasons. This wording will remain
unchanged.
The question was raised as to why the agency requires the borrower
to receive a copy of the title opinion. It goes on to say neither the
conventional nor the government mortgage market provides a title
opinion to the borrower. The agency has a responsibility to provide
supervised credit. It is important that all borrowers are aware of the
terms and conditions of the title insurance commitment as well as the
final title insurance binder. No change is made with regard to this
comment.
A comment was made concerning ``a loan is considered closed,'' and
``the date of closing,'' and which definition is correct. The terms
apply to two different events and are not meant to be the same. By
definition ``closed loan'' is ``a loan is considered to be closed when
the mortgage is filed for record.'' The date of closing is the date
that the closing agent conducts the loan closing activity. No change
was made.
It was commented that sometimes ``mortgagee's policy'' was
interchanged with ``lender's policy.'' All references were changed to
``lender's policy.''
Concerning debarment or suspension, a comment was made that the
proposed regulation implied that once a party was debarred or suspended
they are always debarred or suspended. This was corrected by inserting
the words ``is currently.''
A comment was made that the closing agent should not be required to
determine the validity of the legal description, but rather should use
the legal description provided by the survey or other legal document.
It is part of the closing agent's duties to verify an accurate legal
description. Using the survey or other recorded legal document is one
way of meeting this requirement but the ultimate responsibility rests
with the closing agent. No change has been made.
A comment was made that in one section we required the return of
``the final title opinion or policy of title insurance,'' within one
day, while in another section it requires they be returned ``as soon as
possible.'' The requirement is removed from the section requiring their
return within one day.
It was recommended that Sec. 1927.59(a)(iv) be clarified by
changing the word ``additional'' to ``subsequent.'' This change was
made.
A comment was made that we refer to a ``clear'' title while the
conventional term is ``marketable.'' This change was made.
A comment was made that there are different definitions and
examples of ``exceptions'' in various passages. These variations were
corrected.
Two concerns were raised about the requirement that approved
attorneys providing title opinions must have a $50,000 fidelity bond.
The comment was that no other lender requires a fidelity bond and it
results in increased cost to the borrower. We believe the continued
requirement for a fidelity bond is necessary to protect these funds
which are public monies. Therefore, this requirement will not be
changed for closings where attorney opinions are obtained. In most
cases where the party handling closing funds is covered by an
acceptable closing protection letter, there will be no need for a
fidelity bond.
A question was raised concerning the ``certification of title,''
and the business of insuring titles. It is not the intent of this
regulation that attorneys insure titles. In most cases, the agency will
obtain title insurance and in such cases the agency will look to the
title insurance company, not the closing agent, if there is a defect in
title. In those cases where an attorney's opinion is issued instead of
title insurance, if the title opinion is defective, the agency will
seek redress from the attorney who issued the opinion.
A question was raised with regard to the requirement that an
approved attorney furnishing a title opinion must have at least a
$250,000 errors and omissions insurance policy with a deductible not to
exceed $5,000. The regulation will allow each State Office to establish
the appropriate level of errors and omissions insurance coverage and
the level of deductible, according to what is customary in the area and
necessary for the protection of the agency. To the extent that real
estate loans are closed using a title insurance policy with a closing
protection letter covering the closing agent, concerns regarding
fidelity bonds, and errors and omissions insurance coverage, are
eliminated.
One respondent requested the reinstatement of Form FmHA 427-18,
``Fidelity Bond for Loan Closing Attorneys.'' It is felt that a surety
company can provide verification of fidelity bond coverage without the
agency developing a replacement form. In keeping with the Paperwork
Reduction Act, this form will not be reinstated.
Four public comments encouraged the agency to require the adoption
of title insurance policies. Two respondents said they would reduce
their legal fees, as an accommodation to the purchaser, when title
insurance policies are issued. We believe the proposed rule adequately
addressed these comments and no changes will be required.
List of Subjects for 7 CFR Part 1927
Loan programs--Agriculture, Loan program--Housing and community
development, Mortgages.
Therefore, chapter XVIII, title 7, Code of Federal Regulations is
amended by revising part 1927 to read as follows:
PART 1927--TITLE CLEARANCE AND LOAN CLOSING
Subpart A--[Reserved]
Subpart B--Real Estate Title Clearance and Loan Closing
Sec.
1927.51 General.
1927.52 Definitions.
1927.53 Costs of title clearance and closings of transactions.
1927.54 Requirements for closing agents.
1927.55 Title clearance services.
1927.56 Scheduling loan closing.
1927.57 Preparation of closing documents.
1927.58 Closing the transaction.
1927.59 Subsequent loans and transfers with assumptions.
1927.60--1927.99 [Reserved]-
1927.100 OMB control number.
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
Subpart A--[Reserved]
Subpart B--Real Estate Title Clearance and Loan Closing
1927.51 General.
(a) Types of loans covered by this subpart. This subpart sets forth
the authorities, policies, and procedures for real estate title
clearance and closing of loans, assumptions, voluntary conveyances and
credit sales in connection with the following types of Rural Housing
Service (RHS) and Farm Service Agency (FSA) loans: Farm Ownership (FO),
Nonfarm Enterprise (FO-NFE), Emergency (EM), Operating (OL), Rural
Housing (RH), Farm Labor Housing (LH), Rural Rental Housing (RRH),
Rural Cooperative Housing (RCH), Soil and Water (SW), Indian Land
acquisition loans involving nontrust property, and NonProgram (NP)
loans. This subpart does not apply to guaranteed loans.
(b) Programs not covered by this subpart. Title clearance and
closing for
[[Page 11712]]
all other types of agency loans and assumptions will be handled as
provided in the applicable program instructions or as provided in
special authorizations from the National Office.
(c) [Reserved]
(d) Copies of all agency forms referenced in this regulation and
the agency's internal administrative procedures for title clearance and
loan closing are available upon request from the agency's State Office.
Forms and title clearance and loan closing requirements which are
specific for any individual state must be obtained from the agency
State Office for that state.
1927.52 Definitions.
Agency. The Rural Housing Service (RHS) and Farm Service Agency
(FSA) or their successor agencies.
Approval official. The agency employee who has been delegated the
authority to approve, close, and service the particular kind of loan,
will approve an attorney or title company as closing agent for the
loans. If a loan must be approved at a higher level, the initiating
office may approve the closing agent.
Approved attorney. A duly licensed attorney, approved by the
agency, who provides title opinions directly to the agency and the
borrower or upon whose certification of title an approved title
insurance company issues a policy of title insurance. Approved
attorneys also close loans, assumptions, credit sales, and voluntary
conveyances and disburse funds in connection with agency loans.
Approved attorney is further defined in Sec. 1927.54(c).
Approved title insurance company. A title insurance company,
approved by the agency, (including its local representatives,
employees, agents, and attorneys) that issues a policy of title
insurance. Depending on the local practice, an approved title insurance
company may also close loans, assumptions, credit sales, and voluntary
conveyances and disburse funds in connection with agency loans. If the
approved title insurance company does not close the loan itself, the
loan closing functions may be performed by approved attorneys or
closing agents authorized by the approved title insurance company.
Borrower. The party indebted to the agency after the loan,
assumption, or credit sale is closed.
Certificate of title. A certified statement as to land ownership,
based upon examination of record title.
Closed loan. A loan is considered to be closed when the mortgage is
filed for record and the appropriate lien has been obtained.
Closing agent. The approved attorney or title company selected by
the applicant and approved by the agency to provide closing services
for the proposed loan. Unless a title insurance company also provides
loan closing services, the term ``title company'' does not include
``title insurance company.''
Closing protection letter. An agreement issued by an approved title
insurance company which is an American Land Title Association (ALTA)
form closing protection letter or which is otherwise acceptable to the
agency and which protects the agency against damage, loss, fraud,
theft, or injury as a result of negligence by the issuing agent,
approved attorney, or title company when title clearance is done by
means of a policy of title insurance. Depending on the area, closing
protection letters may also be known as ``Insured Closing Letters,''
``Indemnification Agreements,'' ``Insured Closing Service Agreements,''
or ``Statements of Settlement Service Responsibilities.''
Cosigner. A party who joins in the execution of a promissory note
or assumption agreement to guarantee repayment of the debt.
Credit sale. A sale in which the agency provides credit to the
purchasers of agency inventory property. Title clearance and closing of
a credit sale are the same as for an initial loan except the property
is conveyed by quitclaim deed.
Deed of trust. See trust deed.
Exceptions. Exceptions include, but are not limited to, recorded
covenants; conditions; restrictions; reservations; liens; encumbrances;
easements; taxes and assessments; rights-of-way; leases; mineral, oil,
gas, and geothermal rights (with or without the right of surface
entry); timber and water rights; judgments; pending court proceedings
in Federal and State courts (including bankruptcy); probate
proceedings; and agreements which limit or affect the title to the
property.
Fee simple. An estate in land of which the owner has unqualified
ownership and power of disposition.
FSA. The Farm Service Agency, an agency of the United States
Department of Agriculture ( and any successor agency). FSA is the
successor agency for farm program loans of the former Farmers Home
Administration.
General warranty deed. A deed containing express covenants by the
grantor or seller as to good title and right to possession.
Indemnification agreement. An agreement that protects the agency
against damage, loss, fraud, theft, or injury as a result of useful
conduct or negligence on behalf of the issuing agent, approved
attorney, or title company. This agreement may also be entitled closing
protection letter, insured closing letter, insured closing service
agreement, statement of settlement service responsibilities, or letters
which provide similar protection.
Issuing agent. An individual or entity who is authorized to issue
title insurance for an approved title insurance company.
Land purchase contract (contract for deed). An agreement between
the buyer and seller of land in which the buyer has the right to
possession and use of the land over a period of time (usually in excess
of 1 year) and makes periodic payments of a portion of the purchase
price to the seller. The seller retains legal title to the property
until the final payment is made, at which time the buyer will receive a
deed to the land vesting fee title in the buyer.
Mortgage. Real estate security instrument which pledges land as
security for the performance of an obligation such as repayment of a
loan. For the purpose of this regulation the term ``mortgage'' includes
deed of trust and deed to secure debt. A real estate mortgage or deed
of trust form for the state in which the land to be taken as security
is available in any agency office, and will be used to secure a
mortgage to the agency.
National Office. The National Headquarters Office of FSA or RHS
depending on the loan program involved.
OGC. The Office of the General Counsel, United States Department of
Agriculture.
Program regulations. The agency regulations for the particular loan
program involved (e.g., subpart A of part 1944 of this chapter for
single family housing (SFH) loans).
Quitclaim deed. A transfer of the seller's interest in the title,
without warranties or covenants. This type of deed is used by the
agency to convey title to purchasers of inventory property.
RHS. The Rural Housing Service, an agency of the United States
Department of Agriculture, or its successor agency. RHS is the
successor agency to the Rural Housing and Community Development Service
(RHCDS) which was, in turn, the successor agency to the Farmers Home
Administration.
Seller. Individual or other entity which convey ownership in real
property to an applicant for an agency loan or to the agency itself.
Special warranty deed. A deed containing a covenant whereby the
grantor agrees to protect the grantee against any claims arising during
the grantor's period of ownership.
[[Page 11713]]
State Office. For FSA this term refers to the FSA State Office. For
RHS this term refers to the Rural Economic and Community Development
State Director.
Title clearance. Examination of a title and its exceptions to
assure the agency that the loan is legally secured and has the required
priority.
Title company. A company that may abstract title, act as an issuing
agent of title insurance for a title insurance company, act as a loan
closing agent, and perform other duties associated with real estate
title clearance and loan closing.
Title defects. Any exception or legal claim of ownership (through
deed, lien, judgment, or other recorded document), on behalf of a third
party, which would prevent the seller from conveying a marketable title
to the entire property.
Trust deed. A three party security instrument conveying title to
land as security for the performance of an obligation, such as the
repayment of a loan. For the purpose of this regulation a trust deed is
covered by the term ``mortgage.'' A trust deed is the same as a deed of
trust.
Voluntary conveyance. A method of liquidation by which title to
agency security is transferred by a borrower to the agency by deed in
lieu of foreclosure.
Warranty deed. A deed in which the grantor warrants that he or she
has the right to convey the property, the title is free from
encumbrances, and the grantor shall take further action necessary to
perfect or defend the title.
Sec. 1927.53 Costs of title clearance and closing of transactions.
The borrower or the seller, or both, in compliance with the terms
of the sales contract or option will be responsible for payment of all
costs of title clearance and closing of the transaction and will
arrange for payment before the transaction is closed. These costs will
include any costs of abstracts of title, land surveys, attorney's fees,
owner's and lender's policies of title insurance, obtaining curative
material, notary fees, documentary stamps, recording costs, tax
monitoring service, and other expenses necessary to complete the
transaction.
Sec. 1927.54 Requirements for closing agents.
(a) Form of title certification. State Offices are directed to
require title insurance for all loan closings unless the agency
determines that the use of title insurance is not available or is
economically not feasible for the type of loan involved or the area of
the state where the loan will be closed. If title insurance is used,
State Offices are authorized to require a closing protection letter
issued by an approved title insurance company to cover the closing
agent, if available. A closing protection letter need not be furnished
when the closing is conducted by the title insurance company.
(b) Approval of closing agent. An attorney or title company may act
as a closing agent and close agency real estate loans, provide
necessary title clearance, and perform such other duties as required in
this subpart. A closing agent will be responsible for closing agency
loans and disbursing both agency loan funds and funds provided by the
borrower in connection with the agency loan so as to obtain title and
security position as required by the agency. The closing agent must be
covered by a fidelity bond which will protect the agency unless a
closing protection letter is provided to the agency. The borrower will
select the approved closing agent. If title clearance is by an
attorney's opinion, the agency will approve the attorney who will
perform the closing in accordance with paragraph (c) of this section.
The attorney will be approved after submitting a certification
acceptable to the agency. If title certification is by means of a
policy of title insurance, the title company which will issue the
policy must have been approved in accordance with paragraph (d) of this
section. A closing agent's delay in providing services without
justification in connection with agency loans may be a basis for not
approving the closing agent in future cases.
(c) Approval of attorneys. Any attorney selected by an applicant,
who will be providing title clearance where the certificate of title
will be an attorney's opinion, must submit an agency form certifying to
professional liability insurance coverage. If the attorney is also the
closing agent, fidelity coverage for the attorney and any employee
having access to the funds must be provided. The agency will determine
the appropriate level of such insurance. Required insurance will, as a
minimum, cover the amount of the loan to be closed. The agency will
approve the form stipulating the bond coverage. The agency will approve
any attorney who is duly licensed to practice law in the state where
the real estate security is located and who complies with the bonding
and insurance requirements in this section. If the certification of
title will be by means of title insurance, any attorney or closing
agent designated as an approved attorney or closing agent by the
approved title insurance company which will issue the policy of title
insurance will be acceptable, and when covered by a closing protection
letter, will not be required to obtain professional liability insurance
or a fidelity bond. Each approved title insurance company may provide a
master list of their approved attorneys that are covered by its closing
protection letters to the State Office and, in such cases the attorneys
are approved for closings for that title insurance company. Delay in
providing closing services without justification may be a basis for not
approving the attorney in future cases.
(d) Approval of title companies. A title company acting as a
closing agent, or as an issuing agent for a title insurance company,
must be covered by a title insurance company closing protection letter
or submit an agency form certifying to fidelity coverage to cover all
employees having access to the loan funds. The agency will determine
the appropriate level of such coverage and will approve the form
stipulating the bond coverage. Delay in providing closing services
without justification may be a basis for not approving the company in
future cases. Each approved title insurance company may provide a
master list of their approved title companies that are covered by its
closing protection letter to the State Office and, in such cases the
title companies on the list are approved for closings for that title
insurance company.
(e) Approval of title insurance companies. The agency will approve
any title insurance company which issues policies of title insurance in
the State where the security property is located if:
(1) The form of the owner's and lender's policies of title
insurance (including required endorsements) to be used in closing
agency loans are acceptable to the agency, and will contain only
standard types of exceptions and exclusions approved in advance by the
agency;
(2) The title insurance company is licensed to do business in the
state (if a license is required); and
(3) The title insurance company is regulated by a State Insurance
Commission, or similar regulator, or if not, the title insurance
company submits copies of audited financial statements, or other
approved financial statements satisfactory to the agency, which show
that the company has the financial ability to cover losses arising out
of its activities as a title insurance company and under any closing
protection letters issued by the title insurance company.
[[Page 11714]]
(4) Delay in providing services without justification may be a
basis for not approving the company.
(f) [Reserved]
(g) Conflict of interest. A closing agent who has, or whose spouse,
children, or business associates have, a financial interest in the real
estate which will secure the agency debt shall not be involved in the
title clearance or loan closing process. Financial interest includes
having either an equity, creditor, or debtor interest in any
corporation, trust, or partnership with a financial interest in the
real estate which will secure the agency debt.
(h) Debarment or suspension. No attorney, title company, title
insurance company, or closing agent, currently debarred or suspended
from participating in Federal programs, may participate in any aspect
of the agency loan closing and title clearance process.
(i) Special provisions. Closing agents are responsible for having
current knowledge of the requirements of State law in connection with
loan closing and title clearance and should advise the agency of any
changes in State law which necessitate changes in the agency's State
mortgage forms and State Supplements.
(j) [Reserved]
Sec. 1927.55 Title clearance services.
(a) Responsibilities of closing agents. Services to be provided to
the agency and the borrower by a closing agent in connection with the
transaction vary depending on whether a title insurance policy or title
opinion is being furnished. The closing agent is expected to perform
these services without unnecessary delay.
(b) [Reserved]
(c) Ordering title services. Application for title examination or
insurance will be made by the borrower to a title company or attorney.
The lender's policy will be for at least the amount of the loan. The
United States of America will be named as the insured lender.
(d) Use of title opinion. If a title opinion will be issued, a
title examination will include searches of all relevant land title and
other records, so as to express an opinion as to the title of the
property and the steps necessary to obtain the appropriate title and
security position to issue a title opinion as required by this subpart.
The closing agent or approved attorney will determine:
(1) The legal description and all owners of the real property;
(2) Whether there are any exceptions affecting the property and
advise the approval official and borrower of the nature and effect of
outstanding interests or exceptions, prior sales of part of the
property, judgments, or interests to assist in determining which
exceptions must be corrected in order for the borrowers to obtain good
and marketable title of record in accordance with prevailing title
examination standards, and for the agency to obtain a valid lien of the
required priority;
(3) Whether there are outstanding Federal, State, or local tax
claims (including taxes which under State law may become a lien
superior to a previously attaching mortgage lien) or homeowner's
association assessment liens;
(4) Whether outstanding judgments of record, bankruptcy,
insolvency, divorce, or probate proceedings involving any part of the
property, whether already owned by the borrower, or to be acquired by
assumption or with loan funds, or involving the borrower or the seller
exist;
(5) If a water right is to be included in the security for the
loan, and if so, the full legal description of the water right;
(6) In addition to paragraph(d)(2) of this section, if wetlands
easements or other conservation easements have been placed on the
property;
(7) What measures are required for preparing, obtaining, or
approving curative material, conveyances, and security instruments, and
(8) That sufficient copies of these interests and exceptions are
provided as requested by the approval official.
(e) Use of title insurance. When title insurance is to be obtained,
the approval official will be furnished with a title insurance binder
disclosing any defects in, exceptions to, and encumbrances against, the
title, the conditions to be met to make the title insurable and in the
condition required by the agency, and the curative or other actions to
be taken before closing of the transaction. The binder must include a
commitment to issue a lender policy in an amount at least equal the
amount of the loan, except in instances where there may be an
outstanding owner's policy in favor of the borrower. Not withstanding
the provisions of this section, the instance of an assumption without a
subsequent loan, the existing policy may be continued if the coverage
meets or exceeds the assumption balance and the title company agrees in
writing to extend coverage in full force and effect.
(f) [Reserved]
Sec. 1927.56 Scheduling loan closing.
The agency, in coordination with the closing agent, will arrange a
loan closing and send loan closing instructions, on an agency form to
the closing agent when the agency determines that the exceptions shown
on the preliminary title opinion or title insurance binder will not
adversely affect the suitability, security value, or successful
operation of the property and all other agency conditions to closing
have been satisfied.
Sec. 1927.57 Preparation of closing documents.
(a) Preparation of deeds. The closing agent, unless prohibited by
law, will prepare, complete, or approve documents, including deeds,
necessary for title clearance and closing of the transaction and
provide the agency with the policy of title insurance or title opinion
providing the lien priority required by the agency and subject only to
exceptions approved by the agency. Agency forms will be used when
required by this part.
(1) [Reserved]
(2) [Reserved]
(b) Preparation of mortgages. The closing agent will insure that
all mortgages are properly prepared, completed, executed, and filed for
record. Where applicable, the mortgages should recite that it is a
purchase money mortgage. The following requirements will be observed in
preparing agency morgages:
(1)-(8) [Reserved]
(9) Alteration of mortgage form. An agency mortgage form may be
altered pursuant to a State Supplement having prior approval of the
National Office, or in a special case, to comply with the terms of loan
approval prescribed in accordance with program instructions. No other
alterations in the printed mortgage forms will be made without prior
approval of the National Office. Any changes made by deletion,
substitution, or addition (excluding filling in blanks) will be
initialed in the margin by all persons signing the mortgage.
(10) [Reserved]
(11) Mortgages on leasehold estates. When the agency security
interest is a leasehold estate, unless State law or State Supplement
otherwise provides, the real estate mortgage or deed of trust form,
available in any agency office, will be modified as follows:
(i) In the space provided on the mortgage for the description of
the real property security, the leasehold estate and the land covered
by the lease must be described. The following language must be used
unless modified by a State Supplement:
All of borrower's right, title, and interest in and to a
leasehold estate for an original term of ____ years, commencing on
______, 19 ____, created and established by and between ______ as
lessor and owner and ____ as
[[Page 11715]]
lessee, including any extensions and renewals thereof, a copy of
which lease was recorded or filed in book ____, page ____, as
instrument number ____, in the Office of the (e.g., County Clerk),
for the aforesaid county and State and covering the following real
property: ______.
(ii) Immediately preceding the covenant starting with the words
``should default,'' the following covenant will be added:
( ) Borrower covenants and agrees to pay when due all rents and
any and all other charges required by said lease, to comply with all
other requirements of said lease, and not to surrender or
relinquish, without the Government's prior written consent, any of
borrower's right, title, or interest in or to said leasehold estate
or under said lease while this mortgage remains of record.
(12) Mortgages on land purchase contract. When the agency security
interest is on a borrower's interest in a land purchase contract, OGC
will provide language used to modify agency forms.
(13) [Reserved]
(c) [Reserved]
(d) Preparation of protective instruments. The closing agent will
properly prepare, complete, and approve releases and curative documents
necessary for title clearance and closing, in recordable form and
record them if required.
(1) Prior lienholder's agreement. If any liens (other than agency
liens or tax liens to local governmental authorities) or security
agreements (hereafter called ``liens''), with priority over the agency
mortgage will remain against the real property securing the loan, the
lienholders must execute, in recordable form, agreements containing all
of the following provisions unless prior approval for different
provisions has been obtained from the National Office:
(i) The prior lienholder shall agree not to declare the lien in
default or accelerate the indebtedness secured by the prior lien for a
specific period of time after notice to the agency. The agreement must:
(A) Provide that the specified period of time will not commence
until the lienholder gives written notice of the borrower's default and
the prior lienholder's intention to accelerate the indebtedness to the
agency office servicing the loan,
(B) Include the address of the agency servicing office,
(C) Give the agency the option to cure any monetary default by
paying the amount of the borrower's delinquent payments to the prior
lienholder, or pay the obligation in full and have the lien assigned to
the agency, and
(D) Provide that the prior lienholder will not declare the lien in
default for any nonmonetary reason if the agency commences liquidation
proceedings against the property and thereafter acquires the property.
(ii) When the prior lien secures future advances, including the
lienholder's costs for borrower liquidation or bankruptcy, which under
State law have priority over the mortgage being taken (or an agency
mortgage already held), the prior lienholder shall agree not to make
advances for purposes other than taxes, insurance or payments on other
prior liens without written consent of the agency.
(iii) The prior lienholder shall consent to the agency making (or
transferring) the loan and taking (or retaining) the related mortgage
if the prior lien instrument prohibits a loan or mortgage (or transfer)
without the prior lienholder's consent.
(iv) The prior lienholder shall consent to the agency transferring
the property subject to the prior lien after the agency has obtained
title to the property either by foreclosure or voluntary conveyance if
the prior lien instrument prohibits such transfer without the prior
lienholder's consent.
(2) [Reserved]
(3) [Reserved]
(4) Agreement by holder of seller's interest under land purchase
contract. If the buyer's interest in the security property is that of a
buyer under a land purchase contract, it will be necessary for the
seller to execute, in recordable form, an agreement containing all of
the following provisions:
(i) The seller shall agree not to sell or voluntarily transfer the
seller's interest under the land purchase contract without the prior
written consent of the State Office.
(ii) The seller shall agree not to encumber or cause any liens to
be levied against the property.
(iii) The seller shall agree not to commence or take any action to
accelerate, forfeit, or foreclose the buyer's interest in the security
property until a specified period of time after notifying the State
Office of intent to do so. This period of time will be 90 days unless a
State Supplement provides otherwise. The agreement shall give the
agency the option to cure any monetary default by paying the amount of
the buyer's delinquent payments to the seller, or paying the seller in
full and having the contract assigned to the agency.
(iv) The seller shall consent to the agency making the loan and
taking a security interest in the borrower's interest under the land
purchase contract as security for the agency loan.
(v) The seller shall agree not to take any actions to foreclose or
forfeit the interest of the buyer under the land purchase contract
because the agency has acquired the buyer's interest under the land
purchase contract by foreclosure or voluntary conveyance, or because
the agency has subsequently sold or assigned the buyer's interest to a
third party who will assume the buyer's obligations under the land
purchase contract.
(vi) When the agency acquires a buyer's interest under a land
purchase contract by foreclosure or deed in lieu of foreclosure, the
agency will not be deemed to have assumed any of the buyer's
obligations under the contract, provided that the failure of the agency
to perform any such obligations while it holds the buyer's interest is
a ground to commence an action to terminate the land purchase contract.
(5) [Reserved]
(6) [Reserved]
(e) [Reserved]
1927.58 Closing the transaction.
The closing agent will cooperate with the approval official,
borrower, seller, and other necessary parties to arrange the time and
place of closing. The transaction may be closed when the agency
determines that the agency requirements for the loan have been
satisfied and the closing agent or approved attorney can issue or cause
to be issued a policy of title insurance or final title opinion as of
the date of closing showing title vested as required by the agency, the
lien of the agency's mortgage in the priority required by the agency,
and title to the mortgaged property subject only to those exceptions
approved in writing by the agency. The loan will be considered closed
when the mortgage is filed for record and the required lien is
obtained.
(a) Disbursement of loan funds. When the closing agent indicates
that the conditions necessary to close the loan have been met, loan
funds will be forwarded to the closing agent. Loan funds will not be
disbursed prior to filing of the mortgage for record; however, when
necessary, loan funds may be placed in escrow before the mortgage is
filed for record and disbursed after it is filed. No development funds
will be kept in escrow by the closing agent after loan closing, unless
approved by the agency. Loan funds for the payment of a lien may be
disbursed only upon the recording of a discharge, satisfaction, or
release of prior lien interests (or assignment where necessary to
protect the interests of the agency).
[[Page 11716]]
(b) Title examination and liens or claims against borrowers. If
there are exceptions or recorded items which have arisen since the
preliminary title opinion, the transaction will not be closed until
these entries have been cleared of record or approved by the agency.
The closing agent will advise the approval official of the nature of
such intervening instruments and the effect they may have on obtaining
a valid mortgage of the priority required or the title insurance policy
to be issued.
(c) Taxes and assessments. The closing agent will determine if all
taxes and assessments against the property which are due and payable
are paid at or before the time of loan closing. If the seller and the
borrower have agreed to prorate any taxes or assessments which are not
yet due and payable for the year in which the closing of the
transaction takes place, the seller's proportionate share of the taxes
and assessments will be deducted from the proceeds to be paid to seller
at closing and will be added to the amount required to be paid by
borrower at closing. Appropriate prorations as agreed upon between the
borrower and seller may also be made for taxes paid by the seller which
are applicable to a period after the closing date, and for common area
maintenance fees, prepaid rentals, insurance (unless the borrower is to
obtain a new policy of insurance), and growing crops.
(d) Affidavit regarding work of improvement.
(1) Execution by borrower. If required by State Supplement, the
closing agent will require that an affidavit regarding work of
improvement, provided by the agency, be completed and executed when a
loan is being made to a borrower who already owns the real estate to be
mortgaged. This affidavit will be executed by the borrower at closing.
(2) Execution by seller. If required by State Supplement, the
closing agent will require that an affidavit regarding work of
improvement, provided by the agency, be completed and executed
(including acknowledgment) by the seller when the agency is making a
loan to a borrower to enable the borrower to acquire the property
(including transfers). This affidavit will be executed by the seller at
closing.
(3) Legal insufficiency of affidavit form. If the agency affidavit
regarding work of improvement is not legally sufficient in a particular
State, a State form approved by OGC will be used. A similar form that
may be required by a title insurance company may be substituted for the
agency form.
(4) Recording. The affidavit will not be recorded unless the
closing agent deems it necessary and State law permits.
(5) Delay in closing. The loan will not be closed if, at the loan
closing, the seller (in a sale transaction) or the borrower (in a
nonpurchase money loan situation) indicates that construction, repair,
or remodeling has been commenced or completed on the property, or
related materials or services have been delivered to or performed on
the property within the time limit specified in the affidavit, unless a
State Supplement provides otherwise. The closing agent will notify the
approval official, who will determine if the work of improvement could
result in a lien prior to the agency lien. The State Office will, with
the advice and concurrence of OGC, provide in a State Supplement the
period of time to be used in completing the affidavit.
(e) [Reserved]
(f) [Reserved]
(g) Return of loan documents to approval official after loan
closing. Within 1 day after loan closing, the closing agent will return
completed and executed copies of the loan closing instructions, the
executed original promissory note, and all other documents required for
loan closing (except the mortgage), to the approval official. If the
recorded mortgage is customarily returned to the borrower or closing
agent after recording, then it must be forwarded to the approval
official immediately.
(h) Final title opinion or title insurance policy. As soon as
possible after the transaction has been closed.
(1) Final title opinion. The attorney will issue a final title
opinion to the agency and the borrower on a form provided by the
agency. Issuance of the final title opinion should not be held up
pending the return of recorded instruments. If it is not possible for
the final title opinion to show the book and page of recording of the
agency security instrument, the words ``and is recorded'' in the final
title opinion form provided by the agency office, may be deleted and
the blank space completed to show the filing office and the filing
instrument number, if available. Attached to the final title opinion
will be required documents then available, including any which the
approval official has furnished to the attorney which were not
previously returned. The attorney will ensure that all recorded
instruments are forwarded or delivered to the proper parties after
recording. The certification of title will be forwarded for a voluntary
conveyance.
(2) Title insurance policy. The closing agent will send or deliver
the title insurance policy, with the United States listed as mortgage
holder, to the approval official. The policy will be subject only to
standard exceptions and those outstanding encumbrances, and exceptions,
approved by the approval official. If an owner's policy of title
insurance is requested, the closing agent will send or deliver it to
the borrower. The closing agent will ensure that all recorded
instruments are delivered or sent to the proper parties after
recording.
(3) [Reserved]
(i) Other services of the closing agent.
(1) The closing agent will assist the approval official in
preparing, completing, obtaining execution and acknowledgment, and
recording the required documents when necessary. The closing agent will
keep the approval official advised as to the progress of title
clearance and preparation of material for closing the transaction.
(2) The closing agent will provide services for deeds in lieu of
foreclosure as set forth in Sec. 1927.62 of this subpart, and
Sec. 1955.10 of subpart A of part 1955 of this chapter.
Sec. 1927.59 Subsequent loans and transfers with assumptions.
Title services and closing for subsequent loans to an existing
borrower will be done in accordance with previous instructions in this
subpart, except that:
(a) Loans closed using title insurance or title opinions.
