The U.S. Office of Personnel Management (OPM) is proposing to revise the regulations in 5 CFR 213.3102(u) governing the appointment of people with mental retardation, severe physical disabilities, and psychiatric disabilities. Paragraph (u) of section 213.3102 implements Executive Orders 12125 and 13124 to provide a special hiring authority for people with intellectual disabilities, severe physical disabilities, and psychiatric disabilities. This Schedule A authority is subject to the general provisions of Subpart A, 5 CFR PART 213 for temporary and time-limited appointments. The proposed revisions are described below:

On October 6, 2010, Congress enacted “Rosa's Law,” which changes references from “mental retardation” or “individuals with mental retardation” to “intellectual disability” or “individual with intellectual disability” in various statutes the law amended and required conforming changes in related regulations. Although Rosa's Law is inapplicable to the President's creation of an excepted service hiring authority for persons with specified disabilities, this statute nevertheless prompted OPM to reconsider its own use of terminology. As a result of that process, we propose to revise our language to replace the term “mental retardation” with the currently more commonly used term “intellectual disability.” We added a new paragraph (u)(2) Definitions, to define “intellectual disability” as meaning only those intellectual disabilities that would, under prior iterations of this regulation, have been encompassed by the term “mental retardation.” This addition causes all current paragraphs to change by one number.

Section 213.3102(u)(3)(i) currently requires all applicants seeking either a permanent or time-limited appointment to supply a “certification of job readiness.” This certification, which may be prepared by one of the entities identified in 213.3102(u)(2), has been used as the basis for determining that an applicant can reasonably be expected to perform in a particular work environment. For instance, the certification of readiness for an individual applying for a position as an Administrative Assistant or Accountant might state that the applicant “is likely to succeed performing work in an office environment.” In the alternative, the current 213.3102(u)(3)(ii) allows agencies to give individuals a temporary appointment to establish their ability to perform in the relevant environment when the certification of job readiness has not been provided.

We believe that a requirement that applicants provide a separate “certification of job readiness” is not necessary. Persons with disabilities today often have work, educational, or other relevant experience that an agency may rely upon to determine whether they are likely to succeed in a particular work environment. Agencies also possess the option of giving individuals a temporary appointment that will allow them to establish their job readiness. In those circumstances, the agency may convert the individual to a permanent appointment, once it determines that the individual is able to perform the duties of the position.

Elimination of the requirement that applicants supply a certification of job readiness will speed the hiring process for agencies and remove an unnecessary burden on applicants with disabilities. This is consistent with the policy outlined in the President's Memorandum of May 11, 2010 regarding the elimination of unnecessary complexities and inefficiencies in the federal hiring process.

The proposed section 213.3102(u)(4) provides for permanent or time-limited appointment options when individuals have proof of disability and an agency determines that they are “job ready”—that is, that they are likely to succeed in performing in the required work environment. Under the proposed regulations, the agency determination of job readiness may be based upon any relevant work, educational, or other experience. Section 213.3102(u)(5) addresses temporary employment options, mainly when a determination of job readiness cannot be made based on an individual's prior work, educational, or other experience. We propose to modify this section to clarify the appropriate uses of the temporary employment option (i.e. to determine job readiness, or when the duties to be performed are truly of a short-term nature).

I certify that this regulation will not have a significant economic impact on a substantial number of small entities because it affects only certain potential applicants and Federal employees.

This rule has been reviewed by the Office of Management and Budget in accordance with Executive Order 12866.

Accordingly, OPM is proposing to revise 5 CFR 213.3102 as follows:

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2012-0038; Directorate Identifier 2011-NM-209-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2011-0186, dated September 23, 2011 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

You may obtain further information by examining the MCAI in the AD docket.

The FAA has examined the underlying safety issues involved in fuel tank explosions on several large transport airplanes, including the adequacy of existing regulations, the service history of airplanes subject to those regulations, and existing maintenance practices for fuel tank systems. As a result of those findings, we issued a regulation titled “Transport Airplane Fuel Tank System Design Review, Flammability Reduction and Maintenance and Inspection Requirements” (66 FR 23086, May 7, 2001). In addition to new airworthiness standards for transport airplanes and new maintenance requirements, this rule included Special Federal Aviation Regulation No. 88 (“SFAR 88,” Amendment 21-78, and subsequent Amendments 21-82 and 21-83).

Among other actions, SFAR 88 (66 FR 23086, May 7, 2001) requires certain type design ( i.e., type certificate (TC) and supplemental type certificate (STC)) holders to substantiate that their fuel tank systems can prevent ignition sources in the fuel tanks. This requirement applies to type design holders for large turbine-powered transport airplanes and for subsequent modifications to those airplanes. It requires them to perform design reviews and to develop design changes and maintenance procedures if their designs do not meet the new fuel tank safety standards. As explained in the preamble to the rule, we intended to adopt airworthiness directives to mandate any changes found necessary to address unsafe conditions identified as a result of these reviews.

In evaluating these design reviews, we have established four criteria intended to define the unsafe conditions associated with fuel tank systems that require corrective actions. The percentage of operating time during which fuel tanks are exposed to flammable conditions is one of these criteria. The other three criteria address the failure types under evaluation: Single failures, single failures in combination with a latent condition(s), and in-service failure experience. For all four criteria, the evaluations included consideration of previous actions taken that may mitigate the need for further action.

The Joint Aviation Authorities (JAA) has issued a regulation that is similar to SFAR 88 (66 FR 23086, May 7, 2001). (The JAA is an associated body of the European Civil Aviation Conference (ECAC) representing the civil aviation regulatory authorities of a number of European States who have agreed to co-operate in developing and implementing common safety regulatory standards and procedures.) Under this regulation, the JAA stated that all members of the ECAC that hold type certificates for transport category airplanes are required to conduct a design review against explosion risks.

We have determined that the actions identified in this AD are necessary to reduce the potential of ignition sources inside fuel tanks, which, in combination with flammable fuel vapors, could result in fuel tank explosions and consequent loss of the airplane.

Airbus has issued Mandatory Service Bulletins A300-28-6024, Revision 02, dated January 19, 2011; and A310-28-2039, Revision 01, dated January 19, 2011. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

Based on the service information, we estimate that this proposed AD would affect about 53 products of U.S. registry. We also estimate that it would take about 6 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost about $200 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these parts. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $37,630, or $710 per product.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect 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.

For the reasons discussed above, I certify this proposed regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not affect intrastate aviation in Alaska; and

4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Comments Invited

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.

Communications should identify both docket numbers (FAA Docket No. FAA 2011-1181 and Airspace Docket No. 11-ANM-20) and be submitted in triplicate to the Docket Management System (see ADDRESSES section for address and phone number). You may also submit comments through the Internet at http://www.regulations.gov.

Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2011-1181 and Airspace Docket No. 11-ANM-20”. The postcard will be date/time stamped and returned to the commenter.

All communications received on or before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the closing date for comments. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

An electronic copy of this document may be downloaded through the Internet at http://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the ADDRESSES section for the address and phone number) between 9 a.m. and 5 p.m., Monday through Friday, except federal holidays. An informal docket may also be examined during normal business hours at the Northwest Mountain Regional Office of the Federal Aviation Administration, Air Traffic Organization, Western Service Center, Operations Support Group, 1601 Lind Avenue SW., Renton, WA 98057.

Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking, (202) 267-9677, for a copy of Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.

The FAA is proposing an amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 by amending Class E airspace extending upward from 700 feet above the surface at Boise Air Terminal (Gowen Field), Boise, ID. Airspace reconfiguration is necessary due to the decommissioning of the Donnelly TACAN. The geographic coordinates of the airport would be adjusted in accordance with the FAA's aeronautical database. Controlled airspace is necessary for the safety and management of IFR operations at the airport.

Class E airspace designations are published in paragraph 6005, of FAA Order 7400.9V, dated August 9, 2011, and effective September 15, 2011, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in this Order.

The FAA has determined this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this proposed regulation; (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified this proposed rule, when promulgated, would not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, section 106, describes the authority for the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in subtitle VII, part A, subpart I, section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would amend controlled airspace at Boise Air Terminal (Gowen Field), Boise, ID.

Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:

The temporary regulations in the Rules and Regulations section of this issue of the Federal Register make additions to the Income Tax Regulations (26 CFR part 1) relating to section 501(c)(29) of the Internal Revenue Code (Code). The temporary regulations provide that the Commissioner has the authority to prescribe the procedures under which a qualified nonprofit health insurance issuer (within the meaning of section 1322(c) of the Patient Protection and Affordable Care Act, Public Law 111-148 (March 23, 2010)) which has received a loan or grant from the Centers for Medicare and Medicaid Services under the Consumer Operated and Oriented Plan program may request to be recognized as tax-exempt under section 501(a) as an organization described in section 501(c)(29). The temporary regulations expressly authorize the Commissioner to recognize a qualified nonprofit health insurance issuer as exempt effective as of a date prior to the date of its application, provided that the application is submitted in the manner and within the time prescribed by the Commissioner and the organization's prior purposes and activities were consistent with the requirements for exempt status under section 501(c)(29). The text of the temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the additions.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply, and because no collection of information is imposed on small entities, the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply. Pursuant to section 7805(f) of the Code, the proposed regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comments on its impact on small businesses.

Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES heading. The IRS and the Treasury Department request comments on the proposed regulations, including how they might be made easier to understand. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register .

The principal authors of these regulations are Amy Franklin and Martin Schäffer of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities), although other persons in the IRS and the Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

This document contains proposed regulations that provide guidance on the excise tax imposed on the sale of certain medical devices under section 4191 of the Internal Revenue Code (Code), enacted by section 1405 of the Health Care and Education Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010)), in conjunction with the Patient Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)) (jointly, the ACA).

Section 4191 imposes an excise tax on the sale of certain medical devices by the manufacturer, producer, or importer of the device in an amount equal to 2.3 percent of the sale price. Section 4191 applies to sales of taxable medical devices after December 31, 2012.

Section 4191(b)(1) provides that, in general, a “taxable medical device” is any device, as defined in section 201(h) of the Federal Food, Drug & Cosmetic Act (FFDCA), (codified as amended at 21 U.S.C. 301 et seq. (2006)), that is intended for humans. Section 201(h) of the FFDCA provides generally that the term “device” means an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, that is recognized in the official National Formulary, or the United States Pharmacopeia, or any supplement to them; intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease; or intended to affect the structure or any function of the body, and that does not achieve its primary intended purposes through chemical action within or on the body and that is not dependent upon being metabolized for the achievement of its primary intended purposes.

Section 4191(b)(2) provides that the term “taxable medical device” does not include eyeglasses, contact lenses, hearing aids, and any other medical device determined by the Secretary to be of a type that is generally purchased by the general public at retail for individual use.

In addition, the ACA amended section 4221(a) to limit tax-free sales of taxable medical devices to sales (i) for use by the purchaser for further manufacture, or for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture, and (ii) for export, or for resale by the purchaser to a second purchaser for export. The ACA makes a corresponding amendment to section 6416(b)(2) with regard to claims for refund.

The ACA added section 4191 to chapter 32, subtitle D of the Code, which relates to taxes imposed upon the sales of taxable articles by manufacturers, producers, and importers (commonly referred to as “manufacturers excise taxes”). Therefore, the existing rules governing chapter 32 apply to section 4191. The substantive regulations relating to manufacturers excise taxes are contained in part 48 (Manufacturers and Retailers Excise Tax Regulations) of Title 26 of the Code of Federal Regulations (CFR). The procedural regulations governing manufacturers excise taxes are contained in part 40 (Excise Tax Procedural Regulations) of 26 CFR.

The manufacturers excise tax rules are discussed in Part VII under “Explanation of Provisions,” in this preamble. For additional information on the manufacturers excise tax rules generally, see chapter 5 of IRS Publication 510, “Excise Taxes,” available at http://www.irs.gov/publications/p510/ch05.html .

On December 27, 2010, the IRS published Notice 2010-89 (2010-52 IRB 908) to request comments on the implementation and administration of the new tax under section 4191. The IRS and the Treasury Department received numerous comments in response to the notice and considered all comments in the drafting of the proposed regulations. The comments are discussed in more detail in this preamble. The IRS and the Treasury Department also consulted with the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) in developing these regulations.

Section 4191(b)(1) links the definition of “taxable medical device” to the definition of “device” in section 201(h) of the FFDCA. The FDA generally administers the provisions of the FFDCA, including section 201(h) and other provisions relating to medical devices.

The FDA generally requires owners or operators of places of business (also called establishments) that are located in the United States, or in foreign countries that export devices to the United States, and that manufacture, prepare, propagate, compound, assemble, process, repackage, or relabel medical devices intended for human use to register their establishments and list their devices upon first entering into operation, and to update this information on an annual basis with the FDA. See sections 510(a)-(d), (i), and (j) of the FFDCA, 21 CFR 807.20, and 21 CFR 807.21.

