Federal Register final rules — 1995-12-27

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. X95-21227 Tests and Methods of Assay of Antibiotic and Antibiotic- Containing Drugs

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66897-66898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X95-21227]

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[[Page 66898]]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 436

Tests and Methods of Assay of Antibiotic and Antibiotic-
Containing Drugs

CFR Correction

    In Title 21 CFR parts 300 to 499, revised as of April 1, 1995, on 
pages 372 and 375, the equations following the second table in both 
Secs. 436.105 and 436.106 were misprinted. Both denominators in each 
equation should read ``5'' instead of ``--5''.

BILLING CODE 1505-01-D

Complete official Federal Register PDF

FR Doc. X95-11227 National Marine Sanctuary Program

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66875-66897]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X95-11227]

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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

15 CFR Parts 922, 924, 925, 935, 936, 938, 940, 941, 942, 943 and
944

[Docket No. 951201283-5283-01]
RIN 0648-AI51

National Marine Sanctuary Program

AGENCY: Office of Ocean and Coastal Resource Management (OCRM),
National Ocean Service (NOS), National Oceanic and Atmospheric
Administration (NOAA), Department of Commerce.

ACTION: Final rule.

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SUMMARY: The National Oceanic and Atmospheric Administration (NOAA) is
removing 15 CFR Parts 924, 925, 935, 936, 938, 940, 941, 942, 943, and
944 and revising 15 CFR Part 922 by consolidating therein the removed
regulations. As revised, Part 922 implements the National Marine
Sanctuaries Act, as amended, (Act), 16 U.S.C. 1431 et seq. and governs
ten of the present twelve National Marine Sanctuaries. The rulemakings
to implement the designations of the eleventh and twelfth Sanctuaries,
the Florida Keys National Marine Sanctuary and the Hawaiian Islands
Humpback Whale National Marine Sanctuary, are presently ongoing and the
regulations governing the old Key Largo and Looe Key National Marine
Sanctuaries (15 CFR Parts 929 and 937) subsumed in the new Florida Keys
Sanctuary will continue to be maintained until replaced by regulations
governing the entire Florida Keys Sanctuary. This final rule does not
make substantive changes to the existing regulations governing the
other ten Sanctuaries, rather it removes duplicative and outdated
provisions, makes technical changes to incorporate current term usage
and achieve uniformity in regulatory language, and consolidates and
reorganizes all remaining provisions in a more logical and cohesive
order. The effect of this final rule is to make the regulations
implementing the Act more concise, better organized, and thereby easier
for the public to use.

EFFECTIVE DATE: December 27, 1995.

FOR FURTHER INFORMATION CONTACT:
Harriet Sopher, Office of Ocean and Coastal Resource Management, at
301-713-3125 (ext. 109), fax: 301-713-0404, e-mail:
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

The National Oceanic and Atmospheric Administration (NOAA) is
removing 15 CFR Parts 924, 925, 935, 936, 938, 940, 941, 942, 943, and
944 and is revising 15 CFR Part 922 by consolidating therein the
removed regulations.
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 immediate, comprehensive regulatory
reform. The President directed all agencies to undertake an exhaustive
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 the regulations implementing the Act and the
National Marine Sanctuary program and revises those regulations as
follows:

II. Consolidates National Marine Sanctuary Regulations in One CFR
Part, 15 CFR Part 922, and removes Ten CFR Parts Containing Site-
Specific Regulations

Currently, regulations implementing the Act are included in 13
separate Parts of title 15, Code of Federal Regulations. This
rulemaking removes ten parts of the Code and consolidates the removed
regulations, which addressed ten of the twelve National Marine
Sanctuaries, in 15 CFR Part 922. The rulemakings to implement the
designations of the eleventh and twelfth Sanctuaries, the Florida Keys
National Marine Sanctuary and the Hawaiian Islands Humpback Whale
National Marine Sanctuary, are presently ongoing and the regulations
governing the old Key Largo and Looe Key National Marine Sanctuaries
(15 CFR Parts 929 and 937) subsumed in the new Florida Keys Sanctuary
will continue to be maintained until replaced by regulations governing
the entire Florida Keys Sanctuary. As revised, subparts A, D and E of
the 15 CFR Part 922 are applicable to all the ten Sanctuaries. Site-
specific regulations for each of the ten appear in each Sanctuary's own
subpart (subparts F through O). Subparts B and C apply to the Site
Evaluation List (SEL) and to the designation of future Sanctuaries.

III. Makes Technical Changes to Incorporate Current Term Usage and
Achieve Uniformity in Regulatory Language, and Replaces the
Duplicative Provisions in the Site-Specific Regulations With
Uniform Definitions and Provisions in Subparts A, D and E
Applicable to the Ten Covered Sanctuaries

Many of the existing regulations for the ten Sanctuaries covered by
this rulemaking contain identical or nearly identical provisions
addressing matters such as definitions, emergency regulations,
penalties, appeals of administrative action, and permit procedures and
criteria. The consolidation of these provisions and the deletion of the
duplicative provisions results in the deletion of many pages of text
from the CFR.
The site specific prohibitions were retained for each Sanctuary in
its own respective subpart. Site-specific definitions were only
retained in those cases where application of a given term to other
Sanctuaries other than the Sanctuary in question might create a
conflict with either regulatory provisions or management practice at
another Sanctuary.

IV. Reorganizes Remaining Regulations

The final rule reorganizes the remaining regulations of the present
15 CFR Part 922 in a more logical and cohesive order. For example,
those provisions relating to the SEL and to the designation of future
Sanctuaries have been moved to two separate subparts. Provisions
pertaining to management

[[Page 66876]]
plan development and implementation have been moved to a single
subpart. This reorganization will make the regulations easier for the
public to use.

V. Removes Regulations Restating Statutory Language

The final rule removes those regulations in 15 CFR Part 922 that
simply restate provisions contained in the Act relating to the
designation of National Marine Sanctuaries. These provisions are
replaced, where appropriate, with references to the applicable sections
of the Act.

VI. Removes Site Selection and Identification Criteria and Other
Outdated Provisions

The final rule removes Appendix 1 to 15 CFR Part 922 which sets
forth National Marine Sanctuary site selection and identification
criteria. Removal of these criteria is appropriate because the SEL is
not presently active and the National Marine Sanctuary program intends
to issue revised, updated criteria prior to its reactivation. This
rulemaking does not affect the status of sites currently on the SEL;
such sites remain on the SEL.
In addition, the final rule removes certain regulatory provisions
that are no longer applicable because of the passage of the provision's
effective period as specified in the regulations. The most notable of
these are the provisions found in site-specific regulations for the
Flower Garden Banks, Monterey Bay, Stellwagen Bank and Olympic Coast
National Marine Sanctuaries which describe the process for obtaining
certification of a valid lease, permit, license, other authorization,
or right of subsistence use or access in existence on the date of
Sanctuary designation. The 90-day period specified in these regulations
for notifying NOAA of the existence of such authorizations or rights
has long since expired. Since this type of certification is no longer
available for those individual sites, these sections are obsolete and
continued codification of them in the CFR is not necessary.

VII. Miscellaneous Rulemaking Requirements

Executive Order 12612: Federalism Assessment

NOAA has concluded that this regulatory action does not have
federalism implications sufficient to warrant the preparation of a
Federalism Assessment under Executive Order 12612.

Executive Order 12630: Takings Implication

NOAA has concluded that this regulatory action does not have
takings implications within the meaning of Executive Order 12630.

Executive Order 12866: Regulatory Impact

This final rule has been determined to be not significant for the
purposes of Executive Order 12866.

Paperwork Reduction Act

The revision of 15 CFR Part 922 and removal of 15 CFR Parts 924,
925, 935, 936, 938, 940, 941, 942, 943, and 944 does not impose any
information collection requirement subject to review and approval by
OMB under the Paperwork Reduction Act of 1980, 44 U.S.C. 3500 et seq.

National Environmental Policy Act

NOAA has concluded that this regulatory action does not constitute
a major federal action significantly affecting the quality of the human
environment. Therefore, an environmental impact statement is not
required.

Administrative Procedure Act

Because this rule makes only technical nonsubstantive and
consolidating and organizational changes to existing regulations, no
useful purpose would be served by providing notice and opportunity for
public comment. Accordingly, the Assistant Administrator for Ocean
Services and Coastal Zone Management under 5 U.S.C. 553(b)(B) for good
cause finds that providing notice and opportunity for public comment is
unnecessary. Because this rule is not substantive, under 5 U.S.C.
553(d) it is not subject to a 30-day delay in effective date.

Authority: National Marine Sanctuaries Act, as amended, 16
U.S.C. 1431 et seq.

List of Subjects

15 CFR Part 922

Administrative practice and procedure, Coastal zone, Education,
Environmental protection, Marine resources, Penalties, Recreation and
recreation areas, Reporting and recordkeeping requirements, Research.

15 CFR 924

Administrative practice and procedure
Historic preservation
Monitor
Monuments and memorials
National Oceanic and Atmospheric Administration
Penalties
Reporting and recordkeeping requirements
Vessels

15 CFR 925

Administrative practice and procedure
Coastal zone
Marine resources
National Oceanic and Atmospheric Administration
Penalties
Recreation and recreation areas
Reporting and recordkeeping requirements
Research

15 CFR 935

15 CFR 936

15 CFR 938

15 CFR 940

15 CFR 941

Administrative practice and procedure
American Samoa
Coastal zone

[[Page 66877]]

Marine resources
National Oceanic and Atmospheric Administration
Penalties
Recreation and recreation areas
Reporting and recordkeeping requirements
Research

15 CFR 942

15 CFR 943

15 CFR 944

Dated: December 8, 1995.
W. Stanley Wilson,
Assistant Administrator for Ocean Services and Coastal Zone Management.

1. Accordingly, for the reasons set forth above, 15 CFR Part 922 is
revised to read as follows:

PART 922--NATIONAL MARINE SANCTUARY PROGRAM REGULATIONS

Subpart A--General

Sec.
922.1 Applicability of regulations.
922.2 Mission, goals, and special policies.
922.3 Definitions.
922.4 Effect of National Marine Sanctuary designation.

Subpart B--Site Evaluation List (SEL)

922.10 General.

Subpart C--Designation of National Marine Sanctuaries

922.20 Standards and procedures for designation.
922.21 Selection of active candidates.
922.22 Development of designation materials.
922.23 Coordination with States and other Federal agencies.
922.24 Congressional documents.
922.25 Designation determination and findings.

Subpart D--Management Plan Development and Implementation

922.30 General.
922.31 Promotion and coordination of Sanctuary use.

Subpart E--Regulations of General Applicability

922.40 Purpose.
922.41 Boundaries.
922.42 Allowed activities.
922.43 Prohibited or otherwise regulated activities.
922.44 Emergency regulations.
922.45 Penalties.
922.46 Response costs and damages.
922.47 Pre-existing authorizations or rights and certifications of
pre-existing authorizations or rights.
922.48 National Marine Sanctuary permits--application procedures
and issuance criteria.
922.49 Notification and review of applications for leases,
licenses, permits, approvals or other authorizations to conduct a
prohibited activity.
922.50 Appeals of administrative action.

Subpart F--Monitor National Marine Sanctuary

922.60 Boundary.
922.61 Prohibited or otherwise regulated activities.
922.62 Permit procedures and criteria.

Subpart G--Channel Islands National Marine Sanctuary

922.70 Boundary.
922.71 Prohibited or otherwise regulated activities.
922.72 Permit procedures and criteria.
Appendix A to Subpart G of Part 922--Channel Islands National Marine
Sanctuary Boundary Coordinates
Subpart H--Point Reyes/Farallon Islands National Marine Sanctuary
922.80 Boundary.
922.81 Definitions.
922.82 Prohibited or otherwise regulated activities.
922.83 Permit procedures and criteria.
922.84 Certification of other permits.
Appendix A to Subpart H of Part 922--Point Reyes/Farallon Islands
National Marine Sanctuary Boundary Coordinates

Subpart I--Gray's Reef National Marine Sanctuary

922.90 Boundary.
922.91 Prohibited or otherwise regulated activities.
922.92 Permit procedures and criteria.

Subpart J--Fagatele Bay National Marine Sanctuary.

922.100 Scope of regulations.
922.101 Boundary.
922.102 Prohibited or otherwise regulated activities.
922.103 Management and enforcement.
922.104 Permit procedures and criteria.

Subpart K--Cordell Bank National Marine Sanctuary

922.110 Boundary.
922.111 Prohibited or otherwise regulated activities.
22.112 Permit procedures and criteria.
9Appendix A to subpart K of Part 922--Cordell Bank National Marine
Sanctuary Boundary Coordinates

Subpart L--Flower Garden Banks National Marine Sanctuary

922.120 Boundary.
922.121 Definitions.
922.122 Prohibited or otherwise regulated activities.
922.123 Permit procedures and criteria.
Appendix A to Subpart L of Part 922--Flower Garden Banks
National Marine Sanctuary Boundary Coordinates.
Appendix B to Subpart L of Part 922--Coordinates for the Department
of the Interior Topographic Lease Stipulations for OCS Lease Sale
112

Subpart M--Monterey Bay National Marine Sanctuary

922.130 Boundary.
922.131 Definitions.
922.132 Prohibited or otherwise regulated activities.
922.133 Permit procedures and criteria.
922.134 Notification and review.
Appendix A to Subpart M of Part 922--Monterey Bay National Marine
Sanctuary Boundary Coordinates
Appendix B to Subpart M of Part 922--Dredged Material Disposal Sites
Adjacent to the Monterey Bay National Marine Sanctuary
Appendix C to Subpart M of Part 922--Zones Within the Sanctuary
Where Overflights Below 1000 Feet Are Prohibited
Appendix D to Subpart M of Part 922--Zones and Access Routes Within
the Sanctuary Where the Operation of Motorized Personal Watercraft
Is Allowed

Subpart N--Stellwagen Bank National Marine Sanctuary

922.140 Boundary.
922.141 Definitions.
922.142 Prohibited or otherwise regulated activities.
922.143 Permit procedures and criteria.
Appendix A to Subpart N of Part 922--Stellwagen Bank National Marine
Sanctuary Boundary Coordinates

Subpart O--Olympic Coast National Marine Sanctuary

922.150 Boundary.
922.151 Definitions.
922.152 Prohibited or otherwise regulated activities.
922.153 Permit procedures and criteria.

[[Page 66878]]

922.154 Consultation with the State of Washington, affected Indian
tribes, and adjacent county governments.
Appendix A to Subpart O of Part 922--Olympic Coast National Marine
Sanctuary Boundary Coordinates

Authority: 16 U.S.C. 1431 et seq.

Subpart A--General

Sec. 922.1 Applicability of regulations.

Unless noted otherwise, the regulations in subparts A, D and E
apply to all ten National Marine Sanctuaries for which site-specific
regulations appear in subparts F through O, respectively. Subparts B
and C apply to the site evaluation list and to the designation of
future Sanctuaries.

Sec. 922.2 Mission, goals, and special policies.

(a) In accordance with the standards set forth in title III of the
Marine Protection, Research, and Sanctuaries Act of 1972, as amended,
also known as the National Marine Sanctuaries Act (Act) the mission of
the National Marine Sanctuary program (Program) is to identify,
designate and manage areas of the marine environment of special
national, and in some cases international, significance due to their
conservation, recreational, ecological, historical, research,
educational, or aesthetic qualities.
(b) The goals of the Program are to carry out the mission to:
(1) Identify and designate as National Marine Sanctuaries areas of
the marine environment which are of special national significance;
(2) Provide authority for comprehensive and coordinated
conservation and management of these marine areas, and activities
affecting them, in a manner which complements existing regulatory
authorities;
(3) Support, promote, and coordinate scientific research on, and
monitoring of, the resources of these marine areas, especially long-
term monitoring and research of these areas;
(4) Enhance public awareness, understanding, appreciation, and wise
use of the marine environment;
(5) Facilitate to the extent compatible with the primary objective
of resource protection, all public and private uses of the resources of
these marine areas not prohibited pursuant to other authorities;
(6) Develop and implement coordinated plans for the protection and
management of these areas with appropriate Federal agencies, State and
local governments, Native American tribes and organizations,
international organizations, and other public and private interests
concerned with the continuing health and resilience of these marine
areas;
(7) Create models of, and incentives for, ways to conserve and
manage these areas;
(8) Cooperate with global programs encouraging conservation of
marine resources; and
(9) Maintain, restore, and enhance living resources by providing
places for species that depend upon these marine areas to survive and
propagate.
(c) To the extent consistent with the policies set forth in the
Act, in carrying out the Program's mission and goals:
(1) Particular attention will be given to the establishment and
management of marine areas as National Marine Sanctuaries for the
protection of the area's natural resource and ecosystem values;
particularly for ecologically or economically important or threatened
species or species assemblages, and for offshore areas where there are
no existing special area protection mechanisms;
(2) The size of a National Marine Sanctuary, while highly dependent
on the nature of the site's resources, will be no larger than necessary
to ensure effective management;
(d) Management efforts will be coordinated to the extent
practicable with other countries managing marine protected areas;
(4) Program regulations, policies, standards, guidelines, and
procedures under the Act concerning the identification, evaluation,
registration, and treatment of historical resources shall be
consistent, to the extent practicable, with the declared national
policy for the protection and preservation of these resources as stated
in the National Historic Preservation Act of 1966, 16 U.S.C. 470 et
seq., the Archeological and Historical Preservation Act of 1974, 16
U.S.C. 469 et seq., and the Archeological Resources Protection Act of
1979 (ARPA), 16 U.S.C. 470aa et seq. The same degree of regulatory
protection and preservation planning policy extended to historical
resources on land shall be extended, to the extent practicable, to
historical resources in the marine environment within the boundaries of
designated National Marine Sanctuaries. The management of historical
resources under the authority of the Act shall be consistent, to the
extent practicable, with the Federal archeological program by
consulting the Uniform Regulations, ARPA (43 CFR part 7) and other
relevant Federal regulations. The Secretary of the Interior's Standards
and Guidelines for Archeology may also be consulted for guidance. These
guidelines are available from the Office of Ocean and Coastal
Management at (301) 713-3125.

Sec. 922.3 Definitions.

Act means title III of the Marine Protection, Research, and
Sanctuaries Act of 1972, as amended, 16 U.S.C. 1431 et seq., also known
as the National Marine Sanctuaries Act.
Active Candidate means a site selected by the Secretary from the
Site Evaluation List for further consideration for possible designation
as a National Marine Sanctuary.
Assistant Administrator means the Assistant Administrator for Ocean
Services and Coastal Zone Management, National Oceanic and Atmospheric
Administration (NOAA), or designee.
Benthic community means the assemblage of organisms, substrate, and
structural formations found at or near the bottom that is periodically
or permanently covered by water.
Commercial fishing means any activity that results in the sale or
trade for intended profit of fish, shellfish, algae, or corals.
Conventional hook and line gear means any fishing apparatus
operated aboard a vessel and composed of a single line terminated by a
combination of sinkers and hooks or lures and spooled upon a reel that
may be hind- or electrically operated, hand-held or mounted. This term
does not include bottom longlines.
Cultural resources means any historical or cultural feature,
including archaeological sites, historic structures, shipwrecks, and
artifacts.
Director means, except where otherwise specified, the Director of
the Office of Ocean and Coastal Resource Management, NOAA, or designee.
Exclusive economic zone means the exclusive economic zone as
defined in the Magnuson Fishery Conservation and Management Act, 16
U.S. 1801 et seq.
Fish wastes means waste materials resulting from commercial fish
processing operations.
Historical resource means a resource possessing historical,
cultural, archaeological or paleontological significance, including
sites, structures, districts, and objects significantly associated with
or representative of earlier people, cultures, and human activities and
events. Historical resource also includes ``historical properties'' as
defined in the National Historic Preservation Act, as amended, 16
U.S.C. 470 et seq., and its implementing regulations, as amended.
Indian tribe means any American Indian tribe, band, group, or
community recognized as such by the Secretary of the Interior.

[[Page 66879]]

Injure means to change adversely, either in the short or long term,
a chemical, biological or physical attribute of, or the viability of.
This includes, but is not limited to, to cause the loss of or destroy.
Lightering means at-sea transfer of petroleum-based products,
materials, or other matter from vessel to vessel.
Marine means those areas of coastal and ocean waters, the Great
Lakes and their connecting waters, and submerged lands over which the
United States exercises jurisdiction, including the exclusive economic
zone, consistent with international law.
Mineral means clay, stone, sand, gravel, metalliferous ore, non-
metalliferous ore, or any other solid material or other matter of
commercial value.
National historic landmark means a district, site, building,
structure or object designated as such by the Secretary of the Interior
under the National Historic Landmarks Program (36 CFR part 65).
National Marine Sanctuary means an area of the marine environment
of special national significance due to its resource or human-use
values, which is designated as such to ensure its conservation and
management.
Person means any private individual, partnership, corporation or
other entity; or any officer, employee, agent, department, agency or
instrumentality of the Federal government, of any State or local unit
of government, or of any foreign government.
Regional Fishery Management Council means any fishery council
established under section 302 of the Magnuson Fishery Conservation and
Management Act, 16 U.S.C. 1801 et seq.
Sanctury quality means any particular and essential characteristic
of a Sanctuary, including, but not limited to, water, sediment, and air
quality.
Sanctuary resource means any living or none-living resource of a
National Marine Sanctuary that contributes to the conservation,
recreational, ecological, historical, research, educational, or
aesthetic value of the Sanctuary, including, but not limited to, the
substratum of the area of the Sanctuary, other submerged features and
the surrounding seabed, carbonate rock, corals and other bottom
formations, coralline algae and other marine plants and algae, marine
invertebrates, brine-seep biota, phytoplankton, zooplankton, fish,
seabirds, sea turtles and other marine reptiles, marine mammals and
historical resources.
Secretary means the Secretary of the United States Department of
Commerce, or designee.
Shunt means to discharge expended drilling cuttings and fluids near
the ocean seafloor.
Site Evaluation List (SEL) means a list of selected natural and
historical resource sites selected by the Secretary as qualifying for
further evaluation for possible designation as National Marine
Sanctuaries.
State means each of the several States, the District of Columbia,
the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, American Samos, the United States Virgin Islands,
Guam, and any other commonwealth, territory, or possession of the
United States.
Subsistence use means the customary and traditional use by rural
residents of areas near or in the marine environment for direct
personal or family consumption as food, shelter, fuel, clothing, tools,
or transportation; for the making and selling of handicraft articles;
and for barter, if for food or non-edible items other than money, if
the exchange is of a limited and non-commercial nature.
Take or taking means: (1) For any marine mammal, sea turtle, or
seabird listed as either endangered or threatened pursuant to the
Endangered Species Act, to harass, harm, pursue, hunt, shoot, would,
kill, trap, capture, collect or injure, or to attempt to engage in any
such conduct; (2) For any other marine mammal, sea turtle, or seabird,
to harass, hunt, capture, kill, collect or injure, or to attempt to
engage in any such conduct. For the purposes of both (1) and (2) of
this definition, this includes, but is not limited to, to collect any
dead or injured marine mammal, sea turtle or seabird, or any part
thereof; to restrain or detain any marine mammal, sea turtle or
seabird, or any part thereof, no matter how temporarily; to tag any sea
turtle, marine mammal or seabird; to operate a vessel or aircraft or to
do any other act that results in the disturbance or molestation of any
marine mammal, sea turtle or seabird.
Tropical fish means fish or minimal sport and food value, usually
brightly colored, often used for aquaria purposes and which lives in a
direct relationship with live bottom communities.
Vessel means a watercraft of any description capable of being used
as a means of transportation in/on the waters of a Sanctuary.

Sec. 922.4 Effect of National Marine Sanctuary designation.

The designation of a National Marine Sanctuary, and the regulations
implementing it, are binding on any person subject to the jurisdiction
of the United States. Designation does not constitute any claim to
territorial jurisdiction on the part of the United States for
designated sites beyond the U.S. territorial sea, and the regulations
implementing the designation shall be applied in accordance with
generally recognized principles of international law, and in accordance
with treaties, conventions, and other agreements to which the United
States is a party. No regulation shall apply to a person who is not a
citizen, national, or resident alien of the United States, unless in
accordance with:
(a) Generally recognized principles of international law;
(b) An agreement between the United States and the foreign state of
which the person is a citizen; or
(c) An agreement between the United States and the flag state of
the foreign vessel, if the person is a crew member of the vessel.

Subpart B--Site Evaluation List (SEL)

Sec. 922.10 General.

(a) The Site Evaluation List (SEL) was established as a
comprehensive list of marine sites with high natural resource values
and with historical qualities of special national significance that are
highly qualified for further evaluation for possible designation as
National Marine Sanctuaries.
(b) The SEL is currently inactive. Criteria for inclusion of marine
sites on a revised SEL will be issued, with public notice and
opportunity to comment, when the Director determines that the SEL
should be reactivated.
(c) Only sites on the SEL may be considered for subsequent review
as active candidates for designation.
(d) Placement of a site on the SEL, or selection of a site from the
SEL as an active candidate for designation as provided for in
Sec. 922.21, by itself shall not subject the site to any regulatory
control under the Act. Such controls may only be imposed after
designation.

Subpart C--Designation of National Marine Sanctuaries

Sec. 922.20 Standards and procedures for designation.

In designating a National Marine Sanctuary, the Secretary shall
apply the standards and procedures set forth in section 303 and section
304 of the Act.

Sec. 922.21 Selection of active candidates.

(a) The Secretary shall, from time to time, select a limited number
of sites from the SEL for Active Candidate consideration based on a
preliminary assessment of the designation standards set forth in
section 303 of the Act.

[[Page 66880]]

(b) Selection of a site as an Active Candidate shall begin the
formal Sanctuary designation-evaluation process. A notice of intent to
prepare a draft environmental impact statement shall be published in
the Federal Register and in newspapers in the area(s) of local concern.
A brief written analysis describing the site shall be provided. The
Secretary, at any time, may drop a site from consideration if the
Secretary determines that the site does not meet the designation
standards and criteria set forth in the Act.

Sec. 922.22 Development of designation materials.

(a) In designating a National Marine Sanctuary, the Secretary shall
prepare the designation materials described in section 304 of the Act.
(b) If a proposed Sanctuary includes waters within the exclusive
economic zone, the Secretary shall notify the appropriate Regional
Fishery Management Council(s) which shall have one hundred and twenty
(120) days from the date of such notification to make recommendations
and, if appropriate, prepare draft fishery regulations and to submit
them to the Secretary. In preparing its recommendations and draft
regulations, the Council(s) shall use as guidance the national
standards of section 301(a) of the Magnuson Act (16 U.S.C. 1851) to the
extent that they are consistent and compatible with the goals and
objectives of the proposed Sanctuary designation. Fishery activities
not proposed for regulation under section 304(a)(5) of the Act may be
listed in the draft Sanctuary designation document as potentially
subject to regulation, without following the procedures specified in
section 304(a)(5) of the Act. If the Secretary subsequently determines
that regulation of any such fishery activity is necessary, then the
procedures specified in section 304(a)(5) of the Act shall be followed.

Sec. 922.23 Coordination with States and other Federal agencies.

(a) The Secretary shall consult and cooperate with affected States
throughout the National Marine Sanctuary designation process. In
particular the Secretary shall:
(1) Consult with the relevant State officials prior to selecting
any site on the SEL as an Active Candidate pursuant to Sec. 922.21,
especially concerning the relationship of any site to State waters and
the consistency of the proposed designation with a federally approved
State coastal zone management program. For the purposes of a
consistency review by States with federally approved coastal zone
management programs, designation of a National Marine Sanctuary is
deemed to be a Federal activity, which, if affecting the State's
coastal zone, must be undertaken in a manner consistent to the maximum
extent practicable with the approved State coastal zone program as
provided by section 307(c)(1) of the Coastal Zone Management Act of
1972, as amended, and implementing regulations at 15 CFR part 930,
subpart.
(2) Ensure that relevant State agencies are consulted prior to
holding any public hearings pursuant to section 304(a)(3) of the Act.
(3) Provide the Governor(s) of any State(s) in which a proposed
Sanctuary would be located an opportunity to certify the designation or
any of its terms as unacceptable as specified in section 304(b)(1) of
the Act.
(b) The Secretary shall develop proposed regulations relating to
activities under the jurisdiction of one or more other Federal agencies
in consultation with those agencies.

Sec. 922.24 Congressional documents.

In designating a National Marine Sanctuary, the Secretary shall
prepare and submit to Congress those documents described in section 304
of the Act.

Sec. 922.25 Designation determination and findings.

(a) In designating a National Marine Sanctuary, the Secretary shall
prepare a written Designation Determination and Findings which shall
include those findings and determinations described in section 303 of
the Act.
(b) In addition to those factors set forth in section 303 of the
Act, the Secretary, when making a designation determination, shall
consider the Program's fiscal capability to manage the area as a
National Marine Sanctuary.

Subpart D--Management Plan Development and Implementation

Sec. 922.30 General.

(a) The Secretary shall implement each management plan, and
applicable regulations, including carrying out surveillance and
enforcement activities and conducting such research, monitoring,
evaluation, and education programs as are necessary and reasonable to
carry out the purposes and policies of the Act.
(b) Consistent with Sanctuary management plans, the Secretary shall
develop and implement site-specific contingency and emergency-response
plans designed to protect Sanctuary resources. The plans shall contain
alert procedures and actions to be taken in the event of an emergency
such as a shipwreck or an oil spill.

Sec. 922.31 Promotion and coordination of Sanctuary use.

The Secretary shall take such action as is necessary and reasonable
to promote and coordinate the use of National Marine Sanctuaries for
research, monitoring, and education purposes. Such action may include
consulting with Federal agencies, or other persons to promote use of
one or more Sanctuaries for research, monitoring and education,
including coordination with the National Estuarine Research Reserve
System.

Subpart E--Regulations of General Applicability

Sec. 922.40 Purpose.

The purpose of the regulations in this subpart and in subparts F
through O is to implement the designations of the ten National Marine
Sanctuaries for which site-specific regulations appear in subparts F
through O, respectively, by regulating activities affecting them,
consistent with their respective terms of designation in order to
protect, preserve and manage and thereby ensure the health, integrity
and continued availability of the conservation, ecological,
recreational, research, educational, historical and aesthetic resources
and qualities of these areas.

Sec. 922.41 Boundaries.

The boundary for each of the ten National Marine Sanctuaries
covered by this part is described in subparts F through O,
respectively.

Sec. 922.42 Allowed activities.

All activities except those site-specific activities prohibited or
otherwise regulated in subparts F through O, may be conducted subject
to any emergency regulations promulgated pursuant to Secs. 922.44 and
922.111(c), subject to all prohibitions, restrictions and conditions
validly imposed by any other authority of competent jurisdiction, and
subject to the liability established by section 312 of the Act.

Sec. 922.43 Prohibited or otherwise regulated activities.

Subparts F through O set forth site-specific regulations applicable
to the activities specified therein.

Sec. 922.44 Emergency regulations.

Where necessary to prevent or minimize the destruction of, loss of,
or injury to a Sanctuary resource or quality, or minimize the imminent
risk of such destruction, loss, or injury, any and all activities are
subject to

[[Page 66881]]
immediate temporary regulation, including prohibition. The provisions
of this section do not apply to the Cordell Bank National Marine
Sanctuary. See Sec. 922.111(c) for the authority to issue emergency
regulations with respect to that Sanctuary.

Sec. 922.45 Penalties.

(a) Each violation of the Act, any regulation in this part, or any
permit issued pursuant thereto, is subject to a civil penalty of not
more than $100,000. Each day of a continuing violation constitutes a
separate violation.
(b) Regulations setting forth the procedures governing
administrative proceedings for assessment of civil penalties, permit
sanctions, and denials for enforcement reasons, issuance and use of
written warnings, and release or forfeiture of seized property appear
at 15 CFR part 904.

Sec. 922.46 Response costs and damages.

Under section 312 of the Act, any person who destroys, causes the
loss of, or injures any Sanctuary resource is liable to the United
States for response costs and damages resulting from such destruction,
loss or injury, and any vessel used to destroy, cause the loss of, or
injure any Sanctuary resource is liable in rem to the United States for
response costs and damages resulting from such destruction, loss or
injury.

Sec. 922.47 Pre-existing authorizations or rights and certifications
of pre-existing authorizations or rights.

(a) Leases, permits, licenses, or rights of subsistence use or
access in existence on the date of designation of any National Marine
Sanctuary shall not be terminated by the Director. The Director may,
however, regulate the exercise of such leases, permits, licenses, or
rights consistent with the purposes for which the Sanctuary was
designated.
(b) The prohibitions listed in subparts F through O do not apply to
any activity authorized by a valid lease, permit, license, approval or
other authorization in existence on the effective date of Sanctuary
designation and issued by any Federal, State or local authority of
competent jurisdiction, or by any valid right of subsistence use or
access in existence on the effective date of Sanctuary designation,
provided that the holder of such authorization or right complies with
certification procedures and criteria promulgated at the time of
Sanctuary designation and with any terms and conditions on the exercise
of such authorization or right imposed by the Director as a condition
of certification as he or she deems necessary to achieve the purpose
for which the Sanctuary was designated.

Sec. 922.48 National Marine Sanctuary permits--application procedures
and issuance criteria.

(a) A person may conduct an activity prohibited by this part if
conducted in accordance with the scope, purpose, terms and conditions
of a permit issued under this section and subparts F through O.
(b) Applications for such permits should be addressed to the
Director and sent to the address specified in subparts F through O. An
application must include:
(1) A detailed description of the proposed activity including a
timetable for completion;
(2) The equipment, personnel and methodology to be employed;
(3) The qualifications and experience of all personnel;
(4) The potential effects of the activity, if any, on Sanctuary
resources and qualities; and
(5) Copies of all other required licenses, permits, approvals or
other authorizations.
(c) Upon receipt of an application, the Director may request such
additional information from the applicant as he or she deems necessary
to act on the application and may seek the views of any persons or
entity, within or outside the Federal government, and may hold a public
hearing, as deemed appropriate.
(d) The Director, at his or her discretion, may issue a permit,
subject to such terms and conditions as he or she deems appropriate, to
conduct a prohibited activity, in accordance with the criteria found in
subparts F through O. The Director shall further impose, at a minimum,
the conditions set forth in the relevant subpart.
(e) A permit granted pursuant to this section is nontransferable.
(f) The Director may amend, suspend, or revoke a permit issued
pursuant to this section for good cause. The Director may deny a permit
application pursuant to this section, in whole or in part, if it is
determined that the permittee or applicant has acted in violation of
the terms and conditions of a permit or of the regulations set forth in
this section or subparts F through O or for other good cause. Any such
action shall be communicated in writing to the permittee or applicant
by certified mail and shall set forth the reason(s) for the action
taken. Procedures governing permit sanctions and denials for
enforcement reasons are set forth in subpart D of 15 CFR part 904.

Sec. 922.49 Notification and review of applications for leases,
licenses, permits, approvals or other authorizations to conduct a
prohibited activity.

(a) The prohibitions set forth in regulations found in subparts L
through O, do not apply to any activity authorized by any valid lease,
permit, license, approval or other authorization issued after the
effective date of Sanctuary designated by any Federal, State or local
authority of competent jurisdiction, provided that:
(1) The applicant notifies the Director, in writing, of the
application for such authorization (and of any application for an
amendment, renewal or extension of such authorization) within fifteen
(15) days of the date of application or of the effective date of
Sanctuary designation, whichever is later;
(2) The applicant complies with the other provisions of this
section;
(3) The Director notifies the applicant and authorizing agency that
he or she does not object to issuance of the authorization (or
amendment, renewal or extension); and
(4) The applicant complies with any terms and conditions the
Director deems necessary to protect Sanctuary resources and qualities.
(b) Any potential applicant for a lease, permit, license, approval
or other authorization for any Federal, State or local authority (or
for an amendment, renewal or extension of such authorization) may
request the Director to issue a finding as to whether the activity for
which an application is intended to be made is prohibited by
regulations in this part.
(c) Notifications of filings of applications and requests for
findings should be addressed to the address found in subparts F through
O. A copy of the application must accompany the notification.
(d) The Director may request additional information from the
applicant as he or she deems necessary to determine whether to object
to issuance of such lease, license, permit, approval or other
authorization (or to issuance of an amendment, extension or renewal of
such authorization), or what terms and conditions are necessary to
protect Sanctuary resources and qualities. The information requested
must be received by the Director within 45 days of the postmark date of
the request. The Director may seek the views of any persons on the
application.
(e) The Director shall notify, in writing, the agency to which
application has been made of his or her review of the application and
possible objection to issuance. After review of the application and
information received with respect

[[Page 66882]]
thereto, the Director, or designee shall notify both the agency and
applicant, in writing, whether he or she has an objection to issuance
and what terms and conditions he or she deems necessary to protect
Sanctuary resources and qualities. The Director shall state the
reason(s) for any objection or the reason(s) that any terms and
conditions are deemed necessary to protect Sanctuary resources and
qualities.
(f) The Director may amend the terms and conditions deemed
necessary to protect Sanctuary resources and qualities whenever
additional information becomes available justifying such an amendment.
(g) Any time limit prescribed in or established under this section
may be extended by the Director for good cause.
(h) The applicant may appeal any objection by or terms or
conditions imposed by the Director, to the Assistant Administrator in
accordance with the procedures set forth in Sec. 922.50.

Sec. 922.50 Appeals of administrative action.

(a)(1) Except for permit actions taken for enforcement reasons (see
subpart D of 15 CFR part 904 for applicable procedures), an applicant
for, or a holder of, a National Marine Sanctuary permit; an applicant
for, or a holder of, a Special Use permit pursuant to section 310 of
the Act; a person requesting certification of an existing lease,
permit, license or right of subsistence use or access under
Sec. 922.47; or, for those Sanctuaries described in subparts L through
O, an applicant for a lease, permit, license or other authorization
issued by any Federal, State, or local authority of competent
jurisdiction (hereinafter appellant) may appeal to the Assistant
Administrator:
(i) The granting, denial, conditioning, amendment, suspension or
revocation by the Director of a National Marine Sanctuary or Special
Use permit;
(ii) The conditioning, amendment, suspension or revocation of a
certification under Sec. 922.47; or
(iii) For those Sanctuaries described in subparts L through O, the
objection to issuance of or the imposition of terms and conditions on a
lease, permit, license or other authorization issued by any Federal,
State, or local authority of competent jurisdiction.
(2) For those National Marine Sanctuaries described in subparts F
through K, any interested person may also appeal the same actions
described in paragraphs (a)(1) (i) and (ii) of this section. For
appeals arising from actions taken with respect to these National
Marine Sanctuaries, the term ``appellant'' includes any such interested
persons.
(b) An appeal under paragraph (a) of this section must be in
writing, state the action(s) by the Director appealed and the reason(s)
for the appeal, and be received within 30 days of receipt of notice of
the action by the Director. Appeals should be addressed to the
Assistant Administrator for Ocean Services and Coastal Zone Management,
NOAA 1305 East-West Highway, 13th Floor, Silver Spring, MD 20910.
(c)(1) The Assistant Administrator may request the appellant to
submit such information as the Assistant Administrator deems necessary
in order for him or her to decide the appeal. The information requested
must be received by the Assistant Administrator within 45 days of the
postmark date of the request. The Assistant Administrator may seek the
views of any other persons. For the Monitor National Marine Sanctuary,
if the appellant has requested a hearing, the Assistant Administrator
shall grant an informal hearing. For all other National Marine
Sanctuaries, the Assistant Administrator may determine whether to hold
an informal hearing on the appeal. If the Assistant Administrator
determines that an informal hearing should be held, the Assistant
Administrator may designate an officer before whom the hearing shall be
held.
(2) The hearing officer shall give notice in the Federal Register
of the time, place and subject matter of the hearing. The appellant and
the Director may appear personally or by counsel at the hearing and
submit such material and present such arguments as deemed appropriate
by the hearing officer. Within 60 days after the record for the hearing
closes, the hearing officer shall recommend a decision in writing to
the Assistant Administrator.
(d) The Assistant Administrator shall decide the appeal using the
same regulatory criteria as for the initial decision and shall base the
appeal decision on the record before the Director and any information
submitted regarding the appeal, and, if a hearing has been held, on the
record before the hearing officer and the hearing officer's recommended
decision. The Assistant Administrator shall notify the appellant of the
final decision and he reason(s) therefore in writing. The Assistant
Administrator's decision shall constitute final agency action for the
purpose of the Administrative Procedure Act.
(e) Any time limit prescribed in or established under this section
other than the 30-day limit for filing an appeal may be extended by the
Assistant Administrator or hearing office for good cause.

Subpart F--Monitor National Marine Sanctuary

Sec. 922.60 Boundary.

The Monitor National Marine Sanctuary (Sanctuary) consists of a
vertical water column in the Atlantic Ocean one mile in diameter
extending from the surface to the seabed, the center of which is at
35 deg.00'23'' north latitude and 75 deg.24'32'' west longitude.

Sec. 922.61 Prohibited or otherwise regulated activities.

Except as may be permitted by the Director, the following
activities are prohibited and thus are unlawful for any person to
conduct or to cause to be conducted within the Sanctuary:
(a) Anchoring in any manner, stopping, remaining, or drifting
without power at any time;
(b) Any type of subsurface salvage or recovery operation;
(c) Diving of any type, whether by an individual or by a
submersible;
(d) Lowering below the surface of the water any grappling, suction,
conveyor, dredging or wrecking device;
(e) Detonating below the surface of the water any explosive or
explosive mechanism;
(f) Drilling or coring the seabed;
(g) Lowering, laying, positioning or raising any type of seabed
cable or cable-laying device;
(h) Trawling; or
(i) Discharging waster material into the water in violation of any
Federal statute or regulation.

Sec. 922.62 Permit procedure and criteria.

(a) Any person or entity may conduct in the Sanctuary any activity
listed in Sec. 922.61 if such activity is either: (1) For the purpose
of research related to the Monitor, or (2) Pertains to salvage or
recovery operations in connection with an air or marine casualty and
such person or entity is in possession of a valid permit issued by the
Director authorizing the conduct of such activity; except that, no
permit is required for the conduct of any activity immediately and
urgently necessary for the protection of life, property or the
environment.
(b) Any person or entity who wishes to conduct in the Sanctuary an
activity for which a permit is authorized by this section (hereafter a
permitted activity) may apply in writing to the Director for a permit
to conduct such activity citing this section as the basis for the
application. Such application should be made to: Director, Office of
Ocean and Coastal Resource Management; ATTN: Manager, Monitor National
Marine

[[Page 66883]]
Sanctuary, Building 1519, NOAA, Fort Eustis, VA 23604-5544.
(c) In considering whether to grant a permit for the conduct of a
permitted activity for the purpose of research related to the Monitor,
the Secretary shall evaluate such matters as:
(1) The general professional and financial responsibility of the
applicant;
(2) The appropriateness of the research method(s) envisioned to the
purpose(s) of the research;
(3) The extent to which the conduct of any permitted activity may
diminish the value of the MONITOR as a source of historic, cultural,
aesthetic and/or maritime information;
(4) The end value of the research envisioned; and
(5) Such other matters as the Director deems appropriate.
(d) In considering whether to grant a permit for the conduct of a
permitted activity in the Sanctuary in relation to an air or marine
casualty, the Director shall consider such matters as:
(1) The fitness of the applicant to do the work envisioned;
(2) The necessity of conducting such activity;
(3) The appropriateness of any activity envisioned to the purpose
of the entry into the Sanctuary;
(4) The extent to which the conduct of any such activity may
diminish the value of the Monitor as a source of historic, cultural,
aesthetic and/or maritime information; and
(5) Such other matters as the Director deems appropriate.
(e) In considering any application submitted pursuant to this
section, the Director shall seek and consider the views of the Advisory
Council on Historic Preservation.
(f) The Director may observe any activity permitted by this
section; and/or may require the submission of one or more reports of
the status or progress of such activity.

Subpart G--Channel Islands National Marine Sanctuary

Sec. 922.70 Boundary.

The Channel Islands National Marine Sanctuary (Sanctuary) consists
of an area of the waters off the coast of California of approximately
1252.5 square nautical miles (NM) adjacent to the following islands and
offshore rocks: San Miguel Island, Santa Cruz Island, Santa Rosa
Island, Anacapa Island, Santa Barbara Island, Richardson Rock, and
Castle Rock (collectively the Islands) extending seaward to a distance
of six NM. The boundary coordinates are listed in appendix A to this
subpart.

Sec. 922.71 Prohibited or otherwise regulated activities.

(a) Except as may be necessary for the national defense (subject to
the terms and conditions of Article 5, Section 2 of the Designation
Document) or to respond to an emergency threatening life, property, or
the environment, or except as may be permitted by the Director in
accordance with Sec. 922.48 and Sec. 922.72, the following activities
are prohibited and thus are unlawful for any person to conduct or to
cause to be conducted within the Sanctuary:
(1) Exploring for, developing, and producing hydrocarbons except
pursuant to leases executed prior to March 30, 1981, and except the
laying of pipeline, if the following oil spill contingency equipment is
available at the site of such operations:
(i) 1500 feet of open ocean containment boom and a boat capable of
deploying the boom;
(ii) One oil skimming device capable of open ocean use; and
(iii) Fifteen bales of oil sorbent material, and subject to all
prohibitions, restrictions and conditions imposed by applicable
regulations, permits, licenses or other authorizations and consistency
reviews including those issued by the Department of the Interior, the
Coast Guard, the Corps of Engineers, the Environmental Protection
Agency and under the California Coastal Management Program and its
implementing regulations.
(2) Discharging or depositing any material or other matter except:
(i) Fish or fish parts and chumming materials (bait);
(ii) Water (including cooling water) and other biodegradable
effluents incidental to vessel use of the Sanctuary generated by:
(A) Marine sanitation devices;
(B) Routine vessel maintenance, e.g., deck wash down;
(C) Engine exhaust; or
(D) Meals on board vessels;
(iii) Effluents incidental to hydrocarbon exploration and
exploitation activities allowed by paragraph (a)(1) of this section.
(3) Except in connection with the laying of any pipeline as allowed
by paragraph (a)(1) of this section, within 2 NM of any Island:
(i) Constructing any structure other than a navigation aid,
(ii) Drilling through the seabed, or
(iii) Dredging or otherwise altering the seabed in any way, other
than
(A) To anchor vessels, or
(B) To bottom trawl from a commercial fishing vessel.
(4) Except to transport persons or supplies to or from an Island,
operating within one NM of an Island any vessel engaged in the trade of
carrying cargo, including, but not limited to, tankers and other bulk
carriers and barges, or any vessel engaged in the trade of servicing
offshore installations. In no event shall this section be construed to
limit access for fishing (including kelp harvesting), recreational, or
research vessels.
(5) Disturbing seabirds or marine mammals by flying motorized
aircraft at less than 1000 feet over the waters within one NM of any
Island except:
(i) For enforcement purposes;
(ii) To engage in kelp bed surveys; or
(iii) To transport persons or supplies to or from an Island.
(6) Removing or damaging any historical or cultural resource.
(b) All activities currently carried out by the Department of
Defense within the Sanctuary are essential for the national defense
and, therefore, not subject to the prohibitions in this section. The
exemption of additional activities having significant impact shall be
determined in consultation between the Director and the Department of
Defense.

Sec. 922.72 Permit procedures and criteria.

(a) Any person in possession of a valid permit issued by the
Director in accordance with this section and Sec. 922.48 may conduct
any activity in the Sanctuary prohibited under Sec. 922.71 if such
activity is either:
(1) Research related to the resources of the Sanctuary,
(2) To further the educational value of the Sanctuary; or
(3) For salvage or recovery operations.
(b) Permit applications shall be addressed to: Director, Office of
Ocean and Coastal Resource Management, ATTN: Manager, Channel Islands
National Marine Sanctuary, 113 Harbor Way, Santa Barbara, CA 93109.
(c) In considering whether to grant a permit the Director shall
evaluate such matters as:
(1) The general professional, and financial responsibility of the
applicant;
(2) The appropriateness of the methods envisioned to the purpose(s)
of the activity;
(3) The extent to which the conduct of any permitted activity may
diminish or enhance the value of the Sanctuary as a source of
recreation, or as a source of educational or scientific information;
(4) The end value of the activity and
(5) Such other matters as may be deemed appropriate.
(d) The Director may observe any permitted activity and/or require
the submission of one or more reports of the status or progress of such
activity. Any information obtained shall be available to the public.

[[Page 66884]]

Appendix A to Subpart G of Part 922--Channel Islands National
Marine Sanctuary Boundary Coordinates

----------------------------------------------------------------------------------------------------------------
Point No. Latitude north Longitude west
----------------------------------------------------------------------------------------------------------------
Northern Channel Islands Section
----------------------------------------------------------------------------------------------------------------
01....................................... 33 deg.56'28.959'' 119 deg.16'23.800''
02....................................... 33 deg.58'03.919'' 119 deg.14'56.964''
03....................................... 34 deg.01'33.846'' 119 deg.14'07.740''
04....................................... 34 deg.04'24.203'' 119 deg.15'21.308''
05....................................... 34 deg.06'06.653'' 119 deg.17'27.002''
06....................................... 34 deg.06'54.809'' 119 deg.19'46.046''
07....................................... 34 deg.06'57.988'' 119 deg.23'24.905''
08....................................... 34 deg.06'51.627'' 119 deg.24'04.198''
09....................................... 34 deg.07'01.640'' 119 deg.25'40.819'''
10....................................... 34 deg.06'59.904'' 119 deg.26'50.959''
11....................................... 34 deg.08'02.002'' 119 deg.28'47.501''
12....................................... 34 deg.08'17.693'' 119 deg.29'27.698''
13....................................... 34 deg.08'52.234'' 119 deg.30'39.562''
14....................................... 34 deg.09'16.780'' 119 deg.35'22.667''
15....................................... 34 deg.09'05.106'' 119 deg.36'41.694''
16....................................... 34 deg.08'02.782'' 119 deg.39'33.421''
17....................................... 34 deg.08'46.870'' 119 deg.41'48.621''
18....................................... 34 deg.09'35.563'' 119 deg.45'57.284''
19....................................... 34 deg.09'32.627'' 119 deg.46'37.335''
20....................................... 34 deg.09'33.396'' 119 deg.47'32.285''
21....................................... 34 deg.09'43.668'' 119 deg.48'09.018''
22....................................... 34 deg.10'10.616'' 119 deg.50'07.659''
23....................................... 34 deg.10'21.586'' 119 deg.51'05.146''
24....................................... 34 deg.10'33.161'' 119 deg.53'17.044''
25....................................... 34 deg.10'36.545'' 119 deg.55'57.373''
26....................................... 34 deg.10'21.283'' 119 deg.57'26.403''
27....................................... 34 deg.08'07.255'' 120 deg.01'07.233''
28....................................... 34 deg.08'13.144'' 120 deg.02'27.930''
29....................................... 34 deg.07'47.772'' 120 deg.05'05.449''
30....................................... 34 deg.07'29.314'' 120 deg.06'36.262''
31....................................... 34 deg.07'30.691'' 120 deg.09'35.238''
32....................................... 34 deg.06'36.285'' 120 deg.12'39.335''
33....................................... 34 deg.06'40.634'' 120 deg.13'33.940''
34....................................... 34 deg.08'10.759'' 120 deg.15'07.017''
35....................................... 34 deg.09'12.290'' 120 deg.17'07.046''
35A...................................... 34 deg.09'50.706'' 120 deg.17'31.649''
36....................................... 34 deg.10'56.346'' 120 deg.18'40.520''
36B...................................... 34 deg.11'28.249'' 120 deg.19'29.213''
37....................................... 34 deg.12'08.078'' 120 deg.21'00.835''
37C...................................... 34 deg.12'25.468'' 120 deg.25'01.261''
38....................................... 34 deg.12'18.754'' 120 deg.25'39.373''
38D...................................... 34 deg.11'33.184'' 120 deg.27'33.921''
39....................................... 34 deg.12'19.470'' 120 deg.30'22.620''
39E...................................... 34 deg.12'17.540'' 120 deg.32'19.959''
40....................................... 34 deg.10'54.592'' 120 deg.35'57.887''
40F...................................... 34 deg.06'07.491'' 120 deg.38'27.883''
41....................................... 34 deg.04'53.454'' 120 deg.38'16.602''
41G...................................... 34 deg.03'30.539'' 120 deg.37'39.442''
42....................................... 34 deg.01'09.860'' 120 deg.35'04.808''
42H...................................... 34 deg.00'48.573'' 120 deg.34'25.106''
43....................................... 33 deg.59'13.122'' 120 deg.33'53.385''
44....................................... 33 deg.57'01.427'' 120 deg.31'54.590''
45....................................... 33 deg.55'36.973'' 120 deg.27'37.188''
46....................................... 33 deg.55'30.037'' 120 deg.25'14.587''
47....................................... 33 deg.54'50.522'' 120 deg.22'29.536''
48....................................... 33 deg.55'01.640'' 120 deg.19'26.722''
49....................................... 33 deg.54'34.409'' 120 deg.18'27.344''
50....................................... 33 deg.53'23.129'' 120 deg.17'39.927''
51....................................... 33 deg.50'39.990'' 120 deg.15'13.874''
52....................................... 33 deg.49'53.260'' 120 deg.13'41.904''
53....................................... 33 deg.49'03.437'' 120 deg.12'06.750''
54....................................... 33 deg.48'36.087'' 120 deg.11'10.821''
55....................................... 33 deg.47'39.280'' 120 deg.07'59.707''
56....................................... 33 deg.47'37.617'' 120 deg.06'04.002''
57....................................... 33 deg.47'59.351'' 120 deg.04'08.370''
58....................................... 33 deg.48'38.700'' 120 deg.02'33.188''
59....................................... 33 deg.48'52.167'' 120 deg.01'50.244''
60....................................... 33 deg.50'28.486'' 119 deg.57'50.820''
61....................................... 33 deg.50'55.128'' 119 deg.55'19.934''
62....................................... 33 deg.52'13.338'' 119 deg.52'53.439''
63....................................... 33 deg.52'04.900'' 119 deg.52'10.719''
64....................................... 33 deg.51'39.919'' 119 deg.47'21.152''
65....................................... 33 deg.51'48.592'' 119 deg.46'13.213''
66....................................... 33 deg.51'35.798'' 119 deg.44'34.589''
67....................................... 33 deg.51'44.374'' 119 deg.41'12.738''
68....................................... 33 deg.52'23.857'' 119 deg.39'14.708''
69....................................... 33 deg.53'09.365'' 119 deg.37'30.784''
70....................................... 33 deg.53'12.754'' 119 deg.35'35.793''
71....................................... 33 deg.53'17.114'' 119 deg.34'54.567''
72....................................... 33 deg.53'38.865'' 119 deg.32'51.578''
73....................................... 33 deg.54'02.277'' 119 deg.31'06.274''
74....................................... 33 deg.54'56.444'' 119 deg.28'54.052''
75....................................... 33 deg.54'39.349'' 119 deg.27'37.512''
76....................................... 33 deg.54'15.236'' 119 deg.25'23.779''
77....................................... 33 deg.54'07.847'' 119 deg.24'22.849''
78....................................... 33 deg.54'04.682'' 119 deg.22'58.006''
79....................................... 33 deg.54'14.311'' 119 deg.21'44.573''
80....................................... 33 deg.54'22.824'' 119 deg.21'09.003''
81....................................... 33 deg.54'46.904'' 119 deg.19'54.677''
82....................................... 33 deg.55'05.834'' 119 deg.19'16.027''

Santa Barbara Island Section
83....................................... 33 deg.28'56.904'' 119 deg.10'04.092''
84....................................... 33 deg.26'32.364'' 119 deg.10'01.328''
85....................................... 33 deg.24'19.904'' 119 deg.08'52.236''
86....................................... 33 deg.23'26.019'' 119 deg.07'54.826''
87....................................... 33 deg.22'04.836'' 119 deg.05'16.716''
88....................................... 33 deg.21'49.387'' 119 deg.04'01.551''
89....................................... 33 deg.21'44.594'' 119 deg.02'49.887''
90....................................... 33 deg.21'49.556'' 119 deg.01'37.839''
91....................................... 33 deg.22'07.538'' 118 deg.59'49.357''
92....................................... 33 deg.22'27.774'' 118 deg.58'51.623''
93....................................... 33 deg.22'47.957'' 118 deg.58'07.633''
94....................................... 33 deg.23'20.805'' 118 deg.57'14.375''
95....................................... 33 deg.24'18.458'' 118 deg.56'08.450''
96....................................... 33 deg.26'24.130'' 118 deg.54'51.352''
97....................................... 33 deg.29'02.820'' 118 deg.54'22.276''
98....................................... 33 deg.31'27.917'' 118 deg.54'50.367''
99....................................... 33 deg.32'17.935'' 118 deg.55'18.396''
100...................................... 33 deg.35'10.090'' 118 deg.59'40.091''
101...................................... 33 deg.35'24.575'' 119 deg.01'22.108''
102...................................... 33 deg.35'06.497'' 119 deg.03'59.463''
103...................................... 33 deg.34'48.322'' 119 deg.05'03.374''
104...................................... 33 deg.32'37.151'' 119 deg.08'37.201''
105...................................... 33 deg.30'41.731'' 119 deg.09'45.845''
----------------------------------------------------------------------------------------------------------------

Subpart H--Point Reyes/Farallon Islands National Marine Sanctuary

Sec. 922.80 Boundary.

(a) The Point Reyes/Farallon Islands Marine Sanctuary (Sanctuary)
consists of an area of

FR Doc. X95-11227 National Marine Sanctuary Program

the waters adjacent to the coast of California
north and south of the Point Reyes Headlands, between Bodega Head and
Rocky Point and the Farallon Islands (including Noonday Rock), and
includes approximately 948 square nautical miles (NM). The boundary
coordinates are listed in Appendix A to this subpart.
(b) The shoreward boundary follows the mean high tide line and the
seaward limit of Point Reyes National Seashore. Between Bodega Head and
Point Reyes Headlands, the Sanctuary extends seaward 3 NM beyond State
waters. The Sanctuary also includes the waters within 12 NM of the
Farallon Islands, and between the Islands and the mainland from Point
Reyes Headlands to Rocky Point. The Sanctuary includes Bodega Bay, but
not Bodega Harbor.

Sec. 922.81 Definitions.

In addition to those definitions found at Sec. 922.3, the
following definition applies to this subpart:
Areas of Special Biological Significance (ASBS) means those areas
established by the State of California prior to the designation of the
Sanctuary except that for purposes of the regulations in this subpart,
the area established around the Farallon Islands shall not be included.

Sec. 922.82 Prohibited or otherwise regulated activities.

(a) Except as may be necessary for national defense (subject to the
terms and conditions of Article 5, Section 2 of the Designation
Document) or to respond to an emergency threatening life, property or
the environment, or except as may be permitted by the Director in
accordance with Sec. 922.48 and Sec. 922.83, the following activities
are prohibited and thus are unlawful for any person to conduct or to
cause to be conducted within the Sanctuary:
(1) Exploring for, developing and producing oil or gas except that
pipelines related to hydrocarbon operations outside the Sanctuary may
be placed at a distance greater than 2 NM from the Farallon Islands,
Bolinas Lagoon, and ASBS where certified to have no significant effect
on Sanctuary resources in accordance with Sec. 922.84.
(2) Discharging or depositing any material or other matter except:
(i) Fish or fish parts and chumming materials (bait).
(ii) Water (including cooling water) and other biodegradable
effluents incidental to vessel use of the Sanctuary generated by:
(A) Marine sanitation devices;
(B) Routine vessel maintenance, e.g., deck wash down;
(C) Engine exhaust; or
(D) Meals on board vessels.
(iii) Dredge material disposed of at the interim dumpsite now
established approximately 10 NM south of the southeast Farallon Island
and municipal sewage provided such discharges are certified in
accordance with Sec. 922.84.
(3) Except in connection with the laying of pipelines or
construction of an outfall if certified in accordance with
Sec. 922.84:
(i) Constructing any structure other than a navigation aid,
(ii) Drilling through the seabed, and

[[Page 66885]]

(iii) Dredging or otherwise altering the seabed in any way other
than by anchoring vessels or bottom trawling from a commercial fishing
vessel, except for routine maintenance and navigation, ecological
maintenance, mariculture, and the construction of docks and piers in
Tomales Bay.
(4) Except to transport persons or supplies to or from islands or
mainland areas adjacent to Sanctuary waters, within an area extending 2
NM from the Farallon Islands, Bolinas Lagoon, or any ASBS, operating
any vessel engaged in the trade of carrying cargo, including but not
limited to tankers and other bulk carriers and barges, or any vessel
engaged in the trade of servicing offshore installations. In no event
shall this section be construed to limit access for fishing,
recreational or research vessels.
(5) Disturbing seabirds or marine mammals by flying motorized
aircraft at less than 1000 feet over the waters within one NM of the
Farallon Islands, Bolinas Lagoon, or any ASBS except to transport
persons or supplies to or from the Islands or for enforcement purposes.
(6) Removing or damaging any historical or cultural resource.
(b) All activities currently carried out by the Department of
Defense within the Sanctuary are essential for the national defense
and, therefore, not subject to the prohibitions in this section. The
exemption of additional activities having significant impacts shall be
determined in consultation between the Director and the Department of
Defense.

Sec. 922.83 Permit procedures and criteria.

(a) Any person in possession of a valid permit issued by the
Director in accordance with this section and Sec. 922.48 may conduct
any activity in the Sanctuary, prohibited user Sec. 922.82, if such an
activity is
(1) Research related to the resources of the Sanctuary,
(2) To further the educational value of the Sanctuary, or
(3) For salvage or recovery operations.
(b) Permit applications shall be addressed to the Director, Office
of Ocean and Coastal Resource Management, ATTN: Manager, Point Reyes/
Farallon Islands National Marine Sanctuary, Fort Mason, building #201,
San Francisco, CA 94123.
(c) In considering whether to grant a permit, the Director shall
evaluate
(1) The general professional and financial responsibility of the
applicant,
(2) The appropriateness of the methods envisioned to the purpose(s)
of the activity,
(3) The extent to which the conduct of any permitted activity may
diminish or enhance the value of the Sanctuary,
(4) The end value of the activity, and
(5) Other matters as deemed appropriate.
(d) The Director may observe any permitted activity and/or require
the submission of one or more reports of the status or progress of such
activity. Any information obtained will be made available to the
public.

Sec. 922.84 Certification of other permits.

(a) A permit, license, or other authorization allowing the
discharge of municipal sewage, the laying of any pipeline outside 2 NM
from the Farallon Islands, Bolinas Lagoon and ASBS, or the disposal of
dredge material at the interim dumpsite now established approximately
10 NM south of the Southeast Farallon Island prior to the selection of
a permanent dumpsite shall be valid if certified by the Director as
consistent with the purpose of the Sanctuary and having no significant
effect on Sanctuary resources. Such certification may impose terms and
conditions as deemed appropriate to ensure consistency.
(b) In considering whether to make the certifications called for in
this section, the Director may seek and consider the views of any other
person or entity, within or outside the Federal government, and may
hold a public hearing as deemed appropriate.
(c) Any certification called for in this section shall be presumed
unless the Director acts to deny or condition certification within 60
days from the date that the Director receives notice of the proposed
permit and the necessary supporting data.
(d) The Director may amend, suspend, or revoke any certification
made under this section whenever continued operation would violate any
terms or conditions of the certification. Any such action shall be
forwarded in writing to both the holder of the certified permit and the
issuing agency and shall set forth reason(s) for the action taken.

Appendix A to Subpart H of Part 922--Point Reyes/Farallon Islands
National Marine Sanctuary Boundary Coordinates

Subpart I--Gray's Reef National Marine Sanctuary

Sec. 922.90 Boundary.

The Gray's Reef National Marine Sanctuary (Sanctuary) consists of
16.68 square nautical miles (NM) of high sea waters off the coast of
Georgia. The Sanctuary boundary includes all waters within a rectangle
starting at coordinate 31 deg.21'45''N, 80 deg.55'17''W, commencing to
coordinate 31 deg.25'15''N, 80 deg.55'17''W, thence to coordinate
31 deg.25'15''N, 80 deg.49'42''W, thence to coordinate 31 deg.21'45''N,
80 deg.49'42''W, thence back to the point of origin.

Sec. 922.91 Prohibited or otherwise regulated activities.

[[Page 66886]]

(5) Using a bottom trawl, specimen dredge, or similar vessel-towed
bottom sampling device.
(6)(i)(A) Breaking, cutting, or similarly damaging, taking, or
removing any bottom formation, marine invertebrate, or marine plant.
(B) Taking any tropical fish.
(C) Using poisons, electric charges, explosives, or similar methods
to take any marine animal not otherwise prohibited to be taken.
(ii) There shall be a rebuttable presumption that any bottom
formation, marine invertebrate, tropical fish, marine plant, or marine
animal found in the possession of a person within the Sanctuary have
been collected within or removed from the Sanctuary.
(7) Tampering with, damaging, or removing any historic or cultural
resources.
(b) All activities currently carried out by the Department of
Defense within the Sanctuary are essential for the national defense
and, therefore, not subject to the prohibitions in this section. The
exemption of additional activities having significant impacts shall be
determined in consultation between the Director and the Department of
Defense.

Sec. 922.92 Permit procedures and criteria.

(a) Any person in possession of a valid permit issued by the
Director in accordance with this section and Sec. 922.48 may conduct
the specific activity in the Sanctuary including any activity
specifically prohibited under Sec. 922.91, if such activity is
(1) Research related to the resources of the Sanctuary,
(2) To further the educational value of the Sanctuary, or
(3) For salvage or recovery operations.
(b) Permit applications shall be addressed to the Director, Office
of Ocean and Coastal Resource Management, ATTN: Manager, Gray's Reef
National Marine Sanctuary, 10 Ocean Science Circle, Savannah, GA 31411.
(c) In considering whether to grant a permit, the Director shall
evaluate
(1) The general professional and financial responsibility of the
applicant,
(2) The appropriateness of the methods envisioned to the purpose(s)
of the activity,
(3) The extent to which the conduct of any permitted activity may
diminish or enhance the value of the Sanctuary,
(4) The end value of the activity, and
(5) Other matters as deemed appropriate.
(d) The Director may observe any permitted activity and/or require
the submission of one or more reports of the status or progress of such
activity. Any information obtained will be made available to the
public.

Subpart J--Fagatele Bay National Marine Sanctuary

Sec. 922.100 Scope of regulations.

The provisions of this subpart J apply only to the area of the
Territory of American Samoa within the boundary of the Fagatele Bay
National Marine Sanctuary (Sanctuary). Neither the provisions of this
subpart J nor any permit issued under their authority shall be
construed to relieve a person from any other requirements imposed by
statute or regulation of the Territory of American Samoa or of the
United States. In addition, no statute or regulation of the Territory
of American Samoa shall be construed to relieve a person from the
restrictions, conditions, and requirements contained in this subpart J.

Sec. 922.101 Boundary.

The Sanctuary is a 163-acre (0.25 sq. mi.) coastal embayment formed
by a collapsed volcanic crater on the island of Tutuila, Territory of
American Samoa and includes Fagatele Bay in its entirety. The landward
boundary is defined by the mean high high water (MHHW) line between
Fagatele Point (14 deg.22'15'' S, 170 deg.46'5'' W) and Steps Point
(14 deg.22'44'' S, 170 deg.45'27'' W). The seaward boundary of the
Sanctuary is defined by a straight line between Fagatele Point and
Steps Point.

Sec. 922.102 Prohibited or otherwise regulated activities.