(1) Title insurance or title opinions will be obtained unless:
(i) The cost of title services is excessive in relationship to the
size of the loan,
(ii) The agency currently has a first mortgage security interest,
(iii) The applicant has sufficient income to service the additional
loan,
(iv) The borrower is current on the existing agency loan, and
(v) The best mortgage obtainable adequately protects the agency
security interests.
(2) Title insurance or a final title opinion will not be obtained
for a subsequent Section 504 loan where the previous Section 504 loan
was unsecured or secured for less than $7,500 and the outstanding debt
amount plus the new loan is less than $7,500.
(3) Loans closed using a new lender title insurance policy:
(i) Will cover the entire real property which is to secure the
loan, including the real property already owned and any additional real
property being acquired by the borrower with the loan proceeds.
(ii) Will cover the entire amount of any subsequent loan plus the
amount of any existing loan being refinanced (if
[[Page 11717]]
the existing loan is not being refinanced, the new lender policy will
insure only the amount of the subsequent loan).
(b) Title services required in connection with assumptions. These
regulations are contained in part 1965, subparts A, B, and C, of this
chapter as appropriate for the loan type.
Secs. 1927.60-1927.99 [Reserved]
Sec. 1927.100 OMB control number.
The reporting requirements contained in this regulation have been
approved by the Office of Management and Budget and have been assigned
OMB control number 0575-0147. Public reporting burden for this
collection of information is estimated to vary from 5 minutes to 1.5
hours per response, with an average of .38 hours per response,
including time for reviewing instructions, searching existing data
sources, gathering and maintaining the data needed, and completing and
reviewing the collection of information. Send comments regarding this
burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to Department of
Agriculture, Clearance Officer, OIRM, Ag Box 7630, Washington, D.C.
20250; and to the Office of Management and Budget, Paperwork Reduction
Project (OMB# 0575-0147), Washington, D.C. 20503. You are not required
to respond to the collection of information unless it displays a
currently valid OMB control number.
Dated: February 25, 1996.
Jill Long Thompson,
Under Secretary, Rural Economic and Community Development.
Dated: February 28, 1996.
Eugene Moos,
Under Secretary, Farm and Foreign Agriculture Services.
[FR Doc. 96-6698 Filed 3-21-96; 8:45 am]
BILLING CODE 3410-07-U
Complete official Federal Register PDF
FR Doc. 96-6658 Computation of Time
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11748-11749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6658]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 1
[FCC 96-88]
Computation of Time
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Commission makes three minor amendments to the
Commission's computation of time rule. First, it adds an illustrative
example to the rules to make more explicit that the three extra days
added for service by mail where a response period is 10 days or less
are calculated from the end of the filing period regardless of whether
the last day of the filing period is a business day or a holiday.
Second, it provides that where any party is served by mail, and the
response period is 10 days or less, the filing period for all parties
(not just the ones served by mail) shall be extended the additional
three days. Third, it provides that service by facsimile machine shall
be treated as hand delivery, not service by mail. The intended effect
of this action is to make the rule clearer and more fair.
EFFECTIVE DATE: March 22, 1996.
FOR FURTHER INFORMATION CONTACT: David S. Senzel, Office of General
Counsel (202) 418-1760.
SUPPLEMENTARY INFORMATION: Adopted: March 5, 1996; Released March 15,
1996.
1. In this order we make three minor amendments to the Commission's
computation of time rule, 47 CFR 1.4. First, we add an illustrative
example to the rules to make more explicit that the three extra days
added for service by mail where a response period is 10 days or less
are calculated from the end of the filing period regardless of whether
the last day of the filing period is a business day or a holiday.
Second, we provide that where any party is served by mail, and the
response period is 10 days or less, the filing period for all parties
(not just the ones served by mail) shall be extended the additional
three days. Third, we provide that service by facsimile machine shall
be treated as hand delivery, not service by mail.
2. Section 1.4(h) addresses the filing period for responding to
pleadings that have been served on a party by mail. The rule states:
If a document is required to be served upon other parties by
statute or Commission regulation and the document is in fact served
by mail * * * and the filing period \1\ for a response is 10 days or
less, an additional 3 days (excluding holidays) will be allowed for
filing a response. * * *
\1\ Section 1.4(e)(3) provides: The term filing period means the
number of days allowed or prescribed by statute, rule, order, notice
or other Commission action for filing any document with the
Commission. It does not include any additional days allowed for
filing any document pursuant to paragraphs (g), (h) and (j) of this
section.
3. Section 1.4(j) governs the filing date for pleadings that would
otherwise be due on a holiday (when the Commission is closed for
---------------------------------------------------------------------------
business). It provides that:
If, after making all the computations provided for in this
section, the filing date \2\ falls on a holiday, the document shall
be filed on the next business day. * * *
\2\ Section 1.4(e)(4) provides: The term filing date means the
date upon which a document must be filed after all computations of
time authorized by this section have been made.
4. Because Section 1.4(h) indicates that the three extra days for a
response to a pleading served by mail where the response period is 10
days or less is based on the ``filing period,'' not the ``filing
date,'' and because Section 1.4(j) says that the ``filing date'' is not
calculated until after all other computations are made, the additional
three days for service by mail are added without regard to whether the
last day of the filing period is a holiday and would therefore not be
the filing date if service were by hand. Thus, the first day to be
counted for the extra three days is the first business day after the
end of the filing period whether the filing period ends on a business
day or a holiday. How the rule applies is demonstrated in Summit
Communications, Inc., 9 FCC Rcd 4833, n.1 (Cable Serv. Bur. 1994). In
that case, a party filed a petition for reconsideration of a
franchising authority's certification (47 CFR 76.911) on Thursday,
October 28, 1993. The filing period for oppositions was 10 days (47 CFR
1.106(g)), so the filing period ended on Sunday, November 7. Service
was made by mail, an additional three days were added following the end
of the filing period on Sunday, November 7, and the opposition was due
Wednesday, November 10. The fact that the ``filing date'' would have
been moved forward from Sunday to Monday if there had not been mail
service was irrelevant, since under the rules the filing date is not
determined until after all other computations. Because a more recent
staff decision interpreted the rule differently and incorrectly added
the extra three days from the date the filing date would have been if
service was by hand rather than from the end of the filing period, see
Falcon Cablevision, 10 FCC Rcd 10409 n.3 (Cable Serv. Bur. 1995), we
are amending the rule to be more explicit by adding an illustrative
example setting out the correct interpretation of the rule.
5. We also amend Section 1.4(h) to provide that when one party is
served by mail and the response period is 10 days or less, all parties
should get the additional three days. This approach is most equitable
because it avoids the possibility that some parties in multi-party
litigation may be required to file their pleadings before others,
giving others an opportunity to ``preview'' their arguments before
filing their own pleading. We will therefore amend Section 1.4(h) to
specify that if one party is served by mail and the response period is
10 days or less, all parties will be given the additional three days.
[[Page 11749]]
6. Finally, we amend Section 1.4(h) to treat service by facsimile
machine the same as hand service. See 47 CFR 1.773(a)(4) (treating
delivery by facsimile machine like hand service in the tariff context).
See also SEC v. Stratton Oakmont, Inc., 1995 WL 46559 (D.D.C. 1995).
Because service by facsimile, like hand delivery, is essentially
instantaneous, we believe that this treatment is warranted generally.
7. Because the rule amendments involve rules of agency
organization, procedure, or practice, the notice and comment and
effective date provisions of the Administrative Procedure Act are
inapplicable. 5 U.S.C. 553(b)(A), (d).
8. Accordingly, it is ordered, That pursuant to Sections 4(i),
4(j), and 303(r)of the Communications Act, 47 U.S.C. 154(i), 154(j),
and 303(r), 47 CFR part 1 is amended as set forth below, effective
March 22, 1996.
9. The text of this order is available for inspection and copying
during normal business hours in the FCC Reference Center (Room 239),
1919 M Street NW., Washington D.C. The text may also be purchased from
the Commission's copy contractor, International Transcription Service,
Inc., Suite 140, 2100 M Street NW., Washington, D.C. 20037.
List of Subjects in 47 CFR Part 1
Administrative practice and procedure, Radio, Telecommunications,
Television.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Changes
Part 1 of Title 47 of the Code of Federal Regulations is amended as
follows:
PART 1--PRACTICE AND PROCEDURE
1. The authority citation for Part 1 continues to read as follows:
Authority: Secs. 4, 303, 48 Stat. 1066, 1082, as amended; 47
U.S.C. 154, 303.
2. Section 1.4 is amended in paragraph (h), by revising the text
preceding Example 11, in paragraphs (i) and (j) by redesignating
Examples 12 and 13 as Examples 13 and 14, respectively, and by adding
new Example 12 in paragraph (h) to read as follows:
Sec. 1.4 Computation of time.
* * * * *
(h) If a document is required to be served upon other parties by
statute or Commission regulation and the document is in fact served by
mail (see Sec. 1.47(f)), and the filing period for a response is 10
days or less, an additional 3 days (excluding holidays) will be allowed
to all parties in the proceeding for filing a response. This paragraph
(Sec. 1.4(h)) shall not apply to documents filed pursuant to Sec. 1.89,
Sec. 1.120(d), Sec. 1.315(b) or Sec. 1.316. For purposes of this
paragraph service by facsimile shall be deemed equivalent to hand
delivery.
* * * * *
Example 12: Assume that oppositions to a petition in a particular
proceeding are due 10 days after the petition is filed and must be
served on the parties to the proceeding. If the petition is filed on
October 28, 1993, the last day of the filing period for oppositions is
Sunday, November 7. If service is made by mail, the opposition is due
three days after November 7, or Wednesday, November 10.
* * * * *
[FR Doc. 96-6658 Filed 3-21-96; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 96-6601 Approval and Promulgation of Air Quality Implementation Plans; Rhode Island: Emissions Caps
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11731-11735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6601]
=======================================================================
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[MA-18-01-7262a; A-1-FRL-5427-8]
Approval and Promulgation of Air Quality Implementation Plans;
Rhode Island: Emissions Caps
AGENCY: Environmental Protection Agency (EPA).
ACTION: Direct final rule.
-----------------------------------------------------------------------
SUMMARY: The EPA is approving a State Implementation Plan (SIP)
revision submitted by the State of Rhode Island. This revision approves
Air Pollution Control Act (APC) 29.3 entitled ``Emissions Caps,'' into
the Rhode Island SIP. The intended effect of this action is to approve
a SIP revision by the State of Rhode Island to incorporate regulations
for the issuance of federally enforceable operating permits which
restrict sources' potential to emit criteria
[[Page 11732]]
pollutants such that sources can avoid reasonably available control
technology (RACT), title V operating permit requirements, or otherwise
applicable requirements. This action also extends federal
enforceability to limits on hazardous air pollutants (HAPs). This
action is being taken in accordance with sections 110 and 112(l) of the
Clean Air Act.
DATES: This action is effective May 21, 1996, unless notice is received
April 22, 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 Dave Fierra Director, Office of
Ecosystem Protection, U.S. Environmental Protection Agency, Region I,
JFK Federal Building, Boston, MA 02203-2211. Copies of the documents
relevant to this action 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, 11th floor, Boston, MA; Air and Radiation Docket and
Information Center, U.S. Environmental Protection Agency, 401 M Street,
S.W., (LE-131), Washington, D.C. 20460; and Division of Air and
Hazardous Materials Division of Rhode Island Department of
Environmental Management, 291 Promenade Street, Providence, Rhode
Island 02908.
FOR FURTHER INFORMATION CONTACT: Ida Gagnon (617) 565-3500.
SUPPLEMENTARY INFORMATION: On May 22, 1995, the State of Rhode Island
submitted a formal revision to its State Implementation Plan (SIP) to
incorporate regulations for the issuance of federally enforceable
operating permits. The revision consists of the addition of APC 23.9
entitled ``Emissions Caps.'' The State of Rhode Island adopted these
regulations in order to have the authority to issue federally
enforceable operating permits under its SIP. In order to extend the
federal enforceability of state operating permits to hazardous air
pollutants (HAPs), EPA is also approving this regulation pursuant to
section 112(l) of the Act.
Summary of SIP Revision
The State of Rhode Island's principal purpose for adopting the
operating permit regulations of APC 29.3 is to have a federally
enforceable means of expeditiously restricting potential emissions such
that sources can avoid RACT, title V operating permit requirements, or
otherwise applicable requirements, as well as reduce annual compliance
fees. The operating permit provisions in title V of the Clean Air Act
Amendments of 1990 have created additional interest in mechanisms for
limiting sources' potential to emit, thereby allowing the sources to
avoid being defined as ``major'' with respect to title V operating
permit programs. A key mechanism for such limitations is the use of
federally enforceable state operating permits (FESOPs). The EPA issued
general guidance on FESOPs in the Federal Register on June 28, 1989 (54
FR 27274). This rule making evaluates whether Rhode Island has
satisfied the requirements for this type of federally enforceable
limitation on potential to emit. Each of the five criteria, as
specified in the Federal Register of June 28, 1989, for approval of a
state's program for the issuance of FESOPs under its SIP and how the
state's submittal satisfies those criteria are presented below:
Criterion 1. The state's operating permit program (i.e. the
regulations or other administrative framework describing how such
permits are issued) must be submitted to and approved by EPA as a SIP
revision: On May 22, 1995, the State of Rhode Island submitted an
administratively and technically complete SIP revision request to EPA
consisting of Air Pollution Control Regulation No. 29.3 ``Emissions
Caps.'' That SIP revision is the subject of this rule making action.
Criterion 2. The SIP revision must impose a legal obligation that
operating permit holders adhere to the terms and limitations of such
permits (or subsequent revisions of the permit made in accordance with
the approved operating permit program) and provide that permits which
do not conform to the operating permit program requirements and the
requirements of EPA's underlying regulations may be deemed not
``federally enforceable'' by EPA: APC 29.3.5(b) requires sources to
obtain permits to operate and authorizes Rhode Island to establish
terms and conditions in these permits that are federally enforceable to
``ensure that emissions are limited by quantifiable and enforceable
means.'' Additionally, 29.3.9 requires that no source may operate after
the time it is required to submit a timely and complete application for
an operating permit under APC 29, except in compliance with an
emissions cap or an operating permit.
Criterion 3. The state operating permit program must require that
all emission limitations, controls, and other requirements imposed by
such permits will be at least as stringent as any applicable
limitations and requirements contained in the SIP, or enforceable under
the SIP, and that the program may not issue permits that waive, or make
less stringent, any limitations or requirements contained in or issued
pursuant to the SIP, or that are otherwise ``federally enforceable''
(e.g. standards established under Section 111 and 112 of the Clean Air
Act): APC 29.3.5 contains regulatory provisions which state the
emissions cap issued by the Division will be at least as stringent as
any applicable requirement and the emissions cap will not waive or make
less stringent any applicable requirement. Applicable requirement is
defined in APC 29 to include all SIP requirements.
Criterion 4. The limitations, controls, and requirements of the
state's operating permits must be permanent, quantifiable, and
otherwise enforceable as a practical matter: APC 29.3.5 and 29.3.7
contain regulatory provisions which satisfy this criterion. Emission
cap permits must be renewed every five years, but remain enforceable
pending DEM's action and timely renewal application. In addition,
subparagraphs 29.3.5(b) and (c) require that permit restrictions
contain combinations of production and/or operational limitations to
ensure emissions are limited by quantifiable and enforceable means,
including keeping sufficient records to show limitations are followed.
Criterion 5. The state operating permits must be issued subject to
public participation. This means that the state agrees, as part of its
program, to provide EPA and the public with timely notice of the
proposal and issuance of such permits, and to provide EPA, on a timely
basis, with a copy of each proposed (or draft) and final permit
intended to be ``federally enforceable.'' This process must also
provide for an opportunity for public comment on the permit
applications prior to issuance of the final permits: APC 29.3.6
contains provisions that the Division will either deny the emissions
cap or give public notice of its intention to issue an emissions cap.
The general public will be notified of DEM's intention to issue an
emissions cap by publishing a notice in a newspaper. The applicant,
EPA, city or town executives where a source is located, and persons who
request to be on a mailing list will be sent a copy of the notice.
The State of Rhode Island has also requested approval of its
Emissions Caps program under section 112(l) of the Act for the purpose
of creating federally enforceable limitations on the potential to emit
of HAPs. Approval under section 112(l) is necessary
[[Page 11733]]
because the SIP approval discussed above only extends to criteria
pollutants for which EPA has established national ambient air quality
standards under section 109 of the Act. Federally enforceable limits on
criteria pollutants or their precursors (i.e., VOCs or PM-10) may have
the incidental effect of limiting certain HAPs listed pursuant to
section 112(b).1 As a legal matter, no additional program approval
by the EPA is required beyond SIP approval under section 110 in order
for these criteria pollutant limits to be recognized as federally
enforceable. However, section 112 of the Act provides the underlying
authority for controlling all HAP emissions, regardless of their
relationship to criteria pollutant controls.
\1\ The EPA issued guidance on January 25, 1995 addressing the
technical aspects of how these criteria pollutant limits may be
recognized for purposes of limiting a source's potential to emit of
HAP to below section 112 major source levels.
---------------------------------------------------------------------------
The EPA has determined that the five approval criteria for
approving FESOP programs into the SIP, as specified in the June 28,
1989 Federal Register notice, are also appropriate for evaluating and
approving the programs under section 112(l). The June 28, 1989 notice
does not address HAPs because it was written prior to the 1990
amendments to section 112. The June 28, 1989 criteria are basic
principles which are not unique to criteria pollutants. Therefore, the
five criteria discussed above are applicable to FESOP approvals under
section 112(l) as well as under section 110.
In addition to meeting the criteria in the June 28, 1989 notice, a
FESOP program for HAPs must meet the statutory criteria for approval
under section 112(l)(5). Section 112(l) allows the EPA to approve a
program only if the program: (1) Contains adequate authority to assure
compliance with any section 112 standard or requirement; (2) provides
for adequate resources; (3) provides for an expeditious schedule for
assuring compliance with section 112 requirements; and (4) is otherwise
likely to satisfy the objectives of the Act.
The EPA plans to codify the approval criteria for programs limiting
potential to emit HAPs, in Subpart E of Part 63, the regulations
promulgated to implement section 112(l) of the Act. (See 58 FR 62262,
November 26, 1993.) The EPA currently anticipates that these regulatory
criteria, as they apply to FESOP programs, will mirror those set forth
in the June 28, 1989 notice. FESOP programs approved pursuant to
section 112(l) prior to the planned Subpart E revisions will be
approved as meeting the criteria in EPA's June, 1989 notice. Therefore,
further approval actions for those programs will not be necessary.
The EPA believes it has authority under section 112(l) to approve
programs to limit potential to emit HAPs directly under section 112(l)
prior to this revision to Subpart E. EPA is therefore approving Rhode
Island's Emissions Caps program now so that Rhode Island may begin to
issue federally enforceable synthetic minor permits as soon as
possible.
Regarding the statutory criteria of section 112(l)(5) referred to
above, the EPA believes Rhode Island's Emissions Caps program contains
adequate authority to assure compliance with section 112 requirements
since the third criterion of the June 28, 1989 notice is met, that is,
the program in APC 29.3.5 states that all requirements in the Emissions
Caps program must be at least as stringent as all other applicable
federally enforceable requirements. In connection with EPA's review of
Rhode Island's title V operating permit program, EPA has also conducted
an extensive analysis of Rhode Island's underlying authority to enforce
HAP limits. Please note that a source which receives an Emissions Caps
permit may still need a title V operating permit under APC 29 if EPA
promulgates a MACT standard which requires non-major sources to obtain
title V permits.
Regarding the requirement for adequate resources, the EPA believes
Rhode Island has demonstrated that it can provide for adequate
resources to support the Emissions Caps program through an annual
compliance/assurance fee and a permit fee. EPA believes this mechanism
will be sufficient to provide for adequate resources to implement this
program. For more information regarding the fees program, refer to the
Technical Support Document.
The EPA also believes that Rhode Island's Emissions Cap program
provides for an expeditious schedule which assures compliance with
section 112 requirements. This program will be used to allow a source
to establish a voluntary limit on potential to emit to avoid being
subject to a CAA requirement applicable on a particular date. Nothing
in Rhode Island's program would allow a source to avoid or delay
compliance with a CAA requirement if it fails to obtain an appropriate
federally enforceable limit by the relevant deadline. Finally, the EPA
believes it is consistent with the intent of section 112 and the Act
for States to provide a mechanism through which sources may avoid
classification as a major source by obtaining a federally enforceable
limit on potential to emit. EPA has long recognized federally-
enforceable emissions or operational limits as a means to stay below
major source thresholds under the Act. This approval merely applies the
same principles to another set of pollutants and regulatory
requirements under the Act.
The EPA's review of this SIP revision indicates the criteria for
approval as provided in the June 28, 1989 Federal Register notice (54
FR 27282) and in section 112(l)(5) of the Act have been satisfied.
During the development of this rule, EPA and Rhode Island have been
asked whether permits the State has issued pursuant to these
regulations prior to today's action approving this program into the SIP
are nevertheless federally enforceable. In the preamble to the
regulations that EPA promulgated on June 28, 1989 (54 FR 27274), which
set forth the five criteria outlined above for a federally enforceable
operating permit program, EPA indicated that it would ``consult with
States on methods by which existing operating permits could be made
federally enforceable under a subsequently approved State operating
permits program.'' 54 FR at 27284. The preamble went on to discuss
options for securing EPA approval of previously issued permits. As EPA
concluded in its approval of the Illinois FESOP program (57 FR at 59931
(Dec. 17, 1992)), these options were not intended to be a complete list
of alternatives. To avoid burdensome requirements to reprocess each
previously issued permit, EPA will use the same approach announced in
that Illinois approval for determining whether such permits are
federally enforceable and for ratifying their status as enforceable
under the approved SIP.
EPA today finds the existing Rhode Island regulations to be
consistent with federal requirements. If the State followed its own
procedures, each permit issued under this regulation was subject to
public notice and comment, with notice to EPA. Moreover, the regulation
requires each permit to be enforceable as a practical matter.
Therefore, EPA will consider all previously issued operating permits
which were processed in a manner consistent with the State regulations
federally enforceable with the promulgation of this rule, provided that
any permits the State wishes to make federally enforceable are
submitted to EPA and are accompanied by documentation that the
procedures approved today were followed in issuing the permit.
The EPA is publishing this action without prior proposal because
the Agency views this as a noncontroversial amendment and anticipates
no adverse
[[Page 11734]]
comments. However, in a separate document in this Federal Register
publication, EPA is proposing to approve the SIP revision should
adverse or critical comments be filed. This action will be effective
May 21, 1996, unless adverse or critical comments are received by April
22, 1996.
If EPA receives such comments, this action will be withdrawn before
the effective date by simultaneously 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 this action
serving as a 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 on May 21, 1996.
Final Action
EPA is approving APC 29.3 ``Emissions Caps'' effective in the State
of Rhode Island on May 18, 1995 under sections 110 and 112(l) of the
CAAA.
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, section 112(l), 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. 7410 (a)(2).
This action has been classified as a Table 3 action by the Regional
Administrator under the procedures published in the Federal Register on
January 19, 1989 (54 FR 2214-2225), as revised by an October 4, 1993,
memorandum from Michael H. Shapiro, Acting Assistant Administrator for
Air and Radiation. A future document will inform the general public of
these tables.
The OMB has exempted this action from review under Executive Order
12866.
Nothing in this action should be construed as permitting or
allowing or establishing a precedent for any future request for
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 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 May 21, 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).)
Unfunded Mandates
Under Section 202 of the Unfunded Mandates Reform Act of 1995
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a Federal mandate that may result in estimated
costs to State, local, or tribal governments in the aggregate; or to
the private sector, of $100 million or more. Under Section 205, EPA
must select the most cost-effective and least burdensome alternative
that achieves the objectives of the rule and is consistent with
statutory requirements. Section 203 requires EPA to establish a plan
for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
EPA has determined that the action promulgated today does not
include a Federal mandate that may result in estimated costs of $100
million or more to either State, local, or tribal governments in the
aggregate, or to the private sector. This Federal action approves pre-
existing requirements under State or local law, and imposes no new
Federal requirements. Accordingly, no additional costs to State, local,
or tribal governments, or to the private sector, result from this
action.
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Carbon monoxide,
Hydrocarbons, Incorporation by reference, Intergovernmental relations,
Nitrogen dioxide, Ozone, Particulate matter, Reporting and
recordkeeping requirements, Sulfur oxides.
Note: Incorporation by reference of the State Implementation
Plan for the State of Rhode Island was approved by the Director of
the Federal Register on July 1, 1982.
Dated: January 30, 1996.
John P. DeVillars,
Regional Administrator, Region I.
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 OO--Rhode Island
2. Section 52.2070 is amended by adding paragraph (c)(45) to read
as follows:
Sec. 52.2070 Identification of plan.
* * * * *
(c) * * *
(45) Revisions to the State Implementation Plan submitted by the
Rhode Island Department of Environmental Management on May 15, 1995
(i) Incorporation by reference.
(A) Letter from the Rhode Island Department of Environmental
Protection dated May 15, 1995 submitting a revision to the Rhode Island
State Implementation Plan.
(B) Air Pollution Control Regulation 29.3 ``Emissions Caps'';
effective in the State of Rhode Island on May 18, 1995.
(ii) Additional materials.
(A) Non-regulatory portions of the submittal.
3. In Sec. 52.2081 Table 52.2081 is amended by adding new entry for
state citation APC 29.3 to read as follows:
Sec. 52.2081 EPA-Approved Rhode Island State regulations.
* * * * *
[[Page 11735]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
52.2070 (45)
Date ---------------------------
State citation Title/subject adopted by Date approved by EPA Federal Register citation Comments/unapproved
State sections
--------------------------------------------------------------------------------------------------------------------------------------------------------
* * * * * * *
No. 29.3............ EMISSIONS...................... 4/28/95 March 22, 1996............. [Insert FR citation from This rule limits a
published date]. source's potential to
emit, therefore avoiding
RACT, title V operating
permits.
* * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
[FR Doc. 96-6601 Filed 3-21-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-6312 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Supportive Housing for the Elderly and Persons With Disabilities
[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Rules and Regulations]
[Pages 11948-11983]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6312]
[[Page 11947]]
_______________________________________________________________________
Part III
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 885, et al.
Supportive Housing for the Elderly and Persons With Disabilities; Final
Rule
Federal Register / Vol. 61, No. 57 / Friday, March 22, 1996 / Rules
and Regulations
[[Page 11948]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 885, 889, 890, and 891
[Docket No. FR-3941-F-01]
RIN 2502-AG51
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Supportive Housing for the Elderly and Persons With
Disabilities
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule represents the final rulemaking for HUD's Section
202 Program of Supportive Housing for the Elderly and the Section 811
Program of Supportive Housing for Persons with Disabilities, both of
which HUD has previously implemented through several interim rules. As
part of President Clinton's regulatory reinvention initiative, this
final rule also consolidates and streamlines the regulations for these
two programs in order to make them easier to use and understand. This
rule also eliminates obsolete regulations from 24 CFR part 885
regarding the Loans for Housing for the Elderly or Handicapped Program,
and moves the remaining provisions to a subpart within the consolidated
supportive housing regulations. Furthermore, information that is also
in the statute or that should be more appropriately placed in the
program handbook or in Notices of Funding Availability (NOFAs) has been
deleted from the regulations.
EFFECTIVE DATE: April 22, 1996.
FOR FURTHER INFORMATION CONTACT: Linda Cheatham, Director, Office of
Multifamily Housing Development, Department of Housing and Urban
Development, 451 Seventh Street SW., Room 6134, Washington, DC 20410,
telephone (202) 708-3000. (This number is not toll-free.) Hearing- or
speech-impaired persons may access that number by calling toll-free the
Federal Information Relay Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
A. Loans for Housing for the Elderly or Handicapped; Part 885
Under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q) and
the regulations at 24 CFR part 885, HUD provided direct Federal loans
to assist private, nonprofit corporations and nonprofit consumer
cooperatives in the development of housing projects serving elderly or
handicapped families and individuals. Loans made under part 885 were
used to finance the construction or substantial rehabilitation of
projects for elderly or handicapped families, or to finance the
acquisition with or without moderate rehabilitation of existing housing
and related facilities for group homes for nonelderly handicapped
individuals.
HUD published two interim rules in the Federal Register on June 12,
1991 (56 FR 27070, 27104) establishing the Section 811 Program of
Supportive Housing for Persons with Disabilities (24 CFR part 890) and
the Section 202 Program of Supportive Housing for the Elderly (24 CFR
part 889). The interim rule for the Section 202 Program (56 FR 27104)
also amended part 885 and provided that part 885 would continue to
apply to projects for which Section 202 loan reservations were made in
Fiscal Year (FY) 1990 and prior years. The rule further provided,
however, that projects for the elderly selected for funding in FY 1991
and subsequent years would be covered by part 889. Since no new
projects are being funded under the regulations in part 885, many of
the provisions in that part that do not apply to the continued
management of the projects are unnecessary, and HUD can remove them
from the Code of Federal Regulations.
Therefore, this final rule removes several definitions from
Sec. 885.5. Second, this rule eliminates Secs. 885.200 through 885.405
and Sec. 885.415 regarding projects that received reservations under
section 202 of the Housing Act of 1959 and housing assistance under
section 8 of the United States Housing Act of 1937 (202/8 projects). No
new 202/8 projects will be funded, and all of the projects have either
closed or been converted to capital advances under either part 889 or
part 890. Third, this rule eliminates many sections in subpart C of
part 885 regarding projects for nonelderly handicapped families
receiving reservations under section 202 and project assistance
payments under section 202(h) of the Housing Act of 1959 (202/162
projects). No new 202/162 projects will be funded, and all existing
202/162 projects have closed or have been converted to capital advances
under part 890. Fourth, this rule will also remove other definitions
and provisions from part 885 that are merely explanatory or
duplicative. Lastly, this rule moves the remaining provisions from part
885 to subpart E of the new streamlined regulations for the supportive
housing programs.
B. June 12, 1991 Interim Rules
On June 12, 1991, HUD published in the Federal Register two interim
rules, one for the Section 202 Program of Supportive Housing for the
Elderly (56 FR 27104) and one for the Section 811 Program of Supportive
Housing for Persons with Disabilities (56 FR 27070). The interim rule
for the Section 202 Program (56 FR 27104) provided for the continued
applicability of part 885 to projects for which Section 202 loan
reservations had been made in fiscal year (FY) 1990 and prior years,
and to add part 889 establishing the new Section 202 Program of
Supportive Housing for the Elderly and enabling FY 1991 funding for the
program. The interim rule for the Section 811 Program (56 FR 27070)
added a new part 890 establishing the new program for persons with
disabilities. These two interim rules contained very similar
provisions. As stated in the preambles to both rules (56 FR 27070,
27104), HUD intended to establish additional requirements for the
supportive housing programs in separate rules.
HUD received 19 comments on the interim rule for the Section 202
Program, and 24 comments on the interim rule for the Section 811
Program. HUD responded to some objections raised by commenters by
changing the program requirements in the subsequent interim rules
discussed below. The following discussion summarizes the other comments
and provides HUD's responses to those comments.
1. Definition of ``Acquisition''
One commenter objected to the definition of ``acquisition'' in the
interim rule for the Section 811 Program (Sec. 890.105 of the interim
rule; Sec. 891.305 of this final rule). This definition provides that
property other than from the Resolution Trust Corporation (RTC) is only
eligible for acquisition if at least three years have elapsed from the
completion of the project or the beginning of occupancy to the date of
application. The commenter argued that HUD should eliminate this
limitation, since it is beyond the intent of the statute and it denies
the opportunity for acquisition of newer properties except through the
RTC.
HUD Response: HUD agrees and is removing the three year
requirement. Furthermore, HUD is removing the prohibition against
acquiring property to use as independent living facilities. Previously,
acquisition without rehabilitation was limited to group homes and
property from the Resolution Trust Corporation.