Various commentators observed that the statutory definition of “taxable medical device” leaves uncertainty as to which devices are included in the definition. The proposed regulations address this concern by providing that for purposes of the medical device excise tax, a device defined in section 201(h) of the FFDCA that is intended for humans means a device that is listed as a device with the FDA under section 510(j) of the FFDCA and 21 CFR part 807, pursuant to FDA requirements. The FDA listing requirements are longstanding. Further, device manufacturers must comply with these requirements as part of the FDA's device regulation process. Therefore, device manufacturers can be expected to know which devices fall within the definition.

The FDA has promulgated classification regulations for approximately 1,700 different generic types of devices. Each classification regulation includes one or more product codes that describe a subcategory of the device type described in the regulation. Currently, manufacturers may, in certain circumstances, list multiple different devices that fall within the same product code under a single listing. Therefore, all devices that are listed under a single product code listing in conjunction with the FDA's device listing requirement are “taxable medical devices” unless they fall within an exemption under section 4191(b)(2).

The proposed regulations also provide that if a device is not listed with the FDA but the FDA later determines that the device should have been listed as a device, the device will be deemed to have been listed as a device with the FDA as of the date the FDA notifies the manufacturer or importer in writing that corrective action with respect to listing is required.

Section 4191(b)(2) provides that the term “taxable medical device” does not include eyeglasses, contact lenses, hearing aids, and any other medical device determined by the Secretary to be of a type that is generally purchased by the general public at retail for individual use (the retail exemption).

The FDA has grouped each of the 1,700 classification regulations into 16 medical specialties (21 CFR, parts 862-892). Each of these generic types of devices is assigned to one (or sometimes more than one) of three regulatory classes based on the level of control necessary to assure the safety and effectiveness of the device. The three classes of FDA devices are Class I (general controls), Class II (special controls), and Class III (pre-market approval). A number of device types that predate the enactment of the Medical Device Amendments to the Food, Drug, and Cosmetic Act of 1976 remain unclassified.

With regard to the retail exemption, section 4191 makes no reference to the three regulatory classes. Further, the Joint Committee on Taxation's Technical Explanation of the ACA makes clear that the FDA regulatory classes do not, by themselves, determine whether a device falls within the retail exemption. Specifically, the Technical Explanation states, “The exemption for such items is not limited by device class as defined in section 513 of the Federal Food, Drug, and Cosmetic Act.” Rather, the Technical Explanation notes that the exemption could cover “Class I items such as certain bandages and tipped applicators, Class II items such as certain pregnancy test kits and diabetes testing supplies, and Class III items such as certain denture adhesives and snake bite kits.” The Technical Explanation also emphasizes that “items would only be exempt if they are generally designed and sold for individual use.” Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 111th Congress (JCS-2-11), March 2011, at 366.

The proposed regulations provide a facts and circumstances approach to evaluating whether a taxable medical device is of a type that is generally purchased by the general public at retail for individual use. Under the proposed regulations, a device is considered to be of a type generally purchased by the general public at retail for individual use if (i) the device is regularly available for purchase and use by individual consumers who are not medical professionals, and (ii) the device's design demonstrates that it is not primarily intended for use in a medical institution or office, or by medical professionals. The proposed regulations provide a set of non-exclusive factors for use in evaluating whether a taxable medical device is of a type that is generally purchased by the general public at retail for individual use. The proposed regulations also include a safe harbor provision.

The proposed regulations provide a non-exclusive list of factors to be considered in determining whether a device is regularly available for purchase and use by individual consumers who are not medical professionals. Those factors are (i) whether consumers who are not medical professionals can purchase the device through retail businesses that also sell items other than medical devices, including drug stores, supermarkets, and similar vendors; (ii) whether consumers who are not medical professionals can safely and effectively use the device for its intended medical purpose with minimal or no training from a medical professional; and (iii) whether the device is classified by the FDA under Subpart D of 21 CFR Part 890 (Physical Medicine Devices).

The proposed regulations also provide a non-exclusive list of factors to be considered in determining whether the design of a device demonstrates that it is primarily intended for use in a medical institution or office, or by medical professionals, and therefore not intended for purchase and use by individual consumers. Those factors are (i) whether the device generally must be implanted, inserted, operated, or otherwise administered by a medical professional; (ii) whether the cost to acquire, maintain, and/or use the device requires a large initial investment and/or ongoing expenditure that is not affordable for the average consumer; (iii) whether the device is a Class III device under the FDA system of classification; (iv) whether the device is classified by the FDA under certain parts or subparts of 21 CFR; and (v) whether the device qualifies as durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) for which payment is available exclusively on a rental basis under the Medicare Part B payment rules and is an “item requiring frequent and substantial servicing” as defined in 42 CFR 414.222. With regard to the regulatory classifications incorporated into the fourth factor described in this preamble, the IRS and the Treasury Department have determined, based on all the facts and circumstances, that the overwhelming majority of product codes that fall within these regulatory categories do not include devices that are of a type generally purchased by the general public at retail for individual use.

Whether a device is of a type generally purchased by the general public at retail for individual use is determined based on all relevant facts and circumstances. Thus, there may be relevant facts and circumstances in addition to the factors specifically identified in the proposed regulations.

To provide greater certainty, the proposed regulations also include a safe harbor provision that identifies certain categories of taxable medical devices that the IRS and the Treasury Department have determined fall within the retail exemption. The safe harbor includes (i) devices that are identified in the FDA's IVD Home Use Lab Tests (Over-the-Counter Tests) database, available at http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfIVD/Search.cfm; (ii) devices described as “OTC” or “over the counter” devices in the relevant FDA classification regulation heading; (iii) devices that are described as “OTC” or “over the counter” devices in the FDA's product code name, the FDA's device classification name, or the “classification name” field in the FDA's device registration and listing database, available at http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfrl/rl.cfm; and (iv) certain devices that qualify as DMEPOS for which payment is available on a purchase basis under Medicare Part B payment rules in accordance with the fee schedule published by CMS.

The IRS and the Treasury Department recognize the challenges involved in applying a facts and circumstances test to the wide array of devices that are potentially subject to the medical device excise tax, including for smaller manufacturers or importers for which the application of the retail exemption may determine whether they are subject to the tax at all. The IRS and the Treasury Department intend through the rulemaking process to continue their efforts to find ways to make the test easier to apply to particular cases and to provide certainty with respect to a substantial majority of devices. To that end, comments are requested on additional factors, examples, or safe harbors that could be added to provide greater certainty for a larger number of devices. Comments are particularly requested on how to provide greater clarity with respect to taxable medical devices that are sold primarily or exclusively through specialty medical retailers that sell medical devices and related materials. Comments are also requested on whether the packaging and labeling of a taxable medical device, the terms and conditions of the manufacturer's warranty with respect to a device, and substantial sales of a device over the internet would be meaningful factors for use in establishing whether a device qualifies for the retail exception, and if so, how any such factor should be described and applied. Comments are also requested on other types of DMEPOS that should be considered for safe harbor treatment and how those items can be consistently and specifically identified. For example, “inexpensive equipment,” as defined in 42 CFR 414.220(a)(1), appears to describe items that may meet the retail exception under an application of the facts and circumstances test. However, comments are requested on how devices that fall under the definition would be identified given that the CMS fee schedule categorizes “inexpensive equipment” together with other medical devices that appear not to fall within the retail exception.

The IRS and the Treasury Department received numerous comments suggesting that it is not feasible to base the retail exception on quantitative data that compares the relative number of sales of a certain taxable medical device at retail to the number of sales of the device to doctors' offices, hospitals, and other medical and health care providers and institutions. Several commentators stated that for a given device, numerical data on the proportion of sales to retail purchasers and to non-retail purchasers is often not available to the manufacturers and importers of the device, even with respect to the devices that they manufacture or import. Further, the commentators noted that even if the data is available, a rule that looks to industry-wide data regarding the percentage of retail and non-retail sales of a device would require an ongoing, resource-intensive effort to collect industry-wide sales information, and would not provide certainty to stakeholders because the data may change from year to year. In light of these difficulties, the proposed regulations do not adopt a market data approach to the retail exception.

One commentator suggested that the IRS and the Treasury Department provide a retail exception safe harbor based on a manufacturer's or importer's proportion of sales of a particular device at retail, compared to that manufacturer's or importer's overall sales of the device. Under this suggestion, if the retail sales of a particular device by a manufacturer or importer met or exceeded a certain ratio or percentage, as compared to overall sales by the manufacturer or importer of that device, then all sales of the device would be exempt from tax. The proposed regulations do not adopt this approach to the retail exception because the suggested safe harbor could result in inconsistent treatment of different manufacturers of the same device. The language of section 4191 applies the retail exception to types of devices, not to manufacturers and importers based on the nature of their distributions or sales.

Some commentators suggested that if the manufacturer or importer is able to determine that a particular taxable medical device is sold to consumers at retail, no tax should be imposed on any sale of that device, even if the device is not of a type that is generally purchased by the general public at retail for individual use. Such an approach would be contrary to the language of the statute. Therefore, the proposed regulations do not adopt this approach.

The definition of “device” in section 201(h) of the FFDCA includes devices used in veterinary medicine. However, the definition of “taxable medical device” under section 4191 limits taxable medical devices to devices described in section 201(h) of the FFDCA that are “intended for humans.” The proposed regulations further limit the definition of “taxable medical device” to devices that are listed with the FDA. Under existing FDA regulations, a device intended for use exclusively in veterinary medicine must be labeled as such and is not subject to several pre-market and post-market provisions of the FFDCA, including the listing requirement. Therefore, under the proposed regulations, devices intended for use exclusively in veterinary medicine are not “taxable medical devices.”

A commentator has noted, however, that many medical devices used in veterinary practices are also used in human medicine. The commentator suggested that if the manufacturer can demonstrate that a device is sold for use in veterinary medicine, the excise tax should not be imposed on that sale. The proposed regulations do not adopt this suggestion because the statutory language does not limit the definition of “taxable medical device” to devices intended exclusively for humans. Therefore, a device that is intended for humans but that is also intended for use or used in veterinary medicine is a “taxable medical device” if it is listed as a device with the FDA pursuant to FDA requirements, and does not fall within an exemption under section 4191(b)(2), such as the retail exemption.

Many commentators expressed concern over the potential taxation of devices that have both medical and non-medical uses, such as latex gloves, and requested that the excise tax not be imposed on the sale of devices for non-medical uses.

Section 4191 imposes a tax upon the sale of a taxable medical device by the manufacturer, unless the sale is for export or further manufacture. In most instances, the manufacturer does not sell directly to the end user of the device. Therefore, the manufacturer does not typically know the identity of the end user at the time of sale. Further, commentators suggest that manufacturers would have difficulty tracking their products through the supply chain and determining the ultimate destination of their products once they are sold to a distributor. Commentators also stated that, in some cases, after the manufacturer sells a device to a distributor, the distributor may package and label the device for sale for non-medical uses.

Under the proposed regulations, the definition of “taxable medical device” is tied to the FDA's listing requirements for devices. Therefore, a device that is listed with the FDA pursuant to FDA requirements is a “taxable medical device,” unless it falls within an exemption under section 4191(b)(2), such as the retail exemption.

Several commentators stated that they manufacture devices that are used in clinical medicine to diagnose disease in humans, as well as in industrial laboratory work and laboratory research. Those commentators further stated that when sold for non-medical purposes, such devices are labeled “Research Use Only.” The comments suggest that, although the devices labeled “Research Use Only” are physically suitable for clinical use, FDA regulations prohibit the use of devices with this label in a clinical setting for human medical purposes. The commentators requested that sales of devices that are labeled “Research Use Only” be exempt from the medical device excise tax because of the intended use of such devices.

The proposed regulations define “taxable medical device” as any device that is listed as a device with the FDA pursuant to FDA requirements. Under 21 CFR 807.65(f) of the FDA regulations, persons that “manufacture, prepare, propagate, compound, or process devices solely for use in research, teaching, or analysis and do not introduce such devices into commercial distribution” are exempt from the FDA's registration and listing requirements. See section 510(g) of the FFDCA. Accordingly, a device that is sold for use in research that is not listed because it satisfies the requirements of 21 CFR 807.65(f) is not a “taxable medical device” under the proposed regulations. In contrast, a device that is sold for use in research that is listed with the FDA pursuant to FDA requirements, such as a device not solely used in research or one that is introduced into commercial distribution, is a “taxable medical device” under the proposed regulations, unless it falls within an exemption under section 4191(b)(2), such as the retail exemption.

Several commentators requested an exemption for devices that are subject to an Investigational Device Exemption (IDE). The FDA permits the distribution of certain devices that the FDA has not yet approved for marketing under an IDE. See 21 CFR part 812 for the FDA's regulatory provisions regarding the IDE. Devices under an IDE are exempt from the FDA's listing requirements. Accordingly, a device subject to an IDE is not a “taxable medical device” under the proposed regulations.