(a) Except as may be necessary for national defense or to respond
to an emergency threatening life, property, or the environment, or as
may be permitted by the Director in accordance with Sec. 922.48 and
Sec. 922.104, the following activities are prohibited and thus are
unlawful for any person to conduct or to cause to be conducted within
the Sanctuary:
(1)(i)(A) Gathering, taking, breaking, cutting, damaging,
destroying, or possessing any invertebrate, coral, bottom formation, or
marine plant.
(B) Taking, gathering, cutting, damaging, destroying, or possessing
any crown-of-thorns starfish (Acanthaster planci).
(C) Possessing or using poisons, electrical charges, explosives, or
similar environmentally destructive methods.
(D) Possessing or using spearguns, including such devices known as
Hawaiian slings, pole spears, arbalettes, pneumatic and spring-loaded
spearguns, bows and arrows, bang sticks, or any similar taking device.
(E) Possessing or using a seine, trammel net, or any type of fixed
net.
(ii) There shall be a rebuttable presumption that any items listed
in this paragraph (a)(1) found in the possession of a person within the
Sanctuary have been used, collected, or removed within or from the
Sanctuary.
(2)(i) Operating a vessel closer than 200 feet (60.96 meters) from
another vessel displaying a dive flag at a speed exceeding three knots.
(ii) Operating a vessel in a manner which causes the vessel to
strike or otherwise cause damage to the natural features of the
Sanctuary.
(3) Diving or conducting diving operations from a vessel not flying
in a conspicuous manner the international code flag alpha ``A.''
(4) Littering, depositing, or discharging, into the waters of the
Sanctuary, any material or other matter.
(5) Disturbing the benthic community by dredging, filling,
dynamiting, bottom trawling, or otherwise altering the seabed.
(6) Removing, damaging, or tampering with any historical or
cultural resource within the boundary of the Sanctuary.
(7) Ensnaring, entrapping, or fishing for any sea turtle listed as
a threatened or endangered species under the Endangered Species Act of
1973, as amended, 16 U.S.C. 1531 et seq.
(8) Except for law enforcement purposes, using or discharging
explosives or weapons of any description. Distress signaling devices,
necessary and proper for safe vessel operation, and knives generally
used by fishermen and swimmers shall not be considered weapons for
purposes of this section.
(9) Marking, defacing, or damaging in any way, or displacing or
removing or tampering with any signs, notices, or placards, whether
temporary or permanent, or with any monuments, stakes, posts, or other
boundary markers related to the Sanctuary.
(b) In addition to those activities prohibited or otherwise
regulated under paragraph (a) of this section, the following activities
are prohibited and thus are unlawful for any person to conduct or to
cause to be conducted landward of the straight line connecting Fagatele
Point (14 deg.22'15'' S, 170 deg.46'5'' W) and Matautuloa Benchmark
(14 deg.22'18'' S, 170 deg.45'35'' W).
(1) Possessing or using fishing poles, handlines, or trawls.
(2) Fishing commercially.

Sec. 922.103 Management and enforcement.

The National Oceanic and Atmospheric Administration (NOAA) has
primary responsibility for the

[[Page 66887]]
management of the Sanctuary pursuant to the Act. The American Samoa
Economic and Development Planning Office (EDPO) will assist NOAA in the
administration of the Sanctuary, and act as the lead agency, in
conformance with the Designation Document, these regulations, and the
terms and provisions of any grant or cooperative agreement. NOAA may
act to deputize enforcement agents of the American Samoa Government
(ASG) to enforce the regulations in this subpart in accordance with
existing law. If NOAA chooses to exercise this provision, a memorandum
of understanding shall be executed between NOAA and the ASG or the
person(s) or entity authorized to act on their behalf.

Sec. 922.104 Permit procedures and criteria.

(a) Any person in possession of a valid permit issued by the
Director, in consultation with the EDPO, in accordance with this
section and Sec. 922.48, may conduct an activity otherwise prohibited
by Sec. 922.102 in the Sanctuary if such activity is judged not to
cause long-term or irreparable harm to the resources of the Sanctuary,
and is:
(1) Related to research involving Sanctuary resources designed to
enhance understanding of the Sanctuary environment or to improve
resource management decisionmaking;
(2) Intended to further the educational value of the Sanctuary and
thereby enhance understanding of the Sanctuary environmental or improve
resource management decisionmaking; or
(3) For salvage or recovery operations.
(b) Permit applications shall be addressed to the Director, Office
of Ocean and Coastal Resource Management; ATTN: Sanctuary Coordinator,
Fagatele Bay National Marine Sanctuary, P.O. Box 4318, Pago Pago, AS
96799.
(c) In considering whether to grant a permit, the Director shall
evaluate such matters as:
(1) The general professional and financial responsibility of the
applicant;
(2) The appropriateness of the methods being proposed for the
purpose(s) of the activity;
(3) The extent to which the conduct of any permitted activity may
diminish or enhance the value of the Sanctuary as a source of
recreation, education, or scientific information; and
(4) The end value of the activity.
(d) In addition to meeting the criteria in this section and
Sec. 922.48, the applicant also must demonstrate to the Director that:
(1) The activity shall be conducted with adequate safeguards for
the environment; and
(2) The environment shall be returned to, or will regenerate to,
the condition which existed before the activity occurred.
(e) The Director may, at his or her discretion, grant a permit
which has been applied for pursuant to this section, in whole or in
part, and subject the permit to such condition(s) as he or she deems
necessary. A permit granted for research related to the Sanctuary may
include, but is not limited to, the following conditions:
(1) The Director may observe any activity permitted by this
section;
(2) any information obtained in the research site shall be made
available to the public; and
(3) The submission of one or more reports of the status of such
research activity may be required.

Subpart K--Cordell Bank National Marine Sanctuary

Sec. 922.110 Boundary

The Cordell Bank National Marine Sanctuary (Sanctuary) consists of
a 397.05 square nautical mile (NM) area of marine waters approximately
50 miles west-northwest of San Francisco, California extending at
180 deg. from the northernmost boundary of the Point Reyes-Farallon
Islands National Marine Sanctuary (PRNMS) to the 1,000 fathom isobath
northwest of the Bank, then south along this isobath to the PRNMS
boundary and back to the northwest along this boundary to the beginning
point. The boundary coordinates are listed in appendix A to this
subpart.

Sec. 922.111 Prohibited or otherwise regulated activities.

(a) Except as necessary for national defense or to respond to an
emergency threatening life, property or the environment, or except as
permitted in accordance with Sec. 922.48 and Sec. 922.112 or certified
in accordance with Sec. 922.47, the following activities are prohibited
and thus are unlawful for any person to conduct or to cause to be
conducted:
(1) (1) Depositing or discharging, from any location within the
boundary of the Sanctuary, material or other matter of any kind except:
(A) Fish, fish parts, chumming materials (bait) produced and
discarded during routine fishing activities conducted in the Sanctuary;
and
(B) Water (including cooling water) and other biodegradable
effluents incidental to use of a vessel in the Sanctuary and generated
by: Marine sanitation devices approved by the United States Coast
Guard; routine vessel maintenance, e.g., deck wash down; engine
exhaust; or meals on board vessels.
(ii) Depositing or discharging, from any location beyond the
boundaries of the Sanctuary, material or other matter of any kind,
except for the exclusions listed in paragraph (a)(1)(i) of this
section, which enter the Sanctuary and injure a Sanctuary resource.
(2) Removing, taking, or injuring or attempting to remove, take, or
injure benthic invertebrates or algae located on Cordell Bank or within
the 50 fathom isobath surrounding the Bank. There is a rebuttable
presumption that any such resource found in the possession of a person
within the Sanctuary was taken or removed by that person. This
prohibition does not apply to accidental removal, injury, or takings
during normal fishing operations.
(3) Exploring for, or developing or producing, oil, gas, or
minerals in any area of the Sanctuary.
(b) All activities being carried out by the Department of Defense
(DOD) within the Sanctuary on the effective date of designation that
are necessary for national defense are exempt from the prohibitions
contained in the regulations in this subpart. Additional DOD activities
initiated after the effective date of designation that are necessary
for national defense will be exempted by the Director after
consultation between the Department of Commerce and DOD. DOD activities
not necessary for national defense, such as routine exercises and
vessel operations, are subject to all prohibitions contained in the
regulations in this subpart.
(c) Where necessary to prevent immediate, serious, and irreversible
damage to a Sanctuary resource, any activity may be regulated within
the limits of the Act on an emergency basis for no more than 120 days.

Sec. 922.112 Permit procedures and criteria.

(a) If a person wishes to conduct an activity prohibited under
Sec. 922.111, that person must apply for, receive, and have in
possession on board any vessel used a valid permit issued pursuant to
this section and Sec. 922.48 authorizing that person to conduct that
activity.
(b) Permit applications shall be addressed to the Director, Office
of Ocean and Coastal Resource Management; ATTN: Manager, Cordell Bank
National Marine Sanctuary, Fort Mason, Building #201, San Francisco, CA
94123.
(c) The Director, at his or her discretion, may issue a permit
subject to such terms and conditions as deemed appropriate, to conduct
an activity otherwise prohibited by Sec. 922.111, if the Director finds
that the activity will further research related to Sanctuary resources;
further the educational or

[[Page 66888]]
historical value of the Sanctuary; further salvage or recovery
operations in or near the Sanctuary in connection with a recent air or
marine casualty; or assist in the management of the Sanctuary. In
deciding whether to issue a permit, the Director may consider such
factors as the professional qualifications and financial ability of the
applicant as related to the proposed activity; the appropriateness of
the methods and procedures proposed by the applicant for the conduct of
the activity; the extent to which the conduct of the activity may
diminish or enhance the values for which the Sanctuary was designated;
and the end value of the applicant's overall activity.

Appendix A to subpart K of Part 922--Cordell Bank National Marine
Sanctuary Boundary Coordinates

----------------------------------------------------------------------------------------------------------------
Point No. Latitude Longitude
----------------------------------------------------------------------------------------------------------------
1........................................ 38 deg.15'51.72'' 123 deg.10'52.44''
2........................................ 38 deg.07'55.88'' 123 deg.38'33.53''
3........................................ 38 deg.06'45.21'' 123 deg.38'00.40''
4........................................ 38 deg.04'58.41'' 123 deg.37'14.34''
5........................................ 38 deg.04'28.22'' 123 deg.37'17.83''
6........................................ 38 deg.03'42.75'' 123 deg.36'55.66''
7........................................ 38 deg.03'11.10'' 123 deg.36'19.78''
8........................................ 38 deg.02'46.12'' 123 deg.36'21.98''
9........................................ 38 deg.02'02.74'' 123 deg.35'56.56''
10....................................... 38 deg.01'27.10'' 123 deg.35'55.12''
11....................................... 38 deg.01'22.28'' 123 deg.36'55.13''
12....................................... 38 deg.01'11.54'' 123 deg.37'28.21''
13....................................... 38 deg.00'49.16'' 123 deg.37'29.77''
14....................................... 37 deg.59'54.49'' 123 deg.36'47.90''
15....................................... 37 deg.59'12.39'' 123 deg.35'59.55''
16....................................... 37 deg.58'39.40'' 123 deg.35'14.85''
17....................................... 37 deg.58'00.57'' 123 deg.34'42.93''
18....................................... 37 deg.57'18.99'' 123 deg.33'43.15''
19....................................... 37 deg.56'56.42'' 123 deg.32'51.97''
20....................................... 37 deg.56'18.90'' 123 deg.32'49.24''
21....................................... 37 deg.55'22.37'' 123 deg.32'36.96''
22....................................... 37 deg.54'26.10'' 123 deg.32'21.73''
23....................................... 37 deg.53'07.46'' 123 deg.31'46.81''
24....................................... 37 deg.52'34.93'' 123 deg.31'18.90''
25....................................... 37 deg.51'42.81'' 123 deg.31'19.10''
26....................................... 37 deg.50'59.58'' 123 deg.31'02.96''
27....................................... 37 deg.48'49.14'' 123 deg.28'44.61''
28....................................... 37 deg.49'22.64'' 123 deg.29'34.07''
29....................................... 37 deg.48'49.14'' 123 deg.28'44.61''
30....................................... 37 deg.48'36.95'' 123 deg.28'08.29''
31....................................... 37 deg.48'03.37'' 123 deg.28'23.27''
32....................................... 37 deg.47'41.54'' 123 deg.28'01.97''
33....................................... 37 deg.47'01.78'' 123 deg.27'16.78''
34....................................... 37 deg.46'51.92'' 123 deg.26'48.98''
35....................................... 37 deg.46'13.20'' 123 deg.26'04.79''
36....................................... 37 deg.46'00.73'' 123 deg.25'36.99''
37....................................... 37 deg.50'25.31'' 123 deg.25'26.53''
38....................................... 37 deg.54'32.28'' 123 deg.23'16.49''
39....................................... 37 deg.57'45.71'' 123 deg.19'17.72''
40....................................... 37 deg.59'29.27'' 123 deg.14'12.16''
41....................................... 37 deg.59'43.71'' 123 deg.08'27.55''
42....................................... 38 deg.03'10.20'' 123 deg.07'44.35''
43....................................... 38 deg.04'01.64'' 123 deg.06'58.92''
44....................................... 38 deg.08'33.32'' 123 deg.04'56.24''
45....................................... 38 deg.12'42.06'' 123 deg.07'10.21''
----------------------------------------------------------------------------------------------------------------

Subpart L--Flower Garden Banks National Marine Sanctuary

Sec. 922.120 Boundary.

The Flower Garden Banks National Marine Sanctuary (the Sanctuary)
consists of two separate areas of ocean waters over and surrounding the
East and West Flower Garden Banks, and the submerged lands thereunder
including the Banks, in the northwestern Gulf of Mexico. The area
designated at the East Bank is located approximately 120 nautical miles
(NM) south-southwest of Cameron, Louisiana, and encompasses 19.20
NM\2\, and the area designated at the West Bank is located
approximately 110 NM southeast of Galveston, Texas, and encompasses
22.50 NM\2\. The two areas encompass a total of 41.70 NM\2\ (143.21
square kilometers). The boundary coordinates for each area are listed
in appendix A to this subpart.

Sec. 922.121 Definitions.

In addition to those definitions found at Sec. 922.3, the following
definition applies to this subpart:
No-activity zone means one of the two geographic areas delineated
by the Department of the Interior in stipulations for OCS lease sale
112 over and surrounding the East and West Flower Garden Banks as areas
in which activities associated with exploration for, development of, or
production of hydrocarbons are prohibited. The precise coordinates of
these areas are provided in appendix B of this subpart. These
particular coordinates define the geographic scope of the ``no-activity
zones'' for purposes of the regulations in this subpart. These
coordinates are based on the ``\1/4\ \1/4\ \1/4\'' system formerly used
by the Department of the Interior, a method that delineates a specific
portion of a block rather than the actual underlying isobath.

Sec. 922.122 Prohibited or otherwise regulated activities.

(a) Except as specified in paragraphs (c) through (h) of this
section, the following activities are prohibited and thus are unlawful
for any person to conduct or to cause to be conducted:
(1) Exploring for, developing, or producing oil, gas or minerals
except outside of all no-activity zones and provided all drilling
cuttings and drilling fluids are shunted to the seabed through a
downpipe that terminates an appropriate distance, but no more than ten
meters, from the seabed.
(2)(i) Anchoring or otherwise mooring within the Sanctuary a vessel
greater than 100 feet (30.48 meters) in registered length.
(ii) Anchoring a vessel of less than or equal to 100 feet (30.48
meters) in registered length within an area of the Sanctuary where a
mooring buoy is available.
(iii) Anchoring a vessel within the Sanctuary using more than
fifteen feet (4.57 meters) of chain or wire rope attached to the
anchor.
(iv) Anchoring a vessel within the Sanctuary using anchor lines
(exclusive of the anchor chain or wire rope permitted by paragraph
(a)(4) of this section) other than those of a soft fiber or nylon,
polypropylene, or similar material.
(3)(i) Discharging or depositing, from within the boundaries of the
Sanctuary, any material or other matter except:
(A) Fish, fish parts, chumming materials or bait used in or
resulting from fishing with conventional hook and line gear in the
Sanctuary;
(B) Biodegradable effluents incidental to vessel use and generated
by marine sanitation devices approved in accordance with section 312 of
the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1322;
(C) Water generated by routine vessel operations (e.g., cooling
water, deck wash down, and graywater as defined by section 312 of the
Federal Water Pollution Control Act, as amended, 33 U.S.C. 1322)
excluding oily wastes from bilge pumping;
(D) Engine exhaust; or
(E) In areas of the Sanctuary outside the no-activity zones,
drilling cuttings and drilling fluids necessarily discharged incidental
to the exploration for, development of, or production of oil or gas in
those areas and in accordance with the shunting requirements of
paragraph (a)(1) unless such discharge injures a Sanctuary resource or
quality.
(ii) Discharging or depositing, from beyond the boundaries of the
Sanctuary, any material or other matter, except those listed in
paragraphs (a)(3)(i) (A) through (D) of this section, that subsequently
enters the Sanctuary and injures a Sanctuary resource or quality.
(4) Drilling into, dredging or otherwise altering the seabed of the
Sanctuary (except by anchoring); or constructing, placing or abandoning
any structure, material or other matter on the seabed of the Sanctuary.
(5) Injuring or removing, or attempting to injure or remove, any
coral or other bottom formation, coralline algae or other plant, marine
invertebrate, brine-seep biota or carbonate rock within the Sanctuary.
(6) Taking any marine mammal or turtle within the Sanctuary, except
as permitted by regulations, as amended, promulgated under the Marine
Mammal

[[Page 66889]]
Protection Act, as amended, 16 U.S.C. 1361 et seq., and the Endangered
Species Act, as amended, 16 U.S.C. 1531 et seq.
(7) Injuring, catching, harvesting, collecting or feeding, or
attempting to injure, catch, harvest, collect or feed, any fish within
the Sanctuary by use of bottom longlines, traps, nets, bottom trawls or
any other gear, device, equipment or means except by use of
conventional hook and line gear.
(8) Possessing within the Sanctuary (regardless of where collected,
caught, harvested or removed), except for valid law enforcement
purposes, any carbonate rock, coral or other bottom formation,
coralline algae or other plant, marine invertebrate, brine-seep biota
or fish (except for fish caught by use of conventional hook and line
gear).
(9) Possessing or using within the Sanctuary, except possessing
while passing without interruption through it or for valid law
enforcement purposes, any fishing gear, device, equipment or means
except conventional hook and line gear.
(10) Possessing, except for valid law enforcement purposes, or
using explosives or releasing electrical charges within the Sanctuary.
(b) If any valid regulation issued by any Federal authority of
competent jurisdiction, regardless of when issued, conflicts with a
Sanctuary regulation, the regulation deemed by the Director as more
protective of Sanctuary resources and qualities shall govern.
(c) The prohibitions in paragraphs (a)(2)(i), (iii), and (iv), (4)
and (10) of this section do not apply to necessary activities conducted
in areas of the Sanctuary outside the no-activity zones and incidental
to exploration for, development of, or production of oil or gas in
those areas.
(d) The prohibitions in paragraphs (a)(2) through (10) of this
section do not apply to activities necessary to respond to emergencies
threatening life, property, or the environment.
(e)(1) The prohibitions in paragraphs (a)(2) through (10) of this
section do not apply to activities being carried out by the Department
of Defense as of the effective date of Sanctuary designation (January
18, 1994). Such activities shall be carried out in a manner that
minimizes any adverse impact on Sanctuary resources and qualities. The
prohibitions in paragraphs (a)(2) through (10) of this section do not
apply to any new activities carried out by the Department of Defense
that do not have the potential for any significant adverse impacts on
Sanctuary resources or qualities. Such activities shall be carried out
in a manner that minimizes any adverse impact on Sanctuary resources
and qualities. New activities with the potential for significant
adverse impacts on Sanctuary resources or qualities may be exempted
from the prohibitions in paragraphs (a)(2) through (10) of this section
by the Director after consultation between the Director and the
Department of Defense. If it is determined that an activity may be
carried out, such activity shall be carried out in a manner that
minimizes any adverse impact on Sanctuary resources and qualities.
(2) In the event of threatened or actual destruction of, loss of,
or injury to a Sanctuary resource or quality resulting from an untoward
incident, including but not limited to spills and groundings, caused by
a component of the Department of Defense, the cognizant component shall
promptly coordinate with the Director for the purpose of taking
appropriate actions to respond to and mitigate the harm and, if
possible, restore or replace the Sanctuary resource or quality.
(f) The prohibitions in paragraphs (a)(2) through (10) of this
section do not apply to any activity executed in accordance with the
scope, purpose, terms, and conditions of a National Marine Sanctuary
permit issued pursuant to Sec. 922.48 and Sec. 922.123 or a Special Use
permit issued pursuant to section 310 of the Act.
(g) The prohibitions in paragraphs (a)(2) through (10) of this
section do not apply to any activity authorized by any lease, permit,
license, approval or other authorization issued after January 18, 1994,
provided that the applicant complies with Sec. 922.49, the Director
notifies the applicant and authorizing agency that he or she does not
object to issuance of the authorization, and the applicant complies
with any terms and conditions the Director deems necessary to protect
Sanctuary resources and qualities.
(h) Notwithstanding paragraphs (f) and (g) of this section, in no
event may the Director issue a National Marine Sanctuary permit under
Sec. 922.48 and Sec. 922.123 or a Special Use permit under section 10
of the Act authorizing, or otherwise approve, the exploration for,
development of, or production of oil, gas or minerals in a no-activity
zone. Any leases, permits, approvals, or other authorizations
authorizing the exploration for, development of, or production of oil,
gas or minerals in a no-activity zone and issued after the January 18,
1994 shall be invalid.

Sec. 922.123 Permit procedures and criteria.

(a) A person may conduct an activity prohibited by
Sec. 922.122(a)(2) through (10) if conducted in accordance with the
scope, purpose, terms, and conditions of a permit issued under this
section and Sec. 922.48.
(b) Applications for such permits should be addressed to the
Director, Office of Ocean and Coastal Resource Management; ATTN:
Manager, Flower Garden Banks National Marine Sanctuary, 1716 Briarcrest
Drive, Suite 702, Bryan, TX 77802.
(c) The Director, at his or her discretion, may issue a permit,
subject to such terms and conditions as he or she deems appropriate, to
conduct an activity prohibited by Sec. 922.122(a)(2) through (10), if
the Director finds that the activity will: further research related to
Sanctuary resources; further the educational, natural or historical
resource value of the Sanctuary; further salvage or recovery operations
in or near the Sanctuary in connection with a recent air or marine
casualty; or assist in managing the Sanctuary. In deciding whether to
issue a permit, the Director shall consider such factors as: the
professional qualifications and financial ability of the applicant as
related to the proposed activity; the duration of the activity and the
duration of its effects; the appropriateness of the methods and
procedures proposed by the applicant for the conduct of the activity;
the extent to which the conduct of the activity may diminish or enhance
Sanctuary resources and qualities; the cumulative effects of the
activity; and the end value of the activity. In addition, the Director
may consider such other factors as he or she deems appropriate.
(d) It shall be a condition of any permit issued that the permit or
a copy thereof be displayed on board all vessels or aircraft used in
the conduct of the activity.
(e) The Director may, inter alia, make it a condition of any permit
issued that any information obtained under the permit be made available
to the public.
(f) The Director may, inter alia, make it a condition of any permit
issued that a NOAA official be allowed to observe any activity
conducted under the permit and/or that the permit holder submit one or
more reports on the status, progress, or results of any activity
authorized by the permit.

Appendix A to Subpart L of Part 922--Flower Garden Banks National
Marine Sanctuary Boundary Coordinates

The boundary coordinates are based on geographic positions of the
North American Datum of 1927 (NAD 27).

[[Page 66890]]
----------------------------------------------------------------------------------------------------------------
Point No. Latitude Longitude
----------------------------------------------------------------------------------------------------------------
East Flower Garden Bank
E-1...................................... 27 deg.52'52.13'' 93 deg.37'40.52''
E-2...................................... 27 deg.53'33.81'' 93 deg.38'22.33''
E-3...................................... 27 deg.55'13.31'' 93 deg.38'39.07''
E-4...................................... 27 deg.57'30.14'' 93 deg.38'32.26''
E-5...................................... 27 deg.58'27.79'' 93 deg.37'42.93''
E-6...................................... 27 deg.59'00.29'' 93 deg.35'29.56''
E-7...................................... 27 deg.58'59.23'' 93 deg.35'09.91''
E-8...................................... 27 deg.55'20.23'' 93 deg.34'13.75''
E-9...................................... 27 deg.54'03.35'' 93 deg.34'18.42''
E-10..................................... 27 deg.53'25.95'' 93 deg.35'03.79''
E-11..................................... 27 deg.52'51.14'' 93 deg.36'57.59''

West Flower Garden Bank
W-1...................................... 27 deg.49'09.24'' 93 deg.50'43.35''
W-2...................................... 27 deg.50'10.23'' 93 deg.52'07.96''
W-3...................................... 27 deg.51'13.14'' 93 deg.52'50.68''
W-4...................................... 27 deg.51'31.24'' 93 deg.52'49.79''
W-5...................................... 27 deg.52'49.55'' 93 deg.52'21.89''
W-6...................................... 27 deg.54'59.08'' 93 deg.49'41.87''
W-7...................................... 27 deg.54'57.08'' 93 deg.48'38.52''
W-8...................................... 27 deg.54'33.46'' 93 deg.47'10.36''
W-9...................................... 27 deg.54'13.51'' 93 deg.46'48.96''
W-10..................................... 27 deg.53'7.67'' 93 deg.46'50.67''
W-11..................................... 27 deg.52'56.44'' 93 deg.47'14.10''
W-12..................................... 27 deg.50'38.31'' 93 deg.47'22.86''
W-13..................................... 27 deg.49'11.23'' 93 deg.48'42.59''
----------------------------------------------------------------------------------------------------------------

Appendix B to Subpart L of Part 922--Coordinates for the Department
of the Interior Topographic Lease Stipulations for OCS Lease Sale
112

East Flower Garden Bank
Block A-366
SE\1/4\, SW\1/4\; S\1/2\, NE\1/4\, SE\1/4\; SE\1/4\, NW\1/4\, SE\1/
4\; S\1/2\, SE\1/4\;
Block A-367
W\1/2\, NW\1/4\, SW\1/4\; SW\1/4\, W\1/4\, SW\1/4\.
Block A-374
W\1/2\, NW\1/4\, NW\1/4\; W\1/2\, SW\1/4\, NW\1/4\; SE\1/4\, SW\1/
4\, NW\1/4\; SW\1/4\, NE\1/4\, SW\1/4\; W\1/2\, SW\1/4\; W\1/2\, SE\1/
4\, SW\1/4\; SE\1/4\, SE\1/4\, SW\1/4\.
Block A-375
E\1/2\; E\1/2\, NW\1/4\, NW\1/4\, SW\1/4\, NW\1/4\, NW\1/4\; E\1/
2\, SW\1/4\, NW\1/4\; NW\1/4\, SW\1/4\, NW\1/4\, SW\1/4\;
Block A-388
NE\1/4\; E\1/2\, NW\1/4\; E\1/2\, NW\1/4\, NW\1/4\; NE\1/4\, SW\1/
4\, NW\1/4\; E\1/2\, SW\1/4\; E\1/2\, NE\1/4\, SW\1/4\; NW\1/4\, NE\1/
4\, SW\1/4\; NE\1/4\, NW\1/4\, SW\1/4\; NE\1/4\, SE\1/4\, SW\1/4\;
NE\1/4\; NE\1/4\, SE\1/4\; W\1/2\, NE\1/4\, SE\1/4\; NW\1/4\, SE\1/4\;
NE\1/4\, SW\1/4\, SE\1/4\;
Block A-389
NE\1/4\, NW\1/4\; NW\1/4\, NW\1/4\; SW\1/4\, NW\1/4\; NE\1/4\,
SE\1/4\, NW\1/4\; W\1/2\, SE\1/4\, NW\1/4\; N\1/2\, NW\1/4\, SW\1/4\.
West Flower Garden Bank
Block A-383
E\1/2\, SE\1/4\, SE\1/4\; SW\1/2\, SE\1/4\, SE\1/4\.
Block A-384
W\1/2\, SW\1/4\, NE\1/4\; SE\1/4\, SW\1/4\, NE\1/4\; S\1/2\, SE\1/
4\, NE\1/4\; SE\1/4\, NW\1/4\; E\1/2\, SW\1/4\; E\1/2\, NW\1/4\, SW\1/
4\; SW\1/4\, NW\1/4\, SW\1/4\; SW\1/4\, SW\1/4\; SE\1/4\.
Block A-385
SW\1/4\, SW\1/4\, NW\1/4\; N\1/4\, SW\1/4\; NW\1/4\, SW\1/4\, SW\1/
4\.
Block A-397
W\1/2\, W\1/2\, NW\1/4\; W\1/2\, NW\1/4\, SW\1/4\; NW\1/4\, SW\1/
4\, SW\1/4\.
Block A-398
Entire block
Block A-399
E\1/2\; SE\1/4\, NE\1/4\, NW\1/4\; E\1/2\, SE\1/4\, NW\1/4\; E\1/
2\, NE\1/4\, SW\1/4\; SW\1/4\, NE\1/4\, SW\1/4\; NE\1/4\, SE\1/4\,
SW\1/4\.
Block A-401
NE\1/4\, NE\1/4\; N\1/2\, NW\1/4\, NE\1/4\; NE\1/4\, SE\1/4\, NE\1/
4\.
Block A-Block 134
That portion of the block north of a line connecting points 17 and
18, defined under the universal transverse mercator grid system as
follows: Point 17; X=1,378,080.00'; Y=10,096,183.00'; Point 18:
X=1,376,079.41'; Y=10,096,183.00'; Block A-135
That portion of the block northwest of a line connecting points 16
and 17, defined under the universal transverse mercator grid system as
follows: Point 16: X=1,383,293.84'; Y=10,103,281.93'; Point 17:
X=1,378,080.00'; Y=10,096,183.00'.

Subpart M--Monterey Bay National Marine Sanctuary

Sec. 922.130 Boundary.

(a) The Monterey Bay National Marine Sanctuary (Sanctuary) consists
of an area of approximately 4,024 square nautical miles of coastal and
ocean waters, and the submerged lands thereunder, in and surrounding
Monterey Bay, off the central coast of California.
(b) The northern terminus of the boundary is located along the
southern boundary of the Point Reyes-Farallon Islands National Marine
Sanctuary (PRNMS) and runs westward to approximately 123 deg.07'W. The
boundary then extends south in an arc which generally follows the 500
fathom isobath. At approximately 37 deg.03'N, the boundary arcs south
to 122 deg.25'W, 36 deg.10'N, due west of Partington Point. The
boundary again follows the 500 fathom isobath south to 121 deg.41'W,
35 deg.33'N, due west of Cambria. The boundary then extends shoreward
towards the mean high-water line. The landward boundary is defined by
the mean high-water line between the PRNMS and Cambria, exclusive of a
small area off the north coast of San Mateo County and the City and
County of San Francisco between Point Bonita and Point San Pedro.
Pillar Point, Santa Cruz, Moss Landing and Monterey harbors are
excluded from the Sanctuary boundary shoreward from their respective
International Collision at Sea regulation (Colreg.) demarcation lines
except for Moss Landing Harbor, where all of Elkhorn Slough east of the
Highway One bridge is included within the Sanctuary boundary. The
boundary coordinates are listed in appendix A to this subpart.

Sec. 922.131 Definitions.

In addition to those definitions found at Sec. 922.3, the following
definitions apply to this subpart:
Federal Project means any water resources development project
conducted by the U.S. Army Corps of Engineers or operating under a
permit or other authorization issued by the Corps of Engineers and
authorized by Federal law.
Motorized personal water craft means any motorized vessel that is
less than fifteen feet in length as manufactured, is capable of
exceeding a speed of fifteen knots, and has the capacity to carry not
more than the operator and one other person while in operation. The
term includes, but is not limited to, jet skis, wet bikes, surf jets,
miniature speed boats, air boats, and hovercraft.

Sec. 922.132 Prohibited or otherwise regulated activities.

(a) Except as specified in paragraphs (b) through (f) of this
section, the following activities are prohibited and thus are unlawful
for any person to conduct or to cause to be conducted:
(1) Exploring for, developing or producing oil, gas or minerals
within the Sanctuary.
(2)(i) Discharging or depositing, from within the boundary of the
Sanctuary, any material or other matter except:
(A) Fish, fish parts, chumming materials or bait used in or
resulting from traditional fishing operations in the Sanctuary;
(B) Biodegradable effluent incidental to vessel use and generated
by marine sanitation devices approved in accordance with section 312 of
the Federal Water Pollution Control Act, as amended, (FWPCA), 33 U.S.C.
1322 et seq.;
(C) Water generated by routine vessel operations (e.g., cooling
water, deck wash down and graywater as defined by section 312 of the
FWPCA) excluding oily wastes from bilge pumping;
(D) Engine exhaust; or
(E) Dredged material deposited at disposal sites authorized by the
U.S. Environmental Protection Agency (EPA) (in consultation with the
U.S. Army Corps of Engineers (COE)) prior to the effective date of
Sanctuary designation

[[Page 66891]]
(January 1, 1993), provided that the activity is pursuant to, and
complies with the terms and conditions of, a valid Federal permit or
approval existing on January 1, 1993.
(ii) Discharging or depositing, from beyond the boundary of the
Sanctuary, any material or other matter that subsequently enters the
Sanctuary and injures a Sanctuary resource or quality, except those
listed in paragraphs (a)(2)(i) (A) through (D) of this section and
dredged material deposited at the authorized disposal sites described
in appendix B to this subpart, provided that the dredged material
disposal is pursuant to, and complies with the terms and conditions of,
a valid Federal permit or approval.
(3) Moving, removing or injuring, or attempting to move, remove or
injure, a Sanctuary historical resource. This prohibition does not
apply to moving, removing or injury resulting incidentally from kelp
harvesting, aquaculture or traditional fishing operations.
(4) Drilling into, dredging or otherwise altering the seabed of the
Sanctuary; or constructing, placing or abandoning any structure,
material or other matter on the seabed of the Sanctuary, except as an
incidental result of:
(i) Anchoring vessels;
(ii) Aquaculture, kelp harvesting or traditional fishing
operations;
(iii) Installation of navigation aids;
(iv) Harbor maintenance in the areas necessarily associated with
Federal Projects in existence on January 1, 1993, including dredging of
entrance channels and repair, replacement or rehabilitation of
breakwaters and jetties; or
(v) Construction, repair, replacement or rehabilitation of docks or
piers.
(5) Taking any marine mammal, sea turtle or seabird in or above the
Sanctuary, except as permitted by regulations, as amended, promulgated
under the Marine Mammal Protection Act, as amended, (MMPA), 16 U.S.C.
1361 et seq., the Endangered Species Act, as amended, (ESA), 16 U.S.C.
1531 et seq., and the Migratory Bird Treaty Act, as amended, (MBTA), 16
U.S.C. 703 et seq.
(6) Flying motorized aircraft, except as necessary for valid law
enforcement purposes, at less than 1000 feet above any of the four
zones within the Sanctuary described in appendix C to this subpart.
(7) Operating motorized personal water craft within the Sanctuary
except within the four designated zones and access routes within the
Sanctuary described in appendix D to this subpart.
(8) Possessing within the Sanctuary (regardless of where taken,
moved or removed from), except as necessary for valid law enforcement
purposes, any historical resource, or any marine mammal, sea turtle or
seabird taken in violation of regulations, as amended, promulgated
under the MMPA, ESA or MBTA.
(9) Interfering with, obstructing, delaying or preventing an
investigation, search, seizure or disposition of seized property in
connection with enforcement of the Act or any regulation or permit
issued under the Act.
(b) The prohibitions in paragraphs (a)(2) through (9) of this
section do not apply to activities necessary to respond to emergencies
threatening life, property or the environment.
(c) (1) All Department of Defense activities shall be carried out
in a manner that avoids to the maximum extent practicable any adverse
impacts on Sanctuary resources and qualities. The prohibitions in
paragraphs (a)(2) through (9) of this section do not apply to existing
military activities carried out by the Department of Defense, as
specifically identified in the Final environmental Impact Statement and
Management Plan for the Proposed Monterey Bay National Marine Sanctuary
(NOAA, 1992). (Copies of the FEIS/MP are available from the Monterey
Bay National Marine Sanctuary, 299 Foam Street, Suite D, Monterey, CA
93940). New activities may be exempted from the prohibitions in
paragraphs (a)(2) through (9) of this section by the Director after
consultation between the Director and the Department of Defense.
(2) In the event of threatened or actual destruction of, loss of,
or injury to a Sanctuary resource or quality resulting from an untoward
incident, including but not limited to spills and groundings, caused by
the Department of Defense, the cognizant component shall promptly
coordinate with the Director for the purpose of taking appropriate
actions to respond to and mitigate the harm and, if possible, restore
or replace the Sanctuary resource or quality.
(d) The prohibitions in paragraphs (a) (2) through (8) of this
section do not apply to any activity executed in accordance with the
scope, purpose, terms and conditions of a National Marine Sanctuary
permit issued pursuant to Sec. 922.48 and Sec. 922.133 or a Special Use
permit issued pursuant to section 310 of the Act.
(e) The prohibitions in paragraphs (a) (2) through (8) of this
section do not apply to any activity authorized by any lease, permit,
license, approval or other authorization issued after January 1, 1993
and issued by any Federal, State or local authority of competent
jurisdiction, provided that the applicant complies with Sec. 922.49,
the Director notifies the applicant and authorizing agency that he or
she does not object to issuance of the authorization, and the applicant
complies with any terms and conditions the Director deems necessary to
protect Sanctuary resources and qualities. Amendments, renewals and
extensions of authorizations in existence on the effective date of
designation constitute authorizations issued after the effective date.
(f) Notwithstanding paragraphs (d) and (e) of this section, in no
event may the Director issue a National Marine Sanctuary permit under
Sec. 922.48 and Sec. 922.133 or a Special Use permit under section 310
of the Act authorizing, or otherwise approve: the exploration for,
development or production of oil, gas or minerals within the Sanctuary;
the discharge of primary-treated sewage within the Sanctuary (except by
certification, pursuant to Sec. 922.47, of valid authorizations in
existence on January 1, 1993 and issued by other authorities of
competent jurisdiction); or the disposal of dredged material within the
Sanctuary other than at sites authorized by EPA (in consultation with
COE) prior to January 1, 1993. Any purported authorizations issued by
other authorities after January 1, 1993 for any of these activities
within the Sanctuary shall be invalid.

Sec. 922.113 Permit procedures and criteria.

(a) A person may conduct an activity prohibited by Sec. 922.132
(a)(2) through (8) if conducted in accordance with the scope, purpose,
terms and conditions of a permit issued under this section and
Sec. 922.48.
(b) Applications for such permits should be addressed to the
Director, Office of Ocean and Coastal Resource Management; ATTN:
Manager, Monterey Bay National Marine Sanctuary, 299 Foam Street, Suite
D, Monterey, CA 93940.
(c) The Director, at his or her discretion, may issue a permit,
subject to such terms and conditions as he or she deems appropriate, to
conduct an activity prohibited by Sec. 922.132 (a)(2) through (8) if
the Director finds that the activity will have only negligible short-
term adverse effects on Sanctuary resources and qualities and will:
Further research related to Sanctuary resources and qualities; further
the educational, natural or historical resource value of the Sanctuary;
further salvage or recovery operations in or near the Sanctuary in
connection with a recent air or marine casualty; assist in

[[Page 66892]]
managing the Sanctuary; or further salvage or recovery operations in
connection with an abandoned shipwreck in the Sanctuary title to which
is held by the State of California. In deciding whether to issue a
permit, the Director shall consider such factors as: the professional
qualifications and financial ability of the applicant as related to the
proposed activity; the duration of the activity and the duration of its
effects; the appropriateness of the methods and procedures proposed by
the applicant for the conduct of the activity; the extent to which the
conduct of the activity may diminish or enhance Sanctuary resources and
qualities; the cumulative effects of the activity; and the end value of
the activity. In addition, the Director may consider such other factors
as he or she deems appropriate.
(d) It shall be a condition of any permit issued that the permit or
a copy thereof be displayed on board all vessels or aircraft used in
the conduct of the activity.
(e) The Director may, inter alia, make it a condition of any permit
issued that any data or information obtained under the permit be made
available to the public.
(f) The Director may, inter alia, make it a condition of any permit
issued that a NOAA official be allowed to observe any activity
conducted under the permit and/or that the permit holder submit one or
more reports on the status, progress or results of any activity
authorized by the permit.

Sec. 922.134 Notification and review.

(a) The authority granted the Director under Sec. 922.49 to object
to or impose terms or conditions on the exercise of any valid lease,
permit, license, approval or other authorization issued after January
1, 1993 may not be delegated or otherwise assigned to other Federal
officials below the Director's level.
(b)(1) NOAA has entered into a Memorandum of Agreement (MOA) with
the State of California, EPA and the Association of Monterey Bay Area
Governments regarding the Sanctuary regulations relating to water
quality within State waters within the Sanctuary. With regard to
permits, the MOA encompasses:
(i) National Pollutant Discharge Elimination System (NPDES) permits
issued by the State of California under Sec. 13377 of the California
Water Code; and
(ii) Waste Discharge Requirements issued by the State of California
under Sec. 13263 of the California Water Code.
(2) The MOA specifies how the process of Sec. 922.49 will be
administered within State waters within the Sanctuary in coordination
with the State permit program.

Appendix A to Subpart M of Part 922--Monterey Bay National Marine
Sanctuary Boundary Coordinates

[Appendix based on North American datum of 1983.]
------------------------------------------------------------------------
Point Latitude Longitude
------------------------------------------------------------------------
1................................. 37 deg.52'56.0905
5'' 122 deg.37'39.125
64''
2................................. 37 deg.39'59.0617
6'' 122 deg.45' 3.793
07''
3................................. 37 deg.36'58.3916
4'' 122 deg.46' 9.738
71''
4................................. 37 deg.34'17.3022
4'' 122 deg.48'14.381
41''
5................................. 37 deg.31'47.5564
9'' 122 deg.51'35.567
69''
6................................. 37 deg.30'34.1103
0'' 122 deg.54'22.121
70''
7................................. 37 deg.29'39.0586
6'' 123 deg.00'27.707
92''
8................................. 37 deg.30'29.4760
3'' 123 deg.05'46.227
67''
9................................. 37 deg.31'17.6694
5'' 123 deg.07'47.633
63''
10................................ 37 deg.27'10.9359
4'' 123 deg.08'24.322
10''
11................................ 37 deg.20'35.3749
1'' 123 deg.07'54.127
63''
12................................ 37 deg.13'50.2180
5'' 123 deg.06'15.506
00''
13................................ 37 deg.07'48.7681
0'' 123 deg.01'43.109
94''
14................................ 37 deg.03'46.6099
9'' 122 deg.54'45.395
13''
15................................ 37 deg.02'06.3095
5'' 122 deg.46'35.021
25''
16................................ 36 deg.55'17.5678
2'' 122 deg.48'21.411
21''
17................................ 36 deg.48'22.7424
4'' 122 deg.48'56.290
07''
18................................ 36 deg.41'30.9151
6'' 122 deg.48'19.407
39''
19................................ 36 deg.34'45.7607
0'' 122 deg.46'26.967
72''
20................................ 36 deg.28'24.1807
6'' 122 deg.43'32.435
27''
21................................ 36 deg.22'20.7031
2'' 122 deg.39'28.420
26''
22................................ 36 deg.16'43.9358
8'' 122 deg.34'26.772
55''
23................................ 36 deg.11'44.5383
8'' 122 deg.28'37.161
41''
24................................ 36 deg.07'26.8898
8'' 122 deg.21'54.975
41''
25................................ 36 deg.04'07.0889
8'' 122 deg.14'39.759
24''
26................................ 36 deg.01'28.2223
3'' 122 deg.07'00.190
68''
27................................ 35 deg.59'45.4638
1'' 121 deg.58'56.361
89''
28................................ 35 deg.58'59.1217
0'' 121 deg.50'26.479
31''
29................................ 35 deg.58'53.6386
6'' 121 deg.45'22.823
63''
30................................ 35 deg.55'45.6062
3'' 121 deg.42'40.285
40''
31................................ 35 deg.50'15.8425
6'' 121 deg.43'09.201
93''
32................................ 35 deg.43'14.2669
0'' 121 deg.42'43.791
21''
33................................ 35 deg.35'41.8863
5'' 121 deg.41'25.074
14''
34................................ 35 deg.33'11.7599
9'' 121 deg.37'49.741
92''
35................................ 35 deg.33'17.4586
9'' 121 deg.05'52.898
91''
36................................ 37 deg.35'39.7318
0'' 122 deg.31'14.960
33''
37................................ 37 deg.36'49.2173
9'' 122 deg.37'00.225
77''
38................................ 37 deg.46'00.9898
3'' 122 deg.39'00.404

FR Doc. X95-11227 National Marine Sanctuary Program

66''
39................................ 37 deg.49'05.6908
0'' 122 deg.31'46.305
42''
------------------------------------------------------------------------

[[Page 66893]]

Appendix B to Subpart M of Part 922--Dredged Material Disposal
Sites Adjacent to the Monterey Bay National Marine Sanctuary

(Appendix based on North American Datum of 1983.)
As of January 1, 1993, the U.S. Army Corps of Engineers operates
the following dredged material disposal site adjacent to the Sanctuary
off of the Golden Gate:

In addition, the U.S. Environmental Protection Agency, as of
January 1, 1993, is (in consultation with the U.S. Army Corps of
Engineers) in the process of establishing a dredged material disposal
site outside the northern boundary of the Monterey Bay National Marine
Sanctuary and within one of three study areas described in 57 FR 43310,
Sept. 18, 1992. When that disposal site is authorized, this appendix
will be updated to incorporate its precise location.

Appendix C to Subpart M of Part 992--Zones Within the Sanctuary
Where Overflights Below 1000 Feet Are Prohibited

The four zones are:
(1) From mean high water out to three nautical miles (NM) between a
line extending from Point Santa Cruz on a southwesterly heading of
220 deg. and a line extending from 2.0 NM north of Pescadero Point on a
southwesterly heading of 240 deg.;
(2) From mean high water out to three NM between a line extending
from the Carmel River mouth on a westerly heading of 270 deg. and a
line extending due west along latitude 35 deg. 33'17.5612'' off of
Cambria;
(3) From mean high water and within a five NM arc drawn from a
center point at the end of Moss Landing Pier; and
(4) Over the waters of Elkhorn Slough east of the Highway On bridge
to Elkhorn Road.

Appendix D to Subpart M of Part 922--Zones and Access Routes Within
the Sancturary Where the Operation of Motorized Personal Watercraft
Is Allowed

The four zones and access routes are:
(1) The approximately one [1.0] NM \2\ area off Pillar Point Harbor
from launch ramp (37 deg.30' N, 122 deg.29' W) through harbor entrance
to the northern boundary of Zone One bounded by (a) 37 deg.29.6'
(breakwater buoy), 122 deg.29' W; (b) 37 deg.28.8' N (bell buoy),
122 deg.28.9' W; (c) 37 deg.28.8' N, 122 deg.28' W; and (d)
37 deg.29.6' N, 122 deg.28' W.
(2) The approximately three [3.0] NM \2\ area off of Santa Cruz
Small Craft Harbor ramp from 36 deg.57.4' N along a 100 yard wide
access route due south along 122 deg. W to the northern boundary of
Zone Two (marked by the whistle buoy at 10 fathom curve) bounded by (a)
36 deg.55' N, 122 deg.02' W; (b) 36 deg.55' N, 121 deg.58' W; (c)
36 deg.56.5' N, 121 deg.58' W; and (d) 36 deg.56.5' N, 122 deg.02' W;
(3) The approximately five [5.0] NM \2\ area off of Moss Landing
Harbor/Elkhorn Yacht Club Launch Ramp from 36 deg.48.5' N along a 100
yard wide access route due west along harbor entrance to the eastern
boundary of Zone Three bounded by (a) 36 deg.50' N, 121 deg.49.3' W;
(b) 36 deg.50' N, 121 deg.50.8' W; (c) 36 deg.46.7' N, 121 deg.50.8' W;
(d) 36 deg.46.7' N, 121 deg.49' W; (e) 36 deg.47.8' N, 121 deg.48.2' W;
and (f) 36 deg.48.9' N, 121 deg.48.2' W; and
(4) The approximately five [5.0] NM\2\ area off of the U.S. Coast
Guard Pier (Monterey Harbor) Launch Ramp from 36 deg.36.5' N,
121 deg.53.5' W along a 100 yard wide access route due north to the
southern boundary of Zone Four bounded by (a) 36 deg.38.7' N,
121 deg.55.4' W; (b) 36 deg.36.9' N, 121 deg.52.5' W; (c) 36 deg.38.3'
N, 121 deg.51.3' W; and (d) 36 deg.40' N, 121 deg.54.4' W.

Subpart N--Stellwagen Bank National Marine Sanctuary

Sec. 922.140 Boundary.

(a) The Stellwagen Bank National Marine Sanctuary (Sanctuary)
consists of an area of approximately 638 square nautical miles (NM) of
Federal marine waters and the submerged lands thereunder, over and
around Stellwagen Bank and other submerged features off the coast of
Massachusetts. The boundary encompasses the entirety of Stellwagen
Bank; Tillies Bank, to the northeast of Stellwagen Bank; and portions
of Jeffreys Ledge, to the north of Stellwagen Bank.
(b) The Sanctuary boundary is identified by the following
coordinates, indicating the most northeast, southeast, southwest, west-
northwest, and north-northwest points:
42 deg.45'59.83''N x 70 deg.13'01.77''W (NE);
42 deg.05'35.51''N x 70 deg.02'08.14''W (SE);
42 deg.07'44.89''W x 70 deg.28'15.44''W (SW);
42 deg.32'53.52''N x 70 deg.35'52.38''W (WNW); and
42 deg.39'04.08''N x 70 deg.30'11.29''W (NNW). The western border is
formed by a straight line connecting the most southwest and the west-
northwest points of the Sanctuary. At the most west-northwest point,
the Sanctuary border follows a line contiguous with the three-mile
jurisdictional boundary of Massachusetts to the most north-northwest
point. From this point, the northern border is formed by a straight
line connecting the most north-northwest point and the most northeast
point. The eastern border is formed by a straight line connecting the
most northeast and the most southeast points of the Sanctuary. The
southern border follows a straight line between the most southwest
point and a point located at 42 deg.06'54.57''N x 70 deg.16'42.7'' W.
From that point, the southern border then continues in a west-to-east
direction along a line contiguous with the three-mile jurisdictional
boundary of Massachusetts until reaching the most southeast point of
the Sanctuary. The boundary coordinates are listed in appendix A to
this subpart.

Sec. 922.141 Definitions.

In addition to those definitions found at Sec. 922.3, the following
definitions apply to this subpart:
Industrial material means mineral, as defined in Sec. 922.3.
Traditional fishing means those commercial or recreational fishing
methods which have been conducted in the past within the Sanctuary.

[[Page 66894]]

Sec. 922.142 Prohibited or otherwise regulated activities.

(a) Except as specified in paragraphs (b) through (f) of this
section, the following activities are prohibited and thus are unlawful
for any person to conduct or to cause to be conducted:
(1)(i) Discharging or depositing, from within the boundary of the
Sanctuary, any material or other matter except:
(A) Fish, fish parts, chumming materials or bait used in or
resulting from traditional fishing operations in the Sanctuary;
(B) Biodegradable effluent incidental to vessel use and generated
by marine sanitation devices approved in accordance with section 312 of
the Federal Water Pollution Control Act, as amended, (FWPCA), 33 U.S.C.
1322 et seq.;
(C) Water generated by routine vessel operations (e.g., cooling
water, deck wash down and graywater as defined by section 312 of the
FWPCA) excluding oily wastes from bilge pumping; or
(D) Engine exhaust.
(ii) Discharging or depositing, from beyond the boundary of the
Sanctuary, any material or other matter, except those listed in
paragraphs (a)(1)(l) (A) through (D) of this section, that subsequently
enters the Sanctuary and injures a Sanctuary resource or quality.
(2) Exploring for, developing or producing industrial materials
within the Sanctuary.
(3) Drilling into, dredging or otherwise altering the seabed of the
Sanctuary; or constructing, placing or abandoning any structure,
material or other matter on the seabed of the Sanctuary, except as an
incidental result of:
(i) Anchoring vessels;
(ii) Traditional fishing operations; or
(iii) Installation of navigation aids.
(4) Moving, removing or injuring, or attempting to move, remove or
injure, a Sanctuary historical resource. This prohibition does not
apply to moving, removing or injury resulting incidentally from
traditional fishing operations.
(5) Taking any marine reptile, marine mammal or seabird in or above
the Sanctuary, except as permitted by the Marine Mammal Protection Act,
as amended, (MMPA), 16 U.S.C. 1361 et seq., the Endangered Species Act,
as amended, (ESA), 16 U.S.C. 1531 et seq., and the Migratory Bird
Treaty Act, as amended, (MBTA), 16 U.S.C. 703 et seq.
(6) Lightering in the Sanctuary.
(7) Possessing within the Sanctuary (regardless of where taken,
moved or removed from), except as necessary for valid law enforcement
purposes, any historical resource, or any marine mammal, marine reptile
or seabird taken in violation of the MMPA, ESA or MBTA.
(8) Interfering with, obstructing, delaying or preventing an
investigation, search, seizure or disposition of seized property in
connection with enforcement of the Act or any regulation or permit
issued under the Act.
(b) The prohibitions in paragraphs (a) (1), and (3) through (8) of
this section do not apply to any activity necessary to respond to an
emergency threatening life, property or the environment.
(c)(1)(i) All Department of Defense military activities shall be
carried out in a manner that avoids to the maximum extent practicable
any adverse impacts on Sanctuary resources and qualities.
(ii) Department of Defense military activities may be exempted from
the prohibitions in paragraphs (a)(1) and (3) through (7) of this
section by the Director after consultation between the Director and the
Department of Defense.
(iii) If it is determined that an activity may be carried out, such
activity shall be carried out in a manner that avoids to the maximum
extent practicable any advance impact on Sanctuary resources and
qualities. Civil engineering and other civil works projects conducted
by the U.S. Army Corps of Engineers are excluded from the scope of this
paragraph(c).
(2) In the event of threatened or actual destruction of, loss of,
or injury to a Sanctuary resource or quality resulting from an untoward
incident, including but not limited to spills and groundings caused by
the Department of Defense, the Department of Defense shall promptly
coordinate with the Diretor for the purpose of taking appropriate
actions to respond to and mitigate the harm and, if possible, restore
or replace the Sanctuary resource or quality.
(d) The prohibitions in paragraphs (a) (1) and (3) through (7) of
this section do not apply to any activity executed in accordance with
the scope, purpose, terms and conditions of a National Marine Sanctuary
permit issued pursuant to Sec. 922.48 and Sec. 922.143 or a Special Use
permit issued pursuant to section 310 of the Act.
(e) The prohibitions in paragraphs (a)(1) and (3) through (7) of
this section do not apply any activity authorized by any lease, permit,
license, approval or other authorization issued after the effective
date of Sanctuary designation (November 4, 1992) and issued by any
Federal, State or local authority of competent jurisdiction, provided
that the applicant compiles with Sec. 922.49, the Director notifies the
applicant and authorizing agency that he or she does not object to
issuance of the authorization, and the applicant complies with any
terms and conditions the Director deems necessary to protect Sanctuary
resources and qualifies. Amendments, renewals and extensions of
authorizations in existence on the effective date of designation
constitute authorizations issued after the effective date.
(f) Notwithstanding paragraphs (d) and (e) of this section, in no
event may the Director issue a permit under Sec. 922.48 and
Sec. 922.143, or under section 310 of the act, authorizing, or
otherwise approving, the exploration for, development or production of
industrial materials within the Sanctuary, or the disposal of dredged
materials within the Sanctuary (except by a certification, pursuant to
Sec. 922.47, of valid authorizations in existence on November 4, 1992)
and any leases, licenses, permits, approvals or other authorizations
authorizing the exploration for, development or production of
industrial materials in the Sanctuary issued by other authorities after
November 4, 1992, shall be invalid.

Sec. 922.143 Permit procedures and criteria.

(a) A person may conduct an activity prohibited by Sec. 922.142 (a)
(1) and (3) through (7) if conducted in accordance with scope, purpose,
manner, terms and conditions of a permit issued under this section and
Sec. 922.48.
(b) Applications for such permits should be addressed to the
Director, Office of Ocean and Coastal Resource Management; ATTN:
Manager, Stellwagen Bank National Marine Sanctuary, 14 Union Street,
Plymouth, MA 02360.
(c) The Director, at his or her discretion may issue a permit,
subject to such terms and conditions as he or she deems appropriate, to
conduct an activity prohibited by Sec. 922.142(a) (1) and (3) through
(7), if the Director finds that the activity will have only negligible
short-term adverse effects on Sanctuary resources and qualities and
will: further research related to Sanctuary resources and qualities;
further the educational, natural or historical resource value of the
Sanctuary; further salvage or recovery operations in or near the
Sanctuary in connection with a recent air or marine casualty; or assist
in managing the Sanctuary. In deciding whether to issue a permit, the
Director may consider such factors as: the professional qualifications
and financial ability of the applicant as related to the proposed
activity; the duration of the activity and the duration of its effects;
the appropriateness of the methods and procedures proposed by the
applicant

[[Page 66895]]
for the conduct of the activity; the extent to which the conduct of the
activity may diminish or enhance Sanctuary resources and qualities; the
cumulative effects of the activity; and the end value of the activity.
In addition, the Director may consider such other factors as he or she
deems appropriate.
(d) It shall be a condition of any permit issued that the permit or
a copy thereof be displayed on board all vessels or aircraft used in
the conduct of the activity.
(e) The Director may, inter alia, make it a condition of any permit
issued that any data or information obtained under the permit be made
available to the public.
(f) The Director may, inter alia, make it a condition of any permit
issued that a NOAA official be allowed to observe any activity
conducted under the permit an/or that the permit holder submit one or
more reports on the status, progress or results of any activity
authorized by the permit.

Appendix A to Subpart N of Part 922--Stellwagen Bank National
Marine Sanctuary Boundary Coordinates

----------------------------------------------------------------------------------------------------------------
Loran
Pt. Latitude Longitude -----------------------
9960W 9960X
----------------------------------------------------------------------------------------------------------------
E1................................ 42 deg.45'59.83'' 70 deg.13'01.77'' 13,607.19 25,728.57
E2................................ 42 deg.05'35.51'' 70 deg.02'08.14'' 13,753.39 25,401.78
E3................................ 42 deg.06'8.25'' 70 deg.03'17.55'' 13,756.72 25,412.46
E4................................ 42 deg.06'2.53'' 70 deg.04'03.36'' 13,760.30 25,417.53
E5................................ 42 deg.07'02.70'' 70 deg.05'13.61'' 13,764.52 25,427.27
E6................................ 42 deg.07'13.0'' 70 deg.06'23.75'' 13,770.54 25,434.45
E7................................ 42 deg.07'35.95'' 70 deg.07'27.89'' 13,775.08 25,442.51
E8................................ 42 deg.07'42.33'' 70 deg.08'26.07'' 13,780.35 25,448.27
E9................................ 42 deg.07'59.94'' 70 deg.09'19.78'' 13,784.24 25,455.02
E10............................... 42 deg.08'04.95'' 70 deg.10'24.40'' 13,790.27 25,461.28
E11............................... 42 deg.07'55.19'' 70 deg.11'47.67'' 13,799.38 25,467.56
E12............................... 42 deg.07'59.84'' 70 deg.13'03.35'' 13,806.58 25,474.95
E13............................... 42 deg.07'46.55'' 70 deg.14'21.91'' 13,815.52 25,480.62
E14............................... 42 deg.07'27.29'' 70 deg.15'22.95'' 13,823.21 25,484.05
E15............................... 42 deg.06'54.57'' 70 deg.16'42.71'' 13,833.88 25,487.79
E16............................... 42 deg.07'44.89'' 70 deg.28'15.44'' 13,900.14 25,563.22
E17............................... 42 deg.32'53.52'' 70 deg.35'52.38'' 13,821.60 25,773.51
E18............................... 42 deg.33'30.24'' 70 deg.35'14.96'' 13,814.43 25,773.54
E19............................... 42 deg.33'48.14'' 70 deg.35'03.81'' 13,811.68 25,774.28
E20............................... 42 deg.34'30.45'' 70 deg.34'22.98'' 13,803.64 25,774.59
E21............................... 42 deg.34'50.37'' 70 deg.33'21.93'' 13,795.43 25,770.55
E22............................... 42 deg.35'16.08'' 70 deg.32'32.29'' 13,787.92 25,768.31
E23............................... 42 deg.35'41.80'' 70 deg.31'44.20'' 13,780.57 25,766.25
E24............................... 42 deg.36'23.08'' 70 deg.30'58.98'' 13,772.14 25,766.14
E25............................... 42 deg.37'15.51'' 70 deg.30'23.01'' 13,763.69 25,768.12
E26............................... 42 deg.37'58.88'' 70 deg.30'06.60'' 13,758.09 25,771.07
E27............................... 42 deg.38'32.46'' 70 deg.30'06.54'' 13,755.07 25,774.58
E28............................... 42 deg.39'04.08'' 70 deg.30'11.29'' 13,752.75 25,778.35
----------------------------------------------------------------------------------------------------------------

Subpart O--Olympic Coast National Marine Sanctuary

Sec. 922.150 Boundary.

(a) The Olympic Coast National Marine Sanctuary (Sanctuary)
consists of an area of approximately 2500 square nautical miles (NM)
(approximately 8577 sq. kilometers) of coastal and ocean waters, and
the submerged lands thereunder, off the central and northern coast of
the State of Washington.
(b) The Sanctuary boundary extends from Koitlah Point due north to
the United States/Canada international boundary. The Sanctuary boundary
then follows the U.S./Canada international boundary seaward to the 100
fathom isobath. The seaward boundary of the Sanctuary approximates the
100 fathom isobath in a southerly direction from the U.S./Canada
international boundary to a point due west of the mouth of the Copalis
River cutting across the heads of Nitnat, Juan de Fuca and Quinault
Canyons. The coastal boundary of the Sanctuary is the mean higher high
water line when adjacent to Federally managed lands cutting across the
mouths of all rivers and streams, except where adjacent to Indian
reservations, State and county owned lands; in such case, the coastal
boundary is the mean lower low water line. La Push harbor is excluded
from the Sanctuary boundary shoreward of the International Collision at
Sea regulation (Colreg.) demarcation lines. The boundary coordinates
are listed in appendix A to this subpart.

Sec. 922.151 Definitions.

In addition to those definitions found at Sec. 922.3, the following
definitions apply to this subpart:
Federal Project means any water resources development project
conducted by the U.S. Army Corps of Engineers or operating under a
permit or other authorization issued by the Corps of Engineers and
authorized by Federal law.
Indian reservation means a tract of land set aside by the Federal
Government for use by a Federally recognized American Indian tribe and
includes, but is not limited to, the Makah, Quileute, Hoh and Quinault
Reservations.
Traditional fishing means fishing using a commercial or
recreational fishing method that has been used in the Sanctuary before
the effective date of Sanctuary designation (July 22, 1994), including
the retrieval of fishing gear.
Treaty means a formal agreement between the United States
Government and an Indian tribe.

Sec. 922.152 Prohibited or otherwise regulated activities.

(a) Except as specified in paragraphs (b) through (g) of this
section, the

[[Page 66896]]
following activities are prohibited and thus are unlawful for any
person to conduct or to cause to be conducted:
(1) Exploring for, developing or producing oil, gas or minerals
within the Sanctuary.
(2)(i) Discharging or depositing, from within the boundary of the
Sanctuary, any material or other matter except:
(A) Fish, fish parts, chumming materials or bait used in or
resulting from traditional fishing operations in the Sanctuary;
(B) Biodegradable effluent incidental to vessel use and generated
by marine sanitation devices approved in accordance with section 312 of
the Federal Water Pollution Control Act, as amended, (FWPCA), 33 U.S.C.
1322 et seq.;
(C) Water generated by routine vessel operations (e.g., cooling
water, deck wash down and graywater as defined by section 312 of the
FWPCA) excluding oily wastes from bilge pumping;
(D) Engine exhaust; or
(E) Dredge spoil in connection with beach nourishment projects
related to harbor maintenance activities.
(ii) Discharging or depositing, from beyond the boundary of the
Sanctuary, any material or other matter, except those listed in
paragraphs (a)(2)(i) (A) through (E) of this section, that subsequently
enters the Sanctuary and injures a Sanctuary resource or quality.
(3) Moving, removing or injuring, or attempting to move, remove or
injure, a Sanctuary historical resource. This prohibition does not
apply to moving, removing or injury resulting incidentally from
traditional fishing operations.
(4) Drilling into, dredging or otherwise altering the seabed of the
Sanctuary; or constructing, placing or abandoning any structure,
material or other matter on the seabed of the Sanctuary, except as an
incidental result of:
(i) Anchoring vessels;
(ii) Traditional fishing operations;
(iii) Installation of navigation aids;
(iv) Harbor maintenance in the areas necessarily associated with
Federal Projects in existence on July 22, 1994, including dredging of
entrance channels and repair, replacement or rehabilitation of
breakwaters and jetties;
(v) Construction, repair, replacement or rehabilitation of boat
launches, docks or piers, and associated breakwaters and jetties; or
(vi) Beach nourishment projects related to harbor maintenance
activities.
(5) Taking any marine mammal, sea turtle or seabird in or above the
Sanctuary, except as authorized by the Marine Mammal Protection Act, as
amended, (MMPA), 16 U.S.C. 1361 et seq., the Endangered Species Act, as
amended, (ESA), 16 U.S.C. 1531 et seq., and the Migratory Bird Treaty
Act, as amended, (MBTA), 16 U.S.C. 703 et seq., or pursuant to any
Indian treaty with an Indian tribe to which the United States is a
party, provided that the Indian treaty right is exercised in accordance
with the MMPA, ESA and MBTA, to the extent that they apply.
(6) Flying motorized aircraft at less than 2,000 feet both above
the Sanctuary within one NM of the Flattery Rocks, Quillayute Needles,
or Copalis National Wildlife Refuge, or within one NM seaward from the
coastal boundary of the Sanctuary, except for activities related to
tribal timber operations conducted on reservation lands, or to
transport persons or supplies to or from reservation lands as
authorized by a governing body of an Indian tribe.
(7) Possessing within the Sanctuary (regardless of where taken,
moved or removed from) any historical resource, or any marine mammal,
sea turtle, or seabird taken in violation of the MMPA, ESA or MBTA, to
the extent that they apply.
(8) Interfering with, obstructing, delaying or preventing an
investigation, search, seizure or disposition of seized property in
connection with enforcement of the Act or any regulation or permit
issued under the Act.
(b) The prohibitions in paragraph (a)(2) through (4), (6) and (7)
of this section do not apply to activities necessary to respond to
emergencies threatening life, property or the environment.
(c) The prohibitions in paragraphs (a)(2) through (4), (6) and (7)
of this section do not apply to activities necessary for valid law
enforcement purposes.
(d)(1) All Department of Defense military activities shall be
carried out in a manner that avoids to the maximum extent practicable
any adverse impacts on Sanctuary resources and qualities.
(i) Except as provided in paragraph (d)(2) of this section, the
prohibitions in paragraphs (a) (2) through (7) of this section do not
apply to the following military activities performed by the Department
of Defense in W-237A, W-237B, and Military Operating Areas Olympic A
and B in the Sanctuary:
(A) Hull integrity tests and other deep water tests;
(B) Live firing of guns, missiles, torpedoes, and chaff;
(C) Activities associated with the Quinault Range including the in-
water testing of non-explosive torpedoes; and
(D) Anti-submarine warfare operations.
(ii) New activities may be exempted from the prohibitions in
paragraphs (a) (2) through (7) of this section by the Director after
consultation between the Director and the Department of Defense. If it
is determined that an activity may be carried out, such activity shall
be carried out in a manner that avoids to the maximum extent
practicable any adverse impact on Sanctuary resources and qualities.
Civil engineering and other civil works projects conducted by the U.S.
Army Corps of Engineers are excluded from the scope of this paragraph
(d).
(2) The Department of Defense is prohibited from conducting bombing
activities within the Sanctuary.
(3) In the event of threatened or actual destruction of, loss of,
or injury to a Sanctuary resource or quality resulting from an untoward
incident, including but not limited to spills and groundings caused by
the Department of Defense, the Department of Defense shall promptly
coordinate with the Director for the purpose of taking appropriate
actions to respond to and mitigate the harm and, if possible, restore
or replace the Sanctuary resource or quality.
(e) The prohibitions in paragraphs (a) (2) through (7) of this
section do not apply to any activity executed in accordance with the
scope, purpose, terms and conditions of a National Marine Sanctuary
permit issued pursuant to Sec. 922.48 and Sec. 922.153 or a Special Use
permit issued pursuant to section 310 of the Act.
(f) Members of a federally recognized Indian tribe may exercise
aboriginal and treaty-secured rights, subject to the requirements of
other applicable law, without regard to the requirements of this part.
The Director may consult with the governing body of a tribe regarding
ways the tribe may exercise such rights consistent with the purposes of
the Sanctuary.
(g) The prohibitions in paragraphs (a) (2) through (7) of this
section do not apply to any activity authorized by any lease, permit,
license, or other authorization issued after July 22, 1994 and issued
by any Federal, State or local authority of competent jurisdiction,
provided that the applicant complies with Sec. 922.49, the Director
notifies the applicant and authorizing agency that he or she does not
object to issuance of the authorization, and the applicant complies
with any terms and conditions the Director deems necessary to protect
Sanctuary resources and qualities. Amendments, renewals and extensions
of authorizations in existence on the effective date of designation
constitute authorizations issued after the effective date.