[[Page 11949]]
2. Definition of ``Independent Living Facility''
Three commenters objected to the definition of ``independent living
facility'' in Sec. 890.105 of the interim rule for the Section 811
Program. The definition limits projects for persons with chronic mental
illness to occupancy by 20 such persons. The commenters argued that the
statutory definition allows 24 persons, and makes no distinction
between persons with chronic mental illness and other persons with
disabilities. Some of the commenters argued that such a distinction by
HUD is a violation of the Fair Housing Act and section 504 of the
Rehabilitation Act of 1973. One of the commenters also objected to
allowing projects up to 40 persons, arguing that this is an
``inappropriately large upper limit'' that will result in the
segregation of persons with disabilities. However, the other commenter
argued that the smaller number of persons permitted in facilities for
persons with chronic mental illness will increase costs and make it
more difficult to develop such facilities in large urban areas.
HUD Response: Congress originally set the project size limit for
independent living facilities at 20 persons. Although an amendment to
the statute increased the project size limit to 24 persons (Pub. L.
102-27; approved April 10, 1991) (42 U.S.C. 8013(k)(4)), HUD chose to
retain the 20 person limit for independent living facilities for
persons with chronic mental illness. In FYs 1993, 1994, and 1995,
however, HUD decided that the project size limit for independent living
facilities would be 24 persons regardless of the disabled population
being served. HUD intends to retain this limit in future funding
cycles. In response to the commenter who objected to allowing projects
up to 40 persons, HUD intends to remove the upper limit on exceptions
to the project size limits in the next Notice of Funding Availability
to allow this determination to be made at the local level.
3. Definition of ``Person With Disabilities''
One commenter objected to the definition of ``person with
disabilities'' in the interim rule for the Section 811 Program
(Sec. 890.105 of the interim rule; Sec. 891.305 of this final rule),
which excludes persons whose sole impairment is alcoholism or drug
addiction. This commenter argued that this definition is contrary to
the Fair Housing Act, which protects persons disabled by alcoholism or
substance abuse (although not those who currently and illegally use or
are addicted to controlled substances).
HUD Response: HUD has consistently used a definition of ``person
with disabilities'' for the Section 811 Program and its predecessor,
the Section 202 Program, that excludes persons whose sole impairment is
alcoholism or drug addiction. In other words, drug or alcohol addiction
alone is not a qualifying condition for occupancy in Section 811
housing. Alcohol or drug addiction would not disqualify a person,
however, as long as the person meets the required three-pronged test
for eligibility as a person with a disability (i.e., physical, mental,
or emotional impairment is of long-continued and indefinite duration,
the impairment substantially impedes the person's ability to live
independently, and the person's ability to live independently could be
improved by more suitable housing conditions).
4. Definition of ``Sponsor''; Prohibited Relationships
One commenter suggested that the regulations for these programs be
changed to allow management contracts between the Owner and the Sponsor
or its nonprofit affiliate or wholly-owned for-profit subsidiary. This
commenter, who sponsors Section 202 and Section 811 projects, asserts
that the for-profit nature of its subsidiary has meant that the housing
needs of more people are fulfilled, since the net profits of the
subsidiary go back into the nonprofit Sponsor.
This commenter also objects to the provisions in the interim rules
that no officer or director of the Sponsor is permitted to have any
financial interest in any contract with the Owner in connection with
the rendition of services. This commenter describes a situation in
which the Owner's attorney is also an unpaid board member. This
arrangement is desirable because it allows the organizations to take
advantage of the attorney's unique expertise. However, under the
definition of ``Sponsor,'' the attorney's fees can no longer be paid
from project funds.
Another commenter asserted that these regulations make it virtually
impossible for Sponsors to pay for project management costs,
eliminating the benefits of repeat participation by experienced
nonprofit developers. Specifically, this commenter suggests that HUD
allow Sponsors to receive consultant fees, so that qualified Sponsors
that perform such services can be compensated accordingly.
HUD Response: The handbooks for the Section 202 and Section 811
Programs provide exceptions to these provisions by permitting the
Sponsor or its nonprofit affiliate to contract for a fee with the Owner
to provide management services and/or supportive services. Furthermore,
attorney's fees can be paid from project funds, unless the attorney is
an officer or board member of the Sponsor or Owner. The same
restriction that applies to other development team members also applies
to attorneys. As part of HUD's efforts to simplify the Section 202/811
development process, this rule eliminates the housing consultant's fee
in lieu of a developer's fee from which the Owner can pay the Sponsor
for consulting services.
5. Project Standards for Group Homes
With regard to Sec. 890.210(b) of the interim rule for the Section
811 Program (Sec. 891.310(a) of this final rule), one commenter
remarked that it may be impossible to meet the space per resident
requirements within the development cost limits. Another commenter
requested clarification on the provision requiring that a project
involving acquisition comply with applicable State requirements. In the
absence of such requirements, the project must comply with standards as
described in the interim rule (Sec. 890.210(b) of the interim rule;
Sec. 891.310(a) of this final rule). This commenter asked whether HUD's
standards apply if they are greater than the State's standards, and if
so this commenter requested HUD to state this clearly in the
regulations. The commenter also requested HUD to state clearly that in
no case must a project comply with State standards in violation of the
Fair Housing Act.
HUD Response: During the past five years of program operation, HUD
is not aware of Sponsors having difficulty in meeting the space per
resident requirements within the development cost limits. In the near
future, HUD will be closely examining the development cost limits to
ensure that they are reflective of their respective localities.
Previously, if the fund reservation was not adequate to support the
development of the project, an amendment to the fund reservation would
be made for HUD-approved expenses up to the maximum amount allowable.
Although there will still be amendments to the fund reservation, with
this final rule, amendments will be available only after initial
closing. In response to the commenter asking for clarification
regarding whether HUD's standards apply to acquisition projects if they
are greater than applicable State requirements, Sec. 891.310 of this
final rule requires that the project at least meet applicable State
requirements if they
[[Page 11950]]
exist, and if they do not, the project must meet the HUD requirements.
The purpose of this provision is to permit flexibility in the group
home standards when complying with the HUD requirements may prove to be
cost prohibitive. In regard to the request from the same commenter for
a statement that in no case must a project comply with State standards
in violation of the Fair Housing Act, HUD feels that such a statement
is unnecessary since participation in the program requires a Sponsor to
certify that it will comply with the requirements of the Fair Housing
Act and implementing regulations.
6. Limits on Number of Units
Three commenters objected to the provision of the interim rule for
the Section 202 Program limiting to 10 percent of the national
allocation the number of units for which national organizations can
apply (Sec. 889.215 of the interim rule; Sec. 891.215 of this final
rule). The commenters argued that this limitation is arbitrary, not
required by statute, and contrary to the goal of producing the highest
quality housing. Applications should be funded on merit and local need.
One commenter suggested that if limits are absolutely necessary, this
section should be revised so that the limit only applies if there are
at least 10,000 units being allocated for the program that year.
Furthermore, HUD should base the limits on the number of units awarded,
rather than the number of units for which the Sponsor is applying.
Finally, HUD should waive this requirement if there are no suitable
competing applicants in a particular region.
HUD Response: The limit on the number of Section 202 units for
which national organizations can apply was established to ensure that
organizations that are not national in scope would have a more
equitable opportunity to participate in the program. Contrary to the
opinion of the commenter, applications are funded based on merit and
local need. However, without a limit on the number of units that
national organizations can apply for, these organizations have a
competitive edge over qualified non-national organizations. This
results in a possible tendency to dominate the program. Although HUD
intends to continue placing a limit on the number of Section 202 units
a national organization can apply for, the requirement will be in the
Notice of Funding Availability published in the Federal Register once
Congress appropriates Section 202 funds to HUD. Therefore, this final
rule deletes the limit from the regulations.
7. Project Eligibility and Size Limits
Seven commenters requested additional guidance with regard to the
interim rule for the Section 811 Program, under which eligible projects
include dwelling units in multifamily housing developments,
condominiums, and cooperatives (Sec. 890.215(a)(3) of the interim
rule). These commenters argued that one of the core goals of the
National Affordable Housing Act was to expand available housing options
beyond group homes and independent living facilities. Therefore, HUD
should provide guidance as to the applicability of the requirements of
each section of the interim rule to the newly available options. One
commenter specifically asked for guidance with regard to limits on the
number of dwelling units within multifamily developments and limits on
the number of persons who may reside in such units.
Another commenter suggested that, in order to encourage independent
and integrated housing for persons with disabilities, the regulations
should not require the Sponsor to notify the municipality in the case
of acquisition of individual dwelling units in multifamily
developments, condominiums, and cooperatives.
Three commenters suggested that HUD develop strict guidelines for
waiving the project size limits of the Section 811 rule
(Sec. 890.215(c) of the interim rule). Several commenters asserted that
allowing the development of larger facilities through a waiver of the
size limits is contrary to the goal of providing quality services and
an integrated living environment. The other commenter suggested that
HUD require Sponsors to demonstrate thoroughly the necessity for such
an exception to the size limits. For instance, HUD should require the
Sponsor to demonstrate that there is no other residential site within a
reasonable distance that would make a smaller project feasible.
However, one commenter argued that rather than making these waivers
harder to obtain, HUD should make them easier to obtain by expediting
its review and approval of such waivers.
HUD Response: In response to the seven commenters that requested
guidance as to the applicability of each section of the interim rule to
the newly available options of dwelling units in multifamily housing
developments, condominiums, and cooperatives, HUD has determined that
detailed information concerning these housing options would be more
appropriate in a handbook and intends to issue a revised handbook in
the near future.
In response to the commenter that suggested that the Sponsor not be
required to notify the municipality when acquiring dwelling units in
multifamily developments, condominiums, and cooperatives in order to
encourage independent and integrated housing for persons with
disabilities, HUD does not find that notifying the municipality will
have any negative impact on integrating persons with disabilities. The
units will be dispersed within the structure and thus will be difficult
to identify as housing for disabled persons.
In response to the comments on exceptions to project size limits,
HUD has decided to eliminate from the regulation the section on project
size limits and exceptions. This information will appear in the annual
Notice of Funding Availability (NOFA). However, since HUD published the
last interim rule, HUD has expanded the criteria required for Sponsors
to request a waiver of the project size limits by adding that the
Sponsor must demonstrate why the site was selected, as well as how the
size of the project is consistent with State and/or local policies
governing similar facilities for the proposed population. Furthermore,
HUD intends to remove the upper limits on the number of units that can
be requested so that the size of the project can be determined more
appropriately at the local level.
8. Design and Cost Standards
This provision of the interim rules (Sec. 891.120(c) of this final
rule) provided that HUD would not fund certain amenities, such as
washers and dryers in individual units. One commenter objected, arguing
that easily accessible washers and dryers do not represent excessive
costs, but rather are especially important for older and frailer
persons. This commenter also noted that the failure to provide
individual laundry facilities may increase service costs for those
unable to carry their laundry to distant facilities. Several other
commenters remarked that features such as washers and dryers are
considered standard features in most new housing today, and many of the
excluded amenities can materially contribute to the independence of a
person with disabilities. These commenters argued that Sponsors should
be allowed to provide these amenities if they can do so within the cost
limits.
HUD Response: Section 202 and Section 811 projects must be modest
in design. Therefore, there are certain amenities such as atriums,
bowling alleys, and swimming pools, that are considered excessive and
are not
[[Page 11951]]
eligible to be paid for out of the capital advance (Sec. 891.120(c)).
However, there is no prohibition against the Sponsor including certain
excess amenities as long as they pay for them from other sources.
One commenter also objected to Sec. 890.220(b) in the interim rule
for the Section 811 Program, which provides that HUD will establish
limits on unit sizes and number of bathrooms for independent living
facilities. This commenter remarked that such specifications have
caused costly delays in construction, and that HUD should be more
flexible and result-oriented. HUD should focus on enforcing the
development cost limits and the incentives for savings, as well as the
minimum construction and space standards, rather than on design and
cost standards.
HUD Response: If the project is to be newly constructed and
designed from the beginning according to the maximum unit sizes and
number of bathrooms, HUD disagrees with the commenter that this
requirement could cause costly delays in construction. If the project
is to be rehabilitated, there is flexibility in meeting this
requirement when complying with the limitations would be too costly.
Also, if the Sponsor can develop the project with larger sized units
and more bathrooms within the appropriate development cost limit the
Sponsor is permitted to do so. The Sponsor can also pay for the extra
space and the associated operating cost with funds from other sources.
The reference to unit size and number of bathrooms for independent
living facilities will be in the handbook and not in the regulation.
9. Site and Neighborhood Standards
Two commenters objected to the provision of the interim rule for
the Section 811 Program (Sec. 890.230(g) of the interim rule;
Sec. 891.320(b) of this final rule) that prohibits developing projects
adjacent to certain types of facilities, such as schools or other
housing primarily for persons with disabilities. One of these
commenters argued that persons with disabilities might need to be close
to such supportive services, and developing a project on a site near
such services would decrease the cost of service delivery. This
commenter noted that HUD considers the proximity or accessibility of
such services as a selection criterion for funding
(Sec. 890.300(c)(6)(i)(A) of the interim rule). The other commenter
warned that this requirement contradicts the Fair Housing Amendments
Act of 1988, and that it fuels potential community opposition by
allowing opponents to protest that their area is ``concentrated'' with
other facilities for persons with disabilities.
HUD Response: HUD has determined that the location of the project
should be decided at the local level, and therefore has relaxed the
requirement in Sec. 891.320(b) of this final rule by indicating that
projects ``should'' rather than ``must'' be located in neighborhoods
where other family housing is located, and ``should not'' rather than
``may not'' be located adjacent to certain facilities. However, the
statute still prohibits more than one group home from being located on
one site, as well as a group home from being located on a site
contiguous to another site containing such a home.
10. Development Cost Limits
HUD received many comments on this provision of both interim rules.
One commenter remarked that the development cost limits are ``woefully
inadequate.'' Three commenters objected to the calculation of the
development cost limits under the interim rules. These commenters
asserted that HUD offices are instructed not to add an additional 10
percent for Costs Not Attributable, and this will result in lower
maximum cost limits. They reminded HUD to ensure that the High Cost
Factors are truly reflective of costs in the area, as is required by
the conference report on the National Affordable Housing Act.
Three commenters objected to the development cost limits for the
acquisition without rehabilitation of properties from the Resolution
Trust Corporation (RTC). The interim rules provided that in the case of
RTC properties that require no rehabilitation, the cost limits are
reduced to 85 percent of the limits listed in the rule. These
commenters asserted that there is no statutory basis for this reduction
and that the reduction will effectively eliminate these properties as
viable options.
Five commenters remarked that the interim rule for the Section 811
Program provides no guidance on development cost limits for dwelling
units in multifamily housing, condominiums, or cooperatives.
HUD Response: HUD will review the development cost limits, which
have been deleted from this final rule, to ensure that they adequately
reflect the cost of developing similar housing in the locality. HUD
will establish the development cost limits and all future changes to
them through a notice in the Federal Register.
Although there is no statutory basis for the lower development cost
limit for properties acquired from the RTC that will not need any
rehabilitation, the 85 percent limit is justified since properties can
be obtained less expensively from the RTC than they can from the
private market.
The reason that the interim rule for the Section 811 Program did
not provide guidance on development cost limits for dwelling units in
multifamily housing, condominiums, or cooperatives is that these
housing types are considered independent living units, and therefore
would use the appropriate development cost limit based upon the number
and size of the units and whether or not the structure has an elevator.
In this section (Sec. 891.140 of this final rule), HUD has provided
incentives for savings by providing that Owners whose actual
development costs are less than the initial fund reservation for the
capital advance will retain 50 percent of this savings in their
Replacement Reserve Account. The Owner will retain 75 percent of this
savings by adding energy efficiency features. One commenter asked for
further details concerning which energy efficiency features will
satisfy this incentive.
Six commenters remarked on the retention of the savings in the
Replacement Reserve Account, the funds in which may only be used for
repairs or replacements in or capital improvements of the project.
These commenters requested that HUD provide greater flexibility in the
use of these savings. The commenters suggested HUD change the
regulations in one of the following ways: relax the requirements for
the use of at least a portion of the funds in the Replacement Reserve
Account; retain the funds in the Residual Receipts Account; or split
the funds between the two accounts, so that the funds can be used for
resident services after all repair needs have been met. One commenter
further recommended that HUD's share of the savings should be placed in
a special account to provide needed repairs and modernization for those
Section 202 projects with no reserves on which to draw.
HUD Response: HUD will give further details concerning which energy
efficiency features will satisfy the incentive to retain 75 percent of
the savings in the program handbook.
In response to the request that HUD allow more flexibility in the
use of the savings, HUD believes that the appropriate account for any
savings received is the Replacement Reserve Account since there are no
other funds provided for needed repairs and maintenance. The Residual
Receipts Account is used for other purposes. The
[[Page 11952]]
statute specifically states that if there are savings, HUD retains 50
percent; it does not permit HUD's share to be folded back into the
project.
11. Term of Commitment
Two commenters expressed concern that although HUD requires that
housing assisted under both programs remain available to very low-
income elderly persons and persons with disabilities for 40 years (480
months), the initial contract for project rental assistance shall be
for 240 months, with an extension of not less than 60 months. This
commenter suggests that the regulations provide for contract extensions
for not less than 240 months, since rental assistance will be required
in order to ensure the housing is available.
HUD Response: HUD recognizes that project rental assistance funds
will be necessary to keep the Section 202 and Section 811 projects
viable for 40 years. However, in these times of uncertainty and extreme
budget constraints, HUD is unable to extend contracts for project
rental assistance for an additional 240 months. In fact, in the FY 1995
funding cycle, HUD was permitted to reserve project rental assistance
contract (PRAC) funds for only 60 months as opposed to the usual 240
months. HUD will do all it can to assure that residents of Section 202
and Section 811 housing will continue to receive rental assistance as
long as they remain eligible.
12. Other Financing Sources
Two commenters remarked on HUD's statement in the preamble to the
interim rule for the Section 202 Program (56 FR 27105) that HUD would
generally not accept borrowed funds from other sources. These
commenters suggested that HUD remove this limitation and allow Owners
to use such funds, since Congress intended to encourage mixed financing
(17 U.S.C. 1701q(h)(6)). One commenter suggested that local HUD offices
have the ability to approve such loans, especially ``soft loans'' or
secured grants to ensure program compliance, and that the regulations
should set general parameters on the loan terms.
HUD Response: Owners are permitted to use borrowed funds from other
sources in the case of secondary financing. Field offices must review
requests for approval of secondary financing, and provided the
documents meet HUD requirements, they will be approved.
13. Owner Deposit (Minimum Capital Investment)
HUD received many comments on this provision of both interim rules
(Sec. 891.145 of this final rule). These commenters remarked that this
deposit requirement is a serious financial burden. The commenters
further expressed concern that this provision penalizes Sponsors for
delays that are often beyond the Sponsors' control or even HUD-related.
Other delays are caused by having to obtain municipal approval, conduct
archeological investigations, examine subsurface conditions for toxic
leaks, conduct public hearings, and obtain a building permit.
The commenters offered several suggestions. One commenter suggested
that HUD adopt an approval process that is more decentralized, more
flexible, and result-oriented. Another commenter suggested that HUD
should return the deposit once the project has closed and project
viability is assured; such a provision would allow Sponsors to use the
experience gained in previous projects in the development of subsequent
projects. Another commenter suggested that HUD should treat the 18-
month and 6-month time periods as targets, giving local offices the
permission to extend the time periods based on determinations of
individual circumstances. Two commenters suggested that any processing
time by HUD offices in excess of the recommended times should be
credited to the Sponsor as an extension. Another commenter suggested
that if HUD is responsible for delaying the final closing beyond the 6-
month time period (plus a 2-month extension), then HUD should return
the full balance remaining in the Minimum Capital Investment. Finally,
one commenter suggested that the funds that are returned should be
placed in either the Replacement Reserve or Residual Receipts Accounts,
at the Sponsor's option.
HUD Response: Although HUD appreciates the recommendations, HUD
established the policies regarding the Minimum Capital Investment to
provide an incentive for Owners to reach final closing early, and so
far the policies are working. Therefore, HUD will not make any changes
to these policies at this time.
14. Provision of Services
HUD received one comment requesting clarification on the provision
in Sec. 889.260(b)(3) of the interim rule for the Section 202 Program
(Sec. 891.225 of this final rule) regarding the $15 per unit per month
service cost allowance. This commenter inquired whether the funding for
the service coordinator is different from or included in this $15 per
unit per month service allowance. Three commenters expressed concern
that $15 may be an insufficient service allowance for frail elderly
persons. One of these commenters suggested that more money be allocated
for service subsidies. The other commenter suggested that HUD revise
the dollar amount if it should prove to be insufficient, and at least
annually to reflect the changing cost of services. The third commenter
recommended that a copayment by the tenant receiving the service should
only be voluntary; since these tenants will have low incomes, they may
not have sufficient funds for all their needs.
Two commenters encouraged HUD to allow a $15 per unit operating
cost under the Section 811 Program as well as under the Section 202
Program, since operating costs for housing for persons with
disabilities may often be equal to or greater than those for elderly
persons.
HUD Response: The funding sources for service coordinators and the
$15 per unit per month service allowance are separate. The amount of
$15 per unit per month was determined based upon HUD's experience with
the Congregate Housing Services Program. At this time HUD has not had
sufficient experience with the service allowance in the Section 202
Program to determine whether the amount of $15 per unit per month is
sufficient. The Section 811 statute does not provide for any HUD
funding for supportive services.
15. Service Coordinator Funds in Housing for Frail Elderly Persons
Several commenters objected to HUD's decision that the only
developments that can receive service coordinator funding under the
Section 202 Program are those in which more than 50 percent of the
residents are ``frail.'' First, as one commenter asserted, the service
coordinator is instrumental in assessing clients to determine frailty.
Further, another commenter cited surveys indicating that approximately
25 percent of the residents in subsidized senior housing will require
services. Requiring twice that number of frail elderly tenants will
overwhelm management, even with a service coordinator. It will also
lead to an undesirable balance of ``well to frail'' residents. The
commenters argued that service coordinators are essential to every
development, and therefore HUD should provide service coordinator funds
for all developments regardless of the number of ``frail'' elderly
tenants.
One commenter expressed concern regarding the assessment of the
occupants' abilities (with regard to the ``activities of daily
living'') at the time the Sponsor is developing its supportive
[[Page 11953]]
services plan and the rest of its application. According to the
nondiscrimination requirements, such as section 504 of the
Rehabilitation Act of 1973 and the Americans with Disabilities Act,
this commenter asserts that it will be legally impossible to make such
determinations in advance. The commenter suggested that HUD require a
statement from the Sponsor certifying its intent to assess the physical
characteristics and abilities of the tenants following initial rent-up.
At that time the Sponsor would have a clear idea of the number of
tenants needing services and how to deliver those services.
HUD Response: In response to the objection that only projects with
at least 50 percent frail elderly persons are eligible for service
coordinator funding, the actual requirement is that projects
principally serving the frail elderly are eligible for service
coordinator funding. Limited funds should be provided where there is
the most need. In other projects that do not qualify for service
coordinator funding, management assumes many of the same functions as a
service coordinator.
The requirement to assess occupants' abilities with regard to the
activities of daily living at the time the Sponsor is developing its
supportive services plan and application does not violate section 504
or the Americans with Disabilities Act because the requirement is to
assess in general the abilities of potential occupants from the general
population.
16. Housing Only Independent Persons
With regard to the elderly program, one commenter objected that HUD
has created a loophole by allowing Sponsors to provide no supportive
services by housing all fully independent persons. This commenter cited
a draft of HUD's training materials providing that ``if the applicant
is not going to provide services, it only needs to justify market
demand for fully independent elderly.'' The commenter argued that this
may violate section 504 of the Rehabilitation Act of 1973, and it is
contrary to the purpose of the Section 202 Program. The commenter
suggested that HUD require all Sponsors to anticipate housing some
elderly persons requiring services and to plan for the delivery of such
services.
HUD Response: At the outset, a Sponsor may serve all fully
independent elderly people. However, eventually many occupants will
require services as they get older. Sponsors proposing to serve all
fully independent elderly people initially must describe in their
applications how they will address the service needs of their residents
as they ``age in place.''
17. Provision of Services to Nonresidents
With regard to the Section 202 Program, the statute provides that
HUD may permit the provision of services to elderly persons who are not
residents, as described in the preamble to that interim rule (56 FR
27106). However, one commenter urged HUD not to allow the provision of
services to nonresidents unless these recipients are very low-income,
there is available funding to assist these persons, and the needs of
current residents are fully met.
HUD Response: The Section 202 statute allows the Secretary to
permit the provision of services to elderly persons and persons with
disabilities who are nonresidents only if doing so will not adversely
affect the cost-effectiveness or operation of the program or add
significantly to the need for assistance.
18. Application Contents
HUD received several comments on the application requirements in
the interim rules. Several commenters on the elderly program suggested
that since many Area Agencies on Aging will serve as the primary
services liaisons with any new Section 202 housing development, the
regulations should strongly encourage their coordinated efforts during
the application process under the elderly program.
Another commenter objected to the requirement in the interim rule
for the Section 811 Program that Sponsors submit a certification from
the appropriate State or local agency that it has reviewed the
supportive services plan (Sec. 890.265(c)(19) of the interim rule). One
commenter asserted that some State and local agencies have a ``bias''
against nonprofit organizations operating housing for the populations
they also serve. Therefore, this commenter suggested that HUD allow the
waiver of this requirement upon sufficient documentation that the
supportive services plan is adequate.
Several commenters remarked on the requirement that sponsors
describe their ``ties to the community'' (Sec. 890.265(c) of the
interim rule). While this requirement could include evidence that the
sponsor is a viable part of the community and evidence of the sponsor's
ability to carry out the project, its past experience, and its
financial and programmatic capability, these commenters argued that HUD
cannot require statements of support or approval of the application by
members of the community. The commenters argued that this may be an
unnecessary and illegal requirement in violation of the Fair Housing
Amendments Act of 1988.
HUD Response: This final rule removes the application contents from
the regulations. Instead, HUD will include them in the annual NOFAs
published in the Federal Register for the programs, as well as in a
self-contained application. The requirement that Sponsors submit a
certification from the appropriate State or local agency with a
determination as to whether the supportive services plan is well
designed to meet the needs of persons with disabilities is statutory
and cannot be waived.
In response to the commenters who argued that HUD cannot require
statements of support or approval of the application by members of the
community, HUD revised this requirement in the interim rule published
in the Federal Register on May 5, 1993. Since the effective date of
that rule, applicants have been required to include in their
applications statements of support for the proposed project from
nongovernmental organizations that are familiar with the needs of the
population the project would serve. For example, an applicant proposing
to develop housing for people with chronic mental illness could include
in their application a letter of support for the project from a local
service provider that offers mental health services. Such letters of
support help HUD determine the Sponsor's ties to the community and the
amount of local support for the project, both of which are indicators
of the project's potential sucess.
19. Review of Applications for Fund Reservation
Four commenters objected to the ranking and selection process
described in the interim rule for the Section 811 Program (Sec. 890.300
(d) and (e) of the interim rule). Using this selection process, HUD
would fund all approvable applications that contain evidence of control
of an approvable site before it would fund any applications in which
the Sponsor had identified the site but did not yet have control of the
site. The commenters argued that this process makes all other selection
criteria subordinate to control of the site at the time of application.
This unduly restricts Sponsors from developing innovative housing
opportunities, and HUD should instead balance site control with the
other criteria.
HUD Response: In this final rule, HUD has removed the provisions on
the ranking and selection process from the
[[Page 11954]]
regulation. These provisions will appear in the annual NOFAs for the
programs. The statute requires HUD to use, as a selection criterion for
the Section 811 program, the extent to which the applicant has site
control. In order to implement this requirement, HUD created two
categories of applications; Category A for those applicants with
satisfactory evidence of an approvable site, and Category B for
applicants that had identified a site. Priority in selection was given
to Category A applicants. For the FY 1995 program, HUD changed the
procedures by eliminating the categories in favor of awarding bonus
points to applicants with satisfactory evidence of an approvable site.
HUD believes this procedure satisfies the statutory requirement without
making all other selection criteria subordinate. It does not unduly
restrict Sponsors from developing innovative housing opportunities, but
rather provides an incentive for Sponsors to lock-in suitable sites
that will result in much needed housing being available for persons
with disabilities sooner.
20. Cancellation of Fund Reservation
Two commenters suggested that if a project is cancelled, HUD should
reallocate the funds to another application in the same region in which
HUD had originally allocated them. This will fulfill the goal of
balancing housing opportunities across the country. Another commenter
remarked that HUD should at least inform the public of how HUD will
reallocate the funds by including this information in the regulations.
HUD Response: The appropriations act in effect for the year in
which a project is cancelled governs HUD's ability to recapture and
reuse Section 202 and Section 811 contract authority.
21. OMB Circular A-110
In the preamble to the interim rules (56 FR 27073, 27107), HUD
specifically requested comments regarding the use of OMB Circular A-110
entitled ``Grants and Agreements with Institutions of Higher Education,
Hospitals, and other Nonprofit Organizations--Uniform Administrative
Requirements.'' Three commenters responded that the use of this
circular should not be required. These commenters explained that the
development team concept is more appropriate for this program than the
competitive procurement process. Two of the commenters explained that
bidding would make it difficult for Sponsors to use professionals who
are experienced in the program and who are willing to defer fees
because of their relationship with Sponsors. The other commenter
asserted that competitive procurement is more costly and time-
consuming.
HUD Response: The Office of Management and Budget (OMB) has
determined that OMB Circular A-110 does not apply to the section 202
and section 811 Programs.
C. August 12, 1992 Interim Rules
On August 12, 1993, HUD published in the Federal Register two more
interim rules, one for the section 202 Program of Supportive Housing
for the Elderly (57 FR 36338), and one for the section 811 Program of
Supportive Housing for Persons with Disabilities (57 FR 36330). The
August 12, 1992 interim rules provided guidance on the development of
supportive housing, elements of which include requests for capital
advance financing, approval of such requests, and repayment of a
capital advance. These interim rules also provided guidance regarding
project rental assistance contracts.
HUD received one request for information and one comment in
response to the August 12, 1992 interim rules. The commenter requested
that HUD allow for-profit corporations, as well as nonprofit
organizations, to participate in the programs.
HUD Response: The section 202 and 811 statutes prohibit
participation in the programs by for-profit corporations.
D. May 5, 1993 Interim Rules
On May 5, 1993, HUD again published in the Federal Register two
interim rules, one for the section 202 Program of Supportive Housing
for the Elderly (58 FR 26836) and one for the section 811 Program of
Supportive Housing for Persons with Disabilities (58 FR 26816). As HUD
described in the preambles to these interim rules, the rules
incorporated amendments to the programs made by the Housing and
Community Development Act of 1992. The interim rules also clarified and
simplified many of the requirements in the regulations, including
substantial improvements to the selection process.
HUD received eight comments in response to the May 5, 1993 interim
rules. Several of the comments consisted of inquiries about specific
aspects of the regulations. Many of the other commenters commended HUD
on its efforts to clarify and simplify the application and selection
process. However, two commenters objected to the change in the
processes for Notices of Funding Availability (NOFAs). In the May 5,
1993 interim rules, HUD changed the NOFA process so that field offices
would no longer publish Invitations for Applications in newspapers; the
field offices must only notify media for minority persons, as well as
media for elderly persons and persons with disabilities, as applicable.
The commenters argued that this limits the availability of information
about relatively new programs that will provide urgently needed housing
opportunities.
HUD Response: HUD decided to eliminate the requirement that HUD
field offices publish Invitations for Applications in newspapers
because HUD could not afford to continue paying the advertising costs.
However, each field office keeps a mailing list of organizations that
are current customers, as well as those that have expressed an interest
in the programs but that have not yet participated, and mails to each
of them a copy of the NOFA as soon as it is published in the Federal
Register.
E. March 2, 1995 Interim Rules
On March 2, 1995, HUD published in the Federal Register two more
interim rules, one for each program (60 FR 11828, 11836). These rules
provided guidance on managing supportive housing for the elderly or
persons with disabilities. Specifically, these rules contained
provisions regarding Owner responsibilities, tenant responsibilities,
leases, security deposits, utility allowances, vacancy payments, and
HUD reviews.
HUD received two comments on this set of interim rules. One
commenter requested that HUD provide funds under other programs for
elderly housing.
HUD Response: HUD does provide funds under other programs such as
the Public Housing Program, the section 8 Rental Certificate and
Housing Voucher Program and the section 232 Program for elderly
housing.