A commentator requested that the proposed regulations provide a blanket exclusion for dental instruments and equipment. The proposed regulations do not adopt this suggestion. There is no statutory basis for treating dental devices differently from other taxable medical devices. Many dental instruments and equipment items are subject to the FDA's listing requirement. Accordingly, those devices that are listed as devices with the FDA pursuant to FDA requirements are “taxable medical devices” under the proposed regulations, unless they fall within an exemption under section 4191(b)(2), such as the retail exemption.

The ACA added section 4191 to chapter 32; therefore, the existing rules governing chapter 32 apply to the medical device excise tax. Those rules are longstanding. They are contained in statutory and regulatory provisions, and have been developed further through revenue rulings, other published guidance, and case law.

Several commentators requested clarification on the existing manufacturers excise tax rules. This section provides an overview of the rules and addresses some of the manufacturers excise tax issues raised by commentators.

In general, the manufacturer or importer of a taxable article is liable for the tax upon the sale of the article. Under chapter 32, the lease or use of a taxable article by the manufacturer is generally treated as a sale.

The term “manufacturer” means any person who produces a taxable article from scrap, salvage, or junk material, or from new or raw material, by processing, manipulating, or changing the form of an article or by combining or assembling two or more articles. A manufacturer that sells a taxable article in knockdown (that is, unassembled) condition is considered the manufacturer and is liable for tax on the sale of the article. For chapter 32 purposes, the term “manufacturer” also includes an “importer.” The importer of a taxable article is any person who brings the article into the United States from a source outside the United States, or withdraws an article from a customs bonded warehouse for sale or use in the United States. See § 48.0-2(a)(4) for the definitions of the terms “manufacturer” and “importer.”

If more than one person is involved in the manufacture or importation of an item, such as a contract manufacturing arrangement, the determination of which person is the manufacturer or the importer is based on the facts and circumstances of the arrangement. The substance rather than the form of the transaction is determinative. See Rev. Rul. 58-134 (1958-1 CB 395), Rev. Rul. 60-42 (1960-1 CB 474), and Polaroid v. U.S., 235 F2d. 276 (1st Cir. 1956), for rules regarding the determination of which party is the manufacturer for chapter 32 purposes. See Rev. Rul. 68-197 (1968-1 CB 455) and Rev. Rul. 82-40 (1982-1 CB 175) for rules regarding the determination of which party is the importer for chapter 32 purposes.

Some commentators suggested that, in determining who is liable for the tax, the IRS and the Treasury Department should apply either the section 954 contract manufacturing rules or the FDA's registration and listing rules under 21 CFR part 807. The proposed regulations do not adopt these suggestions. As noted above, the existing chapter 32 framework includes definitions of “manufacturer” and “importer.” Section 4191 does not provide alternate definitions for those terms. Accordingly, the definitions of “manufacturer” and “importer” under chapter 32 apply to section 4191.

Generally, the manufacturers excise tax attaches when the title to the taxable article passes from the manufacturer to a purchaser. When title passes is dependent upon the intention of the parties as gathered from the contract of sale and the attendant circumstances. In the case of a sale on credit, the tax attaches whether or not the purchase price is actually paid. In the case of conditional or installment sales of a taxable article, the tax attaches to each partial payment. See § 48.0-2(b) for the general rules regarding the attachment of tax.

Section 4218 imposes tax on certain uses of an article by the article's manufacturer. The tax attaches at the time the use begins. Under § 48.4218-1(b), generally, if the manufacturer of a taxable article uses the article for any purpose other than in the manufacture of another taxable article, then the manufacturer is liable for tax on the article as if the manufacturer had sold it. However, if a manufacturer uses a taxable article in the testing of another article of its own manufacture, the use of the taxable article by the manufacturer is not a taxable use. See Rev. Rul. 76-119 (1976-1 CB 345). Section 48.4218-5 provides rules on how to calculate the price on which the tax is imposed in cases of the taxable use of an article by the manufacturer.

Several commentators requested guidance on whether taxable medical devices that are used as demonstration products are subject to the medical device excise tax. The provision or use of a taxable medical device as a demonstration product may constitute a taxable sale or use, depending on the facts and circumstances of the arrangement. For example, Rev. Rul. 72-563 (1972-2 CB 568) holds that a manufacturer has sold an article when it provides the article “free of charge” to another person for promotional purposes. In addition, Rev. Rul. 60-290 (1960-2 CB 331) holds that the use of a taxable article by its manufacturer for demonstration purposes is a taxable use for purposes of section 4218.

Under section 4217(a), the lease of a taxable article by the manufacturer is considered a sale. If, at the time of making the lease, the manufacturer is in the business of selling the same type and model of article in arm's length transactions, the tax attaches to each lease payment until the cumulative total of the tax payments equals the total tax. If, however, at the time of making the lease, the manufacturer is not engaged in the business of selling the same type and model of article in arm's length transactions, the tax attaches to each lease payment if the article is leased by the manufacturer. See section 4216(c), section 4217(b), § 48.4216(c)-1, and § 48.4217-2 for the rules regarding the attachment and payment of tax in the context of leases.

Under § 48.4217-1, the term “lease” means a contract or agreement, written or verbal, that gives the lessee an exclusive, continuous right to the possession or use of a particular article for a period of time. The term includes any renewal or extension of a lease, or any subsequent lease of the article.

The tax imposed under section 4191 is based on the price for which a taxable medical device is sold. Under section 48.4216(a)-1(a), the price for which a taxable article is sold includes the total consideration paid for the device, whether that consideration is in the form of money, services, or other things.

The taxable sale price of a taxable article also includes, among other things, any charge for coverings or containers (regardless of their nature), and any charge incident to placing the article in a condition to be packed and ready for shipment. However, the taxable sale price excludes (i) the manufacturers excise tax, whether or not it is stated as a separate charge; (ii) the actual cost of transportation, delivery, insurance, installation, and other expenses incurred by the manufacturer or importer in placing the article in the hands of the purchaser pursuant to a bona fide sale (the costs of transportation of goods to a warehouse before their bona fide sale are not excludable); (iii) discounts, rebates, and similar allowances actually granted to the purchaser; (iv) local advertising charges; and (v) charges for warranty paid at the purchaser's option. See section 4216(a) and § 48.4216(a)-1 for the rules regarding the charges included in sale price. See sections 4216(a) and (e), § 48.4216(a)-2, § 48.4216(e)-1, § 48.4216(e)-2, and § 48.4216(e)-3 for the rules regarding exclusions from sale price.

The basic sale price rules assume that the manufacturer sells the taxable article in an arm's length transaction (that is, in a transaction between two unrelated parties) to a wholesale distributor that then sells the taxable article to a retailer that resells to consumers. However, if a manufacturer sells a taxable article other than to a wholesale distributor or at less than a fair market arm's length price, the taxable sale price is determined on a constructive sale price rather than the actual sale price. The constructive sale price rules are set forth in section 4216(b), in § 48.4216(b)-1, § 48.4216(b)-2, § 48.4216(b)-3, and § 48.4216(b)-4 of the regulations, and in numerous revenue rulings.

If a purchaser of a taxable article returns the article to the manufacturer under a warranty as to its quality or service and the manufacturer replaces the article with a new taxable article free of charge or at a reduced price, the tax on the new article is computed on the actual amount, if any, paid to the manufacturer for the new article. See § 48.4216(a)-3(b) for the rules regarding replacements under warranty.

Several commentators requested clarification on how the sale price rules work in the context of taxable medical devices, particularly with regard to “bonus” goods and rebates. These commentators indicated that rebates are a common practice in the medical device industry. Under existing manufacturers tax rules, if a manufacturer sells taxable articles at the regular price and includes some of the same articles as a bonus, the tax imposed under section 4191 applies to the total price charged for the entire order. With regard to rebates, § 48.4216(a)-3(c) provides that the tax must be based on the original price of the taxable article, unless the rebate has been made prior to the close of the period for which the tax is returned. However, if a manufacturer subsequently allows a rebate for taxable articles on which tax has been paid, the manufacturer is entitled to a credit or refund for that portion of the tax that is proportionate to the part of the price that is rebated. See Rev. Rul. 68-659 (1968-2 CB 511) and Rev. Rul. 69-73 (1969-1 CB 284) for applications of the rules regarding bonus goods, free goods, and rebates. See § 48.4216(a)-3(c) for rules regarding readjustments in sale price for discounts, rebates, and bonuses.

If title to, or ownership of, a taxable article passes from the manufacturer to a transferee by operation of law (such as through an inheritance or as part of the sale of a business) or as a result of any transaction not taxable under chapter 32, tax attaches to the sale of the article by the transferee to the same extent and in the same manner as if the transferee were the manufacturer of the article. See section 4219 and § 48.4219-1 for the rules regarding transfers of title to taxable articles by operation of law.

Under section 4221(a), the tax imposed by section 4191 does not apply to the sale of taxable medical devices for use by the purchaser for further manufacture (or for resale by the purchaser to a second purchaser for further manufacture) or for export (or for resale for export).

Under § 48.4221-2(b), an article is sold for use in further manufacture if the article is sold for use by the purchaser as material in the production of, or as a component part of, another article taxable under chapter 32. Section 48.4221-2 sets forth rules governing tax-free sales of articles to be used or resold for further manufacture.

Under § 48.0-2(a)(10), an article is exported if the article is severed from the mass of things belonging within the United States with the intention of uniting it with the mass of things belonging within some foreign country or within a possession of the United States. Section 48.4221-3 sets forth rules regarding tax-free sales of articles for export.

To make a tax-free sale for further manufacture or export, the manufacturer, the first purchaser, and in some cases the second purchaser must be registered by the IRS. A manufacturer or purchaser applies for registration by filing a Form 637, “Application for Registration (For Certain Excise Tax Activities),” in accordance with the instructions on the form. See § 48.4222(a)-1 for the registration requirements for tax-free sales. Foreign purchasers of articles sold or resold for export are exempt from the registration requirement. See § 48.4222(b)-1(b).

Generally, the purchaser of a taxable article must provide the purchaser's registration number to the manufacturer and certify the exempt purpose for which the article will be used. The information must be in writing and may be noted on the purchase order or other document furnished by the purchaser to the manufacturer in connection with the sale. See § 48.4221-1(c).

A credit or refund of the manufacturers excise tax may be available if a tax-paid article is exported or used for an exempt purpose, such as further manufacture. See 6416 and the corresponding regulations for the conditions to allowance of a claim for credit or refund of tax and for the documentation required to support a claim for credit or refund.

Part 40 of 26 CFR contains the procedural rules applicable to manufacturers excise taxes with regard to returns, deposits, and payments.

Subtitle F of the Code contains the procedural rules applicable to “internal revenue taxes” (including manufacturers excise taxes) with regard to assessment, collection, penalties, overpayments, refunds, and statutes of limitations.

Several commentators requested clarification on the taxation of kits, often referred to as “convenience kits.” In general, a convenience kit is two or more different medical devices, or a combination of medical devices and other items, packaged together for the convenience of the user.

According to commentators, a number of different types of businesses, including device manufacturers and distributors, engage in the practice of creating such convenience kits. A manufacturer may assemble a kit containing a combination of items that it manufactures and items that it purchases from other manufacturers, importers, or distributors. A kit may also be assembled by a distributor that purchases the items contained in the kit from one or more manufacturers or importers. Some kits are designed to be used by medical or health care professionals for the performance of a particular medical procedure. Other kits are available to the general public at retail, such as first aid kits and home pregnancy test kits.

Several commentators expressed concern over the potential for double taxation when one or more taxable medical devices are included in a kit. Some commentators suggested that tax should not be imposed on both the taxable medical devices used as components of the kit and the kit itself. Other commentators recommended imposing tax on the taxable medical devices included in the kit, but not on the assembled kit. Other commentators suggested that the assembly of a kit does not constitute manufacture because the items included in the kit are not transformed.

Under the proposed regulations, a kit is a “taxable medical device” if the kit is listed as a device with the FDA pursuant to FDA requirements. The proposed regulations define “kit” as a set of two or more articles packaged in a single bag, tray, or box for the convenience of the end user.

Moreover, the existing manufacturers excise tax rules apply to kits in determining who is liable for the tax and which sale is subject to tax. Under these existing rules, if a manufacturer sells a taxable medical device to a distributor that uses the device to produce a kit that is a distinct taxable medical device, the distributor's assembly of the kit constitutes further manufacture because the distributor has created a new taxable article. The proposed regulations clarify that if a kit is a taxable medical device, then the use of other taxable medical devices in the assembly of the kit constitutes further manufacture by the person who assembles the kit.