[[Page 66897]]

(h) Notwithstanding paragraphs (e) and (g) of this section, in no
event may the Director issue a National Marine Sanctuary permit under
Sec. 922.48 and Sec. 922.153 or a Special Use permit under section 310
of the Act authorizing, or otherwise approve: The exploration for,
development or production of oil, gas or minerals within the Sanctuary;
the discharge of primary-treated sewage within the Sanctuary (except by
certification, pursuant to Sec. 922.47, of valid authorizations in
existence on July 22, 1994 and issued by other authorities of competent
jurisdiction); the disposal of dredged material within the Sanctuary
other than in connection with beach nourishment projects related to
harbor maintenance activities; or bombing activities within the
Sanctuary. Any purported authorizations issued by other authorities
after July 22, 1994 for any of these activities within the Sanctuary
shall be invalid.

Sec. 922.153 Permit procedures and criteria.

(a) A person may conduct an activity prohibited by paragraphs (a)
(2) through (7) of Sec. 922.152 if conducted in accordance with the
scope, purpose, terms and conditions of a permit issued under this
section and Sec. 922.48.
(b) Applications for such permits should be addressed to the
Director, Office of Ocean and Coastal Resource Management; ATTN:
Manager, Olympic Coast National Marine Sanctuary, 138 West First
Street, Port Angeles, WA 98362.
(c) The Director, at his or her discretion, may issue a permit,
subject to such terms and conditions as he or her deems appropriate, to
conduct an activity prohibited by paragraphs (a) (2) through (7) of
Sec. 922.152, if the Director finds that the activity will not
substantially injure Sanctuary resources and qualities and will:
further research related to Sanctuary resources and qualities; further
the educational, natural or historical resource value of the Sanctuary;
further salvage or recovery operations in or near the Sanctuary in
connection with a recent air or marine casualty; assist in managing the
Sanctuary; further salvage or recovery operations in connection with an
abandoned shipwreck in the Sanctuary title to which is held by the
State of Washington; or promote the welfare of any Indian tribe
adjacent to the Sanctuary. In deciding whether to issue a permit, the
Director may consider such factors as: the professional qualifications
and financial ability of the applicant as related to the proposed
activity; the duration of the activity and the duration of its effects;
the appropriateness of the methods and procedures proposed by the
applicant for the conduct of the activity; the extent to which the
conduct of the activity may diminish or enhance Sanctuary resources and
qualities; the cumulative effects of the activity; the end value of the
activity; and the impacts of the activity on adjacent Indian tribes.
Where the issuance or denial of a permit is requested by the governing
body of an Indian tribe, the Director shall consider and protect the
interests of the tribe to the fullest extent practicable in keeping
with the purposes of the Sanctuary and his or her fiduciary duties to
the tribe. The Director may also deny a permit application pursuant to
this section, in whole or in part, if it is determined that the
permittee or applicant has acted in violation of the terms or
conditions of a permit or of the regulations in this subpart. In
addition, the Director may consider such other factors as he or she
deems appropriate.
(d) It shall be a condition of any permit issued that the permit or
a copy thereof be displayed on board all vessels or aircraft used in
the conduct of the activity.
(e) The Director may, inter alia, make it a condition of any permit
issued that any data or information obtained under the permit be made
available to the public.
(f) The Director may, inter alia, make it a condition of any permit
issued that a NOAA official be allowed to observe any activity
conducted under the permit and/or that the permit holder submit one or
more reports on the status, progress or results of any activity
authorized by the permit.
(g) The Director shall obtain the express written consent of the
governing body of an Indian tribe prior to issuing a permit, if the
proposed activity involves or affects resources of cultural or
historical significance to the tribe.
(h) Removal, or attempted removal of any Indian cultural resource
or artifact may only occur with the express written consent of the
governing body of the tribe or tribes to which such resource or
artifact pertains, and certification by the Director that such
activities occur in a manner that minimizes damage to the biological
and archeological resources. Prior to permitting entry onto a
significant cultural site designated by a tribal governing body, the
Director shall require the express written consent of the governing
body of the tribe or tribes to which such cultural site pertains.

Sec. 922.154 Consultation with the State of Washington, affected
Indian tribes, and adjacent county governments.

(a) The Director shall regularly consult with the State of
Washington, the governing bodies of tribes with reservations adjacent
to the Sanctuary, and adjacent county governments regarding areas of
mutual concern, including Sanctuary programs, permitting, activities,
development, and threats to Sanctuary resources.
(b) The Director shall, when requested by such governments, enter
into a memorandum of understanding regarding such consultations.

Appendix A to Subpart O of Part 922--Olympic Coast National Marine
Sanctuary Boundary Coordinates

------------------------------------------------------------------------
Point Latitude Longitude
------------------------------------------------------------------------
1.............................. 47 deg.07'45'' 124 deg.11'02''
2.............................. 47 deg.07'45'' 124 deg.58'12''
3.............................. 47 deg.35'05'' 125 deg.00'00''
4.............................. 47 deg.40'05'' 125 deg.04'44''
5.............................. 47 deg.50'01'' 125 deg.05'42''
6.............................. 47 deg.57'13'' 125 deg.29'13''
7.............................. 48 deg.07'33'' 125 deg.38'20''
8.............................. 48 deg.15'00'' 125 deg.40'54''
9.............................. 48 deg.18'21.2'' 125 deg.30'02.9''
10............................. 48 deg.20'15.2'' 125 deg.22'52.9''
11............................. 48 deg.26'46.2'' 125 deg.09'16.9''
12............................. 48 deg.27'09.2'' 125 deg.08'29.9''
13............................. 48 deg.28'08.2'' 125 deg.05'51.9''
14............................. 48 deg.29'43.2'' 125 deg.00'10.9''
15............................. 48 deg.29'56.2'' 124 deg.59'19.9''
16............................. 48 deg.30'13.2'' 124 deg.54'56.9''
17............................. 48 deg.30'21.2'' 124 deg.50'25.9''
18............................. 48 deg.30'10.2'' 124 deg.47'17.9''
19............................. 48 deg.29'36.4'' 124 deg.43'38.1''
20............................. 48 deg.28'08'' 124 deg.38'13''
21............................. 48 deg.23'17'' 124 deg.38'13''
------------------------------------------------------------------------

2. For the reasons set forth in the Preamble, and under the
authority of 16 U.S.C. 1431 15 CFR Parts 924--Monitor Marine Sanctuary,
925--Olympic Coast National Marine Sanctuary, 935--Channel Islands
National Marine Sanctuary Regulations, 936--The Point Reyes/Farallon
Islands Marine Sanctuary Regulations, 938--The Gray's Reef National
Marine Sanctuary Regulations, 941--Fagatele Bay National Marine
Sanctuary Regulations, 942--Cordell Bank National Marine Sanctuary,
943--Flower Garden Banks National Marine Sanctuary, 940--Stellwagen
Bank National Marine Sanctuary, and 944--Monterey Bay National Marine
Sanctuary are removed.
[FR Doc. 30564 Filed 12-26-95; 8:45 am]
BILLING CODE 3510-08-M

Complete official Federal Register PDF

FR Doc. 95-31338 Shrimp Fishery of the Gulf of Mexico; Amendment 8

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Page 66928]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31338]

-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE
50 CFR Part 658

[Docket No. 951013251-5303-02; I.D. 091295B]
RIN 0648-AH72

Shrimp Fishery of the Gulf of Mexico; Amendment 8

AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and 
Atmospheric Administration (NOAA), Commerce.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: NMFS issues this final rule to implement Amendment 8 to the 
Fishery Management Plan for the Shrimp Fishery of the Gulf of Mexico 
(FMP). Amendment 8 and this final rule establish a revised FMP 
framework rulemaking procedure for establishing or modifying certain 
management measures applicable to the fishery for royal red shrimp in 
the Gulf of Mexico exclusive economic zone. The intended effect of this 
measure is to allow more timely implementation of management measures.

EFFECTIVE DATE: January 26, 1996.

FOR FURTHER INFORMATION CONTACT: Michael E. Justen, 813-570-5305.

SUPPLEMENTARY INFORMATION: The shrimp fishery of the Gulf of Mexico is 
managed under the FMP. The FMP was prepared by the Gulf of Mexico 
Fishery Management Council and is implemented through regulations at 50 
CFR part 658 under the authority of the Magnuson Fishery Conservation 
and Management Act (Magnuson Act).
    Explanation of the revised framework rulemaking procedure and the 
background and rationale for the procedure are contained in the 
preamble of the proposed rule to implement Amendment 8 (60 FR 54663, 
October 25, 1995) and are not repeated here. No comments were received 
on the proposed rule, and it is published as a final rule without 
change.

Approval of Amendment 8

    On December 15, 1995, the Director, Southeast Region, NMFS 
(Regional Director), approved Amendment 8.

Classification

    The Regional Director determined that Amendment 8 is necessary for 
the conservation and management of the shrimp fishery of the Gulf of 
Mexico and that it is consistent with the Magnuson Act and other 
applicable laws.
    This action has been determined to be not significant for purposes 
of E.O. 12866.
    The Assistant General Counsel for Legislation and Regulation of the 
Department of Commerce certified to the Chief Counsel for Advocacy of 
the Small Business Administration that this rule would not have a 
significant economic impact on a substantial number of small entities. 
The reasons for this certification were published in the preamble to 
the proposed rule (60 FR 54663, October 25, 1995) and are not repeated 
here. As a result, a regulatory flexibility analysis was not prepared.

List of Subjects in 50 CFR Part 658

    Fisheries, Fishing, Reporting and recordkeeping requirements.

    Dated: December 20, 1995.
Nancy Foster,
Acting Assistant Administrator for Fisheries, National Marine Fisheries 
Service.
    For the reasons set out in the preamble, 50 CFR part 658 is amended 
as follows:

PART 658--SHRIMP FISHERY OF THE GULF OF MEXICO

    1. The authority citation for part 658 continues to read as 
follows:

    Authority: 16 U.S.C. 1801 et seq.

    2. A new Sec. 658.29 is added to read as follows:

Sec. 658.29  Adjustment of management measures.

    In accordance with the procedures and limitations of the Fishery 
Management Plan for the Shrimp Fishery of the Gulf of Mexico, the 
Regional Director may establish or modify the maximum sustainable 
yield, optimum yield, and total allowable catch for royal red shrimp.
[FR Doc. 95-31338 Filed 12-26-95; 8:45 am]
BILLING CODE 3510-22-F

Complete official Federal Register PDF

FR Doc. 95-31337 Coral and Coral Reefs Off the Southern Atlantic States; Amendment 3

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66926-66928]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31337]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 638

[Docket No. 950929242-5302-02; I.D. 091295A]
RIN 0648-AH74

Coral and Coral Reefs Off the Southern Atlantic States; Amendment 
3

AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and 
Atmospheric Administration (NOAA), Commerce.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: NMFS issues this final rule to implement Amendment 3 to the 
Fishery Management Plan for Coral and Coral Reefs off the Southern 
Atlantic States (FMP). Amendment 3: Establishes an aquacultured live 
rock permit system applicable to the exclusive economic zone off the 
southern Atlantic states; prohibits chipping of aquacultured live rock; 
prohibits octocoral harvest north of Cape Canaveral, FL; and prohibits 
anchoring of fishing vessels in the Oculina Bank habitat area of 
particular concern. In addition, NMFS amends the regulations to correct 
and clarify certain regulations, or conform them to current standards. 
The intended effect is to establish a management program for live rock 
aquaculture and to protect fishery habitat.

EFFECTIVE DATE: January 26, 1996.

FOR FURTHER INFORMATION CONTACT: Georgia Cranmore, 813-570-5305.

SUPPLEMENTARY INFORMATION: The FMP was prepared by the South Atlantic 
Fishery Management Council (Council) and is implemented through 
regulations at 50 CFR part 638 under the authority of the Magnuson 
Fishery Conservation and Management Act (Magnuson Act). With 
implementation of Amendment 3, the title of the FMP is changed to the 
Fishery Management Plan for Coral, Coral Reefs, and Live/Hard Bottom 
Habitats of the South Atlantic Region. This title change reflects the 
Council's intent to manage and protect essential live/hard bottom 
habitats as well as coral resources.
    Detailed descriptions and rationale for the measures in Amendment 3 
and for additional changes proposed by NMFS were included in the 
preamble to the proposed rule (60 FR 53730, October 17, 1995) and are 
not repeated here.

Comments and Responses

    During the public comment period ending November 27, 1995, comments 
were received from the U.S. Fish and Wildlife Service (USFWS) and the 
Center for Marine Conservation (CMC). USFWS and CMC commended the 
Council for its record on coral reef protection and its recognition of 
the importance of live rock to the marine ecosystem. USFWS supported 
the coral conservation and habitat protection measures of Amendment 3.
    Comment: CMC fully supports Amendment 3, because it is expected to 
minimize enforcement problems, protect important live bottom 
communities, and minimize further damage to the Oculina Bank area. CMC 
also urges NMFS not to delay implementation of the aquaculture permit 
system.
    Response: Since a very similar permit system is already in place 
for live rock aquaculture in the Gulf of Mexico, NMFS expects no delays 
in implementing the aquaculture permit provisions of Amendment 3, 
including the special provisions for proposed sites off the southern 
Atlantic states.

Changes From the Proposed Rule

    In Sec. 638.2, the note added to the definition of ``Allowable 
octocoral'' to clarify the distinction between allowable octocoral and 
live rock is removed. Since publication of the proposed rule, a 
clarifying note was added to 50 CFR part 638 via the final rule 
implementing Amendment 3 to the Fishery Management Plan for Coral and 
Coral Reefs of the Gulf of Mexico (60 FR 56533, November 9, 1995); 
therefore, the note is unnecessary.

Approval of Amendment 3

    On December 15, 1995, the Director, Southeast Region, NMFS 
(Regional Director), approved Amendment 3.

[[Page 66927]]

Classification

    The Regional Director determined that Amendment 3 is necessary for 
the conservation and management of the coral and coral reef resources 
and live/hard bottom habitats off the southern Atlantic states and that 
it is consistent with the Magnuson Act and other applicable law.
    This action has been determined to be not significant for purposes 
of E.O. 12866.
    The Assistant General Counsel for Legislation and Regulation of the 
Department of Commerce certified to the Chief Counsel for Advocacy of 
the Small Business Administration when the proposed rule was published 
that it would not have a significant economic impact on a substantial 
number of small entities. The reasons for this certification were 
published in the preamble to the proposed rule (60 FR 53731, October 
17, 1995) and are not repeated here. As a result, a regulatory 
flexibility analysis was not prepared.

List of Subjects in 50 CFR Part 638

    Fisheries, Fishing, Reporting and recordkeeping requirements.

    Dated: December 20, 1995.
Nancy Foster,
Acting Assistant Administrator for Fisheries, National Marine Fisheries 
Service.
    For the reasons set out in the preamble, 50 CFR part 638 is amended 
as follows:

PART 638--CORAL AND CORAL REEFS OF THE GULF OF MEXICO AND OFF THE 
SOUTHERN ATLANTIC STATES

    1. The authority citation for part 638 continues to read as 
follows:

    Authority: 16 U.S.C. 1801 et seq.

    2. The title of part 638 is revised to read as set forth above.

Sec. 638.1  [Amended]

    3. In Sec. 638.1, in paragraph (a), the phrase ``Fishery Management 
Plan for Coral and Coral Reefs off the Southern Atlantic States'' is 
removed and ``Fishery Management Plan for Coral, Coral Reefs, and Live/
Hard Bottom Habitats of the South Atlantic Region'' is added in its 
place.
    4. In Sec. 638.4, the last sentence in paragraph (a)(1)(v) is 
revised to read as follows:

Sec. 638.4  Permits and fees.

    (a) * * *
    (1) * * *
    (v) * * * A person who has been issued an aquacultured live rock 
permit is exempt from the requirement to obtain a permit for prohibited 
coral that is attached to aquacultured live rock.
* * * * *
    5. In Sec. 638.7, in paragraph (k), the reference to ``(c)'' is 
removed and ``(c)(1)'' is added in its place; in paragraph (q), the 
reference to ``Sec. 635.26(c)'' is removed and ``Sec. 638.26(c)'' is 
added in its place; and paragraphs (x), (y), and (z) are added to read 
as follows:

Sec. 638.7  Prohibitions.

* * * * *
    (x) Harvest allowable octocoral in the EEZ off the southern 
Atlantic states, north of Cape Canaveral, FL (28 deg.35.1' N. lat.--due 
east of the NASA Vehicle Assembly Building) or possess allowable 
octocoral in or from that area, as specified in Sec. 638.21(b).
    (y) Anchor a fishing vessel, or use an anchor and chain or grapple 
and chain on board a fishing vessel, in the Oculina Bank HAPC, as 
specified in Sec. 638.23(c)(2).
    (z) Harvest aquacultured live rock by chipping in the EEZ off the 
southern Atlantic states; possess chipped aquacultured live rock in or 
from that area; remove allowable octocoral or prohibited coral from 
aquacultured live rock; or, while in possession of aquacultured live 
rock, possess prohibited coral not attached to aquacultured live rock 
or allowable octocoral, as specified in Sec. 638.27(c).
    6. Section 638.21 is revised to read as follows:

Sec. 638.21  Harvest limitations.

    (a) Incidental harvest. Except as authorized by a Federal permit or 
a Florida permit as specified in Sec. 638.4, prohibited coral, 
allowable octocoral, and live rock taken as incidental catch must be 
returned immediately to the sea in the general area of fishing. In 
fisheries where the entire catch is landed unsorted, such as the 
scallop and groundfish fisheries, unsorted prohibited coral, allowable 
octocoral, and live rock are exempt from the requirement for a Federal 
permit and may be landed; however, no person may sell, trade, or barter 
or attempt to sell, trade, or barter such prohibited coral, allowable 
octocoral, or live rock.
    (b) Allowable octocoral harvest. Harvest of allowable octocoral in 
the EEZ off the southern Atlantic states, north of Cape Canaveral, FL 
(28 deg.35.1' N. lat.--due east of the NASA Vehicle Assembly Building) 
or possession of allowable octocoral in or from that area is 
prohibited. See the note included in the definition of ``Allowable 
octocoral'' for clarification of the distinction between allowable 
octocoral and live rock.
    7. In Sec. 638.23, in paragraphs (a)(1) and (b)(1), the references 
to ``Sec. 634.4'' are removed and ``Sec. 638.4'' is added in both 
places; and paragraph (c) is revised to read as follows:

Sec. 638.23  Habitat areas of particular concern.

* * * * *
    (c) Oculina Bank. The Oculina Bank is located approximately 15 
nautical miles east of Fort Pierce, FL, at its nearest point to shore, 
and is bounded on the north by 27 deg.53' N. lat., on the south by 
27 deg.30' N. lat., on the east by 79 deg.56' W. long., and on the west 
by 80 deg.00' W. long. The following restrictions apply in the HAPC:
    (1) Fishing with bottom longlines, traps, pots, dredges, or bottom 
trawls is prohibited. See Sec. 646.26(d) of this chapter for 
prohibitions on fishing for snapper-grouper in the Oculina Bank HAPC.
    (2) Anchoring of fishing vessels, or using an anchor and chain or 
grapple and chain on board a fishing vessel, is prohibited.
    8. In Sec. 638.27, in the first sentence of paragraph (a), the 
phrase ``from the Gulf of Mexico EEZ'' is removed; paragraph (b)(2) is 
revised; and two sentences are added at the end of paragraph (c) to 
read as follows:

Sec. 638.27  Aquacultured live rock.

* * * * *
    (b)* * *
    (2) Material deposited on the aquaculture site--
    (i) May not be placed over naturally occurring reef outcrops, 
limestone ledges, coral reefs, or vegetated areas;
    (ii) Must be free of contaminants;
    (iii) Must be nontoxic;
    (iv) Must be placed on the site by hand or lowered completely to 
the bottom under restraint, that is, not allowed to fall freely;
    (v) Must be placed from a vessel that is anchored;
    (vi) In the Gulf of Mexico EEZ, must be distinguishable, 
geologically or otherwise (for example, be indelibly marked or tagged), 
from the naturally occurring substrate; and
    (vii) In the EEZ off the southern Atlantic states must be 
geologically distinguishable from the naturally occurring substrate 
and, in addition, may be indelibly marked or tagged.
* * * * *
    (c) * * * In addition, the following activities are prohibited off 
the southern Atlantic states: Chipping of aquacultured live rock in the 
EEZ; possession of chipped aquacultured live 

[[Page 66928]]
rock in or from the EEZ; removal of allowable octocoral or prohibited 
coral from aquacultured live rock in or from the EEZ; and possession of 
prohibited coral not attached to aquacultured live rock or allowable 
octocoral, while aquacultured live rock is in possession. See the note 
included in the definition of ``Allowable octocoral'' for clarification 
of the distinction between allowable octocoral and live rock.
* * * * *
[FR Doc. 95-31337 Filed 12-26-95; 8:45 am]
BILLING CODE 3510-22-F

Complete official Federal Register PDF

FR Doc. 95-31332 Airworthiness Directives; Pratt and Whitney JT8D Series Turbofan Engines

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66872-66874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31332]

-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION
14 CFR Part 39

[Docket No. 95-ANE-58; Amendment 39-9461; AD 95-26-03]

Airworthiness Directives; Pratt and Whitney JT8D Series Turbofan
Engines

AGENCY: Federal Aviation Administration, DOT.

ACTION: Final rule; request for comments.

-----------------------------------------------------------------------

SUMMARY: This amendment supersedes an existing airworthiness directive
(AD), applicable to Pratt & Whitney (PW) JT8D series turbofan engines,
that currently requires inspection, and replacement, if necessary, of
suspect 7th through 12th stage high pressure compressor (HPC) disks.
This amendment adds 46 more applicable engines, revises the inspection
requirements, incorporates a new PW Alert Service Bulletin (ASB), and
requires reporting the results of the inspection to the manufacturer.
This amendment is prompted by the identification of additional suspect
engines, by the development of revised inspection intervals, and by the
issuance of the new PW ASB. The actions specified by this AD are
intended to prevent an uncontained HPC disk failure, which can result
in damage to the aircraft.
DATES: Effective January 11, 1996.
The incorporation by reference of certain publications listed in
the

[[Page 66873]]
regulations is approved by the Director of the Federal Register as of
January 11, 1996.
Comments for inclusion in the Rules Docket must be received on or
before February 26, 1996.

ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), New England Region, Office of the Assistant Chief
Counsel, Attention: Rules Docket No. 95-ANE-58, 12 New England
Executive Park, Burlington, MA 01803-5299.
The service information referenced in this AD may be obtained from
Pratt & Whitney, Publications Department, M/S 132-30, 400 Main St.,
East Hartford, CT 06108. This information may be examined at the FAA,
New England Region, Office of the Assistant Chief Counsel, Burlington,
MA; or at the Office of the Federal Register, 800 North Capitol Street,
NW., suite 700, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Mark A. Rumizen, Aerospace Engineer,
Engine Certification Office, FAA, Engine and Propeller Directorate, 12
New England Executive Park, Burlington, MA 01803-5299; telephone (617)
238-7137, fax (617) 238-7199.
SUPPLEMENTARY INFORMATION: On August 15, 1995, the Federal Aviation
Administration (FAA) issued airworthiness directive (AD) 95-15-51,
Amendment 39-9345 (60 FR 43963, August 24, 1995), applicable to Pratt &
Whitney (PW) JT8D series engines with specified serial numbers, to
require inspection, and replacement if necessary, of suspect 7th
through 12th stage high pressure compressor (HPC) disks. That action
was prompted by a report that on June 8, 1995, a PW JT8D-9A engine,
installed on a McDonnell Douglas DC-9-32 aircraft, experienced an
uncontained engine failure during takeoff at the William B. Hartsfield
International Airport in Atlanta, Georgia. The FAA determined that the
7th stage HPC disk failed due to a fatigue crack that originated at a
corrosion pit in a shielding hole. The FAA further determined that the
fatigue crack origination could have resulted from a disk inspection
not performed in accordance with all practices and procedures specified
by the FAA and PW. This disk inspection was performed at Turk Hava
Yollari (THY), a Turkish engine overhaul and maintenance facility. The
FAA identified 24 suspect engines in that AD that had been overhauled
by THY for which HPC disk inspection was required. That condition, if
not corrected, could result in an uncontained HPC disk failure, which
can result in damage to the aircraft.
Since the issuance of that AD, the FAA has identified an additional
46 suspect engines, based on a review of records from the THY facility.
In addition, the FAA has also developed revised inspection intervals,
based on further examination and analysis of suspect disks. Also, PW
has issued Alert Service Bulletin (ASB) No. A6226, dated October 17,
1995. Finally, this superseding AD requires reporting the results of
the inspection to the manufacturer. The FAA has reviewed and approved
the technical contents of that ASB, which defines inspection
requirements of these suspect disks.
Since an unsafe condition has been identified that is likely to
exist or develop on other engines of this same type design, this AD
supersedes AD 95-15-51 to add 46 more applicable engines, to revise the
inspection requirements, to incorporate PW ASB No. A6226, dated October
17, 1995, and to report the results of the inspection to the
manufacturer. The actions are required to be accomplished in accordance
with the ASB described previously.
Since a situation exists that requires the immediate adoption of
this regulation, it is found that notice and opportunity for prior
public comment hereon are impracticable, and that good cause exists for
making this amendment effective in less than 30 days.

Comments Invited

Although this action is in the form of a final rule that involves
requirements affecting flight safety and, thus, was not preceded by
notice and an opportunity for public comment, comments are invited on
this rule. Interested persons are invited to comment on this rule by
submitting such written data, views, or arguments as they may desire.
Communications should identify the Rules Docket number and be submitted
in triplicate to the address specified under the caption ADDRESSES. All
communications received on or before the closing date for comments will
be considered, and this rule may be amended in light of the comments
received. Factual information that supports the commenter's ideas and
suggestions is extremely helpful in evaluating the effectiveness of the
AD action and determining whether additional rulemaking action would be
needed.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the rule that might
suggest a need to modify the rule. All comments submitted will be
available, both before and after the closing date for comments, in the
Rules Docket for examination by interested persons. A report that
summarizes each FAA-public contact concerned with the substance of this
AD will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this notice must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to Docket Number 95-ANE-58.'' The postcard will be date stamped and
returned to the commenter.
The regulations adopted herein will not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
The FAA has determined that this regulation is an emergency
regulation that must be issued immediately to correct an unsafe
condition in aircraft, and is not a ``significant regulatory action''
under Executive Order 12866. It has been determined further that this
action involves an emergency regulation under DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979). If it is determined
that this emergency regulation otherwise would be significant under DOT
Regulatory Policies and Procedures, a final regulatory evaluation will
be prepared and placed in the Rules Docket. A copy of it, if filed, may
be obtained from the Rules Docket at the location provided under the
caption ADDRESSES.

List of Subjects in 14 CFR Part 39

Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

Adoption of the Amendment

Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:

PART 39--AIRWORTHINESS DIRECTIVES

1. The authority citation for part 39 continues to read as follows:

Authority: 49 USC 106(g), 40101, 40113, 44701.

[[Page 66874]]

Sec. 39.13 [AMENDED]

2. Section 39.13 is amended by removing Amendment 39--9345 (60 FR
43963, August 24, 1995), and by adding a new airworthiness directive,
Amendment 39-9461, to read as follows:
95-26-03 Pratt & Whitney: Amendment 39-9461. Docket 95-ANE-58.
Supersedes AD 95-15-51, Amendment 39-9345.

Applicability: Pratt & Whitney (PW) Models JT8D-1, -1A, -1B, -7,
-7A, -9, -9A, -11, -15, -15A, -17, -17A, -17R, -17AR engines with
serial numbers specified in Section 2 of PW Alert Service Bulletin
(ASB) No. A6226, dated October 17, 1995. These engines are installed
on but not limited to Boeing B727 and B737, and McDonnell Douglas
DC-9 aircraft.

Note: This airworthiness directive (AD) applies to each engine
identified in the preceding applicability provision, regardless of
whether it has been modified, altered, or repaired in the area
subject to the requirements of this AD. For engines that have been
modified, altered, or repaired so that the performance of the
requirements of this AD is affected, the owner/operator must use the
authority provided in paragraph (c) to request approval from the
Federal Aviation Administration (FAA). This approval may address
either no action, if the current configuration eliminates the unsafe
condition, or different actions necessary to address the unsafe
condition described in this AD. Such a request should include an
assessment of the effect of the changed configuration on the unsafe
condition addressed by this AD. In no case does the presence of any
modification, alteration, or repair remove any engine from the
applicability of this AD.

Compliance: Required as indicated, unless accomplished
previously.
To prevent an uncontained high pressure compressor (HPC) disk
failure, which can result in damage to the aircraft, accomplish the
following:
(a) Perform a records search, inspect if necessary, repair or
replace if necessary, and report results, of stage 7 through 12 HPC
disks in accordance with the intervals and procedures of paragraph
2.A through 2.D of PW ASB No. A6226, dated October 17, 1995.
Reporting requirements have been approved by the Office of
Management and Budget and assigned OMB control number 2120-0056.
(b) For the purpose of this AD, the accomplishment effective
date to be used for determination of inspection intervals, as
required by Section 2.B of PW ASB A6226, dated October 17, 1995, is
defined as the effective date of this AD.
(c) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Engine Certification Office. The
request should be forwarded through an appropriate FAA Principal
Maintenance Inspector, who may add comments and then send it to the
Manager, Engine Certification Office.

Note: Information concerning the existence of approved
alternative methods of compliance with this airworthiness directive,
if any, may be obtained from the Engine Certification Office.

(d) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the aircraft to a location where
the requirements of this AD can be accomplished.
(e) The actions required by this AD shall be done in accordance
with the following service document:

----------------------------------------------------------------------------------------------------------------
Document No. Pages Revision Date
----------------------------------------------------------------------------------------------------------------
PW ASB No. A6226......................... 1-20 Original................. October 17, 1995.
Total pages: 20..........................
----------------------------------------------------------------------------------------------------------------

This incorporation by reference was approved by the Director of
the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR
part 51. Copies may be obtained from Pratt & Whitney, Publications
Department, M/S 132-30, 400 Main St., East Hartford, CT 06108.
Copies may be inspected at the FAA, New England Region, Office of
the Assistant Chief Counsel, 12 New England Executive Park,
Burlington, MA; or at the Office of the Federal Register, 800 North
Capitol Street, NW., suite 700, Washington, DC.
(f) This amendment becomes effective on January 11, 1996.

Issued in Burlington, Massachusetts, on December 11, 1995.
Jay J. Pardee,
Manager, Engine and Propeller Directorate, Aircraft Certification
Service.
[FR Doc. 95-31332 Filed 12-26-95; 8:45 am]
BILLING CODE 4910-13-U

Complete official Federal Register PDF

FR Doc. 95-31297 Airworthiness Directives; Lockheed Model L-1011-385 Series Airplanes

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66870-66872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31297]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 95-NM-246-AD; Amendment 39-9469; AD 95-26-11]

Airworthiness Directives; Lockheed Model L-1011-385 Series 
Airplanes

AGENCY: Federal Aviation Administration, DOT.

ACTION: Final rule; request for comments.

-----------------------------------------------------------------------

SUMMARY: This amendment supersedes an existing airworthiness directive 
(AD), applicable to all Lockheed Model L-1011-385 series airplanes, 
that currently requires visual inspections to detect cracking of the 
fittings that attach the aft pressure bulkhead to the fuselage 
stringers. That AD also currently requires replacement of cracked 
fittings, and repair of adjacent structure if found to be cracked. This 
amendment requires new repetitive inspections to detect cracking of the 
fittings and of the splice tab of the aft pressure bulkhead, and 
corrective actions, if necessary. This amendment is prompted by the 
results of the visual inspections performed in accordance with the 
existing AD, which indicate that the visual inspection is inadequate to 
detect fatigue cracking. The actions specified in this AD are intended 
to prevent fatigue cracking of the aft pressure bulkhead, which could 
lead to failure of the end fittings and splice tabs, and subsequent 
rapid decompression of the airplane during flight.

DATES: Effective January 11, 1996.
    The incorporation by reference of certain publications listed in 
the regulations is approved by the Director of the Federal Register as 
of January 11, 1996.
    Comments for inclusion in the Rules Docket must be received on or 
before February 26, 1996.

ADDRESSES: Submit comments in triplicate to the Federal Aviation 
Administration (FAA), Transport Airplane Directorate, ANM-103, 
Attention: Rules Docket No. 95-NM-246-AD, 1601 Lind Avenue, SW., 
Renton, Washington 98055-4056.
    The service information referenced in this AD may be obtained from 
Lockheed Aeronautical Systems Support Company, Field Support 
Department, Dept. 693, Zone 0755, 2251 Lake Park Drive, Smyrna, Georgia 
30080. This information may be examined at the FAA, Transport Airplane 
Directorate, 1601 Lind Avenue, SW., Renton, Washington; or at the FAA, 
Atlanta Aircraft Certification Office, Small Airplane Directorate, 
Campus Building, 1701 Columbia Avenue, Suite 2-160, College Park, 
Georgia; or at the Office of the Federal Register, 800 North Capitol 
Street, NW., suite 700, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Thomas Peters, Aerospace Engineer, 
Systems and Flight Test Branch, ACE-116A, FAA, Atlanta Aircraft 
Certification Office, Small Airplane Directorate, Campus Building, 1701 
Columbia Avenue, Suite 2-160, College Park, Georgia; telephone (404) 
305-7367; fax (404) 305-7348.

SUPPLEMENTARY INFORMATION: On September 6, 1995, the FAA issued AD 95-
18-52, amendment 39-9366 (60 FR 47465, September 13, 1995), which is 
applicable to all Lockheed Model L-1011-385 series airplanes. That AD 
requires repetitive detailed visual inspections to detect cracking of 
the fittings that attach the aft pressure bulkhead to the fuselage 
stringers at stringers 1 through 10 and at stringers 64 through 56, and 
various follow-on actions. That action was prompted by reports of 
cracks found in these fittings. The actions required by that AD are 
intended to prevent fatigue cracking that can lead to failure of the 
fittings that attach the aft pressure bulkhead to the fuselage 
stringer, and subsequent rapid decompression of the airplane during 
flight.
    The FAA has reviewed the findings from the visual inspections 
performed in accordance with AD 95-18-52, and from eddy current 
inspections performed voluntarily by an operator. The eddy current 
inspections revealed findings of cracks in the end fittings; these same 
fittings had been inspected previously using the visual inspection 
technique required by the existing AD and this cracking was identified. 
In light of these findings, the FAA has determined that the currently 
required visual inspections are inadequate to detect all fatigue 
cracking. Such fatigue cracking, if not detected and corrected in a 
timely manner, could lead to failure of the fittings and splice tabs of 
the aft pressure bulkhead, and subsequently 

[[Page 66871]]
could result in rapid decompression of the airplane during flight.
    The FAA has reviewed and approved Lockheed L-1011 Service Bulletin 
093-53-105, Revision 1, dated November 17, 1995, which describes 
procedures for:
    1. Repetitive eddy current surface scan (ECSS) inspections to 
detect cracking of the end fittings that attach the aft pressure 
bulkhead to the fuselage stringers at stringers 1 through 14 (right 
side) and at stringers 52 through 64 (left side);
    2. Repetitive ECSS inspections to detect cracking of the lower (or 
inner) surface of the upper bonded splice tab of the bulkhead assembly 
at stringers 1 through 14 and at stringers 52 through 64.
    3. If any end fitting is found cracked, replacement of a fitting 
with a new fitting without pilot holes, rework of the fitting, and 
various follow-on actions (i.e., bolt hole eddy current, ECSS, and 
borescope inspections; and repair) of the inner and outer tee caps; and
    4. A bolt hole eddy current inspection to detect cracking of the 
forward flange of the inner tee cap, if any fastener is found cracked; 
and repair, if necessary.
    Accomplishment of the ECSS inspections described in this service 
bulletin would eliminate the need for the repetitive visual 
inspections.
    Since an unsafe condition has been identified that is likely to 
exist or develop on other airplanes of this same type design, this AD 
supersedes AD 95-18-52 to continue to require repetitive detailed 
visual inspections to detect cracking of the fittings that attach the 
aft pressure bulkhead to the fuselage stringers at stringers 1 through 
10 (right side) and at stringers 56 through 64 (left side). This AD 
adds a requirement to conduct repetitive ECSS inspections to detect 
cracking of the end fittings and of the splice tab at stringers 1 
through 14 (right side) and at stringers 52 through 64 (left side) of 
the aft pressure bulkhead, and corrective actions, if necessary.
    Once the ECSS inspections are initiated, the repetitive visual 
inspection requirements of this AD are terminated.
    The previous requirement of AD 95-18-52 to submit a report of 
inspection findings to the FAA has been deleted from this AD.
    Since a situation exists that requires the immediate adoption of 
this regulation, it is found that notice and opportunity for prior 
public comment hereon are impracticable, and that good cause exists for 
making this amendment effective in less than 30 days.

Comments Invited

    Although this action is in the form of a final rule that involves 
requirements affecting flight safety and, thus, was not preceded by 
notice and an opportunity for public comment, comments are invited on 
this rule. Interested persons are invited to comment on this rule by 
submitting such written data, views, or arguments as they may desire. 
Communications shall identify the Rules Docket number and be submitted 
in triplicate to the address specified under the caption ADDRESSES. All 
communications received on or before the closing date for comments will 
be considered, and this rule may be amended in light of the comments 
received. Factual information that supports the commenter's ideas and 
suggestions is extremely helpful in evaluating the effectiveness of the 
AD action and determining whether additional rulemaking action would be 
needed.
    Comments are specifically invited on the overall regulatory, 
economic, environmental, and energy aspects of the rule that might 
suggest a need to modify the rule. All comments submitted will be 
available, both before and after the closing date for comments, in the 
Rules Docket for examination by interested persons. A report that 
summarizes each FAA-public contact concerned with the substance of this 
AD will be filed in the Rules Docket.
    Commenters wishing the FAA to acknowledge receipt of their comments 
submitted in response to this rule must submit a self-addressed, 
stamped postcard on which the following statement is made: ``Comments 
to Docket Number 95-NM-246-AD.'' The postcard will be date stamped and 
returned to the commenter.
    The regulations adopted herein will not have substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Therefore, in 
accordance with Executive Order 12612, it is determined that this final 
rule does not have sufficient federalism implications to warrant the 
preparation of a Federalism Assessment.
    The FAA has determined that this regulation is an emergency 
regulation that must be issued immediately to correct an unsafe 
condition in aircraft, and that it is not a ``significant regulatory 
action'' under Executive Order 12866. It has been determined further 
that this action involves an emergency regulation under DOT Regulatory 
Policies and Procedures (44 FR 11034, February 26, 1979). If it is 
determined that this emergency regulation otherwise would be 
significant under DOT Regulatory Policies and Procedures, a final 
regulatory evaluation will be prepared and placed in the Rules Docket. 
A copy of it, if filed, may be obtained from the Rules Docket at the 
location provided under the caption ADDRESSES.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by 
reference, Safety.

Adoption of the Amendment

    Accordingly, pursuant to the authority delegated to me by the 
Administrator, the Federal Aviation Administration amends part 39 of 
the Federal Aviation Regulations (14 CFR part 39) as follows:

PART 39--AIRWORTHINESS DIRECTIVES

    1. The authority citation for part 39 continues to read as follows:

    Authority: 49 USC 106(g), 40101, 40113, 44701.

Sec. 39.13  [Amended]

    2. Section 39.13 is amended by removing amendment 39-9366 (60 FR 
47465, September 13, 1995), and by adding a new airworthiness directive 
(AD), amendment 39-9469, to read as follows:

95-26-11   Lockheed: Amendment 39-9469. Docket 95-NM-246-AD. 
Supersedes AD 95-18-52, Amendment 39-9366.

    Applicability: All Model L-1011-385 series airplanes, 
certificated in any category.

    Note 1: This AD applies to each airplane identified in the 
preceding applicability provision, regardless of whether it has been 
modified, altered, or repaired in the area subject to the 
requirements of this AD. For airplanes that have been modified, 
altered, or repaired so that the performance of the requirements of 
this AD is affected, the owner/operator must use the authority 
provided in paragraph (h) of this AD to request approval from the 
FAA. This approval may address either no action, if the current 
configuration eliminates the unsafe condition; or different actions 
necessary to address the unsafe condition described in this AD. Such 
a request should include an assessment of the effect of the changed 
configuration on the unsafe condition addressed by this AD.

    In no case does the presence of any modification, alteration, or 
repair remove any airplane from the applicability of this AD.
    Compliance: Required as indicated, unless accomplished 
previously.
    To prevent fatigue cracking of the aft pressure bulkhead, which 
could lead to failure of the end fittings and splice tab, and 

[[Page 66872]]
subsequent rapid decompression of the airplane during flight, 
accomplish the following:

Restatement of Actions Required by AD 95-18-52, Amendment 39-9366

    Perform a detailed visual inspection to detect cracking of the 
fittings that attach the aft pressure bulkhead to the fuselage 
stringers (hereinafter referred to as ``fittings'') at stringers 1 
through 10 (right side) and at stringers 56 through 64 (left side), 
at the later of the times specified in either paragraph (a)(1) or 
(a)(2) of this AD.
    (1) Prior to the accumulation of 20,000 total flight cycles; or
    (2) Within the next 25 flight cycles or 10 days after September 
28, 1995 (the effective date of AD 95-18-52, amendment 39-9366), 
whichever occurs earlier.
    (b) If any cracking is detected in the fitting at either 
stringer 10 or stringer 56 during the inspection required by 
paragraph (a) of this AD, prior to further flight, perform a 
detailed visual inspection to detect cracking of the next adjacent 
fitting (i.e., at stringer 11 or 55). If cracking is detected in 
that fitting, prior to further flight, perform a detailed visual 
inspection to detect cracking of the next adjacent fitting (i.e., at 
stringer 12 or 54). If cracking is detected in that fitting, prior 
to further flight, continue to perform detailed visual inspections 
to detect cracking of the next adjacent fitting(s) until such a 
fitting is found to be free of cracks.
    (c) If any cracked fitting is detected during the inspections 
required by either paragraph (a) or (b) of this AD, prior to further 
flight, accomplish the requirements of paragraphs (c)(1) and (c)(2) 
of this AD.
    (1) Replace the cracked fitting with a new fitting, or with a 
serviceable fitting on which a detailed visual inspection has been 
performed previously to detect cracking and that has been found to 
be free of cracks; and
    (2) Perform a detailed visual inspection to detect cracking in 
the radius at the lower end of the vertical leg of the bulkhead T-
shaped frame between the stringer locations on either side of the 
stringer having the cracked fitting. If any cracked T-shaped frame 
is detected, prior to further flight, repair in accordance with a 
method approved by the Manager, Atlanta Aircraft Certification 
Office (ACO), FAA, Small Airplane Directorate.
    (d) Repeat the inspections and other necessary actions required 
by paragraphs (a), (b), and (c) of this AD at intervals not to 
exceed 1,800 flight cycles or 3,000 flight hours, whichever occurs 
earlier, until paragraph (e) of this AD is accomplished.

New Actions Required by This Amendment

    (e) Except as provided by paragraph (f) of this AD, prior to the 
accumulation of 20,000 flight cycles, or within 30 days after the 
effective date of this AD, whichever occurs later, accomplish the 
requirements of both paragraphs (e)(1) and (e)(2) of this AD, in 
accordance with Lockheed L-1011 Service Bulletin 093-53-105, 
Revision 1, dated November 17, 1995. Repeat the ECSS inspections 
thereafter at intervals not to exceed 2,500 flight cycles. 
Accomplishment of the eddy current surface scan (ECSS) inspection 
constitutes terminating action for the repetitive inspection 
requirements of paragraph (d) of this AD.
    (1) Perform an ECSS inspection to detect cracking of the 
fittings at stringers 1 through 14 (right side) and at stringers 52 
through 64 (left side), in accordance with the service bulletin. 
Except as provided by paragraph (g) of this AD, if any cracking is 
detected, prior to further flight, replace the fitting with a new 
fitting without pilot holes, rework the fitting, and perform various 
follow-on actions (i.e., bolt hole eddy current, ECSS, and borescope 
inspections; and repair) of the inner and outer tee caps, in 
accordance with the service bulletin. And
    (2) Perform an ECSS inspection to detect cracking of the lower 
(or inner) surface of the upper bonded splice tab of the bulkhead 
assembly at stringers 1 through 14 (right side) and at stringers 52 
through 64 (left side), in accordance with the service bulletin.
    (i) Except as provided by paragraph (g) of this AD, if any 
cracking is detected at the upper bonded splice tab, repair in 
accordance with a method approved by the Manager, Atlanta ACO, FAA, 
Small Airplane Directorate.
    (ii) Except as provided by paragraph (g) of this AD, if any 
cracking is detected at a fastener, prior to further flight, perform 
a bolt hole eddy current (BHEC) inspection to detect cracking of the 
forward flange of the inner tee cap, in accordance with the service 
bulletin. If any cracking is detected, prior to further flight, 
repair in accordance with the service bulletin.
    (f) Accomplishment of the initial ECSS inspections required by 
paragraph (e) of this AD may be deferred to a date within 120 days 
after the effective date of this AD provided that, in the interim, a 
visual inspection as specified in paragraph (a) of this AD is 
accomplished within 30 days after the effective date of this AD and 
repeated thereafter at intervals not to exceed 50 flight cycles. 
Once the ECSS inspections begin, the visual inspections may be 
terminated.
    (g) If two or more adjacent fittings on both sides of the 
cracked fittings or bonded splice tabs/fasteners are determined to 
be free of cracks by the ECSS inspection required by paragraph 
(e)(1) and (e)(2) of this AD, repeat the ECSS inspection of the 
adjacent fittings thereafter at intervals not to exceed 600 flight 
cycles until the cracked fittings or splice tabs/fasteners are 
replaced or repaired. Within 2,500 total flight cycles after finding 
the crack, replace or repair the cracked fitting and/or splice tab/
fasteners in accordance with Lockheed L-1011 Service Bulletin 093-
53-105, Revision 1, dated November 17, 1995.
    (h) An alternative method of compliance or adjustment of the 
compliance time that provides an acceptable level of safety may be 
used if approved by the Manager, Atlanta ACO. Operators shall submit 
their requests through an appropriate FAA Principal Maintenance 
Inspector, who may add comments and then send it to the Manager, 
Atlanta ACO.

    Note 2: Information concerning the existence of approved 
alternative methods of compliance with this AD, if any, may be 
obtained from the Atlanta ACO.
    (i) Special flight permits may be issued in accordance with 
sections 21.197 and 21.199 of the Federal Aviation Regulations (14 
CFR 21.197 and 21.199) to operate the airplane to a location where 
the requirements of this AD can be accomplished.
    (j) The actions shall be done in accordance with Lockheed L-1011 
Service Bulletin 093-53-105, Revision 1, dated November 17, 1995. 
This incorporation by reference was approved by the Director of the 
Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 
51. Copies may be obtained from Lockheed Aeronautical Systems 
Support Company, Field Support Department, Dept. 693, Zone 0755, 
2251 Lake Park Drive, Smyrna, Georgia 30080. Copies may be inspected 
at the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., 
Renton, Washington; or at the FAA, Atlanta Aircraft Certification 
Office, Small Airplane Directorate, Campus Building, 1701 Columbia 
Avenue, Suite 2-160, College Park, Georgia; or at the Office of the 
Federal Register, 800 North Capitol Street, NW., suite 700, 
Washington, DC.
    (k) This amendment becomes effective on January 11, 1996.

    Issued in Renton, Washington, on December 18, 1995.
Darrell M. Pederson,
Acting Manager, Transport Airplane Directorate, Aircraft Certification 
Service.
[FR Doc. 95-31297 Filed 12-26-95; 8:45 am]
BILLING CODE 4910-13-U

Complete official Federal Register PDF

FR Doc. 95-31290 Special VFR Weather Minimums

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66874-66875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31290]

-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION
14 CFR Part 91

[Docket No. 24456; Amendment No. 91-247]

Special VFR Weather Minimums

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule; technical amendment.

-----------------------------------------------------------------------

SUMMARY: This action corrects the Special visual flight rules (SVFR) 
weather minimums in Alaska. Specifically, this action allow SVFR 
operations in Alaska when the sun is 6 degrees or more below the 
horizon.

EFFECTIVE DATE: December 27, 1995.

FOR FURTHER INFORMATION CONTACT:
Janet Apple, Air Traffic Rules Branch, ATP-230, Airspace Rules and 
Aeronautical Information Division, Federal Aviation Administration, 800 
Independence Avenue, SW., Washington, DC 20591; telephone (202) 267-
8783.

SUPPLEMENTARY INFORMATION: On December 17, 1991, the FAA published the 
Airspace Reclassification final rule (56 FR 65638) that, in pertinent 
part, changed regulations and procedures in regard to airspace 
classifications. These changes, effective September 16, 1992, were 
intended to simplify airspace classifications to reduce airspace 
complexity and thereby enhance safety.
    Prior to the Airspace Reclassification final rule, Sec. 91.157 of 
Title 14, Code of Federal Regulations (14 CFR) stated that no person 
may operate an aircraft (other than a helicopter) in a control zone 
under the special weather minimums of section 91.157 between sunset and 
sunrise (or in Alaska, when the sun is more than 6 degrees below the 
horizon), with additional conditions. However, the amendment language 
in the Airspace Reclassification final rule (Amdt. 91-227 56 FR 65660, 
December 17, 1991) inadvertently changed section 91.157 to read ``* * * 
6 degrees or more above the horizon.'' This technical amendment 
corrects that error.

The Amendment

    This amendment to 14 CFR part 91 subparagraph (b)(4) revises the 
restriction for Special VFR operations in Alaska to 6 degrees or more 
below the horizon. The FAA has determined that this action: (1) Is not 
a ``major rule'' under Executive Order 12291; (2) is not a 
``significant rule'' under DOT Regulatory Policies and Procedures (44 
FR 11034; February 26, 1979); and (3) does not warrant preparation of a 
regulatory evaluation as the anticipated impact is negligible.
    This action is a clarification of an existing rule and does not 
place any new restrictions or requirements on the public, but rather 
lifts certain restrictions presently in place. Notice and public 
procedure under 5 U.S.C. 553(b) are unnecessary.

List of Subjects in 14 CFR Part 91

    Air traffic control, Aircraft, Airmen, Airports, Aviation safety.
    
[[Page 66875]]

PART 91--GENERAL OPERATING AND FLIGHT RULES

    1. The authority citation for Part 91 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 1155, 40103, 40113, 40120, 44101, 
44111, 44701, 44709, 44711, 44712, 44715, 44716, 44717, 44722, 
46306, 46315, 46316, 46502, 46504, 46506, 46507, 47122, 47508, 
47528-47531; articles 12 and 29 of the Convention on International 
Civil Aviation 961 stat. 1180.

    2. Section 91.157 is amended by revising paragraph (b)(4) 
introductory text to read as follows:

Sec. 91.157  Special VFR weather minimums.

* * * * *
    (b) Special VFR operations may only be conducted--
* * * * *
    (4) Except for helicopters, between sunrise and sunset (or in 
Alaska, when the sun is 6 degrees or more below the horizon) unless--
* * * * *
    Issued in Washington, D.C. on December 18, 1995.
Harold W. Becker,
Acting Program Director for Air Traffic Rules and Procedures.
[FR Doc. 95-31290 Filed 12-26-95; 8:45 am]
BILLING CODE 4910-13-M

Complete official Federal Register PDF

FR Doc. 95-31280 Further Grace Period Extension for Certain Existing Agency Standards of Conduct

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66857-66858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31280]

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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================

Federal Register / Vol. 60, No. 248 / Wednesday, December 27, 1995 / 
Rules and Regulations

[[Page 66857]]

OFFICE OF GOVERNMENT ETHICS

5 CFR Part 2635

RINs 3209-AA04, 3209-AA15

Further Grace Period Extension for Certain Existing Agency 
Standards of Conduct

AGENCY: Office of Government Ethics (OGE).

ACTION: Final rule; technical amendment.

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SUMMARY: The Office of Government Ethics is granting a further 
grandfathering grace period extension of just over eight months for 
certain existing executive agency standards of conduct, dealing with 
financial interest prohibitions and prior approval for outside 
employment and activities, which have been temporarily preserved. This 
further action (two previous extensions have been granted) is necessary 
because many agencies still have not been able to issue, with OGE 
concurrence and co-signature, interim or final supplemental regulations 
during the prior grace periods. This further extension will help ensure 
that agencies which in conjunction with OGE are actively working on 
draft supplementals will have adequate time to issue, if they so 
desire, successor regulatory provisions to replace grandfathered 
financial interest prohibitions and prior approval requirements.

EFFECTIVE DATE: January 3, 1996.

FOR FURTHER INFORMATION CONTACT: William E. Gressman, Office of 
Government Ethics, telephone: 202-523-5757, FAX: 202-523-6325.

SUPPLEMENTARY INFORMATION: The Office of Government Ethics is granting 
under the executive branch standards of ethical conduct a further 
extension of time for just over eight months, until August 7, 1996, for 
certain agencies' existing conduct standards dealing with prohibited 
financial interests and prior approval for outside employment and 
activities. When OGE published its ethical conduct standards for 
executive branch employees in the Federal Register on August 7, 1992 
(as now codified at 5 CFR part 2635), it provided that most existing 
individual agency standards of conduct would be superseded once the 
executive branchwide standards took effect on February 3, 1993. 
However, OGE also provided, by means of notes following 5 CFR 
2635.403(a) and 2635.803, that any existing agency standards dealing 
with the two types of restrictions noted above would be preserved for 
one year, until February 3, 1994, or until the agency concerned issued 
(with OGE concurrence and co-signature) a supplemental regulation, 
whichever occurred first. See 57 FR 35006-35067, as corrected at 57 FR 
48557 and 52583 and 60 FR 51667. In February of 1994 and 1995, OGE 
extended that original grace period for a total of a year and eleven 
months, until January 3, 1996 (or until agency issuance of a 
supplemental regulation), for those executive branch departments and 
agencies that had not yet been able to issue final or interim final 
successor rules. See 59 FR 4779-4780 (February 2, 1994) and 60 FR 6390-
6391 (February 2, 1995), as well as appendixes A and B which were added 
to part 2635.
    Through OGE's liaison efforts, the Office of the Federal Register 
(OFR) has assigned new chapters, including parts, at the end of title 5 
of the Code of Federal Regulations to accommodate agencies' future 
supplemental standards regulations (on these two and other appropriate 
subject areas), as well as any supplemental agency regulations under 
OGE's executive branchwide financial disclosure provisions at 5 CFR 
part 2634. Almost 60 agencies have had such chapters reserved, 
including those which have by now already issued, with OGE concurrence 
and co-signature, interim final or final supplemental ethics 
regulations. However, many agencies have still not yet had the time to 
issue their planned supplemental standards regulations in interim or 
final form.
    The Office of Government Ethics has therefore determined to permit 
a further preservation of existing agency regulatory standards of 
conduct setting forth financial interest prohibitions and outside 
employment and activities prior approval requirements for just over 
eight more months, until August 7, 1996 (or until issuance by each 
agency of its supplemental regulation, whichever comes first), for 
those agencies which are actively working in conjunction with OGE on 
draft supplemental standards regulations. The agencies subject to this 
further grandfathering grace period extension (including the Social 
Security Administration which statutorily separated from the Department 
of Health and Human Services during the past year), as provided in the 
notes (which are hereby being further amended) following 5 CFR 
2635.403(a) and 2635.803, are enumerated at new appendix C which OGE is 
adding to part 2635. The agencies are listed in the order of the 
assignment of their chapter numbers at the end of 5 CFR. Agencies not 
listed either have not expressed an interest in issuing supplemental 
agency ethics regulations, have indicated to OGE that they are no 
longer interested in a further grace period extension, or have already 
issued final or interim final supplemental standards.
    The Office of Government Ethics notes that it is not by this 
rulemaking setting a deadline for agencies to submit supplemental 
ethics regulations. Agencies can, with OGE concurrence and co- 
signature, issue supplementals at any time. Further, they can, at any 
time, have new title 5 CFR chapters reserved through OGE and OFR for 
such purpose if they have not already done so. Moreover, if an agency's 
prohibited financial interest (and/or prior approval) restrictions are 
based on a separate statute, they are not superseded by the 5 CFR part 
2635 executive branchwide standards. If any related regulatory 
provisions were located in its old agency standards of conduct, the 
agency concerned could, after consultation with OGE, retain them in 
their existing place in the agency's own CFR title and chapter or move 
the provisions to another appropriate part of its regulations. See 5 
CFR 2635.105(c)(3). Only prior standards of conduct provisions that are 
purely regulatory in nature are subject to supersession from the 
executive branchwide regulation at 5 CFR part 2635, with entitlement to 
the successive grace periods for the two enumerated types of provisions 
as provided in the further amended notes 

[[Page 66858]]
at Secs. 2635.403(a) and 2635.803 as well as appendixes A, B and C.

Administrative Procedure Act

    Pursuant to 5 U.S.C. 553(b) and (d), as Director of the Office of 
Government Ethics, I find good cause exists for waiving the general 
notice of proposed rulemaking and 30-day delay in effectiveness as to 
this further grace period extension. The notice and delayed effective 
date are being waived because this rulemaking concerns a matter of 
agency organization, practice and procedure. Furthermore, it is in the 
public interest that those agencies concerned have adequate time to 
promulgate successor provisions to another their existing standards of 
conduct regulations in these two areas without a lapse in necessary 
regulatory restrictions.

Executive Order 12866

    In promulgating this grace period extension technical amendment, 
the Office of Government Ethics has adhered to the regulatory 
philosophy and the applicable principles of regulation set forth in 
section 1 of Executive Order 12866, Regulatory Planning and Review. 
This amendment has not been reviewed by the Office of Management and 
Budget under that Executive order, as it is not deemed ``significant'' 
thereunder.

Regulatory Flexibility Act

    As Director of the Office of Government Ethics, I certify under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) that this rulemaking 
will not have a significant economic impact on a substantial number of 
small entities.

Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply 
because this rulemaking does not contain information collection 
requirements that require the approval of the Office of Management and 
Budget.

List of Subjects in 5 CFR Part 2635

    Conflict of interests, Government employees.

    Approved: December 14, 1995.
Stephen D. Potts,
Director, Office of Government Ethics.
    Accordingly, pursuant to its authority under title IV of the Ethics 
in Government Act and Executive Order 12674/12731, the Office of 
Government Ethics is amending 5 CFR part 2635 as follows:

PART 2635--[AMENDED]

    1. The authority citation for part 2635 continues to read as 
follows:

    Authority: 5 U.S.C. 7351, 7353; 5 U.S.C. App. (Ethics in 
Government Act of 1978); E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., 
p. 215, as modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., 
p. 306.

    2. The notes following both Secs. 2635.403(a) and 2635.803 are 
amended by adding a new sentence at the end of each to read as follows:

    Note: * * * Provided still further, that for those agencies 
listed in appendix C to this part, the grace period for any such 
existing provisions shall be further extended until August 7, 1996 
or until issuance by each individual agency concerned of a 
supplemental regulation, whichever occurs first.

    3. A new appendix C is added at the end of part 2635 to read as 
follows:

Appendix C to Part 2635--Agencies Entitled to Another Further 
(Third) Grace Period Extension Pursuant to Notes Following 
Secs. 2635.403(a) and 2635.803

 1. Department of the Treasury
 2. Department of Energy
 3. Federal Energy Regulatory Commission
 4. Department of the Interior
 5. Department of Commerce
 6. Department of Justice
 7. Federal Communications Commission
 8. Securities and Exchange Commission
 9. Office of Personnel Management
10. Thrift Depositor Protection Oversight Board
11. United States Information Agency
12. Occupational Safety and Health Review Commission
13. Department of State
14. Department of Labor
15. National Science Foundation
16. Small Business Administration
17. Department of Health and Human Services
18. Department of Transportation
19. Pension Benefit Guaranty Corporation
20. Environmental Protection Agency
21. National Transportation Safety Board
22. General Services Administration
23. Board of Governors of the Federal Reserve System
24. National Labor Relations Board
25. Equal Employment Opportunity Commission
26. Department of Housing and Urban Development
27. National Archives and Records Administration
28. Peace Corps
29. Tennessee Valley Authority
30. Consumer Product Safety Commission
31. Executive Office of the President
32. Department of Agriculture
33. Federal Mine Safety and Health Review Commission
34. Agency for International Development
35. Social Security Administration

[FR Doc. 95-31280 Filed 12-26-95; 8:45 am]
BILLING CODE 6345-01-U

Complete official Federal Register PDF

FR Doc. 95-31278 Sweet Cherries Grown in Designated Counties in Washington: Establishment of Minimum Size and Maturity Requirements for Rainier Variety Cherries

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66858-66859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31278]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 923

[Docket No. FV94-923-1FR]

Sweet Cherries Grown in Designated Counties in Washington: 
Establishment of Minimum Size and Maturity Requirements for Rainier 
Variety Cherries

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Correction amendment.

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SUMMARY: This docket contains a correction to the final regulation 
which was published Tuesday, June 21, 1994, (59 FR 31917). The final 
rule established a minimum size requirement of 11 row size (61/64 inch 
diameter) and a minimum maturity requirement of 17 percent soluble 
solids for Rainier variety cherries that can be shipped to fresh market 
outlets. The rule inadvertently omitted some regulatory text, and this 
action corrects those errors.

EFFECTIVE DATE: The correcting amendments are effective December 27, 
1995.
FOR FURTHER INFORMATION CONTACT: Britthany E. Beadle, Marketing 
Specialist, Marketing Order Administration Branch, Fruit and Vegetable 
Division, AMS, USDA, room 2523-S., P.O. Box 96456, Washington, DC 
20090-6456; telephone: (202) 720-5127 or FAX (202) 720-5698; or Teresa 
Hutchinson, Marketing Specialist, Northwest Marketing Field Office, 
Fruit and Vegetable Division, AMS, USDA, 1220 S.W. Third Avenue, room 
369, Portland, OR 97204-2807; telephone: (509) 326-2724 or FAX (509) 
326-7440.

SUPPLEMENTARY INFORMATION:

Background

    The final regulation that is the subject of this correction 
inadvertently omitted several paragraphs of regulatory language which 
should be added. These paragraphs were omitted from the June 21, 1994, 
final rule (59 FR 31917) regulating minimum size and maturity 
requirements for Rainier variety cherries effective and resulted in an 
incomplete text of the regulatory requirements for the handling of 
cherries. 

[[Page 66859]]

Need for Correction

    As published, the final regulation contains errors which may prove 
to be misleading and are in need of proper clarification.

List of Subjects in 7 CFR parts 923

    Cherries, Marketing agreements, Reporting and recordkeeping 
requirements.
    Accordingly, 7 CFR part 923 is corrected by making the following 
correcting amendments:

PART 923--SWEET CHERRIES GROWN IN DESIGNATED COUNTIES IN WASHINGTON

    1. The authority citation for 7 CFR part 923 continues to read as 
follows:

    Authority: 7 U.S.C. 601-674.

    2. In Sec. 923.322, paragraphs (f) (1), (2), and (3) are added to 
read as follows:

Sec. 923.322  Washington Cherry Regulation 22.

* * * * *
    (f) * * *
    (1) The shipment consists of cherries sold for home use and not for 
resale;
    (2) The shipment does not, in the aggregate, exceed 100 pounds, net 
weight, of cherries; and
    (3) Each container is stamped or marked with the words ``not for 
resale'' in letters at least one-half inch in height.
* * * * *
    Dated: December 18, 1995.
Sharon Bomer Lauritsen,
Deputy Director, Fruit and Vegetable Division.
[FR Doc. 95-31278 Filed 12-26-95; 8:45 am]
BILLING CODE 3410-02-P

Complete official Federal Register PDF

FR Doc. 95-31275 Technical Amendments to Egg Research and Promotion Order and Rules and Regulations

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66860-66861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31275]

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DEPARTMENT OF AGRICULTURE
7 CFR Part 1250

[Docket No. PY-95-005]

Technical Amendments to Egg Research and Promotion Order and 
Rules and Regulations

AGENCY: Agricultural Marketing Service.

ACTION: Final Rule; Termination Order.

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SUMMARY: A review of the Order and rules and regulations implementing 
the egg research and promotion program identified a number of changes 
to eliminate sections which are duplicative or obsolete and will avoid 
current and future conflict. The revisions eliminate certain sections 
dealing with membership on the Egg Board, obtaining refunds, and other 
miscellaneous provisions.

EFFECTIVE DATE: December 27, 1995.

FOR FURTHER INFORMATION CONTACT: Angela C. Clonts, Standardization 
Branch, Poultry Division, AMS, USDA, P.O. Box 96456, Room 3944-S, 
Washington, DC 20090-6456; telephone (202) 720-3506; fax (202) 720-
5631.

SUPPLEMENTARY INFORMATION: This rule amends the Egg Research and 
Promotion Order and Rules and Regulations [7 CFR part 1250], 
hereinafter referred to as the Order and regulations. The Order and 
regulations are effective under the Egg Research and Consumer 
Information Act, as amended, hereinafter referred to as the Act.
    This regulatory action is being taken as part of the National 
Performance Review program to eliminate unnecessary regulations and 
improve those that remain in force.

Executive Orders 12866 and 12778

    This rule has been determined to be not-significant for purposes of 
Executive Order 12866 and therefore has not been reviewed by OMB.
    This rule has been reviewed under Executive Order 12778, Civil 
Justice Reform. It is not intended to have retroactive effect. This 
rule would not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 14 of the Act, a 
person subject to the Order may file a petition with the Secretary 
stating that the Order, any provisions of the order, or any obligations 
imposed in connection with the Order, are not in accordance with law 
and requesting a modification of the Order or an exemption therefrom. 
The petitioner is afforded the opportunity for a hearing on the 
petition. After a hearing, the Secretary would rule on the petition. 
The Act provides that the district court of the United States in any 
district in which such person is an inhabitant, or has his principal 
place of business, has jurisdiction to review the Secretary's ruling on 
the petition, if a complaint for that purpose is filed within 20 days 
after the date of the entry of the ruling.

Effect on Small Entities

    The Administrator of the Agricultural Marketing Service has 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities, as defined by the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), because the changes are 
primarily to remove obsolete and duplicate material and establish 
definitions consistent with current industry terminology.

Paperwork Reduction

    Information collection requirements and recordkeeping provisions 
contained in 7 CFR Part 1250 have been previously approved by the 
Office of Management and Budget and assigned OMB Control No. 0581-0093 
under the Paperwork Reduction Act of 1980.
    No additional recordkeeping requirements are imposed as a result of 
this rule.

Background and Proposed Changes

    A review of the Order and regulations was conducted in response to 
the President's Regulatory Review Initiative of March 4, 1995. As a 
result, a number of provisions were identified that could be removed 
without adverse impact to the program. The amendments eliminate 
sections that contain provisions duplicated in other sections or are 
obsolete.

Membership Provisions

    Section 1250.328(d) was developed to establish the manner in which 
the initial Board would be nominated. Since June 1984, any changes in 
the 

[[Page 66861]]
geographic areas and number of members assigned to each area have been 
accomplished through informal rulemaking in Sec. 1250.510 of the 
regulations. Therefore, portions of Sec. 1250.328(d) are outdated and 
obsolete. Removing Sec. 1250.328(d) in the Order except for the last 
sentence avoids current and future conflicting information in companion 
rules should additional changes be required. Appropriate language of 
Sec. 1250.328(e) also is removed.

Miscellaneous Provisions

    Sections 1250.360 and 1250.552 are miscellaneous provisions which 
were included in the Order and rules and regulations when they were 
originally published.
    Section 1250.360 deals with board members' and alternates' personal 
liability and is similar to provisions found in Sec. 1250.547 of the 
rules and regulations. Therefore, Sec. 1250.360 is removed.
    Section 1250.552 establishes the right of the Secretary to review 
and approve substantive plans of the board; it duplicates Sec. 1250.361 
of the Order and is removed.