The other commenter expressed two main concerns regarding civil
rights issues. First, this commenter emphasized that the required
receipt of supportive services may violate an individual's civil
rights. Therefore, this commenter urged HUD to include language
throughout the rule stressing that the available services are voluntary
and are not a condition of admission or continued occupancy. Second,
this commenter objected to the provision of ``diagnosis-specific''
housing, or housing for persons with similar disabilities or who
require a similar set of supportive services, under the section 811
Program. The commenter argued that this type of housing is contrary to
the goal of integration and general occupancy housing, and it fails to
[[Page 11955]]
affirmatively further fair housing goals. The commenter urged HUD to
limit the circumstances under which it will approve such housing.
HUD Response: HUD has been working with consumer advocacy
organizations on revisions to the Section 811 program. One of the major
issues of concern to consumers and organizations advocating on their
behalf is the delinking of housing and supportive services. Although
the acceptance of supportive services has never been required as a
condition of occupancy in a Section 811 project, HUD has discovered
that, in reality, just the opposite occurs. Therefore, in the NOFA for
the FY 1995 Section 811 program, HUD stated that the acceptance of
supportive services shall not be a condition of occupancy. This
statement shall continue to appear in the NOFA for the Section 811
program and it will also be added to the handbook.
In regard to the commenter objecting to the provision of
``diagnosis-specific'' housing or housing for persons with similar
disabilities or who require a similar set of supportive services, HUD's
policy is that a Sponsor may design a supportive services package that
is targeted to persons with similar disabilities such as persons with
physical disabilities, developmental disabilities or chronic mental
illness. With the Secretary's approval a Sponsor may design a
supportive services package targeted at any subset within these three
main categories (e.g., persons with mental retardation). This provision
is in the Section 811 statute. In any Section 811 project, however, the
Sponsor must permit occupancy by any qualified person with a disability
who could benefit from the housing and/or services provided regardless
of the person's disability.
F. The Fiscal Year 1995 Rescissions Act
The Fiscal Year 1995 Rescission Act (Pub. L. 104-19; approved July
27, 1995) provides in relevant part that in allocating the rescission
of $1.115 billion of FY 1995 funds, the Secretary may reduce the
appropriations needs of HUD by waiving any provision of section 202 of
the Housing Act of 1959 and section 811 of the National Affordable
Housing Act that the Secretary determines is not necessary to achieve
the objectives of these programs. On January 30, 1996 (61 FR 3047), HUD
published a notice in the Federal Register advising the public of the
impact of the rescissions on the Section 202 and Section 811 Programs.
As described in the notice, for projects funded in FY 1995, the
Secretary reserved PRAC funds at 75 percent of the estimated project's
total operating expenses to take into consideration estimated tenant
contributions. The Secretary also extended eligibility to low-income
households (in addition to very low-income households), waived the
Federal preferences for admission, and reduced the term of the PRAC to
5 years. The PRAC funds reserved for projects funded in FYs 1993 and
1994 that had not gone to initial closing or had an Addendum to the
Agreement to Enter into the Project Rental Assistance Contract (Forms
HUD-90172-A-CA and HUD-90172-B-CA) alerting the Owner of HUD's right to
reduce the PRAC reserved for the project at a later time were also
reduced by 25 percent. However, the authority in the FY 1995
Rescissions Act to waive statutory provisions is limited to achieving
the $1.115 billion rescission. Therefore, since the effects of the
Rescissions Act are temporary, this final rule does not change the
regulations to reflect the changes described in the January 30, 1996
notice.
II. Regulatory Reinvention
In response to Executive Order 12866 and President Clinton's
memorandum of March 4, 1995 to all Federal departments and agencies on
the subject of regulatory reinvention, HUD has reviewed all its
regulations to determine whether certain regulations can be eliminated,
streamlined, or consolidated with other regulations. As part of this
review, HUD determined that since the substance of the regulations in
24 CFR parts 885, 889, and 890 was very duplicative, these parts could
be consolidated and streamlined into one set of regulations. Therefore,
this final rule creates a new part 891 in title 24 of the Code of
Federal Regulations that will contain all the provisions for HUD's
Supportive Housing Programs. Subpart A of part 891 will contain all the
requirements that are similar in the programs. Subparts B and C of part
891 will contain requirements that are unique to the Section 202 and
Section 811 programs, respectively. Subpart D will contain the project
management provisions for the Section 202 and Section 811 programs.
Finally, subpart E will contain the regulations necessary for the
continued management of projects under the Loans for Housing for the
Elderly or Handicapped Program.
In addition to consolidating similar provisions, this rule also
removes provisions that are redundant of statutes or would more
appropriately appear in program handbooks or annual Notices of Funding
Availability (NOFAs). For example, many of the definitions in the
regulations come directly from section 202 of the Housing Act of 1959
and section 811 of the National Affordable Housing Act. The provisions
for the Elder Cottage Housing Demonstration Program are also redundant
of the statute (section 806 of the Cranston-Gonzalez National
Affordable Housing Act (Pub. L. 101-625; approved November 28, 1990).
This final rule removes the redundant provisions and replaces them, as
appropriate, with references to the statute. This final rule also
removes the sections on application requirements, review and approval
of applications, and the ranking and selection process. This
information will instead appear in the NOFAs published in the Federal
Register for these programs. As a result of this rule's consolidation
and streamlining, HUD will eliminate approximately 92 pages of
unnecessary regulations.
III. Lead-Based Paint
HUD is taking the opportunity, in this final rule, to update
technical aspects of its lead-based paint requirements to conform with
new recommendations of the Centers for Disease Control. For example, in
Secs. 891.155(g) and 891.325, HUD is changing the childhood age of
concern from under 7 years of age to under 6 years. In
Sec. 891.325(b)(2), HUD is changing the definition of ``elevated blood-
lead level (EBL),'' with respect to blood lead levels that require
environmental intervention, from 25 ug/dl (micrograms per deciliter) to
20 ug/dl for a single test or 15-19 ug/dl for two consecutive tests
several months apart. (See U.S. Department of Health and Human
Services, Public Health Service, Centers for Disease Control,
Preventing Lead Poisoning in Young Children, A Statement by the Centers
for Disease Control, October 1991.)
Analysis of the need for additional changes to the lead-based paint
requirements is being deferred until the publication of a separate
proposed rule that would implement sections 1012 and 1013 of the
Residential Lead-Based Paint Hazard Reduction Act of 1992 and revise
the lead-based paint requirements for all HUD programs. This proposed
rule is in its final stages of development.
IV. Other Matters
Environmental Impact
At the time of publication of the interim rules for these programs,
Findings of No Significant Impact with respect to the environment were
made in accordance with HUD regulations at 24 CFR part 50 implementing
section 102(2)(C) of the National Environmental Policy Act of 1969 (42
U.S.C. 4332). Those interim rules are being adopted
[[Page 11956]]
by this final rule without significant change in terms of environmental
impact. Accordingly, the initial Findings of No Significant Impact
remain applicable, and are available for public inspection and copying
between 7:30 a.m. and 5:30 p.m. weekdays at the Office of the Rules
Docket Clerk, 451 Seventh Street S.W., Room 10276, Washington, DC
20410-0500.
Regulatory Flexibility Act
Under the Regulatory Flexibility Act (5 U.S.C. 605(b)), the
undersigned hereby certifies that this final rule does not have a
significant economic impact on a substantial number of small entities.
The program will provide capital advances to private nonprofit
organizations and nonprofit consumer cooperatives to expand the supply
of supportive housing for the elderly and to nonprofit organizations to
expand the supply of supportive housing for persons with disabilities.
Although small entities will participate in the program, the rule will
not have a significant impact on them.
Executive Order 12606, The Family
The General Counsel, as the Designated Official for Executive Order
12606, The Family, has determined that the provisions of this final
rule will not have a significant impact on family formation,
maintenance, or general well-being, and thus is not subject to review
under the Order. No significant change in existing HUD policies or
programs will result from promulgation of this rule, as those policies
or programs relate to family concerns.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12611, Federalism, has determined that the policies
contained in this rule will not have substantial direct effects on
States or their political subdivisions, or the relationship between the
Federal government and the States, or on the distribution of power and
responsibilities among the various levels of government. As a result,
the rule is not subject to review under the Order.
List of Subjects
24 CFR Part 885
Aged, Individuals with disabilities, Loan programs--housing and
community development, Low and moderate income housing, Reporting and
recordkeeping requirements.
24 CFR Part 889
Aged, Capital advance programs, Grant programs--housing and
community development, Loan programs--housing and community
development, Low and moderate income housing, Rent subsidies, Reporting
and recordkeeping requirements.
24 CFR Part 890
Capital advance programs, Civil rights, Grant programs--housing and
community development, Individuals with disabilities, Loan programs--
housing and community development, Low and moderate income housing,
Mental health programs, Reporting and recordkeeping requirements.
24 CFR Part 891
Aged, Capital advance programs, Civil rights, Grant programs--
housing and community development, Individuals with disabilities, Loan
programs--housing and community development, Low and moderate income
housing, Mental health programs, Rent subsidies, Reporting and
recordkeeping requirements.
Accordingly, under the authority of 42 U.S.C. 3535(d), for the
reasons stated in the preamble, 24 CFR chapter VIII is amended as set
forth below:
PART 885--[REMOVED]
1. Part 885 is removed.
PART 889--[REMOVED]
2. Part 889 is removed.
PART 890--[REMOVED]
3. Part 890 is removed.
4. A new part 891 is added to read as follows:
PART 891--SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH
DISABILITIES
Subpart A--General Program Requirements
Sec.
891.100 Purpose and policy.
891.105 Definitions.
891.110 Allocation of authority.
891.115 Notice of funding availability.
891.120 Project design and cost standards.
891.125 Site and neighborhood standards.
891.130 Prohibited relationships.
891.135 Amount and terms of capital advances.
891.140 Development cost limits.
891.145 Owner deposit (Minimum Capital Investment).
891.150 Operating cost standards.
891.155 Other Federal requirements.
891.160 Audit requirements.
891.165 Duration of capital advance.
891.170 Repayment of capital advance.
891.175 Technical assistance.
Subpart B--Section 202 Supportive Housing for the Elderly
891.200 Applicability.
891.205 Definitions.
891.210 Special project standards.
891.215 Limits on number of units.
891.220 Prohibited facilities.
891.225 Provision of services.
891.230 Selection preferences.
Subpart C--Section 811 Supportive Housing for Persons With Disabilities
891.300 Applicability.
891.305 Definitions.
891.310 Special project standards.
891.315 Prohibited facilities.
891.320 Site and neighborhood standards.
891.325 Lead-based paint requirements.
Subpart D--Project Management
891.400 Responsibilities of Owner.
891.405 Replacement reserve.
891.410 Selection and admission of tenants.
891.415 Obligations of the household or family.
891.420 Overcrowded and underoccupied units.
891.425 Lease requirements.
891.430 Termination of tenancy and modification of lease.
891.435 Security deposits.
891.440 Adjustment of utility allowances.
891.445 Conditions for receipt of vacancy payments for assisted
units.
891.450 HUD review.
Subpart E--Loans for Housing for the Elderly and Handicapped
891.500 Purpose and policy.
891.505 Definitions
891.510 Displacement, relocation, and real property acquisition.
891.515 Audit requirements.
Section 202--Projects for the Elderly or Handicapped--Section 8
Assistance
891.520 Definitions applicable to 202/8 projects.
891.525 Amount and terms of financing.
891.530 Prepayment privileges.
891.535 Requirements for awarding construction contracts.
891.540 Loan disbursement procedures.
891.545 Completion of project, cost certification, and HUD
approvals.
891.550 Selection preferences.
891.555 Smoke detectors.
891.560 HAP contract.
891.565 Term of HAP contract.
891.570 Maximum annual commitment and project account.
891.575 Leasing to eligible families.
891.580 HAP contract administration.
891.585 Default by Borrower.
891.590 Notice upon HAP contract expiration.
891.595 HAP contract extension or renewal.
891.600 Responsibilities of Borrower.
891.605 Replacement reserve.
891.610 Selection and admission of tenants.
891.615 Obligations of the family.
891.620 Overcrowded and underoccupied units.
891.625 Lease requirements.
891.630 Termination of tenancy and modification of lease.
[[Page 11957]]
891.635 Security deposits.
891.640 Adjustment of rents.
891.645 Adjustment of utility allowances.
891.650 Conditions for receipt of vacancy payments for assisted
units.
Section 202--Projects for the Nonelderly Handicapped Families and
Individuals--Section 162 Assistance
891.655 Definitions applicable to 202/162 projects.
891.660 Project standards.
891.665 Project size limitations.
891.670 Cost containment and modest design standards.
891.675 Prohibited facilities.
891.680 Site and neighborhood standards.
891.685 Prohibited relationships.
891.690 Other Federal requirements.
891.695 Operating cost standards.
891.700 Prepayment of loans.
891.705 Project assistance contract.
891.710 Term of PAC.
891.715 Maximum annual commitment and project account.
891.720 Leasing to eligible families.
891.725 PAC administration.
891.730 Default by Borrower.
891.735 Notice upon PAC expiration.
891.740 Responsibilities of Borrower.
891.745 Replacement reserve.
891.750 Selection and admission of tenants.
891.755 Obligations of the family.
891.760 Overcrowded and underoccupied units.
891.765 Lease requirements.
891.770 Termination of tenancy and modification of lease.
891.775 Security deposits.
891.780 Adjustment of rents.
891.785 Adjustment of utility allowances.
891.790 Conditions for receipt of vacancy payments for assisted
units.
Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.
Subpart A--General Program Requirements
Sec. 891.100 Purpose and policy.
(a) Purpose. The Section 202 Program of Supportive Housing for the
Elderly and the Section 811 Program of Supportive Housing for Persons
with Disabilities provide Federal capital advances and project rental
assistance under section 202 of the Housing Act of 1959 (12 U.S.C.
1701q) (section 202) and section 811 of the National Affordable Housing
Act (42 U.S.C. 8013) (section 811), respectively, for housing projects
serving elderly households and persons with disabilities. Section 202
projects shall provide a range of services that are tailored to the
needs of the residents. Owners of Section 811 projects shall ensure
that the residents are provided with any necessary supportive services
that address their individual needs.
(b) General policy. (1) Supportive Housing for the Elderly. A
capital advance and contract for project rental assistance provided
under this program shall be used for the purposes described in Section
202 (12 U.S.C. 1701q(b)).
(2) Supportive Housing for Persons with Disabilities. A capital
advance and contract for project rental assistance provided under this
program shall be used for the purposes described in Section 811 (42
U.S.C. 8013(b)).
(c) Use of capital advance funds. No part of the funds reserved may
be transferred by the Sponsor, except to the Owner caused to be formed
by the Sponsor. This action must be accomplished prior to issuance of a
commitment for capital advance funding.
(d) Amendments. Subject to the availability of funds, HUD may amend
the amount of an approved capital advance only after initial closing
has occurred.
Sec. 891.105 Definitions.
The following definitions apply, as appropriate, throughout this
part. Other terms with definitions unique to the particular program are
defined in Secs. 891.205, 891.305, and 891.505, as applicable.
Affiliated entities means entities that the field office determines
to be related to each other in such a manner that it is appropriate to
treat them as a single entity. Such relationship shall include any
identity of interest among such entities or their principals and the
use by any otherwise unaffiliated entities of a single Sponsor or of
Sponsors (or of a single Borrower or of Borrowers, as applicable) that
have any identity of interest themselves or their principals.
Annual income is defined in part 813 of this chapter. In the case
of an individual residing in an intermediate care facility for the
developmentally disabled that is assisted under title XIX of the Social
Security Act and this part, the annual income of the individual shall
exclude protected personal income as provided under that Act. For the
purposes of determining the total tenant payment, the income of such
individuals shall be imputed to be the amount that the household would
receive if assisted under title XVI of the Social Security Act.
Household (eligible household) means an elderly or disabled
household (as defined in Secs. 891.205 or 891.305, respectively), as
applicable, that meets the project occupancy requirements approved by
HUD and, if the household occupies an assisted unit, meets the very
low-income requirements described in Sec. 813.102 of this chapter, as
modified by the definition of annual income in this section.
Housing and related facilities means rental housing structures
constructed, rehabilitated, or acquired as permanent residences for use
by elderly or disabled households, as applicable. The term includes
necessary community space. Except for intermediate care facilities for
individuals with developmental disabilities, this term does not include
nursing homes, hospitals, intermediate care facilities, or transitional
care facilities. For the Loans for the Elderly and Persons with
Disabilities Program, see Sec. 891.505.
Low-income families shall have the same meaning provided in section
3(b)(2) of the United States Housing Act of 1937 (42 U.S.C. 1437a).
National Sponsor means a Sponsor that has one or more Section 202
or one or more Section 811 project(s) under reservation, construction,
or management in two or more different HUD geographical regions.
Operating costs means HUD-approved expenses related to the
provision of housing and includes:
(1) Administrative expenses, including salary and management
expenses related to the provision of shelter and, in the case of the
Section 202 Program, the coordination of services;
(2) Maintenance expenses, including routine and minor repairs and
groundskeeping;
(3) Security expenses;
(4) Utilities expenses, including gas, oil, electricity, water,
sewer, trash removal, and extermination services. The term ``operating
costs'' excludes telephone services for households;
(5) Taxes and insurance;
(6) Allowances for reserves; and
(7) Allowances for services (in the Section 202 Program only).
Project rental assistance contract (PRAC) means the contract
entered into by the Owner and HUD setting forth the rights and duties
of the parties with respect to the project and the payments under the
PRAC.
Project rental assistance payment means the payment made by HUD to
the Owner for assisted units as provided in the PRAC. The payment is
the difference between the total tenant payment and the HUD-approved
per unit operating expenses except for expenses related to items not
eligible under design and cost provisions. An additional payment is
made to a household occupying an assisted unit when the utility
allowance is greater than the total tenant payment. A project rental
assistance payment, known as a ``vacancy payment,'' may be made to the
Owner when an assisted unit is vacant, in accordance with the terms of
the PRAC.
[[Page 11958]]
Rehabilitation means the improvement of the condition of a property
from deteriorated or substandard to good condition. Rehabilitation may
vary in degree from the gutting and extensive reconstruction to the
cure of substantial accumulation of deferred maintenance. Cosmetic
improvements alone do not qualify as rehabilitation under this
definition. Rehabilitation may also include renovation, alteration, or
remodeling for the conversion or adaptation of structurally sound
property to the design and condition required for use under this part,
or the repair or replacement of major building systems or components in
danger of failure. Improvement of an existing structure must require 15
percent or more of the estimated development cost to rehabilitate the
project to a useful life of 55 years.
Replacement Reserve Account means a project account into which
specified funds are deposited. Such funds may be used only with the
approval of the Secretary for repairs, replacement, and capital
improvements to the project.
Section 202 means s
FR Doc. 96-6312 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Supportive Housing for the Elderly and Persons With Disabilities
ection 202 of the Housing Act of 1959 (12 U.S.C.
1701q), as amended, or the Supportive Housing for the Elderly Program
authorized by that section.
Section 811 means section 811 of the National Affordable Housing
Act (42 U.S.C. 8013), as amended, or the Supportive Housing for Persons
with Disabilities Program authorized by that section.
Start-up expenses mean necessary costs (to plan a Section 202 or
Section 811 project, as applicable) incurred by the Sponsor or Owner
prior to initial closing.
Tenant payment to Owner equals total tenant payment less utility
allowance, if any.
Total tenant payment means the monthly amount defined in, and
determined in accordance with part 813 of this chapter.
Utility allowance is defined in part 813 of this chapter and is
determined or approved by HUD.
Very low-income families shall have the same meaning provided in
section 3(b)(2) of the United States Housing Act of 1937 (42 U.S.C.
1437a).
Sec. 891.110 Allocation of authority.
In accordance with 24 CFR part 791, the Assistant Secretary will
separately allocate the amounts available for capital advances for the
development of housing for elderly households and for disabled
households, less amounts set aside by Congress for specific types of
projects, and for amendments of fund reservations made in prior years,
for technical assistance, and for other contracted services.
Sec. 891.115 Notice of funding availability.
Following an allocation of authority under Sec. 891.110, HUD shall
publish a separate Notice of Funding Availability (NOFA) for the
Section 202 Program of Supportive Housing for the Elderly and for the
Section 811 Program of Supportive Housing for Persons with Disabilities
in the Federal Register. The NOFAs will contain specific information on
how and when to apply for the available capital advance authority, the
contents of the application, and the selection process.
Sec. 891.120 Project design and cost standards.
In addition to the special project standards described in
Secs. 891.210 and 891.310, as applicable, the following standards
apply:
(a) Property standards. Projects under this part must comply with
HUD Minimum Property Standards, unless otherwise indicated in this
part.
(b) Accessibility requirements. Projects under this part must
comply with the Uniform Federal Accessibility Standards (See 24 CFR
40.7 for availability), section 504 of the Rehabilitation Act of 1973
and HUD's implementing regulations (24 CFR part 8), and for new
construction multifamily housing projects, the design and construction
requirements of the Fair Housing Act and HUD's implementing regulations
at 24 CFR part 100. For the Section 811 Program of Supportive Housing
for Persons with Disabilities, see additional accessibility
requirements in Sec. 891.310(b).
(c) Restrictions on amenities. Projects must be modest in design.
Amenities not eligible for HUD funding include individual unit
balconies and decks, atriums, bowling alleys, swimming pools, saunas,
jacuzzis, and dishwashers, trash compactors, and washers and dryers in
individual units in supportive housing for the elderly or in
independent living facilities for persons with disabilities. Sponsors
may include certain excess amenities but they must pay for them from
sources other than the section 202 or 811 capital advance. They must
also pay for the continuing operating costs associated with any excess
amenities from sources other than the Section 202 or 811 project rental
assistance contract.
(d) Smoke detectors. After October 30, 1992, each dwelling unit
must include at least one battery-operated or hard-wired smoke
detector, in proper working condition, on each level of the unit.
Sec. 891.125 Site and neighborhood standards.
All sites must meet the following site and neighborhood
requirements:
(a) The site must be adequate in size, exposure, and contour to
accommodate the number and type of units proposed, and adequate
utilities (water, sewer, gas, and electricity) and streets must be
available to service the site.
(b) The site and neighborhood must be suitable from the standpoint
of facilitating and furthering full compliance with the applicable
provisions of Title VI of the Civil Rights Act of 1964, the Fair
Housing Act, Executive Order 11063 (27 FR 11527, 3 CFR, 1958-1963
Comp., p. 652); as amended by Executive Order 12259, (46 FR 1253, 3
CFR, 1980 Comp., p. 307)); section 504 of the Rehabilitation Act of
1973, and implementing HUD regulations.
(c) New construction sites must meet the following site and
neighborhood requirements:
(1) The site must not be located in an area of minority
concentration (or minority elderly concentration under the Section 202
Program) except as permitted under paragraph (c)(2) of this section,
and must not be located in a racially mixed area if the project will
cause a significant increase in the proportion of minority to
nonminority residents (or minority elderly to nonminority elderly
residents, under the Section 202 Program) in the area.
(2) A project may be located in an area of minority concentration
(or minority elderly concentration, under the Section 202 Program) only
if:
(i) Sufficient, comparable opportunities exist for housing for
minority elderly households or minority disabled households, as
applicable (or minority families, for projects funded under
Secs. 891.655 through 891.790), in the income range to be served by the
proposed project, outside areas of minority concentration (see
paragraph (c)(3) of this section for further guidance on this
criterion); or
(ii) The project is necessary to meet overriding housing needs that
cannot be met in that housing market area (see paragraph (c)(4) of this
section for further guidance on this criterion).
(3) (i) Sufficient does not require that in every locality there be
an equal number of assisted units within and outside of areas of
minority concentration. Rather, application of this standard should
produce a reasonable distribution of assisted units each year which
over a period of several
[[Page 11959]]
years will approach an appropriate balance of housing opportunities
within and outside areas of minority concentration. An appropriate
balance in any jurisdiction must be determined in light of local
conditions affecting the range of housing choices available for very
low-income minority elderly or disabled households, as applicable (or
low-income minority families, for projects funded under Secs. 891.655
through 891.790), and in relation to the racial mix of the locality's
population.
(ii) Units may be considered to be comparable opportunities if they
have the same household type (elderly or disabled, as applicable) and
tenure type (owner/renter); require approximately the same total tenant
payment; serve the same income group; are located in the same housing
market; and are in standard condition.
(iii) Application of this sufficient, comparable opportunities
standard involves assessing the overall impact of HUD-assisted housing
on the availability of housing choices for very low-income minority
elderly or disabled households, as applicable (or low-income minority
families, for projects funded under Secs. 891.655 through 891.790), in
and outside areas of minority concentration, and must take into account
the extent to which the following factors are present, along with any
other factor relevant to housing choice:
(A) A significant number of assisted housing units are available
outside areas of minority concentration.
(B) There is significant integration of assisted housing projects
constructed or rehabilitated in the past ten years, relative to the
racial mix of the eligible population.
(C) There are racially integrated neighborhoods in the locality.
(D) Programs are operated by the locality to assist minority
elderly or disabled households, as applicable (or minority families,
for projects funded under Secs. 891.655 through 891.790), that wish to
find housing outside areas of minority concentration.
(E) Minority elderly or disabled households, as applicable (or
minority families, for projects funded under Secs. 891.655 through
891.790), have benefitted from local activities (e.g., acquisition and
write-down of sites, tax relief programs for homeowners, acquisitions
of units for use as assisted housing units) undertaken to expand choice
for minority households (or families) outside of areas of minority
concentration.
(F) A significant proportion of minority elderly or disabled
households, as applicable (or minority households, for projects funded
under Secs. 891.655 through 891.790), have been successful in finding
units in nonminority areas under the Section 8 Certificate and Housing
Voucher programs.
(G) Comparable housing opportunities have been made available
outside areas of minority concentration through other programs.
(4) Application of the overriding housing needs criterion, for
example, permits approval of sites that are an integral part of an
overall local strategy for the preservation or restoration of the
immediate neighborhood and of sites in a neighborhood experiencing
significant private investment that is demonstrably changing the
economic character of the area (a ``revitalizing area''). An overriding
housing need, however, may not serve as the basis for determining that
a site is acceptable if the only reason the need cannot otherwise be
feasibly met is that discrimination on the basis of race, color, creed,
sex, or national origin renders sites outside areas of minority
concentration unavailable, or if the use of this standard in recent
years has had the effect of circumventing the obligation to provide
housing choice.
(d) The neighborhood must not be one that is seriously detrimental
to family life or in which substandard dwellings or other undesirable
conditions predominate, unless there is actively in progress a
concerted program to remedy the undesirable conditions.
(e) The housing must be accessible to social, recreational,
educational, commercial, and health facilities and services, and other
municipal facilities and services that are at least equivalent to those
typically found in neighborhoods consisting largely of unassisted,
standard housing of similar market rents.
(f) For the Section 811 Program of Supportive Housing for Persons
with Disabilities, the additional site and neighborhood requirements in
Sec. 891.320 apply.
Sec. 891.130 Prohibited relationships.
This section shall apply to capital advances under the Section 202
Program and the Section 811 Program, as well as to loans financed under
Secs. 891.655 through 891.790.
(a) Conflicts of interest. (1) Officers and Board members of either
the Sponsor or the Owner (or Borrower, as applicable) may not have any
financial interest in any contract with the Owner or in any firm which
has a contract with the Owner. This restriction applies so long as the
individual is serving on the Board and for a period of three years
following resignation or final closing, whichever occurs later.
(2) The following contracts between the Owner (or Borrower, as
applicable) and the Sponsor or the Sponsor's nonprofit affiliate will
not constitute a conflict of interest if no more than two persons
salaried by the Sponsor or management affiliate serve as nonvoting
directors on the Owner's board of directors:
(i) Management contracts (including associated management fees);
(ii) Supportive services contracts (including service fees) under
the Supportive Housing for the Elderly Program; and
(iii) Developer (consultant) contracts.
(b) Identity of interest. An identity of interest between the
Sponsor or Owner (or Borrower, as applicable) and any development team
member or between development team members is prohibited until two
years after final closing.
Sec. 891.135 Amount and terms of capital advances.
(a) Amount of capital advances. The amount of capital advances
approved shall be the amount stated in the notification of fund
reservation, including any adjustment required by HUD before the final
closing. The amount of the capital advance may not exceed the
appropriate development cost limit.
(b) Estimated development cost. The amount of the capital advance
may not exceed the total estimated development cost of the project (as
determined by HUD), less the incremental development cost associated
with excess amenities and design features to be paid for by the Sponsor
under Sec. 891.120.
Sec. 891.140 Development cost limits.
(a) HUD shall use the development cost limits, established by
Notice in the Federal Register and adjusted by locality, to calculate
the fund reservation amount of the capital advance to be made available
to individual Owners. Owners that incur actual development costs that
are less than the amount of the initial fund reservation shall be
entitled to retain 50 percent of the savings in a Replacement Reserve
Account. Such percentage shall be increased to 75 percent for Owners
that add energy efficiency features.
(b) The Replacement Reserve Account established under paragraph (a)
of this section may only be used for repairs, replacements, and capital
improvements to the project.
[[Page 11960]]
Sec. 891.145 Owner deposit (Minimum Capital Investment).
As a Minimum Capital Investment, the Owner must deposit in a
special escrow account one-half of one percent (0.5%) of the HUD-
approved capital advance, not to exceed $10,000, to assure the Owner's
commitment to the housing. Under the Section 202 Program, if an Owner
has a National Sponsor or a National Co-Sponsor, the Minimum Capital
Investment shall be one-half of one percent (0.5%) of the HUD-approved
capital advance, not to exceed $25,000.
Sec. 891.150 Operating cost standards.
HUD shall establish operating cost standards based on the average
annual operating cost of comparable housing for the elderly or for
persons with disabilities in each field office, and shall adjust the
standard annually based on appropriate indices of increases in housing
costs such as the Consumer Price Index. The operating cost standards
shall be developed based on the number of units. However, under the
Section 811 Program and for projects funded under Secs. 891.655 through
891.790, the operating cost standard for group homes shall be based on
the number of residents. HUD may adjust the operating cost standard
applicable to an approved project to reflect such factors as
differences in costs based on location within the field office
jurisdiction. The operating cost standard will be used to determine the
amount of the project assistance initially reserved for a project.
Sec. 891.155 Other Federal requirements.
In addition to the requirements set forth in 24 CFR part 5, the
following requirements in this Sec. 891.155 apply to the Section 202
and Section 811 Programs, as well as projects funded under
Secs. 891.655 through 891.790. Other requirements unique to a
particular program are described in subparts B and C of this part, as
applicable.
(a) Affirmative fair housing marketing. (1) The affirmative fair
housing marketing requirements of 24 CFR part 200, subpart M and the
implementing regulations at 24 CFR part 108; and
(2) The fair housing advertising and poster guidelines at 24 CFR
parts 109 and 110.
(b) Environmental. The National Environmental Policy Act of 1969,
HUD's implementing regulations at 24 CFR part 50, including the related
authorities described in 24 CFR 50.4. For the purposes of Executive
Order No. 11988, Floodplain Management (42 FR 26951, 3 CFR, 1977 Comp.,
p. 117); as amended by Executive Order 12148 (44 FR 43239, 3 CFR, 1979
Comp., p. 412)), and implementing regulations in 24 CFR part 55, all
applications for intermediate care facilities for persons with
developmental disabilities shall be treated as critical actions
requiring consideration of the 500-year floodplain.
(c) Flood insurance. The Flood Disaster Protection Act of 1973 (42
U.S.C. 4001).
(d) Labor standards. (1) All laborers and mechanics (other than
volunteers under the conditions set out in 24 CFR part 70) employed by
contractors and subcontractors in the construction (including
rehabilitation) of housing with 12 or more units assisted under this
part shall be paid wages at rates not less than those prevailing in the
locality, as determined by the Secretary of Labor in accordance with
the Davis-Bacon Act (40 U.S.C. 276a-276a-5). A group home for persons
with disabilities is not covered by the labor standards.
(2) Contracts involving employment of laborers and mechanics shall
be subject to the provisions of the Contract Work Hours and Safety
Standards Act (40 U.S.C. 327-333).