In some circumstances, the manufacturer may make a tax-free sale of a taxable medical device to the distributor for use in the production or assembly of a kit; tax will attach, however, upon the sale of the kit by the distributor. If the manufacturer sells a taxable medical device to the distributor for use in the production or assembly of a kit at a tax-included price, the distributor may be eligible to claim a credit or refund for the overpayment of tax pursuant to section 6416(b)(3). The rules regarding tax-free sales for further manufacture and the credit and refund provisions of section 6416(b)(3) provide a mechanism for avoiding double taxation when a taxable medical device is included in a kit that is also a taxable medical device. See § 48.4221-2(b) for the circumstances under which a taxable article is sold for use in further manufacture. See section 4221 and § 48.4221-1, § 48.4221-2, § 48.4222(a)-1, and § 48.4223-1 for the rules regarding tax-free sales for further manufacture.

Generally, under § 48.4216(a)-1(e), if a taxable and nontaxable article are sold by the manufacturer as a unit, the tax attaches to that portion of the unit that is properly allocable to the taxable article. In the case of a kit that is a separate taxable medical device, the taxable and nontaxable articles used in the kit's production or assembly have lost their identity as separate articles. Accordingly, the proposed regulations clarify that the provisions of § 48.4216(a)-1(e) do not apply to the sale of kits that are separate taxable medical devices. The proposed regulations further clarify that under such circumstances, the entire sale price of the kit is subject to tax under section 4191.

Several commentators requested clarification on the tax treatment of an associated or secondary device that is sold with a primary device, such as a monitor that is sold as part of an x-ray system. Commentators also requested information on the tax treatment of components of a device.

Under the proposed regulations, the definition of “taxable medical device” is tied to the FDA's listing requirements for devices. Therefore, associated devices or components that are listed as devices with the FDA pursuant to FDA requirements are “taxable medical devices” for purposes of section 4191, unless they fall within an exemption under section 4191(b)(2), such as the retail exemption. However, if a manufacturer uses an associated device or component in creating a new device that must be listed with the FDA, then the rules under section 4221 and the corresponding regulations regarding further manufacture apply.

Combination products are therapeutic and diagnostic products that combine drugs, devices, and/or biological products. See 21 CFR 3.2(e). The IRS and the Treasury Department received a comment regarding combination products consisting of a device component and a drug component, such as prefilled syringes and inhalers. The commentator suggested that the sale of a combination product should not be subject to the medical device tax if its drug component is taken into account in computing the branded prescription drug (BPD) fee enacted under section 9008 of the ACA. The commentator suggested that the combination product be subject to either the BPD fee or the medical device tax, but not both, based on the FDA's determination of a combination product's primary mode of action.

The ACA enacted both the medical device excise tax and the BPD fee, but provided no coordination between the provisions. Under the proposed regulations, the definition of “taxable medical device” is tied to the FDA's listing requirements for devices. In general, the annual BPD fee is allocated among covered entities engaged in the business of manufacturing or importing branded prescription drugs with aggregate branded prescription drug sales of over $5 million to specified government programs. See section 9008 of the ACA and 26 CFR part 51. For this purpose, each branded prescription drug is identified based on its National Drug Code (NDC). Based on consultation with the FDA, the IRS and the Treasury Department anticipate that few, if any, combination products will be subject to both the medical device excise tax and the BPD fee. The IRS and the Treasury Department request comments on the extent to which combination products may be subject to the medical device excise tax and taken into account in computing the BPD fee, and the mechanisms by which any such impact could be avoided.

A commentator requested transition relief for sales contracts for medical software and IT systems. According to the commentator, sellers of software and IT systems frequently provide medical devices, such as medical device data systems, under long-term, multi-year contracts. Under these contracts, the manufacturer often delivers software and IT systems in stages, with partial payments due at various times during the contract term. The commentator requested that contracts, leases, and other agreements entered into before January 1, 2013, not be subject to the medical device excise tax, even if payments on the contract are received after December 31, 2012.

The proposed regulations apply the existing manufacturers excise tax rules for sales contracts. Under section 4216 and § 48.4216(c)-1(b), generally, when a taxable article is sold under an installment payment contract with title reserved in the seller, or under another arrangement that creates a security interest and under which payments are to be made in installments, tax is computed and paid on each payment made by the purchaser. The tax payable with each payment is a percentage of each payment based on the rate of the tax, if any, in effect on the date the payment is due.

The proposed regulations do not adopt the request for transition relief. The statute was enacted on March 30, 2010, with an effective date of January 1, 2013. The statute did not provide an exception or special rule for sales pursuant to contracts in existence prior to the effective date of the tax. The proposed regulations track the statute.

The IRS notice and revenue rulings cited in this preamble are published in the Internal Revenue Cumulative Bulletin and are available from the Superintendent of Documents, P.O. Box 979050, St. Louis, MO 63197-9000.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these regulations do not impose a collection of information on small entities, the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and the Treasury Department request comments on the clarity of the proposed regulations and how they may be made easier to understand. All comments will be available for public inspection and copying.

A public hearing has been scheduled for May 16, 2012, at 10 a.m., in the IRS Auditorium, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit electronic or written comments by May 7, 2012 and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by May 7, 2012. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the schedule of speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

The principal author of these regulations is Natalie Payne, Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and the Treasury Department participated in their development.

Accordingly, 26 CFR part 48 is proposed to be amended as follows:

In Notice No. 124, the Alcohol and Tobacco Tax and Trade Bureau (TTB) proposes to replace the current four report forms used by distilled spirits plants to report their operations with two new report forms that would be submitted on a monthly or quarterly basis. The proposal would streamline the reporting process and would result in savings for the industry and for TTB by significantly reducing the number of reports that must be completed and filed by industry members and processed by TTB.

On February 2, 2012, TTB received an email from the Distilled Spirits Council of the United States (DISCUS) requesting additional time to prepare its comment on Notice No. 124. The email stated:

In response to that request, TTB is extending the comment period for Notice No. 124 for an additional 30 days. Therefore, comments on Notice No. 124 are now due on or before March 5, 2012.

Michael D. Hoover of the Regulations and Rulings Division drafted this notice.

Public Participation and Request for Comments

We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided.

If you submit a comment, please include the docket number for this rulemaking (USCG-2012-0039), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online (via http://www.regulations.gov ) or by fax, mail, or hand delivery, but please use only one of these means. If you submit a comment online via www.regulations.gov, it will be considered received by the Coast Guard when you successfully transmit the comment. If you fax, hand deliver, or mail your comment, it will be considered as having been received by the Coast Guard when it is received at the Docket Management Facility. We recommend that you include your name and a mailing address, an email address, or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.

To submit your comment online, go to http://www.regulations.gov, click on the “submit a comment” box, which will then become highlighted in blue. In the “Document Type” drop down menu select “Proposed Rule” and insert “USCG-2012-0039” in the “Keyword” box. Click “Search” then click on the balloon shape in the “Actions” column. If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying and electronic filing. If you submit comments by mail and would like to know that they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period and may change the rule based on your comments.

To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov, click on the “read comments” box, which will then become highlighted in blue. In the “Keyword” box insert “USCG-2012-0039” and click “Search.” Click the “Open Docket Folder” in the “Actions” column. You may also visit the Docket Management Facility in Room W12-140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. We have an agreement with the Department of Transportation to use the Docket Management Facility.

Anyone can search the electronic form of comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review a Privacy Act notice regarding our public dockets in the January 17, 2008, issue of the Federal Register (73 FR 3316).

We do not plan to hold a public meeting, but you may submit a request for one on or before February 16, 2012 using one of the four methods specified under ADDRESSES . Please explain why you believe a public meeting would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register .

The legal basis for the proposed rule is the Coast Guard's authority to establish special local regulations: 33 U.S.C. 1233. The purpose of the proposed rule is to insure safety of life and property on navigable waters of the United States during the Savannah Tall Ships Challenge.

From Thursday, May 3, 2012 through Monday, May 7, 2012, the Savannah Tall Ships Challenge is scheduled to take place on the Savannah River in Savannah, Georgia. Beginning on May 3, 2012, participating vessels will moor at the downtown Savannah River waterfront, along the right and left descending banks of the Savannah River. The vessels will remain moored at these locations until May 7, 2012. On May 7, 2012 between 11:40 a.m. and 3 p.m., vessels participating in the Savannah Tall Ships Challenge will transit the Savannah River from their mooring locations to a staging area, where they will congregate before heading to the next port in the 2012 Tall Ships Challenge. The vessels are scheduled to depart the staging area on May 7, 2012 between 3 p.m. and 4:30 p.m.

The proposed rule would establish special local regulations on the Savannah River in Savannah, Georgia during the Savannah Tall Ships Challenge. The special local regulations would establish the following three regulated areas.

(1) Mooring Zones. All waters of the Savannah River within 25 yards of vessels participating in the Savannah Tall Ships Challenge while such vessels are moored. The mooring zones would be enforced from 10:30 a.m. on May 3, 2012 until 3 p.m. on May 7, 2012.

(2) Buffer Zones. All waters of the Savannah River within 200 yards of vessels participating in the Savannah Tall Ships Challenge as they transit from their mooring locations to the staging area. The buffer zones would be enforced from 11:30 a.m. until 3 p.m. on May 7, 2012.

(3) Staging Area. All waters within a one nautical mile radius of position 31°57′47″ N, 80°40′24″ W. The staging area would be enforced from 11:30 a.m. until 4:30 p.m. on May 7, 2012.

Notice of the special local regulations, including the names and mooring locations of the vessels participating in the Savannah Tall Ships Challenge and the identities of the lead safety vessel and the last safety vessel as the vessels transit to the staging area, would be provided prior to the event by Local Notice to Mariners and Broadcast Notice to Mariners.

Persons and vessels would be prohibited from entering, transiting through, anchoring in, or remaining within any of the regulated areas unless authorized by the Captain of the Port Savannah or a designated representative. Persons and vessels would be able to request authorization to enter, transit through, anchor in, or remain within the regulated areas by contacting the Captain of the Port Savannah by telephone at (912) 652-4353, or a designated representative via VHF radio on channel 16. If authorization to enter, transit through, anchor in, or remain within any of the regulated areas is granted by the Captain of the Port Savannah or a designated representative, all persons and vessels receiving such authorization would be required to comply with the instructions of the Captain of the Port Savannah or a designated representative.

We developed this proposed rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

Executive Orders 13563, Improving Regulation and Regulatory Review, and 12866, Regulatory Planning and Review, direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This proposed rule has not been designated a significant regulatory action under section 3(f) of Executive Order 12866. Accordingly, the Office of Management and Budget has not reviewed this proposed rule under Executive Order 12866.

The economic impact of this proposed rule is not significant for the following reasons: (1) The special local regulations would be enforced for a total of 102 hours; (2) although persons and vessels would not be able to enter, transit through, anchor in, or remain within the regulated areas without authorization from the Captain of the Port Savannah or a designated representative, they would be able to operate in the surrounding area during the enforcement periods; (3) persons and vessels would still be able to enter, transit through, anchor in, or remain within the regulated areas if authorized by the Captain of the Port Savannah or a designated representative; and (4) the Coast Guard would provide advance notification of the safety zones to the local maritime community by Local Notice to Mariners and Broadcast Notice to Mariners.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. This proposed rule may affect the following entities, some of which may be small entities: the owners or operators of vessels intending to enter, transit through, anchor in, or remain within that portion of the Savannah River encompassed within the special local regulations from 10:30 a.m. on May 3, 2012 through 4:30 p.m. on May 7, 2012. For the reasons discussed in the Regulatory Planning and Review section above, this proposed rule would not have a significant economic impact on a substantial number of small entities.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this proposed rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact Chief Petty Officer Benjamin Mercado, Marine Safety Unit Savannah Office of Waterways Management, Coast Guard; telephone (912) 652-4353, email Benjamin.Mercado@uscg.mil. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or Tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this proposed rule would not result in such expenditure, we do discuss the effects of this proposed rule elsewhere in this preamble.

This proposed rule would not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This proposed rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children.

This proposed rule does not have Tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes.

We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this proposed rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves establishing special local regulations issued in conjunction with a marine parade, as described in figure 2-1, paragraph (34)(h), of the Instruction. Under figure 2-1, paragraph (34)(h), of the Instruction, an environmental analysis checklist and a categorical exclusion determination are not required for this proposed rule. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 100 as follows:

Public Participation and Request for Comments

We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted, without change to http://www.regulations.gov and will include any personal information you have provided.

If you submit a comment, please include the docket number for this rulemaking (USCG-2011-1136), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online ( http://www.regulations.gov ), or by fax, mail or hand delivery, but please use only one of these means. If you submit a comment online via http://www.regulations.gov, it will be considered received by the Coast Guard when you successfully transmit the comment. If you fax, hand deliver, or mail your comment, it will be considered as having been received by the Coast Guard when it is received at the Docket Management Facility. We recommend that you include your name and a mailing address, an email address, or a phone number in the body of your document so that we can contact you if we have questions regarding your submission.