Refund Provisions

    Other sections [Secs. 1250.336 (g) and (h), 1250.350, and 1250.523] 
originally implemented a statutory provision allowing producers to 
request refunds of assessments paid to the Egg Board. In a July-August 
1990 referendum, producers voted in favor of mandatory assessments and 
eliminating the refund option. Therefore, the refund provisions are no 
longer applicable and should be removed from the Order and regulations.
    After consideration of all relevant material with regard to the 
termination of the order provisions as hereinafter set forth, it is 
found that the provisions no longer tend to effectuate the declared 
policy of the Act.
    Pursuant to the provisions in 5 U.S.C. 553, it is found and 
determined upon good cause that it is impracticable, unnecessary, and 
contrary to the public interest to give preliminary notice or to engage 
in further public procedure prior to putting this rule into effect and 
that good cause exists for not postponing the effective date of this 
action until 30 days after publication in the Federal Register for the 
following reasons: (1) The sections being removed are either 
duplicative or obsolete, and removal will not alter any aspect of the 
program; and (2) no useful purpose would be served by a delay of the 
effective date.

List of Subjects in 7 CFR Part 1250

    Administrative practice and procedure, Advertising, Agricultural 
research, Eggs and egg products, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 1250 is 
amended as follows:

PART 1250--[AMENDED]

    1. The authority citation of part 1250 continues to read as 
follows:

    Authority: Pub. L. 93-428, 88 Stat. 1171, as amended, 7 U.S.C. 
2701-2718.

Sec. 1250.328  [Amended]

    2. Sec. 1250.328, the first sentence of paragraph (d) is removed.

Sec. 1250.328  [Amended]

    3. In Sec. 1250.328(e), the words ``provided for in paragraph (d) 
of this section'' are removed.

Sec. 1250.336  [Amended]

    4. In Sec. 1250.336, paragraphs (g) and (h) are removed and 
reserved.

Sec. 1250.350  [Removed and Reserved]

    5. Section 1250.350 is removed and reserved.

Sec. 1250.360  [Removed and Reserved]

    6. Section 1250.360 is removed and reserved.

Sec. 1250.523  [Removed]

    7. Section 1250.523 and the undesignated center heading preceding 
it are removed.

Sec. 1250.552  [Removed]

    8. Section 1250.552 and the undesignated center heading preceding 
it are removed.

    Dated: December 18, 1995
Shirley R. Watkins,
Acting Assistant Secretary, Marketing and Regulatory Programs.
[FR Doc. 95-31275 Filed 12-26-95; 8:45 am]
BILLING CODE 3410-02-P

Complete official Federal Register PDF

FR Doc. 95-31274 Tomatoes Grown in Florida; Expenses and Assessment Rate

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66859-66860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31274]

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DEPARTMENT OF AGRICULTURE
7 CFR Part 966

[Docket No. FV95-966-1FIR]

Tomatoes Grown in Florida; Expenses and Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting as a 
final rule, without change, the provisions of an interim final rule 
that authorized expenses and established an assessment rate that 
generated funds to pay those expenses. Authorization of this budget 
enables the Florida Tomato Committee (Committee) to incur expenses that 
are reasonable and necessary to administer the program. Funds to 
administer this program are derived from assessments on handlers.

EFFECTIVE DATE: August 1, 1995, through July 31, 1996.

FOR FURTHER INFORMATION CONTACT: Martha Sue Clark, Marketing Order 
Administration Branch, Fruit and Vegetable Division, AMS, USDA, P.O. 
Box 96456, room 2523-S, Washington, DC 20090-6456, telephone 202-720-
9918, or Aleck J. Jonas, Southeast Marketing Field Office, Fruit and 
Vegetable Division, AMS, USDA, P.O. Box 2276, Winter Haven, FL 33883-
2276, telephone 941-299-4770.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement No. 125 and Order No. 966, both as amended (7 CFR part 966), 
regulating the handling of tomatoes grown in Florida, hereinafter 
referred to as the ``order.'' The order is effective under the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
    The Department of Agriculture is issuing this rule in conformance 
with Executive Order 12866.
    This rule has been reviewed under Executive order 12778, Civil 
Justice Reform. Under the provisions of the marketing order now in 
effect, Florida tomatoes are subject to assessments. It is intended 
that the assessment rate as issued herein will be applicable to all 
assessable tomatoes handled during the 1995-96 fiscal period, which 
began August 1, 1995, and ends July 31, 1996. This final rule will not 
preempt any State or local laws, regulations, or policies, unless they 
present an irreconcilable conflict with this rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and request a modification of the order or to be exempted 
therefrom. Such handler is afforded the opportunity for a hearing on 
the petition. After the hearing the Secretary would rule on the 
petition. The Act provides that the district court of the United States 
in any district in which the handler is an inhabitant, or has his or 
her principal place of business, has jurisdiction in equity to review 
the Secretary's ruling on the petition, provided a bill in equity is 
filed not later than 20 days after the date of the entry of the ruling.
    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), the Administrator of the Agricultural Marketing 
Service (AMS) has considered the economic impact of this rule on small 
entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    Since the interim final rule was issued, new information on the 
actual number of producers and handlers was received. There are 
approximately 90 producers of Florida tomatoes under this marketing 
order, and approximately 75 handlers. Small agricultural producers have 
been defined by the Small Business Administration (13 CFR 121.601) as 
those having annual receipts of less than $500,000, and small 
agricultural service firms are defined as those whose annual receipts 
are less than $5,000,000. The majority of Florida tomato producers and 
handlers may be classified as small entities.
    The budget of expenses for the 1995-96 fiscal period was prepared 
by the Florida Tomato Committee, the agency responsible for local 
administration of the marketing order, and submitted to the Department 
for approval. The members of the Committee are producers of Florida 
tomatoes. They are familiar with the Committee's needs and with the 
costs of goods and services in their local area and are thus in a 
position to formulate an appropriate budget. The budget was formulated 
and discussed in a public meeting. Thus, all directly affected persons 
have had an opportunity to participate and provide input.
    The assessment rate recommended by the Committee was derived by 
dividing anticipated expenses by expected shipments of Florida 
tomatoes. Because that rate will be applied to actual shipments, it 
must be established at a rate that will provide sufficient income to 
pay the Committee's expenses.
    The Committee met September 7, 1995, and unanimously recommended a 
1995-96 budget of $2,025,000, $190,000 less than the previous year. 
Budget items for 1995-96 which have increased compared to those 
budgeted for 1994-95 (in parentheses) are: Office salaries, $319,100 
($297,300), depreciation, $19,000 ($18,200), employee's retirement 
program, $50,500 ($46,600), insurance and bonds, $8,000 ($7,000), 
payroll tax, $22,150 ($20,000), supplies and printing, $8,500 ($7,500), 
and miscellaneous, $2,000 ($1,600), audit, $3,750 ($2,500), and 
research expense, $245,000 ($192,100). Items which have decreased 
compared to those budgeted for 1994-95 (in parentheses) are: Office 

[[Page 66860]]
rent, $24,500 ($24,700), and education and promotion expense, 
$1,225,000 ($1,500,000). All other items are budgeted at last year's 
amounts.
    The Committee also unanimously recommended an assessment rate of 
$0.04 per 25-pound container, the same as last year. This rate, when 
applied to anticipated shipments of 50,000,000 25-pound containers, 
will yield $2,000,000 in assessment income. This, along with $25,000 in 
interest and other income, will be adequate to cover budgeted expenses.
    An interim final rule was published in the Federal Register on 
October 30, 1995 (60 FR 55176). That interim final rule added 
Sec. 966.233 to authorize expenses and establish an assessment rate for 
the Committee. That rule provided that interested persons could file 
comments through November 29, 1995. No comments were received.
    While this action will impose some additional costs on handlers, 
the costs are in the form of uniform assessments on handlers. Some of 
the additional costs may be passed on to producers. However, these 
costs will be offset by the benefits derived by the operation of the 
marketing order. Therefore, the Administrator of the AMS has determined 
that this action will not have a significant economic impact on a 
substantial number of small entities.
    After consideration of all relevant matter presented, including the 
information and recommendations submitted by the Committee and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    It is further found that good cause exists for not postponing the 
effective date of this action until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because the Committee needs to have 
sufficient funds to pay its expenses which are incurred on a continuous 
basis. The 1995-96 fiscal period began on August 1, 1995. The marketing 
order requires that the rate of assessment for the fiscal period apply 
to all assessable tomatoes handled during the fiscal period. In 
addition, handlers are aware of this action which was unanimously 
recommended by the Committee at a public meeting and published in the 
Federal Register as an interim final rule.

List of Subjects in 7 CFR Part 966

    Marketing agreements, Reporting and recordkeeping requirements, 
Tomatoes.

    For the reasons set forth in the preamble, 7 CFR part 966 is 
amended as follows:

PART 966--TOMATOES GROWN IN FLORIDA

    Accordingly, the interim final rule amending 7 CFR part 966 which 
was published at 60 FR 55176 on October 30, 1995, is adopted as a final 
rule without change.

    Dated: December 18, 1995.
Sharon Bomer Lauritsen,
Deputy Director, Fruit and Vegetable Division.
[FR Doc. 95-31274 Filed 12-26-95; 8:45 am]
BILLING CODE 3410-02-P

Complete official Federal Register PDF

FR Doc. 95-31247 Definition of Qualified Financial Contracts

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66863-66866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31247]

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AB69

Definition of Qualified Financial Contracts

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC or 
Corporation) has adopted a rule to include spot and other short-term 
foreign exchange agreements and repurchase agreements on qualified 
foreign government securities within the definition of ``qualified 
financial contracts'' under the Federal Deposit Insurance Act (FDI 
Act). The FDI Act authorizes the FDIC to expand the definition of 
qualified financial contract by promulgation of regulations to include 
agreements similar to those currently identified as qualified financial 
contracts within the FDI Act. The FDIC has determined that spot and 
other short-term foreign exchange agreements are similar to swap 
agreements, which are included within the qualified financial contract 
provisions of the statute and that repurchase agreements on qualified 
foreign government securities are similar to those repurchase 
agreements already recognized as qualified financial contracts under 
the statute.

EFFECTIVE DATE: December 27, 1995.

FOR FURTHER INFORMATION CONTACT: Sharon Powers Sivertsen, Assistant 
General Counsel, Legal Division, (202) 736-0112; Keith A. Ligon, Senior 
Counsel, Legal Division, (202) 736-0160; or Christine M. Bradley, 
Attorney, Legal Division, (202) 736-0106, Legal Division.

SUPPLEMENTARY INFORMATION:

Background

    Sections 11(e)(8) through (10) of the FDI Act, 12 U.S.C. 1821(e)(8) 
through (10), provide special rules for the treatment of qualified 
financial contracts in the event the FDIC is appointed receiver or 
conservator for an insured depository institution. The statute seeks, 
among other things, to protect parties to qualified financial contracts 
by allowing for the liquidation, termination, and netting of their 
agreements. The statute defines certain securities contracts, commodity 
contracts, forward contracts, repurchase agreements and swap agreements 
as qualified financial contracts.
    Section 11(e)(8)(D) of the FDI Act identifies in some detail the 
types of contracts to be treated as qualified financial contracts, but 
additionally affords the FDIC express authority to adopt regulations 
extending the definition to any similar agreement. 12 U.S.C. 
1821(e)(8)(D)(i).

Proposed Rule

    In September 1995, the FDIC requested comment on a proposed 
regulation that would expand the definition of qualified financial 
contract to include agreements similar to the agreements identified 
within the FDI Act as qualified financial contracts. (60 FR 48935, 
Sept. 21, 1995). The FDIC proposed that spot and other short-term 
foreign exchange agreements and that repurchase agreements on 
securities issued or guaranteed by the central governments belonging to 
the Organization for Economic Cooperation and Development (OECD), or 
that have concluded special lending arrangements with the International 
Monetary Fund (IMF) associated with the IMF's General Arrangements to 
Borrow, be considered as qualified financial contracts under the FDI 
Act.
    The FDIC intended that the definition of qualified financial 
contract be expanded to include certain instruments that facilitate 
appropriate liquidity, hedging and financial intermediation operations 
in financial institutions. Adoption of the regulation to include spot 
and other short-term foreign exchange contracts and repurchase 
agreements on qualified foreign government securities within the 
definition of qualified financial contract is not intended to exclude 
other agreements that may otherwise qualify to be qualified financial 
contracts under the language of section 11(e)(8)(D) itself.

Final Rule

    The final rule adopted by the Corporation includes spot and other 
short-term foreign exchange agreements within the definition of 
qualified financial contract. The final rule clarifies that short-dated 
foreign exchange transactions such as spots, tomorrow/next day and same 
day/tomorrow transactions are similar agreements to those agreements 
identified within the statute as swap agreements.
    The final rule also expands the definition of qualified financial 
contract to include repurchase agreements on securities issued or 
guaranteed by the central governments of countries that are either full 
members of the OECD or that have concluded special lending arrangements 
with the International Monetary Fund (IMF) associated with the IMF's 
General Arrangements to Borrow (repurchase agreement on qualified 
foreign government securities). The final rule incorporates by 
reference the definition of ``central government'' as set forth in 12 
CFR part 325, appendix A, II.C note 17 \1\ and ``OECD-based group of 
countries'' as set forth in 12 CFR part 325, appendix A, II.B.2, note 
12 (and incorporating any changes to these definitions that should 
occur by future amendment).

    \1\ The definition of central government includes departments 
and ministries of the central government, as well as central banks, 
but does not extend to state, provincial, or local governments or 
commercial enterprises owned by central governments. Nor does it 
extend to securities of local government entities or commercial 
enterprises guaranteed by the central government. 12 CFR part 325, 
II.C., note 17 (1995).
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Summary of Comments

    The FDIC received 8 comment letters on the proposed regulation on 
the Definition of Qualified Financial Contracts. All commenters 
strongly support the Corporation's expansion of the definition of 
qualified financial contract to include spot and other short-term 
foreign exchange agreements and repurchase agreements on qualified 
foreign government securities. The commenters generally agree that 
promulgation of the proposed regulation 

[[Page 66864]]
clarifies the treatment these contracts would receive in the event the 
FDIC were appointed receiver or conservator of an insured depository 
institution. Five of the commenters provided additional suggestions on 
the proposed rule, which are summarized below.

Definition of Spot Foreign Exchange Agreements

    Two of the commenters suggested that the final regulation recognize 
spot and other short-term foreign exchange agreements as qualified 
financial contracts through the expansion of the existing definition of 
``swap agreement'' as provided in 12 U.S.C. 1821(e)(8)(D)(vi), rather 
than by creating a definition specific to these short-term agreements. 
The commenters stated that by including spot and other short-term 
foreign exchange agreements within the definition of swap agreement, 
counterparties to the agreements would be assured that a master 
agreement for any such agreement would be treated as one swap agreement 
under 12 U.S.C. 1821(e)(8)(D)(vii).
    Additionally, the commenters noted that expansion of the definition 
of swap agreement to include spot foreign exchange agreements is 
consistent with the manner in which the Bankruptcy Code was amended as 
a part of the Bankruptcy Reform Act of 1994. 11 U.S.C. 101(53B).
    The Corporation agrees with this recommendation and has revised the 
final regulation to provide that ``spot foreign exchange agreements'' 
as defined in the regulation are to be considered qualified financial 
contracts through the specific expansion of the definition of swap 
agreement contained at 12 U.S.C. 1821(e)(8)(D)(vi). In light of this 
revision, the Corporation has determined that the phrase ``or 
combination of agreements (including master agreements)'', which 
appeared in the proposed regulation at Sec. 360.5(b)(1), is 
unnecessary. Accordingly, this phrase is deleted in Sec. 360.5(c)(1) of 
the final regulation. A swap agreement includes any combination of such 
agreements and a master agreement for such agreements is treated as one 
swap agreement under 12 U.S.C. 1821(e)(8) (vi) and (vii).

Repurchase Agreements on Qualified Foreign Government Securities

    The Corporation received 4 comments on the proposal to expand the 
definition of repurchase agreements which are recognized as qualified 
financial contracts to include repurchase agreements on securities 
issued or guaranteed by the central governments of OECD countries. 
Although all of the commenters supported promulgation of the proposed 
regulation, three of the commenters suggested that they would prefer 
that the Corporation not restrict the expansion of the definition of 
repurchase agreement under 12 U.S.C. 1821(e)(8)(D)(v) to repurchase 
agreements on securities issued or guaranteed by the OECD countries. 
The fourth commenter endorsed the Corporation's proposed expansion of 
the definition of repurchase agreements to include repurchase 
agreements issued or guaranteed by the OECD countries, and commented 
that the proposed scope of the definition was appropriate in order to 
limit potential exposure to the deposit insurance funds.
    One commenter asserted that because repurchase agreements on the 
securities of any issuer should be recognized as qualified financial 
contracts through the definition of ``securities contract'' provided at 
12 U.S.C. 1821(e)(8)(D)(ii), the regulation should not be restricted to 
repurchase agreements on securities issued or guaranteed by the central 
governments of the OECD countries, and, as a result, any repurchase 
agreement involving any type of security should be considered a 
qualified financial contract.
    The FDI Act identifies the repurchase agreements which are 
qualified financial contracts with reference to the Bankruptcy Code 
definition of repurchase agreement. The Bankruptcy Code defines 
repurchase agreement as:

an agreement, including related terms, which provides for the 
transfer of certificates of deposit, eligible bankers' acceptances, 
or securities that are direct obligations of, or that are fully 
guaranteed as to principal and interest by, the United States or any 
agency of the United States against the transfer of funds by the 
transferee of such certificates of deposit, eligible bankers' 
acceptances, or securities with a simultaneous agreement by such 
transferee to transfer to the transferor thereof certificates of 
deposit, eligible bankers' acceptances, or securities as described 
above, at a date certain not later than one year after such 
transfers or on demand, against the transfer of funds.

11 U.S.C. 101(47). Consequently, the Bankruptcy Code definition and by 
incorporation the FDI Act definition of repurchase agreement does not 
include repurchase agreements on qualified foreign government 
securities. In order for such repurchase agreements to be treated as 
qualified financial contracts under the current statute, the FDIC is 
required to promulgate this final regulation under its regulatory 
authority. 12 U.S.C. 1821(e)(8)(D)(i).
    The second comment on the FDIC's limited expansion of the 
definition of repurchase agreement under 12 U.S.C. 1821(e)(8)(D)(v) 
concentrates on the growth of the international market for repurchase 
agreements on foreign government securities. One commenter stated that 
the growth of this market is not limited to securities issued or 
guaranteed by the central governments of the OECD countries. Another 
commenter submitted that non-OECD government securities were becoming a 
growing portion of the market for repurchase agreements on foreign 
government securities. These commenters conclude that there is no 
difference between repurchase agreements on OECD government securities 
and repurchase agreements on non-OECD government securities other than 
the nature of the risks posed by the underlying securities.
    Qualified financial contracts are accorded special status under the 
FDI Act and are treated differently from other contracts upon 
appointment of the FDIC as conservator or receiver for an insured 
depository institution. Any expansion of the definition of qualified 
financial contract results in a commensurate potential increase in cost 
to the receivership or conservatorship, which indirectly creates 
potential losses to the deposit insurance funds. By limiting the 
expansion of the definition of repurchase agreements, the FDIC is 
balancing the growing internationalization of major banking and 
financial markets with the potential risks posed to the deposit 
insurance funds arising from the credit risk inherent in such an 
expansion.
    In 1989, the FDIC implemented risk-based capital guidelines in 
order to implement the International Convergence of Capital Measurement 
and Capital Standards of July 1988, as reported by the Basle Committee 
on Banking Supervision (the Basle Accord).2 The Basle Committee 
concluded that claims unconditionally guaranteed by governments of 
countries that are full members of the OECD should be distinguished 
from claims similarly guaranteed by governments of non-OECD 
countries.3 The Basle 

[[Page 66865]]
Committee analyzed the credit risk and country transfer risk associated 
with government securities and determined that membership in OECD was 
an appropriate basis for granting a more favorable risk 
weighting.4

    \2\ The Basle Accord is a risk-based framework that was 
originally proposed by the Basle Committee on Banking Supervision 
(Basle Supervisors' Committee) and endorsed by the central bank 
governors of the Group of 10 (G-10) countries in July 1988. The 
Basle Supervisors' Committee was comprised at that time of 
representatives of the central bank and supervisory authorities from 
the G-10 countries (Belgium, Canada, France, Germany, Italy, Japan, 
the Netherlands, Sweden, Switzerland, the United Kingdom, and the 
United States) and Luxembourg.
    \3\ Long-term claims on banks of OECD countries also generally 
receive lower risk weights than corresponding claims on the banks of 
non-OECD countries. See , e.g., Proposed Rule for Capital 
Maintenance Guidelines, 60 FR 8582 (1995).
    \4\ Transfer risk generally refers to the possibility that an 
asset cannot be serviced in the currency of payment because of a 
lack of, or restraints on, the availability of needed foreign 
exchange in the country of the obligor. See, e.g., 60 FR 8582 
(1995).
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    The OECD is an international organization of countries which are 
committed to market-oriented economic policies, including the promotion 
of private enterprise and free market prices, liberal trade policies, 
and the absence of exchange controls. These commitments are expressed 
in the Code of Liberalisation of Capital Movements and the Code of 
Liberalisation of Current Invisible Operations (collectively, the 
Codes). OECD members are expected to ensure that the obligations 
accepted under either Code are honored, including the removal of legal 
or administrative regulations that would otherwise frustrate the 
movement of capital from one member country to another. The OECD 
countries' adherence to the Codes is generally associated with a 
relatively low transfer risk when considering transactions between 
member countries.
    The same considerations which were analyzed by the Basle Committee 
and the FDIC in establishing its risk-based capital guidelines, 
including the commitments of the OECD countries under the Codes, are 
important in determining how the definition of qualified financial 
contract should be expanded under 12 U.S.C. 1821(e)(8)(D)(i). 
Consequently, the FDIC is retaining the provision restricting the 
repurchase agreements recognized as qualified financial contracts to 
repurchase agreements on securities issued or guaranteed by the central 
governments of the countries belonging to the OECD or that have 
concluded special lending arrangements with the IMF associated with the 
IMF's General Arrangements to Borrow.

Other Comments

    One commenter suggested that the FDIC conform its definition of 
qualified financial contract to the definition of ``financial 
contract'' as used by the Board of Governors of the Federal Reserve 
System (Board) in Regulation EE, Netting Eligibility for Financial 
Institutions, 12 CFR part 231 (59 FR 4780, Feb. 2, 1995). Regulation EE 
defines financial contract with reference to the definition of 
qualified financial contract contained in the FDI Act (12 U.S.C. 
1821(e)(8)(D), as amended), except that Regulation EE specifies that a 
forward contract includes a contract with a maturity date of two days 
or less after the date the contract is entered into (i.e., a ``spot'' 
contract). 12 CFR 231.2(c)(1995).
    The FDIC has determined that the definition of financial contract 
as used by the Board in Regulation EE does not affect the FDIC's 
definition of qualified financial contract under the FDI Act. As the 
Board stated in the final publication of Regulation EE, the definition 
of financial contract within Regulation EE is relevant only to a 
determination of whether a particular institution qualifies as a 
``financial institution'' under the regulation. Once an institution 
qualifies as a financial institution under Regulation EE, its ability 
to avail itself of the netting provisions as set forth in 12 U.S.C. 
4401-4407 is determined with reference to the definition of ``netting 
contract'' contained at 12 U.S.C. 4402(14). (59 FR 4780, 4783, Feb. 2, 
1994). The FDIC has determined that its proposed regulation on the 
Definition of Qualified Financial Contracts does not change the 
interpretation of Regulation EE or the netting provisions of sections 
4401-4407 of title 12.
    Finally, one commenter requested that the FDIC delete the provisos 
outlined in paragraph (d) of the Sec. 360.5.5 The FDIC has 
determined that paragraph (d) should be retained to clarify that 
nothing in this regulation is intended to affect any rights and powers 
the Corporation might otherwise have in its capacity of insurer and 
regulator of certain depository institutions.

    \5\ Paragraph (d) of Sec. 360.5 appeared as paragraph (c) in the 
Proposed Rule.
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    In order to facilitate the continued participation of United States 
financial institutions in major financial markets after January 1, 
1996, the Board of Directors has determined that good cause exists for 
waiving the 30-day delayed effective date ordinarily required by the 
Administrative Procedures Act (5 U.S.C. 553). The Board of Directors 
has also determined that section 302 of the Riegle Community 
Development and Regulatory Improvement Act of 1994 (Pub. L. 103-325, 
108 Stat. 2160)(1994) (RCDRIA) does not apply to the issuance of the 
final rule.6

    \6\ Section 302 of RCDRIA provides that any new regulations and 
amendments to existing regulations which impose reporting, 
disclosure or other requirements on insured depository institutions 
may only take effect on the first day of a calendar quarter unless 
certain exceptions are satisfied.
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List of Subjects in 12 CFR Part 360

    Banks, banking, Saving associations.

    For the reasons set out in the preamble, the FDIC Board of 
Directors amends 12 CFR part 360 as follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

    1. The authority citation for part 360 is revised to read as 
follows:

    Authority: 12 U.S.C. 1821(d)(11), 1821(e)(8)(D)(i), 1823(c)(4); 
Sec. 401(h), Pub. L. 101-73, 103 Stat. 357.

    2. Section 360.5 is added to part 360 to read as follows:

Sec. 360.5  Definition of qualified financial contracts.

    (a) Authority and purpose. Sections 11(e) (8) through (10) of the 
Federal Deposit Insurance Act, 12 U.S.C. 1821(e) (8) through (10), 
provide special rules for the treatment of qualified financial 
contracts of an insured depository institution for which the FDIC is 
appointed conservator or receiver, including rules describing the 
manner in which qualified financial contracts may be transferred or 
closed out. Section 11(e)(8)(D)(i) of the Federal Deposit Insurance 
Act, 12 U.S.C. 1821(e)(8)(D)(i), grants the Corporation authority to 
determine by regulation whether any agreement, other than those 
identified within section 11(e)(8)(D), should be recognized as 
qualified financial contracts under the statute. The purpose of this 
section is to identify additional agreements which the Corporation has 
determined to be qualified financial contracts.
    (b) Repurchase agreements. The following agreements shall be deemed 
``repurchase agreements'' under section 11(e)(8)(D)(v) of the Federal 
Deposit Insurance Act, as amended (12 U.S.C. 1821(e)(8)(D)(v)): A 
repurchase agreement on qualified foreign government securities is an 
agreement or combination of agreements (including master agreements) 
which provides for the transfer of securities that are direct 
obligations of, or that are fully guaranteed by, the central 
governments (as set forth at 12 CFR part 325, appendix A, section II.C, 
n. 17, as may be amended from time to time) of the OECD-based group of 
countries (as set forth at 12 CFR part 325, appendix A, section 
II.B.2., note 12 as may be amended from time to time) against the 
transfer of funds by the transferee of such securities with a 
simultaneous agreement by such transferee to transfer to the transferor 
thereof securities as described above, at a date certain not later than 
one year after such transfers or on demand, against the transfer of 
funds. 

[[Page 66866]]

    (c) Swap agreements. The following agreements shall be deemed 
``swap agreements'' under section 11(e)(8)(D)(vi) of the Federal 
Deposit Insurance Act, as amended (12 U.S.C. 1821(e)(8)(D)(vi)): A spot 
foreign exchange agreement is any agreement providing for or effecting 
the purchase or sale of one currency in exchange for another currency 
(or a unit of account established by an intergovernmental organization 
such as the European Currency Unit) with a maturity date of two days or 
less after the agreement has been entered into, and includes short-
dated transactions such as tomorrow/next day and same day/tomorrow 
transactions.
    (d) Nothing in this section shall be construed as limiting or 
changing a party's obligation to comply with all reasonable trading 
practices and requirements, non-insolvency law requirements and any 
other requirements imposed by other provisions of the FDI Act. This 
section in no way limits the authority of the Corporation to take 
supervisory or enforcement actions, or to otherwise manage the affairs 
of a financial institution for which the Corporation has been appointed 
conservator or receiver.

    By Order of the Board of Directors.

    Dated at Washington, DC, this 19th day of December, 1995.

Federal Deposit Insurance Corporation
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 95-31247 Filed 12-26-95; 8:45 am]
BILLING CODE 6714-01-P

Complete official Federal Register PDF

FR Doc. 95-31185 Availability of Information

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66862-66863]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31185]

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DEPARTMENT OF AGRICULTURE
Economic Research Service

7 CFR Part 3701

Availability of Information

AGENCY: Economic Research Service, USDA.

ACTION: Final rule.

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SUMMARY: This document amends regulations of the Economic Research 
Service (ERS) regarding the availability of information to the public 
in accordance with the Freedom of Information Act (FOIA) to notify the 
public of a change in the location of the ERS FOIA Coordinator and the 
location where published data is available.

EFFECTIVE DATE: December 27, 1995.

FOR FURTHER INFORMATION CONTACT:
Stasia A.M. Hutchison, FOIA Coordinator, Agricultural Research Service, 
USDA, 6303 Ivy Lane, Room 456, Greenbelt, MD 20770, (301) 344-2207.

SUPPLEMENTARY INFORMATION: The FOIA (5 U.S.C. 552(a)(1)) requires 
Federal agencies to publish in the Federal Register regulations 
describing how the public may obtain information from the agency. This 
part is issued in accordance with the regulations of the Secretary of 
Agriculture at 7 CFR part 1, subpart A, implementing FOIA. This 
document amends 7 CFR part 3701 to inform the public of the change in 
location of the FOIA Coordinator for ERS delegated the authority to 
make initial determinations on FOIA requests in accordance with 7 CFR 
1.3(a)(3), and the location where published data are available to the 
public.
    This rule relates to internal agency management. Therefore, 
pursuant to 5 U.S.C. 553, notice of proposed rulemaking and opportunity 
for comment are not required, and this rule may be made effective less 
than 30 days after publication in the Federal Register. Further, since 
this rule relates to internal agency management, it is exempt from the 
provisions of Executive Orders 12778 and 12866. Also, this rule will 
not cause a significant economic impact or other substantial effect on 
small entities. Therefore, the requirements of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., do not apply.

List of Subjects in 7 CFR Part 3701

    Freedom of information.

    Accordingly, 7 CFR part 3701 is revised to read as follows:

PART 3701--PUBLIC INFORMATION

Sec.
3701.1  General statement.
3702.2  Public inspection, copying, and indexing.
3701.3  Request for records.
2701.4  Denials.
3701.5  Appeals.
3701.6  Requests for published data and information.

    Authority: 5 U.S.C. 301 and 552; 7 CFR part 1, subpart A.

Sec. 3701.1  General statement.

    This part is issued in accordance with the regulations of the 
Secretary of Agriculture in part 1, subpart A of this title, 
implementing the Freedom of Information Act (FOIA) (5 U.S.C. 552). The 
Secretary's regulations, as implemented by the regulations in this 
part, govern the availability of records of the Economic Research 
Service (ERS) to the public.

Sec. 3701.2  Public inspection, copying, and indexing.

    5 U.S.C. 552(a)(2) requires that certain materials be made 
available for public inspection and copying and that a current index of 
these materials be published quarterly or otherwise be made available. 
Members of the public may request access to such materials maintained 
by ERS at the following office: Information Staff, Agricultural 
Research Service, USDA, 6303 Ivy Lane, Room 456, Greenbelt, MD 20770; 
Telephone (301) 344-2207. Office Hours are 8:00 a.m. to 4:30 p.m.

Sec. 3701.3  Request for records.

    Requests for records of ERS shall be made in accordance with 
Sec. 1.6 (a) and (b) of this title and submitted to the FOIA 
Coordinator, Agricultural Research Service, USDA, 6303 Ivy Lane, Room 
456, Greenbelt, MD 20770; Telephone (301) 344-2207, Facsimile (301) 
344-2325, TDD (301) 344-2425. The FOIA Coordinator is delegated 
authority to make determinations regarding such requests in accordance 
with Sec. 1.3(a)(3) of this title.

Sec. 3701.4  Denials.

    If the FOIA Coordinator determines that a requested record is 
exempt from mandatory disclosure and that 

[[Page 66863]]
discretionary release would be improper, the FOIA Coordinator shall 
give written notice of denial in accordance with Sec. 1.8(a) of this 
title.

Sec. 3701.5  Appeals.

    Any person whose request is denied shall have the right to appeal 
such denial. Appeals shall be made in accordance with Section 1.6(e) of 
this title and should be addressed as follows: Administrator, Economic 
Research Service, U.S. Department of Agriculture, Washington, DC 20250.

Sec. 3701.6  Requests for published data and information.

    Information on published data from ERS programs is contained in the 
ERS ``Reports'' newsletter, available without cost from the Economic 
Research Service, Information Center, U.S. Department of Agriculture, 
1301 New York Avenue, NW., Washington, DC 20005.

    Done at Washington, DC, this 19th day of December 1995.
John Dunmore,
Acting Administrator, Economic Research Service.
[FR Doc. 95-31185 Filed 12-26-95; 8:45 am]
BILLING CODE 3410-18-M

Complete official Federal Register PDF

FR Doc. 95-31183 Availability of Information

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66861-66862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31183]

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DEPARTMENT OF AGRICULTURE
Cooperative State Research, Education, and Extension Service

7 CFR Part 3404

Availability of Information

AGENCY: Cooperative State Research, Education, and Extension Service, 
USDA.

ACTION: Final rule.

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SUMMARY: This document amends regulations of the Department of 
Agriculture (USDA) regarding the availability of information to the 
public in accordance with the Freedom of Information Act (FOIA) to 
reflect the establishment of the Cooperative State Research, Education, 
and Extensive Service (CSREES) by the Department of Agriculture 
Reorganization Act of 1994.

EFFECTIVE DATE: December 27, 1995.

FOR FURTHER INFORMATION CONTACT: Stasia A.M. Hutchison, FOIA 
Coordinator, Agricultural Research Service, USDA, 6303 Ivy Lane, Room 
456, Greenbelt, MD 20770; (301) 344-2207.

SUPPLEMENTARY INFORMATION: The FOIA (5 U.S.C. 552(a)(1)) requires 
Federal agencies to publish in the Federal Register regulations 
describing how the public may obtain information from the agency. This 
part is issued in accordance with the regulations of the Secretary of 
Agriculture at 7 CFR part 1, Subpart A, implementing FOIA.
    CSREES was established by section 251(d) of the Department of 
Agriculture Reorganization Act of 1994, Public Law 103-354 (USDA 
Reorganization Act). The USDA Reorganization Act abolished the former 
Cooperative State Research Service (CSRS) and Extension Service (ES) 
and consolidated the functions of the Department related to cooperative 
State research programs and cooperative extension and education 
programs formerly administered by CSRS and ES into the new CSREES. This 
document amends 7 CFR part 3404 to reflect the reorganization of USDA, 
to make technical corrections in the regulations, and to inform the 
public of the change in location of the FOIA Coordinator for CSREES 
delegated the authority to make initial determinations on FOIA requests 
in accordance with 7 CFR 1.3(a)(3).
    This rule relates to internal agency management. Therefore, 
pursuant to 5 U.S.C. 553, notice of proposed rulemaking and opportunity 
for comment are not required, and this rule may be made effective less 
than 30 days after publication in the Federal Register. Further, since 
this rule relates to internal agency management, it is exempt from the 
provisions of Executive Orders 12778 and 12866. Also, this rule will 
not cause a significant economic impact or other substantial effect on 
small entities. Therefore, the requirements of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., do not apply.

List of Subjects in 7 CFR Part 3404

    Freedom of information.

    Accordingly, 7 CFR part 3404 is revised to read as follows:
    
[[Page 66862]]

PART 3404--PUBLIC INFORMATION

Sec.
3404.1  General statement.
3404.2  Public inspection, copying, and indexing.
3404.3  Requests for records.
3404.4  Denials.
3404.5  Appeals.

    Authority: 5 U.S.C. 301, 552; 7 CFR part 1, subpart A.

Sec. 3404.1  General statement.

    This part is issued in accordance with the regulations of the 
Secretary of Agriculture in part 1, subpart A of this title, 
implementing the Freedom of Information Act (FOIA) (5 U.S.C. 552). The 
Secretary's regulations, as implemented by the regulations in this 
part, govern the availability of records of the Cooperative State 
Research, Education, and Extension Service to the public.

Sec. 3404.2  Public inspection, copying, and indexing.

    5 U.S.C. 552(a)(2) requires that certain materials be made 
available for public inspection and copying and that a current index of 
these materials be published quarterly or otherwise be made available. 
Members of the public may request access to such materials maintained 
by CSREES at the following office: Information Staff, Agricultural 
Research Service, USDA, 6303 Ivy Lane, Room 456, Greenbelt, MD 20770; 
Telephone (301) 344-2207. Office hours are 8:00 a.m. to 4:30 p.m.

Sec. 3404.3  Requests for records.

    Requests for records of CSREES under 5 U.S.C. 552(a)(3) shall be 
made in accordance with Sec. 1.6 of this title and submitted to the 
FOIA Coordinator at the following address: Information Staff, 
Agricultural Research Service, USDA, 6303 Ivy Lane, Room 456, 
Greenbelt, MD 20770; Telephone (301) 344-2207; Facsimile (301) 344-
2325; TDD (301) 344-2435. The FOIA Coordinator is delegated authority 
to make determinations regarding such requests in accordance with 
Sec. 1.3(a)(3) of this title.

Sec. 3404.5  Denials.

    If the FOIA Coordinator determines that a requested record is 
exempt from mandatory disclosure and that discretionary release would 
be improper, the FOIA Coordinator shall give written notice of denial 
in accordance with Sec. 1.8(a) of this title.

Sec. 13404.6  Appeals.

    Any person whose request is denied shall have the right to appeal 
such denial. Appeals shall be made in accordance with Sec. 1.6(e) of 
this title and should be addressed as follows: Administrator, 
Cooperative State Research, Education, and Extension Service, U.S. 
Department of Agriculture, Washington, DC 20250.

    Done at Washington, D.C., this 15th day of December 1995.
Colien Hefferan,
Acting Administrator, Cooperative State Research, Education, and 
Extension Service.
[FR Doc. 95-31183 Filed 12-26-95; 8:45 am]
BILLING CODE 3410-22-M

Complete official Federal Register PDF

FR Doc. 95-31159 Rail Fixed Guideway Systems; State Safety Oversight

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 67034-67048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31159]

[[Page 67033]]

_______________________________________________________________________

Part IV

Department of Transportation

_______________________________________________________________________

Federal Transit Administration

_______________________________________________________________________

49 CFR Part 659

Rail Fixed Guideway Systems; State Safety Oversight; Final Rule

Federal Register / Vol. 60, No. 248 / Wednesday, December 27, 1995 / 
Rules and Regulations

[[Page 67034]]

DEPARTMENT OF TRANSPORTATION

Federal Transit Administration

49 CFR Part 659

[Docket No. 92-D]
RIN 2132-AA39

Rail Fixed Guideway Systems; State Safety Oversight

AGENCY: Federal Transit Administration, DOT.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: As required by the Intermodal Surface Transportation 
Efficiency Act of 1991, the Federal Transit Administration (FTA) issues 
a rule requiring States to oversee the safety of rail fixed guideway 
systems not regulated by the Federal Railroad Administration (FRA). 
This document accordingly sets forth FTA's State safety oversight 
program, which is intended to improve the safety of rail fixed guideway 
systems.

EFFECTIVE DATE: This regulation is effective January 26, 1996. The 
incorporation by reference of certain documents in the regulation is 
approved by the Director of the Federal Register as of January 26, 
1996.

FOR FURTHER INFORMATION CONTACT: For program issues: Judy Meade or Roy 
Field, Office of Safety and Security, Federal Transit Administration, 
(202) 366-2896 (telephone) or (202) 366-3765 (fax). For legal issues: 
Nancy Zaczek, Office of Chief Counsel, Federal Transit Administration, 
(202) 366-4011 or (202) 366-3809.

SUPPLEMENTARY INFORMATION:
    This preamble is organized as follows:

I. Background
    A. 49 U.S.C. Sec. 5330
    B. Summary of the final rule
    C. Overview of the comments
    II. Discussion of the Comments
    A. Rail Fixed Guideway System
    B. System Safety Program Standard
    C. System Safety Program Plan--the six factors
    D. Planning, design, and construction
    E. Accountability factor
    F. EPA and OSHA requirements
    G. Security
    H. Biennial safety reviews
    I. Safety audits
    J. Accident
    K. Hazardous condition
    L. Investigations
    M. Confidentiality of oversight agency investigation reports
    N. Certified Transit Safety Professional
III. Section-by-Section Analysis
IV. Economic Analysis
V. Regulatory Process Matters

I. Background

    The Intermodal Surface Transportation Efficiency Act of 1991 (Pub. 
L. 102-240), enacted into law on December 18, 1991, added section 28 to 
the Federal Transit Act (recently codified at 49 U.S.C. 5330 (1994)), 
which requires the Federal Transit Administration to issue regulations 
creating a State oversight program. On June 25, 1992, FTA issued an 
Advance Notice of Proposed Rulemaking (ANPRM) soliciting public comment 
on a range of issues to be addressed in drafting a Notice of Proposed 
Rulemaking (NPRM). 57 FR 28572. The agency held hearings on the ANPRM 
in Los Angeles, California; Portland, Oregon; and Washington, DC. 
Thirty-five entities either submitted comments to the docket or 
testified at one of the three hearings, including fifteen transit 
authorities, three utility commissions, eight States, one engineering 
firm, two transit associations, one labor union, one Federal agency, 
one transit supplier, two representatives from the people mover 
industry, and one transportation consultant.
    On December 9, 1993, FTA published its NPRM (58 FR 64855) and today 
publishes its final rule, which requires States to oversee the safety 
of rail fixed guideway systems.

A. 49 U.S.C. 5330

    In general, section 5330 applies only to those States in which a 
rail fixed guideway system operates that is not regulated by the 
Federal Railroad Administration, and requires any such State to 
designate a State oversight agency to be responsible for overseeing the 
rail fixed guideway system's safety practices. FTA is required to issue 
a rule implementing the program and may withhold Federal funds if a 
State fails to implement the rule.
    More specifically, the statute describes the responsibilities of 
the State and the agency the State designates to provide oversight, 
which in most instances will be an agency of the State because most 
rail fixed guideway systems operate in only one State. When a rail 
fixed guideway system operates in more than one State, however, the 
statute permits the affected States to designate any entity, other than 
the transit agency itself, to oversee that rail fixed guideway system.
    Whether the oversight agency is a State agency or some other 
entity, it must require each affected transit agency to create a system 
safety program plan, which the oversight agency must review and 
approve. The oversight agency must also investigate accidents and 
hazardous conditions. Once a hazardous condition has been discovered, 
the oversight agency must require the transit agency to correct or 
eliminate it.-
    If a State has not met these requirements or has not made adequate 
efforts to comply with them, the Secretary may withhold up to five 
percent of a fiscal year's apportionment under FTA's formula program 
for urbanized areas (formerly section 9) attributable to the State or 
an affected urbanized area in the State.

B. Summary of the Final Rule

    The rule delineates the responsibilities of the State, the 
oversight agency, the transit agency, and the FTA.

The State

    Under the rule, the primary responsibility of the State is to 
designate an entity or entities to oversee the safety of a rail fixed 
guideway system. When the rail fixed guideway system operates only 
within a single State, that entity or entities must be an agency of the 
State; when it operates in more than one State, the affected States may 
designate a single entity to oversee that system. In neither case may 
the State designate the transit agency as the oversight agency.
    To ensure the oversight agency's candid assessment of the probable 
cause of a particular accident or unacceptable hazardous condition, the 
rule allows the State to enact legislation prohibiting the disclosure 
of oversight agency investigation reports.

The Oversight Agency

    The rule directs the oversight agency, or an entity acting on its 
behalf, to develop a system safety program standard, a document that 
establishes the relationship between the oversight and transit agencies 
and specifies the procedures that the transit agency must follow. The 
system safety program standard must, at a minimum, comply with the 
American Public Transit Association's ``Manual for the Development of 
Rail Transit System Safety Program Plans'' (``APTA Guidelines''), a 
manual widely used throughout the transit industry and available from 
the American Public Transit Association (APTA), 1201 New York Avenue, 
N.W., Washington, D.C. 20005-3917, or the Federal Transit 
Administration, Office of Safety and Security, 400 7th Street, S.W., 
Washington, D.C. 20590. The APTA Guidelines assist in developing safety 
practices to reduce the likelihood of unintentional events that may 
lead to death, injury, or property damage. In 

[[Page 67035]]
addition, the system safety program standard must include specific 
provisions addressing ``security'' matters, intentional wrongful or 
criminal acts, such as muggings, rapes, murders, assaults, or terrorist 
activities. To develop this portion of the system safety program plan, 
we suggest that the oversight agency use FTA's ``Transit Security 
Procedures Guide'' and ``Transit System Security Program Planning 
Guide,'' available from the FTA at the address above.
    The oversight agency must require the transit agency to develop a 
system safety program plan that complies with the oversight agency's 
system safety program standard. By January 1, 1997, the oversight 
agency must review and approve, in writing, the transit agency's system 
safety program plan; however, the ``security'' provisions of the system 
safety program plan must be approved initially by the oversight agency 
by January 1, 1998. After the initial approvals, the oversight agency 
must review, as necessary, the transit agency's system safety program 
plan and determine whether it should be updated. All oversight agency 
approvals must be in writing.
    The rule allows the oversight agency to prohibit the transit agency 
from publicly releasing the ``security'' provisions in the system 
safety program plan.
    The oversight agency must require the transit agency to conduct 
safety audits according to the Internal Safety Audit Process detailed 
in checklist number 9 of the APTA Guidelines. Once a year the transit 
agency must compile and submit an audit report to the oversight agency 
or an entity acting on its behalf for review.
    Aside from reviewing the transit agency's safety audit reports, the 
oversight agency must conduct on-site safety reviews every three years. 
In a safety review, the oversight agency must assess whether the 
transit agency's actual safety practices and procedures comply with its 
system safety program plan. Once this review is completed, the 
oversight agency must prepare a report containing its findings and 
recommendations, an analysis of the efficacy of the transit agency's 
system safety program plan, and a determination of whether the system 
safety program plan should be updated.
    The oversight agency must require the transit agency to report the 
occurrence of accidents and unacceptable hazardous conditions within a 
period of time specified by the oversight agency. The oversight agency 
must investigate such reports in accordance with procedures it has 
established. The oversight agency may conduct its own investigation, 
use a contractor to conduct an investigation, or rely on the 
investigation conducted by the transit agency or the National 
Transportation Safety Board (NTSB).
    After the oversight agency has investigated an accident or 
unacceptable hazardous condition, it must require the transit agency to 
minimize, control, correct, or eliminate it, in accordance with a 
corrective action plan drafted by the transit agency and approved by 
the oversight agency.
    The oversight agency must submit three kinds of reports to FTA: an 
initial submission, an annual submission, and a periodic submission. In 
the initial submission, the oversight agency lists the names and 
addresses of the rail fixed guideway systems it oversees. This report 
must be updated only when that information changes. In the annual 
submissions, the oversight agency must submit to FTA a publicly 
available report summarizing its oversight activities for the past 
year. Periodically, an oversight agency must submit to FTA status 
reports of accidents, hazardous conditions, and corrective action 
plans. The oversight agency must submit these reports only if FTA so 
requests.

The Transit Agency

    The transit agency must develop a system safety program plan that 
complies with the oversight agency's system safety program standard. It 
must conduct safety audits that comply with the Internal Safety Audit 
Process, APTA Guidelines, checklist number 9, and draft and submit to 
the oversight agency a report summarizing the results of the safety 
audit. The transit agency must classify hazardous conditions according 
to the APTA Guidelines' Hazard Resolution Matrix. The transit agency 
must report, within the timeframe specified by the oversight agency, 
any accident or unacceptable hazardous condition that has occurred on 
the rail fixed guideway system. The transit agency may, if the 
oversight agency so chooses, conduct investigations on behalf of the 
oversight agency. Once an investigation has been completed, the transit 
agency must obtain the oversight agency's approval of a corrective 
action plan and then implement the plan so as to minimize, control, 
correct, or eliminate the particular unacceptable hazardous condition 
or condition that has caused an accident.

The Federal Transit Administration

    The FTA assesses whether the State has complied with the rule or 
has made adequate efforts to comply with it. If the FTA determines that 
the State is not in compliance or has not made adequate efforts to 
comply, it may withhold up to five percent of the amount apportioned 
for use in the State or affected urbanized areas under FTA's formula 
program for urbanized areas (formerly section 9). Also, FTA receives 
reports from the oversight agency.

C. Overview of the Comments

    The FTA received 60 comments in response to the NPRM. FTA 
considered all comments filed in a timely manner as well as all 
statements and material presented at the public hearings on the rule. 
The breakdown among commenter categories is as follows:

Transit Agencies.....................................................27
State DOTs............................................................9
Public Utilities......................................................6
Cities................................................................1
Federal Agencies......................................................2
Independent Consultants...............................................8
Trade Associations....................................................2
Safety Societies/Associations.........................................5

    In Section II below, we discuss in detail the public comments 
addressing issues raised in the NPRM. One such issue, how the term 
``rail fixed guideway system'' should be defined, affects the scope of 
the rule. Another key issue, how the system safety program standard 
should be developed and what it should include, will directly affect 
the relationship between the oversight and transit agencies. Most 
important, we examine whether the oversight agency should use the APTA 
Guidelines or Military Standard 882B or 882C (MIL-STD 882B or 882C) to 
develop its system safety program standard. We also examine whether the 
system safety program standard should cover the planning, design, and 
construction phases of a rail fixed guideway system's life cycle; EPA 
and OSHA-type matters; ``security''; and other issues.
    Also, we discuss the oversight agency's role in investigating 
accidents and unacceptable hazardous conditions. A related issue 
concerns whether investigation reports should be kept confidential.
    For additional discussion on individual issues, see also the 
Section-By-Section Analysis below in Section III.

II. Discussion of the Comments

A. Rail Fixed Guideway System

    The first issue is the definition of ``rail fixed guideway 
system.'' Statutes give us limited guidance in this regard; section 
5330, the authority for this rulemaking, states that it applies ``only 
to States that have rail fixed guideway mass transportation systems not 
subject 

[[Page 67036]]
to regulation by the Federal Railroad Administration.'' Another 
provision, 49 U.S.C. Sec. 5302, defines ``mass transportation'' as 
``transportation by a conveyance that provides regular and continuing 
general or special transportation to the public * * *.'' Finally, 49 
U.S.C. Sec. 20102(1), which defines railroads subject to regulation by 
the FRA, specifically excludes ``rapid transit operations within an 
urban area that are not connected to the general railroad system of 
transportation.'' Of mass transportation systems, generally, only 
commuter railroads are regulated by the FRA. Therefore, we asked in 
both the ANPRM and the NPRM whether we should adopt a narrow definition 
and include only light and heavy rail systems or a broad definition and 
include other rail systems, such as monorails, inclined planes, trolley 
systems, and funiculars, as well.
    Many commenters to the ANPRM did not address this issue. Those that 
responded directed their comments to specific issues; for instance, six 
commenters discussed including people movers, while only two commenters 
proposed a definition for FTA's consideration. In the NPRM, FTA 
proposed to define ``rail fixed guideway system'' as

    Any public transportation facility not regulated by the Federal 
Railroad Administration, which occupies a separate right-of-way 
exclusively for public transportation or uses a steel-wheeled 
catenary or other rail system sharing a right-of-way with other 
forms of transportation and, which is included in the calculation of 
fixed guideway route miles under section 9 of the FT Act.

    As we explained in the preamble to the NPRM, this definition would 
cover light and heavy rail, cable cars, trolleys, people movers, and 
inclined planes so long as their mileage is included in the calculation 
of fixed guideway route miles under section 9 of the FT Act. We further 
noted that the Morgantown People Mover, which is not used in the 
calculation of route miles under the section 9 formula program, would 
not be covered by the proposed rule, while the Detroit People Mover, 
which is used in the calculation of the section 9 formula would be 
covered. We further noted that the definition also would not cover 
rubber-wheeled trolley buses that use a catenary system, as they are 
subject to motor vehicle regulations.
    Many of the commenters to the NPRM urged FTA to adopt the narrow 
definition, with most of them suggesting that the definition be limited 
to light and heavy rail systems only. In support of their contention, 
some of these commenters noted that in the past, NTSB had recommended 
that FTA oversee the safety of rapid rail transit systems only, 
although these commenters stated that light rail systems should be 
covered by the rule as well. Concerning people movers, inclined planes, 
amusement rides, funiculars, historical trolleys, cable cars, and other 
rail transit systems, these commenters opposed their inclusion, opining 
that they do not present the same level of risk to public safety as 
posed by heavy and light rail systems.

    NTSB also commented on this issue by stating that although it 
had no accident investigation experience with people movers or 
incline planes that would provide a basis to determine if these 
systems should be covered by the FTA's regulations, the Board 
believe[s] that the safety of any system that regularly transports 
people should be monitored by an appropriate State or local agency. 
Limiting the definition of a rail fixed guideway system to those 
systems used by an urbanized area in the calculation of fixed 
guideway route miles under Section 9 of the Federal Transit Act 
would apparently exclude some of these systems from the proposed 
regulation. Further, it is possible that an urbanized area could not 
count in the statutory formula to determine Section 9 Federal funds 
the rail route miles of a particular system to avoid having the 
system covered by the proposed oversight regulation. In short, the 
Safety Board questions the need for the Section 9 limitation to the 
definition.

    FTA Response. Although most commenters recommended that we cover 
only light and heavy rail systems, we agree with the NTSB that ``any 
system that regularly transports people should be monitored by an 
appropriate State or local agency.'' Hence, the rule covers inclined 
planes, monorails, trolleys, automated guideways, and funiculars along 
with light, rapid, and heavy rail systems. We did, however, change the 
definition to clarify that guided busways are not covered.
    We also made another change in light of NTSB's assertions that the 
proposed definition may exclude some systems that are not used to 
calculate fixed guideway route miles under FTA's formula grant program 
for urbanized areas. We do not believe this would be the case because 
FTA's grant program is based, in part, on the amount of ``fixed 
guideway route miles'' within an urbanized area. It is therefore in the 
urbanized area's interest to include as many systems as possible. 
Moreover, in most instances, a system that receives Federal funding 
under FTA's formula grant program for urbanized areas would have its 
mileage included in the calculation. The opposite, however, is not 
true; there are systems whose mileage is used in the calculation that 
do not receive funding under FTA's formula grant program for urbanized 
areas. That is why we proposed covering those systems that are used in 
the calculation instead of just certain recipients of FTA funding; it 
is actually a broader category. Nevertheless, we have added a provision 
to cover any system that receives funding under FTA's formula grant 
program for urbanized areas or is used in the calculation of ``fixed 
guideway route miles.'' This definition should cover most rail mass 
transit systems not regulated by the FTA.

B. System Safety Program Standard

    Section 5330 requires FTA to issue regulations that direct the 
State oversight agency to develop ``a safety program plan for each 
[rail] fixed guideway mass transportation system in the State.'' In the 
NPRM, we proposed to require the oversight agency to adopt a system 
safety program standard, which a transit agency would then use to 
develop its system safety program plan, the document used by the 
transit agency to ensure that it uses proper safety practices and 
procedures.
    The NPRM further proposed that the oversight agency's ``system 
safety program standard'' comply, at a minimum, with the American 
Public Transit Association's ``Manual for the Development of Rail 
Transit System Safety Program Plans,'' (``APTA Guidelines''). In the 
preamble to the NPRM, we noted that we had considered adopting Military 
Standard 882B (MIL-STD 882B), which has been subsequently superseded by 
MIL-STD 882C, but found it unnecessary because APTA had developed its 
Guidelines by adapting MIL-STD 882B to the transit industry.
    While most commenters favored the use of the APTA Guidelines, one 
commenter strongly favored the use of MIL-STD 882B or 882C to develop 
the system safety program standard. This commenter noted that:

    [T]he discussion of the Proposed Rule indicates that the APTA 
requirement is equivalent to MIL-STD 882B, and that the APTA 
standard can therefore be used in place of the MIL-STD. It should be 
noted that the APTA standard is not equivalent to the military 
standard. There are significant and important philosophical 
differences between the two documents. The most important of the 
differences is that MIL-STD 882 specifies that system safety be 
started very early in the project, that it must be involved in the 
design of the system, that a specific order of precedence must be 
followed to increase safety, and that risk assessments must be based 
upon probability and severity. The APTA standard emphasizes the use 
of system safety for operational systems after they have been 
completed and put into service, 

[[Page 67037]]
indicates that system safety is mostly concerned with operations and 
procedures, and implies that safety can be `audited' into a system. 
While the APTA Manual does mention that system safety is needed 
during the design phases, the emphasis is clearly on later phases * 
* * . Another potential concern with the APTA Manual is that it 
describes the audit process in terms of determining whether or not 
the transit agency is following its system safety program, but is 
silent on the issue of determining whether or not that program can 
be expected to accomplish its goals. While this is appropriate for 
an organization such as APTA, it may not be appropriate for an 
Oversight Agency. It may be important for the Oversight Agency to 
review the Transit Agencies' plans with an eye toward trying to 
determine whether or not the plan is likely to result in an 
effective system safety program * * * .

    This commenter also noted that MIL-STD 882C incorporates changes 
concerning ``Software Safety.''
    FTA Response. This commenter has certainly made a convincing case 
for the adoption of MIL-STD 882B or 882C, and we emphasize that, 
although we have adopted the proposal as published in the NPRM, we have 
not precluded the use of either of those Military Standards. Instead, 
we have adopted the APTA Guidelines as a minimum standard the oversight 
agency must meet or exceed; because the APTA Guidelines were derived 
from MIL-STD 882B, an oversight agency that bases its system safety 
program standard on either MIL-STD 882B or 882C should meet or exceed 
the requirements of the APTA Guidelines. Moreover, by adopting the APTA 
Guidelines as a minimum standard, we accomplish two objectives: 
establishing a nation-wide baseline standard and giving a State more 
flexibility and control in developing its own program.
    We do, in fact, urge the oversight agency to assess the APTA 
Guidelines in relation to MIL-STD 882B or 882C and decide which one 
best addresses its needs. We believe that an oversight agency that uses 
either MIL-STD 882B or 882C as a basis for its system safety program 
standard is well served, and we urge an oversight agency to at least 
consider those Military Standards in developing its own oversight 
program.
    Although we have not mandated the use of MIL-STD 882B or 882C, we 
have addressed one of the concerns of this commenter, by adding a 
provision in the rule to require the oversight agency to determine the 
efficacy of the transit agency's system safety program plan and require 
the transit agency to update it, if necessary.
    This commenter also commented that the MIL-STD 882C's section on 
``Software Safety'' is ``of critical importance to modern transit 
systems''; we recommend that both the oversight agency and the transit 
agency assess whether that section meets the safety needs of the ``rail 
fixed guideway system.''

C. System Safety Program Plan--the Six Factors.

    As mentioned above, under the NPRM the transit agency was to 
develop a system safety program plan that complied with the oversight 
agency's system safety program standard. In the preamble to the NPRM, 
we suggested that the system safety program plan should: (1) be 
endorsed by top management; (2) establish the safety goals and 
objectives of the transit agency; (3) identify safety issues; (4) 
require cooperation within the transit agency to address the identified 
safety issues; (5) recognize that achieving safety goals and objectives 
may require the involvement of entities other than the transit agency; 
and (6) provide a schedule for the implementation and revision of the 
system safety program plan. We then asked for comment on whether we 
should require these six factors in the final rule.
    Only seven commenters responded to this issue, and none of them 
opposed the general concept of the six factors. Several of the 
commenters noted, however, that all six factors are included in the 
APTA Guidelines, making them unnecessary if FTA incorporates the APTA 
Guidelines into the final rule.-
    -FTA Response. Since the six factors are included in the APTA 
Guidelines, which we have incorporated by reference into the final 
rule, the oversight agency must require the transit agency to address 
all six factors in its system safety program plan.

D. Planning, Design, and Construction.

    In the preamble to the NPRM, we noted that section 5330 may be read

    To apply only to the operation of rail fixed guideway systems, 
which would lead to the conclusion that the NPRM covers only those 
rail fixed guideway systems already in existence, or other systems 
only when they commence operations. On the other hand, if we were to 
interpret section [5330] to apply during the planning, design, and 
construction phases of a system, we would then have to decide when 
the State would be required to comply with this proposed rule. This 
would be especially difficult for those States where systems are in 
the planning stage, which can be a lengthy process, and it would be 
difficult to specify at what point the oversight agency would have 
to be established.

    Of the commenters that responded to this issue, only a few favored 
covering the pre-operational phases of the rail fixed guideway system's 
life cycle. One of these commenters stated that ``[t]o ensure that the 
design of facilities and systems results in optimal safety, the system 
safety approach has been shown to be highly effective and cost 
efficient.''
    The vast majority of the commenters were against covering the 
planning, design, and construction phases in this rule, stating in 
effect, that other mechanisms, i.e., FTA's Program Management Oversight 
(PMO) process and the construction contract itself can ensure that 
safety is planned, designed, and constructed into new rail fixed 
guideway systems.
    FTA Response. Although we agree that a system safety program plan 
should cover the planning, design, and construction of a ``rail fixed 
guideway system,'' the language of section 5330 leads us to conclude 
that it covers only operating systems or systems about to commence 
operations. Section 5330 directs a State to establish and carry out a 
``safety program plan for each [rail] fixed guideway mass 
transportation system in the State,'' never mentioning the planning, 
design, and construction phases of a system's life cycle. Moreover, 
because of the lengthy planning, design, and construction phases of a 
system's life cycle, we believe that it is impractical, especially for 
a State planning its first ``rail fixed guideway system,'' to require 
that a State create a bureaucracy years before a single passenger is 
served, when there are other mechanisms available to ensure that safety 
is designed, planned, and constructed into a new ``rail fixed guideway 
system.'' This does not mean, however, that a State is precluded from 
creating an oversight agency that oversees the planning, design, and 
construction of a ``rail fixed guideway system.'' On the contrary, we 
encourage the States to do so, although we do not, under this rule, 
require it. Also, we encourage the oversight agencies to work with PMOs 
to ensure that safety is designed, planned, and constructed into new 
``rail fixed guideway systems.''

E. Accountability Factor.

    While drafting the NPRM, we were concerned that the development of 
a State Safety Oversight Program would not be complete without some 
mechanism to ensure transit agencies' commitment to safety. To 
``institutionalize'' this commitment and to meet the requirements of 
section 5330, we developed the ``accountability factor,'' in which the 
oversight agency would require a transit agency to 

[[Page 67038]]
identify tasks critical to safety and the persons responsible for 
performing those tasks. This concept was derived from section 207 of 
MIL-STD 882B, which concerns the ``identification of safety-critical 
equipment and procedures.'' The ``accountability factor'' was intended 
to help the transit agency identify and correct problems.
    Most of the commenters on this issue opposed the inclusion of the 
``accountability factor'' in the rule because, in their opinion, it 
would not achieve its intended purpose of making systems safer. For 
instance, one commenter stated such a requirement would allow the 
oversight agency not just to oversee but to micromanage the transit 
agency; another claimed that it would become a ``paperwork'' exercise 
and actually hinder the development of safety practices and procedures. 
Yet another commenter stated that it would be used to ``fix'' blame. 
One commenter argued that the ``accountability factor'' was a 
``misapplication'' of section 207 of MIL-STD 882B, which, according to 
this commenter, was developed to verify compliance with safety 
equipment and procedures, an activity distinct from system safety 
program activities. Last, some commenters indicated that the 
``accountability factor'' was not necessary under the rule because a 
well-drafted system safety program plan incorporates accountability 
into it.
    Although the NTSB favored the inclusion of the ``accountability 
factor'' in the final rule, it did not elaborate on its reasoning.
    FTA Response. The final rule does not include the ``accountability 
factor'' because on balance, we have concluded that the oversight 
agency is best suited to meet the directives of section 5330(c)(1) to 
``establish[ ] * * * lines of authority [and] levels of responsibility 
and accountability * * *'' for the rail fixed guideway system. We note 
that the APTA Guidelines checklist numbers 1 through 5 stress the 
development of a concept similar to the proposed ``accountability 
factor.''

F. EPA and OSHA Requirements.

    We asked whether the system safety program plan should address 
matters covered by the Occupational Safety and Health Administration 
(OSHA) and the Environmental Protection Agency (EPA). Four argued that 
it should; three were opposed. Those in favor supported a 
``comprehensive approach'' to safety in which various safety issues or 
``disciplines'' are integrated for a total prevention effort. Those in 
opposition were concerned about creating overlapping jurisdiction 
between the oversight agency and the State agency with authority to 
enforce the EPA and OSHA laws and regulations.
    FTA Response. By adopting the APTA Guidelines, which address OSHA 
and EPA matters in System Safety Checklist numbers 19 and 20, 
respectively, we have required that these matters be included in the 
system safety program plan. Although this allows the possibility of 
jurisdictional conflicts among State agencies, the benefits of the 
oversight agency's adopting a total approach to safety outweigh this 
possibility. Moreover, a State can plan to reduce or eliminate any 
duplicative jurisdiction between the oversight agency and any other 
State agency with jurisdiction over EPA and OSHA matters.-

G. Security.

    In the preamble to the NPRM, we asked whether the system safety 
program plan should address security matters, and if so, what 
specifically should be included. Many commenters responded to this 
question, most negatively; some contended that security matters should 
be handled by law enforcement personnel and not by transit safety 
professionals, others opined that requiring the system safety program 
plan to address security matters is outside the scope of section 5330, 
and others stated that whether transit security matters should be 
included in the system safety program plan should be decided by State 
and local transit officials and not mandated by the Federal government.
    More particularly, one commenter noted that ``security is a 
separate issue which requires separate treatment, separate techniques, 
separate concerns, and separate disciplines.'' This commenter 
continued:

    [A]lthough, many times the public may perceive their safety as 
being `freedom from assault or attack from other individuals', 
normally professionals in the industry define safety in association 
with unintentional events or conditions (accidents), whereas, 
security is defined as being associated with intentional acts 
(usually illegal acts). The causes and the control measures for 
these two situations (safety and security) are entirely different * 
* *. One good reason for keeping these separate is the different 
type of management required. Typically, effective management of 
security requires law enforcement type management philosophies, 
whereas effective management of safety requires entirely different 
(and sometimes opposite) kinds of thinking. Management of these two 
functions must be separated, because of the different skills, 
philosophies, management styles, and kinds of managers required.

    Other commenters noted another important difference between safety 
procedures and security measures: Safety procedures, policies, and 
processes can be made public and still be effective, whereas security 
measures, to be effective, must be kept confidential. Thus, these 
commenters reasoned, security measures should not be included in a 
publicly available document, such as a system safety program plan.
    The commenters in favor of requiring the system safety program plan 
to address security matters focused on the similarities between 
security measures and safety issues. Most notably, these commenters 
stated, safety and security procedures are both forms of risk 
management; ``[s]afety is the management of the risk to persons and 
property from accidental or negligent loss * *  [while] security is the 
management of the risk to persons and property from criminal acts.''
    Last, some commenters contended that emergency planning and 
response procedures were the same for both safety and security events. 
Four commenters recommended that FTA include security only when it 
relates to emergency planning and response.
    FTA Response. Because we agree with the commenter who noted that 
safety and security are both forms of risk management and because of 
recent terrorist acts, we have decided to require the inclusion of 
security considerations in the system safety program plan. In response 
to another commenter, however, we have added a provision to the rule 
that will allow the security portion of the system safety program plan 
to be barred from public disclosure.
    We disagree, however, with the argument that Congress did not 
intend section 5330 to include security. Section 5330(c)(1) states that 
``[a] State meets the requirement of this section if the State--
establishes and is carrying out a safety program plan for each [rail] 
fixed guideway mass transportation system in the State * * *'' 
[emphasis added]. According to Webster's Third New International 
Dictionary, ``safety'' means ``the condition of being safe; freedom 
from exposure to danger, exemption from hurt, injury, or loss,'' 
whereas ``security'' means ``the quality or state of being secure: as 
(a) freedom from danger: safety.'' It seems clear, therefore, that the 
meaning of safety encompasses the meaning of security. Moreover, 
according to the System Safety Glossary published in 1985, by the 
Transportation Safety Institute ``safety'' is defined as ``[a] 
reasonable degree of freedom from those conditions that can cause 
injury or death to personnel, damage to or loss of equipment or 

[[Page 67039]]
property; freedom from danger''; this would certainly cover intentional 
acts. Similarly, according to the Transit Security Program Planning 
Guide recently published by the FTA, ``security'' means ``freedom from 
intentional danger,'' while ``safety'' means ``freedom from danger.'' 
Therefore, section 5330 can be interpreted, and we do, to require the 
inclusion of security in the system safety program plan.
    Other commenters indicated that security should not be included in 
the system safety program plan because safety and security are as 
different from each other as apples from oranges. One transit agency 
presented safety and security as two different disciplines requiring 
two different approaches and two different kinds of trained personnel. 
Thus, this commenter reasoned, the system safety program plan should 
not address security matters. In our view, however, safety and security 
risks are interrelated, especially from the perspective of transit 
passengers. We agree with the commenter who wrote:

    [A]lthough the disciplines have been separated in their normal 
application, there is a trend for a united knowledge base of safety 
with security so that any type of hazard is examined for its 
implication as a security type of problem. As with other 
disciplines, safety and security requirements may be at odds 
requiring careful analysis of the potential hazards and threats 
against the transit system and the development of appropriate trade-
off studies. The Transit Safety Professional needs to have security 
analyses in the curriculum of study and certification to ensure 
awareness of the issues and concerns related to security. In 
addition, security systems themselves require safety analyses to 
ensure that they are properly covered.