(3) Sponsors, Owners, contractors, and subcontractors must comply
with all related rules, regulations, and requirements.
(e) Displacement, relocation, and real property acquisition. (1)
Minimizing displacement. Consistent with the other goals and objectives
of this part, Sponsors and Owners (or Borrowers, if applicable) shall
assure that they have taken all reasonable steps to minimize the
displacement of persons (families, individuals, businesses, nonprofit
organizations, and farms) as a result of a project assisted under this
part.
(2) Relocation assistance for displaced persons. A displaced person
must be provided relocation assistance at the levels described in, and
in accordance with the requirements of, the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970, as
amended (URA) (42 U.S.C. 4201-4655), as implemented by 49 CFR part 24.
(3) Real property acquisition requirements. The acquisition of real
property for a project is subject to the URA and the requirements
described in 49 CFR part 24, subpart B.
(f) Intergovernmental review. The requirements for
intergovernmental review in Executive Order No. 12372 (47 FR 30959, 3
CFR, 1982 Comp., p. 197; as amended by Executive Order No. 12416 (48 FR
15587, 3 CFR, 1983 Comp., p. 186)) and the implementing regulations at
24 CFR part 52 are applicable to this program.
(g) Lead-based paint. (1) The requirements of the Lead-Based Paint
Poisoning Prevention Act (42 U.S.C. 4821-4846) and implementing
regulations at 24 CFR part 35 apply to any dwellings (except zero-
bedroom dwelling units) in section 811 housing that were:
(i) Constructed or substantially rehabilitated before 1978; and
(ii) In which any child under 6 years of age resides or is expected
to reside.
(2) Under the Section 811 Program and projects funded under
Secs. 891.655 through 891.790, the lead-based paint requirements
described in Sec. 891.325 also apply.
Sec. 891.160 Audit requirements.
Nonprofits receiving assistance under this part are subject to the
audit requirements in 24 CFR part 45.
Sec. 891.165 Duration of capital advance.
The duration of the fund reservation for the capital advance is 18
months from the date of issuance with limited exceptions up to 24
months, as approved by HUD on a case-by-case basis.
Sec. 891.170 Repayment of capital advance.
(a) Interest prohibition and repayment. A capital advance provided
under this part shall bear no interest and its repayment shall not be
required so long as the housing project remains available for very low-
income elderly families or persons with disabilities, as applicable, in
accordance with this part. The capital advance may not be repaid to
extinguish the requirements of this part. To ensure its interest in the
capital advance, HUD shall require a note and mortgage, use agreement,
capital advance agreement and regulatory agreement from the Owner in a
form to be prescribed by HUD.
(b) The transfer of physical and financial assets of any project
under this part is prohibited, unless HUD gives prior written approval.
Approval for transfer will not be granted unless HUD determines that
the transfer to a private nonprofit corporation or consumer cooperative
(under the Section 202 Program) or a nonprofit organization (under the
Section 811 Program) is part of a transaction that will ensure the
continued operation of the project for not less than 40 years (from the
date of original closing) in a manner that will provide rental housing
for very low-income elderly persons or persons with disabilities, as
applicable, on terms at least as advantageous to existing and future
tenants as the terms required by the original capital advance.
[[Page 11961]]
Sec. 891.175 Technical assistance.
For purposes of the Section 202 Program and the Section 811
Program, the Secretary shall make available appropriate technical
assistance to assure that applicants having limited resources,
particularly minority applicants, are able to participate more fully in
the programs.
Subpart B--Section 202 Supportive Housing for the Elderly
Sec. 891.200 Applicability.
The requirements set forth in this subpart B apply to the Section
202 Program of Supportive Housing for the Elderly only, and to
applicants, Sponsors, and Owners under that program.
Sec. 891.205 Definitions.
As used in this part in reference to the Section 202 Program, and
in addition to the applicable definitions in Sec. 891.105:
Acquisition means the purchase of (or otherwise obtaining title to)
existing housing and related facilities from the Resolution Trust
Corporation.
Activities of daily living (ADL) means eating, dressing, bathing,
grooming, and household management activities, as further described
below:
(1) Eating--May need assistance with cooking, preparing, or serving
food, but must be able to feed self;
(2) Bathing--May need assistance in getting in and out of the
shower or tub, but must be able to wash self;
(3) Grooming--May need assistance in washing hair, but must be able
to take care of personal appearance;
(4) Dressing--Must be able to dress self, but may need occasional
assistance; and
(5) Home management activities--May need assistance in doing
housework, grocery shopping, laundry, or getting to and from activities
such as going to the doctor and shopping, but must be mobile. The
mobility requirement does not exclude persons in wheelchairs or those
requiring mobility devices.
Congregate space (hereinafter referred to as community space) shall
have the meaning provided in section 202 (12 U.S.C. 1701q(h)(1)). The
term ``community spaces'' excludes offices, halls, mechanical rooms,
laundry rooms, parking areas, dwelling units, and lobbies. Community
space does not include commercial areas.
Elderly person means a household composed of one or more persons at
least one of whom is 62 years of age or more at the time of initial
occupancy.
Frail elderly means an elderly person who is unable to perform at
least three activities of daily living as defined in this section.
Owners may establish additional eligibility requirements acceptable to
HUD based on the standards in local supportive services programs.
Owner means a single-purpose private nonprofit organization that
may be established by the Sponsor that will receive a capital advance
and project rental assistance payments to develop and operate
supportive housing for the elderly as its legal owner. Owner does not
mean a public body or the instrumentality of any public body. The
purposes of the Owner must include the promotion of the welfare of the
elderly. The Owner may not be controlled by or under the direction of
persons or firms seeking to derive profit or gain therefrom.
Private nonprofit organization means any incorporated private
institution or foundation:
(1) That has tax-exempt status under section 501(c)(3) or (c)(4) of
the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);
(2) No part of the net earnings of which inures to the benefit of
any member, founder, contributor, or individual;
(3) That has a governing board:
(i) The membership of which is selected in a manner to assure that
there is significant representation of the views of the community in
which such housing is located; and
(ii) That is responsible for the operation of the housing assisted
under this part; and
(4) That is approved by HUD as to administrative and financial
responsibility.
Services expenses means those costs needed to provide the necessary
services for the elderly tenants, which may include, but are not
limited to: health related activities, continuing education, welfare,
informational, recreational, homemaking, meal and nutritional services,
counseling, and referral services as well as transportation as
necessary to facilitate access to these services.
Sponsor means any private nonprofit entity, including a consumer
cooperative:
(1) No part of the net earnings of which inures to the benefit of
any private shareholder, member, founder, contributor, or individual;
(2) That is not controlled by, or under the direction of, persons
or firms seeking to derive profit or gain therefrom; and
(3) That is approved by the Secretary as to administrative and
financial capacity and responsibility. The term ``Sponsor'' does not
mean a public body or the instrumentality of a public body.
Sec. 891.210 Special project standards.
In addition to the applicable project standards in Sec. 891.120,
resident units in Section 202 projects are limited to efficiencies or
one-bedroom units. If a resident manager is proposed for a project, up
to two bedrooms could be provided for the resident manager unit.
Sec. 891.215 Limits on number of units.
(a) HUD may establish, through publication of a notice in the
Federal Register, limits on the number of units that can be applied for
by a Sponsor or Co-sponsor in a single geographical region and/or
nationwide.
(b) Affiliated entities that submit separate applications shall be
deemed to be a single entity for purposes of these limits.
(c) HUD may also establish, through publication of a notice in the
Federal Register, the minimum size of a single project.
Sec. 891.220 Prohibited facilities.
Projects may not include facilities for infirmaries, nursing
stations, or spaces for overnight care.
Sec. 891.225 Provision of services.
(a) In carrying out the provisions of this part, HUD shall ensure
that housing assisted under this part provides services as described in
section 202 (12 U.S.C. 1701q(g)(1)).
(b) (1) HUD shall ensure that Owners have the managerial capacity
to perform the coordination of services described in 12 U.S.C.
1701q(g)(2).
(2) Any cost associated with this paragraph shall be an eligible
cost under the contract for project rental assistance. Any cost
associated with the employment of a service coordinator shall also be
an eligible cost, except if the project is receiving congregate housing
services assistance under section 802 of the National Affordable
Housing Act. The HUD-approved service costs will be an eligible expense
to be paid from project rental assistance, not to exceed $15 per unit
per month. The balance of service costs shall be provided from other
sources, which may include co-payment by the tenant receiving the
service. Such co-payment shall not be included in the Total Tenant
Payment.
Sec. 891.230 Selection preferences.
For purposes of the Section 202 Program, the selection preferences
in 24 CFR part 5, subpart D apply.
[[Page 11962]]
Subpart C--Section 811 Supportive Housing for Persons With
Disabilities
Sec. 891.300 Applicability.
The requirements set forth in this subpart C apply to the Section
811 Program of Supportive Housing for Persons with Disabilities only,
and to applicants, Sponsors, and Owners under that program.
Sec. 891.305 Definitions.
As used in this part in reference to the Section 811 Program, and
in addition to the applicable definitions in Sec. 891.105:
Acquisition means the purchase of (or otherwise obtaining title to)
existing structures to be used as housing for persons with
disabilities, including housing and related facilities from the
Resolution Trust Corporation. Capital advances are not available in
connection with facilities owned and operated by the Sponsor as housing
for persons with disabilities.
Congregate space (hereinafter referred to as community space) means
space for multipurpose rooms, common areas, and other space necessary
for the provision of supportive services. Community space does not
include commercial areas.
Disabled household means a household composed of:
(1) One or more persons at least one of whom is an adult (18 years
or older) who has a disability;
(2) Two or more persons with disabilities living together, or one
or more such persons living with another person who is determined by
HUD, based upon a certification from an appropriate professional (e.g.,
a rehabilitation counselor, social worker, or licensed physician) to be
important to their care or well being; or
(3) The surviving member or members of any household described in
paragraph (1) of this definition who were living in a unit assisted
under this part, with the deceased member of the household at the time
of his or her death.
Nonprofit organization means any institution or foundation:
(1) That has tax-exempt status under section 501(c)(3) of the
Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);
(2) No part of the net earnings of which inures to the benefit of
any Board member, founder, contributor, or individual;
(3) That has a governing board;
(i) The membership of which is selected in a manner to assure that
there is significant representation of the views of the community in
which such housing is located (including persons with disabilities);
and
(ii) That is responsible for the operation of the housing assisted
under this part; and
(4) That is approved by HUD as to financial responsibility.
Owner means a single-purpose nonprofit organization established by
the Sponsor that will receive a capital advance and project rental
assistance payments to develop and operate, as its legal owner,
supportive housing for persons with disabilities under this part. The
purposes of the Owner must include the promotion of the welfare of
persons with disabilities. The Owner may not be controlled by or under
the direction of persons or firms seeking to derive profit or gain
therefrom.
Person with disabilities shall have the meaning provided in Section
811 (42 U.S.C. 8013(k)(2)). The term ``person with disabilities'' shall
also include the following:
(1) A person who has a developmental disability, as defined in
section 102(7) of the Developmental Disabilities Assistance and Bill of
Rights Act (42 U.S.C. 6001(5)), i.e., if he or she has a severe chronic
disability which:
(i) Is attributable to a mental or physical impairment or
combination of mental and physical impairments;
(ii) Is manifested before the person attains age twenty-two;
(iii) Is likely to continue indefinitely;
(iv) Results in substantial functional limitation in three or more
of the following areas of major life activity:
(A) Self-care;
(B) Receptive and expressive language;
(C) Learning;
(D) Mobility;
(E) Self-direction;
(F) Capacity for independent living;
(G) Economic self-sufficiency; and
(v) Reflects the person's need for a combination and sequence of
special, interdisciplinary, or generic care, treatment, or other
services which are of lifelong or extended duration and are
individually planned and coordinated.
(2) A person with a chronic mental illness, i.e., a severe and
persistent mental or emotional impairment that seriously limits his or
her ability to live independently, and which impairment could be
improved by more suitable housing conditions.
(3) A person infected with the human acquired immunodeficiency
virus (HIV) and a person who suffers from alcoholism or drug addiction,
provided they meet the definition of ``person with disabilities'' in
Section 811 (42 U.S.C. 8013(k)(2)). A person whose sole impairment is a
diagnosis of HIV positive or alcoholism or drug addiction (i.e., does
not meet the qualifying criteria in section 811 (42 U.S.C. 8013(k)(2))
will not be eligible for occupancy in a section 811 project.
Sponsor means any nonprofit entity:
(1) That has tax-exempt status under section 501(c)(3) of the
Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);
(2) No part of the net earnings of which inures to the benefit of
any private shareholder, member, founder, contributor or individual;
(3) That is not controlled by or under the direction of persons or
firms seeking to derive profit or gain therefrom;
(4) That has a governing board the membership of which is selected
in a manner to assure that there is significant representation of the
views of persons with disabilities; and
(5) That is approved by HUD as to administrative and financial
capacity and responsibility.
Sec. 891.310 Special project standards.
In addition to the applicable project standards in Sec. 891.120,
the following special standards apply to the Section 811 Program and to
projects funded under Secs. 891.655 through 891.790:
(a) Minimum group home standards. Each group home must provide a
minimum of 290 square feet of prorated space for each resident,
including a minimum area of 80 square feet for each resident in a
shared bedroom (with no more than two residents occupying a shared
bedroom) and a minimum area of 100 square feet for a single occupant
bedroom; at least one full bathroom for every four residents; space for
recreation at indoor and outdoor locations on the project site; and
sufficient storage for each resident in the bedroom and other storage
space necessary for the operation of the home. If the project involves
acquisition (with or without rehabilitation), the structure must at
least be in compliance with applicable State requirements. In the
absence of such requirements, the above standards shall apply.
(b) Additional accessibility requirements. In addition to the
accessibility requirements in Sec. 891.120(b), the following
requirements apply to the Section 811 Program and to projects funded
under Secs. 891.655 through 891.790:
(1) All entrances, common areas, units to be occupied by resident
staff, and amenities must be readily accessible to and usable by
persons with disabilities.
(2) In projects for chronically mentally ill individuals, a minimum
of 10 percent of all dwelling units in an independent living facility
(or 10 percent of all bedrooms and bathrooms in a group home, but at
least one of each such space), must be designed to be
[[Page 11963]]
accessible or adaptable for persons with disabilities.
(3) In projects for developmentally disabled or physically disabled
persons, all dwelling units in an independent living facility (or all
bedrooms and bathrooms in a group home) must be designed to be
accessible or adaptable for persons with physical disabilities. A
project involving acquisition and/or rehabilitation may provide a
lesser number if:
(i) The cost of providing full accessibility makes the project
financially infeasible;
(ii) Fewer than one-half of the intended occupants have mobility
impairments; and
(iii) The project complies with the requirements of 24 CFR 8.23.
(4) For the purposes of paragraph (b) of this section, the
following definitions apply:
(i) Accessible describes a site, building, facility, or portion
thereof that complies with the Uniform Federal Accessibility Standards
and that can be approached, entered, and used by physically disabled
people;
(ii) Adaptability means the ability of certain building spaces and
elements, such as kitchen counters, sinks, and grab bars, to be added
or altered so as to accommodate the needs of either disabled or
nondisabled persons, or to accommodate the needs of either disabled or
nondisabled persons, or to accommodate the needs of persons with
different types or degrees of disability.
Sec. 891.315 Prohibited facilities.
This section shall apply to capital advances under the Section 811
Program, as well as loans financed under subpart E of this part.
Project facilities may not include infirmaries, nursing stations,
spaces dedicated to the delivery of medical treatment or physical
therapy, padded rooms, or space for respite care or sheltered
workshops, even if paid for from sources other than the HUD capital
advance or loan. Except for office space used by the Owner (or
Borrower, if applicable) exclusively for the administration of the
project, project facilities may not include office space.
Sec. 891.320 Site and neighborhood standards.
In addition to the requirements in Sec. 891.125 and Sec. 891.680,
if applicable, the following site and neighborhood requirements apply
to the Section 811 Program:
(a) Travel time and cost via public transportation or private
automobile, from the neighborhood to places of employment providing a
range of jobs for very low-income workers (or low-income workers, as
applicable), must not be excessive.
(b) Projects should be located in neighborhoods where other family
housing is located. Projects should not be located adjacent to the
following facilities, or in areas where such facilities are
concentrated: schools or day-care centers for persons with
disabilities, workshops, medical facilities, or other housing primarily
serving persons with disabilities. Not more than one group home may be
located on any one site and no such home may be located on a site
contiguous to another site containing such a home.
Sec. 891.325 Lead-based paint requirements.
In addition to the other Federal requirements described in
Sec. 891.155, the following lead-based paint requirements apply to the
Section 811 Program and to projects funded under Secs. 891.655 through
891.790:
(a) The requirements of the Lead-Based Paint Poisoning Prevention
Act (42 U.S.C. 4821-4846) and implementing regulations at 24 CFR part
35 (except as superseded in paragraph (b) of this section) apply to the
dwellings (except zero-bedroom dwelling units or units that are
certified by a qualified inspector to be free of lead-based paint or
the lead-based paint hazards have been eliminated) in housing assisted
under this subpart and to projects funded under Secs. 891.655 through
891.790 that:
(1) Were constructed before 1978; and
(2) In which any child under 6 years of age resides or is expected
to reside.
(b) (1) This paragraph (b) implements the provisions of the Lead-
Based Paint Poisoning Prevention Act, 42 U.S.C. 4821 et seq., by
establishing procedures to eliminate, as far as practicable, the
hazards of lead-based paint poisoning with respect to covered
structures for which assistance is provided under the Section 811
Program and under Secs. 891.655 through 891.790. This paragraph (b) is
promulgated under 24 CFR 35.24(b)(4) and supersedes, with respect to
these programs, the requirements prescribed in subpart C of 24 CFR part
35.
(2) The following definitions apply to this section:
Applicable surface means all intact and nonintact painted interior
and exterior surfaces of a residential structure.
Chewable surface means all protruding painted surfaces up to five
feet from the floor or ground, that are readily accessible to children
under 6 years of age, e.g., protruding corners, windowsills and frames,
doors and frames, and other protruding woodwork.
Defective paint surfaces means a surface on which the paint is
cracking, scaling, chipping, peeling, or loose.
Elevated blood lead level or EBL means excessive absorption of
lead: that is, a confirmed concentration of lead in whole blood of 20
ug/dl (micrograms of lead per deciliter) for a single test or of 15-19
ug/dl in two consecutive tests 3-4 months apart.
Lead-based paint means a paint surface, whether or not defective,
identified as having a lead content greater than or equal to 1 mg/cm2
(milligram per square centimeter) or .5 percent by weight or 5000 parts
per million (PPM).
(3) In the case of a structure constructed before 1978, the Sponsor
must inspect the structure for defective paint surfaces before it
submits site information. If defective paint surfaces are found,
treatment in accordance with paragraph (a)(5) of this section is
required. Correction of defective surfaces found during the initial
inspection must be completed before initial occupancy of the project.
Correction of defective paint conditions discovered at periodic
inspection must be completed within 30 calendar days of their
discovery. When weather conditions prevent completion of repainting of
exterior surfaces within the 30-day period, repainting may be delayed,
but covering or removal of the defective paint must be completed within
the prescribed period.
(4) In the case of a structure constructed before 1978, if the
Owner (or Borrower, if applicable) is presented with test results that
indicate that a child under the age of 6 years occupies the structure
and has an elevated blood lead level (EBL), the Owner (or Borrower, if
applicable) must cause the unit to be tested for lead-based paint on
chewable surfaces. Testing must be conducted by a State or local health
or housing agency, by an inspector certified or regulated by a State or
local health or housing agency, or an organization recognized by HUD.
Lead content shall be tested by using an X-ray fluorescence analysis
(XRF) or by laboratory analysis of paint samples. Where lead-based
paint on chewable surfaces is identified, covering or removal of the
paint surface in accordance with paragraph (a)(5) of this section is
required and treatment shall be completed within the time limits in
paragraph (b)(3) of this section.
(5) Treatment of defective paint surfaces and chewable surfaces
must consist of covering or removal of the
[[Page 11964]]
paint in accordance with the following requirements:
(i) A defective paint surface shall be treated if the total area of
defective paint on a component is:
(A) More than 10 square feet on an exterior wall;
(B) More than 2 square feet on an interior or exterior component
with a large surface area, excluding exterior walls and including, but
not limited to, ceilings, floors, doors, and interior walls; or
(C) More than 10 percent of the total surface area on an interior
or exterior component with a small surface area, including, but not
limited to, window sills, baseboards and trim.
(ii) Acceptable methods of treatment are: removal by wet scraping,
wet sanding, chemical stripping on or off site, replacing painted
components, scraping with infra-red or coil type heat gun with
temperatures below 1100 degrees, HEPA vacuum sanding, HEPA vacuum
needle gun, contained hydroblasting or high pressure wash with HEPA
vacuum, and abrasive sandblasting with HEPA vacuum. Surfaces must be
covered with durable materials with joints and edges sealed and caulked
as needed to prevent the escape of lead contaminated dust.
(iii) Prohibited methods of removal are: open flame burning or
torching; machine sanding or grinding without a HEPA exhaust;
uncontained hydroblasting or high pressure wash; and dry scraping
except around electrical outlets or except when treating defective
paint spots no more than two square feet in any one interior room or
space (hallway, pantry, etc.) or totalling no more than twenty square
feet on exterior surfaces.
(iv) During exterior treatment, soil and playground equipment must
be protected from contamination.
(v) All treatment procedures must be concluded with a thorough
cleaning of all surfaces in the room or area of treatment to remove
fine dust particles. Cleanup must be accomplished by wet washing
surfaces with a lead solubilizing detergent such as trisodium phosphate
or an equivalent solution.
(vi) Waste and debris must be disposed of in accordance with all
applicable Federal, State and local laws.
(6) In lieu of the procedures set forth in the preceding clause,
the Owner (or Borrower, if applicable) may, at its discretion, abate
all interior and exterior chewable surfaces in accordance with the
methods set out paragraph (a)(5) of this section.
(7) The Owner (or Borrower, if applicable) must take appropriate
action to protect tenants from hazards associated with abatement
procedures.
(8) The Owner (or Borrower, if applicable) must keep a copy of each
inspection report for at least three years. If a unit requires testing,
or treatment of chewable surfaces based on the testing, the Owner must
keep the test results, and, if applicable, the certification of
treatment indefinitely. The records must indicate which chewable
surfaces in the units have been tested or treated. If records establish
that certain chewable surfaces were tested, or tested and treated, in
accordance with the standards prescribed in this section, these
surfaces do not have to be tested or treated at any subsequent time.
Subpart D--Project Management
Sec. 891.400 Responsibilities of Owner.
(a) Marketing. (1) The Owner must commence and continue diligent
marketing activities not later than 90 days before the anticipated date
of availability of the first unit or occupancy of the group home.
Market activities shall include the provision of notices of the
availability of housing under the program to operators of temporary
housing for the homeless in the same housing market.
(2) Marketing must be done in accordance with a HUD-approved
affirmative fair housing marketing plan and all Federal, State or local
fair housing and equal opportunity requirements. The purpose of the
plan and requirements is to achieve a condition in which eligible
households of similar income levels in the same housing market area
have a like range of housing choices available to them regardless of
discriminatory considerations such as their race, color, creed,
religion, familial status, disability, sex or national origin.
(3) At the time of PRAC execution, the Owner must submit to HUD a
list of leased and unleased assisted units (or in the case of a group
home, leased and unleased residential spaces) with a justification for
the unleased units or residential spaces, in order to qualify for
vacancy payments for the unleased units or residential spaces.
(b) Management and maintenance. The Owner is responsible for all
management functions. These functions include selection and admission
of tenants, required reexaminations of incomes for households occupying
assisted units or residential spaces, collection of tenant payments,
termination of tenancy and eviction, and all repair and maintenance
functions (including ordinary and extraordinary maintenance and
replacement of capital items). All functions must be performed in
compliance with equal opportunity requirements.
(c) Contracting for services. (1) With HUD approval, the Owner may
contract with a private or public entity for performance of the
services or duties required in paragraphs (a) and (b) of this section.
However, such an arrangement does not relieve the Owner of
responsibility for these services and duties. All such contracts are
subject to the restrictions governing prohibited contractual
relationships described in Sec. 891.130. (These prohibitions do not
extend to management contracts entered into by the Owner with the
Sponsor or its nonprofit affiliate.)
(2) Consistent with the objectives of Executive Order No. 11625 (36
FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order
No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139)); Executive Order
No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 198); and Executive Order
No. 12138 (44 FR 29637, 3 CFR, 1979 Comp., p. 393; as amended by
Executive Order No. 12608 (52 FR 34617, 3 CFR, 1987 Comp., p. 245)),
the Owner will promote awareness and participation of minority and
women's business enterprises in contracting and procurement activities.
(d) Submission of financial and operating statements. The Owner
must submit to HUD:
(1) Within 60 days after the end of each fiscal year of project
operations, financial statements for the project audited by an
independent public accountant and in the form required by HUD; and
(2) Other statements regarding project operation, financial
conditions and occupancy as HUD may require to administer the PRAC and
to monitor project operations.
(e) Use of project funds. The Owner shall maintain a separate
interest bearing project fund account in a depository or depositories
which are members of the Federal Deposit Insurance Corporation or
National Credit Union Share Insurance Fund and shall deposit all tenant
payments, charges, income and revenues arising from project operation
or ownership to this account. All project funds are to be deposited in
Federally insured accounts. All balances shall be fully insured at all
times, to the maximum extent possible. Project funds must be used for
the operation of the project (including required insurance coverage),
and to make required deposits to the replacement reserve under
Sec. 891.405, in accordance with HUD-approved budget.
[[Page 11965]]
Any remaining project funds in the project funds account (including
earned interest) following the expiration of the fiscal year shall be
deposited in a Federally-insured residual receipts account within 60
days following the end of the fiscal year. Withdrawals from this
account may be made only for project purposes and with the approval of
HUD. If there are funds remaining in the residual receipts account when
the mortgage is satisfied, such funds shall be returned to HUD.
(f) Reports. The Owner shall submit such reports as HUD may
prescribe to demonstrate compliance with applicable civil rights and
equal opportunity requirements. See Sec. 891.410(a).
(Approved by the Office of Management and Budget under control
number 2502-0470)
Sec. 891.405 Replacement reserve.
(a) Establishment of reserve. The Owner shall establish and
maintain a replacement reserve to aid in funding extraordinary
maintenance and repair and replacement of capital items.
(b) Deposits to reserve. The Owner shall make monthly deposits to
the replacement reserve in an amount determined by HUD.
(c) Level of reserve. The reserve must be built up to and
maintained at a level determined by HUD to be sufficient to meet
projected requirements. Should the reserve reach that level, the amount
of the deposit to the reserve may be reduced with the approval of HUD.
(d) Administration of reserve. Replacement reserve funds must be
deposited with HUD or in a Federally-insured depository in an interest-
bearing account(s) whose balances(s) are fully insured at all times.
All earnings including interest on the reserve must be added to the
reserve. Funds may be drawn from the reserve and used only in
accordance with HUD guidelines and with the approval of, or as directed
by, HUD.
Sec. 891.410 Selection and admission of tenants.
(a) Written procedures. The Owner shall adopt written tenant
selection procedures that ensure nondiscrimination in the selection of
tenants and that are consistent with the purpose of improving housing
opportunities for very low-income elderly persons and persons with
disabilities (as applicable); and reasonably related to program
eligibility and an applicant's ability to perform the obligations of
the lease. Owners shall promptly inform in writing any rejected
applicant of the grounds for any rejection. Additionally, Owners shall
maintain a written, chronological waiting list showing the name, race,
gender, ethnicity, and date of each person applying for the program.
(b) Application for admission. The Owner must accept applications
for admission to the project in the form prescribed by HUD, and (under
the Section 202 Program only) is obligated to confirm all information
provided by applicant families on the application. Applicant households
applying for assisted units (or residential spaces in a group home)
must complete a certification of eligibility as part of the application
for admission. Applicant households must meet the disclosure and
verification requirements for Social Security Numbers, as provided by
24 CFR part 5, subpart B. Applicant families must sign and submit
consent forms for the obtaining of wage and claim information from
State Wage Information Collection Agencies, as provided by 24 CFR part
5, subpart B. Both the Owner and the applicant household must complete
and sign the application for admission. On request, the Owner must
furnish copies of all applications for admission to HUD.
(c) Determination of eligibility and selection of tenants. (1) The
Owner is responsible for determining whether applicants are eligible
for admission and for the selection of households. To be eligible for
admission, an applicant must be an elderly person or a person with
disabilities, as applicable (as defined in Secs. 891.205 and 891.305,
respectively); must meet the disclosure and verification requirements
for Social Security Numbers, as provided by 24 CFR part 5, subpart B;
must sign and submit consent forms for the obtaining of wage and claim
information from State Wage Information Collection Agencies, as
provided by 24 CFR part 5, subpart B; and must be a very low-income
family, as defined in Sec. 891.105.
(2) Under the Section 811 Program:
(i) In order to be eligible for admission, the applicant must also
meet any project occupancy requirements approved by HUD.
(ii) Owners shall make selections in a nondiscriminatory manner
without regard to considerations such as race, religion, color, sex,
national origin, familial status, or disability. An Owner may, with the
approval of the Secretary, limit occupancy within housing developed
under this part 891 to persons with disabilities who have similar
disabilities and require a similar set of supportive services in a
supportive housing environment. However, the Owner must permit
occupancy by any qualified person with a disability who could benefit
from the housing and/or services provided regardless of the person's
disability.
(d) Unit assignment. If the Owner determines that the household is
eligible and is otherwise acceptable and units (or residential spaces
in a group home) are available, the Owner will assign the household a
unit or residential space in a group home. If the household will occupy
an assisted unit, the Owner will assign the household a unit of the
appropriate size in accordance with HUD's general occupancy guidelines.
If no suitable unit (or residential space in a group home) is
available, the Owner will place the household on a waiting list for the
project and notify the household when a suitable unit or residential
space may become available. If the waiting list is so long that the
applicant would not be likely to be admitted for the next 12 months,
the Owner may advise the applicant that no additional applications for
admission are being considered for that reason.
(e) Ineligibility determination. If the Owner determines that an
applicant is ineligible for admission or the Owner is not selecting the
applicant for other reasons, the Owner will promptly notify the
applicant in writing of the determination, the reasons for the
determination, and the applicant's right to request a meeting to review
the rejection, in accordance with HUD requirements. The review, if
requested, may not be conducted by a member of the Owner's staff who
made the initial decision to reject the applicant. The applicant may
also exercise other rights (e.g., rights granted under Federal, State
or local civil rights laws) if the applicant believes he or she is
being discriminated against on a prohibited basis.
(f) Records. Records on applicants and approved eligible
households, which provide racial, ethnic, gender and place of previous
residency data required by HUD, must be retained for three years. See
Sec. 891.410(a).
(g) Reexamination of household family income and composition. (1)
Regular reexaminations. The Owner must reexamine the income and
composition of the household at least every 12 months. Upon
verification of the information, the Owner must make appropriate
adjustments in the total tenant payment in accordance with part 813 of
this chapter, as modified by Sec. 891.105, and must determine whether
the household's unit size is still appropriate. The Owner must adjust
tenant payment and the project rental assistance payment, and must
carry out any unit transfer in accordance with HUD standards. At the
time of reexamination under paragraph (g)(1) of
[[Page 11966]]
this section, the Owner must require the household to meet the
disclosure and verification requirements for Social Security Numbers,
as provided by 24 CFR part 5, subpart B. For requirements regarding the
signing and submitting of consent forms by families for obtaining of
wage and claim information from State Wage Information Collection
Agencies, see 24 CFR part 5, subpart B.
(2) Interim reexaminations. The household must comply with the
provisions in its lease regarding interim reporting of changes in
income. If the Owner receives information concerning a change in the
household's income or other circumstances between regularly scheduled
reexaminations, the Owner must consult with the household and make any
adjustments determined to be appropriate. See 24 CFR part 5, subpart B
for the requirements for the disclosure and verification of Social
Security Number at interim reexaminations involving new household
members. For requirements regarding the signing and submitting of
consent forms by families for the obtaining of wage and claim
information from State Wage Information Collection Agencies, see 24 CFR
part 5, subpart B. Any change in the household's income or other
circumstances that result in an adjustment in the total tenant payment,
tenant payment, and project rental assistance payment must be verified.