To submit your comment online, go to http://www.regulations.gov, click on the “submit a comment” box, which will then become highlighted in blue. In the “Document Type” drop down menu select “Proposed Rules” and insert “USCG-2011-1136” in the “Keyword” box. Click “Search” then click on the balloon shape in the “Actions” column. If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8 1/2 ; by 11 inches, suitable for copying and electronic filing. If you submit them by mail and would like to know that they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period and may change the rule based on your comments.

To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov, click on the “read comments” box, which will then become highlighted in blue. In the “Keyword” box insert “USCG-2011-1136” and click “Search.” Click the “Open Docket Folder” in the “Actions” column. You may also visit the Docket Management Facility in Room W12-140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue SE., Washington, DC, 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. We have an agreement with the Department of Transportation to use the Docket Management Facility.

Anyone can search the electronic form of comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc. ). You may review a Privacy Act notice regarding our public dockets in the January 17, 2008, issue of the Federal Register (73 FR 3316).

We do not now plan to hold a public meeting. But you may submit a request for one using one of the four methods specified under ADDRESSES . Please explain why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register .

Norfolk Southern Corporation (NS), who owns and operates both swing-type bridges, has requested changes in the operating regulations of their railroad drawbridges across Christina River, at miles 4.1 and 4.2, in Wilmington, DE, set out in 33 CFR 117.237(d).

The NS drawbridges at miles 4.1 and 4.2 have vertical clearances in the closed position to vessels of six and three feet above mean high water, respectively.

Under the regular operating schedule, the drawbridges shall open on signal from 6 a.m. to 8 p.m., if at least 24 hours notice is given; and from 8 p.m. to 6 a.m., the draws need not be opened for the passage of vessels.

There had been no request to open either drawbridge for a vessel for more than 20 years. Approximately two trains per day traverse the NS drawbridge at mile 4.1, and there is no train service at the NS drawbridge at mile 4.2, where the bridge is currently placed in the open-to-navigation position. In accordance with 33 CFR 117.39 and 117.41, the Coast Guard proposes to allow the NS drawbridge at mile 4.1 to be maintained in the closed-to-navigation position; and allow the NS drawbridge at mile 4.2 to be maintained in the open-to-navigation position and discontinue draw tender service for both drawbridges. The 24-hour advance notice in the current regulation is no longer necessary due to the lack of openings.

The Coast Guard proposes to revise 33 CFR 117.237(d). This proposed change would divide the current paragraph into paragraphs (d)(1) and (d)(2).

Paragraph (d)(1) would contain the proposed rule for the Norfolk Southern Railroad Bridge at mile 4.1. The rule would allow the draw of the bridge to remain in the closed-to-navigation position and would not require openings for the passage of vessels.

Paragraph (d)(2) would contain the proposed rule for the Norfolk Southern Railroad Bridge at mile 4.2. The rule would allow the draw of the bridge to be maintained in the open-to-navigation position and would allow for unobstructed passage of vessels.

We developed this proposed rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Executive Order 12866. The Office of Management and Budget has not reviewed it under that Order. The proposed change is expected to have minimal impact on mariners since there have been no requests for vessel openings for more than 20 years for either drawbridge with no anticipated change to vessel traffic.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. This action will not have a significant economic impact on a substantial number of small entities for the following reasons. There have been no requests to open either drawbridge for the passage of vessels for more than 20 years and there is no anticipated change to vessel traffic.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact Terrance Knowles, Environmental Protection Specialist, Fifth Coast Guard District, (757) 398-6587 or email Terrance.A.Knowles@uscg.mil. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule will not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This proposed rule would not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children.

This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this proposed rule under Department of Homeland Security Management Directive 023-01, and Commandant Instruction M16475.lD which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment because it simply promulgates the operating regulations or procedures for drawbridges. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows:

Throughout this document wherever “we”, “us” or “our” are used, we mean EPA. Information is organized as follows:

EPA is proposing to approve the State Implementation Plan (SIP) submittal from the State of Oregon to demonstrate that the SIP meets the requirements of section 110(a)(1) and (2) of the Clean Air Act (CAA) for the National Ambient Air Quality Standards (NAAQS) promulgated for ozone on July 18, 1997. EPA is proposing to find that the current Oregon SIP meets the following 110(a)(2) infrastructure elements for the 1997 8-hour ozone NAAQS: (A), (B), (C), (D)(ii), (E), (F), (G), (H), (J), (K), (L), and (M).

Section 110(a)(1) of the CAA requires that each state, after a new or revised NAAQS is promulgated, review their SIPs to ensure that they meet the requirements of the “infrastructure” elements of section 110(a)(2). The State of Oregon submitted a certification to EPA on September 25, 2008, certifying that Oregon's SIP meets the infrastructure obligations for the 1997 8-hour ozone and 1997 PM 2.5 NAAQS. The certification included an analysis of Oregon's SIP as it relates to each section of the infrastructure requirements with regard to the 1997 8-hour ozone and 1997 PM 2.5 NAAQS.

At this time, EPA is acting on the infrastructure SIP submittal for the 110(a)(2) required elements as they relate to the 1997 8-hour ozone NAAQS. This action does not address infrastructure requirements with respect to the 1997 PM 2.5 NAAQS which EPA intends to act on at a later time. This action also does not address the requirements of 110(a)(2)(D(i) for the 1997 8-hour ozone NAAQS which were previously approved by EPA in three separate actions on June 9, 2011 (76 FR 33650), July 5, 2011 (76 FR 38997), and November 9, 2011 (76 FR 80747).

On July 18, 1997, EPA promulgated a new NAAQS for ozone. EPA revised the ozone NAAQS to provide an 8-hour averaging period which replaced the previous 1-hour averaging period, and the level of the NAAQS was changed from 0.12 parts per million (ppm) to 0.08 ppm (62 FR 38856).

The CAA requires SIPs meeting the requirements of sections 110(a)(1) and (2) be submitted by states within 3 years after promulgation of a new or revised standard. Sections 110(a)(1) and (2) require states to address basic SIP requirements, including emissions inventories, monitoring, and modeling to assure attainment and maintenance of the standards, so-called “infrastructure” requirements. States were required to submit such SIPs for the 1997 8-hour ozone NAAQS to EPA no later than June 2000. However, intervening litigation over the 1997 8-hour ozone standard created uncertainty about how to proceed, and many states did not provide the required infrastructure SIP submissions for the newly promulgated standard.

To help states meet this statutory requirement for the 1997 8-hour ozone NAAQS, EPA issued guidance to address infrastructure SIP elements under section 110(a)(1) and (2). 1 This guidance provides that to the extent an existing SIP already meets the section 110(a)(2) requirements, states need only to certify that fact via a letter to EPA. Section 110(a) imposes the obligation upon states to make a SIP submission to EPA for a new or revised NAAQS, but the contents of that submission may vary depending upon the facts and circumstances. In particular, the data and analytical tools available at the time the state develops and submits the SIP for a new or revised NAAQS affects the content of the submission. The contents of such SIP submissions may also vary depending upon what provisions the state's federally approved SIP already contains. In the case of the 1997 8-hour ozone NAAQS, states typically have met the basic program elements required in section 110(a)(2) through earlier SIP submissions in connection with previous ozone standards.

Section 110(a)(1) provides the procedural and timing requirements for SIP submissions after a new or revised NAAQS is promulgated. Section 110(a)(2) lists specific elements that states must meet for “infrastructure” SIP requirements related to a newly established or revised NAAQS. These requirements include SIP infrastructure elements such as modeling, monitoring, and emissions inventories that are designed to assure attainment and maintenance of the NAAQS. The requirements, with their corresponding CAA subsection, are listed below:

• 110(a)(2)(A): Emission limits and other control measures.

• 110(a)(2)(B): Ambient air quality monitoring/data system.

• 110(a)(2)(C): Program for enforcement of control measures.

• 110(a)(2)(D): Interstate transport.

• 110(a)(2)(E): Adequate resources.

• 110(a)(2)(F): Stationary source monitoring system.

• 110(a)(2)(G): Emergency power.

• 110(a)(2)(H): Future SIP revisions.

• 110(a)(2)(I): Areas designated nonattainment and meet the applicable requirements of part D.

• 110(a)(2)(J): Consultation with government officials; public notification; and Prevention of Significant Deterioration (PSD) and visibility protection.

• 110(a)(2)(K): Air quality modeling/data.

• 110(a)(2)(L): Permitting fees.

• 110(a)(2)(M): Consultation/participation by affected local entities.

EPA's October 2, 2007 guidance clarified that two elements identified in section 110(a)(2) are not governed by the 3 year submission deadline of section 110(a)(1) because SIPs incorporating necessary local nonattainment area controls are not due within 3 years after promulgation of a new or revised NAAQS, but rather due at the time the nonattainment area plan requirements are due pursuant to CAA section 172. These requirements are: (i) Submissions required by section 110(a)(2)(C) to the extent that subsection refers to a permit program as required in part D, Title I of the CAA, and (ii) submissions required by section 110(a)(2)(I) which pertain to the nonattainment planning requirements of part D, Title I of the CAA. As a result, this action does not address infrastructure elements related to section 110(a)(2)(C) with respect to nonattainment new source review (NSR) or 110(a)(2)(I).

This action also does not address the requirements of 110(a)(2)(D)(i) for the 1997 8-hour ozone NAAQS which have been addressed by three separate actions issued by EPA. On June 9, 2011, EPA approved the SIP revision submitted by the Oregon Department of Environmental Quality (ODEQ) to address specific provisions of Clean Air Act section 110(a)(2)(D)(i) for the 1997 8-hour ozone NAAQS including two of the four prongs of 110(a)(2)(D)(i): significant contribution to nonattainment of these NAAQS in any other state (prong 1) and interference with maintenance of these NAAQS by any other state (prong 2) (76 FR 33650). Subsequently, on July 5, 2011, EPA approved portions of a SIP revision submitted by ODEQ as meeting the requirements of the fourth prong of Clean Air Act section 110(a)(2)(D)(i) as it applies to visibility for the 1997 8-hour ozone NAAQS (prong 4) (76 FR 38997). Finally, on November 9, 2011, EPA approved an Oregon SIP revision that addressed among other things, interference with any other state's required measures to prevent significant deterioration (PSD) of its air quality with respect to the 1997 8-hour ozone NAAQS (prong 3) (76 FR 80747).

Furthermore, EPA interprets the section 110(a)(2)(J) provision on visibility as not being triggered by a new NAAQS because the visibility requirements in part C are not changed by a new NAAQS.

EPA is currently acting upon SIPs that address the infrastructure requirements of CAA section 110(a)(1) and (2) for ozone and PM 2.5 NAAQS for various states across the country. Commenters on EPA's recent proposals for some states raised concerns about EPA statements that it was not addressing certain substantive issues in the context of acting on those infrastructure SIP submissions. 2 The commenters specifically raised concerns involving provisions in existing SIPs and with EPA's statements in other proposals that it would address two issues separately and not as part of actions on the infrastructure SIP submissions: (i) Existing provisions related to excess emissions during periods of start-up, shutdown, or malfunction at sources that may be contrary to the CAA and EPA's policies addressing such excess emissions (“SSM”) and (ii) existing provisions related to “director's variance” or “director's discretion” that purport to permit revisions to SIP approved emissions limits with limited public process or without requiring further approval by EPA, that may be contrary to the CAA (“director's discretion”). EPA notes that there are two other substantive issues for which EPA likewise stated in other proposals that it would address the issues separately: (i) Existing provisions for minor source new source review programs that may be inconsistent with the requirements of the CAA and EPA's regulations that pertain to such programs (“minor source NSR”) and (ii) existing provisions for Prevention of Significant Deterioration programs that may be inconsistent with current requirements of EPA's “Final NSR Improvement Rule,” 67 FR 80,186 (December 31, 2002), as amended by 72 FR 32,526 (June 13, 2007) (“NSR Reform”). In light of the comments, EPA believes that its statements in various proposed actions on infrastructure SIPs with respect to these four individual issues should be explained in greater depth. It is important to emphasize that EPA is taking the same position with respect to these four substantive issues in this action on the infrastructure SIP for the 1997 8-hour ozone NAAQS submittal from Oregon.

EPA intended the statements in the other proposals concerning these four issues merely to be informational, and to provide general notice of the potential existence of provisions within the existing SIPs of some states that might require future corrective action. EPA did not want states, regulated entities, or members of the public to be under the misconception that the Agency's approval of the infrastructure SIP submission of a given state should be interpreted as a reapproval of certain types of provisions that might exist buried in the larger existing SIP for such state. Thus, for example, EPA explicitly noted that the Agency believes that some states may have existing SIP approved SSM provisions that are contrary to the CAA and EPA policy, but that “in this rulemaking, EPA is not proposing to approve or disapprove any existing State provisions with regard to excess emissions during SSM of operations at facilities.” EPA further explained, for informational purposes, that “EPA plans to address such State regulations in the future.” EPA made similar statements, for similar reasons, with respect to the director's discretion, minor source NSR, and NSR Reform issues. EPA's objective was to make clear that approval of an infrastructure SIP for these ozone and PM 2.5 NAAQS should not be construed as explicit or implicit reapproval of any existing provisions that relate to these four substantive issues. EPA is reiterating that position in this action on the 1997 8-hour ozone infrastructure SIP for Oregon.