    We also disagree with the commenter who recommended that only 
emergency response procedures be included in the system safety program 
plan. We note that the APTA Guidelines already contain a provision 
concerning emergency preparedness. While emergency preparedness is 
itself a valuable activity, it does not prevent either intentional or 
unintentional acts from occurring. An emergency preparedness plan is 
used to develop a response to an event, while the overall system safety 
program plan develops procedures to reduce the likelihood of either 
intentional or unintentional events from occurring.

H. Biennial Safety Reviews

    In the proposed rule, the oversight agency would comprehensively 
review, on-site, the rail fixed guideway system's safety practices 
every two years. Most commenters objected to this provision. Some 
maintained that a review every two years was unnecessary and 
burdensome; in support of their contention, they mentioned APTA's Rail 
Safety Audit Program, in which auditors employed by APTA review a rail 
fixed guideway system's safety practices every three years. They 
maintain that a three-year review schedule adequately addresses safety 
needs. One commenter indicated that APTA adopted a three-year schedule 
to give rail fixed guideway systems time to take corrective and other 
recommended actions. Another commenter, a State agency already 
overseeing rail fixed guideway systems, stated that it does not 
independently conduct on-site reviews, but instead observes the APTA 
auditors review a system; this commenter concluded that this approach 
works well for it and the rail fixed guideway systems under its 
jurisdiction. Some commenters urged us to specifically allow oversight 
agencies to use the APTA Rail Safety Audit Program.
    Other commenters favored a flexible approach, in which the 
oversight and transit agencies schedule reviews appropriate for the 
age, size, and complexity of the rail fixed guideway system. One 
commenter recommended that we specify the exact requirements of a 
safety review.
    FTA Response. Agreeing generally with the commenters, we have made 
the rule more flexible. For instance, the rule requires the oversight 
agency to review the transit agency's safety practices at least every 
three years instead of every two, as we had proposed. The oversight 
agency may conduct these reviews more frequently if it chooses. 
Moreover, the rule expressly allows the oversight agency to use a 
contractor to conduct the required review, which allows the oversight 
agency to use the APTA Rail Safety Audit Program or any other qualified 
contractor to conduct safety reviews.
    Although one commenter had urged us to define specifically the 
requirements of a safety review, we have declined to do so. Instead, 
the oversight agency should determine for itself, based on the age, 
size, and complexity of the individual rail fixed guideway system 
within its jurisdiction, the exact extent of the review; however, it 
must be comprehensive, i.e., cover all matters included in the transit 
agency's system safety program plan.
    The process used by the California Public Utilities Commission 
(CPUC) illustrates how the rule can be flexible. Instead of using its 
staff to conduct comprehensive safety reviews, CPUC staff accompany and 
observe APTA auditors who perform a comprehensive safety audit. This 
system allows CPUC personnel to cover the daily operation and 
maintenance activities of the rail fixed guideway system and conduct 
in-depth reviews of particular activities on an ``apparent need'' 
basis. For instance, CPUC's staff conducted in-depth reviews of track 
maintenance practices at five different rail fixed guideway systems. In 
short, an oversight agency could conduct its own safety reviews, 
contract them out completely, or adopt an approach similar to CPUC's, 
in which both a comprehensive safety review and an in-depth review of a 
particular system component is conducted by another contractor or 
oversight agency personnel.
    One commenter recommended that the extent and frequency of safety 
reviews depends on the particular phase of the rail fixed guideway 
system's lifecycle. This commenter recommended that a safety audit be 
performed during the preliminary engineering phase to assure properly 
defined criteria, during the final design stage to assure that the 
criteria has been included in the specifications, during pre-revenue 
testing to assure the systems have been properly installed and the 
system tested and safety certified, then every two to three years when 
the system is operational, and more frequently if there are serious 
problems. We agree with this commenter, although we have not adopted 
his suggestions formally in the rule. Instead, we strongly urge 
oversight agencies to consider these kinds of factors when establishing 
a safety review process.

I. Safety Audits

    FTA proposed to require the transit agency to conduct a ``safety 
audit,'' a ``methodical, ongoing, internal examination of a transit 
agency's safety practices to determine whether they comply with the 
policies and procedures required under the transit agency's system 
safety program plan.'' The results of these safety audits were to be 
compiled every six months by the transit agency into a report to the 
oversight agency, which would review those reports as part of its 
monitoring function required under section 5330.
    Nineteen commenters responded to this proposed safety audit 
process, with most of them objecting that such audits amount to a 
``paperwork exercise'' that could be detrimental to the safe operation 
of a rail fixed guideway system. They argued that the ``safety audits'' 
and the ``biennial reviews'' were redundant and that auditing 
continuously was not necessary to 

[[Page 67040]]
ensure the safe operation of a rail fixed guideway system. Some of 
these commenters recommended that FTA adopt a system of random periodic 
checks similar to the APTA review process; others recommended that the 
oversight agency set the timeframe for safety audits by the transit 
agency. Still others recommended that the frequency of safety audits be 
linked to the age, type, and speed of the system, maintaining that 
different rail fixed guideway systems have different safety auditing 
needs.
    FTA Response. FTA had intended the ``safety audit'' process to be 
used in addition to the ``Internal Safety Audit Process'' in checklist 
number 9 of the APTA Guidelines, which apparently confused the 
commenters. To clarify our intent, we have withdrawn the proposed 
definition, ``safety audit,'' and now require the oversight agency to 
develop a process that complies with APTA's ``Internal Safety Audit 
Process.'' Although we make this change, we nevertheless encourage 
transit and oversight agencies to view safety and the safety auditing 
process as a routine, daily matter. As noted in the APTA Guidelines, 
``[t]he Internal Safety Audit Process * * * requires constant attention 
and activity.''
    To ensure that both transit and oversight agencies view the safety 
auditing process as a ``constant activity,'' we have retained the 
requirement for the transit agency to complete and submit safety 
auditing reports to the oversight agency, a requirement in the APTA 
Guidelines, which states that audit reports are to be used as a 
``management tool.'' FTA had proposed semi-annual reports, which most 
commenters objected to as a ``paperwork exercise.'' In response, we 
have changed the reporting time period from semi-annually to annually 
to reduce the paperwork burden.

J. Accident

    To focus oversight agency accident investigations on serious events 
that may show a systemic safety problem, FTA proposed to define 
``accident'' as ``any event involving the operation of a rail fixed 
guideway system resulting in: (1) [D]eath directly related to the 
event; (2) [i]njury requiring hospitalization within twenty-four hours 
of the event; (3) [a] collision, derailment, or fire causing property 
damage in excess of $25,000; or (4) [a]n emergency evacuation.'' The 
vast majority of commenters opposed this definition and recommended 
numerous ways to change it.--
    For instance, several commenters requested that FTA limit the 
definition to those events involving revenue service operations, thus 
excluding incidents occurring in rail yards. According to the 
commenters, these kinds of incidents are covered by OSHA rules; 
eliminating them from the rule, these commenters reasoned, would avoid 
duplicative and perhaps conflicting jurisdiction between the oversight 
agency and the State and Federal agencies responsible for enforcing 
OSHA regulations. --
    Some commenters recommended that any incident involving trespassers 
or employees be excluded from the definition. These commenters 
maintained that events involving trespassers would not necessarily 
indicate a systemic safety problem; in other words, it is impossible to 
protect against trespassers. Several commenters maintained that events 
involving employees should not be covered to avoid duplicative 
jurisdiction between the oversight agency and the State and Federal 
agencies regulating the workplace. --
    Other commenters recommended that FTA exclude certain kinds of 
personal injuries from the definition, stating that it is difficult, if 
not impossible, for a transit agency to monitor every slip, trip, or 
fall that occurs at a rail fixed guideway system. They further maintain 
that these kinds of injuries are not sufficiently serious to trigger an 
investigation by the oversight agency. --
    Still other commenters noted that, in most cases, a transit agency 
would be unable to determine whether a person was hospitalized as a 
result of the injury. Transit agency personnel operating in large 
metropolitan areas would be forced to contact dozens of hospitals, a 
task that would strain its resources; moreover, many hospitals do not 
release this kind of information to the public. --
    Several of these commenters recommended that FTA define accident, 
in part, as any injury in which a person is treated at the scene or is 
transported from the scene by medical personnel. This change would ease 
the administrative burden on the rail fixed guideway system, these 
commenters contended. --
    Many commenters strongly objected to the $25,000 property damage 
threshold, with most of them indicating that property damage estimates 
are subjective and become obsolete over time; others contended that 
$25,000 was too low. Some recommended that FTA annually adjust the 
dollar amount for inflation, and others recommended that the dollar 
amount be set by agreement between the oversight and transit agencies. 
--
    Several commenters recommended that FTA define an emergency 
evacuation, with one proposing that it be limited to circumstances in 
which emergency doors and exit routes are used, thus excluding 
instances when passengers are asked to leave a train disabled in a 
station. --
    FTA Response. In light of the comments, FTA has made several 
changes to the definition of accident. For instance, we have limited 
the definition to only those events that occur during the revenue 
service operation of the rail fixed guideway system, which eliminates 
from the rule any injuries or deaths to workers in rail yards. We made 
this change, not because these are unimportant events, but to avoid 
overlapping jurisdiction among State agencies. We do, however, 
encourage the oversight agency to establish a relationship with the 
State agency having jurisdiction over these matters and share 
information, thus making the workplace safer for rail fixed guideway 
system employees. --
    We disagree with commenters asking us to exclude incidents 
involving trespassers from the rule. Although we sympathize with the 
perspective of transit agencies, we believe that any death or injury 
requiring immediate medical treatment away from the scene of the event, 
which occurs while the rail fixed guideway system is in revenue 
service, should be investigated by the oversight agency. --
    We agree with those commenters who objected to the hospitalization 
requirement and have changed the rule to state that an accident has 
occurred if a person has been injured and ``immediately receives 
medical treatment away from the scene of the accident.'' This language 
is used in FTA's drug and alcohol rules, as well. --
    Although several commenters asked us to remove property damage 
dollar thresholds, we did not do so. Instead, we have raised the dollar 
threshold to $100,000, which should reduce the number of accidents 
involving property damage. --
    Last, we have removed the portion of the definition concerning 
emergency evacuations. In many instances, a serious event involving the 
evacuation of a mass transit vehicle also will involve a death, an 
injury requiring immediate medical treatment away from the scene, or 
more than $100,000 in property damage, any of which, by themselves, 
will trigger an oversight agency investigation. Hence, by making this 
change we have focused an oversight agency's resources on serious 
events involving the emergency evacuation of a mass transit vehicle. --

[[Page 67041]]

K. Hazardous Condition

    FTA proposed to define a ``hazardous condition'' as ``any condition 
which may endanger human life or property,'' and ``unacceptable 
hazardous condition'' as ``a hazardous condition determined to be an 
unacceptable hazardous condition using the hazard resolution matrix of 
the `Rail Safety Audit Manual' published by APTA.'' FTA further 
proposed to require the oversight agency to investigate only 
unacceptable hazardous conditions, whereas the transit agency was to 
correct or eliminate any hazardous condition. --
    Several commenters were confused by these two definitions and one 
maintained that the definitions were understandable only in conjunction 
with the APTA Guidelines checklist number 7. --
    Another commenter argued that FTA should not adopt the APTA 
Guidelines' hazard classification process. This commenter stated that

    [T]he Hazard Resolution Matrix contained in the APTA guidelines 
is an inadequate indicator of when an investigation should be 
triggered. As an example, it is well-known that currently-operating 
modern escalators frequently cause minor injuries to patrons 
(particularly children). Following the APTA guidelines, one would 
categorize the hazard associated with an operating escalator in 
Category III (marginal-minor injury). Furthermore, since escalators 
are usually operating more often than not, the hazard exists all the 
time the escalator is operating. Again following the APTA 
guidelines, the hazard probability would be in Category A--frequent-
likely to occur frequently (individual); continuously experienced 
(fleet/inventory). Under the Hazard Resolution Matrix of the APTA 
guidelines, this would be a Category III-A, which would be labeled 
`unacceptable.' Following the reasoning proposed in the NPRM, all 
escalators would continuously have to be corrected or eliminated by 
all transit agencies, and all escalator accidents investigated by 
the oversight agency. Since escalators cannot be corrected (at least 
so far no one has been successful in creating an escalator that 
doesn't have these hazards), all escalators would have to be 
eliminated from transit properties.

    --In contrast, another commenter supported the use of the APTA 
Guidelines Hazard Resolution Matrix because, according to this 
commenter, it has been adopted and practiced by more than 95 percent of 
the affected systems. --
    Several commenters objected to FTA's proposal to require transit 
agencies to ``correct or eliminate any hazardous condition,'' which 
they characterize as an ``impossible chore.'' In the words of one 
commenter, ``[i]f every transit agency was required to eliminate every 
condition that may cause minor injury * * *, all of its resources would 
be extended in attempting to eliminate these potential minor threats, 
with little resources left to run the transit system.'' One commenter 
recognized this problem also, and suggested that FTA require that 
hazardous conditions be corrected, eliminated, or controlled. One 
commenter maintained that the oversight agency should not be required 
to investigate any hazardous condition. --
    FTA Response. Although FTA has made some changes to the rule, we 
have not changed the definitions. The terms ``hazardous condition'' and 
``unacceptable hazardous condition'' must be read in conjunction with 
the APTA Guidelines, particularly with the hazard resolution process, 
checklist number 7. To identify hazards, FTA has mandated the use of 
this particular process by transit agencies, even if a transit agency 
has used MIL-STD 882B or 882C to develop its system safety program 
plan. We have mandated this process, despite some commenters who 
opposed its adoption, because it is widely used and accepted throughout 
the transit industry. --
    Also, the rule requires the oversight agency to investigate 
unacceptable hazardous conditions as well as accidents. Although at 
least one commenter opposed requiring the oversight agency to 
investigate unacceptable hazardous conditions, section 5330(c)(2)(B) 
requires the oversight agency to ``investigate hazardous conditions.'' 
To focus State resources on serious safety issues, FTA has interpreted 
section 5330 narrowly, thus requiring an oversight agency to 
investigate only ``unacceptable hazardous conditions.'' --
    We agree with the commenters who maintained that not all hazardous 
conditions can be corrected or eliminated. Risk cannot be taken out of 
life. Therefore, we require a transit agency to correct or eliminate 
any hazardous condition if possible, and if not, the transit agency 
must either minimize or control it. For instance, one commenter noted 
that escalators are hazardous conditions, which can be corrected only 
by eliminating the escalator. Under this rule, the transit agency is 
not required to eliminate escalators, but it is required to minimize or 
control the risks associated with escalators. A transit agency can take 
one or more of several actions to minimize these risks, such as 
installing an emergency shut-off switch, retrofitting the escalator 
with additional safety devices, posting instructions on how to avoid 
accidents on escalators, or developing educational programs for 
children on how to properly use escalators. Many transit agencies have 
addressed the safety issues of escalators, but we urge them to consider 
other measures to make escalators safer, especially for children. --

L. Investigations

    FTA proposed to require the oversight agency to develop its own 
investigation procedures and to investigate accidents, except those 
being investigated by the National Transportation Safety Board (NTSB), 
and all unacceptable hazardous conditions. --
    Twenty-seven commenters responded to issues arising from this 
proposal. Although one commenter stressed that the oversight agency 
should not conduct any investigations, most commenters focused on the 
oversight agency's role in investigating an ``accident'' or 
``unacceptable hazardous condition.'' The vast majority of these 
commenters maintained that the oversight agency should not conduct its 
own independent investigation, but should focus on the process used by 
the transit agency in conducting investigations. These commenters noted 
that the transit agency must be responsible for operating its own 
system; an independent investigation by the oversight agency may 
implicitly usurp the authority of the transit agency over safety and 
other operational matters, according to these commenters. Others 
insisted that although the oversight agency's primary responsibility 
was to ensure that the transit agency properly conducted 
investigations, it should nevertheless be authorized to investigate 
extraordinary events. One commenter maintained that the oversight 
agency should not investigate an ``accident'' or ``unacceptable 
hazardous condition'' unless the transit agency's investigation is 
inadequate. --
    FTA Response. Despite the opinion of at least one commenter, the 
oversight agency is required under section 5330 to investigate 
accidents and hazardous conditions. As discussed above, we proposed to 
define ``accident'' in a manner to focus the oversight agency's 
investigation on serious events of a systemic nature. Similarly, 
instead of proposing to require the oversight agency to investigate all 
``hazardous conditions,'' we proposed that it investigate only 
``unacceptable hazardous conditions.'' We have not changed this basic 
scheme. -
    Moreover, we believe that our proposal was misunderstood, and we 
seek now to clarify the role of the oversight agency in conducting 
investigations. The oversight agency is not only responsible for 
developing its own investigatory procedures, it is 

[[Page 67042]]
responsible for determining how it will investigate. An oversight 
agency may contract for this service; some may elect to use APTA's 
Panel of Inquiry, others may choose to use other experts. The oversight 
agency may allow the transit agency to conduct some or all 
investigations. The oversight agency may choose to investigate all 
``accidents'' and ``unacceptable hazardous conditions'' or investigate 
some and contract for the investigation of others. The rule is flexible 
in this regard, just as we had proposed in the NPRM. Although the 
examples set forth above are not exhaustive, ultimately, unless the 
NTSB is conducting an investigation, either the oversight agency or an 
entity acting on its behalf must investigate ``accidents'' and 
``unacceptable hazardous conditions.''
    We do, however, encourage the oversight agency to either directly 
or by contract conduct independent investigations. Moreover, we 
disagree strongly with commenters who maintain that the oversight 
agency should focus on the process used by the transit agency to 
conduct investigations. The purpose of this rule is to ensure that a 
rail fixed guideway system operates safely and that the systemic causes 
of ``accidents'' and ``unacceptable hazardous conditions'' are 
addressed; focusing on process in this context, therefore, is 
misplaced. Rather, the focus of the oversight agency should be to 
assist the transit agency in preventing ``accidents'' and ``hazardous 
conditions.''

M. Confidentiality of Oversight Agency Investigation Reports

    Several commenters to the ANPRM requested that we include a 
provision in the rule barring the discovery or the use in evidence of 
any investigative report compiled as a result of this rule. In the 
NPRM, we noted that section 5330 did not specifically address this 
matter, and hence, we doubted that we could make such a mandate. 
Nevertheless, we asked whether we should adopt a provision which would 
require that the oversight agency investigation reports be kept 
confidential.
    Almost every commenter favored the adoption of such a provision. 
One commenter wrote:

    [T]he investigations at rail fixed guideway systems are often 
confidential * * * and thus they are not subject to discovery or 
public disclosure. If the information gathered by the states becomes 
a public document, then the FTA will be building into this 
regulation a serious conflict between the state agencies and the 
[rail] fixed guideway systems. In order to ensure better gathering 
of information by the states, and to maintain unreserved cooperation 
with the local transit systems, it is strongly recommended that the 
information gathered by the states must be protected from 
disclosure.

    Another commenter wrote ``[w]e submit that a discovery exemption is 
critical to the efficient operation of the oversight agency, as it 
would protect the agency's limited staff and resources from the 
inundation of subpoenas and other discovery requests.'' Yet another 
commenter wrote that

    [The rail fixed guideway system] believes that FTA should 
provide protection for Attorney-Client privilege under the proposed 
rule to include investigative materials and materials pertaining to 
`hazardous condition' discussions or findings by the State oversight 
agency. If FTA does not have the statutory authority to provide such 
protection, it should require the States to do so. The loss of [the 
rail fixed guideway system's] Attorney-Client privilege over such 
documents would have a serious negative economic impact on third 
party litigation. -

    The remaining commenters maintained that although the issue is an 
important one, FTA should remain silent on it.
    FTA Response. FTA agrees strongly that the oversight agency 
investigation reports should be kept confidential; thus, we have added 
a provision to the rule permitting a State to require that these 
reports be kept confidential, and we encourage strongly that the State 
authorize the oversight agency to do so.

N. Certified Transit Safety Professional.

    FTA proposed to require the use of Certified Transit Safety 
Professionals primarily in response to comments to the ANPRM and 
related public hearings, which reflected concern throughout the transit 
industry about the expertise necessary to carry out an effective 
oversight program. These commenters maintained that an effective 
oversight program could not be achieved without the use of certified 
safety professionals.
    In response to these comments, the NPRM proposed to require both 
the oversight agency and the transit agency to use the services of a 
Certified Transit Safety Professional, either from within their own 
organizations or under contract, to comply with the requirements of the 
rule. A Certified Transit Safety Professional was defined as one who 
had ``successfully completed the Safety Professional Certification 
requirements established by the Board of Certified Safety 
Professionals, * * * or, a registered professional engineer in system 
safety.'' FTA also sought comment on whether it should require a 
Certified Transit Safety Professional to have a minimum number of years 
of experience in transit safety.
    Forty-seven comments were received on this matter, which was among 
the most controversial proposals in the NPRM. Although most commenters 
opposed the inclusion of this concept in the final rule, some 
recommended changes to the definition of certified transit safety 
professional. For instance, several commenters noted that organizations 
other than the Board of Certified Safety Professionals certify safety 
professionals, such as the World Safety Organization or the Federal 
Railroad Administration. Others recommended that the rule recognize 
experience equivalent to the training required by the Board of Safety 
Professionals. One commenter recommended that, in addition to 
certification, a Certified Transit Safety Professional be required to 
have a minimum number of years of experience.
    Several commenters opposing this proposal maintained that the Board 
of Certified Safety Professionals does not certify professionals in 
transit safety. The Board of Safety Professionals, however, did not 
oppose this proposal. Instead, they recommended that FTA require the 
certified transit safety professional's certification to be current. 
Several commenters noted that States do not certify professional 
engineers in system safety, although one commenter noted that the Board 
of Certified Safety Professionals 1993-1994 Directory listed 200 Safety 
Professionals certified in system safety.
    One commenter who opposed this proposal nevertheless recommended 
that FTA require safety professionals to complete FTA's Rail System 
Safety Course. Another commenter recommended that a peer group develop 
guidelines concerning the experience and training for transit safety 
professionals, which a transit agency could adopt. Other commenters 
objected to the proposal stating that such a training requirement would 
be too expensive.-
    FTA Response. In response to the overwhelming comments opposed to 
this proposal, FTA has removed the Certified Transit Safety 
Professional provision from the rule. We do, however, urge the States 
to develop their own criteria to ensure that both the transit and 
oversight agencies are using qualified professionals under this rule to 
ensure the safe operation of rail fixed guideway systems. In this 
regard, we recommend that safety professionals, at a minimum, have 
transit safety experience and complete the courses at the 
Transportation Safety Institute (TSI) sponsored by FTA applicable to 
rail transit systems. TSI offers the following 

[[Page 67043]]
courses: System Safety, Accident Investigation, System Security, and 
Emergency Management. FTA has provided training assistance to the 
transit industry in safety since 1976, and this program will be a major 
contribution to State Safety Oversight. Moreover, we urge States to 
require safety employees to be certified by the Board of Certified 
Safety Professionals, the World Safety Organization, or other 
comparable organization; safety professionals should possess a certain 
level of experience as well.

III. Section-by-Section Analysis

    Please note that issues addressed in the Section-by-Section 
Analysis may also be discussed in the Discussion of the Comments.

Subpart A--General Provisions

A. Purpose. (Sec. 659.1)

    This section explains that FTA is implementing the requirements of 
49 U.S.C. Sec. 5330, which requires a State to establish an agency to 
oversee the safety of rail fixed guideway systems. This rule directs 
the oversight agency to develop a system safety program standard and to 
require the transit agency to develop a system safety program plan that 
complies with the system safety program standard. In addition, the 
oversight agency must conduct safety reviews and investigations and 
ensure that the transit agency has developed and implemented a system 
safety program plan that complies with this rule and is effective.

B. Scope. (Sec. 659.3)

    This section explains that the rule applies only to States with 
rail fixed guideway systems that are not regulated by the FRA.

C. Definitions. (Sec. 659.5)

1. Accident
    An accident triggers an investigation by the oversight agency or 
its agent, and is defined as an event that occurs when the rail fixed 
guideway system is in revenue service and an individual dies or is 
injured and immediately receives medical treatment away from the scene; 
or a collision, derailment, or fire results in $100,000 in property 
damage.
    Injuries, deaths, or property damage that occur when the rail fixed 
guideway system is not in revenue service are excluded from the 
definition. Hence, under the rule, the oversight agency or its agent is 
not required to investigate these events, but may do so under its own 
authority.
    An ``individual'' means anyone, including a passenger, trespasser, 
employee, or other bystander.
2. APTA Guidelines
    The ``APTA Guidelines'' means the ``Manual for the Development of 
Rail Transit System Safety Program Plans'' published by the American 
Public Transit Association on August 20, 1991.
3. Contractor
    A ``contractor'' means an entity that performs tasks required under 
this part on behalf of the oversight or transit agency. A transit 
agency may not be a contractor for an oversight agency.
4. FTA
    The ``FTA'' means the Federal Transit Administration, an agency of 
the United States Department of Transportation.
5. Hazardous Condition
    ``Hazardous Condition'' means a condition that may endanger human 
life or property. It encompasses ``unacceptable hazardous conditions,'' 
defined below.
6. Investigation
    ``Investigation'' means the process used to determine the probable 
cause of the ``accident'' or ``unacceptable hazardous condition.'' It 
includes a review by the oversight agency of the transit agency's 
determination of the probable cause of an ``accident'' or 
``unacceptable hazardous condition.''
    An ``investigation'' may be conducted by the oversight agency 
itself or by some other entity acting on its behalf, or the 
investigation may be conducted by the transit agency. If the oversight 
agency chooses the latter method it must, at a minimum, review and 
approve the transit agency's findings of probable cause of the 
``accident'' or ``unacceptable hazardous condition.''
7. Oversight Agency
    The agency designated by the State or affected States to implement 
the requirements of this part.
8. Rail Fixed Guideway System
    ``Rail fixed guideway system'' means any light, heavy, or rapid 
rail system, monorail, inclined plane, funicular, trolley, or automated 
guideway that is included in FTA's calculation of fixed guideway route 
miles or receives funding under FTA's formula program for urbanized 
areas and is not regulated by the Federal Railroad Administration.
9. Safety
    ``Safety'' means freedom from danger; it includes freedom from 
unintentional as well as intentional acts.
10. Safety Review
    ``Safety review'' means a comprehensive review by the oversight 
agency of the transit agency's safety practices. It includes an 
analysis by the oversight agency of the efficacy of the transit 
agency's system safety program plan and a determination of whether the 
system safety program plan must be modified, changed, or updated. The 
safety review must be conducted at the rail fixed guideway system.
11. Security
    ``Security'' means freedom from intentional danger. Intentional 
danger includes criminal acts such as muggings, rapes, robberies, or 
terrorists acts, such as bombings, releases of poisonous gases, or 
kidnappings.
12. System Safety Program Plan
    ``System safety program plan'' means the written document developed 
by the transit agency in accordance with the requirements of the 
oversight agency's system safety program standard.
13. System Safety Program Standard
    ``System safety program standard'' means the document developed by 
the oversight agency that complies, at a minimum, with the APTA 
Guidelines and requires the rail fixed guideway system to address the 
personal security of its passengers and employees. It may cont

FR Doc. 95-31159 Rail Fixed Guideway Systems; State Safety Oversight

ain more 
requirements than the APTA Guidelines. The transit agency must comply 
with this document when it develops its system safety program plan.
14. Transit Agency
    ``Transit agency'' means the entity operating the rail fixed 
guideway system.
15. Unacceptable Hazardous Condition
    An ``unacceptable hazardous condition'' is a particular kind of 
hazardous condition determined by using the Hazard Resolution Matrix 
contained in the APTA Guidelines at checklist number 7.
D. Withholding of Funds for Non-Compliance. (Sec. 659.7)
    This section is taken from section 5330, which authorizes FTA to 
withhold Federal funding from a State or an urbanized area in the 
State. In particular, FTA is authorized to withhold up to five percent 
of an affected urbanized area's apportionment if the State, in the 
opinion of FTA, is not in compliance or making adequate efforts to 
comply with the rule. The sanctions for non-compliance do not begin 
until September 30, 1997. In the event of non-compliance with the rule, 

[[Page 67044]]

the Administrator may withhold funds until the State comes into 
compliance.

Subpart B--The Role of the State

A. Designation of Oversight Agency. (Sec. 659.21)

    This section directs the State to select an agency to oversee the 
rail fixed guideway system and prohibits the State from selecting the 
transit agency to perform this role. Paragraph (a) concerns rail fixed 
guideway systems that operate within only one State. In these 
instances, the State must designate a State agency to implement the 
rule. If the State chooses, this paragraph allows the State to 
designate an oversight agency for each rail fixed guideway system 
within the State. For instance, a State may wish to designate one 
agency for an historical trolley system and another for the remaining 
systems within the State. The rule is flexible in this regard and is 
written to accommodate those States that have established an oversight 
program under State law.
    For those States that have not established an oversight program and 
have more than one rail fixed guideway system within the State, we 
recommend that the State designate only one agency to implement the 
rule. This would save resources and ensure the consistent application 
of the rule.
    Paragraph (b) is directed to States that jointly operate a multi-
State rail fixed guideway system. Although we recommend that the 
affected States designate a single oversight agency, this paragraph 
allows them to designate more than one agency, other than the transit 
agency, to implement the rule. Moreover, this paragraph recognizes that 
a single oversight agency designated by the affected States will not be 
an agency of any particular State.

B. Confidential Accident Reports. (Sec. 659.23)

    This section permits the State to require the oversight agency to 
keep investigation reports confidential in civil litigation.

Subpart C--The Oversight Agency's Role

A. The System Safety Program Standard. (Sec. 659.31)

    This section directs the oversight agency to develop a system 
safety program standard that complies, at a minimum, with the American 
Public Transit Association's ``Manual for the Development of Rail 
Transit System Safety Program Plans'' (APTA Guidelines) available from 
the American Public Transit Association, 1201 New York Avenue, N.W., 
Washington, D.C. 20005-3917 or Office of Safety and Security, Federal 
Transit Administration, 400 Seventh Street, S.W., Washington, D.C. 
20590, and requires the transit agency to address the personal security 
of its passengers and employees.
    As discussed above, because the APTA Guidelines were derived from 
MIL-STD 882B, we believe that existing oversight agencies that have 
used MIL-STD 882B or its successor MIL-STD 882C to create their 
oversight programs should meet, if not exceed, the APTA Guidelines, 
although we recommend that these existing oversight agencies review 
their programs in this regard.
    This section further directs the oversight agency to develop a 
standard that would require the transit agency to address the personal 
security of its passengers and employees. In this regard, FTA has 
neither developed specifications nor adopted a standard for the 
oversight agency to follow. Instead, we have published, independently, 
two ``how to'' documents to be used by both the oversight and transit 
agencies in developing security standards and procedures. These 
documents, ``Transit Security Procedures Guide'' and ``Transit System 
Security Program Planning Guide,'' are available free of charge from 
the Office of Safety and Security, Federal Transit Administration, at 
the address noted above. Although the use of these documents is not 
mandated under the rule, we recommend strongly that every affected 
State and transit agency obtain copies and review them. As noted above, 
FTA also offers several courses on security through TSI. Moreover, we 
suggest that the oversight agency require the transit agency to address 
such criminal acts as terrorist activities and ``street crime'' such as 
muggings, rapes, drug dealings, etc.
    This section also allows the oversight agency to create a program 
that is more stringent than that required under the APTA Guidelines, 
although we urge those agencies not to adopt FRA-type regulations.

B. System Safety Program Plans. (Sec. 659.33)

    This section establishes January 1, 1997, as the deadline for the 
implementation of the system safety program plan and requires the 
oversight agency to have initially reviewed and approved it before that 
date. It further establishes January 1, 1998, as the implementation 
date for the security provisions of the system safety program plan. It 
also requires the oversight agency to direct the transit agency to 
update the system safety program plan as necessary. The oversight 
agency may decide that it is necessary for a system safety program plan 
to be updated at certain intervals, or it may make a determination 
based on accident statistics or results from safety audits or reviews, 
for example. Should the oversight agency make such a determination, 
this section directs it to again review and approve the transit 
agency's updated system safety program plan.
    This section allows the oversight agency to determine whether the 
security provisions of the system safety program plan should be 
publicly available. FTA recommends strongly that the oversight agency 
prohibit the transit agency from publicly disclosing the security 
portions of the system safety program plan under any circumstance.

C. Transit Agency Annual Audit Reports. (Sec. 659.35)

    Checklist number 9 of the APTA Guidelines requires the transit 
agency to draft a report summarizing the findings of its internal 
safety audit. This section of the rule requires the annual submission 
of that report to the oversight agency for its review.

D. Safety Reviews. (Sec. 659.37)

    At least every three years, the oversight agency must conduct an 
on-site safety review of the transit agency's implementation of its 
system safety program plan. After this review has been completed, the 
oversight agency must issue a report detailing its findings and 
recommendations, its analysis of the system safety program plan, and 
its determination whether the safety program plan should be updated or 
changed.

E. Transit Agency Report on Accidents and Unacceptable Hazardous 
Conditions. (Sec. 659.39)

    To investigate ``accidents'' and ``unacceptable hazardous 
conditions'' as required by section 5330, the oversight agency must 
know about them. This section directs the oversight agency to require 
the transit agency to report ``accidents'' and ``unacceptable hazardous 
conditions'' within the time specified by the oversight agency.

F. Investigations. (Sec. 659.41)

    As discussed above in the Discussion of the Comments, the oversight 
agency is not required to conduct the investigation itself, but may do 
so through another entity such as a 

[[Page 67045]]
contractor or even the transit agency. The oversight agency, however, 
must decide how it is going to conduct an investigation and establish 
the procedures it or the entity acting on its behalf will use.
    There are numerous ways the oversight agency may comply with this 
requirement. For instance, the oversight agency may establish one set 
of procedures to investigate accidents and another to investigate 
unacceptable hazardous conditions. The oversight agency may use a 
contractor, such as the APTA Panel of Inquiry, to investigate certain 
kinds of accidents and its own staff to investigate others.
    The rule is intentionally flexible to allow the oversight agency to 
adapt an oversight program to the needs of the rail fixed guideway 
systems within the State's jurisdiction.

G. Corrective Actions. (Sec. 659.43)

    Section 659.41 requires the oversight agency to investigate 
``unacceptable hazardous conditions.'' This section directs the 
oversight agency to require the transit agency to develop a corrective 
action plan to eliminate, minimize, or control investigated hazardous 
conditions in accordance with the approved corrective action plan and 
within the time period specified by the oversight agency.

H. Oversight Agency Report to the Federal Transit Administration. 
(Sec. 659.45)

    This section requires three kinds of reports: initial, annual, and 
periodic. The initial submission contains information that will not 
change frequently, such as the name and address of the oversight agency 
and the transit agencies it oversees, a copy of the system safety 
program standard, and a description of the oversight agency's 
procedures for conducting investigations and ensuring that the transit 
agency has undertaken appropriate corrective actions. This report must 
be updated only when some of the information within it changes.
    The annual submission describes the activities of the oversight 
agency for the previous twelve months, including any determinations by 
the oversight agency of the probable cause of ``accidents'' and 
``unacceptable hazardous conditions,'' if it can do so and protect the 
confidentiality of investigation reports. This section allows an 
oversight agency required to submit annual reports to the State to 
submit the same report to FTA, if it contains all the necessary 
information.
    Last, this section allows FTA to periodically ask the oversight 
agency to submit certain kinds of information such as the status 
reports on ``accidents,'' ``hazardous conditions,'' and corrective 
action plans. These reports must be submitted only upon FTA's request.

I. Use of Contractors. (Sec. 659.47)

    This section expressly allows the oversight or transit agency to 
use contractors to perform certain tasks required under the rule. The 
agencies may use a contractor to perform some or all of these tasks. 
For instance, an oversight agency may use a contractor to conduct only 
accident investigations, while another may use a contractor solely to 
conduct safety reviews. A transit agency may not be a contractor for 
the oversight agency, however.

J. Certification of Compliance. (Sec. 659.49)

    This section requires the oversight agency to initially certify 
before January 1, 1997, that it has complied with the rule. Thereafter, 
the oversight agency is required to certify annually that it is in 
compliance with the rule.

IV. Economic Analysis

    FTA has evaluated the industry-wide costs and benefits of the rule, 
``Rail Fixed Guideway Systems; State Safety Oversight,'' which requires 
a State to develop, through an oversight agency, a program to oversee 
the safety of rail fixed guideway systems. At least 19 States will be 
required to create an oversight agency that must:
     Develop a System Safety Program Standard which includes 
provisions addressing security.
     Approve the transit agency's initial system safety program 
plan.
     Conduct safety reviews.
     Establish investigation procedures.
     Investigate accidents and unacceptable hazardous 
conditions.
     Ensure the transit agency complies with the oversight 
agency's system safety program standard.
     Review corrective action plans.
     Report to FTA.
    At least 33 transit agencies must:
     Develop a System Safety Program Plan and update it, as 
necessary.
     Prepare annual audit reports.
     Conduct safety audits.
     Classify hazardous conditions according to the APTA Hazard 
Resolution Matrix.
     Report accidents and unacceptable hazardous conditions to 
the oversight agency.
     Prepare corrective action plans.
     Handle hazardous conditions according to approved 
corrective action plans.
     Maintain safety data.
    Generally, in analyzing the costs of this rule, the Regulatory 
Evaluation considered only those activities required by the rule. For 
those States and transit agencies that have already established a 
program similar to the one required by the rule, the Regulatory 
Evaluation considered only those activities necessary to bring these 
programs into compliance with the rule. Year One costs are estimated to 
be approximately $336,000, the lowest for any single year. This is 
because the costs incurred in Year One are generally limited to 
activities of the oversight agencies and the FTA. Total costs for the 
first ten years are estimated to be approximately $9.1 million.
    The estimated benefits of the rule are assumed to take full effect 
in the third year of implementation, 1998. Therefore, the estimated 
fatalities and injuries averted are based on an eight-year period. For 
this period there would be 16 fatalities and 1,528 injuries averted. 
Based on the Department's Willingness to Pay Threshold, the total 
benefit of the rule is approximately $107 million over a ten-year 
period.

V. Regulatory Process Matters

A. Executive Order 12866

    FTA has evaluated the costs and benefits to the States of creating 
an oversight program to oversee the safety of rail fixed guideway 
systems and has determined that this rule is a major rule under 
Executive Order 12866 because it affects State and local governments.

B. Departmental Significance

    This proposed rule is a ``significant regulation'' under the 
Department's Regulatory Policies and Procedures, because it changes an 
important Departmental policy. That policy change requires the States 
to oversee the safety of rail fixed guideway systems, something the 
Federal government has never before required.

C. Regulatory Flexibility Act

    In accordance with 5 U.S.C. 603(a), FTA has evaluated the effects 
of this proposed rule on small entities. Based on this evaluation, FTA 
hereby certifies that this action will not have a significant economic 
impact on a substantial number of small entities because the affected 
transit agencies will in most cases be large.

D. Paperwork Reduction Act

    The information collection requirements in this rule have been 
reviewed and approved by the Office of Management and Budget under OMB 
#2132-0558.

[[Page 67046]]

E. Executive Order 12612

    We have reviewed this rule under the requirements of Executive 
order 12612 on Federalism. FTA has determined that since this rule has 
significant Federalism implications it warrants a Federalism 
assessment. We note, however, that this rulemaking is mandated by 49 
U.S.C. 5330, which requires a State to create an oversight agency to 
oversee the safety of rail fixed guideway systems.
    In considering the Federalism implications of the proposed rule, 
FTA has focused on several key provisions of Executive order 12612.
    Necessity for action. This rule is mandated by law, which requires 
that rail fixed guideway systems be subject to State oversight. 
Approximately twenty-one States have rail fixed guideway systems 
operating within their jurisdictions. Of those, only five States have 
established a State oversight program.
    Consultation with State and local governments. FTA's mission is to 
provide financial assistance to mass transportation systems throughout 
the nation, thus providing grants to State and local governments. 
Because this rule will affect almost half of the States as well as many 
local governments, we published an ANPRM on June 25, 1992, at 57 FR 
28572, to solicit the views of State and local governments. In 
addition, we held three public hearings in conjunction with the ANPRM. 
Also, FTA published an NPRM on December 9, 1993, at 58 FR 64855, on 
which numerous State and local governmental agencies commented. 
Moreover, we held a public hearing on the NPRM on March 8, 1994, in 
conjunction with an American Public Transit Association conference, 
thus allowing more State and local agencies to participate in the 
development of this rule. In short, we actively sought the views and 
comments of the affected States.
    Need for Federal action. This rule responds to a Congressional 
mandate but is designed to give a State maximum flexibility in 
designing its own oversight program.
    Authority. The statutory authority for this rule is discussed 
elsewhere in this preamble.
    Pre-emption. This rule does not, as such, pre-empt State or local 
law. There may be instances in which a State or local agency faces a 
conflict between compliance with the rule and State and local 
requirements. Because compliance with the rule is a condition of 
Federal financial assistance, State and local governments have the 
option of not seeking the Federal funds if they choose not to comply 
with this rule.

F. National Environmental Policy Act

    FTA has determined that this rule has no environmental 
implications. Its purpose is to create a State oversight program 
designed to oversee the safety of rail fixed guideway systems.

G. Energy Impact Implications

    This regulation does not affect the use of energy because it 
creates a State oversight program designed to oversee the safety of 
rail fixed guideway systems.

List of Subjects in 49 CFR Part 659

    Grant programs--transportation, Incorporation by reference, Mass 
transportation, Reporting and recordkeeping requirements, Safety, 
Security, and Transportation.
    Accordingly, for the reasons cited above, the agency amends title 
49 of the Code of Federal Regulations by adding a new part 659, to read 
as follows:

PART 659--RAIL FIXED GUIDEWAY SYSTEMS; STATE SAFETY OVERSIGHT

Subpart A--General Provisions

Sec.
659.1  Purpose.
659.3  Scope.
659.5  Definitions.
659.7  Withholding of funds for non-compliance.

Subpart B--The Role of the State

659.21  Designation of oversight agency.
659.23  Confidential investigation reports.

Subpart C--The Oversight Agency's Role

659.31  The system safety program standard.
659.33  System safety program plans.
659.35  Transit agency annual audit reports.
659.37  Safety reviews.
659.39  Transit agency report on accidents and unacceptable 
hazardous conditions.
659.41  Investigations.
659.43  Corrective actions.
659.45  Oversight agency report to the Federal Transit 
Administration.
659.47  Use of contractors.
659.49  Certification of compliance.

Appendix to Part 659--Sample Certification of Compliance.

    Authority: 49 U.S.C. Sec. 5330.

Subpart A--General Provisions

Sec. 659.1  Purpose.

    This part implements 49 U.S.C. 5330 by requiring a State to oversee 
the safety of rail fixed guideway systems through a designated 
oversight agency.

Sec. 659.3  Scope.

    This part applies to a State that has within its boundaries a rail 
fixed guideway system not regulated by the Federal Railroad 
Administration (FRA).

Sec. 659.5  Definitions.

    As used in this part--
    Accident means any event involving the revenue service operation of 
a rail fixed guideway system if as a result:
    (1) An individual dies;
    (2) An individual suffers bodily injury and immediately receives 
medical treatment away from the scene of the accident; or
    (3) A collision, derailment, or fire causes property damage in 
excess of $100,000.
    APTA Guidelines means the American Public Transit Association's 
``Manual for the Development of Rail Transit System Safety Program 
Plans,'' published on August 20, 1991.
    Contractor means an entity that performs tasks required by this 
part on behalf of the oversight or transit agency. The transit agency 
may not be a contractor for the oversight agency.
    FTA means the Federal Transit Administration, an agency within the 
U.S. Department of Transportation.
    Hazardous condition means a condition that may endanger human life 
or property. It includes unacceptable hazardous conditions.
    Investigation means a process to determine the probable cause of an 
accident or an unacceptable hazardous condition; it may involve no more 
than a review and approval of the transit agency's determination of the 
probable cause of an accident or unacceptable hazardous condition.
    Oversight agency means the entity, other than the transit agency, 
designated by the State or several States to implement this part.
    Rail fixed guideway system means any light, heavy, or rapid rail 
system, monorail, inclined plane, funicular, trolley, or automated 
guideway that is:
    (1) Included in FTA's calculation of fixed guideway route miles or 
receives funding under FTA's formula program for urbanized areas (49 
U.S.C. 5336); and
    (2) Not regulated by the Federal Railroad Administration.
    Safety means freedom from danger.
    Safety review means a formal, comprehensive, on-site examination by 
the oversight agency of a transit agency's safety practices to 
determine whether they comply with the policies and procedures required 
under the transit agency's system safety program plan.
    Security means freedom from intentional danger.
    System safety program plan means a document adopted by the transit 
agency 

[[Page 67047]]
detailing its safety policies, objectives, responsibilities, and 
procedures.
    System safety program standard means the standard developed and 
adopted by the State oversight agency which, at a minimum, complies 
with the APTA Guidelines and which addresses personal security.
    Transit agency means an entity operating a rail fixed guideway 
system.
    Unacceptable hazardous condition means a hazardous condition 
determined to be an unacceptable hazardous condition using the APTA 
Guidelines' Hazard Resolution Matrix (APTA Guidelines, checklist number 
7).

Sec. 659.7  Withholding of funds for non-compliance.

    The Administrator of the FTA may withhold up to five percent of the 
amount required to be apportioned for use in any State or affected 
urbanized area in such State under FTA's formula program for urbanized 
areas for any fiscal year beginning after September 30, 1997, if the 
State in the previous fiscal year has not met the requirements of this 
part and the Administrator determines that the State is not making 
adequate efforts to comply with this part.

Subpart B--The Role of the State

Sec. 659.21  Designation of oversight agency.

    (a) For a transit agency or agencies operating within a single 
State, the State must designate an agency of the State, other than a 
transit agency, to serve as the oversight agency and to implement the 
requirements of this part.
    (b) For a transit agency operating a system within more than one 
State, those States may designate a single entity, other than the 
transit agency, to implement the requirements of this part.

Sec. 659.23  Confidential investigation reports.

    The State may prohibit an investigation report that may be prepared 
by the oversight agency from being admitted into evidence or used in a 
civil action for damages resulting from a matter mentioned in the 
report.

Subpart C--The Oversight Agency's Role

Sec. 659.31  The system safety program standard.

    (a) The oversight agency must develop and adopt a system safety 
program standard that, at a minimum--
    (1) Complies with the American Public Transit Association's 
``Manual for the Development of Rail Transit System Safety Program 
Plans'' (APTA Guidelines) published on August 20, 1991, hereby 
incorporated by reference; and
    (2) Requires the transit agency to address the personal security of 
its passengers and employees.
    (b) The APTA Guidelines specify procedures for developing a system 
safety program plan, generally discuss the principles of system safety, 
and specifically address certain issues critical to the safe operation 
of a rail fixed guideway system.
    (c) The incorporation by reference of the APTA Guidelines has been 
approved by the Director of the Federal Register in accordance with 5 
U.S.C. 552(a) and 1 CFR Part 51. Copies of the APTA Guidelines may be 
obtained from the American Public Transit Association, 1201 New York 
Avenue, N.W., Washington D.C. 20005-3917, (202) 893-4000. The 
Guidelines may be inspected at, and are available from the Federal 
Transit Administration, Office of Safety and Security, 400 7th Street, 
S.W., Washington, D.C. 20590, and at the Office of the Federal 
Register, 800 North Capitol Street, N.W., Washington, D.C.

Sec. 659.33  System safety program plans.

    (a) Except as provided in Sec. 659.33(b), the oversight agency must 
require the transit agency to--
    (1) Implement, beginning on January 1, 1997, a system safety 
program plan conforming to the oversight agency's system safety program 
standard; and
    (2) Approve in writing before January 1, 1997, the transit agency's 
system safety program plan.-
    (b) The oversight agency must require the transit agency to--
    (1) Implement, beginning on January 1, 1998, the security portions 
of its system safety program plan; and
    (2) Approve in writing before January 1, 1998, the security 
portions of the transit agency's system safety program plan.
    (c) After December 31, 1996, the oversight agency must review and 
approve, in writing, the transit agency's system safety program plan, 
as necessary, and require the transit agency to update its system 
safety program plan, as necessary.
    (d) The oversight agency may prohibit a transit agency from 
publicly disclosing the security aspects of the system safety program 
plan.

Sec. 659.35  Transit agency annual audit reports.

    The oversight agency must--
    (a) Require that the transit agency submit, annually, a copy of the 
annual safety audit report prepared by the transit agency as a result 
of the Internal Safety Audit Process (APTA Guidelines, checklist number 
9); and
    (b) Review the annual safety audit reports prepared by the transit 
agency.

Sec. 659.37  Safety reviews.

    At least every three years the oversight agency must conduct an on-
site safety review of the transit agency's implementation of its system 
safety program plan and prepare and issue a report containing findings 
and recommendations resulting from that review, which, at a minimum, 
must include an analysis of the efficacy of the system safety program 
plan and a determination of whether it should be updated.

Sec. 659.39  Transit agency report on accidents and unacceptable 
hazardous conditions.

    The oversight agency must require that the transit agency report 
accidents and unacceptable hazardous conditions to the oversight agency 
within a specified period of time.-

Sec. 659.41  Investigations.

    The oversight agency must--
    (a) Establish procedures to investigate accidents and unacceptable 
hazardous conditions.
    (b) Unless the National Transportation Safety Board has 
investigated or will investigate an accident, the oversight agency must 
investigate accidents and unacceptable hazardous conditions occurring 
at a transit agency under its jurisdiction.

Sec. 659.43   Corrective actions.

    The oversight agency must require the transit agency to minimize, 
control, correct, or eliminate any investigated hazardous condition 
within a time period specified by and in accordance with a corrective 
action plan approved by the oversight agency.

Sec. 659.45  Oversight agency report to the Federal Transit 
Administration. -

    (a) Initial submissions. Before January 1, 1997, the oversight 
agency must submit to FTA the following information, which must be 
updated as necessary: -
    (1) The name and address of the oversight agency; -
    (2) The name(s) and address(es) of the transit agency or agencies 
subject to the oversight agency's jurisdiction under this part; and -
    (3) A written description of the oversight agency's oversight 
program including the following information: -
    (i) A copy of its system safety program standard; -
    (ii) Its procedures or process for reviewing and approving the 
transit agency's system safety program plan; -

[[Page 67048]]

    (iii) Its investigatory procedures; and -
    (iv) Its procedures for ensuring that appropriate corrective 
actions have been taken by the transit agency to correct, eliminate, 
minimize, or control investigated hazardous conditions. -
    (b) Annual submissions. Before January 1 of each year, the 
oversight agency must submit to FTA a publicly available annual report 
summarizing its oversight activities for the preceding twelve months, 
including a description of the most common probable causal factors of 
accidents and unacceptable hazardous conditions. -
    (c) Periodic submissions. Status reports of accidents, hazardous 
conditions, and corrective action plans must be forwarded to the FTA 
upon request. -
    (d) Addresses. Reports and annual summaries must be sent to: 
Federal Transit Administration, Office of Safety and Security, 400 7th 
Street, S.W., Washington, D.C. 20590.

Sec. 659.47  Use of contractors. -

    (a) The oversight agency may use a contractor to---
    (1) Develop a system safety program standard; -
    (2) Review system safety program plans; -
    (3) Review annual audit reports; -
    (4) Conduct safety reviews; -
    (5) Prepare safety review findings; -
    (6) Establish investigation procedures; -
    (7) Conduct investigations; -
    (8) Review corrective action plans; and/or -
    (9) Prepare initial or annual submissions to FTA. -
    (b) The oversight agency may allow a transit agency to use a 
contractor to---
    (1) Develop or update a system safety program plan; -
    (2) Prepare annual audit reports; and/or -
    (3) Develop a corrective action plan.

Sec. 659.49  Certification of compliance. -

    (a) Before January 1, 1997, and annually thereafter, the oversight 
agency must certify to the FTA that it has complied with the 
requirements of this part. Each certification shall comply with the 
applicable sample certification provided in the appendix to this part. 
Each certification shall be sent to: Federal Transit Administration, 
Office of Safety and Security, 400 7th Street, S.W., Washington, D.C. 
20590. -
    (b) Each certification must be signed by an official authorized by 
the oversight agency and must comply with the applicable sample 
certification provided in the appendix to this part.

Appendix to Part 659--Sample Certification of Compliance -

    This appendix contains an example of certification language. - -
    I, (name), (title), certify that (name of the oversight agency) 
has implemented a State oversight program that meets the 
requirements of 49 CFR part 659 and further certify that I have no 
conflict of interest with any rail fixed guideway system overseen as 
a result of 49 CFR part 659, nor does (name of the oversight agency) 
and its contractors.

    Issued: December 18, 1995. ----- ------ ------
Gordon J. Linton,
Administrator.
[FR Doc. 95-31159 Filed 12-26-95; 8:45 am]
BILLING CODE 4910-57-U

Complete official Federal Register PDF

FR Doc. 95-31121 Regulatory Review

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66866-66870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31121]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 500, 504, 510, 515, 529, 533, 543, 545, 552, 556, 562, 
563, 563d, 563g, 571, 583, and 584

[No. 95-201]
RIN 1550-AA85

Regulatory Review

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Office of Thrift Supervision (OTS or Office) is today 
issuing a final rule eliminating duplicative, unduly burdensome, and 
unnecessary regulations. These amendments result from a review of OTS 
regulations pursuant to section 303(a) of the Community Development and 
Regulatory Improvement Act of 1994 (CDRIA) and the Regulatory 
Reinvention Initiative of the Vice President's National Performance 
Review.

EFFECTIVE DATE: December 27, 1995.

FOR FURTHER INFORMATION CONTACT: Francis E. Raue, Policy Analyst, 
Supervision Policy, (202) 906-5750; or Valerie J. Lithotomos, Counsel 
(Banking and Finance), Regulations and Legislation Division, Chief 
Counsel's Office, (202) 906-6439, Office of Thrift Supervision, 1700 G 
Street NW., Washington, D.C. 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    The OTS conducted a comprehensive review of its regulations in the 
spring of 1995 pursuant to section 303 of CDRIA and the 
Administration's Reinvention Initiative. Staff in both the Washington 
and Regional Offices reviewed the regulations and policy statements 
contained in Chapter V of Title 12 of the Code of Federal Regulations 
(CFR) to: ``streamline and modify those regulations and policies in 
order to improve efficiency, reduce unnecessary costs, * * * eliminate 
unwarranted constraints on credit availability [and] remove 
inconsistencies and outmoded and duplicative requirements.'' 1 The 
OTS sought industry input through town meetings and industry roundtable 
meetings held by the Acting Director and Regional Directors.

    \1\ Section 303 of CDRIA, 12 U.S.C. 4803(a)(1)(A), (B).
---------------------------------------------------------------------------

    As a result of this effort, the OTS identified a number of ways in 
which its regulations could be improved and, on August 28, 1995, issued 
a notice of proposed rulemaking.2 The preamble to the proposed 
rulemaking described a multi-step process that the agency intends to 
follow to implement the results of its regulatory review.

    \2\ See 60 FR 44442 (August 28, 1995).
---------------------------------------------------------------------------

    The first step in that process is to eliminate regulations that are 
clearly outdated, duplicative, or otherwise unnecessary. Today's final 
rule draws this first step to a close.
    The second step is to conduct focused, intensive reviews of key 
areas of OTS's regulations in an effort to find additional ways to 
streamline and reduce burden. This effort is already underway. Over the 
next several months, OTS expects to issue proposals that will reduce 
the burden imposed by its regulations governing lending, subsidiaries, 
corporate governance, and preemption.
    A third step in the review process is to determine whether the 
OTS's regulations should be reorganized to make them more user-
friendly. In the August 28 preamble, the agency posed five questions 
regarding the overall structure and content of its regulations.3 
The OTS appreciates the comments received in response to these 
questions and will take them into consideration in future rulemakings 
that specifically address the organizational issues raised by the 
comments.

    \3\ The specific questions in the preamble were:
    1. Should OTS consolidate common definitions of general 
applicability now in parts 541, 561, 563, and 583 in a new part 501?
    2. Should OTS consolidate the remaining safety and soundness 
regulations in part 545 into part 563?
    3. Should OTS delete regulations that only repeat statutory 
authority or list an implied power?
    4. Should policy statements in parts 556 and 571 be deleted and 
either recast as regulations or placed as guidance in the 
appropriate regulatory handbook?
    5. What is the best method of communicating different types of 
information, guidance, policies, restrictions, and requirements?
---------------------------------------------------------------------------

II. Summary of Comments

    The August 28, 1995, notice of proposed rulemaking targeted 
approximately eight percent of OTS's regulations for immediate repeal. 
The public comment period on the August 28 proposal closed on October 
27, 1995. Two federal savings banks, one savings and loan holding 
company, and one national trade association submitted comments. In 
addition to its comment letter, the national trade association, 
America's Community Bankers (ACB), included the results of a survey 
which ACB sent to a number of OTS-supervised institutions.4

    \4\ ACB is a trade association representing 2,000 savings 
associations and community financial institutions and related 
business firms. ACB's survey was sent to 94 OTS-supervised 
institutions; 43 institutions completed the survey. As reported by 
ACB, 86 percent of the respondents deem simplification of OTS rules 
to be worth the time and attention of the OTS and the industry.
---------------------------------------------------------------------------

    Generally all of the commenters supported the OTS initiative to 
streamline and eliminate unnecessary and burdensome rules in the 
proposal. They indicated that the deletions and modifications, with a 
few exceptions, would be helpful.
    However, one commenter recommended that paragraphs (a) and (c) of 
Sec. 545.15 not be deleted. Paragraph (a) provides generally that a 
Federal savings association shall require at least seven days advance 
notice of withdrawals from savings accounts that do not have fixed or 
minimum terms of at least seven days. The commenter asked that this 
paragraph be retained because it believes that the elimination of the 
seven-day withdrawal notice on savings accounts may conflict with 

[[Page 66867]]
section 5(b)(1)(C) of the Home Owners' Loan Act (HOLA).5 We 
disagree. Section 5(b)(1)(C) of the HOLA provides that a ``Federal 
savings association may require not less than 14 days notice * * * if 
the charter of the savings association or the regulations of the 
Director so provide.'' By its terms, this statutory provision applies 
only to withdrawal notice requirements that equal or exceed 14 days. 
The provision does not affect the ability of savings associations to 
impose notice requirements of shorter duration.

    \5\ 12 U.S.C. 1464(b)(1)(C).
---------------------------------------------------------------------------

    Moreover, the seven-day notice requirement that currently appears 
in OTS's regulations is unrelated to, and does not implement, section 
5(b)(1)(C) of the HOLA. Section 545.15(a) was meant to mirror the 
requirements under the Federal Reserve Board's Regulation D for savings 
accounts.6 Regulation D defines a savings deposit for reserve 
purposes as a deposit or account where a depository institution may 
require at least seven days advance notice of withdrawal.7 The OTS 
is removing section 545.15(a) because it is duplicative of Regulation 
D. Savings associations will, of course, still be required to comply 
with Regulation D.

    \6\ See 12 CFR Part 204.
    \7\ 12 CFR 204.2(d)(1).
---------------------------------------------------------------------------

    Because section 545.15(a) does not implement HOLA section 
5(b)(1)(C), its removal will not adversely affect the ability of 
savings associations to impose notice requirements of 14 days or more. 
Associations that wish to do so may continue, as under current law, to 
include an authorizing provision in their charters and appropriate 
terms in their savings account contracts.
    The same commenter requested that OTS retain paragraph (c) of 
section 545.15. That paragraph states that, when computing earnings due 
on deposit accounts at the end of a business period, a Federal savings 
association may elect to disregard amounts withdrawn from accounts in 
the last three days of any business period--thereby effectively paying 
depositors slightly more interest than they might be entitled to under 
the terms of their deposit contracts. The commenter stated that the 
three-day grace period should be retained because it may have 
operational significance for small institutions without adequate 
technology to make computations on all of their accounts on one day at 
the end of the period. Removal of paragraph (c) will not adversely 
affect the flexibility of savings associations in computing interest on 
their deposit accounts. Institutions that wish to compute interest 
without reference to withdrawals made during the last three days of a 
business period may continue to do so. A regulation is not needed to 
authorize this practice.
    The same commenter asked that section 556.15 be retained because it 
delineates the specific services that may and may not be performed at 
drive-in and pedestrian facilities. Under Sec. 545.92(g), Federal 
savings associations are authorized to establish such facilities 
without prior OTS approval, subject to certain restrictions. The 
services provided at such facilities are limited to those ``ordinary 
functions'' provided at teller windows at branch offices. Section 
556.15 defines what constitutes services ``ordinarily'' provided at 
teller windows. This definition is outdated and unduly restrictive. 
Elimination of Sec. 556.15 will allow more flexibility in defining the 
scope of services that can be offered from drive-in and pedestrian 
facilities.
    One commenter stated that it would prefer that Sec. 545.31(a) 
(Election regarding classification of loans or investments) not be 
removed unless it would be included in its entirety in the regulatory 
handbook. The OTS notes that the proposal did not suggest the deletion 
of that section and that it is not anticipated that OTS's regulatory 
review of its lending regulations will propose deleting that section.
    One commenter requested that the OTS review the documentation and 
recordkeeping requirements in Secs. 563.41 (Loans and other 
transactions with affiliates and subsidiaries) and 563.42 (Additional 
standards applicable to transactions with affiliates and subsidiaries) 
because they are too cumbersome. The commenter also requested that 
certain clarifications be made to these regulations. On the same 
subject, another commenter requested that the term ``affiliated 
person'' in the OTS's regulations be replaced by the term ``insider'' 
as defined in the regulations of the other Federal banking agencies. 
The OTS will address these comments in a subsequent notice of proposed 
rulemaking, during the phase of regulatory review dealing with OTS's 
regulations on subsidiaries and related entities.
    Finally, one commenter suggested that the OTS consider reviewing 
its manufactured home financing regulation at section 545.45 so that 
savings associations may more fairly compete with other lenders in the 
market. The OTS will address this comment in the phase of regulatory 
review addressing the OTS's lending regulations.

III. Description of Final Rule

    The final rule issued today implements all of the proposed 
revisions and modifications contained in the August 28, 1995 proposal, 
except for the proposed revision to Sec. 567.1's definition of an OECD-
based country, which will be addressed in a later final rule.
    The following parts and sections are being removed:

------------------------------------------------------------------------
         Part or section No.                         Title              
------------------------------------------------------------------------
Part 504.............................  National security information.   
Sec.  510.1..........................  Ex parte communications.         
Sec.  510.3..........................  Coordination of subchapters.     
Part 515.............................  Use of penalty mail in the       
                                        location and recovery of missing
                                        children.                       
Part 529.............................  Nondiscrimination in federally   
                                        assisted programs.              
Part 533.............................  Electronic funds transfers.      
Sec.  543.12.........................  Bank Insurance Fund-insured      
                                        Federal savings banks.          
Sec.  543.13.........................  Notice to FDIC.                  
Sec.  545.15.........................  Withdrawal requests.             
Sec.  545.18.........................  Issuance of mutual capital       
                                        certificates.                   
Sec.  545.19.........................  Issuance of net worth            
                                        certificates.                   
Sec.  545.20.........................  Borrowing, issuing obligations   
                                        and giving security.            
Sec.  545.44.........................  Mortgage transactions with the   
                                        Federal Home Loan Mortgage      
                                        Corporation.                    
Sec.  545.122........................  Employment contracts.            
Sec.  545.136........................  Financial futures transactions.  
Sec.  545.137........................  Financial options transactions.  
Sec.  552.2-4........................  Limitation on transaction of     
                                        business.                       
Sec.  556.4..........................  Insurance.                       
Sec.  556.6..........................  Savings accounts.                
Sec.  556.8..........................  Suretyship.                      
Sec.  556.9..........................  Imposition of late charges and   
                                        due on sale clauses.            
Sec.  556.11.........................  Prepayment penalty on mortgage   
                                        loans.                          
Sec.  556.14.........................  Chief executive officer of a     
                                        branch office.                  
Sec.  556.15.........................  Drive-in and pedestrian          
                                        facilities.                     
Sec.  562.3..........................  Statements of Condition.         
Sec.  563.8..........................  Negotiable order of withdrawal   
                                        accounts authorized.            
Sec.  563.49.........................  Membership in a Federal Home Loan
                                        Bank.                           
Sec.  563.72.........................  Form, return, and maturity of    
                                        securities.                     
Sec.  563d.200-30....................  Delegation of authority to the   
                                        Chief Counsel.                  
Sec.  563g.22........................  Delegation of authority to the   
                                        Chief Counsel.                  
Sec.  584.3..........................  Transactions with affiliates.    
Sec.  584.6..........................  Penalty for loss of QTL status.  
Sec.  584.11.........................  Hearings.                        
------------------------------------------------------------------------

[[Page 66868]]

    The OTS is also amending the following parts or sections to remove 
unnecessary burdens, as proposed.

------------------------------------------------------------------------
         Part or section No.                Description of amendment    
------------------------------------------------------------------------
Part 500.............................  Simplification of organizational 
                                        structure.\1\                   
Sec.  563.41(b)(11)..................  Addition of definition of        
                                        ``unimpaired capital and        
                                        unimpaired surplus'' for        
                                        purposes of transactions with   
                                        affiliates limitations.         
Sec.  563.41(d)(1)...................  Removal of expired limitation on 
                                        sister bank provision for       
                                        transactions with affiliates.   
Sec.  563.42(d)(1)...................  Removal of expired limitation on 
                                        sister bank provision for       
                                        transactions with affiliates.   
Sec.  563.43(f)......................  Addition of definition of        
                                        ``unimpaired capital and        
                                        unimpaired surplus'' for        
                                        purposes of loans to insiders   
                                        limitations.                    
Sec.  563g.5.........................  Reduction in the number of copies
                                        required for securities filings.
------------------------------------------------------------------------
\1\ OTS's current organizational structure will be reflected in a notice
  to be published in the Federal Register at a later date.              

    The preamble to the August 28 proposal contains a full section-by-
section discussion of the reasons why these sections are being amended 
or removed. Today's final rule also adopts the proposed modifications 
to cross-references in other OTS regulations to conform to the changes 
being made today.

IV. Administrative Procedure Act

    Section 553(d)\8\ of the APA permits the waiver of its 30-day 
delayed effective date requirement for good cause, or where a rule 
relieves a restriction. Also, Section 302 of the CDRIA\9\ requires that 
a federal banking agency regulation that imposes new requirements take 
effect on the first day of the quarter following publication of the 
final rule. That section provides, however, that an agency may 
determine that the rule should take effect earlier upon a finding of 
good cause.

    \8\ 5 U.S.C. 553(d).
    \9\ 12 U.S.C. 4802.
---------------------------------------------------------------------------

    The OTS believes that the final rule will relieve regulatory burden 
by eliminating obsolete, redundant and unnecessary requirements. The 
final rule eliminates inefficient and unduly costly regulatory 
requirements and better focuses thrifts on the substantive and relevant 
requirements. For these reasons, the OTS believes there is good cause 
pursuant to both the APA and CDRIA section 302 provisions to make the 
final rule effective immediately upon publication in the Federal 
Register.

V. Executive Order 12866

    The Director of the OTS has determined that this final rule does 
not constitute a ``significant regulatory action'' for the purposes of 
Executive Order 12866.

VI. Regulatory Flexibility Act Analysis

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
OTS certifies that this final rule will not have a significant economic 
impact on a substantial number of small entities. The final rule does 
not impose any additional burdens or requirements upon small entities 
and lowers several paperwork and other burdens on all savings 
associations.

VII. Unfunded Mandates Reform Act of 1995

    The OTS has determined that the requirements of this final rule 
will not result in expenditures by State, local, and tribal 
governments, or by the private sector, of more than $100 million in any 
one year. Accordingly, a budgetary impact statement is not required 
under section 202 of the Unfunded Mandates Reform Act of 1995.

List of Subjects

12 CFR Part 500

    Organization and functions (Government agencies).

12 CFR Part 504

    Classified information.