(3) Continuation of project rental assistance payment. (i) A
household shall remain eligible for project rental assistance payment
until the total tenant payment equals or exceeds the gross rent (or a
pro rata share of the gross rent in a group home). The termination of
subsidy eligibility will not affect the household's other rights under
its lease. Project rental assistance payment may be resumed if, as a
result of changes in income, rent or other relevant circumstances
during the term of the PRAC, the household meets the income eligibility
requirements of 24 CFR part 813 (as modified in Sec. 891.105) and
project rental assistance is available for the unit or residential
space under the terms of the PRAC. The household will not be required
to establish its eligibility for admission to the project under the
remaining requirements of paragraph (c) of this section.
(ii) A household's eligibility for project rental assistance
payment may be terminated in accordance with HUD requirements for such
reasons as failure to submit requested verification information,
including information related to disclosure and verification of Social
Security Numbers, as provided by 24 CFR part 5, subpart B or failure to
sign and submit consent forms for the obtaining of wage and claim
information from State Wage Information Collection Agencies (as
provided by 24 CFR part 5, subpart B).
(h) Selection preferences. Under the Section 202 Program, the
selection preferences in 24 CFR part 5, subpart D apply.
Sec. 891.415 Obligations of the household or family.
This section shall apply to capital advances under the Section 202
Program and the Section 811 Program, as well as loans financed under
subpart E of this part.
(a) Requirements. The household (or family, as applicable) shall:
(1) Pay amounts due under the lease directly to the Owner (or
Borrower, as applicable);
(2) Supply such certification, release of information, consent,
completed forms or documentation as the Owner (or Borrower, as
applicable) or HUD determines necessary, including information and
documentation relating to the disclosure and verification of Social
Security Numbers, as provided by 24 CFR part 5, subpart B, and the
signing and submission of consent forms for the obtaining of wage and
claim information from State Wage Information Collection Agencies, as
provided by 24 CFR part 5, subpart B;
(3) Allow the Owner (or Borrower, as applicable) to inspect the
dwelling unit or residential space at reasonable times and after
reasonable notice;
(4) Notify the Owner (or Borrower, as applicable) before vacating
the dwelling unit or residential space; and
(5) Use the dwelling unit or residential space solely for residence
by the household (or family, as applicable) and as the household's (or
family's) principal place of residence.
(b) Prohibitions. The household (or family, as applicable) shall
not:
(1) Assign the lease or transfer the unit or residential space; or
(2) Occupy, or receive assistance for the occupancy of, a unit or
residential space governed under this part 891 while occupying, or
receiving assistance for the occupancy of, another unit assisted under
any Federal housing assistance program, including any section 8
program.
(Approved by the Office of Management and Budget under control
number 2502-0470)
Sec. 891.420 Overcrowded and underoccupied units.
If the Owner determines that because of change in household size,
an assisted unit is smaller than appropriate for the eligible household
to which it is leased, or that the assisted unit is larger than
appropriate, project rental assistance payment with respect to the unit
will not be reduced or terminated until the eligible household has been
relocated to an appropriate alternate unit. If possible, the Owner
will, as promptly as possible, offer the household an appropriate
alternate unit. The Owner may receive vacancy payments for the vacated
unit if the Owner complies with the requirements of Sec. 891.445.
Sec. 891.425 Lease requirements.
This section shall apply to capital advances under the Section 202
Program and the Section 811 Program, as well as loans financed under
subpart E of this part.
(a) Term of lease. The term of the lease may not be less than one
year. Unless the lease has been terminated by appropriate action, upon
expiration of the lease term, the household and Owner (or family and
Borrower, as applicable) may execute a new lease for a term not less
than one year, or may take no action. If no action is taken, the lease
will automatically be renewed for successive terms of one month.
(b) Termination by the household (or family, as applicable). All
leases may contain a provision that permits the household (or family)
to terminate the lease upon 30 days advance notice. A lease for a term
that exceeds one year must contain such provision.
(c) Form. The Owner (or Borrower, as applicable) shall use the
lease form prescribed by HUD. In addition to required provisions of the
lease form, the Owner (or Borrower) may include a provision in the
lease permitting the Owner (or Borrower) to enter the leased premises
at any time without advance notice when there is reasonable cause to
believe that an emergency exists or that health or safety of a family
member is endangered.
Sec. 891.430 Termination of tenancy and modification of lease.
The provisions of part 247 of this title apply to all decisions by
an Owner to terminate the tenancy or modify the lease of a household
residing in a unit (or residential space in a group home).
Sec. 891.435 Security deposits.
This section shall apply to capital advances under the Section 202
Program and the Section 811 Program, as well as loans financed under
subpart E of this part. For loans financed under subpart E of this
part, the requirements in Sec. 891.635 also apply.
(a) Collection of security deposits. At the time of the initial
execution of the lease, the Owner (or Borrower, as applicable) will
require each household
[[Page 11967]]
(or family, as applicable) occupying an assisted unit or residential
space in a group home to pay a security deposit in an amount equal to
one month's tenant payment or $50, whichever is greater. The household
(or family) is expected to pay the security deposit from its own
resources and other available public or private resources. The Owner
(or Borrower) may collect the security deposit on an installment basis.
(b) Security deposit provisions applicable to units. (1)
Administration of security deposit. The Owner (or Borrower, as
applicable) must place the security deposits in a segregated interest-
bearing account. The amount of the segregated, interest-bearing account
maintained by the Owner (or Borrower) must at all times equal the total
amount collected from the households (or families, as applicable) then
in occupancy plus any accrued interest and less allowable
administrative cost adjustments. The Owner (or Borrower) must comply
with any applicable State and local laws concerning interest payments
on security deposits.
(2) Household (or family, as applicable) notification requirement.
In order to be considered for the refund of the security deposit, a
household (or family) must provide the Owner (or Borrower, as
applicable) with a forwarding address or arrange to pick up the refund.
(3) Use of security deposit. The Owner (or Borrower, as
applicable), subject to State and local law and the requirements of
paragraphs (b)(1) and (b)(3) of this section, may use the household's
(or family's, as applicable) security deposit balance as reimbursement
for any unpaid amounts that the household (or family) owes under the
lease. Within 30 days (or shorter time if required by State or local
law) after receiving notification under paragraph (b)(2) of this
section, the Owner (or Borrower) must:
(i) Refund to a household (or family) that does not owe any amount
under the lease the full amount of the household's (or family's)
security deposit balance;
(ii) Provide to a household (or family) owing amounts under the
lease a list itemizing each amount, along with a statement of the
household's (or family's) rights under State and local law. If the
amount that the Owner (or Borrower) claims is owed by the household (or
family) is less than the amount of the household's (or family's)
security deposit balance, the Owner (or Borrower) must refund the
excess balance to the household (or family). If the Owner (or Borrower)
fails to provide the list, the household (or family) will be entitled
to the refund of the full amount of the household's (or family's)
security deposit balance.
(4) Disagreements. If a disagreement arises concerning
reimbursement of the security deposit, the household (or family, if
applicable) will have the right to present objections to the Owner (or
Borrower, if applicable) in an informal meeting. The Owner (or
Borrower) must keep a record of any disagreements and meetings in a
tenant file for inspection by HUD. The procedures of this paragraph do
not preclude the household (or family) from exercising its rights under
State or local law.
(5) Decedent's interest in security deposit. Upon the death of a
member of a household (or family, as applicable), the decedent's
interest, if any, in the security deposit will be governed by State or
local law.
(c) Reimbursement by HUD for assisted units. If the household's (or
family's, if applicable) security deposit balance is insufficient to
reimburse the Owner (or Borrower, if applicable) for any amount that
the household (or family) owes under the lease for an assisted unit or
residential space, and the Owner (or Borrower) has provided the
household (or family) with the list required by paragraph (b)(3)(ii) of
this section, the Owner (or Borrower) may claim reimbursement from HUD
for an amount not to exceed the lesser of:
(1) The amount owed the Owner (or Borrower); or
(2) One month's per unit operating cost (or contract rent, if
applicable), minus the amount of the household's (or family's) security
deposit balance. Any reimbursement under this section will be applied
first toward any unpaid tenant payment (or rent, if applicable) due
under the lease. No reimbursement may be claimed for any unpaid tenant
payment (or rent) for the period after termination of the tenancy. The
Owner (or Borrower) may be eligible for vacancy payments following a
vacancy in accordance with the requirements of Sec. 891.445 (or
Secs. 891.650 or 891.790, as applicable).
Sec. 891.440 Adjustment of utility allowances.
This section shall apply to projects funded under the Section 202
Program, to independent living complexes funded under Section 811
Program, and to projects financed with loans under subpart E of this
part. The Owner (or Borrower, as applicable) must submit an analysis of
any utility allowances applicable. Such data as changes in utility
rates and other facts affecting utility consumption should be provided
as part of this analysis to permit appropriate adjustments in the
utility allowances for assisted units. In addition, when utility rate
changes would result in a cumulative increase of 10 percent or more in
the most recently approved utility allowances, the Owner (or Borrower)
must advise HUD and request approval of new utility allowances.
Whenever a utility allowance for an assisted unit is adjusted, the
Owner (or Borrower) will promptly notify affected households (or
families, as applicable) and make a corresponding adjustment of the
tenant payment (or rent, as applicable) and the amount of the project
rental assistance payment (or housing or project assistance payment, as
applicable).
(Approved by the Office of Management and Budget under control
number 2502-0470)
Sec. 891.445 Conditions for receipt of vacancy payments for assisted
units.
(a) General. Vacancy payments under the PRAC will not be made
unless the conditions for receipt of these project rental assistance
payments set forth in this section are fulfilled.
(b) Vacancies during rent-up. For each unit (or residential space
in a group home) that is not leased as of the effective date of the
PRAC, the Owner is entitled to vacancy payments in the amount of 50
percent of the per unit operating cost (or pro rata share of the group
home operating cost) for the first 60 days of vacancy, if the Owner:
(1) Conducted marketing in accordance with Sec. 891.400(a) and
otherwise complied with Sec. 891.400;
(2) Has taken and continues to take all feasible actions to fill
the vacancy; and
(3) Has not rejected any eligible applicant except for good cause
acceptable to HUD.
(c) Vacancies after rent-up. If an eligible household vacates an
assisted unit (or residential space in a group home) the Owner is
entitled to vacancy payments in the amount of 50 percent of the
approved per unit operating cost (or pro rata share of the group home
operating cost) for the first 60 days of vacancy if the Owner:
(1) Certifies that it did not cause the vacancy by violating the
lease, the PRAC, or any applicable law;
(2) Notified HUD of the vacancy or prospective vacancy and the
reasons for the vacancy upon learning of the vacancy or prospective
vacancy;
(3) Has fulfilled and continues to fulfill the requirements
specified in Sec. 891.400(a) (2) and (3) and Sec. 891.445(b) (2) and
(3); and
(4) For any vacancy resulting from the Owner's eviction of an
eligible household, certifies that it has complied with Sec. 891.430.
(d) Prohibition of double compensation for vacancies. If the
[[Page 11968]]
Owner collects payments for vacancies from other sources (tenant
payment, security deposits, payments under Sec. 891.435(c), or
governmental payments under other programs), the Owner shall not be
entitled to collect vacancy payments to the extent these collections
from other sources plus the vacancy payment exceed the approved per
unit operating cost.
Sec. 891.450 HUD review.
HUD shall conduct periodic on-site management reviews of the
Owner's compliance with the requirements of this part.
Subpart E--Loans for Housing for the Elderly and Handicapped
Sec. 891.500 Purpose and policy.
(a) Purpose. The program under subpart E of this part provides
direct Federal loans under section 202 of the Housing Act of 1959 (42
U.S.C. 1701q) for housing projects serving elderly or handicapped
families and individuals. The housing projects shall provide the
necessary services for the occupants which may include, but are not
limited to: Health, continuing education, welfare, informational,
recreational, homemaking, meal and nutritional services, counseling,
and referral services, as well as transportation where necessary to
facilitate access to these services.
(b) General policy. A loan made under subpart E of this part shall
be used to finance the construction or the substantial rehabilitation
of projects for elderly or handicapped families, or for the acquisition
with or without moderate rehabilitation of existing housing and related
facilities for group homes for nonelderly handicapped individuals.
(c) Applicability. Subpart E of this part applies to all fund
reservations made before October 1, 1990, except for loans not
initially closed that were converted to capital advances. Specifically,
Sec. 891.520 through 891.650 of subpart E apply to projects for elderly
or handicapped families that received reservations under section 202 of
the Housing Act of 1959 (12 U.S.C. 1701q) and housing assistance under
section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437 et
seq). Sections 891.655 through 891.790 of subpart E apply to projects
for nonelderly handicapped families receiving reservations under
section 202 and project assistance payment
FR Doc. 96-6312 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Supportive Housing for the Elderly and Persons With Disabilities
s under section 202(h) of the
Housing Act of 1959.
Sec. 891.505 Definitions.
For the purposes of this subpart E:
Act means section 202 of the Housing Act of 1959, as amended (12
U.S.C. 1701q).
Borrower means a private nonprofit corporation or a nonprofit
consumer cooperative that may be established by the Sponsor, which will
obtain a Section 202 loan and execute a mortgage in connection
therewith as the legal owner of the project. ``Borrower'' does not mean
a public body or the instrumentality of any public body. The purposes
of the Borrower must include the promotion of the welfare of elderly
and/or handicapped families. No part of the net earnings of the
Borrower may inure to the benefit of any private shareholder,
contributor, or individual, and the Borrower may not be controlled by
or under the direction of persons or firms seeking to derive profit or
gain therefrom. Because of the nonprofit nature of the Section 202
program, no officer or director, or trustee, member, stockholder or
authorized representative of the Borrower is permitted to have any
financial interest in any contract in connection with the rendition of
services, the provision of goods or supplies, project management,
procurement of furnishings and equipment, construction of the project,
procurement of the site or other matters whatsoever.
Elderly family means:
(1) Families of two or more persons the head of which (or his or
her spouse) is 62 years of age or older;
(2) The surviving member or members of any family described in
paragraph (1) of this definition living in a unit assisted under
subpart E of this part with the deceased member of the family at the
time of his or her death;
(3) A single person who is 62 years of age or older; or
(4) Two or more elderly persons living together, or one or more
such persons living with another person who is determined by HUD, based
upon a licensed physician's certificate provided by the family, to be
essential to their care or well being.
Handicapped family means:
(1) Families of two or more persons the head of which (or his or
her spouse) is handicapped;
(2) The surviving member or members of any family described in
paragraph (1) of this definition living in a unit assisted under
subpart E of this part with the deceased member of the family at the
time of his or her death;
(3) A single handicapped person over the age of 18; or
(4) Two or more handicapped persons living together, or one or more
such persons living with another person who is determined by HUD, based
upon a licensed physician's certificate provided by the family, to be
essential to their care or well being.
Handicapped person or individual means:
(1) Any adult having a physical, mental, or emotional impairment
that is expected to be of long-continued and indefinite duration,
substantially impedes his or her ability to live independently, and is
of a nature that such ability could be improved by more suitable
housing conditions.
(2) A person with a developmental disability, as defined in section
102(7) of the Developmental Disabilities Assistance and Bill of Rights
Act (42 U.S.C. 6001(5), i.e., a person with a severe chronic disability
that:
(i) Is attributable to a mental or physical impairment or
combination of mental and physical impairments;
(ii) Is manifested before the person attains age twenty-two;
(iii) Is likely to continue indefinitely;
(iv) Results in substantial functional limitation in three or more
of the following areas of major life activity:
(A) Self-care;
(B) Receptive and expressive language;
(C) Learning;
(D) Mobility;
(E) Self-direction;
(F) Capacity for independent living;
(G) Economic self-sufficiency; and
(v) Reflects the person's need for a combination and sequence of
special, interdisciplinary, or generic care, treatment, or other
services that are of lifelong or extended duration and are individually
planned and coordinated.
(3) A person with a chronic mental illness, i.e., if he or she has
a severe and persistent mental or emotional impairment that seriously
limits his or her ability to live independently, and whose impairment
could be improved by more suitable housing conditions.
(4) Persons infected with the human acquired immunodeficiency virus
(HIV) who are disabled as a result of infection with the HIV are
eligible for occupancy in section 202 projects designed for the
physically disabled, developmentally disabled, or chronically mentally
ill depending upon the nature of the person's disability. A person
whose sole impairment is alcoholism or drug addition (i.e., who does
not have a developmental disability, chronic mental illness, or
physical disability that is the disabling condition required for
eligibility in a particular project) will not be considered to be
disabled for the purposes of the section 202 program.
Housing and related facilities means rental or cooperative housing
structures constructed or substantially
[[Page 11969]]
rehabilitated as permanent residences for use by elderly or handicapped
families, or acquired with or without moderate rehabilitation for use
by nonelderly handicapped families as group homes. The term includes
structures suitable for use by families residing in the project or in
the area, such as cafeterias or dining halls, community rooms, or
buildings, or other essential service facilities. In the case of
acquisition with or without moderate rehabilitation, at least three
years must have elapsed from the later of the date of completion of the
project or the beginning of occupancy to the date of the application
for a Section 202 fund reservation. Except for intermediate care
facilities for the mentally retarded and individuals with related
conditions, this term does not include nursing homes, hospitals,
intermediate care facilities, or transitional care facilities.
Nonelderly handicapped family means a handicapped family in which
the head of the family (and spouse, if any) is less than 62 years of
age at the time of the family's initial occupancy of a project.
Section 8 Program means the housing assistance payments program
that implements section 8 of the United States Housing Act of 1937 (42
U.S.C. 1437f note).
Sec. 891.510 Displacement, relocation, and real property acquisition.
(a) Minimizing displacement. Consistent with the other goals and
objectives of subpart E of this part, Sponsors and Borrowers shall
assure that they have taken all reasonable steps to minimize the
displacement of persons (families, individuals, businesses, nonprofit
organizations, and farms) as a result of a project assisted under
subpart E of this part.
(b) Relocation assistance for displaced persons. A displaced person
(defined in paragraph (f) of this section) must be provided relocation
assistance at the levels described in, and in accordance with the
requirements of the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4201-
4655), as implemented by 49 CFR part 24. A displaced person shall be
advised of his or her rights under the Fair Housing Act (42 U.S.C.
3601-3619). If the comparable replacement dwellings are located in
areas of minority concentration, minority persons also must be given,
if possible, referrals to suitable, decent, safe, and sanitary
replacement dwellings not located in such areas.
(c) Real property acquisition requirements. The acquisition of real
property for a project is subject to the URA and the requirements
described in 49 CFR part 24, subpart B.
(d) Appeals. A person who disagrees with the Sponsor's/Borrower's
determination concerning whether the person qualifies as a ``displaced
person,'' or with the amount of relocation assistance for which the
person is eligible, may file a written appeal of that determination
with the Sponsor/Borrower. A low-income person who is dissatisfied with
the Sponsor's/Borrower's determination on his or her appeal may submit
a written request for review of that determination to the HUD field
office.
(e) Responsibility of Sponsor/Borrower. The Sponsor/Borrower shall
certify that it will comply (i.e., provide assurance of compliance, as
required by 49 CFR part 24) with the URA, the regulations at 49 CFR
part 24, and the requirements of this section, and shall ensure such
compliance notwithstanding any third party's contractual obligation to
comply with these provisions. The Sponsor/Borrower shall maintain
records in sufficient detail to demonstrate compliance with the
provisions of this section. The Sponsor/Borrower shall maintain data on
the race, ethnic, gender, and handicap status of displaced persons.
(f) Definition of a displaced person. (1) For purposes of this
section, the term ``displaced person'' means a person (family,
individual, business, nonprofit organization, or farm) that moves from
real property, or moves personal property from real property,
permanently, as a direct result of acquisition, rehabilitation, or
demolition for a project assisted under this part. This includes any
permanent, involuntary move for an assisted project including any
permanent move from the real property that is made:
(i) After notice by the Sponsor/Borrower to move permanently from
the property if the move occurs on or after:
(A) The date of the submission of an application to HUD that is
later approved, if the Sponsor has control of an appropriate site; or
(B) The date that the Sponsor obtains control of an approvable
site, if such control is obtained after the submission of an
application to HUD:
(ii) Before the date described in paragraph (f)(1)(i) of this
section, if the Sponsor, Borrower or HUD determines that the
displacement resulted directly from acquisition, rehabilitation, or
demolition for the project;
(iii) By a tenant-occupant of a dwelling unit, if any one of the
following three situations occurs;
(A) The tenant moves after execution of the Agreement between the
Sponsor/Borrower and HUD, and the move occurs before the tenant is
provided written notice offering him or her the opportunity to lease
and occupy a suitable, decent, safe, and sanitary dwelling in the same
building/complex upon completion of the project under reasonable terms
and conditions. Such reasonable terms and conditions include a monthly
rent and estimated average monthly utility costs that do not exceed the
greater of:
(1) The tenant's monthly rent and estimated average monthly utility
costs before the Agreement; or
(2) The total tenant payment, as determined under 24 CFR 813.107,
if the tenant is low-income, or 30 percent of gross household income,
if the tenant is not low-income; or
(B) The tenant is required to relocate temporarily, does not return
to the building/complex, and either:
(1) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation;
or
(2) Other conditions of the temporary relocation are not
reasonable; or
(C) The tenant is required to move to another dwelling in the same
building/complex but is not offered reimbursement for all reasonable
out-of-pocket expenses incurred in connection with the move, or other
conditions of the move are not reasonable.
(2) Notwithstanding the provisions of paragraph (f)(1) of this
section, however, a person does not qualify as a ``displaced person''
(and is not eligible for relocation assistance at URA levels), if:
(i) The person has been evicted for cause based upon a serious or
repeated violation of the terms and conditions of the lease or
occupancy agreement, violation of applicable Federal, State, or local
law, or other good cause, and HUD determines that the eviction was not
undertaken for the purpose of evading the obligation to provide
relocation assistance.
(ii) The person moved into the property after the submission of the
application and, before signing a lease and commencing occupancy, was
provided written notice of the project, its possible impact on the
person (e.g., displacement, temporary relocation or a rent increase)
and the fact that he or she will not qualify as a displaced person as a
result of the project;
(iii) The person is ineligible under 49 CFR 24.2(g)(2); or
(iv) HUD determines that the person was not displaced as a direct
result of
[[Page 11970]]
acquisition, rehabilitation, or demolition for the project;
(3) The Sponsor/Borrower may request, at any time, a HUD
determination of whether a displacement is or would be covered by this
section.
Sec. 891.515 Audit requirements.
Nonprofits receiving assistance under this part are subject to the
audit requirements in 24 CFR part 45.
Section 202 Projects for the Elderly or Handicapped--Section 8
Assistance
Sec. 891.520 Definitions applicable to 202/8 projects.
The following definitions apply to projects for eligible families
receiving assistance under section 8 of the United States Housing Act
of 1937 in addition to reservations under section 202 of the Housing
Act of 1959 (202/8 projects):
Assisted unit means a dwelling unit eligible for assistance under a
HAP contract.
Contract rent means the total amount of rent specified in the HAP
contract as payable by HUD and the tenant to the Borrower for an
assisted unit.
Family (eligible family) means an elderly or handicapped family
that meets the project occupancy requirements approved by HUD and, if
the family occupies an assisted unit, meets the requirements described
in part 813 of this chapter.
Gross rent is defined in part 813 of this chapter.
HAP contract (housing assistance payments contract) means the
contract entered into by the Borrower and HUD setting forth the rights
and duties of the parties with respect to the project and the payments
under the HAP contract.
Housing assistance payment means the payment made by HUD to the
Borrower for assisted units as provided in the HAP contract. The
payment is the difference between the contract rent and the tenant
rent. An additional payment is made to a family occupying an assisted
unit when the utility allowance is greater than the total tenant
payment. A housing assistance payment, known as a ``vacancy payment,''
may be made to the Borrower when an assisted unit is vacant, in
accordance with the terms of the HAP contract.
Project account means a specifically identified and segregated
account for each project that is established in accordance with
Sec. 891.570(b) out of the amounts by which the maximum annual
commitment exceeds the amount actually paid out under the HAP contract
each year.
Project occupancy requirements means that eligible populations to
be served under the Section 202 program are qualified individuals or
families whose head of household or spouse is elderly, physically
handicapped, developmentally disabled, or chronically mentally ill.
Projects are designed to meet the special needs of the particular
tenant population that the Borrower was selected to serve. Individuals
from one eligible group may not be accepted for occupancy in a project
designed for a different tenant group. However, a Sponsor can propose
to house eligible tenant groups other than the one it was selected to
serve, but must apply to the HUD field office for permission to do so,
based on a plan that demonstrates that it can adequately serve the
proposed tenant group. Upon review and recommendation by the field
office, HUD Headquarters will approve or disapprove the request.
Rent, in the case of a unit in a cooperative project, means the
carrying charges payable to the cooperative with respect to occupancy
of the unit.
Tenant rent means the monthly amount defined in, and determined in
accordance with part 813 of this chapter.
Total tenant payment means the monthly amount defined in, and
determined in accordance with part 813 of this chapter.
Utility allowance is defined in part 813 of this chapter and is
determined or approved by HUD.
Utility reimbursement is defined in part 813 of this chapter.
Vacancy payment means the housing assistance payment made to the
Borrower by HUD for a vacant assisted unit if certain conditions are
fulfilled, as provided in the HAP contract. The amount of the vacancy
payment varies with the length of the vacancy period and is less after
the first 60 days of any vacancy.
Sec. 891.525 Amount and terms of financing.
(a) The amount of financing approved shall be the amount stated in
the Notice of Section 202 Fund Reservation, including any increase
approved by the field office prior to the final closing of a loan;
provided, however, that the amount of financing provided shall not
exceed the lesser of:
(1) The dollar amounts stated in paragraphs (b) through (f) of this
section; or
(2) The total development cost of the project as determined by the
field office.
(b) For such part of the property or project attributable to
dwelling use (excluding exterior land improvements, as defined by the
Assistant Secretary) the maximum loan amount, depending on the number
of bedrooms, may not exceed:
(1) $28,032 per family unit without a bedroom.
(2) $32,321 per family unit with one bedroom.
(3) $38,979 per family unit with two bedrooms.
(c) In order to compensate for the higher costs incident to
construction of elevator type structures of sound standards of
construction and design, the field office may increase the dollar
limitations per family unit, as provided in paragraph (b) of this
section, to not to exceed:
(1) $29,500 per family unit without a bedroom.
(2) $33,816 per family unit with one bedroom.
(3) $41,120 per family unit with two bedrooms.
(d) Reduced loan amount--leaseholds. In the event the loan is
secured by a leasehold estate rather than a fee simple estate, the
allowable cost of the property upon which the loan amount is based
shall be reduced by the value of the leased fee.
(e) Adjusted loan amount--rehabilitation projects. A loan amount
that involves a project to be rehabilitated shall be subject to the
following additional limitations:
(1) Property held in fee. If the Borrower is the fee simple owner
of the project not encumbered by a mortgage, the maximum loan amount
shall not exceed 100 percent of the cost of the proposed
rehabilitation.
(2) Property subject to existing mortgage. If the Borrower owns the
project subject to an outstanding indebtedness, which is to be
refinanced with part of the Section 202 loan, the maximum loan amount
shall not exceed the cost of rehabilitation plus such portion of the
outstanding indebtedness as does not exceed the fair market value of
such land and improvements prior to the rehabilitation, as determined
by the field office.
(3) Property to be acquired. If the project is to be acquired by
the Borrower and the purchase price is to be financed with a part of
the Section 202 loan, the maximum loan amount shall not exceed the cost
of the rehabilitation plus such portion of the purchase price as does
not exceed the fair market value of such land and improvements prior to
the rehabilitation, as determined by the field office.
(f) Increased Mortgage Limits--High Cost Areas. (1)(i) The
Assistant Secretary may increase the dollar amount limitations in
paragraphs (b) and (c) of this section:
[[Page 11971]]
(A) By not to exceed 110 percent in any geographical area in which
the Assistant Secretary finds that cost levels so require; and
(B) By not to exceed 140 percent where the Assistant Secretary
determines it necessary on a project-by-project basis.
(ii) In no case, however, may any such increase exceed 90 percent,
where the Assistant Secretary determines that there is involved a
mortgage purchased or to be purchased by the Government National
Mortgage Association (GNMA) in implementing its Special Assistance
Functions under section 305 of the National Housing Act (as section 305
existed immediately before its repeal on November 30, 1983).
(2) If the Assistant Secretary finds that because of high costs in
Alaska, Guam, or Hawaii it is not feasible to construct dwellings
without the sacrifice of sound standards of construction, design, and
livability within the limitations of maximum loan amounts provided in
this section, the principal amount of mortgages may be increased by
such amounts as may be necessary to compensate for such costs, but not
to exceed in any event the maximum, including high cost area increases,
if any, otherwise applicable by more than one-half thereof.
(g) Loan interest rate. Loans shall bear interest at a rate
determined by HUD in accordance with this section.
(1) Annual interest rate. Except as provided under paragraph
(g)(2), loans shall bear interest at the rate in effect at the time the
loan is made. The loan interest rate shall not exceed:
(i) The average yield on the most recently issued 30-year
marketable obligations of the United States during the 3-month period
immediately preceding the fiscal year in which the loan is made
(adjusted to the nearest one-eighth of one percent), plus an allowance
to cover administrative costs and probable losses under the program;
and
(ii) Any applicable statutory ceiling on the loan interest rate
including the allowance to cover administrative costs and probable
losses.
(2) Optional interest rate. The Borrower may elect an optional loan
interest rate. To elect the optional rate, the Borrower must request
that HUD determine the loan interest rate at the time of the Borrower's
request for conditional or firm commitment for direct loan financing.
(i) If the Borrower elects the optional loan interest rate, the
loan interest rate shall not exceed:
(A) The average yield on the most recently issued 30-year
marketable obligations of the United States during the 3-month period
immediately preceding the fiscal year in which the request for
commitment is submitted (adjusted to the nearest one-eighth of one
percent), plus an allowance to cover administrative costs and probable
losses under the program;
(B) The average yield on the most recently issued 30-year
marketable obligations of the United States during the 1-month period
immediately preceding the month in which the request for commitment is
submitted (adjusted to the nearest one-eighth of one percent), plus an
allowance to cover the administrative costs and probable losses under
the program; and (C) Any applicable statutory ceiling on the loan
interest rate including an allowance to cover administrative costs and
probable losses under the program.
(ii) The date of submission of a request for conditional or firm
commitment is the date that the Borrower submits the complete and
acceptable request to HUD. The date of the submission of a request for
commitment will not be affected by any subsequent resubmission of the
request by the Borrower or by any reprocessing of the request by HUD.
(iii) The Borrower may withdraw its election of the optional
interest rate at any time before initial loan closing. If the Borrower
elected the optional interest rate with its request for conditional
commitment and withdraws its election, the loan will bear interest at
the rate determined under paragraph (g)(1) of this section, unless the
Borrower elects an optional interest rate with its request for firm
commitment. If the Borrower withdraws its election after the date of
submission of its request for firm commitment, the loan will bear
interest at the rate determined under paragraph (g)(1) of this section.
(iv) If initial loan closing has not occurred within 18 months
after the Notice of Section 202 Fund Reservation is issued, the
Borrower's election of the optional rate will be cancelled and the loan
will bear interest at the rate determined under paragraph (g)(1) of
this section.
(3) Allowance for administrative costs and probable losses. For the
purpose of computing the loan interest rate under paragraphs (g) (1)
and (2) of this section, the allowance to cover administrative costs
and probable losses under the program is one-fourth of one percent
(.25%) per annum for both the construction and permanent loan periods.
(h) Announcement of interest rates. (1) HUD will annually announce
the loan interest rate determination under paragraph (g)(1) of this
section by publishing notice of the rate in the Federal Register. The
Federal Register notice will include a statement explaining the basis
for the interest rate determination.
(2) Upon the Borrower's request, HUD will provide available current
information concerning the determination of the interest rate under
paragraph (g)(2) of this section.