Unfortunately, the commenters and others evidently interpreted these statements to mean that EPA considered action upon the SSM provisions and the other three substantive issues to be integral parts of acting on an infrastructure SIP submission, and therefore that EPA was merely postponing taking final action on the issues in the context of the infrastructure SIPs. This was not EPA's intention. To the contrary, EPA only meant to convey its awareness of the potential for certain types of deficiencies in existing SIPs, and to prevent any misunderstanding that it was reapproving any such existing provisions. EPA's intention was to convey its position that the statute does not require that infrastructure SIPs address these specific substantive issues in existing SIPs and that these issues may be dealt with separately, outside the context of acting on the infrastructure SIP submission of a state. To be clear, EPA did not mean to imply that it was not taking a full final agency action on the infrastructure SIP submission with respect to any substantive issue that EPA considers to be a required part of acting on such submissions under section 110(k) or under section 110(c). Given the confusion evidently resulting from EPA's statements in those other proposals, however, we want to explain more fully the Agency's reasons for concluding that these four potential substantive issues in existing SIPs may be addressed separately from actions on infrastructure SIP submissions.

The requirement for the SIP submissions at issue arises out of CAA section 110(a)(1). That provision requires that states must make a SIP submission “within 3 years (or such shorter period as the Administrator may prescribe) after the promulgation of a national primary ambient air quality standard (or any revision thereof)” and that these SIPS are to provide for the “implementation, maintenance, and enforcement” of such NAAQS. Section 110(a)(2) includes a list of specific elements that “[e]ach such plan” submission must meet. EPA has historically referred to these particular submissions that states must make after the promulgation of a new or revised NAAQS as “infrastructure SIPs.” This specific term does not appear in the statute, but EPA uses the term to distinguish this particular type of SIP submission designed to address basic structural requirements of a SIP from other types of SIP submissions designed to address other different requirements, such as “nonattainment SIP” submissions required to address the nonattainment planning requirements of part D, “regional haze SIP” submissions required to address the visibility protection requirements of CAA section 169A, new source review permitting program submissions required to address the requirements of part D, and a host of other specific types of SIP submissions that address other specific matters.

Although section 110(a)(1) addresses the timing and general requirements for these infrastructure SIPs, and section 110(a)(2) provides more details concerning the required contents of these infrastructure SIPs, EPA believes that many of the specific statutory provisions are facially ambiguous. In particular, the list of required elements provided in section 110(a)(2) contains a wide variety of disparate provisions, some of which pertain to required legal authority, some of which pertain to required substantive provisions, and some of which pertain to requirements for both authority and substantive provisions. 3 Some of the elements of section 110(a)(2) are relatively straightforward, but others clearly require interpretation by EPA through rulemaking, or recommendations through guidance, in order to give specific meaning for a particular NAAQS. 4

Notwithstanding that section 110(a)(2) provides that “each” SIP submission must meet the list of requirements therein, EPA has long noted that this literal reading of the statute is internally inconsistent, insofar as section 110(a)(2)(I) pertains to nonattainment SIP requirements that could not be met on the schedule provided for these SIP submissions in section 110(a)(1). 5 This illustrates that EPA must determine which provisions of section 110(a)(2) may be applicable for a given infrastructure SIP submission. Similarly, EPA has previously decided that it could take action on different parts of the larger, general “infrastructure SIP” for a given NAAQS without concurrent action on all subsections, such as section 110(a)(2)(D)(i), because the Agency bifurcated the action on these latter “interstate transport” provisions within section 110(a)(2) and worked with states to address each of the four prongs of section 110(a)(2)(D)(i) with substantive administrative actions proceeding on different tracks with different schedules. 6 This illustrates that EPA may conclude that subdividing the applicable requirements of section 110(a)(2) into separate SIP actions may sometimes be appropriate for a given NAAQS where a specific substantive action is necessitated, beyond a mere submission addressing basic structural aspects of the state's SIP. Finally, EPA notes that not every element of section 110(a)(2) would be relevant, or as relevant, or relevant in the same way, for each new or revised NAAQS and the attendant infrastructure SIP submission for that NAAQS. For example, the monitoring requirements that might be necessary for purposes of section 110(a)(2)(B) for one NAAQS could be very different than what might be necessary for a different pollutant. Thus, the content of an infrastructure SIP submission to meet this element from a state might be very different for an entirely new NAAQS, versus a minor revision to an existing NAAQS. 7

Similarly, EPA notes that other types of SIP submissions required under the statute also must meet the requirements of section 110(a)(2), and this also demonstrates the need to identify the applicable elements for other SIP submissions. For example, nonattainment SIPs required by part D likewise have to meet the relevant subsections of section 110(a)(2) such as section 110(a)(2)(A) or (E). By contrast, it is clear that nonattainment SIPs would not need to meet the portion of section 110(a)(2)(C) that pertains to part C, i.e., the PSD requirements applicable in attainment areas. Nonattainment SIPs required by part D also would not need to address the requirements of section 110(a)(2)(G) with respect to emergency episodes, as such requirements would not be limited to nonattainment areas. As this example illustrates, each type of SIP submission may implicate some subsections of section 110(a)(2) and not others.

Given the potential for ambiguity of the statutory language of section 110(a)(1) and (2), EPA believes that it is appropriate for EPA to interpret that language in the context of acting on the infrastructure SIPs for a given NAAQS. Because of the inherent ambiguity of the list of requirements in section 110(a)(2), EPA has adopted an approach in which it reviews infrastructure SIPs against this list of elements “as applicable.” In other words, EPA assumes that Congress could not have intended that each and every SIP submission, regardless of the purpose of the submission or the NAAQS in question, would meet each of the requirements, or meet each of them in the same way. EPA elected to use guidance to make recommendations for infrastructure SIPs for these ozone and PM 2.5 NAAQS.

On October 2, 2007, EPA issued guidance making recommendations for the infrastructure SIP submissions for both the 1997 8-hour ozone NAAQS and the 1997 PM 2.5 NAAQS. 8 Within this guidance document, EPA described the duty of states to make these submissions to meet what the Agency characterized as the “infrastructure” elements for SIPs, which it further described as the “basic SIP requirements, including emissions inventories, monitoring, and modeling to assure attainment and maintenance of the standards.”  9 As further identification of these basic structural SIP requirements, “attachment A” to the guidance document included a short description of the various elements of section 110(a)(2) and additional information about the types of issues that EPA considered germane in the context of such infrastructure SIPs. EPA emphasized that the description of the basic requirements listed on attachment A was not intended “to constitute an interpretation of” the requirements, and was merely a “brief description of the required elements. ”  10 EPA also stated its belief that with one exception, these requirements were “relatively self explanatory, and past experience with SIPs for other NAAQS should enable States to meet these requirements with assistance from EPA Regions.”  11 For the one exception to that general assumption, however, i.e., how states should proceed with respect to the requirements of section 110(a)(2)(G) for the 1997 PM 2.5 NAAQS, EPA gave much more specific recommendations. But for other infrastructure SIP submittals, and for certain elements of the submittals for the 1997 PM 2.5 NAAQS, EPA assumed that each State would work with its corresponding EPA regional office to refine the scope of a State's submittal based on an assessment of how the requirements of section 110(a)(2) should reasonably apply to the basic structure of the State's SIP for the NAAQS in question.

On September 25, 2009, EPA issued guidance to make recommendations to states with respect to the infrastructure SIPs for the 2006 PM 2.5 NAAQS. 12 In the 2009 Guidance, EPA addressed a number of additional issues that were not germane to the infrastructure SIPs for the 1997 8-hour ozone and 1997 PM 2.5 NAAQS, but were germane to these SIP submissions for the 2006 PM 2.5 NAAQS, e.g., the requirements of section 110(a)(2)(D)(i) that EPA had bifurcated from the other infrastructure elements for those specific 1997 ozone and PM 2.5 NAAQS. Significantly, neither the 2007 Guidance nor the 2009 Guidance explicitly referred to the SSM, director's discretion, minor source NSR, or NSR Reform issues as among specific substantive issues EPA expected states to address in the context of the infrastructure SIPs, nor did EPA give any more specific recommendations with respect to how states might address such issues even if they elected to do so. The SSM and director's discretion issues implicate section 110(a)(2)(A), and the minor source NSR and NSR Reform issues implicate section 110(a)(2)(C). In the 2007 Guidance and the 2009 Guidance, however, EPA did not indicate to states that it intended to interpret these provisions as requiring a substantive submission to address these specific issues in existing SIP provisions in the context of the infrastructure SIPs for these NAAQS. Instead, EPA's 2007 Guidance merely indicated its belief that the states should make submissions in which they established that they have the basic SIP structure necessary to implement, maintain, and enforce the NAAQS. EPA believes that states can establish that they have the basic SIP structure, notwithstanding that there may be potential deficiencies within the existing SIP. Thus, EPA's proposals for other states mentioned these issues not because the Agency considers them issues that must be addressed in the context of an infrastructure SIP as required by section 110(a)(1) and (2), but rather because EPA wanted to be clear that it considers these potential existing SIP problems as separate from the pending infrastructure SIP actions. The same holds true for this action on the 1997 8-hour ozone infrastructure SIP for Oregon.

EPA believes that this approach to the infrastructure SIP requirement is reasonable, because it would not be feasible to read section 110(a)(1) and (2) to require a top to bottom, stem to stern, review of each and every provision of an existing SIP merely for purposes of assuring that the state in question has the basic structural elements for a functioning SIP for a new or revised NAAQS. Because SIPs have grown by accretion over the decades as statutory and regulatory requirements under the CAA have evolved, they may include some outmoded provisions and historical artifacts that, while not fully up to date, nevertheless may not pose a significant problem for the purposes of “implementation, maintenance, and enforcement” of a new or revised NAAQS when EPA considers the overall effectiveness of the SIP. To the contrary, EPA believes that a better approach is for EPA to determine which specific SIP elements from section 110(a)(2) are applicable to an infrastructure SIP for a given NAAQS, and to focus attention on those elements that are most likely to need a specific SIP revision in light of the new or revised NAAQS. Thus, for example, EPA's 2007 Guidance specifically directed states to focus on the requirements of section 110(a)(2)(G) for the 1997 PM 2.5 NAAQS because of the absence of underlying EPA regulations for emergency episodes for this NAAQS and an anticipated absence of relevant provisions in existing SIPs.

Finally, EPA believes that its approach is a reasonable reading of section 110(a)(1) and (2) because the statute provides other avenues and mechanisms to address specific substantive deficiencies in existing SIPs. These other statutory tools allow the Agency to take appropriate tailored action, depending upon the nature and severity of the alleged SIP deficiency. Section 110(k)(5) authorizes EPA to issue a “SIP call” whenever the Agency determines that a state's SIP is substantially inadequate to attain or maintain the NAAQS, to mitigate interstate transport, or otherwise to comply with the CAA. 13 Section 110(k)(6) authorizes EPA to correct errors in past actions, such as past approvals of SIP submissions. 14 Significantly, EPA's determination that an action on the infrastructure SIP is not the appropriate time and place to address all potential existing SIP problems does not preclude the Agency's subsequent reliance on provisions in section 110(a)(2) as part of the basis for action at a later time. For example, although it may not be appropriate to require a state to eliminate all existing inappropriate director's discretion provisions in the course of acting on the infrastructure SIP, EPA believes that section 110(a)(2)(A) may be among the statutory bases that the Agency cites in the course of addressing the issue in a subsequent action. 15

The Oregon SIP submittal lists specific provisions of the Oregon Revised Statutes (ORS) Chapter 468 Environmental Quality, Public Health and Safety, General Administration; ORS Chapter 468A Air Quality, Public Health and Safety, Air Quality Control; Oregon Administrative Rules (OAR) Chapter 340, and the Oregon SIP. The specific sections are listed below, with an analysis of how the Oregon submittal by ODEQ meets the requirements.

110(a)(2)(A): Emission limits and other control measures:

Section 110(a)(2)(A) requires SIPs to include enforceable emission limits and other control measures, means or techniques, schedules for compliance and other related matters. EPA notes that the specific nonattainment area plan requirements of Section 110(a)(2)(I) are subject to the timing requirement of Section 172, not the timing requirement of Section 110(a)(1).