12 CFR Part 510

    Administrative practice and procedure.

12 CFR Part 515

    Infants and children, Postal service.

12 CFR Part 529

    Administrative practice and procedure, Civil rights.

12 CFR Part 533

    Consumer protection, Electronic funds transfers, Savings 
associations.

12 CFR Part 543

    Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 545

    Accounting, Consumer protection, Credit, Electronic funds 
transfers, Investments, Manufactured homes, Mortgages, Reporting and 
recordkeeping requirements, Savings associations.

12 CFR Part 552

    Reporting and recordkeeping requirements, Savings associations, 
Securities.

12 CFR Part 556

    Savings associations.

12 CFR Part 562

    Accounting, Reporting and recordkeeping requirements, Savings 
associations.

12 CFR Part 563

    Accounting, Advertising, Crime, Currency, Flood insurance, 
Investments, Mortgages, Reporting and recordkeeping requirements, 
Savings associations, Securities, Surety bonds.

12 CFR Part 563d

    Authority delegations (Government agencies), Reporting and 
recordkeeping requirements, Savings associations, Securities.

12 CFR Parts 563g

    Reporting and recordkeeping requirements, Savings associations, 
Securities.

12 CFR Part 571

    Accounting, Conflicts of interest, Investments, Reporting and 
recordkeeping requirements, Savings associations.

12 CFR Part 583

    Holding companies, Savings associations.

12 CFR Part 584

    Administrative practice and procedure, Holding companies, Reporting 
and recordkeeping requirements, Savings associations, Securities.
    Accordingly, and under the authority of 12 U.S.C. 1462a, the Office 
of Thrift Supervision amends chapter V, title 12, Code of Federal 
Regulations, as set forth below.

PART 500--ORGANIZATION AND CHANNELLING OF FUNCTIONS

    1. The authority citation for part 500 continues to read as 
follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464.

Sec. 500.1  [Amended]

Secs. 500.3--500.5  [Removed]

    2. The existing text of Sec. 500.1 is designated as paragraph (a), 
the existing texts of Secs. 500.3, 500.4, and 500.5 are redesignated as 
paragraphs (b), (c) and (d), respectively, of Sec. 500.1, and 
Secs. 500.3, 500.4, and 500.5 are removed. 

[[Page 66869]]

    3. Section 500.10 is amended by adding two new sentences at the end 
of the section to read as follows:

Sec. 500.10  The OTS or The Office.

    * * * The Director directs and carries out the mission of the OTS 
with the assistance of offices reporting directly to him. One of these 
offices oversees the direct examination and supervision of savings 
associations by regulatory staff to ensure the safety and soundness of 
the industry.

Secs. 500.11-500.17  [Removed]

    4. Sections 500.11 through 500.17 are removed.

PART 504--[REMOVED]

    5. Part 504 is removed.

PART 510--MISCELLANEOUS ORGANIZATIONAL REGULATIONS

    6. The authority citation for part 510 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 1462a, 1463, 1464.

Sec. 510.1  [Removed]

    7. Section 510.1 is removed.

Sec. 510.3  [Removed]

    8. Section 510.3 is removed.

PART 515--[REMOVED]

    9. Part 515 is removed.

PART 529--[REMOVED]

    10. Part 529 is removed.

PART 533--[REMOVED]

    11. Part 533 is removed.

PART 543--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL 
MUTUAL ASSOCIATIONS

    12. The authority citation for part 543 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et 
seq.

Secs. 543.12-543.13  [Removed]

    13. Sections 543.12 and 543.13 are removed.

PART 545--OPERATIONS

    14. The authority citation for part 545 continues to read as 
follows:
    Authority: 12 U.S.C. 1462a, 1463, 1464, 1828.

Secs. 545.15, 545.18-545.20, 545.44, 545.122, 545.136-
545.137  [Removed]

    15. Sections 545.15, 545.18 through 545.20, 545.44, 545.122, 
545.136 and 545.137 are removed.

PART 552--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL 
STOCK ASSOCIATIONS

    16. The authority citation for part 552 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.

Sec. 552.2-4  [Removed]

    17. Section 552.2-4 is removed.

Sec. 552.6-2  [Amended]

    18. Section 552.6-2 is amended by removing the phrase 
``Sec. 545.122 of this chapter'' in paragraph (b), and by adding in 
lieu thereof the phrase ``Sec. 563.39 of this chapter''.

PART 556--STATEMENTS OF POLICY

    19. The authority citation for part 556 continues to read as 
follows: 

    Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1464, 1701j-3; 15 U.S.C. 
1693-1693r.

Secs. 556.4, 556.6, 556.8-556.9, 556.11, 556.14-556.15  [Removed]

    20. Sections 556.4, 556.6, 556.8 through 556.9, 556.11, and 556.14 
through 556.15 are removed.

PART 562--REGULATORY REPORTING STANDARDS

    21. The authority citation for part 562 continues to read as 
follows:

    Authority: 12 U.S.C. 1463.

Sec. 562.3  [Removed]

    22. Section 562.3 is removed.

PART 563--OPERATIONS

    23. The authority citation for part 563 continues to read as 
follows:

    Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468, 
1817, 1828, 3806; 42 U.S.C. 4106.

Secs. 563.8, 563.49, 563.72  [Removed]

    24. Sections 563.8, 563.49 and 563.72 are removed.
    25. Section 563.41 is amended by removing the period at the end of 
paragraph (b)(10)(iv) and adding a semicolon in its place, by adding 
paragraph (b)(11), by removing paragraph (d)(1), by redesignating 
paragraphs (d)(2) through (d)(7) as paragraphs (d)(1) through (d)(6), 
respectively, and by removing the phrase ``After January 1, 1995, any'' 
in the introductory text of newly designated paragraph (d)(1) and 
adding the word ``Any'' in its place, to read as follows:

Sec. 563.41  Loans and other transactions with affiliates and 
subsidiaries.

* * * * *
    (b) * * *
    (11) The term capital stock and surplus of the savings association 
means ``unimpaired capital and unimpaired surplus'' as defined at 
Sec. 563.93(b)(11) of this part.
* * * * *

Sec. 563.42  [Amended]

    26. Section 563.42 is amended, in paragraph (d)(1), by removing the 
phrase ``Sec. 563.41, any bank, any savings association in a structure 
qualifying under Sec. 563.41(d)(1) of this part or, after January 1, 
1995,'', and by adding in lieu thereof the phrase ``Sec. 563.41 of this 
part, any bank, or''.

Sec. 563.45  [Amended]

    27. Section 563.43 is amended by adding paragraph (f) to read as 
follows:

Sec. 563.43  Loans by savings associations to their executive officers, 
directors and principal shareholders.

* * * * *
    (f) References to the term ``unimpaired capital and unimpaired 
surplus'' shall be deemed to refer to ``unimpaired capital and 
unimpaired surplus'' as defined at Sec. 563.93(b)(11) of this part.

Sec. 563.52  [Amended]

    28. Section 563.52 is amended by removing the phrase ``Sec. 584.6 
of this chapter'' in paragraph (b), and by adding in lieu thereof the 
phrase ``12 U.S.C. 1467a(m)''.

PART 563d--SECURITIES OF SAVINGS ASSOCIATIONS

    29. The authority citation for part 563d continues to read as 
follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464; 15 U.S.C. 78c(b), 78l, 
78m, 78n, 78w, 78d-1.

Sec. 563d.200-30  [Removed]

    30. Section 563d.200-30 is removed.

PART 563g--SECURITIES OFFERINGS

    31. The authority citation for part 563g continues to read as 
follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464; 15 U.S.C. 78c(b), 78l, 
78m, 78n, 78p, 78w.

    32. Section 563g.5 is amended by revising paragraphs (b)(1) and 
(b)(2) to read as follows:

Sec. 563g.5  Filing and signature requirements.

* * * * *
    (b) Number of copies. (1) Unless otherwise required, any filing 
under this part shall include nine copies of the document to be filed 
with the OTS, as follows:
    (i) Seven copies, which shall include one manually signed copy with 
exhibits, 

[[Page 66870]]
three conformed copies with exhibits, and three conformed copies 
without exhibits, to the Dissemination Branch, Records Management and 
Information Policy; and
    (ii) Two copies, which shall include one manually signed copy with 
exhibits and one conformed copy, without exhibits, to the Regional 
Director.
    (2) Within five days after the effective date of an offering 
circular or the commencement of a public offering after the effective 
date, whichever occurs later, nine copies of the offering circular used 
shall be filed with the OTS, as follows: seven copies to the 
Dissemination Branch, Records Management and Information Policy, and 
two copies to the Regional Director.
* * * * *

Sec. 563g.22  [Removed]

    33. Section 563g.22 is removed.

PART 571--STATEMENTS OF POLICY

    34. The authority citation for part 571 continues to read as 
follows:

    Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462a, 1463, 1464.

Sec. 571.24  [Amended]

    35. Section 571.24 is amended by removing the phrase ``parts 528 
and 529'' in paragraph (a), and by adding in lieu thereof the phrase 
``part 528''.

PART 583--DEFINITIONS

    36. The authority citation for part 583 is revised to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.

Sec. 583.17  [Amended]

    37. Section 583.17 is amended by removing the phrase ``Sec. 584.6 
of this chapter'', and by adding in lieu thereof the phrase ``12 U.S.C. 
1467a(m)''.

PART 584--REGULATED ACTIVITIES

    38. The authority citation for part 584 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.

Sec. 584.2a  [Amended]

    39. Section 584.2a is amended by removing the phrase ``Sec. 584.6 
of this chapter'' in paragraph (a)(2), and by adding in lieu thereof 
the phrase ``12 U.S.C. 1467a(m)''.

Sec. 584.2-1  [Amended]

    40. Section 584.2-1 is amended by removing the phrase ``Sec. 584.3 
of this part'' where it appears in paragraphs (b)(2) and (b)(3) 
introductory text, and by adding in lieu thereof the phrase ``12 U.S.C. 
1468''.

Secs. 584.3, 584.6, 584.11  [Removed]

    41. Sections 584.3, 584.6 and 584.11 are removed.

    Dated: December 8, 1995.

    By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 95-31121 Filed 12-26-95; 8:45 am]
BILLING CODE 6720-01-P

Complete official Federal Register PDF

FR Doc. 95-30873 Generation-Skipping Transfer Tax

[Federal Register Volume 60, Number 248 (Wednesday, December 27, 1995)]
[Rules and Regulations]
[Pages 66898-66926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30873]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 26, 301, and 602

[TD 8644]
RIN 1545-AJ11; 1545-AL75; 1545-AO89

Generation-Skipping Transfer Tax

AGENCY: Internal Revenue Service, Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final generation-skipping transfer 
(GST) tax regulations under chapter 13 of the Internal Revenue Code 
(Code), as added by section 1431 of the Tax Reform Act of 1986. Changes 
to the applicable law were made by the Tax Reform Act of 1986, the 
Technical and Miscellaneous Revenue Act of 1988, and the Revenue 
Reconciliation Act of 1989. The regulations are necessary to provide 
guidance to taxpayers so that they may comply with chapter 13 of the 
Code.

EFFECTIVE DATE: December 27, 1995.
FOR FURTHER INFORMATION CONTACT: James F. Hogan, (202) 622-3090 (not a 
toll free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information requirements contained in these final 
regulations have been reviewed and approved by the Office of Management 
and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 
3507) under control numbers 1545-0985 (relating to Secs. 26.2601-1 and 
26.2662-2) and 1545-1358 (relating to Secs. 26.2632-1, 26.2642-1, 
26.2642-2, 26.2642-3, 26.2642-4 and 26.2652-2). All of these paperwork 
requirements will be consolidated under control number 1545-0985. 
Responses to this collection of information are required to ensure the 
proper collection of the generation-skipping transfer tax.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection unless the collection of information 
displays a valid control number.
    The estimated burden per respondent is 1 hour under control number 
1545-0985. The time estimates for the reporting and recordkeeping 
requirements under control number 1545-1358 are included in the 
estimates of burden applicable to Forms 706, 706NA, 706GS(T), 706GS(D), 
706GS(D-1), and 709.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer T:FP, Washington, 
DC 20224, and to the Office of Management and Budget, Attn: Desk 
Officer for the Department of Treasury, Office of Information and 
Regulatory Affairs, Washington, DC 20503.
    Books or records relating to this collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    On March 15, 1988, the IRS published in the Federal Register a 
notice of proposed rulemaking (53 FR 8469) by cross reference to 
Temporary Regulations published on the same date in the Federal 
Register (53 FR 8441) under Secs. 2601 and 2662. Subsequently, on 
December 24, 1992, the IRS published a second notice of proposed 
rulemaking (57 FR 61353) amending the prior notice. Also, on December 
24, 1992, the IRS published a notice of proposed rulemaking in the 
Federal Register (57 FR 61356) containing proposed regulations under 
Secs. 2611, 2612, 2613, 2632, 2641, 2642, 2652, 2653, 2654, and 2663. 
The IRS received written and oral comments on the proposed regulations 
and, on April 21, 1993, a public hearing was held. These documents 
adopt final regulations with respect to these notices of proposed 
rulemaking.
    The following is a discussion of the more significant revisions 
that were made.

Section 2601--Transitional Rules

Transfers After September 25, 1985 and Before October 23, 1986
    Section 26.2601-1(a)(2)(i), relating to inter vivos transfers made 
after September 25, 1985, and before October 23, 1986, clarifies that 
chapter 13 applies to inter vivos transfers that are subject to chapter 
12 even though a gift tax is not actually paid because of, for example, 
the marital deduction or the unified credit.
    Section 26.2601-1(a)(2)(ii) (which treats inter vivos transfers 
made after September 25, 1985, and before October 23, 1986, as if made 
on October 23, 1986) clarifies that the value of the transferred 
property for purposes of chapter 13 is determined as of the actual 
transfer date rather than as of the deemed transfer date of October 23, 
1986.
    Section 26.2601-1(a)(4) adds an example illustrating that 
Sec. 26.2601-1(a)(2) does not apply to transfers made under a revocable 
trust that becomes irrevocable by reason of the grantor's death after 
September 25, 1985, but before October 23, 1986. Those transfers are 
not subject to chapter 13 because they are in the nature of 
testamentary transfers that occurred prior to October 23, 1986.
    Section 26.2601-1(b)(1)(ii)(C) clarifies that incidents of 
ownership in an insurance policy that are relinquished before September 
25, 1985, are not to be taken into account in determining whether a 
trust is irrevocable for purposes of Sec. 26.2601-1(b)(1), which 
exempts trusts that were irrevocable on September 25, 1985, from the 
provisions of chapter 13.
    Under Sec. 26.2601-1(b)(1)(iii)(A), a qualified terminable interest 
property (QTIP) trust that is grandfathered under Sec. 26.2601-1(b)(1) 
is treated as if the reverse QTIP election had been made under section 
2652(a)(3). Example 1 in Sec. 26.2601-1(b)(1)(iii)(B) has been revised 
to illustrate that the initial QTIP election under section 2523(f) need 
not be made before September 25, 1985, provided that the trust was 
irrevocable on that date. Further, Sec. 26.2601-1(b)(1)(v)(C) has been 
revised to provide that in the case of a trust with respect to which a 
reverse QTIP election is deemed to have been made, the failure to 
exercise the right of reimbursement under section 2207A will not be 
treated as a constructive addition to the trust. This conforms the 
treatment of trusts that are irrevocable on September 25, 1985, with 
the rule provided in Sec. 26.2652-1(a)(3) which applies to trusts 
created after September 25, 1985.

[[Page 66899]]

    In Sec. 26.2601-1(b)(2)(iv)(B), the phrase ``or to a generation-
skipping trust'' has been added to eliminate any implication that the 
provision is limited to situations involving direct skips. The 
provision applies to all generation-skipping transfers.
    Section 26.2601-1(b)(3)(iii) applies the transitional rules where 
the decedent was under a mental disability but had not been adjudged a 
mental incompetent. This section has been clarified to provide that any 
evidence submitted to establish the decedent's state of incompetency is 
not conclusive and is subject to examination. In addition, an example 
has been added to illustrate the transitional rules applicable in the 
case of mental incompetency.
Uniform Statutory Rule Against Perpetuities
    The notice of proposed rulemaking published on December 24, 1992, 
(57 FR 61353) contained a proposed modification to Sec. 26.2601-
1(b)(1)(v)(B)(2). Section 26.2601-1(b)(1)(v)(B)(2) provided that the 
exercise of a nongeneral power of appointment will not be treated as an 
addition to a grandfathered GST trust if the power is exercised in a 
manner that may not postpone or suspend the vesting, absolute 
ownership, or power of alienation of a interest in property for a 
period, measured from the date of creation of the trust, extending 
beyond any life in being at the date of creation of the trust plus a 
period of 21 years (perpetuities period).
    The proposed modification to Sec. 26.2601-1(b)(1)(v)(B)(2), which 
is finalized in this document, provides that the exercise of a 
nongeneral power of appointment that validly postpones or suspends the 
vesting, absolute ownership, or power of alienation of an interest in 
property for a term of years that will not exceed 90 years (measured 
from the date of creation of the trust) will not be considered an 
exercise that postpones vesting, etc., beyond the perpetuities period. 
The modification takes into account the fact that many states have 
adopted the Uniform Statutory Rule Against Perpetuities (USRAP) which 
allows either a 90 year perpetuities period or the common law 
perpetuities period. Under Sec. 26.2601-1(b)(1)(v)(B)(2), as modified, 
the nongeneral power may not be exercised in a manner that postpones 
vesting, etc., for the longer of 90 years or the common law period 
(lives in being plus 21 years).
    The discussion in the preamble published on December 24, 1992, 
indicates that USRAP has a ``wait and see'' aspect that is not 
appropriate for GST purposes because it will be necessary to determine 
the GST tax consequences of distributions and terminations at the time 
they occur. Thus, the preamble stated that, in order to comply with the 
regulation and avoid a constructive addition, it must be clear at the 
time the nongeneral power is exercised that the exercise may not 
postpone or suspend vesting, etc., beyond either lives in being plus 21 
years or 90 years (but not the longer of the two periods). A 
commentator has pointed out that the USRAP invalidates any attempt to 
exercise a power for the longer of the two periods. Under the USRAP, it 
will be clear at the time the nongeneral power is exercised that the 
exercise may not postpone or suspend vesting, etc., beyond one of the 
two periods (but not both). Under the USRAP, the common law period 
(lives in being plus 21 years) is imposed in the event that the power 
holder exercises the power in a manner that attempts to suspend or 
postpone vesting, etc., for the longer of the two periods. Although the 
preamble published on December 24, 1992, may have been misleading in 
referring to a ``wait and see'' aspect of USRAP, the modification to 
Sec. 26.2601-1(b)(1)(v)(B)(2) is not affected.

Section 2611 et. seq.--GST Substantive Rules

Definition of Generation-Skipping Transfers
    Section 26.2611-1 has been revised to clarify that, in determining 
whether an event is subject to the GST tax, reference must be made to 
the most recent transfer that was subject to Federal estate or gift 
tax. This is because the most recent transfer that was subject to 
estate or gift tax establishes the identity of the transferor, which in 
turn determines the identity of the skip persons and non-skip persons.
Definitions
    Section 26.2612-1(a)(2)(i) of the proposed regulations provides 
generally that, for purposes of determining whether a transfer 
constitutes a direct skip, the generation assignment of a person who 
would otherwise be a skip person is redetermined by disregarding the 
intervening generation, if certain individuals have died prior to the 
transfer (e.g., a predeceased child of the transferor). The section has 
been modified to provide that, if an individual who is a member of the 
intervening generation dies no later than 90 days after the transfer, 
the deceased individual is treated as having predeceased the 
transferor, if the governing instrument or applicable state law 
provides for such treatment.
    Section 26.2612-1(a)(2)(ii) has been added to provide that, if a 
transferor makes an addition to an existing trust after the death of an 
individual described in paragraph (a)(2)(i) of that section (i.e., an 
individual in the intervening generation), the additional property is 
treated as being held in a separate trust for purposes of chapter 13.
    Section 2612(a)(1) defines the term taxable termination to mean the 
termination of an interest in property held in trust unless, among 
other things, at no time after such termination may a distribution 
(including distributions on termination) be made from the trust to a 
skip person. Section 26.2612-1(b)(1)(iii), as proposed, has been 
revised to provide that, for purposes of applying this rule, potential 
distributions to skip persons are to be disregarded if the probability 
of occurrence is so remote as to be negligible. A similar rule has been 
applied to Sec. 26.2612-1(d)(2), regarding when a trust is considered a 
skip person. The probability that a distribution will occur is so 
remote as to be negligible only if it can be ascertained by actuarial 
standards that there is less than a 5 percent probability that the 
distribution will occur.
    Section 26.2612-1(c)(2) has been added to clarify that the look-
through rule in section 2651(e)(2) does not apply for purposes of 
determining whether a transfer from one trust to another trust is a 
taxable distribution. Thus, the transfer is treated as having been made 
to the recipient trust rather than to the beneficiaries of that trust. 
Accordingly, a transfer is a taxable distribution only if the recipient 
trust itself is a skip person.
    Section 26.2612-1(e)(3) has been added to provide that, in 
determining whether a trust is a skip person, trust interests 
disclaimed pursuant to a qualified disclaimer described in section 2518 
are not taken into account.
    Example 3 has been added to Sec. 26.2612-1(f) to illustrate that a 
transfer to a trust pursuant to which a beneficiary who is a skip 
person has a withdrawal power is not a direct skip unless the trust is 
a skip person.
    Example 9 has been added to Sec. 26.2612-1(f) to illustrate that a 
taxable termination may occur upon the distribution of the entire trust 
property (less amounts retained to pay a resulting GST tax and 
administration expenses).
    Example 14 contained in Sec. 26.2612-1(f) of the proposed 
regulations illustrates that an individual is not treated as having an 
interest in a trust 

[[Page 66900]]
for purposes of Chapter 13, if the individual's support obligation 
could be satisfied at the discretion of the trustee. This example has 
been renumbered as Example 15 and has been clarified to provide that an 
individual will have an interest in the trust if the trustee is 
required to make distributions for the beneficiary's support, in 
satisfaction of the individual's support obligation.
Allocation of GST Exemption
    Under Sec. 26.2632-1(b)(2)(ii)(A) of the proposed regulations, a 
late allocation of GST exemption is effective on the date the Form 709 
reporting the allocation is filed, and is deemed to precede in point of 
time any taxable event occurring on that date. This section has been 
revised to specify that the Form 709 is treated as filed on the date it 
is mailed to the appropriate IRS Service Center. Further, the late 
allocation may be made on a timely filed Form 709 reporting another 
transfer.
    Section 26.2632-1(b)(2)(ii)(B) has been added to clarify how the 
GST exemption allocated on a Federal gift tax return (Form 709) is to 
be apportioned in the event that the amount allocated on the return 
exceeds the value of the transfers reported on the return.
    Example 4 of Sec. 26.2632-1(b)(2)(iii) of the proposed regulations 
has been revised to better illustrate the effective date of a late 
allocation of GST exemption.
    Example 5 of Sec. 26.2632-1(b)(2)(iii) has been added to illustrate 
the automatic allocation of GST exemption to inter vivos direct skips 
in situations where split gift treatment is elected on an initial gift 
tax return filed after its due date.
    Section 26.2632-1(d)(1) has been revised to provide that a late 
allocation of GST exemption made by an executor with respect to an 
inter vivos transfer not included in the gross estate, is effective as 
of the date the allocation is filed. This rule does not apply to any 
automatic allocation under section 2632(b)(1). This revision conforms 
the regulation to section 2642(b)(3).
Estate Tax Inclusion Period
    As proposed, Sec. 26.2632-1(c)(2)(ii) provided that an estate tax 
inclusion period (ETIP) exists during the period in which the 
transferred property would have been includible in the transferor's 
gross estate had the transferor retained an interest held by the 
transferor's spouse, but only to the extent the spouse acquired the 
interest from the transferor in an inter vivos transfer that was not 
included in the transferor's taxable gifts or for which a deduction was 
allowed under section 2523. Commentators stated that there was no 
support in the statute for this spousal rule, and any such rule would 
require a legislative change. The final regulations eliminate this 
spousal rule and Example 5 of Sec. 26.2632-1(c)(5).
    Section 26.2632-1(c)(2)(ii)(A) has been added to provide that the 
ETIP rules do not apply when the possibility that the property will be 
included in the gross estate of the transferor (or the transferor's 
spouse) is so remote as to be negligible.
    Further, Sec. 26.2632-1(c)(2)(ii)(B) has been added to provide that 
transferred property will not be treated as being subject to inclusion 
in the transferor's spouse's gross estate, and thus, subject to an 
ETIP, where the only power possessed by the spouse is a right to 
withdraw no more than the greater of 5 percent or $5,000 of the trust's 
corpus and the withdrawal right terminates within 60 days of the 
transfer to the trust.
    Section 26.2632-1(c)(5) Example 3, of the proposed regulations 
illustrates that if a transferor's spouse elects gift-splitting 
treatment with respect to the transferor's gift that is subject to an 
ETIP, the spouse is treated as the transferor of one-half of the gift. 
The example has been expanded to illustrate that, since the spouse's 
deemed transfer is subject to an ETIP, if the spouse dies prior to the 
termination of the trust, the spouse's executor may allocate GST 
exemption to the trust. However, the allocation will not be effective 
until the ETIP terminates on the transferor's death.

Erroneous Allocations

    Under the proposed regulations, allocations in excess of the amount 
of the property transferred are void. This treatment has been expanded 
under the final regulations. Thus, any allocation to a trust that has 
no GST potential at the time of the allocation, with respect to the 
transferor for whom the allocation is made, is also void. This 
provision is intended to prevent the wasting of GST exemption because 
of an erroneous allocation with respect to a testamentary or inter 
vivos transfer. A trust will have no GST potential only if there is no 
possibility that a GST will be made from the trust with respect to the 
transferor.
Determination of Applicable Fraction
    Section 26.2642-1(b)(2) of the proposed regulations provided rules 
for determining the inclusion ratio with respect to a trust subject to 
an ETIP where GSTs are made from the trust during the ETIP. Comments 
were received that the rules were unclear regarding whether an 
ineffective allocation, i.e., an allocation made prior to any 
distributions or terminations, would apply in determining the amount of 
the transferor's unused GST exemption, or whether such an allocation 
could be modified prior to an ETIP termination. In response to the 
comments, Sec. 26.2632-1(c)(1) (providing rules for the allocation of 
exemption with respect to a trust subject to an ETIP) and Sec. 26.2642-
1(b)(2) clarify that an allocation made to a trust subject to an ETIP 
prior to any distribution or termination is not subject to modification 
or revocation. However, the allocation will not be effective, i.e., the 
allocation does not operate to fix the inclusion ratio of the trust, at 
the time it is made. Rather, the allocation becomes effective as of the 
date of a subsequent distribution or termination. Section 26.2632-
1(c)(5) Example 2, illustrates this point.
    Section 26.2642-2 of the proposed regulations provides valuation 
rules for determining the denominator of the applicable fraction under 
section 2642. Section 26.2642-2(a)(1) of the final regulations 
specifies that, in the case of a timely allocation of GST exemption 
with respect to an inter vivos transfer, the denominator of the 
applicable fraction is the fair market value of the transferred 
property, as finally determined for gift tax purposes.
    Section 26.2642-2(b)(1) of the proposed regulations provides 
special rules for determining the denominator of the applicable 
fraction in situations involving property subject to the special 
valuation rules contained in section 2032A. Under the proposed 
regulations, the special use value of the property could only be used 
in determining the applicable fraction if the property was transferred 
in a direct skip. Thus, a generation-skipping trust to which section 
2032A property was transferred in a transfer that was not a direct skip 
would not receive the benefit of the favorable valuation rules of 
section 2032A in determining the applicable fraction with respect to 
the trust.
    Comments stated that the proposed regulation was inconsistent with 
section 2642(b), which provides that the chapter 11 value must be used 
to determine the applicable fraction in the case of a testamentary 
transfer. Under the final regulations, the section 2032A value of 
property is to be used to determine the applicable fraction for a 
direct skip transfer and for a generation-skipping trust created in a 
transfer other than a direct skip.
    In the event that additional estate tax is imposed under section 
2032A(c) with respect to the property, then the 

[[Page 66901]]
applicable fraction is redetermined as of the transferor's date of 
death. Thus, the GST tax liability with respect to any direct skip, 
taxable termination, or taxable distribution occurring prior to the 
recapture event would be recomputed based on the redetermined 
applicable fraction, and an additional GST tax would be due. The 
taxation of any future GST transfers would also be based on the 
redetermined applicable fraction.
    Sections 26.2642-2(b) (2) and (3) of the proposed regulations 
contain special rules for determining the denominator of the applicable 
fraction in situations involving residuary and pecuniary payments. 
Generally, in the case of a residual GST after the payment of a 
pecuniary amount, the denominator of the applicable fraction will be 
the estate tax value of the total assets available to satisfy the 
pecuniary payment less the amount of the pecuniary payment, provided 
the pecuniary payment carries ``appropriate interest'' as defined in 
Sec. 26.2642-2(b)(4). Under Sec. 26.2642-2(b)(4)(ii), the payment need 
not carry appropriate interest if, inter alia, the payment is 
irrevocably ``set aside'' within 15 months of the transferor's death. 
The final regulations clarify that this exception to the appropriate 
interest requirement applies only if the entire payment is set aside. 
Further, the payment is treated as set aside if the amount is 
segregated and held in a separate account pending distribution. 
Finally, under the proposed regulation, the appropriate interest 
requirement can be satisfied if a pro rata share of estate income is 
allocated to the pecuniary bequest. The final regulations clarify that 
the payment of income may be allocated pursuant to the terms of the 
governing instrument or applicable local law.
    Section 26.2642-4(a)(3) of the proposed regulations addresses a 
situation where a lifetime allocation is made with respect to a trust 
when the trust was not subject to an ETIP, and the trust is 
subsequently included in the transferor's gross estate. The regulation 
has been revised to provide that, if additional GST exemption is 
allocated to the trust, the nontax portion of the trust is determined 
immediately after the date of the transferor's death. Also, if 
additional GST exemption is not allocated to the trust by the 
transferor's executor, the applicable fraction does not change, if the 
trust was not otherwise subject to an ETIP at the time the previous 
allocation of GST exemption was made. Further, where such property is 
included in the gross estate, the denominator of the applicable 
fraction is reduced to reflect any federal or state estate or 
inheritance tax paid by the trust.
Definition of Transferor
    Section 26.2652-1(a)(1) of the proposed regulations, defining 
transferor, has been revised to specify that a surviving spouse is 
treated as the transferor of a qualified domestic trust (QDOT) 
described in section 2056A that is included in the surviving spouse's 
gross estate for federal estate tax purposes, assuming the trust is not 
subject to a reverse QTIP election under section 2652(a)(3). The 
surviving spouse is also the transferor of any QDOT created by the 
surviving spouse under section 2056(d)(2)(B).
    Section 26.2652-1(a)(4), as proposed, provided that the creator of 
a special power of appointment will be treated as making a transfer 
subject to estate or gift tax (and thus be considered a transferor) if 
the holder of the power exercised the power in a manner that may 
postpone vesting, etc., of the property subject to the power beyond the 
permissible perpetuities period. This result is inconsistent with 
section 2041(a)(3), which treats the holder of the power as making a 
transfer under these circumstances. Accordingly, the regulation has 
been revised to provide that the holder of the power will be treated as 
making a taxable transfer, if the holder exercises the power in the 
manner prescribed.
    Section 26.2652-1(a)(5) has been added to specify that where a 
donor's spouse consents to have the donor's gift treated as made one-
half by the spouse, then for purposes of chapter 13, the spouse is 
treated as the transferor of one-half of the property transferred by 
the donor. Thus, if a donor transfers property to a trust and retains a 
qualified interest as defined in section 2702(b), with the remainder to 
a grandchild, a consenting spouse would be treated as the transferor of 
one-half the entire property. It was suggested that the spouse should 
only be treated as the transferor of that portion of the trust 
corresponding to one-half of the actuarial value of the interest 
passing to the grandchild, since under section 2513, only one half the 
gift to the grandchild may be treated as made by the consenting spouse. 
However, treating the consenting spouse as the transferor of one-half 
of the entire trust is consistent with the general treatment accorded 
other split-interest transfers. For example, if a transferor 
transferred property in trust retaining an interest that qualified 
under section 2702(b), with the remainder to the transferor's 
grandchild, the transferor would be considered the transferor of the 
entire trust for purposes of chapter 13, notwithstanding that, from a 
technical standpoint, only the actuarial value of the gift to the 
grandchild is subject to gift tax at the time of the transfer.
    Example 8 in Sec. 26.2652-1(a)(6) has been added illustrating that 
a surviving spouse will not be treated as making a contribution to a 
QTIP trust that is included in the spouse's gross estate and is subject 
to a reverse QTIP election, where the spouse directs in the will that 
the estate tax generated by the inclusion of the trust is to be paid 
from the spouse's probate estate.
Separate Shares Treated as Separate Trusts
    Section 26.2654-1 of the proposed regulations provides rules under 
which ``separate shares'' of a single trust that satisfy the 
requirements of the regulations will be recognized as separate trusts 
for GST purposes.
    Under the proposed regulations, a mandatory payment of a pecuniary 
amount is treated as a separate share of a trust (and thus, a separate 
trust for GST purposes) if certain conditions are satisfied. The 
section is clarified to specify that a mandatory payment is a payment 
that is nondiscretionary and noncontingent; i.e., the payment must be 
made in all events.
    A sentence was added to Example 3, now contained in Sec. 26.2654-
1(a)(5), to clarify that, where a decedent's probate estate pours over 
to a revocable trust, and then amounts are distributed pursuant to the 
terms of the trust, the distributions will be treated as separate 
shares for purposes of chapter 13.
    Example 4, now contained in Sec. 26.2654-1(a)(5), has been revised 
to specify that the bequest of a pecuniary amount payable in kind is 
not treated as a separate share of the trust, since, under the facts 
presented, neither the trust nor local law requires that the assets 
distributed in satisfaction of the bequest fairly reflect net 
appreciation and depreciation. This is the result regardless of whether 
the assets are distributed within 15 months of the transferor's death.
    Comments received suggested that the regulations should allow 
separate trust treatment whenever a single inter vivos trust was 
recognized as separate trusts under local law. For example, an inter 
vivos trust provides income to child for life, but when each grandchild 
reaches age 35, a separate trust is to be established for the child, 
the grandchild, and the grandchild's issue. Comments suggested that the 
Service should recognize each trust established when a grandchild 
reaches age 35 as a separate trust, and allow a late allocation of GST 

[[Page 66902]]
exemption specifically to that trust when severance occurs.
    This suggestion was rejected. Generally, the adoption of this 
approach would effectively allow the allocation of GST exemption to 
specific distributions from a GST trust, rather than to the entire 
trust. This result would be contrary to the clear language of the 
statute. See, e.g., sections 2642(a)(1)(A) and (a)(2).
Division of a Single Trust Into Separate Trusts
    Under Sec. 26.2654-1(c) of the proposed regulations, a testamentary 
trust could be severed into several parts, provided the severance was 
commenced prior to the filing of the estate tax return. Further, the 
new trusts created pursuant to the severance had to be identical to the 
old trusts. For example, a testamentary trust providing for income to 
spouse, remainder to be divided equally between child and grandchild 
could only be severed into two trusts both providing income to spouse 
with the remainder to be divided between child and grandchild. Finally, 
an inter vivos trust could not be severed unless it consisted of 
separate shares, or different transferors had contributed to the trust.
    The regulation has been clarified to specify that the division of a 
single trust that is included in the transferor's gross estate will be 
recognized if either: (1) The single trust consists of separate shares 
and is thus, treated as separate trusts; or (2) the single trust, 
although not consisting of separate shares, is severed into separate 
trusts pursuant to a direction in the governing instrument providing 
that the trust is to be divided into separate trusts on the 
transferor's death; or (3) the governing instrument does not require or 
direct severance but the trust is severed pursuant to the discretionary 
authority of the trustee granted under the governing instrument or 
local law.
    The final regulations provide that the trusts resulting from the 
severance of a single testamentary trust need not be identical. Thus, 
if the trust provides income to spouse, remainder to child and 
grandchild, the trust may be severed to create two trusts, one with 
income to spouse, remainder to child and a second with income to spouse 
remainder to grandchild. This result could be achieved through proper 
estate planning in any event. However, the regulations make it clear 
that the resulting trusts must provide for the same succession of 
interests as provided for under the original trusts. Thus, a trust 
providing for an income interest to a child, with remainder to a 
grandchild, could not be divided into one trust for the child (equal in 
value to the child's income interest) and another for the grandchild.
    The proposed regulations provided that the new trusts must be 
funded with a fractional share of each and every asset held by the 
original single trust. The provision has been revised to provide that 
the new trusts may also be funded on a nonpro rata basis, based on the 
fair market value of the assets selected on the date of severance. 
Thus, the executor or trustee may select the assets with which to fund 
each trust, and need not fractionalize each asset.
    An example has been added to illustrate that, if a revocable trust 
included in the transferor's gross estate is, under the terms of the 
trust, divided into multiple trusts on the transferor's death, then 
each trust established will be treated as a separate trust for GST 
purposes.
Due Date of Return
    New Sec. 26.2662-1(d)(2) has been added to provide that the due 
date of the return with respect to a taxable termination subject to an 
election under section 2624(c) (relating to alternate valuation in 
accordance with section 2032) is April 15th of the following year in 
which the taxable termination occurred or on or before the 15th day of 
the tenth month following the month in which the death that resulted in 
the taxable termination occurred, whichever is later.
Application of Chapter 13 to Nonresident Aliens
    Section 2663(2) requires that the Commissioner prescribe 
regulations, consistent with the provisions of chapters 11 and 12, 
providing for the application of the GST tax to a nonresident alien 
(NRA). In general, under Sec. 26.2663-2(b) as proposed, the GST tax 
applied to inter vivos and testamentary direct skip transfers by a NRA, 
to the extent that the transferred property was U.S. situs property 
such that the transfer was subject to a gift tax (in the case of inter 
vivos transfers) or an estate tax (in the case of testamentary 
transfers). Similarly, in the case of transfers in trust, chapter 13 
applied to taxable terminations and distributions to the extent the 
initial transfer to the trust (whether inter vivos or testamentary) 
consisted of U.S. situs property, such that the initial transfer was 
subject to the gift or estate tax. This was the case regardless of the 
situs of the property at the time of the actual distribution or 
termination and regardless of the residency or citizenship of the skip 
person receiving the beneficial interest or property.
    Under Sec. 26.2663-2(c) as proposed, if the property involved in a 
generation-skipping transfer was not situated in the U.S. at the time 
of the initial transfer, the generation-skipping transfer was still 
subject to the GST tax if: (1) At the time of the direct skip, taxable 
termination or distribution, the property passes to a skip person who 
is a U.S. resident or citizen; and (2) at the time of the initial 
transfer to the skip person or trust, a lineal descendant of the 
transferor, who is a lineal ancestor of the skip person, was a resident 
or citizen of the U.S. This rule applied regardless of the situs of the 
property at the time of the actual distribution or termination. Section 
26.2663-2(f) of the proposed regulations provided for the automatic 
allocation of a NRA's $1,000,000 GST exemption regardless of whether 
the transfer was a direct skip.
    Thus, the proposed regulations subjected non-U.S. situs property to 
the GST tax based on the status of the skip person/recipient of the 
property at the time the property was received, and the status of the 
generation that was skipped at the time of the initial transfer to the 
trust or skip person.
    Many comments were critical of this approach. In general, these 
comments emphasized that the estate and gift tax provisions subject 
transfers by NRAs to transfer tax based on the situs of the property, 
not the status of the recipient. Therefore, the proposed regulations 
conflict with section 2663, which provides that the regulations should 
be consistent with the principles of chapters 11 and 12 of the Internal 
Revenue Code (Code). Further, the commentators argued that treating a 
NRA who transfers non-U.S. situs property as a transferor for GST tax 
purposes would conflict with the definition of transferor under section 
2652, since the transfer would not be subject to estate or gift tax. 
Under section 2652, an individual is a transferor only to the extent 
the transfer is subject to U.S. gift tax or estate tax.
    The proposed regulations have been revised to address these 
concerns. Thus, the rules in the proposed regulations applying chapter 
13 to transfers of property that were not subject to estate or gift tax 
have been eliminated. Under the final regulations, the application of 
the GST tax will be limited to situations where an estate or gift tax 
is imposed on the property. Thus, the GST tax will apply to inter vivos 
and testamentary direct skip transfers by a NRA transferor to the 
extent a gift tax is imposed on the transfer (in the case of an inter 
vivos transfer) or the transferred property is 

[[Page 66903]]
included in the transferor's gross estate (in the case of a 
testamentary direct skip). In the case of taxable terminations and 
taxable distributions, chapter 13 will apply to the extent a gift tax 
was imposed on the initial transfer to the trust, or the property was 
included in the transferor's gross estate. Accordingly, under the final 
regulations (in the absence of a situation involving an ETIP), the 
application of Chapter 13 is generally dependent on the situs of the 
property at the time of the initial transfer. The regulations contain 
special rules for determining the applicable fraction and inclusion 
ratio where a trust is funded with both U.S. and foreign situs 
property.
    In general, the rules of Sec. 26.2632-1 apply with respect to the 
allocation of the exemption. However, the ETIP rule provided in 
Sec. 26.2632-1(c) applies only if the property transferred by the NRA 
is subsequently included in the transferor's gross estate. The final 
regulations provide transitional relief with respect to NRA's who made 
GST transfers and relied on the automatic allocation rules in the 
proposed regulations.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Small Business Administration for comment on its 
impact on small business.
    Drafting Information. The principal author of these regulations is 
James F. Hogan, Office of the Chief Counsel, IRS. Other personnel from 
the IRS and Treasury Department participated in their development.

List of Subjects

26 CFR Part 26

    Estate taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

26 CFR part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 26, 301, and 602 are amended as follows:
    Paragraph 1. Part 26 is revised to read as follows:

PART 26--GENERATION-SKIPPING TRANSFER TAX REGULATIONS UNDER THE TAX 
REFORM ACT OF 1986

Sec.
26.2600-1  Table of contents.
26.2601-1  Effective dates.
26.2611-1  Generation-skipping transfer defined.
26.2612-1  Definitions.
26.2613-1  Skip person.
26.2632-1  Allocation of GST exemption.
26.2641-1  Applicable rate of tax.
26.2642-1  Inclusion ratio.
26.2642-2  Valuation.
26.2642-3  Special rule for charitable lead annuity trusts.
26.2642-4  Redetermination of applicable fraction.
26.2642-5  Finality of inclusion ratio.
26.2652-1  Transferor defined; other definitions.
26.2652-2  Special election for qualified terminable interest 
property.
26.2653-1  Taxation of multiple skips.
26.2654-1  Certain trusts treated as separate trusts.
26.2662-1  Generation-skipping transfer tax return requirements.
26.2663-1  Recapture tax under section 2032A.
26.2663-2  Application of chapter 13 to transfers by nonresidents 
not citizens of the United States.

    Authority: 26 U.S.C. 7805 and 26 U.S.C. 2663.

    Section 26.2632-1 also issued under 26 U.S.C. 2632 and 2663.
    Section 26.2642-4 also issued under 26 U.S.C. 2632 and 2663.
    Section 26.2662-1 also issued under 26 U.S.C. 2662.
    Section 26.2663-2 also issued under 26 U.S.C. 2632 and 2663.

Sec. 26.2600-1  Table of contents.

    This section lists the captions that appear in the regulations 
under sections 2601 through 2663.

Sec. 26.2601-1  Effective dates.

    (a) Transfers subject to the generation-skipping transfer tax.
    (1) In general.
    (2) Certain transfers treated as if made after October 22, 1986.
    (3) Certain trust events treated as if occurring after October 
22, 1986.
    (4) Example.
    (b) Exceptions.
    (1) Irrevocable trusts.
    (2) Transition rule for wills or revocable trusts executed 
before October 22, 1986.
    (3) Transition rule in the case of mental incompetency.
    (4) Exceptions to additions rule.
    (c) Additional effective dates.

Sec. 26.2611-1  Generation-skipping transfer defined.

Sec. 26.2612-1  Definitions.

    (a) Direct skip.
    (1) In general.
    (2) Special rule for certain lineal descendants.
    (b) Taxable termination.
    (1) In general.
    (2) Partial termination.
    (c) Taxable distribution.
    (1) In general.
    (2) Look-through rule not to apply.
    (d) Skip person.
    (e) Interest in trust.
    (1) In general.
    (2) Exceptions.
    (3) Disclaimers.
    (f) Examples.

Sec. 26.2613-1  Skip person.

Sec. 26.2632-1  Allocation of GST exemption.

    (a) General rule.
    (b) Lifetime allocations.
    (1) Automatic allocation to direct skips.
    (2) Allocation to other transfers.
    (c) Special rules during an estate tax inclusion period.
    (1) In general.
    (2) Estate tax inclusion period defined.
    (3) Termination of an ETIP.
    (4) Treatment of direct skips.
    (5) Examples.
    (d) Allocations after the transferor's death.
    (1) Allocation by executor.
    (2) Automatic allocation after death.

Sec. 26.2641-1  Applicable rate of tax.

Sec. 26.2642-1  Inclusion ratio.

    (a) In general.
    (b) Numerator of applicable fraction.
    (1) In general.
    (2) GSTs occurring during an ETIP.
    (c) Denominator of applicable fraction.
    (1) In general.
    (2) Zero denominator.
    (3) Nontaxable gifts.
    (d) Examples.

Sec. 26.2642-2  Valuation.

    (a) Lifetime transfers.
    (1) In general.
    (2) Special rule for late allocations during life.
    (b) Transfers at death.
    (1) In general.
    (2) Special rule for pecuniary payments.
    (3) Special rule for residual transfers after payment of a 
pecuniary payment.
    (4) Appropriate interest.
    (c) Examples.

Sec. 26.2642-3  Special rule for charitable lead annuity trusts.

    (a) In general.
    (b) Adjusted GST exemption defined.
    (c) Example.
    
[[Page 66904]]

Sec. 26.2642-4  Redetermination of applicable fraction.

    (a) In general.
    (1) Multiple transfers to a single trust.
    (2) Consolidation of separate trusts.
    (3) Property included in transferor's gross estate.
    (4) Imposition of recapture tax under section 2032A.
    (b) Examples.

Sec. 26.2642-5  Finality of inclusion ratio.

    (a) Direct skips.
    (b) Other GSTs.

Sec. 26.2652-1  Transferor defined; other definitions.

    (a) Transferor defined.
    (1) In general.
    (2) Transfers subject to Federal estate or gift tax.
    (3) Special rule for certain QTIP trusts.
    (4) Exercise of certain nongeneral powers of appointment.
    (5) Split-gift transfers.
    (6) Examples.
    (b) Trust defined.
    (1) In general.
    (2) Examples.
    (c) Trustee defined.
    (d) Executor defined.
    (e) Interest in trust.

Sec. 26.2652-2  Special election for qualified terminable interest 
property.

    (a) In general.
    (b) Time and manner of making election.
    (c) Transitional rule.
    (d) Examples.

Sec. 26.2653-1  Taxation of multiple skips.

    (a) General rule.
    (b) Examples.

Sec. 26.2654-1  Certain trusts treated as separate trusts.

    (a) Single trust treated as separate trusts.
    (1) Substantially separate and independent shares.
    (2) Multiple transferors with respect to a single trust.
    (3) Severance of a single trust.
    (4) Allocation of exemption.
    (5) Examples.
    (b) Division of a trust included in the gross estate.
    (1) In general.
    (2) Special rule.
    (3) Allocation of exemption.
    (4) Example.

Sec. 26.2662-1  Generation-skipping transfer tax return 
requirements.

    (a) In general.
    (b) Form of return.
    (1) Taxable distributions.
    (2) Taxable terminations.
    (3) Direct skip.
    (c) Person liable for tax and required to make return.
    (1) In general.
    (2) Special rule for direct skips occurring at death with 
respect to property held in trust arrangements.
    (3) Limitation on personal liability of trustee.
    (4) Exceptions.
    (d) Time and manner of filing return.
    (1) In general.
    (2) Exceptions for alternative valuation of taxable termination.
    (e) Place for filing returns.
    (f) Lien on property.

Sec. 26.2663-1  Recapture tax under section 2032A.

Sec. 26.2663-2  Application of chapter 13 to transfers by 
nonresidents not citizens of the United States.

    (a) In general.
    (b) Transfers subject to Chapter 13.
    (1) Direct skips.
    (2) Taxable distributions and taxable terminations.
    (c) Trusts funded in part with property subject to Chapter 13 
and in part with property not subject to Chapter 13.
    (1) In general.
    (2) Nontax portion of the trust.
    (3) Special rule with respect to estate tax inclusion period.
    (d) Examples.
    (e) Transitional rule for allocations for transfers made before 
December 27, 1995.

26.2601-1  Effective dates.

    (a) Transfers subject to the generation-skipping transfer tax--(1) 
In general. Except as otherwise provided in this section, the 
provisions of chapter 13 of the Internal Revenue Code of 1986 (Code) 
apply to any generation-skipping transfer (as defined in section 2611) 
made after October 22, 1986.
    (2) Certain transfers treated as if made after October 22, 1986. 
Solely for purposes of chapter 13, an inter vivos transfer is treated 
as if it were made on October 23, 1986, if it was--
    (i) Subject to chapter 12 (regardless of whether a tax was actually 
incurred or paid); and
    (ii) Made after September 25, 1985, but before October 23, 1986. 
For purposes of this paragraph, the value of the property transferred 
shall be the value of the property on the date the property was 
transferred.
    (3) Certain trust events treated as if occurring after October 22, 
1986. For purposes of chapter 13, if an inter vivos transfer is made to 
a trust after September 25, 1985, but before October 23, 1986, any 
subsequent distribution from the trust or termination of an interest in 
the trust that occurred before October 23, 1986, is treated as 
occurring immediately after the deemed transfer on October 23, 1986. If 
more than one distribution or termination occurs with respect to a 
trust, the events are treated as if they occurred on October 23, 1986, 
in the same order as they occurred. See paragraph (b)(1)(iv)(B) of this 
section for rules determining the portion of distributions and 
terminations subject to tax under chapter 13. This paragraph (a)(3) 
does not apply to transfers to trusts not subject to chapter 13 by 
reason of the transition rules in paragraphs (b) (2) and (3) of this 
section. The provisions of this paragraph (a)(3) do not apply in 
determining the value of the property under chapter 13.
    (4) Example. The following example illustrates the principle that 
paragraph (a)(2) of this section is not applicable to transfers under a 
revocable trust that became irrevocable by reason of the transferor's 
death after September 25, 1985, but before October 23, 1986:

    Example. T created a revocable trust on September 30, 1985, that 
became irrevocable when T died on October 10, 1986. Although the 
trust terminated in favor of a grandchild of T, the transfer to the 
grandchild is not treated as occurring on October 23, 1986, pursuant 
to paragraph (a)(2) of this section because it is not an inter vivos 
transfer subject to chapter 12. The transfer is not subject to 
chapter 13 because it is in the nature of a testamentary transfer 
that occurred prior to October 23, 1986.

    (b) Exceptions--(1) Irrevocable trusts--(i) In general. The 
provisions of chapter 13 do not apply to any generation-skipping 
transfer under a trust (as defined in section 2652(b)) that was 
irrevocable on September 25, 1985. The rule of the preceding sentence 
does not apply to a pro rata portion of any generation-skipping 
transfer under an irrevocable trust if additions are made to the trust 
after September 25, 1985. See paragraph (b)(1)(iv) of this section for 
rules for determining the portion of the trust that is subject to the 
provisions of chapter 13.
    (ii) Irrevocable trust defined--(A) In general. Unless otherwise 
provided in either paragraph (b)(1)(ii) (B) or (C) of this section, any 
trust (as defined in section 2652(b)) in existence on September 25, 
1985, is considered an irrevocable trust.
    (B) Property includible in the gross estate under section 2038. For 
purposes of this chapter a trust is not an irrevocable trust to the 
extent that, on September 25, 1985, the settlor held a power with 
respect to such trust that would have caused the value of the trust to 
be included in the settlor's gross estate for Federal estate tax 
purposes by reason of section 2038 (without regard to powers 
relinquished before September 25, 1985) if the settlor had died on 
September 25, 1985. A trust is considered subject to a power on 
September 25, 1985, even though the exercise of the power was subject 
to the precedent giving of notice, or even though the exercise could 
take effect only on the expiration of a stated period, whether or not 
on or before September 25, 1985, notice had been given or the power had 
been exercised. 

[[Page 66905]]
A trust is not considered subject to a power if the power is, by its 
terms, exercisable only on the occurrence of an event or contingency 
not subject to the settlor's control (other than the death of the 
settlor) and if the event or contingency had not in fact taken place on 
September 25, 1985.
    (C) Property includible in the gross estate under section 2042. A 
policy of insurance on an individual's life that is treated as a trust 
under section 2652(b) is not considered an irrevocable trust to the 
extent that, on September 25, 1985, the insured possessed any incident 
of ownership (as defined in Sec. 20.2042-1(c) of this chapter, and 
without regard to any incidents of ownership relinquished before 
September 25, 1985), that would have caused the value of the trust, 
(i.e., the insurance proceeds) to be included in the insured's gross 
estate for Federal estate tax purposes by reason of section 2042, if 
the insured had died on September 25, 1985.
    (D) Examples. The following examples illustrate the application of 
this paragraph (b)(1):

    Example 1. Section 2038 applicable. On September 25, 1985, T, 
the settlor of a trust that was created before September 25, 1985, 
held a testamentary power to add new beneficiaries to the trust. T 
held no other powers over any portion of the trust. The testamentary 
power held by T would have caused the trust to be included in T's 
gross estate under section 2038 if T had died on September 25, 1985. 
Therefore, the trust is not an irrevocable trust for purposes of 
this section.
    Example 2. Section 2038 not applicable when power held by a 
person other than settlor. On September 25, 1985, S, the spouse of 
the settlor of a trust in existence on that date, had an annual 
right to withdraw a portion of the principal of the trust. The trust 
was otherwise irrevocable on that date. Because the power was not 
held by the settlor of the trust, it is not a power described in 
section 2038. Thus, the trust is considered an irrevocable trust for 
purposes of this section.
    Example 3. Section 2038 not applicable. In 1984, T created a 
trust and retained the right to expand the class of remaindermen to 
include any of T's afterborn grandchildren. As of September 25, 
1985, all of T's grandchildren were named remaindermen of the trust. 
Since the exercise of T's power was dependent on there being 
afterborn grandchildren who were not members of the class of 
remaindermen, a contingency that did not exist on September 25, 
1985, the trust is not considered subject to the power on September 
25, 1985, and is an irrevocable trust for purposes of this section. 
The result is not changed even if grandchildren are born after 
September 25, 1985, whether or not T exercises the power to expand 
the class of remaindermen.
    Example 4. Section 2042 applicable. On September 25, 1985, T 
purchased an insurance policy on T's own life and designated child, 
C, and grandchild, GC, as the beneficiaries. T retained the power to 
obtain from the insurer a loan against the surrender value of the 
policy. T's insurance policy is a trust (as defined in section 
2652(b)) for chapter 13 purposes. The trust is not considered an 
irrevocable trust because, on September 25, 1985, T possessed an 
incident of ownership that would have caused the value of the policy 
to be included in T's gross estate under section 2042 if T had died 
on that date.
    Example 5. Trust partially irrevocable. In 1984, T created a 
trust naming T's grandchildren as the income and remainder 
beneficiaries. T retained the power to revoke the trust as to one-
half of the principal at any time prior to T's death. T retained no 
other powers over the trust principal. T did not die before 
September 25, 1985, and did not exercise or release the power before 
that date. The half of the trust not subject to T's power to revoke 
is an irrevocable trust for purposes of this section.

    (iii) Trust containing qualified terminable interest property--(A) 
In general. For purposes of chapter 13, a trust described in paragraph 
(b)(1)(ii) of this section that holds qualified terminable interest 
property by reason of an election under section 2056(b)(7) or section 
2523(f) (made either on, before or after September 25, 1985) is treated 
in the same manner as if the decedent spouse or the donor spouse (as 
the case may be) had made an election under section 2652(a)(3). Thus, 
transfers from such trusts are not subject to chapter 13, and the 
decedent spouse or the donor spouse (as the case may be) is treated as 
the transferor of such property. The rule of this paragraph (b)(1)(iii) 
does not apply to that portion of the trust that is subject to chapter 
13 by reason of an addition to the trust occurring after September 25, 
1985. See Sec. 26.2652-2(a) for rules where an election under section 
2652(a)(3) is made. See Sec. 26.2652-2(c) for rules where a portion of 
a trust is subject to an election under section 2652(a)(3).
    (B) Examples. The following examples illustrate the application of 
this paragraph (b)(1)(iii):

    Example 1. QTIP election made after September 25, 1985. On March 
28, 1985, T established a trust. The trust instrument provided that 
the trustee must distribute all income annually to T's spouse, S, 
during S's life. Upon S's death, the remainder is to be distributed 
to GC, the grandchild of T and S. On April 15, 1986, T elected under 
section 2523(f) to treat the property in the trust as qualified 
terminable interest property. On December 1, 1987, S died and soon 
thereafter the trust assets were distributed to GC. Because the 
trust was irrevocable on September 25, 1985, the transfer to GC is 
not subject to tax under chapter 13. T is treated as the transferor 
with respect to the transfer of the trust assets to GC in the same 
manner as if T had made an election under section 2652(a)(3) to 
reverse the effect of the section 2523(f) election for chapter 13 
purposes.
    Example 2. Section 2652(a)(3) election deemed to have been made. 
Assume the same facts as in Example 1, except the trust instrument 
provides that after S's death all income is to be paid annually to 
C, the child of T and S. Upon C's death, the remainder is to be 
distributed to GC. C died on October 1, 1992, and soon thereafter 
the trust assets are distributed to GC. Because the trust was 
irrevocable on September 25, 1985, the termination of C's interest 
is not subject to chapter 13.

    (iv) Additions to irrevocable trusts--(A) In general. If an 
addition is made after September 25, 1985, to an irrevocable trust 
which is excluded from chapter 13 by reason of paragraph (b)(1) of this 
section, a pro rata portion of subsequent distributions from (and 
terminations of interests in property held in) the trust is subject to 
the provisions of chapter 13. If an addition is made, the trust is 
thereafter deemed to consist of two portions, a portion not subject to 
chapter 13 (the non-chapter 13 portion) and a portion subject to 
chapter 13 (the chapter 13 portion), each with a separate inclusion 
ratio (as defined in section 2642(a)). The non-chapter 13 portion 
represents the value of the assets of the trust as it existed on 
September 25, 1985. The applicable fraction (as defined in section 
2642(a)(2)) for the non-chapter 13 portion is deemed to be 1 and the 
inclusion ratio for such portion is 0. The chapter 13 portion of the 
trust represents the value of all additions made to the trust after 
September 25, 1985. The inclusion ratio for the chapter 13 portion is 
determined under section 2642. This paragraph (b)(1)(iv)(A) requires 
separate portions of one trust only for purposes of determining 
inclusion ratios. For purposes of chapter 13, a constructive addition 
under paragraph (b)(1)(v) of this section is treated as an addition. 
See paragraph (b)(4) of this section for exceptions to the additions 
rule of this paragraph (b)(1)(iv). See Sec. 26.2654-1(a)(2) for rules 
treating additions to a trust by an individual other than the initial 
transferor as a separate trust for purposes of chapter 13.
    (B) Terminations of interests in and distributions from trusts. 
Where a termination or distribution described in section 2612 occurs 
with respect to a trust to which an addition has been made, the portion 
of such termination or distribution allocable to the chapter 13 portion 
is determined by reference to the allocation fraction, as defined in 
paragraph (b)(1)(iv)(C) of this section. In the case of a termination 
described in section 2612(a) with respect to a trust, the portion of 
such termination that is 

[[Page 66906]]
subject to chapter 13 is the product of the allocation fraction and the 
value of the trust (to the extent of the terminated interest therein). 
In the case of a distribution described in section 2612(b) from a 
trust, the portion of such distribution that is subject to chapter 13 
is the product of the allocation fraction and the value of the property 
distributed.
    (C) Allocation fraction--(1) In general. The allocation fraction 
allocates appreciation and accumulated income between the chapter 13 
and non-chapter 13 portions of a trust. The numerator of the allocation 
fraction is the amount of the addition (valued as of the date the 
addition is made), determined without regard to whether any part of the 
transfer is subject to tax under chapter 11 or chapter 12, but reduced 
by the amount of any Federal or state estate or gift tax imposed and 
subsequently paid by the recipient trust with respect to the addition. 
The denominator of the allocation fraction is the total value of the 
entire trust immediately after the addition. For purposes of this 
paragraph (b)(1)(iv)(C), the total value of the entire trust is the 
fair market value of the property held in trust (determined under the 
rules of section 2031), reduced by any amount attributable to or paid 
by the trust and attributable to the transfer to the trust that is 
similar to an amount that would be allowable as a deduction under 
section 2053 if the addition had occurred at the death of the 
transferor, and further reduced by the same amount that the numerator 
was reduced to reflect Federal or state estate or gift tax incurred by 
and subsequently paid by the recipient trust with respect to the 
addition. Where there is more than one addition to principal after 
September 25, 1985, the portion of the trust subject to chapter 13 
after each such addition is determined pursuant to a revised fraction. 
In each case, the numerator of the revised fraction is the sum of the 
value of the chapter 13 portion of the trust immediately before the 
latest addition, and the amount of the latest addition. The denominator 
of the revised fraction is the total value of the entire trust 
immediately after the addition. If the transfer to the trust is a 
generation-skipping transfer, the numerator and denominator are reduced 
by the amount of the generation-skipping transfer tax, if any, that is 
imposed by chapter 13 on the transfer and actually recovered from the 
trust. The allocation fraction is rounded off to five decimal places 
(.00001).
    (2) Examples. The following examples illustrate the application of 
paragraph (b)(1)(iv) of this section. In each of the examples, assume 
that the recipient trust does not pay any Federal or state transfer tax 
by reason of the addition.

    Example 1. Post September 25, 1985, addition to trust. (i) On 
August 16, 1980, T established an irrevocable trust. Under the trust 
instrument, the trustee is required to distribute the entire income 
annually to T's child, C, for life, then to T's grandchild, GC, for 
life. Upon GC's death, the remainder is to be paid to GC's issue. On 
October 1, 1986, when the total value of the entire trust is 
$400,000, T transfers $100,000 to the trust. The allocation fraction 
is computed as follows:
[GRAPHIC][TIFF OMITTED]TR27DE95.002

    (ii) Thus, immediately after the transfer, 20 percent of the 
value of future generation-skipping transfers under the trust will 
be subject to chapter 13.
    Example 2. Effect of expenses. Assume the same facts as in 
Example 1, except immediately prior to the transfer on October 1, 
1986, the fair market value of the individual assets in the trust 
totaled $400,000. Also, assume that the trust had accrued and unpaid 
debts, expenses, and taxes totaling $300,000. Assume further that 
the entire $300,000 represented amounts that would be deductible 
under section 2053 if the trust were includible in the transferor's 
gross estate. The numerator of the allocation fraction is $100,000 
and the denominator of the allocation fraction is $200,000 
(($400,000-$300,000)+$100,000). Thus, the allocation fraction is .5 
($100,000/$200,000) and 50 percent of the value of future 
generation-skipping transfers will be subject to chapter 13.
    Example 3. Multiple additions. (i) Assume the same facts as in 
Example 1, except on January 30, 1988, when the total value of the 
entire trust is $600,000, T transfers an additional $40,000 to the 
trust. Before the transfer, the value of the portion of the trust 
that was attributable to the prior addition was $120,000 
($600,000 x .2). The new allocation fraction is computed as follows:
[GRAPHIC][TIFF OMITTED]TR27DE95.003

    (ii) Thus, immediately after the transfer, 25 percent of the 
value of future generation-skipping transfers under the trust will 
be subject to chapter 13.
    Example 4. Allocation fraction at time of generation-skipping 
transfer. Assume the same facts as in Example 3, except on March 1, 
1989, when the value of the trust is $800,000, C dies. A generation-
skipping transfer occurs at C's death because of the termination of 
C's life estate. Therefore, $200,000 ($800,000 x .25) is subject to 
tax under chapter 13.