(i) The loan shall be secured by a first mortgage on real estate in
fee simple or long term leasehold. The mortgage shall be repayable
during a term not to exceed 40 years and shall be subject to such terms
and conditions as shall be determined by the Assistant Secretary.
(j) In order to assure HUD of the Borrower's continued commitment
to the development, management, and operation of the project, a minimum
capital investment is required of Section 202 Borrowers of one-half of
one percent (0.5%) of the mortgage amount committed to be disbursed,
not to exceed the amount of $10,000. Section 106(b) loans made pursuant
to section 106 of the Housing Act of 1968 may not be utilized to meet
the minimum capital investment requirement. Such minimum capital
investment shall be placed in escrow at the initial closing of the
Section 202 loan and shall be held by HUD or other escrow agent
acceptable to the field office for not less than a 3-year period from
the date of initial occupancy and may be used for operating expenses or
deficits as may be directed by the field office. Any unexpended balance
remaining in the minimum capital investment account at the end of the
escrow period shall be returned to the Borrower.
Sec. 891.530 Prepayment privileges.
(a) The prepayment (whether in whole or in part) or the assignment
or transfer of physical and financial assets of any Section 202 project
is prohibited, unless the Secretary gives prior written approval.
(b) The Secretary may not grant approval unless he or she has
determined that the prepayment or transfer of the loan is part of a
transaction that will ensure the continued operation of the project,
until the original maturity date of the loan, in a manner that will
provide rental housing for the elderly and handicapped on terms at
least as advantageous to existing and future tenants as the terms
required by the original Section 202 loan agreement and any other loan
agreements entered into under other provisions of law.
[[Page 11972]]
Sec. 891.535 Requirements for awarding construction contracts.
(a) Awards shall be made only to responsible contractors that
possess the potential ability to perform successfully under the terms
and conditions of a proposed construction contract. Consideration shall
be given to such matters as contractor integrity, compliance with
public policy, record of past performance, and financial and technical
resources.
(b) Each Borrower is permitted to use either competitive bidding
(formal advertising) in selecting a construction contractor or the
negotiated noncompetitive method of contract award under paragraph (c)
of this section. In competitive bidding, sealed bids are publicly
solicited and a firm, fixed-price contract is awarded (in accordance
with the requirements of this paragraph (b)) to the responsible bidder
whose bid, conforming with all the material terms and conditions of the
invitation for bids, is lowest in price. Regardless of which method a
Borrower uses, there should be an opportunity for minority owned and
women owned businesses to be awarded a contract.
(1) Bids shall be solicited from an adequate number of known
contractors a reasonable time prior to the date set forth for opening
of bids. In addition, the invitation shall be publicly advertised.
(2) The invitation for bids shall specify:
(i) The name of the Borrower;
(ii) A brief description of the proposed project and the proposed
construction contract;
(iii) A preliminary estimate of cost;
(iv) That bids will be received at a specified place until a
specified time at which time and place all bids will be publicly
opened;
(v) The location where the proposed forms of contract and bid
documents, including plans and specifications, are on file and may be
obtained on payment of a specified returnable deposit;
(vi) That a certified check or bank draft or satisfactory bid bond
in the amount of 5 percent of the bid shall be submitted with the bid;
(vii) That the successful bidder will be required to provide
assurance of completion in the form of a performance and payment bond
or cash escrow; and
(viii) That the Borrower reserves the right to reject any or all
bids and to waive any informality.
(3) The bid form, which must be submitted by all bidders, must
specify:
(i) The name of the project;
(ii) The name and address of the bidder;
(iii) That the bidder proposes to furnish all labor, materials,
equipment and services required to construct and complete the project,
as described in the invitation for bids (including the contents of all
documents on file), for a specified lump-sum price;
(iv) That the security specified in paragraph (b)(2)(vi) of this
section accompanies the bid;
(v) The period after the bid opening during which the bid shall not
be withdrawn without the consent of the Borrower;
(vi) That the bidder will, if notified of acceptance of such bid
within a specified period after the opening, execute and deliver a
contract in the prescribed form and furnish the required bond within
ten days thereafter;
(vii) That the bidder acknowledges any amendments to the invitation
for bids; and
(viii) That the bidder certifies that the bid is in strict
accordance with all terms of the invitation for bids (including the
contents of all documents on file) and that the bid is signed by a
person authorized to bind the bidder.
(4) Bidding shall be open to all general contractors who furnish
the security guaranteeing their bid, as described in paragraph
(b)(2)(vi) of this section.
(5) All bids shall be opened publicly at the time and place stated
in the invitation for bids, in the presence of the HUD Regional
Administrator or his designee.
(6) A firm, fixed-price contract award shall be made by written
notice to the responsible bidder whose bid, conforming to the
invitation for bids, is lowest. The contract may provide for an
incentive payment to the contractor for an early completion.
(c) A Sponsor or Borrower may award a negotiated, noncompetitive
construction contract.
Sec. 891.540 Loan disbursement procedures.
(a) Disbursements of loan proceeds shall be made directly by HUD to
or for the account of the Borrower and may be made through an approved
lender, mortgage servicer, title insurance company, or other agent
satisfactory to the Borrower and HUD.
(b) All disbursements to the Borrower shall be made on a periodic
basis in an amount not to exceed the HUD-approved cost of portions of
construction or rehabilitation work completed and in place (except as
modified in paragraph (d) of this section), minus the appropriate
holdback, as determined by the field office.
(c) Requisitions for loan disbursements shall be submitted by the
Borrower on forms to be prescribed by the Assistant Secretary and shall
be accompanied by such additional information as the field office may
require in order to approve loan disbursements under subpart E of this
part, including but not limited to evidence of compliance with the
Davis-Bacon Act, Department of Labor regulations, all applicable
zoning, building, and other governmental requirements, and such
evidence of continued priority of the mortgage of the Borrower as the
Assistant Secretary may prescribe.
(d) In loan disbursements for building components stored off-site,
the term ``building component'' shall mean any manufactured or
preassembled part of a structure as defined by HUD and that the
Assistant Secretary has designated for off-site storage because it is
of such size or weight that storage of the components required for
timely construction progress at the construction site is impractical,
or weather damage or other adverse conditions prevailing at the
construction site would make storage at the site impractical or unduly
costly. Each building component must be specifically identified for
incorporation into the property as provided under paragraph (d)(1)(ii)
of this section.
(1) Storage. (i) A loan disbursement may be made for up to 90
percent of the invoice value (to exclude costs of transportation and
storage) of the building components stored off-site if the components
are stored at a location approved by HUD.
(ii) Each building component shall be adequately marked so as to
be readily identifiable in the inventory of the off-site location. It
shall be kept together with all other building components of the same
manufacturer intended for use in the same project for which loan
disbursements have been made and separate and apart from similar units
not for use in the project.
(iii) Storage costs, if any, shall be borne the general contractor.
(2) Responsibility for transportation, storage and insurance of
off-site building components. The general contractor of the project
shall have the responsibility for:
(i) Insuring the components in the name of the Borrower while in
transit and storage; and
(ii) Delivering or contracting for the delivery of the components
to the storage area and to the construction site, including payment of
freight.
(3) Loan disbursements. (i) Before a loan disbursement for a
building component stored off-site is made, the Borrower shall:
[[Page 11973]]
(A) Obtain a bill of sale for the component;
(B) Provide HUD with a security agreement pledged by a first lien
on the building components with the exception of such other liens or
encumbrances as may be approved by HUD; and
(C) File a financing statement in accordance with the Uniform
Commercial Code.
(ii) Before each loan disbursement for building components stored
off-site is made the manufacturer and the general contractor shall
certify to HUD that the components, in their intended use, comply with
HUD-approved contract plan and specifications.
(iii) Loan disbursements may be made only for components stored
off-site in a quantity required to permit uninterrupted installation at
the site.
(iv) At no time shall the invoice value of building components
being stored off-site, for which advances have been insured, represent
more than 25 percent of the total estimated construction costs for the
insured mortgaged project as specified in the construction contract.
Notwithstanding the preceding sentence and other regulatory
requirements that set bonding requirements, the percentage of total
estimated construction costs insured by advances under this section may
exceed 25 percent but not 50 percent if the mortgagor furnishes
assurance of completion in the form of a corporate surety bond for the
payment and performance each in the amount of 100 percent of the amount
of the construction contract. In no event will insurance of components
stored off-site be made in the absence of a payment and performance
bond.
(v) No single loan disbursement which is to be made shall be in an
amount less than ten thousand ($10,000) dollars.
Sec. 891.545 Completion of project, cost certification, and HUD
approvals.
(a) The Borrower must satisfy the requirements for completion of
construction and substantial rehabilitation and approvals by HUD before
submission of a final requisition for disbursement of loan proceeds.
(b) The Borrower shall submit to the field office all documentation
required for final disbursement of the loan, including:
(1) A Borrower's/Mortgagor's Certificate of Actual Cost, showing
the actual cost to the mortgagor of the construction contract,
architectural, legal, organizational, offsite costs, and all other
items of eligible expense. The certificate shall not include as actual
cost any kickbacks, rebates, trade discounts, or other similar payments
to the mortgagor or to any of its officers, directors, or members.
(2) A verification of the Certificate of Actual Cost by an
independent Certified Public Accountant or independent public
accountant acceptable to the field office.
(3) In the case of projects not subject to competitive bidding, a
certification of the general contractor (and of such subcontractors,
material suppliers, and equipment lessors as the Assistant Secretary or
field office may require), on a form prescribed by the Assistant
Secretary, as to all actual costs paid for labor, materials, and
subcontract work under the general contract exclusive of the builder's
fee and kickbacks, rebates, trade discounts, or other similar payments
to the general contractor, the mortgagor, or any of its officers,
directors, stockholders, partners, or members.
(c) In lieu of the requirements set forth in paragraphs (c)(1) and
(3) of this section, a simplified form of cost certification prescribed
by the Secretary may be completed and submitted by the Borrower for
projects with mortgages of $500,000 or less. The simplified cost
certification shall be verified by an independent Certified Public
Accountant or an independent public accountant in a manner acceptable
to the Secretary.
(d) If the Borrower's certified costs provided in accordance with
paragraph (c) or (d) of this section and as approved by HUD are less
than the loan amount, the contract rents will be reduced accordingly.
(e) If the contract rents are reduced pursuant to paragraph (e) of
this section, the maximum annual HAP Contract commitment will be
reduced. If contract rents are reduced based on cost certification
after HAP Contract execution, any overpayment after the effective date
of the Contract will be recovered from the Borrower by HUD.
(Approved by the Office of Management and Budget under control
number 2502-0044.)
Sec. 891.550 Selection preferences.
For purposes of projects assisted under Secs. 891.520 through
891.650, the selection preferences in 24 CFR part 5, subpart D apply.
Sec. 891.555 Smoke detectors.
(a) Performance requirement. After October 30, 1992, each dwelling
unit must include at least one battery-operated or hard-wired smoke
detector, in proper working condition, on each level of the unit. If
the unit is occupied by hearing-impaired persons, smoke detectors must
have an alarm system designed for hearing-impaired persons in each
bedroom occupied by a hearing-impaired person.
(b) Acceptability criteria. The smoke detector must be located, to
the extent practicable, in a hallway adjacent to a bedroom, unless the
unit is occupied by a hearing-impaired person, in which case each
bedroom occupied by a hearing-impaired person must have an alarm system
connected to the smoke detector installed in the hallway.
Sec. 891.560 HAP contract.
(a) HAP contract. The housing assistance payments contract sets
forth rights and duties of the Borrower and HUD with respect to the
project and the housing assistance payments.
(b) HAP contract execution. (1) Upon satisfactory completion of the
project, the Borrower and HUD shall execute the HAP contract on the
form prescribed by HUD.
(2) The effective date of the HAP contract may be earlier than the
date of execution, but no earlier than the date of HUD's issuance of
the permission to occupy.
(3) If the project is completed in stages, the procedures of
paragraph (b) of this section shall apply to each stage.
(c) Housing assistance payments to owners under the HAP contract.
The housing assistance payments made under the HAP contract are:
(1) Payments to the Borrower to assist eligible families leasing
assisted units. The amount of the housing assistance payment made to
the Borrower for an assisted unit leased to an eligible family is equal
to the difference between the contract rent for the unit and the tenant
rent payable by the family.
(2) Payments to the Borrower for vacant assisted units (vacancy
payments). The amount of and conditions for vacancy payments are
described in Sec. 891.650. The housing assistance payments are made
monthly by HUD upon proper requisition by the Borrower, except payments
for vacancies of more than 60 days, which are made semiannually by HUD
upon requisition by the Borrower.
(d) Payment of utility reimbursement. As applicable, a utility
reimbursement will be paid to a family occupying an assisted unit as an
additional housing assistance payment. The HAP contract will provide
that the Borrower will make this payment on behalf of HUD. Funds will
be paid to the Borrower in trust solely for the purpose of making the
additional payment. The Borrower may pay the utility reimbursement
jointly to the family and the utility company, or, if the family and
utility
[[Page 11974]]
company consent, directly to the utility company.
Sec. 891.565 Term of HAP contract.
The term of the HAP contract for assisted units shall be 20 years.
If the project is completed in stages, the term of the HAP contract for
assisted units in each stage shall be 20 years. The term of the HAP
contract for all assisted units in all stages of a project shall not
exceed 22 years.
Sec. 891.570 Maximum annual commitment and project account.
(a) Maximum annual commitment. The maximum annual amount that may
be committed under the HAP contract is the total of the contract rents
and utility allowances for all assisted units in the project.
(b) Project account. (1) HUD will establish and maintain a
specifically identified and segregated project account for each
project. The project account will be established out of the amounts by
which the maximum annual commitment exceeds the amount actually paid
out under the HAP contract each year. HUD will make payments from this
account for housing assistance payments as needed to cover increases in
contract rents or decreases in tenant income and other payments for
costs specifically approved by the Secretary.
(2) If the HUD-approved estimate of required annual payments under
the HAP contract for a fiscal year exceeds the maximum annual
commitment for that fiscal year plus the current balance in the project
account, HUD will, within a reasonable time, take such steps authorized
by section 8(c)(6) of the United States Housing Act of 1937 (42 U.S.C.
1437f note), as may be necessary, to assure that payments under the HAP
contract will be adequate to cover increases in contract rents and
decreases in tenant income.
Sec. 891.575 Leasing to eligible families.
(a) Availability of assisted units for occupancy by eligible
families. (1) During the term of the HAP contract, a Borrower shall
make available for occupancy by eligible families the total number of
units for which assistance is committed under the HAP contract. For
purposes of this section, making units available for occupancy by
eligible families means that the Borrower:
(i) Is conducting marketing in accordance with Sec. 891.600(a);
(ii) Has leased or is making good faith efforts to lease the units
to eligible and otherwise acceptable families, including taking all
feasible actions to fill vacancies by renting to such families;
(iii) Has not rejected any such applicant family except for reasons
acceptable to HUD.
(2) If the Borrower is temporarily unable to lease all units for
which assistance is committed under the HAP contract to eligible
families, one or more units may, with the prior approval of HUD, be
leased to otherwise eligible families that do not meet the income
eligibility requirements of part 813 of this chapter. Failure on the
part of the Borrower to comply with these requirements is a violation
of the HAP contract and grounds for all available legal remedies,
including an action for specific performance of the HAP contract,
suspension or debarment from HUD programs, and reduction of the number
of units under the HAP contract as set forth in paragraph (b) of this
section.
(b) Reduction of number of units covered by the HAP contract. HUD
may reduce the number of units covered by the HAP contract to the
number of units available for occupancy by eligible families if:
(1) The Borrower fails to comply with the requirements of paragraph
(a) of this section; or
(2) Notwithstanding any prior approval by HUD, HUD determines that
the inability to lease units to eligible families is not a temporary
problem.
(c) Restoration. HUD will agree to an amendment of the HAP contract
to provide for subsequent restoration of any reduction made under
paragraph (b) of this section if:
(1) HUD determines that the restoration is justified by demand;
(2) The Borrower otherwise has a record of compliance with the
Borrower's obligations under the HAP contract; and
(3) Contract and budget authority is available.
(d) Applicability. In accordance with section 555 of the Cranston-
Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and
(b) of this section apply to all contracts. An owner who had leased an
assisted unit to an ineligible family consistent with the regulations
in effect at the time will continue to lease the unit to that family.
However, the owner must make the unit available for occupancy by an
eligible family when the ineligible family vacates the unit.
(e) Occupancy by families that are not elderly or handicapped. HUD
may permit units in the project to be leased to other than elderly or
handicapped families if:
(1) The Borrower has made reasonable efforts to lease assisted and
unassisted units to eligible families;
(2) The Borrower has been granted HUD approval under paragraph (a)
of this section; and
(3) The Borrower is temporarily unable to achieve or maintain a
level of occupancy sufficient to prevent financial default and
foreclosure under the Section 202 loan documents. HUD approval under
paragraph (e)(3) of this section will be of limited duration. HUD may
impose terms and conditions to this approval that are consistent with
program objectives and necessary to protect its interest in the Section
202 loan.
Sec. 891.580 HAP contract administration.
HUD is responsible for the administration of the HAP contract.
Sec. 891.585 Default by Borrower.
(a) HAP contract provisions. The HAP contract will provide:
(1) That if HUD determines that the Borrower is in default under
the HAP contract, HUD will notify the Borrower of the actions required
to be taken to cure the default and of the remedies to be applied by
HUD including an action for specific performance under the HAP
contract, reduction or suspension of housing assistance payments and
recovery of overpayments, where appropriate; and
(2) That if the Borrower fails to cure the default, HUD has the
right to terminate the HAP contract or to take other corrective action.
(b) Loan provisions. Additional provisions governing default under
the section 202 loan are included in the regulatory agreement and other
loan documents.
Sec. 891.590 Notice upon HAP contract expiration.
(a) Notice required. The HAP contract will provide that the
Borrower will, at least one year before the end of the HAP contract
term, notify each family leasing an assisted unit of any increase in
the amount the family will be required to pay as rent as a result of
the expiration.
(b) Service requirements. The notice under paragraph (a) of this
section shall be accomplished by sending a letter by first class mail,
properly stamped and addressed, to the family at its address at the
project, with a proper return address; and serving a copy of the notice
on any adult person answering the door at the leased dwelling unit, or
if no adult responds, by placing the notice under or through the door,
if possible, or else by affixing the notice to the door. Service shall
not be considered to be effective until both required notices have been
accomplished. The date on which the notice shall be considered to
[[Page 11975]]
be received by the family shall be the date on which the Borrower mails
the first class letter provided for in paragraph (b) of this section,
or the date on which the notice provided for in paragraph (b) of this
section is properly given, whichever is later.
(c) Contents of notice. The notice shall advise each affected
family that, after the expiration date of the HAP contract, the family
will be required to bear the entire cost of the rent and that the
Borrower may, subject to requirements and restrictions contained in the
regulatory agreement, the lease, and State or local law, change the
rent. The notice also shall state:
(1) The actual (if known) or the estimated rent that will be
charged following the expiration of the HAP contract;
(2) The difference between the new rent and the total tenant
payment toward rent under the HAP contract; and
(3) The date the HAP contract will expire.
(d) Certification to HUD. The Borrower shall give HUD a
certification that families have been notified in accordance with this
section and shall attach to the certification an example of the text of
the notice.
(e) Applicability. This section applies to all HAP contracts
entered into under an agreement to enter into a housing assistance
payments contract executed on or after October 1, 1981, or entered into
under such an agreement executed before October 1, 1981 but renewed or
amended after February 9, 1995.
(Approved by the Office of Management and Budget under control
number 2502-0371.)
Sec. 891.595 HAP contract extension or renewal.
Upon expiration of the term of the HAP contract, HUD and the
Borrower may agree (subject to available funds) to extend the term of
the HAP contract or to renew the HAP contract. The number of assisted
units under the extended or renewed HAP contract shall equal the number
of assisted units under the original HAP contract, except that:
(a) HUD and the Borrower may agree to reduce the number of assisted
units by the number of assisted units that are not occupied by eligible
families at the time of the extension or renewal; and
(b) HUD and the Borrower may agree to permit reductions in the
number of assisted units during the term of the extended or renewed HAP
contract as assisted units are vacated by eligible families. Nothing in
this section shall prohibit HUD from reducing the number of units
covered under the extended or renewed HAP contract in accordance with
Sec. 891.575(b).
Sec. 891.600 Responsibilities of Borrower.
(a) Marketing. (1) The Borrower must commence and continue diligent
marketing activities not later than 90 days before the anticipated date
of availability for occupancy of the first unit of the project. Market
activities shall include the provision of notices of availability of
housing under the program to operators of temporary housing for the
homeless in the same housing market.
(2) Marketing must be done in accordance with the HUD-approved
affirmative fair housing marketing plan and all Federal, State, or
local fair housing and equal opportunity requirements. The purpose of
the plan and requirements is to achieve a condition in which eligible
families of similar income levels in the same housing market have a
like range of housing choices available to them regardless of
discriminatory considerations, such as their race, color, creed,
religion, familial status, disability, sex or national origin.
Marketing must also be done in accordance with the communication and
notice requirements of Section 504 at 24 CFR 8.6 and 24 CFR 8.54.
(3) At the time of HAP contract execution, the Borrower must submit
to HUD a list of leased and unleased assisted units, with a
justification for the unleased units, in order to qualify for vacancy
payments for the unleased units.
(b) Management and maintenance. The Borrower is responsible for all
management functions. These functions include selection and admission
of tenants, required reexaminations of incomes for families occupying
assisted units (or residential spaces, as applicable), collection of
rents, termination of tenancy and eviction, and all repair and
maintenance functions (including ordinary and extraordinary maintenance
and replacement of capital items). All functions must be performed in
compliance with equal opportunity requirements.
(c) Contracting for services. (1) With HUD approval, the Borrower
may contract with a private or public entity for performance of the
services or duties required in paragraphs (a) and (b) of this section.
However, such an arrangement does not relieve the Borrower of
responsibility for these services and duties. All such contracts are
subject to the restrictions governing prohibited contractual
relationships described in Secs. 891.130 and 891.505, if applicable.
(These prohibitions do not extend to management contracts entered into
by the Borrower with the Sponsor or its nonprofit affiliate).
(2) Consistent with the objectives of Executive Order No. 11625 (36
FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order
No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139; unless otherwise
noted); Executive Order No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p.
198; unless otherwise noted); and Executive Order No. 12138 (44 FR
29637, 3 CFR, 1979 Comp., p. 393; unless otherwise noted), the Borrower
will promote awareness and participation of minority and women's
business enterprises in contracting and procurement activities.
(d) Submission of financial and operating statements. The Borrower
must submit to HUD:
(1) Within 60 days after the end of each fiscal year of project
operations, financial statements for the project audited by an
independent public accountant and in the form required by HUD; and
(2) Other statements regarding project operation, financial
conditions and occupancy as HUD may require to administer the housing
assistance payments contract (HAP contract) or the project assistance
contract (PAC), as applicable, and to monitor project operations.
(e) Use of project funds. The Borrower shall maintain a separate
project fund account in a depository or depositories that are members
of the Federal Deposit Insurance Corporation or National Credit Union
Share Insurance Fund and shall deposit all rents, charges, income and
revenues arising from project operation or ownership to this account.
All project funds are to be deposited in Federally-insured accounts.
All balances shall be fully insured at all times, to the maximum extent
possible. Project funds must be used for the operation of the project
(including required insurance coverage), to make required principal and
interest payments on the Section 202 loan, and to make required
deposits to the replacement reserve under Secs. 891.605 and 891.745 (as
applicable), in accordance with a HUD-approved budget. Any project
funds in the project funds account (including earned interest)
following the expiration of the fiscal year shall be deposited in a
Federally-insured residual receipts account within 60 days following
the end of the fiscal year. Withdrawals from this account may be made
only for project purposes and with the approval of HUD. If there are
funds remaining in the residual receipts account when the
[[Page 11976]]
mortgage is satisfied, such funds shall be returned to HUD.
(f) Reports. The Borrower shall submit such reports as HUD may
prescribe to demonstrate compliance with applicable civil rights and
equal opportunity requirements.
(Approved by the Office of Management and Budget under control
number 2502-0371.)
Sec. 891.605 Replacement reserve.
(a) Establishment of reserve. The Borrower shall establish and
maintain a replacement reserve to aid in funding extraordinary
maintenance, and repair and replacement of capital items.
(b) Deposits to reserve. The Borrower shall make monthly deposits
to the replacement reserve in an amount determined by HUD. Further
requirements regarding the amount of the deposits for projects funded
under Secs. 891.655 through 891.790 are provided in Sec. 891.745.
(c) Level of reserve. The reserve must be built up to and
maintained at a level determined by HUD to be sufficient to meet
projected requirements. Should the reserve reach that level, the amount
of the deposit to the reserve may be reduced with the approval of HUD.
(d) Administration of reserve. Replacement reserve funds must be
deposited with HUD or in a Federally-insured depository in an interest-
bearing account(s) whose balances are fully insured at all times. All
earnings including interest on the reserve must be added to the
reserve. Funds may be drawn from the reserve and used only in
accordance with HUD guidelines and with the approval of, or as directed
by, HUD.
Sec. 891.610 Selection and admission of tenants.
(a) Written procedures. The Owner shall adopt written tenant
selection procedures that ensure nondiscrimination in the selection of
tenants and that are consistent with the purpose of improving housing
opportunities for very low-income elderly or handicapped persons; and
reasonably related to program eligibility and an applicant's ability to
perform the obligations of the lease. Owners shall promptly notify in
writing any rejected applicant of the grounds for any rejection.
Additionally, owners shall maintain a written, chronological waiting
list showing the name, race, gender, ethnicity and date of each person
applying for the program.
(b) Application for admission. The Borrower must accept
applications for admission to the project in the form prescribed by HUD
and is obligated to confirm all information provided by the applicant
families on the application. Applicant families must be requested to
complete a release of information consent for verification of
information. Applicants applying for assisted units must complete a
certification of eligibility as part of the application for admission.
Applicant families must meet the disclosure and verification
requirements for Social Security Numbers, and sign and submit consent
forms for the obtaining of wage and claim information from State Wage
Information Collection Agencies, as provided by 24 CFR part 5, subpart
B. Both the Borrower and the applicant must complete and sign the
application for admission. On request, the Borrower must furnish copies
of all applications for admission to HUD.
(c) Determination of eligibility and selection of tenants. The
Borrower is responsible for determining whether applicants are eligible
for admission and for the selection of families. To be eligible for
admission, an applicant must be an elderly or handicapped family as
defined in Sec. 891.505; meet any project occupancy requirements
approved by HUD; meet the disclosure and verification requirements for
Social Security Numbers and sign and submit consent forms for obtaining
of wage and claim information from State Wage Information Collection
Agencies, as provided by 24 CFR part 5, subpart B; and, if applying for
an assisted unit, be eligible for admission under part 813 of this
chapter.
(d) Unit assignment. If the Borrower determines that the family is
eligible and is otherwise acceptable and units are available, the
Borrower will assign the family a unit. The Borrower will assign the
family a unit of the appropriate size in accordance with HUD's general
occupancy guidelines. If no suitable unit is available, the Borrower
will place the family on a waiting list for the project and notify the
family of when a suitable unit may become available. If the waiting
list is so long that the applicant would not be likely to be admitted
within the next 12 months, the Borrower may advise the applicant that
no additional applications for admission are being considered for that
reason, except that the Borrower may not refuse to place an applicant
on the waiting list if the applicant is otherwise eligible for
assistance and claims that he or she qualifies for a Federal preference
as provided in 24 CFR part 5, subpart D.
(e) Ineligibility determination. If the Borrower determines that an
applicant is ineligible for admission or the Borrower is not selecting
the applicant for other reasons, the Borrower will promptly notify the
applicant in writing of the determination, the reasons for the
determination, and that the applicant has a right to request a meeting
with the Borrower or managing agent to review the rejection, in
accordance with HUD requirements. The review, if requested, may not be
conducted by a member of the Borrower's staff who made the initial
decision to reject the applicant. The applicant may also exercise other
rights (e.g., rights granted under Federal, State, or local civil
rights laws) if the applicant believes he or she is being discriminated
against on a prohibited basis. The informal review provisions for the
denial of a Federal preference are provided in Sec. 5.410(g) of this
title.
(f) Records. Records on applicants and approved eligible families,
which provide racial, ethnic, gender, handicap status, and place of
previous residency data required by HUD, must be retained for three
years.
(g) Reexamination of family income and composition. (1) Regular
reexaminations. The Borrower must reexamine the income and composition
of the family at least every 12 months. Upon verification of the
information, the Borrower shall make appropriate adjustments in the
total tenant payment in accordance with part 813 of this chapter and
determine whether the family's unit size is still appropriate. The
Borrower must adjust tenant rent and the housing assistance payment and
must carry out any unit transfer in accordance with the administrative
instructions issued by HUD. At the time of reexamination under
paragraph (g)(1) of this section, the Borrower must require the family
to meet the disclosure and verification requirements for Social
Security Numbers, as provided by 24 CFR part 5, subpart B.
(2) Interim reexaminations. The family must comply with the
provisions in its lease regarding interim reporting of changes in
income. If the Borrower receives information concerning a change in the
family's income or other circumstances between regularly scheduled
reexaminations, the Borrower must consult with the family and make any
adjustments determined to be appropriate. Any change in the family's
income or other circumstances that results in an adjustment in the
total tenant payment, tenant rent and housing assistance payment must
be verified.
(3) Continuation of housing assistance payments. (i) A family shall
remain eligible for housing assistance payments until the total tenant
payment equals or exceeds the gross rent. The termination of subsidy
eligibility will not affect the family's other rights under its lease.
Housing assistance payments may be
[[Page 11977]]
resumed if, as a result of changes in income, rent or other relevant
circumstances during the term of the HAP contract, the family meets the
income eligibility requirements of part 813 of this chapter and housing
assistance is available for the unit under the terms of the HAP
contract. The family will not be required to establish its eligibility
for admission to the project under the remaining requirements of
paragraph (c) of this section.
(ii) A family's eligibility for housing assistance payments may be
terminated in accordance with HUD requirements for such reasons as
failure to submit requested verification information, including
information related to disclosure and verification of Social Security
Numbers, or failure to sign and submit consent forms for the obtaining
of wage and claim information from State wage information collection
agencies, as provided by 24 CFR part 5, subpart B.
(Approved by the Office of Management and Budget under control
number 2502-0371.)
Sec. 891.615 Obligations of the family.
The obligations of the family are provided in Sec. 891.415.
Sec. 891.620 Overcrowded and underoccupied units.
If the Borrower determines that because of change in family size,
an assisted unit is smaller than appropriate for the eligible family to
which it is leased, or that the assisted unit is larger than
appropriate, housing assistance payments or project assistance payments
(as applicable) with respect to the unit will not be reduced or
terminated until the eligible family has been relocated to an
appropriate alternate unit. If possible, the Borrower will, as promptly
as possible, offer the family an appropriate alternate unit. The
Borrower may receive vacancy payments for the vacated unit if the
Borrower complies with the requirements of Sec. 891.650.
Sec. 891.625 Lease requirements.
The lease requirements are provided in Sec. 891.425.
Sec. 891.630 Termination of tenancy and modification of lease.
The provisions of part 247 of this title apply to all decisions by
a Borrower to terminate the tenancy or modify the lease of a family
residing in a unit.
Sec. 891.635 Security deposits.
The general requirements for security deposits on assisted units
are provided in Sec. 891.435. For purposes of subpart E of this part,
the additional requirements apply:
(a) The Borrower may require each family occupying an unassisted
unit (or residential space in a group home) to pay a security deposit
equal to one month's rent payable by the family.
(b) The Borrower shall maintain a record of the amount in the
segregated interest-bearing account that is attributable to each family
in residence in the project. Annually for all families, and when
computing the amount available for disbursement under
Sec. 891.435(b)(3), the Borrower shall allocate to the family's balance
the interest accrued on the balance during the year. Unless prohibited
by State or local law, the Borrower may deduct for the family, from the
accrued interest for the year, the administrative cost of computing the
allocation to the family's balance. The amount of the administrative
cost adjustment shall not exceed the accrued interest allocated to the
family's balance for the year.
Sec. 891.640 Adjustment of rents.