Oregon's submittal: The Oregon SIP submittal cites multiple Oregon air quality laws and regulations to address this element. ORS 468A.035 “General Comprehensive Plan” provides authority to ODEQ to develop a general comprehensive plan for the control or abatement of air pollution. ORS 468A.020 “Rules and Standards” gives the Environmental Quality Commission (EQC) authority to adopt rules and standards to perform function vested by law. ORS 468A.025 “Air Purity Standards” provides the EQC with authority to set air quality standards, emission standards, and emission treatment and control provisions. The Oregon submittal goes on to cite the following listing of Oregon laws and regulations that establish emission limits and pollution controls. For a detailed description, please refer to the Technical Support Document (TSD) in the docket for this action:

EPA analysis: EPA finds that Oregon's rules define and reference emissions limits and significant emissions rates for air pollutants including NO X and VOCs, as precursors to ozone. Oregon has no areas designated nonattainment for the 1997 8-hour ozone NAAQS.

Some of the rules listed above were approved into the SIP under part D because certain areas in Oregon were historically nonattainment under the 1-hour ozone standard and required maintenance plans to ensure on-going compliance with the 1997 8-hour ozone standard. As a result, Oregon regulates ozone and its precursors through its SIP-approved major and minor source permitting programs and ozone maintenance plans. EPA does not consider SIP requirements triggered by the nonattainment area mandates in part D of Title I of the CAA to be governed by the submission deadline of section 110(a)(1). Nevertheless, Oregon has referenced some SIP provisions originally submitted in response to part D in its submittal documenting its compliance with the infrastructure requirements of section 110(a)(1) and (2). Oregon has over time continually updated the elements of its SIP addressing the ozone NAAQS, and the provisions reviewed here are a weave of SIP revisions submitted in response to the infrastructure requirements of section 110(a)(2) and the nonattainment requirements of part D.

For the purposes of this action, EPA is reviewing any rules originally submitted in response to part D solely for the purposes of determining whether they support a finding that the state has met the basic infrastructure requirements under section 110(a)(2). EPA is proposing to approve Oregon's SIP as meeting the requirements of section 110(a)(2)(A) for the 1997 8-hour ozone NAAQS.

In this action, EPA is not proposing to approve or disapprove any existing state provisions with regard to excess emissions during startup, shutdown, or malfunction (SSM) of operations at a facility. EPA believes that a number of states may have SSM provisions that are contrary to the Clean Air Act and existing EPA guidance  16 and the Agency plans to address such state regulations in the future. In the meantime, EPA encourages any state having a deficient SSM provision to take steps to correct it as soon as possible.

In this action, EPA is not proposing to approve or disapprove any existing state rules relating to director's discretion or variance provisions. EPA believes that a number of states may have such provisions that are contrary to the Clean Air Act and existing EPA guidance (52 FR 45109), November 24, 1987, and the Agency plans to take action in the future to address such state regulations. In the meantime, EPA encourages any state having a director's discretion or variance provision that is contrary to the Clean Air Act and EPA guidance to take steps to correct the deficiency as soon as possible.

110(a)(2)(B): Ambient air quality monitoring/data system:

Section 110(a)(2)(B) requires SIPs to include provisions to provide for establishment and operation of ambient air quality monitors, collecting and analyzing ambient air quality data, and making these data available to EPA upon request.

Oregon's submittal: Oregon references ORS 468.035(a-e, m) “Functions of the Department” which provide authority to conduct and supervise inquiries and programs to assess and communicate air conditions and to obtain necessary resources (assistance, materials, supplies, etc) to meet these responsibilities.

EPA analysis: A comprehensive air quality monitoring plan, intended to meet requirements of 40 CFR part 58 was submitted by Oregon to EPA on December 27, 1979 (40 CFR 52.1970) and approved by EPA on March 4, 1981 (46 FR 15136). This air quality monitoring plan has been subsequently updated, with the most recent submittal dated July 1, 2011. EPA approved the plan on January 6, 2012. This plan includes, among other things, the locations for the ozone monitoring network. Oregon provides an annual air quality data report to the public on the ODEQ Web site at http://www.deq.state.or.us/aq/forms/annrpt.htm . In addition, Oregon sends real time air monitoring information for ozone, particulate matter, and carbon monoxide to EPA's AIRNow Web page at http://www.airnow.gov and also provides the information on the ODEQ Air Quality Index (AQI) Web site at http://www.deq.state.or.us/aqi . Based on the foregoing, EPA proposes to approve the Oregon's SIP as meeting the requirements of CAA Section 110(a)(2)(B) for the 1997 8-hour ozone NAAQS.

110(a)(2)(C): Program for enforcement of control measures:

Section 110(a)(2)(C) requires states to include a program providing for enforcement of all SIP measures and the regulation of construction of new or modified stationary sources, including a program to meet PSD and nonattainment NSR requirements.

Oregon's submittal: Oregon's SIP submittal refers to ORS 468.090-.140 “Enforcement” which provides ODEQ with authority to investigate complaints, investigate and inspect sources for compliance, access records, commence enforcement procedures, and impose civil penalties. In addition, ORS 468.035 (j, k) “Functions of the Department” provides ODEQ with the authority to enforce state air pollution laws and compel compliance with any rule, standard, order, permit or condition. The Oregon submittal goes on to cite the following listing of Oregon laws and regulations related to enforcement and permitting. For a detailed description, please refer to the TSD in the docket for this action:

• OAR 340-210 Stationary Source Notification Requirements

• OAR 340-214 Stationary Source Reporting Requirements

• OAR 340-224 Major New Source Review

EPA analysis: To generally meet the requirements of section 110(a)(2)(C), the state is required to have PSD, nonattainment NSR, and minor NSR permitting programs adequate to implement the 1997 8-hour ozone NAAQS. As explained above, in this action EPA is not evaluating nonattainment related provisions, such as the nonattainment NSR program required by part D of the CAA. In addition, Oregon has no nonattainment areas for the 1997 8-hour ozone NAAQS.

EPA believes Oregon code provides ODEQ with the authority to enforce the air quality laws, regulations, permits, and orders promulgated pursuant to ORS Chapters 468 and 468A. ODEQ staffs and maintains an enforcement program to ensure compliance with SIP requirements. The ODEQ Director, at the direction of the Governor, may enter a cease and desist order for polluting activities that present an imminent and substantial danger to public health (ORS 468-115). Enforcement cases may be referred to the state Attorney General's Office for civil or criminal enforcement. Therefore, EPA is proposing to approve the Oregon SIP as meeting the requirements of 110(a)(2)(C) related to enforcement for the 1997 8-hour ozone NAAQS.

EPA is proposing to approve Oregon's SIP as generally meeting the requirements related to PSD under section 110(a)(2)(C) for the 1997 8-hour ozone standard. EPA most recently approved revisions to Oregon's major NSR rules (which encompass PSD and Part D NSR) to include NO X as a precursor for ozone for PSD purposes and PSD permitting of GHGs on November 9, 2011 (76 FR 80747).

EPA is proposing to approve Oregon's infrastructure certification for the 1997 8-hour ozone NAAQS with respect to the general requirement in section 110(a)(2)(C) to include a program in the SIP that regulates the modification and construction of any stationary source as necessary to assure that the NAAQS are achieved. EPA most recently approved revisions to Oregon's NSR program, including NSR Reform on November 9, 2011 (76 FR 80747). EPA has determined that Oregon's minor NSR program adopted pursuant to section 110(a)(2)(C) of the Act regulates emissions of ozone and its' precursors.

Oregon's NSR program includes requirements for major source permitting in nonattainment areas, maintenance areas, and attainment and unclassifiable areas (OAR 340-224). Oregon's federally-enforceable state operating permit program is found at OAR 340-216 “Air Contaminant Discharge Permits” and is also the administrative permit mechanism used to implement the notice of construction and major new source review programs. ODEQ delegates authority to Lane Regional Air Protection Agency (LRAPA) to implement the source permitting programs within its area of jurisdiction. The requirements and procedures contained in OAR 340-216, OAR 340-222 and OAR 340-224 are used by LRAPA to implement its permitting programs until it adopts rules which are at least as restrictive as state rules. In this action, EPA is not proposing to approve or disapprove any state rules with regard to NSR reform requirements for major sources.

In addition, EPA is not proposing to approve or disapprove the state's existing minor NSR program in this action; we are not evaluating this program for consistency with EPA's regulations governing minor NSR herein. EPA believes that a number of states may have minor NSR provisions that are contrary to the existing EPA regulations for this program. EPA intends to work with states to reconcile state minor NSR programs with EPA's regulatory provisions for the program. The statutory requirements of section 110(a)(2)(C) provide for considerable flexibility in designing minor NSR programs, and EPA believes it may be time to revisit the regulatory requirements for this program to give the states an appropriate level of flexibility to design a program that meets their particular air quality concerns, while assuring reasonable consistency across the country in protecting the NAAQS with respect to new and modified minor sources.

110(a)(2)(D): Interstate transport:

Section 110(a)(2)(D) requires SIPs to include provisions prohibiting any source or other type of emissions activity in one state from contributing significantly to nonattainment, or interfering with maintenance of the NAAQS in another state, or from interfering with measures required to prevent significant deterioration of air quality or to protect visibility in another state.

As noted above, this action does not address the requirements of 110(a)(2)(D)(i) for the 8-hour ozone NAAQS which have been addressed by three separate actions issued by EPA. On June 9, 2011, EPA approved the ODEQ SIP submittal to address specific provisions of Clean Air Act section 110(a)(2)(D)(i) for the 1997 8-hour ozone NAAQS including two of the four prongs of 110(a)(2)(D)(i): Significant contribution to nonattainment of these NAAQS in any other state (prong 1); and interference with maintenance of these NAAQS by any other state (prong 2) (76 FR 33650). Subsequently, on July 5, 2011, EPA approved portions of a SIP revision submitted by ODEQ as meeting the requirements of the fourth prong of Clean Air Act section 110(a)(2)(D)(i) as it applies to visibility for the 1997 8-hour ozone NAAQS (prong 4) (76 FR 38997). Finally, on November 9, 2011, EPA approved an Oregon SIP revision that addressed among other things, interference with any other state's required measures to prevent significant deterioration (PSD) of its air quality with respect to the 1997 8-hour ozone NAAQS (prong 3) (76 FR 80747).

Interstate and International transport provisions:

Section 110(a)(2)(D)(ii) requires SIPs to include provisions ensuring compliance with the applicable requirements of sections 126 and 115 (relating to interstate and international pollution abatement). Specifically, section 126(a) requires new or modified major sources to notify neighboring states of potential impacts from the source.

EPA analysis: EPA most recently approved revisions to Oregon's NSR regulations on November 9, 2011 (76 FR 80747). Oregon's public notice requirements at OAR 340-209-0060 require that for major NSR actions ODEQ will provide notice to neighboring states, among other officials and agencies. The state has no pending obligations under section 115 or 126(b) of the Act. EPA is proposing to approve the Oregon SIP as meeting the requirements of CAA Section 110(a)(2)(D)(ii) for the 1997 8-hour ozone NAAQS.

110(a)(2)(E): Adequate resources:

Section 110(a)(2)(E) requires states to provide (i) necessary assurances that the state will have adequate personnel, funding, and authority under state law to carry out the SIP (and is not prohibited by any provision of Federal or state law from carrying out the SIP or portion thereof), (ii) requires that the state comply with the requirements respecting state boards under section 128 and (iii) necessary assurances that, where the state has relied on a local or regional government, agency, or instrumentality for the implementation of any SIP provision, the state has responsibility for ensuring adequate implementation of such SIP provision.

Oregon's submittal: Oregon cites ORS 468.035 which provides ODEQ authority to employ personnel, purchase supplies, enter into contracts, and to receive appropriate and expend federal and other funds for purposes of air pollution research and control. In addition, ORS 468.045 provides the ODEQ director with the power to hire, assign, reassign, and coordinate personnel of the department; authority to administer and enforce the laws of the state concerning environmental quality. ORS 468.035(c) provides authority to advise, consult, and cooperate with other states, state and federal agencies, or political subdivisions on all air quality control matters. ORS 468A.010 calls for a coordinated statewide program of air quality control with responsibility allocated between the state and the units of local government and ORS 468A.100-180 describes the establishment, role and function of regional air quality control authorities and includes the provision that regional rules may not be less strict than state rules. The statute also provides the state Environmental Quality Commission with authority to require corrective measures by the regional agency or to remove the regional agency's administrative and enforcement functions if they fail to meet the specified requirements of state law. Oregon regulations at OAR 340-200 specify Lane Regional Air Protection Agency (LRAPA) has authority in Lane County and defines the term “Regional Agency.”

EPA analysis: Regarding adequate personnel, funding and authority, EPA believes the Oregon SIP meets the requirements of this element. Oregon receives sections 103 and 105 grant funds from EPA and provides state matching funds necessary to carry out SIP requirements. Regarding the state board requirements under section 128, EPA approved OAR 340-200-0100 through OAR 340-200-0120 as meeting the requirements of CAA section 128 on January 22, 2003 (68 FR 2891). Finally, regarding state responsibility and oversight of local and regional entities, Oregon law and regulation listed above provide ODEQ with adequate authority to carry out SIP obligations with respect to the 1997 8-hour ozone NAAQS. Therefore EPA is proposing to approve the Oregon SIP as meeting the requirements of CAA Section 110(a)(2)(E) for the 1997 8-hour ozone NAAQS.