    (v) Constructive additions--(A) Powers of Appointment. Except as 
provided in paragraph (b)(1)(v)(B) of this section, where any portion 
of a trust remains in the trust after the post-September 25, 1985, 
release, exercise, or lapse of a power of appointment over that portion 
of the trust, and the release, exercise, or lapse is treated to any 
extent as a taxable transfer under chapter 11 or chapter 12, the value 
of the entire portion of the trust subject to the power that was 
released, exercised, or lapsed is treated as if that portion had been 
withdrawn and immediately retransferred to the trust at the time of the 
release, exercise, or lapse. The creator of the power will be 
considered the transferor of the addition except to the extent that the 
release, exercise, or lapse of the power is treated as a taxable 
transfer under chapter 11 or chapter 12. See Sec. 26.2652-1 for rules 
for determining the identity of the transferor of property for purposes 
of chapter 13.
    (B) Special rule for certain powers of appointment. The release, 
exercise, or lapse of a power of appointment (other than a general 
power of appointment as defined in section 2041(b)) is not treated as 
an addition to a trust if--
    (1) Such power of appointment was created in an irrevocable trust 
that is not subject to chapter 13 under paragraph (b)(1) of this 
section; and
    (2) In the case of an exercise, the power of appointment is not 
exercised in a manner that may postpone or 

[[Page 66907]]
suspend the vesting, absolute ownership or power of alienation of an 
interest in property for a period, measured from the date of creation 
of the trust, extending beyond any life in being at the date of 
creation of the trust plus a period of 21 years plus, if necessary, a 
reasonable period of gestation (the perpetuities period). For purposes 
of this paragraph (b)(1)(v)(B)(2), the exercise of a power of 
appointment that validly postpones or suspends the vesting, absolute 
ownership or power of alienation of an interest in property for a term 
of years that will not exceed 90 years (measured from the date of 
creation of the trust) will not be considered an exercise that 
postpones or suspends vesting, absolute ownership or the power of 
alienation beyond the perpetuities period. If a power is exercised by 
creating another power, it is deemed to be exercised to whatever extent 
the second power may be exercised.
    (C) Constructive addition if liability is not paid out of trust 
principal. Where a trust described in paragraph (b)(1) of this section 
is relieved of any liability properly payable out of the assets of such 
trust, the person or entity who actually satisfies the liability is 
considered to have made a constructive addition to the trust in an 
amount equal to the liability. The constructive addition occurs when 
the trust is relieved of liability (e.g., when the right of recovery is 
no longer enforceable). But see Sec. 26.2652-1(a)(3) for rules 
involving the application of section 2207A in the case of an election 
under section 2652(a)(3).
    (D) Examples. The following examples illustrate the application of 
this paragraph (b)(1)(v):

    Example 1. Lapse of a power of appointment. On June 19, 1980, T 
established an irrevocable trust with a corpus of $500,000. The 
trust instrument provides that the trustee shall distribute the 
entire income from the trust annually to T's spouse, S, during S's 
life. At S's death, the remainder is to be distributed to T and S's 
grandchild, GC. T also gave S a general power of appointment over 
one-half of the trust assets. On December 21, 1989, when the value 
of the trust corpus is $1,500,000, S died without having exercised 
the general power of appointment. The value of one-half of the trust 
corpus, $750,000 ($1,500,000  x  .5) is included in S's gross estate 
under section 2041(a) and is subject to tax under Chapter 11. 
Because the value of one-half of the trust corpus is subject to tax 
under Chapter 11 with respect to S's estate, S is treated as the 
transferor of that property for purposes of Chapter 13 (see section 
2652(a)(1)(A)). For purposes of the generation-skipping transfer 
tax, the lapse of S's power of appointment is treated as if $750,000 
($1,500,000  x  .5) had been distributed to S and then transferred 
back to the trust. Thus, S is considered to have added $750,000 
($1,500,000  x  .5) to the trust at the date of S's death. Because 
this constructive addition occurred after September 25, 1985, 50 
percent of the corpus of the trust became subject to Chapter 13 at 
S's death.
    Example 2. Multiple actual additions. On June 19, 1980, T 
established an irrevocable trust with a principal of $500,000. The 
trust instrument provides that the trustee shall distribute the 
entire income from the trust annually to T's spouse, S, during S's 
life. At S's death, the remainder is to be distributed to GC, the 
grandchild of T and S. On October 1, 1985, when the trust assets 
were valued at $800,000, T added $200,000 to the trust. After the 
transfer on October 1, 1985, the allocation fraction was .2 
($200,000/$1,000,000). On December 21, 1989, when the value of the 
trust principal is $1,000,000, T adds $1,000,000 to the trust. After 
this addition, the new allocation fraction is 0.6 ($1,200,000/
$2,000,000). The numerator of the fraction is the value of that 
portion of trust assets that were subject to chapter 13 immediately 
prior to the addition (by reason of the first addition), $200,000 
(.2  $1,000,000), plus the value of the second transfer, 
$1,000,000, which equals $1,200,000. The denominator of the 
fraction, $2,000,000, is the total value of the trust assets 
immediately after the second transfer. Thus, 60 percent of the 
principal of the trust becomes subject to chapter 13.
    Example 3. Entire portion of trust subject to lapsed power is 
treated as an addition. On September 25, 1985, B possessed a general 
power of appointment over the assets of an irrevocable trust that 
had been created by T in 1980. Under the terms of the trust, B's 
power lapsed on July 20, 1987. For Federal gift tax purposes, B is 
treated as making a gift of ninety-five percent (100%--5%) of the 
value of the principal (see section 2514). However, because the 
entire trust was subject to the power of appointment, 100 percent 
(that portion of the trust subject to the power) of the assets of 
the trust are treated as a constructive addition. Thus, the entire 
amount of all generation-skipping transfers occurring pursuant to 
the trust instrument after July 20, 1987, are subject to chapter 13.
    Example 4. Exercise of power of appointment in favor of another 
trust. On March 1, 1985, T established an irrevocable trust as 
defined in paragraph (b)(1)(ii) of this section. Under the terms of 
the trust instrument, the trustee is required to distribute the 
entire income annually to T's child, C, for life, then to T's 
grandchild, GC, for life. GC has the power to appoint any or all of 
the trust assets to Trust 2 which is an irrevocable trust (as 
defined in paragraph (b)(1)(ii) of this section) that was 
established on August 1, 1985. The terms of Trust 2's governing 
instrument provide that the trustee shall pay income to T's great 
grandchild, GGC, for life. Upon GGC's death the remainder is to be 
paid to GGC's issue. GGC was alive on March 1, 1985, when Trust 1 
was created. C died on April 1, 1986. On July 1, 1987, GC exercised 
the power of appointment. The exercise of GC's power does not 
subject future transfers from Trust 2 to tax under chapter 13 
because the exercise of the power in favor of Trust 2 does not 
suspend the vesting, absolute ownership, or power of alienation of 
an interest in property for a period, measured from the date of 
creation of Trust 1, extending beyond the life of GGC (a beneficiary 
under Trust 2 who was in being at the date of creation of Trust 1) 
plus a period of 21 years. The result would be the same if Trust 2 
had been created after the effective date of chapter 13.
    Example 5. Exercise of power of appointment in favor of another 
trust. Assume the same facts as in Example 3, except that GGC was 
born on March 28, 1986. The valid exercise of GC's power in favor of 
Trust 2 causes the principal of Trust 1 to be subject to chapter 13, 
because GGC was not born until after the creation of Trust 1. Thus, 
such exercise may suspend the vesting, absolute ownership, or power 
of alienation of an interest in the trust principal for a period, 
measured from the date of creation of Trust 1, extending beyond the 
life of GGC (a beneficiary under Trust 2 who was not a life in being 
at the date of creation of Trust 1).
    Example 6. Extension for the longer of two periods. Prior to the 
effective date of chapter 13, GP established an irrevocable trust 
under which the trust income was to be paid to GP's child, C, for 
life. C was given a testamentary power to appoint the remainder in 
further trust for the benefit of C's issue. In default of C's 
exercise of the power, the remainder was to pass to charity. C died 
on February 3, 1995, survived by a child who was alive when GP 
established the trust. C exercised the power in a manner that 
validly extends the trust in favor of C's issue until the latter of 
May 15, 2064 (80 years from the date the trust was created), or the 
death of C's child plus 21 years. C's exercise of the power is a 
constructive addition to the trust because the exercise may extend 
the trust for a period longer than the permissible periods of either 
the life of C's child (a life in being at the creation of the trust) 
plus 21 years or a term not more than 90 years measured from the 
creation of the trust. On the other hand, if C's exercise of the 
power could extend the trust based only on the life of C's child 
plus 21 years or only for a term of 80 years from the creation of 
the trust (but not the later of the two periods) then the exercise 
of the power would not have been a constructive addition to the 
trust.
    Example 7. Extension for the longer of two periods. The facts 
are the same as in Example 6 exce

FR Doc. 95-30873 Generation-Skipping Transfer Tax

pt local law provides that the 
effect of C's exercise is to extend the term of the trust until May 
15, 2064, whether or not C's child predeceases that date by more 
than 21 years. C's exercise is not a constructive addition to the 
trust because C exercised the power in a manner that cannot postpone 
or suspend vesting, absolute ownership, or power of alienation for a 
term of years that will exceed 90 years. The result would be the 
same if the effect of C's exercise is either to extend the term of 
the trust until 21 years after the death of C's child or to extend 
the term of the trust until the first to occur of May 15, 2064 or 21 
years after the death of C's child.

    (vi) Appreciation and income. Except to the extent that the 
provisions of paragraphs (b)(1)(iv) and (v) of this 

[[Page 66908]]
section allocate subsequent appreciation and accumulated income between 
the original trust and additions thereto, appreciation in the value of 
the trust and undistributed income added thereto are not considered an 
addition to the principal of a trust.
    (2) Transition rule for wills or revocable trusts executed before 
October 22, 1986--(i) In general. The provisions of chapter 13 do not 
apply to any generation-skipping transfer under a will or revocable 
trust executed before October 22, 1986, provided that--
    (A) The document in existence on October 21, 1986, is not amended 
at any time after October 21, 1986, in any respect which results in the 
creation of, or an increase in the amount of, a generation-skipping 
transfer;
    (B) In the case of a revocable trust, no addition is made to the 
revocable trust after October 21, 1986, that results in the creation 
of, or an increase in the amount of, a generation-skipping transfer; 
and
    (C) The decedent dies before January 1, 1987.
    (ii) Revocable trust defined. For purposes of this section, the 
term revocable trust means any trust (as defined in section 2652(b)) 
except to the extent that, on October 22, 1986, the trust--
    (A) Was an irrevocable trust described in paragraph (b)(1) of this 
section; or
    (B) Would have been an irrevocable trust described in paragraph 
(b)(1) of this section had it not been created or become irrevocable 
after September 25, 1985, and before October 22, 1986.
    (iii) Will or revocable trust containing qualified terminable 
interest property. The rules contained in paragraph (b)(1)(iii) of this 
section apply to any will or revocable trust within the scope of the 
transition rule of this paragraph (b)(2).
    (iv) Amendments to will or revocable trust. For purposes of this 
paragraph (b)(2), an amendment to a will or a revocable trust in 
existence on October 21, 1986, is not considered to result in the 
creation of, or an increase in the amount of, a generation-skipping 
transfer where the amendment is--
    (A) Basically administrative or clarifying in nature and only 
incidentally increases the amount transferred; or
    (B) Designed to ensure that an existing bequest or transfer 
qualifies for the applicable marital or charitable deduction for 
estate, gift, or generation-skipping transfer tax purposes and only 
incidentally increases the amount transferred to a skip person or to a 
generation-skipping trust.
    (v) Creation of, or increase in the amount of, a GST. In 
determining whether a particular amendment to a will or revocable trust 
creates, or increases the amount of, a generation-skipping transfer for 
purposes of this paragraph (b)(2), the effect of the instrument(s) in 
existence on October 21, 1986, is measured against the effect of the 
instrument(s) in existence on the date of death of the decedent or on 
the date of any prior generation-skipping transfer. If the effect of an 
amendment cannot be immediately determined, it is deemed to create, or 
increase the amount of, a generation-skipping transfer until a 
determination can be made.
    (vi) Additions to revocable trusts. Any addition made after October 
21, 1986, but before the death of the settlor, to a revocable trust 
subjects all subsequent generation-skipping transfers under the trust 
to the provisions of chapter 13. Any addition made to a revocable trust 
after the death of the settlor (if the settlor dies before January 1, 
1987) is treated as an addition to an irrevocable trust. See paragraph 
(b)(1)(v) of this section for rules involving constructive additions to 
trusts. See paragraph (b)(1)(v)(B) of this section for rules providing 
that certain transfers to trusts are not treated as additions for 
purposes of this section.
    (vii) Examples. The following examples illustrate the application 
of paragraph (b)(2)(iv) of this section:
    (A) Facts applicable to Examples 1 through 5. In each of Examples 1 
through 5 assume that T executed a will prior to October 22, 1986, and 
that T dies on December 31, 1986.

    Example 1. Administrative change. On November 1, 1986, T 
executes a codicil to T's will removing one of the co-executors 
named in the will. Although the codicil may have the effect of 
lowering administrative costs and thus increasing the amount 
transferred, it is considered administrative in nature and thus does 
not cause generation-skipping transfers under the will to be subject 
to chapter 13.
    Example 2. Effect of amendment not immediately determinable. On 
November 1, 1986, T executes a codicil to T's will revoking a 
bequest of $100,000 to C, a non-skip person (as defined under 
section 2613(b)) and causing that amount to be added to a residuary 
trust held for a skip person. The amendment is deemed to increase 
the amount of a generation-skipping transfer and prevents any 
transfers under the will from qualifying under paragraph (b)(2)(i) 
of this section. If, however, C dies before T and under local law 
the property would have been added to the residue in any event 
because the bequest would have lapsed, the codicil is not considered 
an amendment that increases the amount of a generation-skipping 
transfer.
    Example 3. Refund of tax paid because of amendment. T's will 
provided that an amount equal to the maximum allowable marital 
deduction would pass to T's spouse with the residue of the estate 
passing to a trust established for the benefit of skip persons. On 
October 23, 1986, the will is amended to provide that the marital 
share passing to T's spouse shall be the lesser of the maximum 
allowable marital deduction or the minimum amount that will result 
in no estate tax liability for T's estate. The amendment may 
increase the amount of a generation-skipping transfer. Therefore, 
any generation-skipping transfers under the will are subject to tax 
under chapter 13. If it becomes apparent that the amendment does not 
increase the amount of a generation-skipping transfer, a claim for 
refund may be filed with respect to any generation-skipping transfer 
tax that was paid within the period set forth in section 6511. For 
example, it would become apparent that the amendment did not result 
in an increase in the residue if it is subsequently determined that 
the maximum marital deduction and the minimum amount that will 
result in no estate tax liability are equal in amount.
    Example 4. An amendment that increases a generation-skipping 
transfer causes complete loss of exempt status. T's will provided 
for the creation of two trusts for the benefit of skip persons. On 
November 1, 1986, T executed a codicil to the will specifically 
increasing the amount of a generation-skipping transfer under the 
will. All transfers made pursuant to the will or either of the 
trusts created thereunder are precluded from qualifying under the 
transition rule of paragraph (b)(2)(i) of this section and are 
subject to tax under chapter 13.
    Example 5. Corrective action effective. Assume that T in Example 
4 later executes a second codicil deleting the increase to the 
generation-skipping transfer. Because the provision increasing a 
generation-skipping transfer does not become effective, it is not 
considered an amendment to a will in existence on October 22, 1986.

    (B) Facts applicable to Examples 6 through 9. T created a trust on 
September 30, 1985, in which T retained the power to revoke the 
transfer at any time prior to T's death. The trust provided that, upon 
the death of T, the income was to be paid to T's spouse, W, for life 
and then to A, B, and C, the children of T's sibling, S, in equal 
shares for life, with one-third of the principal to be distributed per 
stirpes to each child's surviving issue upon the death of the child. 
The trustee has the power to make discretionary distributions of trust 
principal to T's sibling, S.

    Example 6. Amendment that affects only a person who is not a 
skip person. A became disabled, and T modified the trust on December 
1, 1986, to increase A's share of the income. Since the amendment 
does not result in the creation of, or increase in the amount of, a 
generation-skipping transfer, 

[[Page 66909]]
transfers pursuant to the trust are not subject to chapter 13.
    Example 7. Amendment increasing skip person's share. Assume that 
A, B, and C are the grandchildren of S rather than the children (and 
thus are skip persons as defined in section 2613). T's amendment of 
the trust increasing A's share of the income subjects the trust to 
the provisions of chapter 13 because the amendment increases the 
amount of the generation-skipping transfers to be made to A.
    Example 8. Amendment that adds a skip person. Assume that T 
amends the trust to add T's grandchild, D, as an income beneficiary. 
The trust will be subject to the provisions of chapter 13 because 
the amendment creates a generation-skipping transfer.
    Example 9. Refund of tax paid during interim period when effect 
of amendment is not determinable. Assume that T amends the trust to 
provide that the issue of S are to take a one-fourth share of the 
principal per stirpes upon S's death. Because the distribution to be 
made upon S's death may involve skip persons, the amendment is 
considered an amendment that creates or increases the amount of a 
generation-skipping transfer until a determination can be made. 
Accordingly, any distributions from (or terminations of interests 
in) such trust are subject to chapter 13 until it is determined that 
no skip person has been added to the trust. At that time, a claim 
for refund may be filed within the period set forth in section 6511 
with respect to any generation-skipping transfer tax that was paid.

    (3) Transition rule in the case of mental incompetency--(i) In 
general. If an individual was under a mental disability to change the 
disposition of his or her property continuously from October 22, 1986, 
until the date of his or her death, the provisions of chapter 13 do not 
apply to any generation-skipping transfer-(A) Under a trust (as defined 
in section 2652(b)) to the extent such trust consists of property, or 
the proceeds of property, the value of which was included in the gross 
estate of the individual (other than property transferred by or on 
behalf of the individual during the individual's life after October 22, 
1986); or
    (B) Which is a direct skip (other than a direct skip from a trust) 
that occurs by reason of the death of the individual.
    (ii) Mental disability defined. For purposes of this paragraph 
(b)(2), the term mental disability means mental incompetence to execute 
an instrument governing the disposition of the individual's property, 
whether or not there was an adjudication of incompetence and regardless 
of whether there has been an appointment of a guardian, fiduciary, or 
other person charged with either the care of the individual or the care 
of the individual's property.
    (iii) Decedent who has not been adjudged mentally incompetent. If 
there has not been a court adjudication that the decedent was mentally 
incompetent on or before October 22, 1986, the executor must file, with 
Form 706, either--
    (A) A certification from a qualified physician stating that the 
decedent was--
    (1) mentally incompetent at all times on and after October 22, 
1986; and
    (2) did not regain competence to modify or revoke the terms of the 
trust or will prior to his or her death; or
    (B) Sufficient other evidence demonstrating that the decedent was 
mentally incompetent at all times on and after October 22, 1986, as 
well as a statement explaining why no certification is available from a 
physician; and
    (C) Any judgment or decree relating to the decedent's incompetency 
that was made after October 22, 1986. Such items will be considered 
relevant, but not determinative, in establishing the decedent's state 
of competency.
    (iv) Decedent who has been adjudged mentally incompetent. If the 
decedent has been adjudged mentally incompetent on or before October 
22, 1986, a copy of the judgment or decree, and any modification 
thereof, must be filed with the Form 706.
    (v) Rule applies even if another person has power to change trust 
terms. In the case of a transfer from a trust, this paragraph (b)(3) 
applies even though a person charged with the care of the decedent or 
the decedent's property has the power to revoke or modify the terms of 
the trust, provided that the power is not exercised after October 22, 
1986, in a manner that creates, or increases the amount of, a 
generation-skipping transfer. See paragraph (b)(2)(iv) of this section 
for rules concerning amendments that create or increase the amount of a 
generation-skipping transfer.
    (vi) Example. The following example illustrates the application of 
paragraph (b)(3)(v) of this section:

    Example. T was mentally incompetent on October 22, 1986, and 
remained so until death in 1993. Prior to becoming incompetent, T 
created a revocable generation-skipping trust that was includible in 
T's gross estate. Prior to October 22, 1986, the appropriate court 
issued an order under which P, who was thereby charged with the care 
of T's property, had the power to modify or revoke the revocable 
trust. Although P exercised the power after October 22, 1986, and 
while T was incompetent, the power was not exercised in a manner 
that created, or increased the amount of, a generation-skipping 
transfer. Thus, the existence and exercise of P's power did not 
cause the trust to lose its exempt status under paragraph (b)(3) of 
this section. The result would be the same if the court order was 
issued after October 22, 1986.

    (4) Exceptions to additions rule--(i) In general. Any addition to a 
trust made pursuant to an instrument or arrangement covered by the 
transition rules in paragraph (b) (2) or (3) of this section is not 
treated as an addition for purposes of this section. Moreover, any 
property transferred inter vivos to a trust is not treated as an 
addition if the same property would have been added to the trust 
pursuant to an instrument covered by the transition rules in paragraph 
(b) (2) or (3) of this section.
    (ii) Examples. The following examples illustrate the application of 
paragraph (b)(4)(i) of this section:

    Example 1. Addition pursuant to terms of exempt instrument. On 
December 31, 1980, T created an irrevocable trust having a principal 
of $100,000. Under the terms of the trust, the principal was to be 
held for the benefit of T's grandchild, GC. Pursuant to the terms of 
T's will, a document entitled to relief under the transition rule of 
paragraph (b)(2) of this section, the residue of the estate was paid 
to the trust. Because the addition to the trust was paid pursuant to 
the terms of an instrument (T's will) that is not subject to the 
provisions of chapter 13 because of paragraph (b)(2) of this 
section, the payment to the trust is not considered an addition to 
the principal of the trust. Thus, distributions to or for the 
benefit of GC, are not subject to the provisions of chapter 13.
    Example 2. Property transferred inter vivos that would have been 
transferred to the same trust by the transferor's will. T is the 
grantor of a trust that was irrevocable on September 25, 1985. T's 
will, which was executed before October 22, 1986, and not amended 
thereafter, provides that, upon T's death, the entire estate will 
pour over into T's trust. On October 1, 1985, T transfers $100,000 
to the trust. While T's will otherwise qualifies for relief under 
the transition rule in paragraph (b)(2) of this section, the 
transition rule is not applicable unless T dies prior to January 1, 
1987. Thus, if T dies after December 31, 1986, the transfer is 
treated as an addition to the trust for purposes of any distribution 
made from the trust after the transfer to the trust on October 1, 
1985. If T dies before January 1, 1987, the entire trust (as well as 
any distributions from or terminations of interests in the trust 
prior to T's death) is exempt, under paragraph (b)(2) of this 
section, from chapter 13 because the $100,000 would have been added 
to the trust under a will that would have qualified under paragraph 
(b)(2) of this section. In either case, for any generation-skipping 
transfers made after the transfer to the trust on October 1, 1985, 
but before T's death, the $100,000 is treated as an addition to the 
trust and a proportionate amount of the trust is subject to chapter 
13.
    Example 3. Pour over to a revocable trust. T and S are the 
settlors of separate revocable trusts with equal values. Both trusts 
were established for the benefit of skip persons (as 

[[Page 66910]]
defined in section 2613). S dies on December 1, 1985, and under the 
provisions of S's trust, the principal pours over into T's trust. If 
T dies before January 1, 1987, the entire trust is excluded under 
paragraph (b)(2) of this section from the operation of chapter 13. 
If T dies after December 31, 1986, the entire trust is subject to 
the generation-skipping transfer tax provisions because T's trust is 
not a trust described in paragraph (b)(1) or (2) of this section. In 
the latter case, the fact that S died before January 1, 1987, is 
irrelevant because the principal of S's trust was added to a trust 
that never qualified under the transition rules of paragraph (b)(1) 
or (2) of this section.
    Example 4. Pour over to exempt trust. Assume the same facts as 
in Example 3, except upon the death of S on December 1, 1985, S's 
trust continues as an irrevocable trust and that the principal of 
T's trust is to be paid over upon T's death to S's trust. Again, if 
T dies before January 1, 1987, S's entire trust falls within the 
provisions of paragraph (b)(2) of this section. However, if T dies 
after December 31, 1986, the pour-over is considered an addition to 
the trust. Therefore, S's trust is not a trust excluded under 
paragraph (b)(2) of this section because an addition is made to the 
trust.
    Example 5. Lapse of a general power of appointment. S, the 
spouse of the settlor of an irrevocable trust that was created in 
1980, had, on September 25, 1985, a general power of appointment 
over the trust assets. The trust provides that should S fail to 
exercise the power of appointment the property is to remain in the 
trust. On October 21, 1986, S executed a will under which S failed 
to exercise the power of appointment. If S dies before January 1, 
1987, without having exercised the power in a manner which results 
in the creation of, or increase in the amount of, a generation-
skipping transfer (or amended the will in a manner that results in 
the creation of, or increase in the amount of, a generation-skipping 
transfer), transfers pursuant to the trust or the will are not 
subject to chapter 13 because the trust is an irrevocable trust and 
the will qualifies under paragraph (b)(2) of this section.
    Example 6. Lapse of general power of appointment held by 
intestate decedent. Assume the same facts as in Example 5, except on 
October 22, 1986, S did not have a will and that S dies after that 
date. Upon S's death, or upon the prior exercise or release of the 
power, the value of the entire trust is treated as having been 
distributed to S, and S is treated as having made an addition to the 
trust in the amount of the entire principal. Any distribution or 
termination pursuant to the trust occurring after S's death is 
subject to chapter 13. It is immaterial whether S's death occurs 
before January 1, 1987, since paragraph (b)(2) of this section is 
only applicable where a will or revocable trust was executed before 
October 22, 1986.

    (c) Additional effective dates. Except as otherwise provided, the 
regulations under Secs. 26.2611-1, 26.2612-1, 26.2613-1, 26.2632-1, 
26.2641-1, 26.2642-1, 26.2642-2, 26.2642-3, 26.2642-4, 26.2642-5, 
26.2652-1, 26.2652-2, 26.2653-1, 26.2654-1, 26.2663-1, and 26.2663-2 
are effective with respect to generation-skipping transfers as defined 
in Sec. 26.2611-1 made on or after [December 27, 1995]. However, 
taxpayers may, at their option, rely on these regulations in the case 
of generation-skipping transfers made, and trusts that became 
irrevocable, after December 23, 1992, and before December 27, 1995.

Sec. 26.2611-1  Generation-skipping transfer defined.

    A generation-skipping transfer (GST) is an event that is either a 
direct skip, a taxable distribution, or a taxable termination. See 
Sec. 26.2612-1 for the definition of these terms. The determination as 
to whether an event is a GST is made by reference to the most recent 
transfer subject to the estate or gift tax. See Sec. 26.2652-1(a)(2) 
for determining whether a transfer is subject to Federal estate or gift 
tax.

Sec. 26.2612-1   Definitions.

    (a) Direct skip--(1) In general. A direct skip is a transfer to a 
skip person that is subject to Federal estate or gift tax. If property 
is transferred to a trust, the transfer is a direct skip only if the 
trust is a skip person. Only one direct skip occurs when a single 
transfer of property skips two or more generations. See paragraph (d) 
of this section for the definition of skip person. See Sec. 26.2652-
1(b) for the definition of trust. See Sec. 26.2632-1(c)(4) for the time 
that a direct skip occurs if the transferred property is subject to an 
estate tax inclusion period.
    (2) Special rule for certain lineal descendants--(i) In general. 
Solely for the purpose of determining whether a transfer to or for the 
benefit of a lineal descendant of the transferor, the transferor's 
spouse, or a former spouse of the transferor is a direct skip, the 
generation assignment of the descendant is determined by disregarding 
the generation of a predeceased individual who was both an ancestor of 
the descendant and a lineal descendant of the transferor, the 
transferor's spouse, or a former spouse of the transferor (a 
predeceased child). If a transfer to a trust would be a direct skip but 
for this paragraph, any generation assignment determined under this 
paragraph continues to apply in determining whether any subsequent 
distribution from (or termination of an interest in) the portion of the 
trust attributable to that transfer is a GST. A living descendant who 
dies no later than 90 days after the subject transfer is treated as 
having predeceased the transferor to the extent that either the 
governing instrument or applicable local law provides that such 
individual shall be treated as predeceasing the transferor. Except as 
provided in this paragraph (a)(2), a living descendant is not treated 
as a predeceased child solely by reason of applicable local law; e.g., 
an individual is not treated as a predeceased child solely because 
state law treats an individual executing a disclaimer as having 
predeceased the transferor of the disclaimed property. See 
Sec. 26.2652-1(a)(1) for the definition of transferor. See paragraph 
(e) of this section for the definition of interest in trust.
    (ii) Special rule. If a transferor makes an addition to an existing 
trust after the death of an individual described in paragraph (a)(2)(i) 
of this section (so that the transferor would be assigned to a lower 
generation by reason of that death), the additional property is treated 
as being held in a separate trust for purposes of chapter 13 and the 
provisions of Sec. 26.2654-1(a)(2) apply as if the portions of the 
single trust had separate transferors. Subsequent additions are treated 
as additions to the appropriate portion of the single trust.
    (b) Taxable termination--(1) In general. Except as otherwise 
provided in this paragraph (b), a taxable termination is a termination 
(occurring for any reason) of an interest in trust unless--
    (i) A transfer subject to Federal estate or gift tax occurs with 
respect to the property held in the trust at the time of the 
termination (i.e., a new transferor is determined with respect to the 
property);
    (ii) Immediately after the termination, a person who is not a skip 
person has an interest in the trust; or
    (iii) At no time after the termination may a distribution, other 
than a distribution the probability of which occurring is so remote as 
to be negligible (including a distribution at the termination of the 
trust) be made from the trust to a skip person. For this purpose, the 
probability that a distribution will occur is so remote as to be 
negligible only if it can be ascertained by actuarial standards that 
there is less than a 5 percent probability that the distribution will 
occur.
    (2) Partial termination. If a distribution of a portion of trust 
property is made to a skip person by reason of a termination occurring 
on the death of a lineal descendant of the transferor, the termination 
is a taxable termination with respect to the distributed property.
    (3) Simultaneous terminations. A simultaneous termination of two or 

[[Page 66911]]
more interests creates only one taxable termination.
    (c) Taxable distribution--(1) In general. A taxable distribution is 
a distribution of income or principal from a trust to a skip person 
unless the distribution is a taxable termination or a direct skip. If 
any portion of GST tax (including penalties and interest thereon) 
imposed on a distributee is paid from the distributing trust, the 
payment is an additional taxable distribution to the distributee. For 
purposes of chapter 13, the additional distribution is treated as 
having been made on the last day of the calendar year in which the 
original taxable distribution is made. If Federal estate or gift tax is 
imposed on any individual with respect to an interest in property held 
by a trust, the interest in property is treated as having been 
distributed to the individual to the extent that the value of the 
interest is subject to Federal estate or gift tax. See Sec. 26.2652-
1(a)(6) Example 5, regarding the treatment of the lapse of a power of 
appointment as a transfer to a trust.
    (2) Look-through rule not to apply. Solely for purposes of 
determining whether any transfer from a trust to another trust is a 
taxable distribution, the rules of section 2651(e)(2) do not apply. If 
the transferring trust and the recipient trust have the same 
transferor, see Sec. 26.2642-4(a) (1) and (2) for rules for recomputing 
the applicable fraction of the recipient trust.
    (d) Skip person. A skip person is--
    (1) An individual assigned to a generation more than one generation 
below that of the transferor (determined under the rules of section 
2651); or
    (2) A trust if--
    (i) All interests in the trust are held by skip persons; or
    (ii) No person holds an interest in the trust and no distributions, 
other than a distribution the probability of which occurring is so 
remote as to be negligible (including distributions at the termination 
of the trust), may be made after the transfer to a person other than a 
skip person. For this purpose, the probability that a distribution will 
occur is so remote as to be negligible only if it can be ascertained by 
actuarial standards that there is less than a 5 percent probability 
that the distribution will occur.
    (e) Interest in trust--(1) In general. An interest in trust is an 
interest in property held in trust as defined in section 2652(c) and 
these regulations. An interest in trust exists if a person--
    (i) Has a present right to receive trust principal or income;
    (ii) Is a permissible current recipient of trust principal or 
income and is not described in section 2055(a); or
    (iii) Is described in section 2055(a) and the trust is a charitable 
remainder annuity trust or unitrust (as defined in section 664(d)) or a 
pooled income fund (as defined in section 642(c)(5)).
    (2) Exceptions--(i) Support obligations. In general, an individual 
has a present right to receive trust income or principal if trust 
income or principal may be used to satisfy the individual's support 
obligations. However, an individual does not have an interest in a 
trust merely because a support obligation of that individual may be 
satisfied by a distribution that is either within the discretion of a 
fiduciary or pursuant to provisions of local law substantially 
equivalent to the Uniform Gifts (Transfers) to Minors Act.
    (ii) Certain interests disregarded. An interest which is used 
primarily to postpone or avoid the GST tax is disregarded for purposes 
of chapter 13. An interest is considered as used primarily to postpone 
or avoid the GST tax if a significant purpose for the creation of the 
interest is to postpone or avoid the tax.
    (3) Disclaimers. An interest does not exist to the extent it is 
disclaimed pursuant to a disclaimer that constitutes a qualified 
disclaimer under section 2518.
    (f) Examples. The following examples illustrate the provisions of 
this section. Unless stated otherwise, paragraph (a)(2) of this 
section, which assigns descendants to a higher generation when there is 
a predeceased ancestor, does not apply.

    Example 1. Direct skip. T gratuitously conveys Blackacre to T's 
grandchild. Because the transfer is a transfer to a skip person of 
property subject to Federal gift tax, it is a direct skip.
    Example 2. Direct skip of more than one generation. T 
gratuitously conveys Blackacre to T's great-grandchild. The transfer 
is a direct skip. Only one GST tax is imposed on the direct skip 
although two generations are skipped by the transfer.
    Example 3. Withdrawal power in trust. T transfers $50,000 to a 
new trust providing that trust income is to be paid to T's child, C, 
for life and, on C's death, the trust principal is to be paid to T's 
descendants. Under the terms of the trust, T grants four 
grandchildren the right to withdraw $10,000 from the trust for a 60 
day period following the transfer. Since C, who is not a skip 
person, has an interest in the trust, the trust is not a skip 
person. T's transfer to the trust is not a direct skip.
    Example 4. Taxable termination. T establishes an irrevocable 
trust under which the income is to be paid to T's child, C, for 
life. On the death of C, the trust principal is to be paid to T's 
grandchild, GC. Since C has an interest in the trust, the trust is 
not a skip person and the transfer to the trust is not a direct 
skip. If C dies survived by GC, a taxable termination occurs at C's 
death because C's interest in the trust terminates and thereafter 
the trust property is held by a skip person who occupies a lower 
generation than C.
    Example 5. Direct skip of property held in trust. T establishes 
a testamentary trust under which the income is to be paid to T's 
surviving spouse, S, for life and the remainder is to be paid to a 
grandchild of T and S. T's executor elects to treat the trust as 
qualified terminable interest property under section 2056(b)(7). The 
transfer to the trust is not a direct skip because S, a person who 
is not a skip person, holds a present right to receive income from 
the trust. Upon S's death, the trust property is included in S's 
gross estate under section 2044 and passes directly to a skip 
person. The GST occurring at that time is a direct skip because it 
is a transfer subject to chapter 11. The fact that the interest 
created by T is terminated at S's death is immaterial because S 
becomes the transferor at the time of the transfer subject to 
chapter 11.
    Example 6. Predeceased ancestor exception. T establishes an 
irrevocable trust providing that trust income is to be paid to T's 
grandchild, GC, for 5 years. At the end of the 5-year period, the 
trust is to terminate and the principal is to be distributed to GC. 
T's child, C, a parent of GC, is deceased at the time T establishes 
the trust. Therefore, GC is treated as a child of T rather than as a 
grandchild. As a result, GC is not a skip person, and the initial 
transfer to the trust is not a direct skip. Similarly, distributions 
to GC during the term of the trust and at the termination of the 
trust will not be GSTs.
    Example 7. Predeceased ancestor exception not applicable. The 
facts are the same as in Example 6, except the trust income is to be 
paid to T's spouse, S, during the first two years of the trust. 
Since S has an interest in the trust, the trust is not a skip person 
and the transfer by T is not a direct skip. Since the transfer is 
not a direct skip, the predeceased ancestor rule does not apply and 
GC is not treated as the child of T. A taxable termination occurs at 
the expiration of S's interest.
    Example 8. Taxable termination. T establishes an irrevocable 
trust for the benefit of T's child, C, T's grandchild, GC, and T's 
great-grandchild, GGC. Under the terms of the trust, income and 
principal may be distributed to any or all of the living 
beneficiaries at the discretion of the trustee. Upon the death of 
the second beneficiary to die, the trust principal is to be paid to 
the survivor. C dies first. A taxable termination occurs at that 
time because, immediately after C's interest terminates, all 
interests in the trust are held by skip persons (GC and GGC).
    Example 9. Taxable termination resulting from distribution. The 
facts are the same as in Example 8, except twenty years after C's 
death the trustee exercises its discretionary power and distributes 
the entire principal to GGC. The distribution results in a taxable 
termination because GC's interest in the trust terminates as a 
result of the distribution of 

[[Page 66912]]
the entire trust property to GGC, a skip person. The result would be 
the same if the trustee retained sufficient funds to pay the GST tax 
due by reason of the taxable termination, as well as any expenses of 
winding up the trust.
    Example 10. Simultaneous termination of interests of more than 
one beneficiary. T establishes an irrevocable trust for the benefit 
of T's child, C, T's grandchild, GC, and T's great-grandchild, GGC. 
Under the terms of the trust, income and principal may be 
distributed to any or all of the living beneficiaries at the 
discretion of the trustee. Upon the death of C, the trust property 
is to be distributed to GGC if then living. If C is survived by both 
GC and GGC, both C's and GC's interests in the trust will terminate 
on C's death. However, because both interests will terminate at the 
same time and as a result of one event, only one taxable termination 
occurs.
    Example 11. Partial taxable termination. T creates an 
irrevocable trust providing that trust income is to be paid to T's 
children, A and B, in such proportions as the trustee determines for 
their joint lives. On the death of the first child to die, one-half 
of the trust principal is to be paid to T's then living 
grandchildren. The balance of the trust principal is to be paid to 
T's grandchildren on the death of the survivor of A and B. If A 
predeceases B, the distribution occurring on the termination of A's 
interest in the trust is a taxable termination and not a taxable 
distribution. It is a taxable termination because the distribution 
is a distribution of a portion of the trust that occurs as a result 
of the death of A, a lineal descendant of T. It is immaterial that a 
portion of the trust continues and that B, a person other than a 
skip person, thereafter holds an interest in the trust.
    Example 12. Taxable distribution. T establishes an irrevocable 
trust under which the trust income is payable to T's child, C, for 
life. When T's grandchild, GC, attains 35 years of age, GC is to 
receive one-half of the principal. The remaining one-half of the 
principal is to be distributed to GC on C's death. Assume that C 
survives until GC attains age 35. When the trustee distributes one-
half of the principal to GC on GC's 35th birthday, the distribution 
is a taxable distribution because it is a distribution to a skip 
person and is neither a taxable termination nor a direct skip.
    Example 13. Exercise of withdrawal right as taxable 
distribution. The facts are the same as in Example 12, except GC 
holds a continuing right to withdraw trust principal and after one 
year GC withdraws $10,000. The withdrawal by GC is not a taxable 
termination because the withdrawal does not terminate C's interest 
in the trust. The withdrawal by GC is a taxable distribution to GC.
    Example 14. Interest in trust. T establishes an irrevocable 
trust under which the income is to be paid to T's child, C, for 
life. On the death of C, the trust principal is to be paid to T's 
grandchild, GC. Because C has a present right to receive income from 
the trust, C has an interest in the trust. Because GC cannot 
currently receive distributions from the trust, GC does not have an 
interest in the trust.
    Example 15. Support obligation. T establishes an irrevocable 
trust for the benefit of T's grandchild, GC. The trustee has 
discretion to distribute property for GC's support without regard to 
the duty or ability of GC's parent, C, to support GC. Because GC is 
a permissible current recipient of trust property, GC has an 
interest in the trust. C does not have an interest in the trust 
because the potential use of the trust property to satisfy C's 
support obligation is within the discretion of a fiduciary. C would 
be treated as having an interest in the trust if the trustee was 
required to distribute trust property for GC's support.

Sec. 26.2613-1  Skip person.

    For the definition of skip person see Sec. 26.2612-1(d).

Sec. 26.2632-1  Allocation of GST exemption.

    (a) General rule. Except as otherwise provided in this section, an 
individual or the individual's executor may allocate the individual's 
$1 million GST exemption at any time from the date of the transfer 
through the date for filing the individual's Federal estate tax return 
(including any extensions for filing that have been actually granted). 
If no estate tax return is required to be filed, the GST exemption may 
be allocated at any time through the date a Federal estate tax return 
would be due if a return were required to be filed (including any 
extensions actually granted). If property is held in trust, the 
allocation of GST exemption is made to the entire trust rather than to 
specific trust assets. If a transfer is a direct skip to a trust, the 
allocation of GST exemption to the transferred property is also treated 
as an allocation of GST exemption to the trust for purposes of future 
GSTs with respect to the trust by the same transferor.
    (b) Lifetime allocations--(1) Automatic allocation to direct 
skips--(i) In general. If a direct skip occurs during the transferor's 
lifetime, the transferor's GST exemption not previously allocated 
(unused GST exemption) is automatically allocated to the transferred 
property (but not in excess of the fair market value of the property on 
the date of the transfer). The transferor may prevent the automatic 
allocation of GST exemption by describing on a timely-filed United 
States Gift (and Generation-Skipping Transfer) Tax Return (Form 709) 
the transfer and the extent to which the automatic allocation is not to 
apply. In addition, a timely-filed Form 709 accompanied by payment of 
the GST tax (as shown on the return with respect to the direct skip) is 
sufficient to prevent an automatic allocation of GST exemption with 
respect to the transferred property. See paragraph (c)(4) of this 
section for special rules in the case of direct skips treated as 
occurring at the termination of an estate tax inclusion period.
    (ii) Time for filing Form 709. A Form 709 is timely filed if it is 
filed on or before the date required for reporting the transfer if it 
were a taxable gift (i.e., the date prescribed by section 6075(b), 
including any extensions to file actually granted (the due date)). 
Except as provided in paragraph (b)(1)(iii) of this section, the 
automatic allocation of GST exemption (or the election to prevent the 
allocation, if made) is irrevocable after the due date. An automatic 
allocation of GST exemption is effective as of the date of the transfer 
to which it relates. Except as provided above, a Form 709 need not be 
filed to report an automatic allocation.
    (iii) Transitional rule. An election to prevent an automatic 
allocation of GST exemption filed on or before January 26, 1996, 
becomes irrevocable on July 24, 1996.
    (2) Allocation to other transfers--(i) In general. An allocation of 
GST exemption to property transferred during the transferor's lifetime, 
other than in a direct skip, is made on Form 709. The allocation must 
clearly identify the trust to which the allocation is being made, the 
amount of GST exemption allocated to it, and if the allocation is late 
or if an inclusion ratio greater than zero is claimed, the value of the 
trust assets at the effective date of the allocation. See paragraph 
(b)(2)(ii) of this section. The allocation should also state the 
inclusion ratio of the trust after the allocation. Except as otherwise 
provided in this paragraph, an allocation of GST exemption may be made 
by a formula; e.g., the allocation may be expressed in terms of the 
amount necessary to produce an inclusion ratio of zero. However, 
formula allocations made with respect to charitable lead annuity trusts 
are not valid except to the extent they are dependent on values as 
finally determined for Federal estate or gift tax purposes. With 
respect to a timely allocation, an allocation of GST exemption becomes 
irrevocable after the due date of the return. Except as provided in 
Sec. 26.2642-3 (relating to charitable lead annuity trusts), an 
allocation of GST exemption to a trust is void to the extent the amount 
allocated exceeds the amount necessary to obtain an inclusion ratio of 
zero with respect to the trust. See Sec. 26.2642-1 for the definition 
of inclusion ratio. An allocation is also void if the allocation is 
made with respect to a trust that has no GST potential with respect to 
the transferor making the allocation, at the time of the allocation. 
For this purpose, a trust has GST potential even if the 

[[Page 66913]]
possibility of a GST is so remote as to be negligible.
     (ii) Effective date of allocation--(A) In general. (1) Except as 
otherwise provided, an allocation of GST exemption is effective as of 
the date of any transfer as to which the Form 709 on which it is made 
is a timely filed return (a timely allocation). If more than one timely 
allocation is made, the earlier allocation is modified only if the 
later allocation clearly identifies the transfer and the nature and 
extent of the modification. Except as provided in paragraph (d)(1) of 
this section, an allocation to a trust made on a Form 709 filed after 
the due date for reporting a transfer to the trust (a late allocation) 
is effective on the date the Form 709 is filed and is deemed to precede 
in point of time any taxable event occurring on such date. For purposes 
of this paragraph (b)(2)(ii), the Form 709 is deemed filed on the date 
it is postmarked to the Internal Revenue Service Center. See 
Sec. 26.2642-2 regarding the effect of a late allocation in determining 
the inclusion ratio, etc. See paragraph (c)(1) of this section 
regarding allocation of GST exemption to property subject to an estate 
tax inclusion period. If it is unclear whether an allocation of GST 
exemption on a Form 709 is a late or a timely allocation to a trust, 
the allocation is effective in the following order--
    (i) To any transfer to the trust disclosed on the return as to 
which the return is a timely return;
    (ii) As a late allocation; and
    (iii) To any transfer to the trust not disclosed on the return as 
to which the return would be a timely return.
    (2) A late allocation to a trust may be made on a Form 709 that is 
timely filed with respect to another transfer. A late allocation is 
irrevocable when made.
    (B) Amount of allocation. If other transfers exist with respect to 
which GST exemption could be allocated under paragraphs 
(b)(2)(ii)(A)(1) (ii) and (iii), any GST exemption allocated under 
paragraph (b)(2)(ii)(A)(1)(i) of this section is allocated in an amount 
equal to the value of the transferred property as reported on the Form 
709. Thus, if the GST exemption allocated on the Form 709 exceeds the 
value of the transfers reported on that return that have generation-
skipping potential, the initial allocation under paragraph 
(b)(2)(ii)(A)(1)(i) of this section is in the amount of the value of 
those transfers as reported on that return. Any remaining amount of GST 
exemption allocated on that return is then allocated pursuant to 
paragraphs (b)(2)(ii)(A)(1) (ii) and (iii) of this section, 
notwithstanding any subsequent upward adjustment in value of the 
transfers reported on the return.
    (iii) Examples. The following examples illustrate the provisions of 
this paragraph (b):

     Example 1. Modification of allocation of GST exemption. T 
transfers $100,000 to an irrevocable generation-skipping trust on 
December 1, 1996. The transfer to the trust is not a direct skip. 
The date prescribed for filing the gift tax return reporting the 
taxable gift is April 15, 1997. On February 10, 1997, T files a Form 
709 allocating $50,000 of GST exemption to the trust. On April 10 of 
the same year, T files an amended Form 709 allocating $100,000 of 
GST exemption to the trust in a manner that clearly indicates the 
intention to modify and supersede the prior allocation with respect 
to the 1996 transfer. The allocation made on the April 10 return 
supersedes the prior allocation because it is made on a timely-filed 
Form 709 that clearly identifies the trust and the nature and extent 
of the modification of GST exemption allocation. The allocation of 
$100,000 of GST exemption to the trust is effective as of December 
1, 1996. The result would be the same if the amended Form 709 
decreased the amount of the GST exemption allocated to the trust.
    Example 2. Modification of allocation of GST exemption. The 
facts are the same as in Example 1, except on July 10, 1997, T files 
a Form 709 attempting to reduce the earlier allocation. The return 
is not a timely-filed return. The $100,000 GST exemption allocated 
to the trust, as amended on April 10, 1997, remains in effect 
because an allocation, once made, is irrevocable and may not be 
modified after the last date on which a timely-filed Form 709 can be 
filed.
    Example 3. Effective date of late allocation of GST exemption. T 
transfers $100,000 to an irrevocable generation-skipping trust on 
December 1, 1996. The transfer to the trust is not a direct skip. 
The date prescribed for filing the gift tax return reporting the 
taxable gift is April 15, 1997. On December 1, 1997, T files a Form 
709 and allocates $50,000 to the trust. The allocation is effective 
as of December 1, 1997.
    Example 4. Effective date of late allocation of GST exemption. T 
transfers $100,000 to a generation-skipping trust on December 1, 
1996, in a transfer that is not a direct skip. T does not make an 
allocation of GST exemption on a timely-filed Form 709. On July 1, 
1997, the trustee makes a taxable distribution from the trust to T's 
grandchild in the amount of $30,000. Immediately prior to the 
distribution, the value of the trust assets was $150,000. On the 
same date, T allocates GST exemption to the trust in the amount of 
$50,000. The allocation of GST exemption on the date of the transfer 
is treated as preceding in point of time the taxable distribution. 
At the time of the GST, the trust has an inclusion ratio of .6667 (1 
- (50,000/150,000)).
    Example 5. Automatic allocation to split-gift direct skip. On 
May 15, 1996, T transfers $50,000 to a trust in a direct skip. T 
does not file a timely gift tax return electing out of the automatic 
allocation. On April 30, 1998, T and T's spouse, S, file an initial 
gift tax return for 1996 on which they consent, pursuant to section 
2513, to have the gift treated as if one-half had been made by each. 
As a result of the election under section 2513, which is retroactive 
to the date of T's transfer, T and S are each treated as the 
transferor of one-half of the property transferred in the direct 
skip. Thus, $25,000 of T's unused GST exemption and $25,000 of S's 
unused GST exemption is automatically allocated to the trust. Both 
allocations are effective on and after the date that T made the 
transfer.

    (c) Special rules during an estate tax inclusion period--(1) In 
general. An allocation of GST exemption (including an automatic 
allocation) to property subject to an estate tax inclusion period 
(ETIP) that is made prior to termination of the ETIP cannot be revoked, 
but becomes effective no earlier than the date of any termination of 
the ETIP with respect to the trust. Where an allocation has not been 
made prior to the termination of the ETIP, an allocation is effective 
at the termination of the ETIP during the transferor's lifetime if made 
by the due date for filing a Form 709 that would apply to a taxable 
gift occurring at the time the ETIP terminates (timely ETIP return). An 
allocation is effective in the case of the termination of the ETIP on 
the death of the transferor as provided in paragraph (d) of this 
section. If any part of a trust is subject to an ETIP, the entire trust 
is subject to the ETIP. See Sec. 26.2642-1(b)(2) for rules determining 
the inclusion ratio applicable in the case of GSTs during an ETIP.
    (2) Estate tax inclusion period defined--(i) In general. An ETIP is 
the period during which, should death occur, the value of transferred 
property would be includible (other than by reason of section 2035) in 
the gross estate of--
    (A) The transferor; or
    (B) The spouse of the transferor.
    (ii) Exceptions--(A) For purposes of paragraph (c)(2) of this 
section, the value of transferred property is not considered as being 
subject to inclusion in the gross estate of the transferor or the 
spouse of the transferor if the possibility that the property will be 
included is so remote as to be negligible. A possibility is so remote 
as to be negligible if it can be ascertained by actuarial standards 
that there is less than a 5 percent probability that the property will 
be included in the gross estate.
    (B) For purposes of paragraph (c)(2) of this section, the value of 
transferred property is not considered as being subject to inclusion in 
the gross estate of the spouse of the transferor, if the spouse 
possesses with respect to any transfer to the trust, a right to 
withdraw 

[[Page 66914]]
no more than the greater of $5,000 or 5 percent of the trust corpus, 
and such withdrawal right terminates no later than 60 days after the 
transfer to the trust.
    (C) The rules of this paragraph (c)(2) do not apply to qualified 
terminable interest property with respect to which the special election 
under Sec. 26.2652-2 has been made.
    (3) Termination of an ETIP. An ETIP terminates on the first to 
occur of--
    (i) The death of the transferor;
    (ii) The time at which no portion of the property is includible in 
the transferor's gross estate (other than by reason of section 2035) 
or, in the case of an individual who is a transferor solely by reason 
of an election under section 2513, the time at which no portion would 
be includible in the gross estate of the individual's spouse (other 
than by reason of section 2035);
    (iii) The time of a GST, but only with respect to the property 
involved in the GST; or
    (iv) In the case of an ETIP arising by reason of an interest or 
power held by the transferor's spouse under subsection (c)(2)(i)(B) of 
this section, at the first to occur of--
    (A) The death of the spouse; or
    (B) The time at which no portion of the property would be 
includible in the spouse's gross estate (other than by reason of 
section 2035).
    (4) Treatment of direct skips. If property transferred to a skip 
person is subject to an ETIP, the direct skip is treated as occurring 
on the termination of the ETIP.
    (5) Examples. The following examples illustrate the rules of this 
section as they apply to the termination of an ETIP during the lifetime 
of the transferor. In each example assume that T transfers $100,000 to 
an irrevocable trust:

    Example 1. Allocation of GST exemption during ETIP. The trust 
instrument provides that trust income is to be paid to T for 9 years 
or until T's prior death. The trust principal is to be paid to T's 
grandchild on the termination of T's income interest. If T dies 
within the 9-year period, the value of the trust principal is 
includible in T's gross estate under section 2036(a). Thus, the 
trust is subject to an ETIP. T files a timely Form 709 reporting the 
transfer and allocating $100,000 of GST exemption to the trust. The 
allocation of GST exemption to the trust is not effective until the 
termination of the ETIP.
    Example 2. Effect of prior allocation on termination of ETIP. 
The facts are the same as in Example 1, except the trustee has the 
power to invade trust principal on behalf of T's grandchild, GC, 
during the term of T's income interest. In year 4, when the value of 
the trust is $200,000, the trustee distributes $15,000 to GC. The 
distribution is a taxable distribution. The ETIP with respect to the 
property distributed to GC terminates at the time of the taxable 
distribution. See paragraph (c)(3)(iii) of this section. Solely for 
purposes of determining the trust's inclusion ratio with respect to 
the taxable distribution, the prior $100,000 allocation of GST 
exemption (as well as any additional allocation made on a timely 
ETIP return) is effective immediately prior to the taxable 
distribution. See Sec. 26.2642-1(b)(2). The trust's inclusion ratio 
with respect to the taxable distribution is therefore .50 
(1-(100,000/200,000)).
    Example 3. Split-gift transfers subject to ETIP. The trust 
instrument provides that trust income is to be paid to T for 9 years 
or until T's prior death. The trust principal is to be paid to T's 
grandchild on the termination of T's income interest. T files a 
timely Form 709 reporting the transfer. T's spouse, S, consents to 
have the gift treated as made one-half by S under section 2513. 
Because S is treated as transferring one-half of the property to T's 
grandchild, S becomes the transferor of one-half of the trust for 
purposes of chapter 13. Because the value of the trust would be 
includible in T's gross estate if T died immediately after the 
transfer, S's transfer is subject to an ETIP. If S should die prior 
to the termination of the trust, S's executor may allocate S's GST 
exemption to the trust, but only to the portion of the trust for 
which S is treated as the transferor. However, the allocation does 
not become effective until the earlier of the expiration of T's 
income interest or T's death.
    Example 4. Transfer of retained interest as ETIP termination. 
The trust instrument provides that trust income is to be paid to T 
for 9 years or until T's prior death. The trust principal is to be 
paid to T's grandchild on the termination of T's income interest. 
Four years after the initial transfer, T transfers the income 
interest to T's sibling. The ETIP with respect to the trust 
terminates on T's transfer of the income interest because, after the 
transfer, the trust property would not be includible in T's gross 
estate (other than by reason of section 2035) if T died at that 
time.

    (d) Allocations after the transferor's death--(1) Allocation by 
executor. Except as otherwise provided in this paragraph (d), an 
allocation of a decedent's unused GST exemption by the executor of the 
decedent's estate is made on the appropriate United States Estate (and 
Generation-Skipping Transfer) Tax Return (Form 706 or Form 706NA) filed 
on or before the date prescribed for filing the return by section 
6075(a) (including any extensions actually granted (the due date)). An 
allocation of GST exemption with respect to property included in the 
gross estate of a decedent is effective as of the date of death. A 
timely allocation of GST exemption by an executor with respect to a 
lifetime transfer of property that is not included in the transferor's 
gross estate is made on a Form 709. A late allocation of GST exemption 
by an executor, other than an allocation that is deemed to be made 
under section 2632(b)(1), with respect to a lifetime transfer of 
property is made on Form 706 or Form 706NA and is effective as of the 
date the allocation is filed. An allocation of GST exemption to a trust 
(whether or not funded at the time the Form 706 or Form 706NA is filed) 
is effective if the notice of allocation clearly identifies the trust 
and the amount of the decedent's GST exemption allocated to the trust. 
An executor may allocate the decedent's GST exemption by use of a 
formula. For purposes of this section, an allocation is void if the 
allocation is made for a trust that has no GST potential with respect 
to the transferor for whom the allocation is being made, as of the date 
of the transferor's death. For this purpose, a trust has GST potential 
even if the possibility of a GST is so remote as to be negligible.
    (2) Automatic allocation after death. A decedent's unused GST 
exemption is automatically allocated on the due date for filing Form 
706 or Form 706NA to the extent not otherwise allocated by the 
decedent's executor on or before that date. The automatic allocation 
occurs whether or not a return is actually required to be filed. Unused 
GST exemption is allocated pro rata (subject to the rules of 
Sec. 26.2642-2(b)), on the basis of the value of the property as 
finally determined for purposes of chapter 11 (chapter 11 value), first 
to direct skips treated as occurring at the transferor's death. The 
balance, if any, of unused GST exemption is allocated pro rata (subject 
to the rules of Sec. 26.2642-2(b)) on the basis of the chapter 11 value 
of the nonexempt portion of the trust property (or in the case of 
trusts that are not included in the gross estate, on the basis of the 
date of death value of the trust) to trusts with respect to which a 
taxable termination may occur or from which a taxable distribution may 
be made. The automatic allocation of GST exemption is irrevocable, and 
an allocation made by the executor after the automatic allocation is 
made is ineffective. No automatic allocation of GST exemption is made 
to a trust that will have a new transferor with respect to the entire 
trust prior to the occurrence of any GST with respect to the trust. In 
addition, no automatic allocation of GST exemption is made to a trust 
if, during the nine month period ending immediately after the death of 
the transferor--
    (i) No GST has occurred with respect to the trust; and
    (ii) At the end of such period no future GST can occur with respect 
to the trust.

[[Page 66915]]

Sec. 26.2641-1  Applicable rate of tax.

    The rate of tax applicable to any GST (applicable rate) is 
determined by multiplying the maximum Federal estate tax rate in effect 
at the time of the GST by the inclusion ratio (as defined in 
Sec. 26.2642-1). For this purpose, the maximum Federal estate tax rate 
is the maximum rate set forth under section 2001(c) (without regard to 
section 2001(c)(2)).

Sec. 26.2642-1  Inclusion ratio.

    (a) In general. Except as otherwise provided in this section, the 
inclusion ratio is determined by subtracting the applicable fraction 
(rounded to the nearest one-thousandth (.001)) from 1. In rounding the 
applicable fraction to the nearest one-thousandth, any amount that is 
midway between one one-thousandth and another one-thousandth is rounded 
up to the higher of those two amounts.
    (b) Numerator of applicable fraction--(1) In general. Except as 
otherwise provided in this paragraph (b), and in Secs. 26.2642-3 
(providing a special rule for charitable lead annuity trusts) and 
26.2642-4 (providing rules for the redetermination of the applicable 
fraction), the numerator of the applicable fraction is the amount of 
GST exemption allocated to the trust (or to the transferred property in 
the case of a direct skip not in trust).
    (2) GSTs occurring during an ETIP--(i) In general. For purposes of 
determining the inclusion ratio with respect to a taxable termination 
or a taxable distribution that occurs during an ETIP, the numerator of 
the applicable fraction is the sum of--
    (A) The GST exemption previously allocated to the trust (including 
any allocation made to the trust prior to any taxable termination or 
distribution) reduced (but not below zero) by the nontax amount of any 
prior GSTs with respect to the trust; and
    (B) Any GST exemption allocated to the trust on a timely ETIP 
return filed after the termination of the ETIP. See Sec. 26.2632-
1(c)(5) Example 2.
    (ii) Nontax amount of a prior GST. (1) The nontax amount of a prior 
GST with respect to the trust is the amount of the GST multiplied by 
the applicable fraction attributable to the trust at the time of the 
prior GST.
    (2) For rules regarding the allocation of GST exemption to property 
during an ETIP, see Sec. 26.2632-1(c).
    (c) Denominator of applicable fraction--(1) In general. Except as 
otherwise provided in this paragraph (c) and in Secs. 26.2642-3 and 
26.2642-4, the denominator of the applicable fraction is the value of 
the property transferred to the trust (or transferred in a direct skip 
not in trust) (as determined under Sec. 26.2642-2) reduced by the sum 
of--
    (i) Any Federal estate tax and any State death tax incurred by 
reason of the transfer that is chargeable to the trust and is actually 
recovered from the trust;
    (ii) The amount of any charitable deduction allowed under section 
2055, 2106, or 2522 with respect to the transfer; and
    (iii) In the case of a direct skip, the value of the portion of the 
transfer that is a nontaxable gift. See paragraph (c)(3) of this 
section for the definition of nontaxable gift.
    (2) Zero denominator. If the denominator of the applicable fraction 
is zero, the inclusion ratio is zero.
    (3) Nontaxable gifts. Generally, for purposes of chapter 13, a 
transfer is a nontaxable gift to the extent the transfer is excluded 
from taxable gifts by reason of section 2503(b) (after application of 
section 2513) or section 2503(e). However, a transfer to a trust for 
the benefit of an individual is not a nontaxable gift for purposes of 
this section unless--
    (i) Trust principal or income may, during the individual's 
lifetime, be distributed only to or for the benefit of the individual; 
and
    (ii) The assets of the trust will be includible in the gross estate 
of the individual if the individual dies before the trust terminates.
    (d) Examples. The following examples illustrate the provisions of 
this section. See Sec. 26.2652-2(d) Examples 2 and 3 for illustrations 
of the computation of the inclusion ratio where the special (reverse 
QTIP) election may be applicable.

    Example 1. Computation of the inclusion ratio. T transfers 
$100,000 to a newly-created irrevocable trust providing that income 
is to be accumulated for 10 years. At the end of 10 years, the 
accumulated income is to be distributed to T's child, C, and the 
trust principal is to be paid to T's grandchild. T allocates $40,000 
of T's GST exemption to the trust on a timely-filed gift tax return. 
The applicable fraction with respect to the trust is .40 ($40,000 
(the amount of GST exemption allocated to the trust) over $100,000 
(the value of the property transferred to the trust)). The inclusion 
ratio is .60 (1 - .40). If the maximum Federal estate tax rate is 55 
percent at the time of a GST, the rate of tax applicable to the 
transfer (applicable rate) will be .333 (55 percent (the maximum 
estate tax rate)  x  .60 (the inclusion ratio)).
    Example 2. Gift entirely nontaxable. On December 1, 1996, T 
transfers $10,000 to an irrevocable trust for the benefit of T's 
grandchild, GC. GC possesses a right to withdraw any contributions 
to the trust such that the entire transfer qualifies for the annual 
exclusion under section 2503(b). Under the terms of the trust, the 
income is to be paid to GC for 10 years or until GC's prior death. 
Upon the expiration of GC's income interest, the trust principal is 
payable to GC or GC's estate. The transfer to the trust is a direct 
skip. T made no prior gifts to or for the benefit of GC during 1996. 
The entire $10,000 transfer is a nontaxable transfer. For purposes 
of computing the tax on the direct skip, the denominator of the 
applicable fraction is zero, and thus, the inclusion ratio is zero.
    Example 3. Gift nontaxable in part. T transfers $12,000 to an 
irrevocable trust for the benefit of T's grandchild, GC. Under the 
terms of the trust, the income is to be paid to GC for 10 years or 
until GC's prior death. Upon the expiration of GC's income interest, 
the trust principal is payable to GC or GC's estate. Further, GC has 
the right to withdraw $10,000 of any contribution to the trust such 
that $10,000 of the transfer qualifies for the annual exclusion 
under section 2503(b). The amount of the nontaxable transfer is 
$10,000. Solely for purposes of computing the tax on the direct 
skip, T's transfer is divided into two portions. One portion is 
equal to the amount of the nontaxable transfer ($10,000) and has a 
zero inclusion ratio; the other portion is $2,000 ($12,000 - 
$10,000). With respect to the $2,000 portion, the denominator of the 
applicable fraction is $2,000. Assuming that T has sufficient GST 
exemption available, the numerator of the applicable fraction is 
$2,000 (unless T elects to have the automatic allocation provisions 
not apply). Thus, assuming T does not elect to have the automatic 
allocation not apply, the applicable fraction is one ($2,000/$2,000 
= 1) and the inclusion ratio is zero (1 - 1 = 0).
    Example 4. Gift nontaxable in part. Assume the same facts as in 
Example 3, except T files a timely Form 709 electing that the 
automatic allocation of GST exemption not apply to the $12,000 
transferred in the direct skip. T's transfer is divided into two 
portions, a $10,000 portion with a zero inclusion ratio and a $2,000 
portion with an applicable fraction of zero (0/$2,000 = 0) and an 
inclusion ratio of one (1 - 0 = 1).

Sec. 26.2642-2  Valuation.

    (a) Lifetime transfers--(1) In general. For purposes of determining 
the denominator of the applicable fraction, the value of property 
transferred during life is its fair market value on the effective date 
of the allocation of GST exemption. In the case of a timely allocation 
under Sec. 26.2632-1(b)(2)(ii), the denominator of the applicable 
fraction is the fair market value of the property as finally determined 
for purposes of chapter 12.
    (2) Special rule for late allocations during life. If a transferor 
makes a late allocation of GST exemption to a trust, the value of the 
property transferred to the trust is the fair market value of the trust 
assets determined on the effective date of the allocation of GST 
exemption. Except as otherwise provided in this paragraph (a)(2), if a 
transferor makes a 

[[Page 66916]]
late allocation of GST exemption to a trust, the transferor may, solely 
for purposes of determining the fair market value of the trust assets, 
elect to treat the allocation as having been made on the first day of 
the month during which the late allocation is made (valuation date). An 
election under this paragraph (a)(2) is not effective with respect to a 
life insurance policy or a trust holding a life insurance policy, if 
the insured individual has died. An allocation subject to the election 
contained in this paragraph (a)(2) is not effective until it is 
actually filed with the Internal Revenue Service. The election is made 
by stating on the Form 709 on which the allocation is made--
    (i) That the election is being made;
    (ii) The applicable valuation date; and
    (iii) The fair market value of the trust assets on the valuation 
date.
    (b) Transfers at death--(1) In general. Except as provided in 
paragraphs (b) (2) and (3) of this section, in determining the 
denominator of the applicable fraction, the value of property included 
in the decedent's gross estate is its value for purposes of chapter 11. 
In the case of qualified real property with respect to which the 
election under section 2032A is made, the value of the property is the 
value determined under section 2032A provided the recapture agreement 
described in section 2032A(d)(2) filed with the Internal Revenue 
Service specifically provides for the signatories' consent to the 
imposition of, and personal liability for, additional GST tax in the 
event an additional estate tax is imposed under section 2032A(c). See 
Sec. 26.2642-4(a)(4). If the recapture agreement does not contain these 
provisions, the value of qualified real property as to which the 
election under section 2032A is made is the fair market value of the 
property determined without regard to the provisions of section 2032A.
    (2) Special rule for pecuniary payments--(i) In general. If a 
pecuniary payment is satisfied with cash, the denominator of the 
applicable fraction is the pecuniary amount. If property other than 
cash is used to satisfy a pecuniary payment, the denominator of the 
applicable fraction is the pecuniary amount only if payment must be 
made with property on the basis of the value of the property on--
    (A) The date of distribution; or
    (B) A date other than the date of distribution, but only if the 
pecuniary payment must be satisfied on a basis that fairly reflects net 
appreciation and depreciation (occurring between the valuation date and 
the date of distribution) in all of the assets from which the 
distribution could have been made.
    (ii) Other pecuniary amounts payable in kind. The denominator of 
the applicable fraction with respect to any property used to satisfy 
any other pecuniary payment payable in kind is the date of distribution 
value of the property.
    (3) Special rule for residual transfers after payment of a 
pecuniary payment--(i) In general. Except as otherwise provided in this 
paragraph (b)(3), the denominator of the applicable fraction with 
respect to a residual transfer of property after the satisfaction of a 
pecuniary payment is the estate tax value of the assets available to 
satisfy the pecuniary payment reduced, if the pecuniary payment carries 
appropriate interest (as defined in paragraph (b)(4) of this section), 
by the pecuniary amount. The denominator of the applicable fraction 
with respect to a residual transfer of property after the satisfaction 
of a pecuniary payment that does not carry appropriate interest is the 
estate tax value of the assets available to satisfy the pecuniary 
payment reduced by the present value of the pecuniary payment. For 
purposes of this paragraph (b)(3)(i), the present value of the 
pecuniary payment is determined by using--
    (A) The interest rate applicable under section 7520 at the death of 
the transferor; and
    (B) The period between the date of the transferor's death and the 
date the pecuniary amount is paid.
    (ii) Special rule for residual transfers after pecuniary payments 
payable in kind. The denominator of the applicable fraction with 
respect to any residual transfer after satisfaction of a pecuniary 
payment payable in kind is the date of distribution value of the 
property distributed in satisfaction of the residual transfer, unless 
the pecuniary payment must be satisfied on the basis of the value of 
the property on--
    (A) The date of distribution; or
    (B) A date other than the date of distribution, but only if the 
pecuniary payment must be satisfied on a basis that fairly reflects net 
appreciation and depreciation (occurring between the date of death and 
the date of distribution) in all of the assets from which the 
distribution could have been made.
    (4) Appropriate interest--(i) In general. For purposes of this 
section and Sec. 26.2654-1 (relating to certain trusts treated as 
separate trusts), appropriate interest means that interest must be 
payable from the date of death of the transferor (or from the date 
specified under applicable State law requiring the payment of interest) 
to the date of payment at a rate--
    (A) At least equal to--
    (1) The statutory rate of interest, if any, applicable to pecuniary 
bequests under the law of the State whose law governs the 
administration of the estate or trust; or
    (2) If no such rate is indicated under applicable State law, 80 
percent of the rate that is applicable under section 7520 at the death 
of the transferor; and
    (B) Not in excess of the greater of--
    (1) The statutory rate of interest, if any, applicable to pecuniary 
bequests under the law of the State whose law governs the 
administration of the trust; or
    (2) 120 percent of the rate that is applicable under section 7520 
at the death of the transferor.
    (ii) Pecuniary payments deemed to carry appropriate interest. For 
purposes of this paragraph (b)(4), if a pecuniary payment does not 
carry appropriate interest, the pecuniary payment is considered to 
carry appropriate interest to the extent--
    (A) The entire payment is made or property is irrevocably set aside 
to satisfy the entire pecuniary payment within 15 months of the 
transferor's death; or
    (B) The governing instrument or applicable local law specifically 
requires the executor or trustee to allocate to the pecuniary payment a 
pro rata share of

FR Doc. 95-30873 Generation-Skipping Transfer Tax

the income earned by the fund from which the 
pecuniary payment is to be made between the date of death of the 
transferor and the date of payment. For purposes of paragraph 
(b)(4)(ii)(A) of this section, property is irrevocably set aside if it 
is segregated and held in a separate account pending distribution.
    (c) Examples. The following examples illustrate the provisions of 
this section:

    Example 1. T transfers $100,000 to a newly-created irrevocable 
trust on December 15, 1996. The trust provides that income is to be 
paid to T's child for 10 years. At the end of the 10-year period, 
the trust principal is to be paid to T's grandchild. T does not 
allocate any GST exemption to the trust on the gift tax return 
reporting the transfer. On November 15, 1997, T files a Form 709 
allocating $50,000 of GST exemption to the trust. Because the 
allocation was made on a late filed return, the value of the 
property transferred to the trust is determined on the date the 
allocation is filed (unless an election is made pursuant to 
paragraph (a)(2) of this section to value the trust property as of 
the first day of the month in which the allocation document is filed 
with the Internal Revenue Service). On November 15, 1997, the value 
of the trust property is $150,000. Effective as of November 15, 
1997, the applicable fraction with respect to the trust is .333 
($50,000 (the 

[[Page 66917]]
amount of GST exemption allocated to the trust) over $150,000 (the 
value of the trust principal on the effective date of the GST 
exemption allocation)), and the inclusion ratio is .667 (1.0-.333).
    Example 2. The facts are the same as in Example 1, except the 
value of the trust property is $80,000 on November 15, 1997. The 
applicable fraction is .625 ($50,000 over $80,000) and the inclusion 
ratio is .375 (1.0-.625).
    Example 3. T transfers $100,000 to a newly-created irrevocable 
trust on December 15, 1996. The trust provides that income is to be 
paid to T's child for 10 years. At the end of the 10-year period, 
the trust principal is to be paid to T's grandchild. T does not 
allocate any GST exemption to the trust on the gift tax return 
reporting the transfer. On November 15, 1997, T files a Form 709 
allocating $50,000 of GST exemption to the trust. T elects to value 
the trust principal on the first day of the month in which the 
allocation is made pursuant to the election provided in paragraph 
(a)(2) of this section. Because the late allocation is made in 
November, the value of the trust is determined as of November 1, 
1997.