(a) Contract rents. (1) Adjustment based on approved budget. If
the HAP contract provides, or has been amended to provide, that
contract rents will be adjusted based upon a HUD-approved budget, HUD
will calculate contract rent adjustments based on the sum of the
project's operating costs and debt service (as calculated by HUD), with
adjustments for vacancies, the project's nonrental income, and other
factors that HUD deems appropriate. The calculation will be made on the
basis of information provided by the Borrower on a form acceptable to
the Secretary. The automatic adjustment factor described in part 888 of
this chapter is not used to adjust contract rents under paragraph
(a)(1) of this section, except to the extent that the amount of the
replacement reserve deposit is adjusted under Sec. 880.602 of this
chapter.
(2) Annual and special adjustments. If the HAP contract provides
that contract rents will be adjusted based on the application of an
automatic adjustment factor and by special additional adjustments:
(i) Consistent with the HAP contract, contract rents may be
adjusted in accordance with part 888 of this chapter;
(ii) Special additional adjustments will be granted, to the extent
determined necessary by HUD, to reflect increases in the actual and
necessary expenses of owning and maintaining the assisted units that
have resulted from substantial general increases in real property
taxes, assessments, utility rates or similar costs (i.e., assessments
and utilities not covered by regulated rates), and that are not
adequately compensated for by an annual adjustment. The Borrower must
submit to HUD required supporting data, financial statements, and
certifications for the special additional adjustment.
(b) Rent for unassisted units. The rent payable by families
occupying units that are not assisted under the HAP contract shall be
equal to the contract rent computed under paragraph (a) of this
section.
(Approved by the Office of Management and Budget under control
number 2502-0371.)
Sec. 891.645 Adjustment of utility allowances.
In connection with adjustments of contract rents as provided in
Sec. 891.640(a), the requirements for the adjustment of utility
allowances provided in Sec. 891.440 apply.
Sec. 891.650 Conditions for receipt of vacancy payments for assisted
units.
(a) General. Vacancy payments under the HAP contract will not be
made unless the conditions for receipt of these housing assistance
payments set forth in this section are fulfilled.
(b) Vacancies during rent-up. For each unit that is not leased as
of the effective date of the HAP contract, the Borrower is entitled to
vacancy payments in the amount of 80 percent of the contract rent for
the first 60 days of vacancy, if the Borrower:
(1) Complied with Sec. 891.600;
(2) Has taken and continues to take all feasible actions to fill
the vacancy; and
(3) Has not rejected any eligible applicant except for good cause
acceptable to HUD.
(c) Vacancies after rent-up. If an eligible family vacates a unit,
the Borrower is entitled to vacancy payments in the amount of 80
percent of the contract rent for the first 60 days of vacancy if the
Borrower:
(1) Certifies that it did not cause the vacancy by violating the
lease, the HAP contract, or any applicable law;
(2) Notified HUD of the vacancy or prospective vacancy and the
reasons for the vacancy immediately upon learning of the vacancy or
prospective vacancy;
(3) Has fulfilled and continues to fulfill the requirements
specified in Sec. 891.600(a)(2) and (3), and in paragraphs (b)(2) and
(3) of this section; and
(4) For any vacancy resulting from the Borrower's eviction of an
eligible family, certifies that it has complied with Sec. 891.630.
(d) Vacancies for longer than 60 days. If a unit continues to be
vacant after the 60-day period specified in paragraph (b) or (c) of
this section, the Borrower may
[[Page 11978]]
apply to receive additional vacancy payments in an amount equal to the
principal and interest payments required to amortize that portion of
the debt service attributable to the vacant unit for up to 12
additional months for the unit if:
(1) The unit was in decent, safe, and sanitary condition during the
vacancy period for which payment is claimed;
(2) The Borrower has fulfilled and continues to fulfill the
requirements specified in paragraph (b) or (c) of this section, as
appropriate; and
(3) The Borrower has demonstrated to the satisfaction of HUD that:
(i) For the period of vacancy, the project is not providing the
Borrower with revenues at least equal to project expenses (exclusive of
depreciation) and the amount of payments requested is not more than the
portion of the deficiency attributable to the vacant unit; and
(ii) The project can achieve financial soundness within a
reasonable time.
(e) Prohibition of double compensation for vacancies. If the
Borrower collects payments for vacancies from other sources (tenant
rent, security deposits, payments under Sec. 891.435(c), or
governmental payments under other programs), the Borrower shall not be
entitled to collect vacancy payments to the extent these collections
from other sources plus the vacancy payment exceed contract rent.
(Approved by the Office of Management and Budget under control
number 2502-0371.)
Section 202 Projects for the Nonelderly Handicapped Families and
Individuals--Section 162 Assistance
Sec. 891.655 Definitions applicable to 202/162 projects.
The following definitions apply to projects for eligible families
receiving project assistance payments under section 202(h) of the
Housing Act of 1959 in addition to reservations under section 202 (202/
162 projects):
Annual income is defined in part 813 of this chapter. In the case
of an individual residing in an intermediate care facility for the
mentally retarded that is assisted under Title XIX of the Social
Security Act and subpart E of this part, the annual income of the
individual shall exclude protected personal income as provided under
that Act. For the purposes of determining the total tenant payment, the
income of such individuals shall be imputed to be the amount that the
family would receive if assisted under Title XVI of the Social Security
Act.
Assisted unit means a dwelling unit that is eligible for assistance
under a project assistance contract (PAC).
Contract rent means the total amount of rent specified in the PAC
as payable by HUD and the family to the Borrower for an assisted unit
or residential space.
Family (eligible family) means a handicapped family (as defined in
Sec. 891.505) that meets the project occupancy requirements approved by
HUD and, if the family occupies an assisted unit, meets the low-income
requirements described in Sec. 813.102 of this chapter, as modified by
the definition of ``annual income'' in this section.
Gross rent is defined in part 813 of this chapter.
Group home means a single family residential structure designed or
adapted for occupancy by nonelderly handicapped individuals.
Housing for handicapped families means housing and related
facilities occupied by handicapped families that are primarily
nonelderly handicapped families.
Independent living complex means a project designed for occupancy
by noneld
FR Doc. 96-6312 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Supportive Housing for the Elderly and Persons With Disabilities
erly handicapped families in separate dwelling units where
each dwelling unit includes a kitchen and a bath.
Operating costs means expenses related to the provision of housing
and excludes expenses related to administering, or managing the
provision of, supportive services. Operating costs include:
(1) Administrative expenses, including salary and management
expenses related to the provision of shelter;
(2) Maintenance expenses, including routine and minor repairs and
groundskeeping;
(3) Security expenses;
(4) Utilities expenses, including gas, oil, electricity, water,
sewer, trash removal, and extermination services. Operating costs
exclude telephone services for families;
(5) Taxes and insurance; and
(6) Allowances for reserves.
PAC (project assistance contract) means the contract entered into
by the Borrower and HUD setting forth the rights and duties of the
parties with respect to the project and the payments under the PAC.
Project account means a specifically identified and segregated
account for each project which is established in accordance with
Sec. 891.715(b) out of the amounts by which the maximum annual
commitment exceeds the amount actually paid out under the PAC each
year.
Project assistance payment means the payment made by HUD to the
Borrower for assisted units as provided in the PAC. The payment is the
difference between the contract rent and the tenant rent. An additional
payment is made to a family occupying an assisted unit in an
independent living complex when the utility allowance is greater than
the total tenant payment. A project assistance payment, known as a
``vacancy payment,'' may be made to the Borrower when an assisted unit
(or residential space in a group home) is vacant, in accordance with
the terms of the PAC.
Rent is defined in Sec. 891.505.
Tenant rent means the monthly amount defined in, and determined in
accordance with part 813 of this chapter.
Total tenant payment means the monthly amount defined in, and
determined in accordance with part 813 of this chapter.
Utility allowance is defined in part 813 of this chapter and is
determined or approved by HUD.
Utility reimbursement is defined in part 813 of this chapter.
Vacancy payment means the project assistance payment made to the
Borrower by HUD for a vacant assisted unit (or residential space in a
group home) if certain conditions are fulfilled, as provided in the
PAC. The amount of the vacancy payment varies with the length of the
vacancy period and is less after the first 60 days of any vacancy.
Sec. 891.660 Project standards.
(a) Property standards. The property standards for 202/162 projects
are provided in Sec. 891.120(a).
(b) Minimum group home standards. The minimum group home standards
for 202/162 projects are provided in Sec. 891.310(a).
(c) Accessibility requirements. The accessibility requirements for
202/162 projects are provided in Secs. 891.120(b) and 891.310(b).
(d) Smoke detectors. The requirements for smoke detectors for 202/
162 projects are provided in Sec. 891.120(d).
Sec. 891.665 Project size limitations.
(a) Maximum project size. Projects funded under Secs. 891.655
through 891.790 are subject to the following project size limitations:
(1) Group homes may not be designed to serve more than 15 persons
on one site;
(2) Independent living complexes for chronically mentally ill
individuals may not be designed to serve more than 20 persons on one
site; and
(3) Independent living complexes for handicapped families in the
developmental disability or physically
[[Page 11979]]
handicapped occupancy categories may not have more than 24 units nor
more than 24 households on one site. For the purposes of this section,
``household'' has the same meaning as ``handicapped family,'' except
that unrelated handicapped individuals sharing a unit (other than a
handicapped person living with another person who is essential to the
handicapped person's well-being) are counted as separate households.
For independent living complexes for handicapped families in the
developmental disability or physically handicapped occupancy
categories, units with three or more bedrooms may only be developed to
serve handicapped families of one or two parents with children.
(b) Additional limitations. Based on the amount of loan authority
appropriated for a fiscal year, HUD may have imposed additional
limitations on the number of units or residents that may be proposed
under an application for Section 202 loan fund reservation, as
published in the annual notice of funding availability or the
invitation for Section 202 fund reservation.
(c) Exemptions. On a case-by-case basis, HUD may approve
independent living complexes that do not comply with the project size
limitations prescribed in paragraphs (a)(2), (a)(3), or (b) of this
section. HUD may approve such projects if the Sponsor demonstrates:
(1) The increased number of units is necessary for the economic
feasibility of the project;
(2) A project of the size proposed is compatible with other
residential development and the population density of the area in which
the project is to be located;
(3) A project of the size proposed can be successfully integrated
into the community; and
(4) A project of the size proposed is marketable in the community.
Sec. 891.670 Cost containment and modest design standards.
(a) Restrictions on amenities. Projects must be modest in design.
Except as provided in paragraph (d) of this section, amenities must be
limited to those amenities, as determined by HUD, that are generally
provided in unassisted decent, safe, and sanitary housing for low-
income families in the market area. Amenities not eligible for HUD
funding include balconies, atriums, decks, bowling alleys, swimming
pools, saunas, and jacuzzis. Dishwashers, trash compactors, and washers
and dryers in individual units will not be funded in independent living
complexes. The use of durable materials to control or reduce
maintenance, repair, and replacement costs is not an excess amenity.
(b) Unit sizes. For independent living complexes, HUD will
establish limitations on the size of units and number of bathrooms,
based on the number of bedrooms that are in the unit.
(c) Special spaces and accommodations. (1) The costs of
construction of special spaces and accommodations may not exceed 10
percent of the total cost of construction, except as provided in
paragraph (d) of this section. Special spaces and accommodations
include multipurpose rooms, game rooms, libraries, lounges, and, in
independent living complexes, central kitchens and dining rooms.
(2) Special spaces and accommodations exclude offices, halls,
mechanical rooms, laundry rooms, and parking areas; dwelling units and
lobbies in independent living complexes; and bedrooms, living rooms,
dining and kitchen areas, shared bathrooms, and resident staff dwelling
units in group homes.
(d) Exceptions. HUD may approve a project that does not comply with
the cost containment and modest design standards of paragraphs (a)
through (c) of this section if:
(1) The Sponsor demonstrates a willingness and ability to
contribute the incremental development cost and continuing operating
costs associated with the additional amenities or design features; or
(2) The proposed project involves substantial rehabilitation or
acquisition with or without moderate rehabilitation, the additional
amenities or design features were incorporated into the existing
structure before the submission of the application, and the total
development cost of the project with the additional amenities or design
features does not exceed the cost limits.
Sec. 891.675 Prohibited facilities.
The requirements for prohibited facilities for 202/162 projects
are provided in Sec. 891.315, except that Section 202/162 projects may
not include commercial spaces.
Sec. 891.680 Site and neighborhood standards.
The general requirements for site and neighborhood standards for
202/162 projects are provided in Secs. 891.125 and 891.320. In addition
to the requirements in Secs. 891.125 and 891.320, the following
requirements apply to 202/162 projects:
(a) The site must promote greater choice of housing opportunities
and avoid undue concentration of assisted persons in areas containing a
high proportion of low-income persons.
(b) Projects must be located in neighborhoods where other family
housing is located. Except as provided below, projects may not be
located adjacent to the following facilities, or in areas where such
facilities are concentrated: schools or day care centers for
handicapped persons, workshops, medical facilities, or other housing
primarily serving handicapped persons. Projects may be located adjacent
to other housing primarily serving handicapped persons if the projects
together do not exceed the project size limitations under
Sec. 891.665(a).
Sec. 891.685 Prohibited relationships.
The requirements for prohibited relationships for 202/162 projects
are provided in Sec. 891.130.
Sec. 891.690 Other Federal requirements.
In addition to the Federal requirements set forth in 24 CFR part 5,
other Federal requirements for the 202/162 projects are provided in
Secs. 891.155 and 891.325.
Sec. 891.695 Operating cost standards.
The requirements for the operating cost standards are provided in
Sec. 891.150.
Sec. 891.700 Prepayment of loans.
(a) Prepayment prohibition. The prepayment (whether in whole or in
part) or the assignment or transfer of physical and financial assets of
any Section 202 project is prohibited, unless the Assistant Secretary
gives prior written approval.
(b) HUD-approved prepayment. Approval for prepayment or transfer
will not be granted unless HUD determines that the prepayment or
transfer of the loan is a part of a transaction that will ensure the
continued operation of the project until the original maturity date of
the loan in a manner that will provide rental housing for the
handicapped families on terms at least as advantageous to existing and
future tenants as the terms required by the original Section 202 loan
agreement and any other loan agreements entered into under other
provisions of law.
Sec. 891.705 Project assistance contract.
(a) Project assistance contract (PAC). The PAC sets forth rights
and duties of the Borrower and HUD with respect to the project and the
project assistance payments.
(b) PAC execution. (1) Upon satisfactory completion of the
project, the Borrower and HUD shall execute the PAC on the form
prescribed by HUD.
[[Page 11980]]
(2) The effective date of the PAC may be earlier than the date of
execution, but no earlier than the date of HUD's issuance of the
permission to occupy.
(3) If the project is completed in stages, the procedures of
paragraph (b) of this section shall apply to each stage.
(c) Project assistance payments to owners under the PAC. The
project assistance payments made under the PAC are:
(1) Payments to the Borrower to assist eligible families leasing
assisted units. The amount of the project assistance payment made to
the Borrower for an assisted unit (or residential space in a group
home) that is leased to an eligible family is equal to the difference
between the contract rent for the unit (or pro rata share of the
contract rent in a group home) and the tenant rent payable by the
family.
(2) Payments to the Borrower for vacant assisted units (``vacancy
payments''). The amount of and conditions for vacancy payments are
described in Sec. 891.790. HUD makes the project assistance payments
monthly upon proper requisition by the Borrower, except payments for
vacancies of more than 60 days, which HUD makes semiannually upon
requisition by the Borrower.
(d) Payment of utility reimbursement. If applicable, a utility
reimbursement will be paid to a family occupying an assisted unit in an
independent living complex as an additional project assistance payment.
The PAC will provide that the Borrower will make this payment on behalf
of HUD. Funds will be paid to the Borrower in trust solely for the
purpose of making the additional payment. The Borrower may pay the
utility reimbursement jointly to the family and the utility company,
or, if the family and utility company consent, directly to the utility
company.
Sec. 891.710 Term of PAC.
The term of the PAC shall be 20 years. If the project is completed
in stages, the term of the PAC for each stage shall be 20 years. The
term of the PAC for stages of a project shall not exceed 22 years.
Sec. 891.715 Maximum annual commitment and project account.
(a) Maximum annual commitment. The maximum annual amount that may
be committed under the PAC is the total of the initial contract rents
and utility allowances for all assisted units in the project.
(b) Project account. (1) HUD will establish and maintain a
specifically identified and segregated project account for each
project. The project account will be established out of the amounts by
which the maximum annual commitment exceeds the amount actually paid
out under the PAC each year. HUD will make payments from this account
for project assistance payments as needed to cover increases in
contract rents or decreases in tenant income and other payments for
costs specifically approved by the Secretary.
(2) If the HUD-approved estimate of required annual payments under
the PAC for a fiscal year exceeds the maximum annual commitment for
that fiscal year plus the current balance in the project account, HUD
will, within a reasonable time, take such steps authorized by section
202(h)(4)(A) of the Housing Act of 1959, as may be necessary, to assure
that payments under the PAC will be adequate to cover increases in
contract rents and decreases in tenant income.
Sec. 891.720 Leasing to eligible families.
(a) Availability of assisted units for occupancy by eligible
families. During the term of the PAC, a Borrower shall make all units
(or residential spaces in a group home) available for eligible
families. For purposes of this section, making units or residential
spaces available for occupancy by eligible families means that the
Borrower:
(1) Is conducting marketing in accordance with Sec. 891.740(a);
(2) Has leased or is making good faith efforts to lease the units
or residential spaces to eligible and otherwise acceptable families,
including taking all feasible actions to fill vacancies by renting to
such families; and (3) Has not rejected any such applicant family
except for reasons acceptable to HUD. If the Borrower is temporarily
unable to lease all units or residential spaces to eligible families,
one or more units or residential spaces may, with the prior approval of
HUD, be leased to otherwise eligible families that do not meet the
income requirements of part 813 of this chapter, as modified by
Sec. 891.505. Failure on the part of the Borrower to comply with these
requirements is a violation of the PAC and grounds for all available
legal remedies, including an action for specific performance of the
PAC, suspension or debarment from HUD programs, and reduction of the
number of units (or in the case of group homes, reduction of the number
of residential spaces) under the PAC as set forth in paragraph (b) of
this section.
(b) Reduction of number of units covered by the PAC. HUD may reduce
the number of units (or in the case of group homes, the number of
residential spaces) covered by the PAC to the number of units or
residential spaces available for occupancy by eligible families if:
(1) The Borrower fails to comply with the requirements of
paragraph (a) of this section; or
(2) Notwithstanding any prior approval by HUD, HUD determines that
the inability to lease units or residential spaces to eligible families
is not a temporary problem.
(c) Restoration. HUD will agree to an amendment of the PAC to
provide for subsequent restoration of any reduction made under
paragraph (b) of this section if:
(1) HUD determines that the restoration is justified by demand;
(2) The Borrower otherwise has a record of compliance with the
Borrower's obligations under the PAC; and
(3) Contract and budget authority is available.
(d) Occupancy by families that are not handicapped. HUD may relieve
the Borrower of the requirement that all units in the project (or
residential spaces in a group home) must be leased to handicapped
families if:
(1) The Borrower has made reasonable efforts to lease to eligible
families;
(2) The Borrower has been granted HUD approval under paragraph (a)
of this section; and
(3) The Borrower is temporarily unable to achieve or maintain a
level of occupancy sufficient to prevent financial default and
foreclosure under the Section 202 loan documents. HUD approval under
this paragraph will be of limited duration. HUD may impose terms and
conditions to this approval that are consistent with program objectives
and necessary to protect its interest in the Section 202 loan.
Sec. 891.725 PAC administration.
HUD is responsible for the administration of the PAC.
Sec. 891.730 Default by Borrower.
(a) PAC provisions. The PAC will provide:
(1) That if HUD determines that the Borrower is in default under
the PAC, HUD will notify the Borrower of the actions required to be
taken to cure the default and of the remedies to be applied by HUD,
including an action for specific performance under the PAC, reduction
or suspension of project assistance payment and recovery of
overpayments, as appropriate; and
(2) That if the Borrower fails to cure the default, HUD has the
right to terminate the PAC or to take other corrective action.
(b) Loan provisions. Additional provisions governing default under
the
[[Page 11981]]
Section 202 loan are included in the regulatory agreement and other
loan documents.
Sec. 891.735 Notice upon PAC expiration.
The PAC will provide that the Borrower will, at least 90 days
before the end of the PAC contract term, notify each family occupying
an assisted unit (or residential space in a group home) of any increase
in the amount the family will be required to pay as rent as a result of
the expiration. The notice of expiration will contain such information
and will be served in such manner as HUD may prescribe.
Sec. 891.740 Responsibilities of Borrower.
(a) Marketing. (1) The Borrower must commence and continue diligent
marketing activities not later than 90 days before the anticipated date
of availability for occupancy of the group home or the anticipated date
of availability of the first unit in an independent living complex.
Market activities shall include the provision of notices of the
availability of housing under the program to operators of temporary
housing for the homeless in the same housing market.
(2) Marketing must be done in accordance with the HUD-approved
affirmative fair housing marketing plan and all fair housing and equal
opportunity requirements. The purpose of the plan and requirements is
to achieve a condition in which eligible families of similar income
levels in the same housing market have a like range of housing choices
available to them regardless of their race, color, creed, religion,
sex, or national origin.
(3) At the time of PAC execution, the Borrower must submit to HUD a
list of leased and unleased assisted units (or in the case of a group
home, leased and unleased residential spaces) with a justification for
the unleased units or residential spaces, in order to qualify for
vacancy payments for the unleased units or residential spaces.
(b) Management and maintenance. The responsibilities of the
Borrower with regard to management and maintenance are provided in
Sec. 891.600(b).
(c) Contracting for services. The responsibilities of the Borrower
with regard to contracting for services are provided in
Sec. 891.600(c).
(d) Submission of financial and operating statements. The
responsibilities of the Borrower with regard to the submission of
financial and operating statements are provided in Sec. 891.600(d).
(e) Use of project funds. The responsibilities of the Borrower with
regard to the use of project funds are provided in Sec. 891.600(e).
(f) Reports. The responsibilities of the Borrower with regard to
reports are provided in Sec. 891.600(f).
Sec. 891.745 Replacement reserve.
The general requirements for the replacement reserve are provided
in Sec. 891.605. For projects funded under Secs. 891.655 through
891.790, the amount of the deposits for the initial year of operation
shall be an amount equal to 0.6 percent of the cost of the total
structures (for new construction projects), 0.4 percent of the cost of
the initial mortgage amount (for all other projects), or such higher
rate as required by HUD. For the purposes of this section, total
structures include main buildings, accessory buildings, garages, and
other buildings. The amount of the deposits will be adjusted each year
by the amount of the annual adjustment factor as described in part 888
of this chapter.
Sec. 891.750 Selection and admission of tenants.
(a) Application for admission. The Borrower must accept
applications for admission to the project in the form prescribed by
HUD. Applicant families applying for assisted units (or residential
spaces in a group home) must complete a certification of eligibility as
part of the application for admission. Applicant families must meet the
disclosure and verification requirements for Social Security Numbers,
and sign and submit consent forms for the obtaining of wage and claim
information from State Wage Information Collection Agencies, as
provided by 24 CFR part 5, subpart B. Both the Borrower and the
applicant family must complete and sign the application for admission.
On request, the Borrower must furnish copies of all applications for
admission to HUD.
(b) Determination of eligibility and selection of tenants. The
Borrower is responsible for determining whether applicants are eligible
for admission and for the selection of families. To be eligible for
admission, an applicant family must be a handicapped family (as defined
in Sec. 891.505); meet any project occupancy requirements approved by
HUD; meet the disclosure and verification requirements for Social
Security Numbers, as provided by 24 CFR part 5, subpart B; and be a
low-income family, as defined in Sec. 813.102 of this chapter (as
modified by Sec. 891.505). Under certain circumstances, HUD may permit
the leasing of units (or residential space in a group home) to
ineligible families under Sec. 891.720.
(1) Local residency requirements are prohibited. Local residency
preferences may be applied in selecting tenants only to the extent that
they are not inconsistent with affirmative fair housing marketing
objectives and the Borrower's HUD-approved affirmative fair housing
marketing plan. Preferences may not be based on the length of time the
applicant has resided in the jurisdiction. With respect to any
residency preference, persons expected to reside in the community as a
result of current or planned employment will be treated as residents.
(2) If the Borrower determines that the family is eligible and is
otherwise acceptable and units (or residential spaces in a group home)
are available, the Borrower will assign the family a unit or
residential space in a group home. If the family will occupy an
assisted unit the Borrower will assign the family a unit of the
appropriate size in accordance with HUD standards. If no suitable unit
(or residential space in a group home) is available, the Borrower will
place the family on a waiting list for the project and notify the
family when a suitable unit or residential space may become available.
If the waiting list is so long that the applicant would not be likely
to be admitted within the next 12 months, the Borrower may advise the
applicant that no additional applications for admission are being
considered for that reason.
(3) If the Borrower determines that an applicant is ineligible for
admission or the Borrower is not selecting the applicant for other
reasons, the Borrower will promptly notify the applicant in writing of
the determination, the reasons for the determination, and that the
applicant has a right to request a meeting to review the rejection, in
accordance with HUD requirements. The review, if requested, may not be
conducted by the member of the Borrower's staff who made the initial
decision to reject the applicant. The applicant may also exercise other
rights if the applicant believes the applicant is being discriminated
against on the basis of race, color, creed, religion, sex, handicap, or
national origin.
(4) Records on applicants and approved eligible families, which
provide racial, ethnic, gender and place of previous residency data
required by HUD, must be maintained and retained for three years.
(c) Reexamination of family income and composition (1) Regular
reexaminations. If the family occupies an assisted unit (or residential
space in a group home), the Borrower must reexamine the income and
composition
[[Page 11982]]
of the family at least every 12 months. Upon verification of the
information, the Borrower shall make appropriate adjustments in the
total tenant payment in accordance with part 813 of this chapter, as
modified by Sec. 891.505, and determine whether the family's unit size
is still appropriate. The Borrower must adjust tenant rent and the
project assistance payment and must carry out any unit transfer in
accordance with HUD standards. At the time of the annual reexamination
of family income and composition, the Borrower must require the family
to meet the disclosure and verification requirements for Social
Security Numbers, as provided by 24 CFR part 5, subpart B.
(2) Interim reexamination. If the family occupies an assisted unit
(or residential space in a group home) the family must comply with
provisions in the lease regarding interim reporting of changes in
income. If the Borrower receives information concerning a change in the
family's income or other circumstances between regularly scheduled
reexaminations, the Borrower must consult with the family and make any
adjustments determined to be appropriate. Any change in the family's
income or other circumstances that results in an adjustment in the
total tenant payment, tenant rent, and project assistance payment must
be verified.
(3) Continuation of project assistance payment. (i) A family
occupying an assisted unit (or residential space in a group home) shall
remain eligible for project assistance payment until the total tenant
payment equals or exceeds the gross rent (or a pro rata share of the
gross rent in a group home). The termination of subsidy eligibility
will not affect the family's other rights under its lease. Project
assistance payment may be resumed if, as a result of changes in income,
rent, or other relevant circumstances during the term of the PAC, the
family meets the income eligibility requirements of part 813 of this
chapter (as modified in Sec. 891.505) and project assistance is
available for the unit or residential space under the terms of the PAC.
The family will not be required to establish its eligibility for
admission to the project under the remaining requirements of paragraph
(b) of this section.
(ii) A family's eligibility for project assistance payment may also
be terminated in accordance with HUD requirements for such reasons as
failure to submit requested verification information, including failure
to meet the disclosure and verification requirements for Social
Security Numbers, or failure to sign and submit consent forms for the
obtaining of wage and claim information from State Wage Information
Collection Agencies, as provided by 24 CFR part 5, subpart B.
(Approved by the Office of Management and Budget under control
number 2502-0204 and 2505-0267.)
Sec. 891.755 Obligations of the family.
The obligations of the family are provided in Sec. 891.415.
Sec. 891.760 Overcrowded and underoccupied units.
The requirements for overcrowded and underoccupied units are
provided in Sec. 891.620.
Sec. 891.765 Lease requirements.
The lease requirements are provided in Sec. 891.425.
Sec. 891.770 Termination of tenancy and modification of lease.
The provisions of part 247 of this title apply to all decisions by
a Borrower to terminate the tenancy or modify the lease of a family
residing in a unit (or residential space in a group home).
Sec. 891.775 Security deposits.
The general requirements for security deposits on assisted units
are provided in Sec. 891.435. For purposes of subpart E of this part,
the additional requirements in Sec. 891.635 apply.
Sec. 891.780 Adjustment of rents.
(a) Contract rents. HUD will calculate contract rent adjustments
based on the sum of the project's operating costs and debt service (as
calculated by HUD), with adjustments for vacancies, the project's
nonrental income, and other factors that HUD deems appropriate. The
calculation will be made on the basis of information provided by the
Borrower on a form prescribed by HUD.
(b) Rent for unassisted units. The rent payable by families
occupying units or residential spaces that are not assisted under the
PAC shall be equal to the contract rent computed under paragraph (a) of
this section.
Sec. 891.785 Adjustment of utility allowances.
In connection with adjustments of contract rents as provided in
Sec. 891.780(a), the requirements for the adjustment of utility
allowances provided in Sec. 891.440 apply.
Sec. 891.790 Conditions for receipt of vacancy payments for assisted
units.
(a) General. Vacancy payments under the PAC will not be made unless
the conditions for receipt of these project assistance payments set
forth in this section are fulfilled.
(b) Vacancies during rent-up. For each unit (or residential space
in a group home) that is not leased as of the effective date of the
PAC, the Borrower is entitled to vacancy payments in the amount of 80
percent of the contract rent (or pro rata share of the contract rent
for a group home) for the first 60 days of vacancy, if the Borrower:
(1) Complied with Sec. 891.740;
(2) Has taken and continues to take all feasible actions to fill
the vacancy; and
(3) Has not rejected any eligible applicant except for good cause
acceptable to HUD.
(c) Vacancies after rent-up. If an eligible family vacates an
assisted unit (or residential space in a group home) the Borrower is
entitled to vacancy payments in the amount of 80 percent of the
contract rent (or pro rata share of the contract rent in a group home)
for the first 60 days of vacancy if the Borrower:
(1) Certifies that it did not cause the vacancy by violating the
lease, the PAC, or any applicable law;
(2) Notified HUD of the vacancy or prospective vacancy and the
reasons for the vacancy immediately upon learning of the vacancy or
prospective vacancy;
(3) Has fulfilled and continues to fulfill the requirements
specified in Sec. 891.740(a)(2) and (3), and in paragraphs (b)(2) and
(3) of this section; and
(4) For any vacancy resulting from the Borrower's eviction of an
eligible family, certifies that it has complied with Sec. 891.770.
(d) Vacancies for longer than 60 days. If an assisted unit (or
residential space in a group home) continues to be vacant after the 60-
day period specified in paragraph (b) or (c) of this section, HUD may
approve additional vacancy payments for 60-day periods up to a total of
12 months in an amount equal to the principal and interest payments
required to amortize that portion of the debt service attributable to
the vacant unit (or, in the case of group homes, the residential
space). Such payments may be approved if:
(1) The unit was in decent, safe, and sanitary condition during the
vacancy period for which payment is claimed;
(2) The Borrower has fulfilled and continues to fulfill the
requirements specified in paragraph (b) or (c) of this section, as
appropriate; and
(3) The Borrower has demonstrated to the satisfaction of HUD that:
(i) For the period of vacancy, the project is not providing the
Borrower with revenues at least equal to project expenses (exclusive of
depreciation) and the amount of payments requested is not more than the
portion of the deficiency attributable to the vacant unit (or
residential space in a group home); and
[[Page 11983]]
(ii) The project can achieve financial soundness within a
reasonable time.
(e) Prohibition of double compensation for vacancies. If the
Borrower collects payments for vacancies from other sources (tenant
rent, security deposits, payments under Sec. 891.435(c), or
governmental payments under other programs), the Borrower shall not be
entitled to collect vacancy payments to the extent these collections
from other sources plus the vacancy payment exceed contract rent.
Dated: March 7, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing Federal Housing Commissioner.
[FR Doc. 96-6312 Filed 3-21-96; 8:45 am]
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