110(a)(2)(F): Stationary source monitoring system:

Section 110(a)(2)(F) requires (i) the installation, maintenance, and replacement of equipment, and the implementation of other necessary steps, by owners or operators of stationary sources to monitor emissions from such sources, (ii) periodic reports on the nature and amounts of emissions and emissions-related data from such sources, and (iii) correlation of such reports by the state agency with any emission limitations or standards established pursuant to the CAA, which reports shall be available at reasonable times for public inspection.

Oregon's submittal: Oregon's SIP submittal refers to statute and regulation which provides authority and requirements for source emissions monitoring, reporting, and correlation with emission limits or standards. For a detailed description, please refer to the TSD in the docket for this action:

EPA analysis: The provisions cited by the Oregon SIP submittal provide for monitoring, recordkeeping and reporting requirements for sources subject to major and minor source permitting. EPA proposes to approve the Oregon SIP as meeting the requirements of CAA Section 110(a)(2)(F) for the 1997 8-hour ozone NAAQS.

110(a)(2)(G): Emergency episodes:

Section 110(a)(2)(G) requires states to provide for authority to address activities causing imminent and substantial endangerment to public health, including contingency plans to implement the emergency episode provisions in their SIPs.

Oregon's submittal: The Oregon submittal cites ORS 468-115 “Enforcement in Cases of Emergency” which authorizes the ODEQ Director, at the direction of the Governor, to enter a cease and desist order for polluting activities that present an imminent and substantial danger to public health. In addition, OAR 340-206 “Air Pollution Emergencies” authorizes the ODEQ Director to declare an air pollution alert or warning or to issue an ozone advisory to notify the public. OAR 340-214 “Stationary Source Reporting Requirements” requires reporting of emergencies and excess emissions and reporting requirements.

EPA analysis: As noted in EPA's October 2, 2007 guidance, the significant harm level for the 8-hour ozone NAAQS shall remain unchanged at 0.60 ppm ozone, 2 hour average, as indicated in 40 CFR 51.151. EPA believes that the existing ozone-related provisions of 40 CFR part 51 subpart H remain appropriate. Oregon's regulations discussed above, which have previously been approved by EPA into the SIP on January 22, 2003 (68 FR 2891) continue to be consistent with the requirements of 40 CFR 51.151. Accordingly, EPA proposes to find that the Oregon SIP is adequate for purposes of CAA section 110(a)(2)(G) for the 1997 8-hour ozone NAAQS.

110(a)(2)(H): Future SIP Revisions:

Section 110(a)(2)(H) requires that SIPs provide for revision of such plan (i) from time to time as may be necessary to take account of revisions of such national primary or secondary ambient air quality standard or the availability of improved or more expeditious methods of attaining such standard, and (ii) except as provided in paragraph 110(a)(3)(C), whenever the Administrator finds on the basis of information available to the Administrator that the SIP is substantially inadequate to attain the NAAQS which it implements or to otherwise comply with any additional requirements under the CAA.

Oregon's submittal: Oregon's SIP submittal refers to OAR 340-200 “General Air Pollution Procedures and Definitions: -0040 State of Oregon Clean Air Act Implementation Plan” which provides for revisions to Oregon's SIP and submittal of revisions to the EPA, including standards submitted by a regional authority and adopted verbatim in ODEQ rules.

EPA analysis: Oregon regularly submits SIP revisions to EPA. On November, 9, 2011, EPA most recently approved a number of Oregon SIP revisions, including updates to Oregon's rules to reflect federal changes to the NAAQS for PM 2.5, ozone and lead (76 FR 80747). EPA proposes to approve the Oregon SIP as meeting the requirements of section 110(a)(2)(H) for the 1997 8-hour ozone NAAQS.

110(a)(2)(I): Nonattainment area plan revision under part D:

EPA analysis: There are two elements identified in section 110(a)(2) not governed by the 3 year submission deadline of section 110(a)(1) because SIPs incorporating necessary local nonattainment area controls are not due within 3 years after promulgation of a new or revised NAAQS, but rather due at the time of the nonattainment area plan requirements pursuant to section 172. These requirements are: (i) Submissions required by section 110(a)(2)(C) to the extent that subsection refers to a permit program as required in part D Title I of the CAA, and (ii) submissions required by section 110(a)(2)(I) which pertain to the nonattainment planning requirements of part D, Title I of the CAA. As a result, this action does not address infrastructure elements related to section 110(a)(2)(C) with respect to nonattainment NSR or section 110(a)(2)(I).

110(a)(2)(J): Consultation with government officials:

Section 110(a)(2)(J) requires states to provide a process for consultation with local governments and Federal Land Managers carrying out NAAQS implementation requirements pursuant to Section 121 relating to consultation. Section 110(a)(2)(J) further requires states to notify the public if NAAQS are exceeded in an area and to enhance public awareness of measures that can be taken to prevent exceedances. Lastly, Section 110(a)(2)(J) requires states to meet applicable requirements of Part C related to prevention of significant deterioration and visibility protection.

Oregon's submittal: Oregon's SIP submittal refers to a number of laws and regulations relating to consultation, public notification, and PSD and visibility protection. For a detailed description, please refer to the TSD in the docket for this action:

EPA analysis: EPA finds that Oregon's SIP includes specific provisions for consulting with local governments and Federal Land Managers relating to CAA section 121. ODEQ routinely coordinates with local governments, states, federal land managers and other stakeholders on air quality issues and provides notice to appropriate agencies related to permitting actions. Oregon regularly participates in regional planning processes including the Western Regional Air Partnership which is a voluntary partnership of states, tribes, federal land managers, local air agencies and the U.S. EPA whose purpose is to understand current and evolving regional air quality issues in the West. Therefore EPA proposes to approve the Oregon SIP as meeting the requirements of CAA Section 110(a)(2)(J) for consultation with government officials.

Oregon sends real time air monitoring information for ozone, particulate matter, and carbon monoxide to EPA's AIRNow Web page at http://www.airnow.gov and also provides the information on the ODEQ Air Quality Index (AQI) Web site at http://www.deq.state.or.us/aqi including measures that can be taken to improve air quality. Therefore, EPA is proposing to approve the Oregon SIP as meeting the requirements of CAA Section 110(a)(2)(J) for public notification.

Turning to the requirement in section 110(a)(2)(J) that the SIP meet the applicable requirements of part C of title I of the CAA, EPA has evaluated this requirement in the context of section 110(a)(2)(C) with respect to permitting. EPA most recently approved revisions to Oregon's PSD program on November 9, 2011 (76 FR 80747). Oregon's PSD program regulates NO X as a precursor for ozone. Oregon has no nonattainment areas for the 1997 8-hour ozone standard. Therefore, EPA is proposing to approve Oregon's SIP as meeting the requirements of CAA Section 110(a)(2)(J) related to PSD.

With regard to the applicable requirements for visibility protection, EPA recognizes that states are subject to visibility and regional haze program requirements under part C of the CAA. In the event of the establishment of a new NAAQS, however, the visibility and regional haze program requirements under part C do not change. Thus we find that there is no new visibility obligation triggered under section 110(a)(2)(J) when a new NAAQS becomes effective.

110(a)(2)(K): Air quality and modeling/data:

Section 110(a)(2)(K) requires that SIPs provide for (i) the performance of such air quality modeling as the Administrator may prescribe for the purpose of predicting the effect on ambient air quality of any emissions of any air pollutant for which the Administrator has established a national ambient air quality standard, and (ii) the submission, upon request, of data related to such air quality modeling to the Administrator.

Oregon's submittal: Oregon's SIP submittal refers to ORS 468.035 “Functions of Department” (b) which provides ODEQ authority to conduct studies and investigations to determine air quality. Oregon's SIP submittal also refers to OAR 340-225 “Air Quality Analysis Requirements” which includes modeling requirements for analysis and demonstration of compliance with standards and increments in specified areas.

EPA analysis: EPA previously approved Oregon's regulations on air quality modeling into the SIP on January 22, 2003 (68 FR 2891). Oregon's rules above require all modeled estimates of ambient concentrations be based on 40 CFR Part 51, Appendix W (Guidelines on Air Quality Models). Any change or substitution from models specified in 40 CFR Part 51, Appendix W is subject to notice and opportunity for public comment and must receive prior written approval from ODEQ and the EPA. While Oregon has no nonattainment areas for the 1997 8-hour ozone NAAQS, Oregon has submitted a recent SIP revision supported by modeling for ozone. The Portland and Salem areas were historically nonattainment under the 1-hour ozone standard and require maintenance plans that ensure on-going compliance with the 1997 8-hour ozone standard. On May 22, 2007, Oregon submitted these maintenance plans to EPA, supported by extensive modeling. EPA approved the SIP revision on December 19, 2011 (76 FR 78571). Based on the foregoing, EPA is proposing to approve Oregon's SIP as meeting the requirements of CAA Section 110(a)(2)(K) for the 1997 8-hour ozone NAAQS.

110(a)(2)(L): Permitting fees:

Section 110(a)(2)(L) requires SIPs to require each major stationary source to pay permitting fees to cover the cost of reviewing, approving, implementing and enforcing a permit, until such time as the SIP fee requirement is superseded by EPA's approval of the state's title V operating permit program.

Oregon's submittal: Oregon's SIP submittal refers to ORS 468.065 “Issuance of Permits: Content; Fees; Use” which provides the EQC authority to establish a schedule of fees for permits based upon the costs of filing and investigating applications, issuing or denying permits, carrying out Title V requirements and determining compliance. Oregon's submittal also refers to OAR 340-216 “Air Contaminant Discharge Permits” which requires payment of permit fees based on a specified table of sources and fee schedule.

EPA analysis: On September 28, 1995, EPA fully approved Oregon's Title V program (60 FR 50106) (effective November 27, 1995). While Oregon's operating permit program is not formally approved into the state's SIP, it is a legal mechanism the state can use to ensure that ODEQ has sufficient resources to support the air program, consistent with the requirements of the SIP. Before EPA can grant full approval, a state must demonstrate the ability to collect adequate fees. Oregon's title V program included a demonstration the state will collect a fee from title V sources above the presumptive minimum in accordance with 40 CFR 70.9(b)(2)(i). Oregon collects sufficient fees to administer the title V permit program. Therefore, EPA proposes to conclude that Oregon's SIP demonstrates the state has satisfied the requirements of CAA Section 110(a)(2)(L) for the 1997 8-hour ozone NAAQS.

110(a)(2)(M): Consultation/participation by affected local entities:

Section 110(a)(2)(M) requires states to provide for consultation and participation in SIP development by local political subdivisions affected by the SIP.

Oregon's submittal: Oregon's SIP submittal refers to the following laws and regulations. For a detailed description, please refer to the TSD that can be found in the docket for this proposed action:

EPA analysis: The regulations cited by Oregon's submittal were previously approved on November 9, 2011 (76 FR 80747) and provide for authority and procedures for local and regional authorities to participate and consult in the SIP development process. Therefore EPA proposes to find that Oregon's SIP meets the requirements of CAA Section 110(a)(2)(M) for the 1997 8-hour ozone NAAQS.

Oregon has not demonstrated authority to implement and enforce the Oregon Administrative Rules within “Indian Country” as defined in 18 U.S.C. 1151. 17 Therefore, this SIP approval does not extend to “Indian Country” in Oregon. See CAA sections 110(a)(2)(A) (SIP shall include enforceable emission limits), 110(a)(2)(E)(i) (State must have adequate authority under State law to carry out SIP), and 172(c)(6) (nonattainment SIPs shall include enforceable emission limits). This is consistent with EPA's previous approval of Oregon's PSD program, in which EPA specifically disapproved the program for sources within Indian Reservations in Oregon because the State had not shown it had authority to regulate such sources. See 40 CFR 52.1987(c). It is also consistent with EPA's approval of Oregon's title V operating permits program. See 59 FR 61820, 61827 (December 2, 1994) (interim approval does not extend to Indian Country); 60 FR 50106, 50106 (September 28, 1995) (full approval does not extend to Indian Country).

EPA is proposing to approve the SIP submittal from the State of Oregon to demonstrate that the SIP meets the requirements of section 110(a)(1) and (2) of the CAA for the NAAQS promulgated for ozone on July 18, 1997. EPA is proposing to approve in full the following section 110(a)(2) infrastructure elements for Oregon for the 1997 ozone NAAQS: (A), (B), (C), (D)(ii), (E), (F), (G), (H), (J), (K), (L), (M). EPA is taking no action on infrastructure elements (D)(i) and (I) for the 1997 ozone NAAQS. This action is being taken under section 110 of the CAA.

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this proposed action merely approves the state's law as meeting Federal requirements and does not impose additional requirements beyond those imposed by the state's law. For that reason, this proposed action:

In addition, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in Oregon, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.