Sec. 26.2642-3  Special rule for charitable lead annuity trusts.

    (a) In general. In determining the applicable fraction with respect 
to a charitable lead annuity trust--
    (1) The numerator is the adjusted generation-skipping transfer tax 
exemption (adjusted GST exemption); and
    (2) The denominator is the value of all property in the trust 
immediately after the termination of the charitable lead annuity.
    (b) Adjusted GST exemption defined. The adjusted GST exemption is 
the amount of GST exemption allocated to the trust increased by an 
amount equal to the interest that would accrue if an amount equal to 
the allocated GST exemption were invested at the rate used to determine 
the amount of the estate or gift tax charitable deduction, compounded 
annually, for the actual period of the charitable lead annuity. If a 
late allocation is made to a charitable lead annuity trust, the 
adjusted GST exemption is the amount of GST exemption allocated to the 
trust increased by the interest that would accrue if invested at such 
rate for the period beginning on the date of the late allocation and 
extending for the balance of the actual period of the charitable lead 
annuity. The amount of GST exemption allocated to a charitable lead 
annuity trust is not reduced even though it is ultimately determined 
that the allocation of a lesser amount of GST exemption would have 
resulted in an inclusion ratio of zero. For purposes of chapter 13, a 
charitable lead annuity trust is any trust providing an interest in the 
form of a guaranteed annuity described in Sec. 25.2522(c)-3(c)(2)(vi) 
of this chapter for which the transferor is allowed a charitable 
deduction for Federal estate or gift tax purposes.
    (c) Example. The following example illustrates the provisions of 
this section:

    Example. T creates a charitable lead annuity trust for a 10-year 
term with the remainder payable to T's grandchild. T timely 
allocates an amount of GST exemption to the trust which T expects 
will ultimately result in a zero inclusion ratio. However, at the 
end of the charitable lead interest, because the property has not 
appreciated to the extent T anticipated, the numerator of the 
applicable fraction is greater than the denominator. The inclusion 
ratio for the trust is zero. No portion of the GST exemption 
allocated to the trust is restored to T or to T's estate.

Sec. 26.2642-4  Redetermination of applicable fraction.

    (a) In general. The applicable fraction for a trust is redetermined 
whenever additional exemption is allocated to the trust or when certain 
changes occur with respect to the principal of the trust. Except as 
otherwise provided in this paragraph (a), the numerator of the 
redetermined applicable fraction is the sum of the amount of GST 
exemption currently being allocated to the trust (if any) plus the 
value of the nontax portion of the trust, and the denominator of the 
redetermined applicable fraction is the value of the trust principal 
immediately after the event occurs. The nontax portion of a trust is 
determined by multiplying the value of the trust assets, determined 
immediately prior to the event, by the then applicable fraction.
    (1) Multiple transfers to a single trust. If property is added to 
an existing trust, the denominator of the redetermined applicable 
fraction is the value of the trust immediately after the addition 
reduced as provided in Sec. 26.2642-1(c).
    (2) Consolidation of separate trusts. If separate trusts created by 
one transferor are consolidated, a single applicable fraction for the 
consolidated trust is determined. The numerator of the redetermined 
applicable fraction is the sum of the nontax portions of each trust 
immediately prior to the consolidation.
    (3) Property included in transferor's gross estate. If the value of 
property held in a trust created by the transferor, with respect to 
which an allocation was made at a time that the trust was not subject 
to an ETIP, is included in the transferor's gross estate, the 
applicable fraction is redetermined if additional GST exemption is 
allocated to the property. The numerator of the redetermined applicable 
fraction is an amount equal to the nontax portion of the property 
immediately after the death of the transferor increased by the amount 
of GST exemption allocated by the executor of the transferor's estate 
to the trust. If additional GST exemption is not allocated to the 
trust, the applicable fraction immediately before death is not changed, 
if the trust was not subject to an ETIP at the time GST exemption was 
allocated to the trust. The denominator of the applicable fraction is 
reduced to reflect any federal or state, estate or inheritance taxes 
paid from the trust.
    (4) Imposition of recapture tax under section 2032A--(i) If an 
additional estate tax is imposed under section 2032A and if the section 
2032A election was effective (under Sec. 26.2642-2(b)) for purposes of 
the GST tax, the applicable fraction with respect to the property is 
redetermined as of the date of death of the transferor. In making the 
redetermination, any available GST exemption not allocated at the death 
of the transferor (or at a prior recapture event) is automatically 
allocated to the property. The denominator of the applicable fraction 
is the fair market value of the property at the date of the 
transferor's death reduced as provided in Sec. 26.2642-1(c) and further 
reduced by the amount of the additional GST tax actually recovered from 
the trust.
    (ii) The GST tax imposed with respect to any taxable termination, 
taxable distribution, or direct skip occurring prior to the recapture 
event is recomputed based on the applicable fraction as redetermined. 
Any additional GST tax as recomputed is due and payable on the date 
that is six months after the event that causes the imposition of the 
additional estate tax under section 2032A. The additional GST tax is 
remitted with Form 706-A and is reported by attaching a statement to 
Form 706-A showing the computation of the additional GST tax.
    (iii) The applicable fraction, as redetermined under this section, 
is also used in determining any GST tax imposed with respect to GSTs 
occurring after the date of the recapture event.
    (b) Examples. The following examples illustrate the principles of 
this section:

    Example 1. Allocation of additional exemption. T transfers 
$200,000 to an irrevocable trust under which the income is payable 
to T's child, C, for life. Upon the termination of the trust, the 
remainder is payable to T's grandchild, GC. At a time when no ETIP 
exists with respect to the trust property, T makes a timely 
allocation of $100,000 of GST exemption, resulting in an inclusion 
ratio of .50. Subsequently, when the entire trust property is valued 
at $500,000, T allocates an additional $100,000 of T's unused GST 
exemption to the trust. The inclusion ratio of the trust is 
recomputed at that time. The numerator of the applicable fraction is 
$350,000 ($250,000 (the nontax 

[[Page 66918]]
portion as of the date of the allocation) plus $100,000 (the GST 
exemption currently being allocated)). The denominator is $500,000 
(the date of allocation fair market value of the trust). The 
inclusion ratio is .30 (1 - .70).
    Example 2. Multiple transfers to a trust, allocation both timely 
and late. On December 10, 1993, T transfers $10,000 to an 
irrevocable trust that does not satisfy the requirements of section 
2642(c)(2). T makes identical transfers to the trust on December 10, 
1994, 1995, 1996, and on January 15, 1997. Immediately after the 
transfer on January 15, 1997, the value of the trust principal is 
$40,000. On January 14, 1998, when the value of the trust principal 
is $50,000, T allocates $30,000 of GST exemption to the trust. T 
discloses the 1997 transfer on the Form 709 filed on January 14, 
1998. Thus, T's allocation is a timely allocation with respect to 
the transfer in 1997, $10,000 of the allocation is effective as of 
the date of that transfer, and, on and after January 15, 1997, the 
inclusion ratio of the trust is .75 (1 - ($10,000/$40,000)). The 
balance of the allocation is a late allocation with respect to prior 
transfers to the trust and is effective as of January 14, 1998. In 
redetermining the inclusion ratio as of that date, the numerator of 
the redetermined applicable fraction is $32,500 ($12,500 (.25  x  
$50,000), the nontax portion of the trust on January 14, 1998) plus 
$20,000 (the amount of GST exemption allocated late to the trust). 
The denominator of the new applicable fraction is $50,000 (the value 
of the trust principal at the time of the late allocation).
    Example 3. Excess allocation. (i) T creates an irrevocable trust 
for the benefit of T's child and grandchild in 1996 transferring 
$50,000 to the trust on the date of creation. T allocates no GST 
exemption to the trust on the Form 709 reporting the transfer. On 
July 1, 1997 (when the value of the trust property is $60,000), T 
transfers an additional $40,000 to the trust.
    (ii) On April 15, 1998, when the value of the trust is $150,000, 
T files a Form 709 reporting the 1997 transfer and allocating 
$150,000 of GST exemption to the trust. The allocation is a timely 
allocation of $40,000 with respect to the 1997 transfer and is 
effective as of that date. Thus, the applicable fraction for the 
trust as of July 1, 1997 is .40 ($40,000/$100,000 ($40,000 + 
$60,000)).
    (iii) The allocation is also a late allocation of $90,000, the 
amount necessary to attain a zero inclusion ratio on April 15, 1998, 
computed as follows: $60,000 (the nontax portion immediately prior 
to the allocation (.40  x  $150,000)) plus $90,000 (the additional 
allocation necessary to produce a zero inclusion ratio based on a 
denominator of $150,000)/$150,000 equals one and, thus, an inclusion 
ratio of zero. The balance of the allocation, $20,000 ($150,000 less 
the timely allocation of $40,000 less the late allocation of 
$90,000) is void.
    Example 4. Undisclosed transfer. (i) The facts are the same as 
in Example 3, except that on February 1, 1998 (when the value of the 
trust is $150,000), T transfers an additional $50,000 to the trust 
and the value of the entire trust corpus on April 15, 1998 is 
$220,000. The Form 709 filed on April 15, 1998 does not disclose the 
1998 transfer. Under the rule in Sec. 26.2632-1(b)(2)(ii), the 
allocation is effective first as a timely allocation to the 1997 
transfer; second, as a late allocation to the trust as of April 15, 
1998; and, finally as a timely allocation to the February 1, 1998 
transfer. As of April 15, 1998, $55,000, a pro rata portion of the 
trust assets, is considered to be the property transferred to the 
trust on February 1, 1998 (($50,000/$200,000)  x  $220,000). The 
balance of the trust, $165,000, represents prior transfers to the 
trust.
    (ii) As in Example 3, the allocation is a timely allocation as 
to the 1997 transfer (and the applicable fraction as of July 1, 1997 
is .40) and a late allocation as of 1998. The amount of the late 
allocation is $99,000, computed as follows: (.40  x  $165,000 plus 
$99,000)/$165,000 = one.
    (iii) The balance of the allocation, $11,000 ($150,000 less the 
timely allocation of $40,000 less the late allocation of $99,000) is 
a timely allocation as of February 1, 1998. The applicable fraction 
with respect to the trust, as of February 1, 1998, is .355, computed 
as follows: $60,000 (the nontax portion of the trust immediately 
prior to the February 1, 1998 transfer (.40  x  $150,000)) plus 
$11,000 (the amount of the timely allocation to the 1998 transfer)/
$200,000 (the value of the trust on February 1, 1998, after the 
transfer on that date) = $71,000/$200,000 = .355.
    (iv) The applicable fraction with respect to the trust, as of 
April 15, 1998, is .805 computed as follows: $78,100 (the nontax 
portion immediately prior to the allocation (.355  x  $220,000)) 
plus $99,000 (the amount of the late allocation)/ $220,000 = 
$177,100/$220,000 = .805.
    Example 5. Redetermination of inclusion ratio on ETIP 
termination. (i) T transfers $100,000 to an irrevocable trust. The 
trust instrument provides that trust income is to be paid to T for 9 
years or until T's prior death. The trust principal is to be paid to 
T's grandchild, GC, on the termination of T's income interest. The 
trustee has the power to invade trust principal for the benefit of 
GC during the term of T's income interest. The trust is subject to 
an ETIP while T holds the retained income interest. T files a timely 
Form 709 reporting the transfer and allocates $100,000 of GST 
exemption to the trust. In year 4, when the value of the trust is 
$200,000, the trustee distributes $15,000 to GC. The distribution is 
a taxable distribution. Because of the existence of the ETIP, the 
inclusion ratio with respect to the taxable distribution is 
determined immediately prior to the occurrence of the GST. Thus, the 
inclusion ratio applicable to the year 4 GST is .50 (1 - ($100,000/
$200,000 = .50).
    (ii) In year 5, when the value of the trust is again $200,000, 
the trustee distributes another $15,000 to GC. Because the trust is 
still subject to the ETIP in year 5, the inclusion ratio with 
respect to the year 5 GST is again computed immediately prior to the 
GST. In computing the new inclusion ratio, the numerator of the 
applicable fraction is reduced by the nontax portion of prior GSTs 
occurring during the ETIP. Thus, the numerator of the applicable 
fraction with respect to the GST in year 5 is $92,500 ($100,000 - 
(.50  x  $15,000)) and the inclusion ratio applicable with respect 
to the GST in year 5 is .537 (1 - ($92,500/$200,000) = .463). Any 
additional GST exemption allocated on a timely ETIP return with 
respect to the GST in year 5 is effective immediately prior to the 
transfer.

Sec. 26.2642-5  Finality of inclusion ratio.

    (a) Direct skips. The inclusion ratio applicable to a direct skip 
becomes final when no additional GST tax (including additional GST tax 
payable as a result of a cessation, etc. of qualified use under section 
2032A(c)) may be assessed with respect to the direct skip.
    (b) Other GSTs. With respect to taxable distributions and taxable 
terminations, the inclusion ratio for a trust becomes final, on the 
later of--
    (1) The expiration of the period for assessment with respect to the 
first GST tax return filed using that inclusion ratio; (unless the 
trust is subject to an election under section 2032A in which case the 
applicable date under this subsection is the expiration of the period 
of assessment of any additional GST tax due as a result of a cessation, 
etc. of qualified use under section 2032A); or
    (2) The expiration of the period for assessment of Federal estate 
tax with respect to the estate of the transferor. For purposes of this 
paragraph (b)(2), if an estate tax return is not required to be filed, 
the period for assessment is determined as if a return were required to 
be filed and as if the return were timely filed within the period 
prescribed by section 6075(a).

Sec. 26.2652-1  Transferor defined; other definitions.

    (a) Transferor defined--(1) In general. Except as otherwise 
provided in paragraph (a)(3) of this section, the individual with 
respect to whom property was most recently subject to Federal estate or 
gift tax is the transferor of that property for purposes of chapter 13. 
An individual is treated as transferring any property with respect to 
which the individual is the transferor. Thus, an individual may be a 
transferor even though there is no transfer of property under local law 
at the time the Federal estate or gift tax applies. For purposes of 
this paragraph, a surviving spouse is the transferor of a qualified 
domestic trust created by the deceased spouse that is included in the 
surviving spouse's gross estate, provided the trust is not subject to 
the election described in Sec. 26.2652-2 (reverse QTIP election). A 
surviving spouse is also the transferor of a qualified domestic trust 
created by the surviving spouse pursuant to section 2056(d)(2)(B).
    (2) Transfers subject to Federal estate or gift tax. For purposes 
of this section, 

[[Page 66919]]
a transfer is subject to Federal gift tax if a gift tax is imposed 
under section 2501(a). A transfer is subject to Federal estate tax if 
the value of the property is includible in the decedent's gross estate 
as determined under section 2031 or section 2103.
    (3) Special rule for certain QTIP trusts. Solely for purposes of 
chapter 13, if a transferor of qualified terminable interest property 
(QTIP) elects under Sec. 26.2652-2(a) to treat the property as if the 
QTIP election had not been made (reverse QTIP election), the identity 
of the transferor of the property is determined without regard to the 
application of sections 2044, 2207A, and 2519.
    (4) Exercise of certain nongeneral powers of appointment. The 
exercise of a power of appointment that is not a general power of 
appointment (as defined in section 2041(b)) is treated as a transfer 
subject to Federal estate or gift tax by the holder of the power if the 
power is exercised in a manner that may postpone or suspend the 
vesting, absolute ownership, or power of alienation of an interest in 
property for a period, measured from the date of creation of the trust, 
extending beyond any specified life in being at the date of creation of 
the trust plus a period of 21 years plus, if necessary, a reasonable 
period of gestation (perpetuities period). For purposes of this 
paragraph (a)(4), the exercise of a power of appointment that validly 
postpones or suspends the vesting, absolute ownership, or power of 
alienation of an interest in property for a term of years that will not 
exceed 90 years (measured from the date of creation of the trust) is 
not an exercise that may extend beyond the perpetuities period.
    (5) Split-gift transfers. In the case of a transfer with respect to 
which the donor's spouse makes an election under section 2513 to treat 
the gift as made one-half by the spouse, the electing spouse is treated 
as the transferor of one-half of the entire value of the property 
transferred by the donor, regardless of the interest the electing 
spouse is actually deemed to have transferred under section 2513. The 
donor is treated as the transferor of one-half of the value of the 
entire property. See Sec. 26.2632-1(c)(5) Example 3, regarding 
allocation of GST exemption with respect to split-gift transfers 
subject to an ETIP.
    (6) Examples. The following examples illustrate the principles of 
this paragraph (a):

    Example 1. Identity of transferor. T transfers $100,000 to a 
trust for the sole benefit of T's grandchild. The transfer is a 
completed gift under Sec. 25.2511-2 of this chapter. Thus, for 
purposes of chapter 13, T is the transferor of the $100,000. It is 
immaterial that a portion of the transfer is excluded from the total 
amount of T's taxable gift by reason of section 2503(b).
    Example 2. Gift splitting and identity of transferor. The facts 
are the same as in Example 1, except T's spouse, S, consents under 
section 2513 to split the gift with T. For purposes of chapter 13, S 
and T are each treated as a transferor of $50,000 to the trust.
    Example 3. Change of transferor on subsequent transfer tax 
event. T transfers $100,000 to a trust providing that all the net 
trust income is to be paid to T's spouse, S, for S's lifetime. T 
elects under section 2523(f) to treat the transfer as a transfer of 
qualified terminable interest property, and T does not make the 
reverse QTIP election under section 2652(a)(3). On S's death, the 
trust property is included in S's gross estate under section 2044. 
Thus, S becomes the transferor at the time of S's death.
    Example 4. Effect of transfer of an interest in trust on 
identity of the transferor. T transfers $100,000 to a trust 
providing that all of the net income is to be paid to T's child, C, 
for C's lifetime. At C's death, the trust property is to be paid to 
T's grandchild. C transfers the income interest to X, an unrelated 
party, in a transfer that is a completed transfer for Federal gift 
tax purposes. Because C's transfer is a transfer of a term interest 
in the trust that does not affect the rights of other parties with 
respect to the trust property, T remains the transferor with respect 
to the trust.
    Example 5. Effect of lapse of withdrawal right on identity of 
transferor. T transfers $10,000 to a new trust providing that the 
trust income is to be paid to T's child, C, for C's life and, on the 
death of C, the trust principal is to be paid to T's grandchild, GC. 
The trustee has discretion to distribute principal for GC's benefit 
during C's lifetime. C has a right to withdraw $10,000 from the 
trust for a 60-day period following the transfer. Thereafter, the 
power lapses. C does not exercise the withdrawal right. The transfer 
by T is a completed transfer within the meaning of Sec. 25.2511-2 of 
this chapter and, thus, T is treated as having transferred the 
entire $10,000 to the trust. On the lapse of the withdrawal right, C 
becomes a transferor to the extent C is treated as having made a 
completed transfer for purposes of chapter 12. Therefore, except to 
the extent that the amount with respect to which the power of 
withdrawal lapses exceeds the greater of $5,000 or 5% of the value 
of the trust property, T remains the transferor of the trust 
property for purposes of chapter 13.
    Example 6. Effect of reverse QTIP election on identity of the 
transferor. T establishes a testamentary trust having a principal of 
$500,000. Under the terms of the trust, all trust income is payable 
to T's surviving spouse, S, during S's lifetime. T's executor makes 
an election to treat the trust property as qualified terminable 
interest property and also makes the reverse QTIP election. For 
purposes of chapter 13, T is the transferor with respect to the 
trust. On S's death, the then full fair market value of the trust is 
includible in S's gross estate under section 2044. However, because 
of the reverse QTIP election, S does not become the transferor with 
respect to the trust; T continues to be the transferor.
    Example 7. Effect of reverse QTIP election on constructive 
additions. The facts are the same as in Example 6, except the 
inclusion of the QTIP trust in S's gross estate increased the 
Federal estate tax liability of S's estate by $200,000. The estate 
does not exercise the right of recovery from the trust granted under 
section 2207A. Under local law, the beneficiaries of S's residuary 
estate (which bears all estate taxes under the will) could compel 
the executor to exercise the right of recovery but do not do so. 
Solely for purposes of chapter 13, the beneficiaries of the 
residuary estate are not treated as having made an addition to the 
trust by reason of their failure to exercise their right of 
recovery. Because of the reverse QTIP election, for GST purposes, 
the trust property is not treated as includible in S's gross estate 
and, under those circumstances, no right of recovery exists.
    Example 8. Effect of reverse QTIP election on constructive 
additions. S, the surviving spouse of T, dies testate. At the time 
of S's death, S was the beneficiary of a trust with respect to which 
T's executor made a QTIP election under section 2056(b)(7). Thus, 
the trust is includible in S's gross estate under section 2044. T's 
executor also made the reverse QTIP election with respect to the 
trust. S's will provides that all death taxes payable with respect 
to the trust are payable from S's residuary estate. Since the 
transferor of the property is determined without regard to section 
2044 and section 2207A, S is not treated as making a constructive 
addition to the trust by reason of the tax apportionment clause in 
S's will.
    Example 9. Exercise of a nongeneral power of appointment. On May 
15, 1990, T established an irrevocable trust under which the trust 
income is to be paid to T's child, C, for life. C is given a 
testamentary power to appoint the remainder in further trust for the 
benefit of C's issue. In default of C's exercise of the power, the 
remainder is to pass to charity. C dies on February 3, 1997, 
survived by two children and a sibling, S (who was born prior to May 
15, 1990). C exercises the power in a manner that validly extends 
the trust in favor of C's issue until the later of May 15, 2070 (80 
years from the date the trust was created), or the death of S. C's 
exercise of the power is considered a transfer by C that is subject 
to the estate or gift tax because it may extend the term of the 
trust beyond the perpetuities period.
    Example 10. Exercise of a nongeneral power of appointment. The 
facts are the same as in Example 9, except local law provides that 
the effect of C's exercise is to extend the term of the trust until 
May 15, 2070, whether or not S survives that date. C is not treated 
as having made a transfer to the trust as a result of the exercise 
of the power because the exercise of the power does not extend the 
term of the trust beyond a period of 90 years measured from the 
creation of the trust. The result would be the same if the effect of 
C's exercise is either to extend the term of the trust until the 
death of S or to extend the term of the trust until the first to 
occur of May 15, 2070, or the death of S.

[[Page 66920]]

    Example 11. Split-gift transfers. T transfers $100,000 to an 
inter vivos trust that provides T with an annuity payable for ten 
years or until T's prior death. The annuity satisfies the definition 
of a qualified interest under section 2702(b). When the trust 
terminates, the corpus is to be paid to T's grandchild, GC. T's 
spouse, S, consents under section 2513 to have the gift treated as 
made one-half by S. Under section 2513, only the actuarial value of 
the gift to GC is eligible to be treated as made one-half by S. 
However, because S is treated as the donor of one-half of the gift 
to GC, S becomes the transferor of one-half of the entire trust 
($50,000) for purposes of Chapter 13.

    (b) Trust defined--(1) In general. A trust includes any arrangement 
(other than an estate) that has substantially the same effect as a 
trust. Thus, for example, arrangements involving life estates and 
remainders, estates for years, and insurance and annuity contracts are 
trusts. Generally, a transfer as to which the identity of the 
transferee is contingent upon the occurrence of an event is a transfer 
in trust; however, a transfer of property included in the transferor's 
gross estate, as to which the identity of the transferee is contingent 
upon an event that must occur within 6 months of the transferor's 
death, is not considered a transfer in trust solely by reason of the 
existence of the contingency.
    (2) Examples. The following examples illustrate the provisions of 
this paragraph (b):

    Example 1. Uniform gifts to minors transfers. T transfers cash 
to an account in the name of T's child, C, as custodian for C's 
child, GC (who is a minor), under a state statute substantially 
similar to the Uniform Gifts to Minors Act. For purposes of chapter 
13, the transfer to the custodial account is treated as a transfer 
to a trust.
    Example 2. Contingent transfers. T bequeaths $200,000 to T's 
child, C, provided that if C does not survive T by more than 6 
months, the bequest is payable to T's grandchild, GC. C dies 4 
months after T. The bequest is not a transfer in trust because the 
contingency that determines the recipient of the bequest must occur 
within 6 months of T's death. The bequest to GC is a direct skip.
    Example 3. Contingent transfers. The facts are the same as in 
Example 2, except C must survive T by 18 months to take the bequest. 
The bequest is a transfer in trust for purposes of chapter 13, and 
the death of C is a taxable termination.

    (c) Trustee defined. The trustee of a trust is the person 
designated as trustee under local law or, if no such person is so 
designated, the person in actual or constructive possession of property 
held in trust.
    (d) Executor defined. For purposes of chapter 13, the executor is 
the executor or administrator of the decedent's estate. However, if no 
executor or administrator is appointed, qualified or acting within the 
United States, the executor is the fiduciary who is primarily 
responsible for payment of the decedent's debts and expenses. If there 
is no such executor, administrator or fiduciary, the executor is the 
person in actual or constructive possession of the largest portion of 
the value of the decedent's gross estate.
    (e) Interest in trust. See Sec. 26.2612-1(e) for the definition of 
interest in trust.

Sec. 26.2652-2  Special election for qualified terminable interest 
property.

    (a) In general. If an election is made to treat property as 
qualified terminable interest property (QTIP) under section 2523(f) or 
section 2056(b)(7), the person making the election may, for purposes of 
chapter 13, elect to treat the property as if the QTIP election had not 
been made (reverse QTIP election). An election under this section is 
irrevocable. An election under this section is not effective unless it 
is made with respect to all of the property in the trust to which the 
QTIP election applies. See, however, Sec. 26.2654-1(b)(1). Property 
that qualifies for a deduction under section 2056(b)(5) is not eligible 
for the election under this section.
    (b) Time and manner of making election. An election under this 
section is made on the return on which the QTIP election is made. If a 
protective QTIP election is made, no election under this section is 
effective unless a protective reverse QTIP election is also made.
    (c) Transitional rule. If a reverse QTIP election is made with 
respect to a trust prior to December 27, 1995, and GST exemption has 
been allocated to that trust, the transferor (or the transferor's 
executor) may elect to treat the trust as two separate trusts, one of 
which has a zero inclusion ratio by reason of the transferor's GST 
exemption previously allocated to the trust. The separate trust with 
the zero inclusion ratio consists of that fractional share of the value 
of the entire trust equal to the value of the nontax portion of the 
trust under Sec. 26.2642-4(a). The reverse QTIP election is treated as 
applying only to the trust with the zero inclusion ratio. An election 
under this paragraph (c) is made by attaching a statement to a copy of 
the return on which the reverse QTIP election was made under section 
2652(a)(3). The statement must indicate that an election is being made 
to treat the trust as two separate trusts and must identify the values 
of the two separate trusts. The statement is to be filed in the same 
place in which the original return was filed and must be filed before 
June 24, 1996. A trust subject to the election described in this 
paragraph is treated as a trust that was created by two transferors. 
See Sec. 26.2654-1(a)(2) for special rules involving trusts with 
multiple transferors.
    (d) Examples. The following examples illustrate the provisions of 
this section:

    Example 1. Special (reverse QTIP) election under section 
2652(a)(3). T transfers $1,000,000 to a trust providing that all 
trust income is to be paid to T's spouse, S, for S's lifetime. On 
S's death, the trust principal is payable to GC, a grandchild of S 
and T. T elects to treat all of the transfer as a transfer of QTIP 
and also makes the reverse QTIP election for all of the property. 
Because of the reverse QTIP election, T continues to be treated as 
the transferor of the property after S's death for purposes of 
chapter 13. A taxable termination rather than a direct skip occurs 
on S's death.
    Example 2. Election under transition rule. In 1994, T died 
leaving $4 million in trust for the benefit of T's surviving spouse, 
S. On January 16, 1995, T's executor filed T's Form 706 on which the 
executor elects to treat the entire trust as qualified terminable 
interest property. The executor also makes a reverse QTIP election. 
The reverse QTIP election is effective with respect to the entire 
trust even though T's executor could allocate only $1 million of GST 
exemption to the trust. T's executor may elect to treat the trust as 
two separate trusts, one having a value of 25% of the value of the 
single trust and an inclusion ratio of zero, but only if the 
election is made prior to June 24, 1996. If the executor makes the 
transitional election, the other separate trust, having a value of 
75% of the value of the single trust and an inclusion ratio of one, 
is not treated as subject to the reverse QTIP election.
    Example 3. Denominator of the applicable fraction of QTIP trust. 
T bequeaths $1,500,000 to a trust in which T's surviving spouse, S, 
receives an income interest for life. Upon the death of S, the 
property is to remain in trust for the benefit of C, the child of T 
and S. Upon C's death, the trust is to terminate and the trust 
property paid to the descendants of C. The bequest qualifies for the 
estate tax marital deduction under section 2056(b)(7) as QTIP. The 
executor does not make the reverse QTIP election under section 
2652(a)(3). As a result, S becomes the transferor of the trust at 
S's death when the value of the property in the QTIP trust is 
included in S's gross estate under section 2044. For purposes of 
computing the applicable fraction with respect to the QTIP trust 
upon S's death, the denominator of the fraction is reduced by any 
Federal estate tax (whether imposed under section 2001, 2101 or 
2056A(b)) and State death tax attributable to the trust property 
that is actually recovered from the trust.

Sec. 26.2653-1  Taxation of multiple skips.

    (a) General rule. If property is held in trust immediately after a 
GST, solely for purposes of determining whether future events involve a 
skip person, the transferor is thereafter deemed to occupy the 
generation immediately 

[[Page 66921]]
above the highest generation of any person holding an interest in the 
trust immediately after the transfer. If no person holds an interest in 
the trust immediately after the GST, the transferor is treated as 
occupying the generation above the highest generation of any person in 
existence at the time of the GST who then occupies the highest 
generation level of any person who may subsequently hold an interest in 
the trust. See Sec. 26.2612-1(e) for rules determining when a person 
has an interest in property held in trust.
    (b) Examples. The following examples illustrate the provisions of 
this section:

    Example 1. T transfers property to an irrevocable trust for the 
benefit of T's grandchild, GC, and great-grandchild, GGC. During 
GC's life, the trust income may be distributed to GC and GGC in the 
trustee's absolute discretion. At GC's death, the trust property 
passes to GGC. Both GC and GGC have an interest in the trust for 
purposes of chapter 13. The transfer by T to the trust is a direct 
skip, and the property is held in trust immediately after the 
transfer. After the direct skip, the transferor is treated as being 
one generation above GC, the highest generation individual having an 
interest in the trust. Therefore, GC is no longer a skip person and 
distributions to GC are not taxable distributions. However, because 
GGC occupies a generation that is two generations below the deemed 
generation of T, GGC is a skip person and distributions of trust 
income to GGC are taxable distributions.
    Example 2. T transfers property to an irrevocable trust 
providing that the income is to be paid to T's child, C, for life. 
At C's death, the trust income is to be accumulated for 10 years and 
added to principal. At the end of the 10-year accumulation period, 
the trust income is to be paid to T's grandchild, GC, for life. Upon 
GC's death, the trust property is to be paid to T's great-
grandchild, GGC, or to GGC's estate. A GST occurs at C's death. 
Immediately after C's death and during the 10-year accumulation 
period, no person has an interest in the trust within the meaning of 
section 2652(c) and Sec. 26.2612-1(e) because no one can receive 
current distributions of income or principal. Immediately after C's 
death, T is treated as occupying the generation above the generation 
of GC (the trust beneficiary in existence at the time of the GST who 
then occupies the highest generation level of any person who may 
subsequently hold an interest in the trust). Thus, subsequent income 
distributions to GC are not taxable distributions.

Sec. 26.2654-1  Certain trusts treated as separate trusts.

    (a) Single trust treated as separate trusts--(1) Substantially 
separate and independent shares--(i) In general. If a single trust 
consists solely of substantially separate and independent shares for 
different beneficiaries, the share attributable to each beneficiary (or 
group of beneficiaries) is treated as a separate trust for purposes of 
chapter 13. The phrase ``substantially separate and independent 
shares'' generally has the same meaning as provided in Sec. 1.663(c)-3 
of this chapter. However, a portion of a trust is not a separate share 
unless such share exists from and at all times after the creation of 
the trust. For purposes of this paragraph (a)(1), a trust is treated as 
created at the date of death of the grantor if the trust is includible 
in its entirety in the grantor's gross estate for Federal estate tax 
purposes. Further, treatment of a single trust as separate trusts under 
this paragraph (a)(1) does not permit treatment of those portions as 
separate trusts for purposes of filing returns and payment of tax or 
for purposes of computing any other tax imposed under the Internal 
Revenue Code. Also, additions to, and distributions from, such trusts 
are allocated pro rata among the separate trusts, unless the governing 
instrument expressly provides otherwise.
    (ii) Certain pecuniary amounts. For purposes of this section, if a 
person holds the current right to receive a mandatory (i.e., 
nondiscretionary and noncontingent) payment of a pecuniary amount at 
the death of the transferor from an inter vivos trust that is 
includible in the transferor's gross estate, or a testamentary trust, 
the pecuniary amount is a separate and independent share if--
    (A) The trustee is required to pay appropriate interest (as defined 
in Sec. 26.2642-2(b)(4)(i) and (ii)) to the person; or
    (B) If the pecuniary amount is payable in kind on the basis of 
value other than the date of distribution value of the assets, the 
trustee is required to allocate assets to the pecuniary payment in a 
manner that fairly reflects net appreciation or depreciation in the 
value of the assets in the fund available to pay the pecuniary amount 
measured from the date of death to the date of payment.
    (2) Multiple transferors with respect to single trust--(i) In 
general. If there is more than one transferor with respect to a trust, 
the portions of the trust attributable to the different transferors are 
treated as separate trusts for purposes of chapter 13. Treatment of a 
single trust as separate trusts under this paragraph (a)(2) does not 
permit treatment of those portions as separate trusts for purposes of 
filing returns and payment of tax or for purposes of computing any 
other tax imposed under the Internal Revenue Code. Also, additions to, 
and distributions from, such trusts are allocated pro rata among the 
separate trusts unless otherwise expressly provided in the governing 
instrument.
    (ii) Addition by a transferor. If an individual makes an addition 
to a trust of which the individual is not the sole transferor, the 
portion of the single trust attributable to each separate trust is 
determined by multiplying the fair market value of the single trust 
immediately after the contribution by a fraction. The numerator of the 
fraction is the value of the separate trust immediately after the 
contribution. The denominator of the fraction is the fair market value 
of all the property in the single trust immediately after the transfer.
    (3) Severance of a single trust. A single trust treated as separate 
trusts under paragraphs (a)(1) or (2) of this section may be divided at 
any time into separate trusts to reflect that treatment. For this 
purpose, the rules of paragraph (b)(1)(ii)(C) of this section apply 
with respect to the severance and funding of the severed trusts.
    (4) Allocation of exemption--(i) In general. With respect to a 
separate share treated as a separate trust under paragraph (a)(1) or 
(2) of this section, an individual's GST exemption is allocated to the 
separate trust. See Sec. 26.2632-1 for rules concerning the allocation 
of GST exemption.
    (ii) Automatic allocation to direct skips. If the transfer is a 
direct skip to a trust that occurs during the transferor's lifetime and 
is treated as a transfer to separate trusts under paragraphs (a)(1) or 
(a)(2) of this section, the transferor's GST exemption not previously 
allocated is automatically allocated on a pro rata basis among the 
separate trusts. The transferor may prevent an automatic allocation of 
GST exemption to a separate share of a single trust by describing on a 
timely-filed United States Gift (and Generation-Skipping Transfer) Tax 
Return (Form 709) the transfer and the extent to which the automatic 
allocation is not to apply to a particular share. See Sec. 26.2632-1(b) 
for rules for avoiding the automatic allocation of GST exemption.
    (5) Examples. The following examples illustrate the principles of 
this section (a):

    Example 1. Separate shares as separate trusts. T transfers 
$100,000 to a trust under which income is to be paid in equal shares 
for 10 years to T's child, C, and T's grandchild, GC (or their 
respective estates). The trust does not permit distributions of 
principal during the term of the trust. At the end of the 10-year 
term, the trust principal is to be distributed to C and GC in equal 
shares. The shares of C and GC in the trust are separate and 
independent and, therefore, are treated as separate trusts. The 
result 

[[Page 66922]]
would not be the same if the trust permitted distributions of principal 
unless the distributions could only be made from a one-half separate 
share of the initial trust principal and the distributee's future 
rights with respect to the trust are correspondingly reduced. T may 
allocate part of T's GST exemption under section 2632(a) to the 
share held for the benefit of GC.
    Example 2. Separate share rule inapplicable. The facts are the 
same as in Example 1, except the trustee holds the discretionary 
power to distribute the income in any proportion between C and GC 
during the last year of the trust. The shares of C and GC in the 
trust are not separate and independent shares throughout the entire 
term of the trust and, therefore, are not treated as separate trusts 
for purposes of chapter 13.
    Example 3. Pecuniary payment as separate share. T creates a 
lifetime revocable trust providing that on T's death $500,000 is 
payable to T's spouse, S, with the balance of the principal to be 
held for the benefit of T's grandchildren. The value of the trust is 
includible in T's gross estate upon T's death. Under the terms of 
the trust, the payment to S is required to be made in cash, and 
under local law S is entitled to receive interest on the payment at 
an annual rate of 6 percent, commencing immediately upon T's death. 
For purposes of chapter 13, the trust is treated as created at T's 
death, and the $500,000 payable to S from the trust is treated as a 
separate share. The result would be the same if the payment to S 
could be satisfied using noncash assets at their value on the date 
of distribution. Further, the result would be the same if the 
decedent's probate estate poured over to the revocable trust on the 
decedent's death and was then distributed in accordance with the 
terms of the trust.
    Example 4. Pecuniary payment not treated as separate share. The 
facts are the same as in Example 3, except the bequest to S is to be 
paid in noncash assets valued at their values as finally determined 
for Federal estate tax purposes. Neither the trust instrument nor 
local law requires that the assets distributed in satisfaction of 
the bequest fairly reflect net appreciation or depreciation in all 
the assets from which the bequest may be funded. S's $500,000 
bequest is not treated as a separate share and the trust is treated 
as a single trust for purposes of chapter 13.
    Example 5. Multiple transferors to single trust. A transfers 
$100,000 to an irrevocable generation-skipping trust; B 
simultaneously transfers $50,000 to the same trust. As of the time 
of the transfers, the single trust is treated as two trusts for 
purposes of chapter 13. Because A contributed \2/3\ of the value of 
the initial corpus, \2/3\ of the single trust principal is treated 
as a separate trust created by A. Similarly, because B contributed 
\1/3\ of the value of the initial corpus, \1/3\ of the single trust 
is treated as a separate trust created by B. A or B may allocate 
their GST exemption under section 2632(a) to the respective separate 
trusts.
    Example 6. Additional contributions. A transfers $100,000 to an 
irrevocable generation-skipping trust; B simultaneously transfers 
$50,000 to the same trust. When the value of the single trust has 
increased to $180,000, A contributes an additional $60,000 to the 
trust. At the time of the additional contribution, the portion of 
the single trust attributable to each grantor's separate trust must 
be redetermined. The portion of the single trust attributable to A's 
separate trust immediately after the contribution is \3/4\ ((2/3  x  
$180,000) + $60,000)/$240,000). The portion attributable to B's 
separate trust after A's addition is \1/4\.
    Example 7. Distributions from a separate share. The facts are 
the same as in Example 6, except that, after A's second 
contribution, $50,000 is distributed to a beneficiary of the trust. 
Absent a provision in the trust instrument that charges the 
distribution against the contribution of either A or B, \3/4\ of the 
distribution is treated as made from the separate trust of which A 
is the transferor and 1/4 from the separate trust of which B is the 
transferor.
    Example 8. Separate share rule inapplicable. T creates an 
irrevocable trust that provides the trustee with the discretionary 
power to distribute income or corpus to T's children and 
grandchildren. The trust provides that, when T's youngest child 
reaches age 21, the trust will be divided into separate shares, one 
share for each child of T. The income from a respective child's 
share will be paid to the child during the child's life with the 
remainder passing to such child's children (grandchildren of T). The 
separate shares that come into existence when the youngest child 
reaches age 21 will not be recognized as separate trusts for 
purposes of Chapter 13 because the shares did not exist from and at 
all times after the creation of the trust. Any allocation of GST 
exemption to the trust either before or after T's youngest child 
reaches age 21 will apply with respect to the entire trust. Thus, 
the inclusion ratio will be the same with respect to any 
distribution from the trust or the separate shares. The result would 
be the same if, the trust instrument provided that the trust was to 
be divided into separate trusts when T's youngest child reached age 
21.

    (b) Division of a trust included in the gross estate--(1) In 
general. The severance of a trust that is included in the transferor's 
gross estate (or created under the transferor's will) into two or more 
trusts is recognized for purposes of chapter 13 if--
    (i) The trust is severed pursuant to a direction in the governing 
instrument providing that the trust is to be divided upon the death of 
the transferor; or
     (ii) The governing instrument does not require or otherwise direct 
severance but the trust is severed pursuant to discretionary authority 
granted either under the governing instrument or under local law; and
    (A) The terms of each of the new trusts provide for the same 
succession of interests and beneficiaries as are provided in the 
original trust;
    (B) The severance occurs (or a reformation proceeding, if required, 
is commenced) prior to the date prescribed for filing the Federal 
estate tax return (including extensions actually granted) for the 
estate of the transferor; and
    (C) Either--
    (1) The new trusts are severed on a fractional basis. If severed on 
a fractional basis, the separate trusts need not be funded with a pro 
rata portion of each asset held by the undivided trust. The trusts may 
be funded on a nonpro rata basis provided funding is based on either 
the fair market value of the assets on the date of funding or in a 
manner that fairly reflects the net appreciation or depreciation in the 
value of the assets measured from the date of death to the date of 
funding; or
    (2) If the severance is required (by the terms of the governing 
instrument) to be made on the basis of a pecuniary amount, the 
pecuniary payment is satisfied in a manner that would meet the 
requirements of paragraph (a)(1)(ii) of this section if it were paid to 
an individual.
    (2) Special rule. If a court order severing the trust has not been 
issued at the time the Federal estate tax return is filed, the executor 
must indicate on a statement attached to the return that a proceeding 
has been commenced to sever the trust and describe the manner in which 
the trust is proposed to be severed. A copy of the petition or other 
instrument used to commence the proceeding must also be attached to the 
return. If the governing instrument of a trust or local law authorizes 
the severance of the trust, a severance pursuant to that authorization 
is treated as meeting the requirement of paragraph (b)(1)(ii)(B) of 
this section if the executor indicates on the Federal estate tax return 
that separate trusts will be created (or funded) and clearly sets forth 
the manner in which the trust is to be severed and the separate trusts 
funded.
    (3) Allocation of exemption. An individual's GST exemption under 
Sec. 2632 may be allocated to the separate trusts created pursuant to 
this section at the discretion of the executor or trustee.
    (4) Examples. The following examples illustrate the provisions of 
this section (b):

    Example 1. Severance of single trust. T's will establishes a 
testamentary trust providing that income is to be paid to T's spouse 
for life. At the spouse's death, one-half of the corpus is to be 
paid to T's child, C, or C's estate (if C fails to survive the 
spouse) and one-half of the corpus is to be paid to T's grandchild, 
GC, or GC's estate (if GC fails to survive the spouse). If the 
requirements of paragraph (b) of this section are otherwise 
satisfied, T's executor may divide the testamentary trust equally 
into two separate trusts, one trust providing an income interest to 
spouse for life with 

[[Page 66923]]
remainder to C, and the other trust with an income interest to spouse 
for life with remainder to GC. Furthermore, if the requirements of 
paragraph (b) of this section are satisfied, the executor or trustee 
may further divide the trust for the benefit of GC. GST exemption 
may be allocated to any of the divided trusts.
    Example 2. Severance of revocable trust. T creates an inter 
vivos revocable trust providing that, at T's death and after payment 
of all taxes and administration expenses, the remaining corpus will 
be divided into two trusts. One trust, for the benefit of T's 
spouse, is to be funded with the smallest amount that, if qualifying 
for the marital deduction, will reduce the estate tax to zero. The 
other trust, for the benefit of T's descendants, is to be funded 
with the balance of the revocable trust corpus. The trust corpus is 
includible in T's gross estate. Each trust is recognized as a 
separate trust for purposes of chapter 13.

26.2662-1  Generation-skipping transfer tax return requirements.

    (a) In general. Chapter 13 imposes a tax on generation-skipping 
transfers (as defined in section 2611). The requirements relating to 
the return of tax depend on the type of generation-skipping transfer 
involved. This section contains rules for filing the required tax 
return. Paragraph (c)(2) of this section provides special rules 
concerning the return requirements for generation-skipping transfers 
pursuant to certain trust arrangements (as defined in paragraph 
(c)(2)(ii) of this section), such as life insurance policies and 
annuities.
    (b) Form of return--(1) Taxable distributions. Form 706GS(D) must 
be filed in accordance with its instructions for any taxable 
distribution (as defined in section 2612(b)). The trust involved in a 
transfer described in the preceding sentence must file Form 706GS(D-1) 
in accordance with its instructions. A copy of Form 706GS(D-1) shall be 
sent to each distributee.
    (2) Taxable terminations. Form 706GS(T) must be filed in accordance 
with its instructions for any taxable termination (as defined in 
section 2612(a)).
    (3) Direct skip--(i) Inter vivos direct skips. Form 709 must be 
filed in accordance with its instructions for any direct skip (as 
defined in section 2612(c)) that is subject to chapter 12 and occurs 
during the life of the transferor.
    (ii) Direct skips occurring at death--(A) In general. Form 706 or 
Form 706NA must be filed in accordance with its instructions for any 
direct skips (as defined in section 2612(c)) that are subject to 
chapter 11 and occur at the death of the decedent.
    (B) Direct skips payable from a trust. Schedule R-1 of Form 706 
must be filed in accordance with its instructions for any direct skip 
from a trust if such direct skip is subject to chapter 11. See 
paragraph (c)(2) of this section for special rules relating to the 
person liable for tax and required to make the return under certain 
circumstances.
    (c) Person liable for tax and required to make return--(1) In 
general. Except as otherwise provided in this section, the following 
person is liable for the tax imposed by section 2601 and must make the 
required tax return--
    (i) The transferee in a taxable distribution (as defined in section 
2612(b));
    (ii) The trustee in the case of a taxable termination (as defined 
in section 2612(a));
    (iii) The transferor (as defined in section 2652(a)(1)(B)) in the 
case of an inter vivos direct skip (as defined in section 2612(c));
    (iv) The trustee in the case of a direct skip from a trust or with 
respect to property that continues to be held in trust; or
    (v) The executor in the case of a direct skip (other than a direct 
skip described in paragraph (c)(1)(iv) of this section) if the transfer 
is subject to chapter 11. See paragraph (c)(2) of this section for 
special rules relating to direct skips to or from certain trust 
arrangements (as defined in paragraph (c)(2)(ii) of this section).
    (2) Special rule for direct skips occurring at death with respect 
to property held in trust arrangements--(i) In general. In the case of 
certain property held in a trust arrangement (as defined in paragraph 
(c)(2)(ii) of this section) at the date of death of the transferor, the 
person who is required to make the return and who is liable for the tax 
imposed by chapter 13 is determined under paragraphs (c)(2)(iii) and 
(iv) of this section.
    (ii) Trust arrangement defined. For purposes of this section, the 
term trust arrangement includes any arrangement (other than an estate) 
which, although not an explicit trust, has the same effect as an 
explicit trust. For purposes of this section, the term ``explicit 
trust'' means a trust described in Sec. 301.7701-4(a).
    (iii) Executor's liability in the case of transfers with respect to 
decedents dying on or after June 24, 1996 if the transfer is less than 
$250,000. In the case of a direct skip occurring at death, the executor 
of the decedent's estate is liable for the tax imposed on that direct 
skip by chapter 13 and is required to file Form 706 or Form 706NA (and 
not Schedule R-1 of Form 706) if, at the date of the decedent's death--
    (A) The property involved in the direct skip is held in a trust 
arrangement; and
    (B) The total value of the property involved in direct skips with 
respect to the trustee of that trust arrangement is less than $250,000.
    (iv) Executor's liability in the case of transfers with respect to 
decedents dying prior to June 24, 1996 if the transfer is less than 
$100,000. In the case of a direct skip occurring at death with respect 
to a decedent dying prior to June 24, 1996, the rule in paragraph 
(c)(2)(iii) of this section that imposes liability upon the executor 
applies only if the property involved in the direct skip with respect 
to the trustee of the trust arrangement, in the aggregate, is less than 
$100,000.
    (v) Executor's right of recovery. In cases where the rules of 
paragraphs (c)(2)(iii) and (iv) of this section impose liability for 
the generation-skipping transfer tax on the executor, the executor is 
entitled to recover from the trustee (if the property continues to be 
held in trust) or from the recipient of the property (in the case of a 
transfer from a trust), the generation-skipping transfer tax 
attributable to the transfer.
    (vi) Examples. The following examples illustrate the application of 
this paragraph (c)(2) with respect to decedents dying on or after June 
24, 1996:

    Example 1. Insurance proceeds less than $250,000. On August 1, 
1997, T, the insured under an insurance policy, died. The proceeds 
($200,000) were includible in T's gross estate for Federal estate 
tax purposes. T's grandchild GC, was named the sole beneficiary of 
the policy. The insurance policy is treated as a trust under section 
2652(b)(1), and the payment of the proceeds to GC is a transfer from 
a trust for purposes of chapter 13. Therefore, the payment of the 
proceeds to GC is a direct skip. Since the proceeds from the policy 
($200,000) are less than $250,000, the executor is liable for the 
tax imposed by chapter 13 and is required to file Form 706.
    Example 2. Aggregate insurance proceeds of $250,000 or more. 
Assume the same facts as in Example 1, except T is the insured under 
two insurance policies issued by the same insurance company. The 
proceeds ($150,000) from each policy are includible in T's gross 
estate for Federal estate tax purposes. T's grandchild, GC1, was 
named the sole beneficiary of Policy 1, and T's other grandchild, 
GC2, was named the sole beneficiary of Policy 2. GC1 and GC2 are 
skip persons (as defined in section 2613). Therefore, the payments 
of the proceeds are direct skips. Since the total value of the 
policies ($300,000) exceeds $250,000, the insurance company is 
liable for the tax imposed by chapter 13 and is required to file 
Schedule R-1 of Form 706.
    Example 3. Insurance proceeds of $250,000 or more held by 
insurance company. On August 1, 1997, T, the insured under an 
insurance policy, dies. The policy provides that the insurance 
company shall make 

[[Page 66924]]
monthly payments of $750 to GC, T's grandchild, for life with the 
remainder payable to T's great grandchild, GGC. The face value of 
the policy is $300,000. Since the proceeds continue to be held by 
the insurance company (the trustee), the proceeds are treated as if 
they were transferred to a trust for purposes of chapter 13. The 
trust is a skip person (as defined in section 2613(a)(2)) and the 
transfer is a direct skip. Since the total value of the policy 
($300,000) exceeds $250,000, the insurance company is liable for the 
tax imposed by chapter 13 and is required to file Schedule R-1 of 
Form 706.
    Example 4. Insurance proceeds less than $250,000 held by 
insurance company. Assume the same facts as in Example 3, except the 
policy provides that the insurance company shall make monthly 
payments of $500 to GC and that the face value of the policy is 
$200,000. The transfer is a transfer to a trust for purposes of 
chapter 13. However, since the total value of the policy ($200,000) 
is less than $250,000, the executor is liable for the tax imposed by 
chapter 13 and is required to file Form 706.
    Example 5. On August 1, 1997, A, the insured under a life 
insurance policy, dies. The insurance proceeds on A's life that are 
payable under policies issued by Company X are in the aggregate 
amount of $200,000 and are includible in A's gross estate. Because 
the proceeds are includible in A's gross estate, the generation-
skipping transfer that occurs upon A's death, if any, will be a 
direct skip rather than a taxable distribution or a taxable 
termination. Accordingly, because the aggregate amount of insurance 
proceeds with respect to Company X is less than $250,000, Company X 
may pay the proceeds without regard to whether the beneficiary is a 
skip person in relation to the decedent-transferor.

    (3) Limitation on personal liability of trustee. Except as provided 
in paragraph (c)(3)(iii) of this section, a trustee is not personally 
liable for any increases in the tax imposed by section 2601 which is 
attributable to the fact that--
    (i) A transfer is made to the trust during the life of the 
transferor for which a gift tax return is not filed; or
    (ii) The inclusion ratio with respect to the trust, determined by 
reference to the transferor's gift tax return, is erroneous, the actual 
inclusion ratio being greater than the reported inclusion ratio.
    (iii) This paragraph (c)(3) does not apply if the trustee has or is 
deemed to have knowledge of facts sufficient to reasonably conclude 
that a gift tax return was required to be filed or that the inclusion 
ratio is erroneous. A trustee is deemed to have knowledge of such facts 
if the trustee's agent, employee, partner, or co-trustee has knowledge 
of such facts.
    (4) Exceptions--(i) Legal or mental incapacity. If a distributee is 
legally or mentally incapable of making a return, the return may be 
made for the distributee by the distributee's guardian or, if no 
guardian has been appointed, by a person charged with the care of the 
distributee's person or property.
    (ii) Returns made by fiduciaries. See section 6012(b) for a 
fiduciary's responsibilities regarding the returns of decedents, 
returns of persons under a disability, returns of estates and trusts, 
and returns made by joint fiduciaries.
    (d) Time and manner of filing return--(1) In general. Forms 706, 
706NA, 706GS(D), 706GS(D-1), 706GS(T), 709, and Schedule R-1 of Form 
706 must be filed with the Internal Revenue Service office with which 
an estate or gift tax return of the transferor must be filed. The 
return shall be filed--
    (i) Direct skip. In the case of a direct skip, on or before the 
date on which an estate or gift tax return is required to be filed with 
respect to the transfer (see section 6075(b)(3)); and
    (ii) Other transfers. In all other cases, on or before the 15th day 
of the 4th month after the close of the calendar year in which such 
transfer occurs. See paragraph (d)(2) of this section for an exception 
to this rule when an election is made under section 2624(c) to value 
property included in certain taxable terminations in accordance with 
section 2032.
    (2) Exception for alternative valuation of taxable termination. In 
the case of a taxable termination with respect to which an election is 
made under section 2624(c) to value property in accordance with section 
2032, a Form 706GS(T) must be filed on or before the 15th day of the 
4th month after the close of the calendar year in which the taxable 
termination occurred, or on or before the 10th month following the 
month in which the death that resulted in the taxable termination 
occurred, whichever is later.
    (e) Place for filing returns. See section 6091 for the place for 
filing any return, declaration, statement, or other document, or copies 
thereof, required by chapter 13.
    (f) Lien on property. The liens imposed under sections 6324, 6324A, 
and 6324B are applicable with respect to the tax imposed under chapter 
13. Thus, a lien under section 6324 is imposed in the amount of the tax 
imposed by section 2601 on all property transferred in a generation-
skipping transfer until the tax is fully paid or becomes uncollectible 
by reason of lapse of time. The lien attaches at the time of the 
generation-skipping transfer and is in addition to the lien for taxes 
under section 6321.

Sec. 26.2663-1  Recapture tax under section 2032A.

    See Sec. 26.2642-4(a)(4) for rules relating to the recomputation of 
the applicable fraction and the imposition of additional GST tax, if 
additional estate tax is imposed under section 2032A.

Sec. 26.2663-2  Application of chapter 13 to transfers by nonresidents 
not citizens of the United States.

    (a) In general. This section provides rules for applying chapter 13 
of the Internal Revenue Code to transfers by a transferor who is a 
nonresident not a citizen of the United States (NRA transferor). For 
purposes of this section, an individual is a resident or citizen of the 
United States if that individual is a resident or citizen of the United 
States under the rules of chapter 11 or 12 of the Internal Revenue 
Code, as the case may be. Every NRA transferor is allowed a GST 
exemption of $1,000,000. See Sec. 26.2632-1 regarding the allocation of 
the exemption.
    (b) Transfers subject to chapter 13--(1) Direct skips. A transfer 
by a NRA transferor is a direct skip subject to chapter 13 only to the 
extent that the transfer is subject to the Federal estate or gift tax 
within the meaning of Sec. 26.2652-1(a)(2). See Sec. 26.2612-1(a) for 
the definition of direct skip.
    (2) Taxable distributions and taxable terminations. Chapter 13 
applies to a taxable distribution or a taxable termination to the 
extent that the initial transfer of property to the trust by a NRA 
transferor, whether during life or at death, was subject to the Federal 
estate or gift tax within the meaning of Sec. 26.2652-1(a)(2). See 
Sec. 26.2612-1(b) for the definition of a taxable termination and 
Sec. 26.2612-1(c) for the definition of a taxable distribution.
    (c) Trusts funded in part with property subject to chapter 13 and 
in part with property not subject to chapter 13--(1) In general. If a 
single trust created by a NRA transferor is in part subject to chapter 
13 under the rules of paragraph (b) of this section and in part not 
subject to chapter 13, the applicable fraction with respect to the 
trust is determined as of the date of the transfer, except as provided 
in paragraph (c)(3) of this section.
    (i) Numerator of applicable fraction. The numerator of the 
applicable fraction is the sum of the amount of GST exemption allocated 
to the trust (if any) plus the value of the nontax portion of the 
trust.
    (ii) Denominator of applicable fraction. The denominator of the 
applicable fraction is the value of the property transferred to the 
trust reduced as provided in Sec. 26.2642-1(c).
    (2) Nontax portion of the trust. The nontax portion of a trust is a 
fraction, the numerator of which is the value of property not subject 
to chapter 13 

[[Page 66925]]
determined as of the date of the initial completed transfer to the 
trust, and the denominator of which is the value of the entire trust. 
For example, T, a NRA transferor, transfers property that has a value 
of $1,000 to a generation-skipping trust. Of the property transferred 
to the trust, property having a value of $200 is subject to chapter 13 
and property having a value of $800 is not subject to chapter 13. The 
nontax portion is .8 ($800 (the value of the property not subject to 
chapter 13) over $1,000 (the total value of the property transferred to 
the trust).
    (3) Special rule with respect to the estate tax inclusion period. 
For purposes of this section, the provisions of Sec. 26.2632-1(c), 
providing rules applicable in the case of an estate tax inclusion 
period (ETIP), apply only if the property transferred by the NRA 
transferor is subsequently included in the transferor's gross estate. 
If the property is not subsequently included in the gross estate, then 
the nontax portion of the trust and the applicable fraction are 
determined as of the date of the initial transfer. If the property is 
subsequently included in the gross estate, then the nontax portion and 
the applicable fraction are determined as of the date of death.
    (d) Examples. The following examples illustrate the provisions of 
this section. In each example T, a NRA, is the transferor; C is T's 
child; and GC is C's child and a grandchild of T:

    Example 1. Direct transfer to skip person. T transfers property 
to GC in a transfer that is subject to Federal gift tax under 
chapter 12 within the meaning of Sec. 26.2652-1(a)(2). At the time 
of the transfer, C and GC are NRAs. T's transfer is subject to 
chapter 13 because the transfer is subject to gift tax under chapter 
12.
    Example 2. Transfers of both U.S. and foreign situs property. 
(i) T's will established a testamentary trust for the benefit of C 
and GC. The trust was funded with stock in a publicly traded U.S. 
corporation having a value on the date of T's death of $100,000, and 
property not situated in the United States (and therefore not 
subject to estate tax) having a value on the date of T's death of 
$400,000.
    (ii) On a timely filed estate tax return (Form 706NA), the 
executor of T's estate allocates $50,000 of GST exemption under 
section 2632(a) to the trust. The numerator of the applicable 
fraction is $450,000, the sum of $50,000 (the amount of exemption 
allocated to the trust) plus $400,000 (the value of the nontax 
portion of the trust (4/5 x $500,000)). The denominator is $500,000. 
Hence, the applicable fraction with respect to the trust is .9 
($450,000/$500,000), and the inclusion ratio is .1 (1 - 9/10).
    Example 3. Inter vivos transfer of U.S. and foreign situs 
property to a trust and a timely allocation of GST exemption. T 
establishes a trust providing that trust income is payable to T's 
child for life and the remainder is to be paid to T's grandchild. T 
transfers property to the trust that has a value of $100,000 and is 
subject to chapter 13. T also transfers property to the trust that 
has a value of $300,000 but is not subject to chapter 13. T 
allocates $100,000 of exemption to the trust on a timely filed 
United States Gift (and Generation-Skipping Transfer) Tax return 
(Form 709). The applicable fraction with respect to the trust is 1, 
determined as follows: $300,000 (the value of the nontax portion of 
the trust) plus $100,000 (the exemption allocated to the trust)/ 
$400,000 (the total value of the property transferred to the trust).
    Example 4. Inter vivos transfer of U.S. and foreign situs 
property to a trust and a late allocation of GST exemption. (i) In 
1996, T transfers $500,000 of property to an inter vivos trust the 
terms of which provide that income is payable to C, for life, with 
the remainder to GC. The property transferred to the trust consists 
of property subject to chapter 13 that has a value of $400,000 on 
the date of the transfer and property not subject to chapter 13 that 
has a value of $100,000. T does not allocate GST exemption to the 
trust. On the transfer date, the nontax portion of the trust is .2 
($100,000/$500,000) and the applicable fraction is also .2 
determined as follows: $100,000 (the value of the nontax portion of 
the trust)/$500,000 (the value of the property transferred to the 
trust).
    (ii) In 1999, when the value of the trust is $800,000, T 
allocates $100,000 of GST exemption to the trust. The applicable 
fraction of the trust must be recomputed. The numerator of the 
applicable fraction is $260,000 ($100,000 (the amount of GST 
exemption allocated to the trust)) plus $160,000 (the value of the 
nontax portion of the trust as of the date of allocation (.2 x 
$800,000)). The denominator of the applicable fraction is $800,000. 
Accordingly, the applicable fraction with respect to the trust after 
the allocation is .325 ($260,000/$800,000) and the inclusion ratio 
is .675 (1 - .325).
    Example 5. Taxable termination. The facts are the same as in 
Example 4 except that, in 2006, when the value of the property is 
$1,200,000, C dies and the trust corpus is distributed to GC. The 
termination is a taxable termination. If no further GST exemption 
has been allocated to the trust, the applicable fraction remains 
.325 and the inclusion ratio remains .675.
    Example 6. Estate Tax Inclusion Period. (i) T transferred 
property to an inter vivos trust the terms of which provided T with 
an annuity payable for 10 years or until T's prior death. The 
annuity satisfies the definition of a qualified interest under 
section 2702(b). The trust also provided that, at the end of the 
trust term, the remainder will pass to GC or GC's estate. The 
property transferred to the trust consisted of property subject to 
chapter 13 that has a value of $100,000 and property not subject to 
chapter 13 that has a value of $400,000. T allocated $100,000 of GST 
exemption to the trust. If T dies within the 10 year period, the 
value of the trust principal will be subject to inclusion in T's 
gross estate to the extent provided in sections 2103 and 2104(b). 
Accordingly, the ETIP rule under paragraph (c)(3) of this section 
applies.
    (ii) In year 6 of the trust term, T died. At T's death, the 
trust corpus had a value of $800,000, and $500,000 was includible in 
T's gross estate as provided in sections 2103 and 2104(b). Thus, 
$500,000 of the trust corpus is subject to chapter 13 and $300,000 
is not subject to chapter 13. The $100,000 GST exemption allocation 
is effective as of T's date of death. Also, the nontax portion of 
the trust and the applicable fraction are determined as of T's date 
of death. In this case, the nontax portion of the trust is .375, 
determined as follows: $300,000 (the value of the trust not subject 
to chapter 13)/$800,000 (the value of the trust). The numerator of 
the applicable fraction is $400,000, determined as follows: $100,000 
(GST exemption previously allocated to the trust) plus $300,000 (the 
value of the nontax portion of the trust). The denominator of the 
applicable fraction is $800,000. Thus, the applicable fraction with 
respect to the trust is .50, unless additional exemption is 
allocated to the trust by T's executor or the automatic allocation 
rules of Sec. 26.2632-1(d)(2) apply.
    Example 7. The facts are the same as in Example 6 except that T 
survives the termination date of T's retained annuity and the trust 
corpus is distributed to GC. Since the trust was not included in T's 
gross estate, the ETIP rules do not apply. Accordingly, the nontax 
portion of the trust and the applicable fraction are determined as 
of the date of the transfer to the trust. The nontax portion of the 
trust is .80 ($400,000/$500,000). The numerator of the applicable 
fraction is $500,000 determined as follows: $100,000 (GST exemption 
allocated to the trust) plus $400,000 (the value of the nontax 
portion of the trust). Accordingly, the applicable fraction is 1, 
and the inclusion ratio is zero.

     (e) Transitional rule for allocations for transfers made before 
December 27, 1995. If an NRA made a GST (inter vivos or testamentary) 
after December 23, 1992, and before December 27, 1995 that is subject 
to chapter 13 (within the meaning of Sec. 26.2663-2), the NRA will be 
treated as having made a timely allocation of GST exemption to the 
transfer in a calendar year in the order prescribed in section 2632(c). 
Thus, an NRA's unused GST exemption will initially be treated as 
allocated to any direct skips made during the calendar year and then to 
any trusts with respect to which the NRA made transfers during the same 
calendar year and from which a taxable distribution or a taxable 
termination may occur. Allocations within the above categories are made 
in the order in which the transfers occur. Allocations among 
simultaneous transfers within the same category are made pursuant to 
the principles of section 2632(c)(2). This transitional allocation rule 
will not apply if the NRA transferor, or the executor of the NRA's 
estate, as the case may be, elected to have an automatic allocation of 
GST exemption not apply by describing on a timely-filed Form 709 for 
the year of the 

[[Page 66926]]
transfer, or a timely filed Form 706NA, the details of the transfer and 
the extent to which the allocation was not to apply.

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 2. The authority citation for part 301 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805.* * *

    Par. 3. Section 301.9100-7T is amended as follows:
    a. Paragraph (a)(1) is amended in the table by removing both 
entries for ``1431(a)''.
    b. Paragraph (a)(4)(i) is amended in the table by removing the 
entry for ``1431(a)''.
    c. Paragraph (a)(4)(iii) is revised to read as follows:

Sec. 301.9100-7T   Time and manner of making certain elections under 
the Tax Reform Act of 1986.

    (a) * * *
    (4) * * *
    (iii) Freely revocable election. The election described in this 
section under Act section 311(d)(2) is freely revocable.
* * * * *

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 4. The authority citation for part 602 continues to read as 
follows:
    Authority: 26 U.S.C. 7805.
    Par. 5. In Sec. 602.101, paragraph (c) is amended by adding entries 
in numerical order in the table to read as follows:

Sec. 602.101 OMB Control numbers.

* * * * *
    (c) * * *

------------------------------------------------------------------------
 CFR part or section where identified and                               
                 described                     Current OMB control No.  
------------------------------------------------------------------------
                                                                        
              *        *        *        *        *                     
26.2601-1.................................  1545-0985                   
                                                                        
                  *        *        *        *        *                 
26.2632-..................................  1545-0985                   
                                                                        
                   *        *        *        *      *                  
26.2642-1.................................  1545-0985                   
26.2642-2.................................  1545-0985                   
26.2642-3.................................  1545-0985                   
26.2642-4.................................  1545-0985                   
                                                                        
                  *        *        *        *        *                 
26.2652-2.................................  1545-0985                   
                                                                        
                  *        *        *        *        *                 
26.2662-2.................................  1545-0985                   
                                                                        
                  *        *        *        *        *                 
------------------------------------------------------------------------

    Approved: December 14, 1995
Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
Leslie Samuels,
Assistant Secretary of the Treasury
 [FR Doc. 95-30873 Filed 12-26-95; 8:45 am]
BILLING CODE 4830-01-U

Complete official Federal Register PDF

Federal Register final rules — 1995-12-27

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FR Doc. 95-30873 Generation-Skipping Transfer Tax

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